SHRI KAILASH CHAND JAT, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 229/JPR/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4590 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 15-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJENDRA JHA J CIT DHK
• Keywords: Capital asset; Recovery proceedings; Business income; Principle of natural justice; Cost of acquisition; Date of conversion; Initiation of penalty proceedings; Fair market value; Wrong claim
• Section: 80C

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 229/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 KAILASH CHAND JAT, VILLAGE- SUKHIYA, WARD NO. 2, NEAR ADARSH PUBLIC SCHOOL, TEHSIL- SANGANER, JAIPUR. CUKE VS. INCOME TAX OFFICER WARD-7(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AJVPJ 0804 J VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI RAJENDRA JHA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 06/08/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 09/08/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 14/12/2017 OF LD. CIT(A)-3, JAIPUR ARISING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR THE A.Y. 2012-13. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS O F APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED U/S 271(1)(C) IS ILLEGAL AND BAD IN LAW. 2. THE LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LEVY OF PENALTY OF RS. 99,750/- U/S 271(1)(C) OF THE IT ACT , 1961. ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 2 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2. THE ASSESSEE FILES HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 1,74,780/-, WHICH INCLUDES CAPITAL GAIN OF RS. 1,62, 429/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT PRIOR TO THE SALE OF LAND IN QUESTION RESULTING THE CAPITAL GAIN, THE ASSESSEE HAD CARRIED OUT SOME OF DEVELOPMENT WORK AND ALSO CARVED OUT THE PLO TS, THUS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE D URING THE YEAR UNDER CONSIDERATION, CONVERTED ITS INVESTMENT INTO STOCK IN TRADE AND THEN SOLD THE SAME. ACCORDINGLY, THE ASSESSING OFFICER BIFURC ATED THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE INTO TWO PARTS I.E. LONG TERM CAPITAL GAIN AND BUSINESS INCOME. FURTHER THE ASSESSING OFF ICER HAS ALSO RECOMPUTED THE COST OF ACQUISITION AND ADOPTED THE FAIR MARKET VALUE OF THE LAND IN QUESTION AS ON 01/4/1981 AT RS. 3196/- AND AFTER INDEXATION COST OF ACQUISITION WAS DETERMINED BY THE ASSESSING OFFICER AT RS. 25,089/- AS AGAINST THE COST OF ACQUISITION COMPUTE D BY THE ASSESSEE AS ON 01/4/1981 AT RS. 98,125/-. THUS, THE ASSESSING O FFICER HAS MADE THE ADDITION BY BIFURCATING THE CAPITAL GAIN INTO CAPIT AL GAIN AND BUSINESS INCOME AND THEREAFTER RECOMPUTED THE CAPITAL GAIN O N THE BASIS OF THE COST OF ACQUISITION ADOPTED BY THE ASSESSING OFFICE R. THE ASSESSING OFFICER ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 3 HAS ALSO DISALLOWED THE CLAIM OF DEDUCTION U/S 80C O F THE ACT OF RS. 16,000/- FOR WANT OF REQUIRED EVIDENCES. THE ASSESSIN G OFFICER INITIATED THE PROCEEDINGS FOR LEVY OF PENALTY U/S 271(1)(C) O F THE ACT IN RESPECT OF ADDITIONS MADE IN THE ASSESSMENT ORDER AND FURTHER BY ISSUING SHOW CAUSE NOTICE DATED 23/3/2015. THE ASSESSING OFFICER FINALLY LEVIED THE PENALTY OF RS. 99,750/- BEING 100% OF THE TAX SOUGH T TO THE EVADED. 3. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSI NG OFFICER BEFORE THE LD. CIT(A) BUT COULD NOT SUCCEED. 4. GROUND NO. 1 OF THE APPEAL IS REGARDING VALIDITY OF THE ORDER PASSED U/S 271(1)(C) OF THE ACT. IN THIS REGARD, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS NOT SPECIF IED THE CHARGE AND GROUNDS FOR LEVY OF PENALTY U/S 271 OF THE ACT EITH ER IN THE SATISFACTION RECORDED IN THE ASSESSMENT ORDER OR IN THE SHOW CAUS E NOTICE ISSUED U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT. HE HAS R EFERRED THE SATISFACTION RECORDED BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER AND ALSO SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFIC ER AND SUBMITTED THAT THE ASSESSING OFFICER HAS STATED THE GROUNDS AS THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THUS, THE ASSESSING OFFICER WAS NOT CERTAIN A BOUT THE CHARGE AND DEFAULT ON THE PART OF THE ASSESSEE WHILE INITIATING THE PROCEEDINGS U/S ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 4 271(1)(C) OF THE ACT. IN SUPPORT OF HIS CONTENTION, THE LD AR HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT I N THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY & ORS. 359 ITR 5 65 (KAR.) AS WELL AS THE DECISION OF HON'BLE SUPREME COURT IN THE CAS E OF CIT VS SSAS EMERALD MEADOWS (2016) 242 TAXMAN 180 (SC) AND SUBMIT TED THAT THE HON'BLE HIGH COURT HAS HELD THAT IN THIS CASE, THE ASSESSING OFFICER HAS FAILED TO SPECIFY THE GROUND AND CHARGE FOR LEVY OF PENALTY. PENALTY PROCEEDINGS INITIATED WITHOUT SPECIFYING THE CHARGE ARE NOT VALID AND CONSEQUENTLY THE ORDER PASSED BY THE ASSESSING OFFI CER IS BAD IN LAW. THE SAID DECISION OF HONBLE KARNATAKA HIGH COURT HAS B EEN UPHELD BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS SSAS EM ERALD MEADOWS (SUPRA) AS THE SLP FILED BY THE REVENUE WAS DISMISSE D. THE LD AR HAS FURTHER POINTED OUT THAT THE LD. CIT(A) HAS NOT FOLL OWED THE DECISION OF HON'BLE HIGH COURT AS WELL AS THE HON'BLE SUPREME CO URT BY APPLYING THE REASONS THAT MERE DISMISSAL OF SLP WITHOUT SPEAKING ORDER IS NOT A LAW LAID DOWN BY THE HON'BLE SUPREME COURT. THUS, THE LD AR HAS SUBMITTED THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT IS BAD IN LAW AND LIABLE TO BE QUASHED. 5. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT THE ASSESSEE HAS INFLATED THE COST OF ACQUISITION TO REDUCE THE TAX LIABILITY WHICH WAS ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 5 DEDUCTED BY THE ASSESSING OFFICER IN THE SCRUTINY A SSESSMENT. FURTHER THE ASSESSEE HAS CARRIED OUT THE DEVELOPMENT WORK AND TH EN DIVIDED THE LAND IN PLOTS BEFORE THE SAME WERE SOLD, THEREFORE, THE A SSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS BIFURCATED THE GAIN ARISING FROM THE SALE OF THE PLOTS INTO TWO PARTS AS PER PROVISIONS OF SECTION 45 OF THE ACT AND ASSESSED THE CAPITAL GAIN ON THE DATE OF CONVERSION OF THE ASSET INTO STOCK IN TRADE AND THEN PROFIT ARISING THEREAFTER WAS ASSE SSED AS BUSINESS INCOME. THEREFORE, IT IS CLEAR CASE OF FURNISHING IN ACCURATE PARTICULARS OF INCOME BY THE ASSESSEE ATTRACTING THE PENAL PROVISI ON U/S 271(1)(C) OF THE ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITI ES BELOW. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AS WELL AS TH E RELEVANT MATERIAL AVAILABLE ON THE RECORD. THE ASSESSEE HAS R AISED THE LEGAL GROUND OF VALIDITY OF INITIATION OF PROCEEDINGS AND CONSEQ UENTIAL ORDER PASSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. WE NOTE THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER, THOUGH, RE CORDED ITS SATISFACTION FOR INITIATING THE PENALTY PROCEEDINGS, HOWEVER, EXC EPT THE TERM THIS ISSUE IS FIT FOR INITIATING THE PENALTY PROCEEDINGS , THE ASSESSING OFFICER HAS NOT MENTIONED WHETHER IT IS A CASE OF CONCEALMEN T OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. SIMILARLY, IN THE NOTICE DATED 23/03/2015 ISSUED U/S 274 OF THE ACT F OR INITIATION OF PENALTY ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 6 PROCEEDINGS DATED 23/3/2015 PLACED AT PAGE 8 OF THE PAPER BOOK IS ALSO WITHOUT SPECIFYING THE CHARGE AND DEFAULT ON THE PAR T OF THE ASSESSEE. THE RELEVANT PARA OF THE CHARGE MENTIONED IN THE SHO W CAUSE NOTICE IS AS UNDER: HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FU RNISHED INACCURATE PARTICULARS OF SUCH INCOME. THUS, THE ASSESSING OFFICER HAS NEITHER STRIKE OF TH E IRRELEVANT PART NOR SPECIFIED THE GROUND AND CHARGE AGAINST WHICH THE PE NALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE. THUS, IT IS CLEA R CASE OF NON- SPECIFYING THE GROUNDS AND CHARGE FOR WHICH THE PENA LTY PROCEEDINGS WERE INITIATED BY THE ASSESSING OFFICER. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING F ACTORY & ORS. (SUPRA), IN PARA 60 TO 63 HAS HELD AS UNDER: 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THE RE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PE NALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FO R ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(L)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN T O THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PR OCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLE S OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 7 IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDE R WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNO T VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT T O INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDIN GS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL IN COME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIF FERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF T. ASHOK PAI V. CIT [2007] 292 ITR 11/161 TAXMAN 340 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COUR T IN THE CASE OF CIT V. MANU ENGG. [1980] 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING (P.) LTD. [2008] 171 TAXMAN 156 , HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSIT ION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROP RIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. TH E STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE A S TO NON-APPLICATION OF MIND. INDEPENDENT PROCEEDING 62. THE PENALTY PROCEEDINGS ARE DISTINCT FROM ASSESSME NT PROCEEDINGS, AND INDEPENDENT THEREFROM. THE ASSESSMENT PROCEEDINGS ARE TAXING PR OCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATING FROM PROCEED INGS OF ASSESSMENT ARE INDEPENDENT AND SEPARATE ASPECTS OF THE PROCEEDING. SEPARATE PROVISION IS MADE FOR THE IMPOSITION OF PENALTY AND SEPARATE NOTICES OF DEMAN D ARE MADE FOR RECOVERY OF TAX AND AMOUNT OF PENALTY. ALSO SEPARATE APPEAL IS PROVIDED AGAINST ORDER OF IMPOSITION OF PENALTY. ABOVE ALL, NORMALLY, ASSESSMENT PROCEEDING S MUST PRECEDE PENALTY PROCEEDINGS. ASSESSEE IS ENTITLED TO SUBMIT FRESH EVIDENCE IN TH E COURSE OF PENALTY PROCEEDINGS. IT IS BECAUSE PENALTY PROCEEDINGS ARE INDEPENDENT PROCEED INGS. THE ASSESSEE CANNOT QUESTION THE ASSESSMENT JURISDICTION IN PENALTY PROCEEDINGS. JURISDICTION UNDER PENALTY PROCEEDINGS CAN ONLY BE LIMITED TO THE ISSUE OF PEN ALTY, SO THAT VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LE VIED, CANNOT BE THE SUBJECT MATTER IN PENALTY PROCEEDINGS. IT IS NOT POSSIBLE TO GIVE A F INDING THAT THE REASSESSMENT IS INVALID IN SUCH PENALTY PROCEEDINGS. CLEARLY, THERE IS NO IDEN TITY BETWEEN THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS. THE LATTER ARE SEPARATE PROCEEDINGS THAT MAY, IN SOME CASES, FOLLOW AS A CONSEQUENCE OF THE ASSES SMENT PROCEEDINGS. THOUGH IT IS USUAL FOR THE ASSESSING OFFICER TO RECORD IN THE AS SESSMENT ORDER THAT PENALTY PROCEEDINGS ARE BEING INITIATED, THIS IS MORE A MAT TER OF CONVENIENCE THAN OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRES, SO FAR AS T HE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT THEY SHOULD BE INITIATED IN THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT. IT IS SUFFICIENT, IF THERE IS SOME RECORD SOMEWHERE, EVEN APART FROM THE ASSESSMENT ORDER ITSELF, THAT THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OR OTHER DEFAULT FOR WHICH PENALTY A CTION IS CALLED FOR. INDEED, IN CERTAIN ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 8 CASES, IT IS POSSIBLE FOR THE ASSESSING OFFICER TO ISSUE A PENALTY NOTICE OR INITIATE PENALTY PROCEEDINGS EVEN LONG BEFORE THE ASSESSMENT IS COMP LETED. THERE IS NO STATUTORY REQUIREMENT THAT THE PENALTY ORDER SHOULD PRECEDE O R BE SIMULTANEOUS WITH THE ASSESSMENT ORDER. IN POINT OF FACT, HAVING REGARD T O THE MODE OF COMPUTATION OF PENALTY OUTLINED IN THE STATUTE, THE ACTUAL PENALTY ORDER C ANNOT BE PASSED UNTIL THE ASSESSMENT IS FINALISED. CONCLUSION 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: ( A ) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIABILIT Y. ( B ) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING P ENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. ( C ) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. ( D ) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(L )(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. ( E ) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTH ORITY. ( F ) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS ME NTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LE GAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. ( G ) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271 (L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECA USE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). ( H ) THE SAID DEEM ING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PAS SED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. ( I ) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. ( J ) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. ( K ) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASS ESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSE LF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 9 ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD H AVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. ( L ) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANAT ION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATI ON OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. ( M ) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTAN TIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME A ND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. ( N ) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECT ION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. ( O ) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED B Y THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. ( P ) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFIC ALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETHER IT IS FOR CONCEALM ENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME ( Q ) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. ( R ) THE A SSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEE T SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE B ASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. ( S ) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. ( T ) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSES SMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT E FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. ( U ) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' W OULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO C ONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN TH E PENALTY PROCEEDINGS. ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 10 THERE IS NO DISPUTE THAT THE SAID DECISION OF HONBL E KARNATAKA HIGH COURT WAS FOLLOWED IN A SUBSEQUENT DECISION IN THE CASE OF CIT VS SSAS EMERALD MEADOWS (SUPRA) AND THE SLP FILED BY THE REV ENUE AGAINST THE SAID DECISION WAS DISMISSED BY THE HON'BLE SUPREME C OURT REPORTED IN 242 TAXMAN 180. FURTHER THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHEVETA CONSTRUCTION CO. PVT. LTD. IN DBIT APPEAL NO. 534/2008 DATED 06.12.2016 IN PARA 9 HAS HELD AS UNDER: 'TAKING INTO CONSIDERATION THE DECISION OF THE ANDH RA PRADESH HIGH COURT WHICH VIRTUALLY CONSIDERED THE SUBSEQUENT LAW AND THE LAW WHICH WAS PREVAILING ON THE DATE THE DECISION WAS RENDERED ON 27.08.2012. IN VI EW OF THE OBSERVATION MADE IN THE SAID JUDGMENT, WE ARE OF THE OPINION THAT THE C ONTENTION RAISED BY THE APPELLANT IS REQUIRED TO BE ACCEPTED AND IN THE FINDING OF AS SESSING OFFICER IN THE ASSESSMENT ORDER IT IS HELD THAT THE AO, HAS TO GIVE A NOTICE AS TO WHETHER HE PROPOSES TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING INA CCURATE PARTICULARS. HE CANNOT HAVE BOTH THE CONDITIONS AND IF IT IS SO HE HAS TO SAY SO IN THE NOTICE AND RECORD A FINDING IN THE PENALTY ORDER' (EMPHASIS SUPPLIED) IN VIEW OF THE ABOVE, PENALTY LEVIED BY THE LD. AO DESERVES TO BE DELETED AS THE SAME HAS BEEN LEVIED BY HIM IN A MECHANICAL MANNER AND WITHOUT APPLICATION OF MIND.' ACCORDINGLY AS HELD BY THE HON'BLE HIGH COURT, SPEC IFICATION OF THE EXISTENCE OF THE GROUND MENTIONED IN SECTION 271(1) (C) OF THE ACT IS MANDATORY FOR INITIATION OF PROCEEDINGS AND THE PEN ALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS. THEREFORE, THE GROUNDS HAS TO BE SPECIFICALLY STATED IN THE SHOW CAUSE NOTICE SO T HAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. THE ASSE SSING OFFICER WHILE ENSUING THE NOTICE HAS TO COME TO THE CONCLUSION WHE THER IT IS A CASE OF CONCEALMENT OF INCOME OR IT IS A CASE OF FURNISHING OF INACCURATE ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 11 PARTICULARS OF INCOME. THE LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEA R, PENALTY IS NOT SUSTAINABLE. THE AMBIGUITY IN SPECIFYING THE LIMB F OR INITIATING THE PROCEEDINGS FOR LEVY OF PENALTY RENDERS THE INITIAT ION INVALID AND CONSEQUENTIAL ORDER PASSED U/S 271(1)(C) OF THE ACT ALSO INVALID. HENCE, IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS N OT SPECIFIED THE LIMB AND CHARGE FOR INITIATION OF PENALTY PROCEEDINGS IN THE SHOW CAUSE NOTICE THEN THE IMPUGNED ORDER PASSED BY THE ASSESSING OFF ICER IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. 6.1 IT IS PERTINENT TO NOTE THAT IN THE SHOW CAUSE N OTICE, THE ASSESSING OFFICER HAS MENTIONED THE CHARGE AS THE ASSESSEE FU RNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME WHEREAS IN THE ORDER PASSED U/S 271(1)(C), THE ASSESSING OFFIC ER HAS STATED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME AND CONCEALED HIS INCOME, THEREFORE, THE CHARGE IN THE SHOW CAUSE NOTI CE IS NOