Punlab Mal, V. ITO Ward-1 (1),

ITA 2263/DEL/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5680 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-02-2010
• Assessment Year: 1999-2000
• Appeal Filed On: 09-06-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: K L ANEJA
• Keywords: Business income; Initiation of penalty proceedings; Onus to prove
• Section: 147; 54; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI D.R.SINGH AND SHRI K.D.RANJAN ITA NOS. 2263 & 2264 /DEL/ 2008. ASSESSMENT YEARS : 1999-2000 & 2000-01 PUNJAB MAL, ANAND MARKET, MUZAFFARNAGAR (U.P.) VS. THE INCOME-TAX OFFICER, WARD-1(1), MUZAFFARNAGAR (U.P.) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.L.ANEJA, ADVOCATE RESPONDENT BY : MS. MONA MOHANTY, SR. D.R. ORDER PER K.D.RANJAN, AM: THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEARS 1999-2000 AND 2000-01 ARISE OUT OF CONSOLIDATED ORDER OF LD. CIT(A), MUZAFFARNA GAR. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE, ARE DISPO SED OF BY THIS COMMON ORDER. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO LEVY OF PENALTY U/S 271(1)(C) OF INCOME TAX ACT, 1961 AT RS. 15,000/- FOR ASSESSMENT YEAR 1 999-2000 AND RS. 75,000/- FOR ASSESSMENT YEAR 2000-01. FACTS OF THE CASE, STATED IN BRIEF, ARE THAT THE ASSESSEE IN ADDITION TO INCOME FROM ORNAMENTS BUSINESS AND INTE REST ADMITTED INCOME FROM SALE OF AGRICULTURAL LAND UNDER THE HEAD CAPITAL GAINS AN D CLAIMED THE SAME AS EXEMPT BEING INVESTMENT U/S 54EA/54EB OF THE ACT. THE ASSESSING OFFICER, HOWEVER, COMPLETED THE 2 ITA NOS.2263 & 2264/DEL/2008 ASSESSMENT U/S 143(3)/147 IN BOTH THE YEARS ASSESSI NG THE INCOME FROM SALE OF AGRICULTURAL LAND AS ADVENTURE IN THE NATURE OF TRA DE. 3. ON APPEAL, THE QUANTUM APPEALS WERE DECIDED AGAI NST THE ASSESSEE BY THE LD. CIT(A). ON FURTHER APPEAL, THE APPEALS FILED BY THE ASSESSEE FOR BOTH THE YEARS WERE DISMISSED BY THE I.T.A.T. UPHOLDING THE ORDER OF LD . CIT(A). 4. DURING THE COURSE OF PENALTY PROCEEDINGS U/S 271 (1)(C ) THE ASSESSING OFFICER PROVIDED FRESH OPPORTUNITY TO THE ASSESSEE. IT WAS SUBMITTED THAT ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE TRANSACTIONS BUT HAD NOT INCLUDED THE RESULTANT INCOME ON THE BONA FIDE BELIEF THAT SUCH INCOME WAS ELIGIBLE FOR EXEMPTION U/S 54EA AND 54EB OF THE ACT. HOWEVER, THE ASSESSING OFFICER HELD THAT THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, THE ASSESSING O FFICER IMPOSED PENALTY OF RS. 15,000/- AND RS. 75,000/- FOR ASSESSMENT YEARS 1999 -2000 AND 2000-01, RESPECTIVELY. 5. BEFORE LD. CIT(A), THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAD DISCLOSED ALL THE RELEVANT BASIC FACTS REGARDING THE TRANSACTION. HE HAD SHOWN THE INCOME FROM SALE OF AGRICULTURAL LAND UNDER THE HEAD LONG-TERM CAPITAL GAINS UNDER THE BONA FIDE BELIEF THAT HE WAS NOT LIABLE TO INCLUDE GAINS ARISING OUT OF SALE OF AGRICULTURAL LAND IN HIS INCOME AS THE SAME WAS EXEMPT U/S 54EA/54EB. THE FA ULT ON THE PART OF THE ASSESSEE WAS THAT ON BONA FIDE BELIEF HE HAD SHOWN THE INCOME UN DER WRONG HEAD OTHERWISE THERE WAS NO DELIBERATE INTENTION OF THE ASSESSEE. THE ASSESS ING OFFICER WITHOUT PROPERLY APPRECIATING THE SUBMISSIONS MADE BY THE ASSESSEE H AD IMPOSED THE PENALTY. THE ASSESSEE PLACED RELIANCE ON VARIOUS DECISIONS IN SUPPORT OF THE CONTENTION THAT PENALTY U/S 271(1)(C) WAS NOT LEVIABLE. THE LD. CIT(A), HOWEVER , WAS OF THE VIEW THAT SALE OF AGRICULTURAL LAND WAS ASSESSABLE AS BUSINESS INCOME . HE ALSO PLACED RELIANCE ON THE ORDER OF I.T.A.T. IN ITA NOS. 382 AND 5582/DEL/2006 FOR A SSESSMENT YEARS1999-2000 AND 2000-01 WHEREIN I.T.A.T. UPHELD THE QUANTUM ADDITIO N. THEREFORE, HE WAS OF THE OPINION THAT BURDEN TO PROVE THAT THE ASSESSEE WAS NOT GUIL TY OF CONCEALMENT, HAD SHIFTED TO ASSESSEE. THE CONTENTION OF ASSESSEE THAT HE WAS UN DER BONA FIDE BELIEF THAT THE ASSESSEE WAS NOT LIABLE TO INCLUDE THIS INCOME IN HIS TAXABL E INCOME BECAUSE THE EXEMPTION WAS AVAILABLE U/S 54EA/54EB OF THE ACT WAS NOT SUPPORTE D BY EVIDENCE. HE WAS OF THE 3 ITA NOS.2263 & 2264/DEL/2008 OPINION THAT THE ASSESSEE HAD PURCHASED LAND TO CAR RY ON TRADING IN SALE AND PURCHASE OF LAND. THIS ACTIVITY OF PURCHASE AND SALE OF LAND WA S REGULAR ACTIVITY ON THE PART OF THE ASSESSEE. THE ASSESSEE WAS BUYING BIG CHUNKS OF LAN D, IMPROVING THEM BY PROVIDING ROADS AND OTHER FACILITIES AND SELLING THEM AS PLOT FROM YEAR TO YEAR TO REALIZE MAXIMUM GAINS. THE ASSESSEE WAS FOUND TO HAVE MADE SEVERAL PURCHASES FROM JAIN MUNI, LAND AT MIMLANA ROAD APART FROM LAND IN QUESTION. FURTHER, THERE WAS NOTHING ON RECORD TO SHOW THAT ACQUISITION OF LAND WAS AN INVESTMENT. THEREF ORE, HE WAS OF THE OPINION THAT THE WHOLE SCHEME ADOPTED BY THE ASSESSEE WAS TO DECREAS E ITS PROFITS. THE CIRCUMSTANCES SHOWED THAT THERE WAS A CONSENSUS AND NO INADVERTEN T OR BONA FIDE COMMISSION WAS MADE IN FURNISHING INACCURATE PARTICULARS OF THE INCOME. THEREFORE, ASSESSEES EXPLANATION FOR THE CONCEALMENT WAS UNSATISFACTORY WHILE THE ASSESS ING OFFICER HAS BEEN ABLE TO SHOW THAT ASSESSEE HAD DELIBERATELY WITH A MOTIVE SUPPRE SSED THE MATERIAL LEADING TO FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO OBTAIN BENEFIT OF EVADING TAX. HE PLACED RELIANCE ON SEVERAL DECISIONS TO SUPPORT HIS CONTEN TION. THE LD. CIT (A) ACCORDINGLY UPHELD THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IN BOTH THE YEARS. 6. BEFORE US, THE LD. A.R. OF THE ASSESSEE SUBMITTE D THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME WHEREIN ALL THE DETAILS RELATING T O COMPUTATION OF INCOME WERE DISCLOSED. THE ASSESSEES INTENTION WAS NOT MALA FIDE. THE DEP ARTMENT HAD ACCEPTED THE INCOME DISCLOSED IN FOUR EARLIER YEARS I.E. IN ASSESSMENT YEARS 1995-96 TO 1998-99. THE ASSESSMENT FOR THOSE YEARS HAVE NOT BEEN REOPENED A ND THEREFORE, THE ASSESSEE WAS UNDER BONA FIDE BELIEF THAT THE INCOME EARNED FROM SALE O F AGRICULTURAL LAND WAS EXEMPT U/S 54EA/54 EB OF THE ACT AND ACCORDINGLY NO PENALTY U/ S 271(1)(C) COULD BE IMPOSED. HE ALSO SUBMITTED THAT PROCEEDINGS U/S 271(1) (C) ARE INDEPENDENT. THEREFORE, PENALTY U/S 271(1)(C) COULD NOT BE IMPOSED ON THE BASIS OF FACT S FOUND IN QUANTUM ASSESSMENT ORDER. HE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MS MADHUSRI GUPTA (317 ITR 107) FOR THE PROPOSITION TH AT WHERE THE ASSESSING OFFICER HAD NOT RECORDED SATISFACTION WHILE INITIATING PENALTY PROCEEDINGS U/S 271(1)(C), IMPOSITION OF PENALTY WOULD BE BAD IN LAW. HENCE, PENALTY COULD N OT BE IMPOSED U/S 271(1)(C ) OF THE ACT. 7. ON THE OTHER HAND, LD. SR. D.R. SUPPORTED THE OR DER OF THE LD. CIT(A). 4 ITA NOS.2263 & 2264/DEL/2008 8. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORDS. IN THIS CASE, THE QUANTUM ADDITION WAS SUS TAINED BY I.T.A.T. SMC BENCH, NEW DELHI IN ITA NO.382 AND 1582/DEL/2006 DATED 21/7/20 06. THE BENCH IN PARA 8 OF THE ORDER WHILE CONFIRMING THE ADDITION HAS HELD AS UND ER: 8. HAVING REGARD TO THE TESTS LAID DOWN IN THE AFO RESAID DECISIONS AND APPLYING THEM TO THE FACTS OF THE PRESENT CASE, IT IS QUITE CLEAR THAT THE ASSESSEE PURCHASED LAND TO CARRY ON TRADE IN SALE AND PURCHA SE OF LAND. HE IS NO DOUBT, GOLDSMITH BY PROFESSION, BUT FROM FACTS IT IS CLEAR LY FOUND THAT THE ASSESSEE CARRIED ON PURCHASE AND SALE OF LAND AS A REGULAR A CTIVITY. THE ASSESSING OFFICER IN THIS CASE HAS BROUGHT SUFFICIENT MATERIAL ON REC ORD TO SHOW THAT THE ASSESSEE IS BUYING BIG CHUNKS OF LAND, IMPROVING THEM BY PROVID ING ROADS AND OTHER FACILITIES IS CUTTING PLOTS AND SELLING THEM AS PLOTS FROM YEA R TO YEAR TO REALIZE MAXIMUM GAINS. IT IS NOT THAT HE HAS PURCHASED ONLY ONE PIE CE OF LAND. THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS MADE REFERENCE TO SEVERAL PURCHASES FROM JAIN MUNI, LAND AT MIMLANA ROAD APART FROM LAND IN QUESTION. IT IS NO DOUBT TRUE THAT AGRICULTURAL LAND WAS CLAIMED TO HAVE BEEN PUR CHASED AND SOME AGRICULTURAL INCOME HAS ALSO BEEN SHOWN. BUT THAT IS ONLY A TEMP ORARY/TRANSITORY INCOME TILL THE LAND WAS DEVELOPED BY CUTTING PLOTS AND BY PROV IDING ROADS AND OTHER AMENITIES WITH A PURPOSE TO MAKE MAXIMUM PROFIT FRO M THE VENTURE. THERE IS NOTHING ON RECORD TO SHOW THAT VARIOUS LANDS WERE N OT PURCHASED WITH INTENTION TO SELL THEM AND REALIZE MAXIMUM PROFIT. NO OTHER PURP OSE FOR ACQUIRING THE LAND HAS BEEN SHOWN OR DISCLOSED BY THE ASSESSEE. THERE IS NOTHING ON RECORD TO SHOW THAT ACQUISITION OF LAND WAS ON CAPITAL ACCOUNT AS AN INVESTMENT. THE ACTIVITY OF PURCHASE AND SALE OF LAND HAS ALSO BEEN CARRIED AS A REGULAR AND SYSTEMATIC ACTIVITY. ALL TRAITS REQUIRED TO BE SHOWN AN ACTIVI TY AS A BUSINESS ARE PRESENT HERE. THEREFORE, REVENUE AUTHORITIES WERE RIGHT IN HOLD T HAT PROFIT REALIZED BY THE ASSESSEE FROM SALE OF LAND WAS LIABLE TO BE ASSESSE D UNDER THE HEAD BUSINESS AND NOT UNDER THE HEAD CAPITAL GAINS. IN THESE CIRCUM STANCES THERE WAS NO QUESTION OF ALLOWING ANY DEDUCTION UNDER SECTION54EA & 54 EB TO THE ASSESSEE. THE COMPUTATION OF GAIN WAS NOT CHALLENGED BEFORE ME. I THEREFORE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDERS OF THE REVENUE AUT HORITIES IN TAXING GAIN FROM SALE OF LAND UNDER THE HEAD BUSINESS IN BOTH THE ASSESSMENT YEARS. THE ACTIONS OF REVENUE AUTHORITIES ARE ACCORDINGLY CONFIRMED. 9. FROM THE ORDER OF THE I.T.A.T. AS ABOVE, IT IS C LEAR THAT THE ASSESSEE WAS ENGAGED IN PURCHASE AND SALE OF LAND ON REGULAR BASIS. THE ASSESSEE WAS PURCHASING AGRICULTURAL LAND, IMPROVING THEM BY PROVIDING ROADS AND OTHER F ACILITIES AND CONVERTING THE LAND INTO PLOTS TO MAXIMIZE THE GAINS FROM YEAR TO YEAR. HE NCE, THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITIES AS COLONIZER. ACCORDINGLY, THE PROFITS EARNED FROM PURCHASE AND SALE OF AGRICULTURAL LANDS IN FORM PLOTS CANNOT BE TREATE D AS A SIMPLE CASE OF CAPITAL GAINS BUT IT IS A CASE OF REGULAR BUSINESS ACTIVITIES IN WHICH T HE ASSESSEE WAS ENGAGED. THE I.T.A.T. 5 ITA NOS.2263 & 2264/DEL/2008 SMC BENCH HAS CONFIRMED THIS FINDING OF FACT MADE B Y LOWER AUTHORITIES. THEREFORE, IN THE RETURN OF INCOME THE ASSESSEE HAS CONSCIOUSLY D ECLARED THE INCOME FROM PURCHASE AND SALE OF PLOTS AS CAPITAL GAINS AND HAS ALSO CLAIMED DEDUCTION U/S 54EA/54EB WHICH WAS NOT AVAILABLE AT ALL TO THE ASSESSEE. THEREFORE, TH ERE IS A CASE OF CONSCIOUS CONCEALMENT ON THE PART OF THE ASSESSEE TO CONCEAL THE INCOME. 10. THE CONTENTION OF ASSESSEE THAT DEPARTMENT HAS ACCEPTED THE CLAIM OF THE ASSESSEE IN EARLIER YEARS IS NOT CORRECT. WE HAVE GONE THRO UGH THE DETAILS FILED BY THE ASSESSEE. THE RETURNS OF INCOME FILED BY THE ASSESSEE FOR ASS ESSMENT YEARS 1995-96 TO 1998-99 HAVE BEEN ACCEPTED U/S 143(1) OF THE ACT. IN NONE O F ASSESSMENT YEARS ASSESSMENT WAS MADE U/S 143(3). THE HONBLE SUPREME COURT IN THE C ASE OF RAJESH JHAVERI STOCK BROKERS LTD. (291 ITR 500) HAS HELD THAT PROCESSING OF RETURN U/S 143(1) IS NOT AN ASSESSMENT. THEREFORE, THE CONTENTION OF THE ASSES SEE THAT THE RETURNS OF INCOME WERE ACCEPTED BY DEPARTMENT HAS NO MERIT. MERELY BECAUSE THE ASSESSING OFFICER HAD NOT INITIATED ASSESSMENT PROCEEDINGS U/S 147 IT CANNOT BE SAID THAT THE CLAIM OF THE ASSESSEE AS CAPITAL GAINS HAD BEEN ACCEPTED IN EARLIER YEARS. T HERE COULD SEVERAL REASONS INCLUDING FAILURE ON THE PART OF THE ASSESSING OFFICER TO TAK E SUCH A STEP. HENCE THIS CONTENTION OF ASSESSEE DESERVES TO BE REJECTED. 11. THE NEXT CONTENTION OF THE ASSESSEE IS THAT THE RE WAS NO MALAFIDE INTENTION OF THE ASSESEE IN FURNISHING INACCURATE PARTICULARS OF INC OME. HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES PROC ESSORS AND OTHERS (SC) 306 ITR 277 (SC) HELD AS UNDER. THE EXPLANATION APPENDED TO S. 271(1)(C) OF THE IN COME TAX ACT, 1961 INDICATE THE ELEMENT OF STRICT LIABILITY ON THE ASSESSEE FOR CON CEALMENT OR FOR GIVING INACCURATE PARTICULARS WHILE FILING THE RETURN. THE OBJECT BE HIND THE ENACTMENT OF SECTION 271(1)(C) READ WITH THE EXPLANATIONS INDICATES THAT THE SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE PENA LTY UNDER THAT PROVISION IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTI ON UNDER SECTION 276 C. 6 ITA NOS.2263 & 2264/DEL/2008 12. IN VIEW OF THE DECISION (SUPRA) OF HONBLE SUPR EME COURT, IT IS CLEAR THAT PENALTY PROCEEDINGS BEING IN NATURE OF CIVIL LIABILITIES TH E ELEMENT OF MENS REA IS NOT TO BE PROVED. THEREFORE, THIS CONTENTION OF THE ASSESSEE IS ALSO REJECTED. 13. ANOTHER ARGUMENT OF LD. COUNSEL FOR THE ASSESSE E IS THAT THE AO HAS TO RECORD SATISFACTION IN VIEW OF DECISION OF MS. MADHUSHREE GUPTA VS. UNION OF INDIA (DEL) 317 ITR 108. IN THIS CASE IT HAS BEEN HELD AS UNDER (HE AD NOTES): THE LEGAL POSITION THAT POWER TO IMPOSE PENALTY U NDER SECTION 271 OF THE ACT DEPENDS UPON THE SATISFACTION OF THE INCOME TAX OFF ICER IN THE COURSE OF THE PROCEEDINGS UNDER THE ACT REMAINS THE CASE EVEN AFT ER THE INSERTION OF S.271(1B). PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER A S REFLECTED IN THE RECORD AS AGAINST HIS FINAL CONCLUSION SHOULD BE DISCERNIBL E CLEARLY FROM THE ORDER PASSED DURING THE COURSE OF SUCH PROCEEDINGS. THE PROVISI ON ONLY PROVIDES THAT AN ORDER INITIATING PENALTY CANNOT BE DECLARED BAD IN LAW ON LY BECAUSE IT STATES THAT PENALTY PROCEEDINGS ARE INITIATED, IF OTHERWISE IT IS DISCE RNIBLE FROM THE RECORD, THAT THE ASSESSING OFFICER HAS ARRIVED AT PRIMA FACIE SATISF ACTION FOR INITIATION OF PENALTY PROCEEDINGS. THE ISSUE IS OF DISCERNIBILITY OF THE SATISFACTION ARRIVED AT BY THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDING B EFORE HIM. SECTION 271(1)(C ) HAS TO BE READ IN CONSONANCE WITH SECTION 271 (1B). THE PRESENCE OF PRIMA FACIE SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS WAS AND REMAINS A JURISDICTIONAL FACT. THE CONTENTION THAT PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER NEED NOT BE REFLECTED AT THE STAGE OF INITIATION BUT ONLY AT THE STAGE OF IMPOSITION OF PENALTY WOULD RENDER THE PROVISION ARBITRARY. THE ASSESSIN G OFFICER WOULD IN SUCH A SITUATION BE IN A POSITION TO PICK A CASE FOR INITI ATION OF PENALTY MERELY BECAUSE THERE IS AN ADDITION OR DISALLOWANCE WITHOUT ARRIVI NG AT A PRIMA FACIE SATISFACTION WITH RESPECT TO INFRACTION BY THE ASSESSEE OF CLAUS E (C ) OF SUB-SECTION (1) OF SECTION 271 OF THE ACT. PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM TH E ORDER PASSED DURING THE COURSE OF THE PROCEEDINGS. OBVIOUSLY, THE ASSESSING OFFIC ER WOULD ARRIVE AT A DECISION, I.E. 7 ITA NOS.2263 & 2264/DEL/2008 A FINAL CONCLUSION ONLY AFTER HEARING THE ASSESSEE. THE INITIATION OF PENALTY PROCEEDINGS CANNOT BE SET ASIDE ONLY ON THE GROUND THAT THE ASSESSMENT ORDER STATES PENALTY PROCEEDINGS ARE INITIATED SEPARATELY IF O THERWISE, IT CONFORMS TO THE PARAMETERS SET OUT. IF THERE IS NO MATERIAL TO INITIATE PENALTY PROCEE DINGS, AN ASSESSEE WILL BE ENTITLED TO HAVE RECOURSE TO A COURT OF LAW. ON THE OTHER HAND, IF THE ASSESSING OFFICERS PRIMA FACIE SATISFACTION IS DISCERNIBLE F ROM THE RECORD ORDINARILY, AN ASSESSEE WOULD BE REQUIRED TO APPROACH THE AUTHORIT IES UNDER THE STATUTE. AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS THE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS --VIS EACH AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHE RED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. THE INTER-RELATIO N OF ADDITIONS OR DISALLOWANCES, IF ANY, MAY BE UNRAVELED ONLY AT THE CONCLUSION OF THE PENALTY PROCEEDINGS. IT WOULD BE SUFFICIENT COMPLIANCE WIT H THE LAW THAT THERE IS PRIMA FACIE EVIDENCE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THIS IS SO AS TH E LEGISLATURE DOES NOT ENJOIN A FULL FLEDGED INVESTIGATION AT THE STAGE OF INITIA TION OF PENALTY PROCEEDINGS. TO THAT EXTENT THE CONTENTION THAT THE PROVISION GI VES ARBITRARY POWER TO THE ASSESSING OFFICER TO PICK AND CHOSE ASSESSEES AGAIN WHOM PENALTY PROCEEDINGS MAY BE INITIATED EVEN THOUGH SIMILAR AD DITIONS AND DISALLOWANCES ARE MADE OR THAT EVEN THOUGH THERE ARE FIVE OR SIX ITEMS OF ADDITIONS AND DISALLOWANCES AND INFRACTION OF CLAUSE (C ) OF SECT ION 271(1) IS VIS--VIS ONLY ONE OR TWO SUCH ITEMS OF INCOME OR DEDUCTION, NOTIC E FOR INITIATION UNDER THE IMPUGNED PROVISION WILL ISSUE IN RESPECT OF ALL, IS NOT TENABLE AS PURPORTED HARDSHIP CANNOT BE A GROUND FOR STRIKING DOWN THE P ROVISION. HOWEVER, THIS WOULD NOT DEBAR AN ASSESSEE FROM FURNISHING EVIDENC E TO REBUT THE PRIMA FACIE SATISFACTION OF THE ASSESSING OFFICER, SINCE PENALTY PROCEEDING ARE NOT A CONTINUATION OF ASSESSMENT PROCEEDINGS. UNDER SECTION 271(1)(C ) TO INITIATE PENALTY PROCE EDINGS THE FOLLOWING PREREQUISITES SHOULD OBTAIN: (I) THE ASSESSING OFFI CER SHOULD BE SATISFIED THAT : (A) THE ASSESSEE HAS EITHER CONCEALED PARTIC ULARS OF HIS INCOME OR (B) FURNISHED INACCURATE PARTICULARS OF HIS INCOME, OR (C) INFRACTED BOTH (A) AND 8 ITA NOS.2263 & 2264/DEL/2008 (B). (II) THIS SATISFACTION SHOULD BE ARRIVED AT DURING THE COURSE OF ANY PROCEEDINGS. THESE COULD BE ASSESSMENT, REASSESSME NT OR RECTIFICATION PROCEEDINGS, BUT NOT PENALTY PROCEEDINGS. (III) IF INGREDIENTS CONTAINED IN (I) AND (II) ARE PRESENT A NOTICE TO SHOW CAUSE UNDER S ECTION 274 OF THE ACT SHALL ISSUE SETTING OUT THEREIN THE INFRACTION THE ASSESS EE IS SAID TO HAVE COMMITTED. THE NOTICE UNDER SECTION 274 OF THE ACT CAN BE ISSU ED BOTH DURING OR AFTER THE COMPLETION OF ASSESSMENT PROCEEDINGS, BUT THE SATIS FACTION OF THE ASSESSING OFFICER THAT THERE HAS BEEN AN INFRACTION OF CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 SHOULD PRECEDE CONCLUSION OF THE PROCEE DINGS PENDING BEFORE THE ASSESSING OFFICER. (IV) THE ORDER IMPOSING PENALTY CAN BE PASSED ONLY AFTER ASSESSMENT PROCEEDINGS ARE COMPLETED. THE TIME FRA ME FOR PASSING THE ORDER IS CONTAINED IN SECTION 275 OF THE ACT. DUE COMPLI ANCE WOULD BE REQUIRED TO BE MADE IN RESPECT OF THE PROVISION OF SECTIONS 274 AND 275 OF THE ACT. 14. FROM THE ABOVE DECISION OF HONBLE DELHI HIGH C OURT, IT IS CLEAR THAT THE SATISFACTION SHOULD BE DISCERNIBLE FROM ASSESSMENT ORDER. IN THE INSTANT CASE THE ASSESEE WAS ENGAGED IN THE BUSINESS AS COLONIZER BY PURCHAS ING BIG CHUNKS OF LAND AND DEVELOPING THEN INTO PLOTS. HENCE, THE ASSESSEE HA D FURNISHED INACCURATE PARTICULARS OF INCOME WHILE CLAIMING THE INCOME EARNED U/S 54 EA/5 4 EB OF THE ACT. THEREFORE, EVEN AFTER DECISION OF HONBLE DELHI HIGH COURT IN THE C ASE OF MS. MADHUSHREE GUPTA VS. UNION OF INDIA (SUPRA), PENALTY U/S 271(1)(C ) WILL BE IMPOSABLE IF THE SATISFACTION IS DISCERNIBLE FROM THE ASSESSMENT ORDER. SINCE THE S ATISFACTION IS DISCERNIBLE FROM THE ASSESSMENT ORDER, THE CONTENTION OF ASSESSEE DESERV ES TO BE REJECTED. 15. AS PER EXPLANATION I TO SEC. 271(1)(C ) THE PEN ALTY IS IMPOSABLE IN THE CASE WHERE THE ASSESEE FAILS TO OFFER THE EXPLANATION OR OFFE RS AN EXPLANATION WHICH IS FOUND TO BE FALSE. THE PENALTY IS ALSO LEVIABLE WHERE THE EXPL ANATION OFFERED BY THE ASSESEE IS NOT SUBSTANTIATED WITH EVIDENCE AND THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION WAS BONAFIDE AND ALL THE RELEVANT FACTS AND MATERIAL FO R COMPUTATION OF HIS TOTAL INCOME WAS FULLY DISCLOSED. IN THE INSTANT CASE THE ASSESSEE HAD NOT BEEN ABLE TO SUBSTANTIATE ITS CONTENTION THAT THE EXPLANATION OFFERED BY HIM WAS BONAFIDE. SINCE IN THE ABSENCE OF ANY MATERIAL TO PROVE THAT THE EXPLANATION OFFERED BY H IM WAS BONAFIDE, THE AMOUNT ADDED IN 9 ITA NOS.2263 & 2264/DEL/2008 COMPUTING THE TOTAL INCOME SHALL BE DEEMED TO REPRE SENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. SINCE THE ASSESSE E HAD NOT BEEN ABLE TO SUBSTANTIATE AND HAD FAILED TO PROVE THAT THE EXPLANATION OFFERED WA S BONAFIDE, THE INCOME COMPUTED BY THE A.O. FROM PURCHASE AND SALE OF PLOTS AS BUSINES S, THE ASSESSEE IS DEEMED TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME. ACCORDING LY THE PENALTY IS IMPOSABLE U/S 271(1)(C ). HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD CIT(A) CONFIRMING THE IMPOSITION OF PENALTY U/S 271(1)(C ) FOR BOTH THE A.YS. 16. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E FOR ASSESSMENT YEARS 1999-2000 AND 2000-2001 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH FEBRUARY, 2010 IMMEDIATELY AFTER CONCLUSION OF THE HEARING. SD/- SD/- (D.R. SINGH ) (K.D. RANJAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11TH FEBRUARY, 2010 . PSP / *GMV COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR 10 ITA NOS.2263 & 2264/DEL/2008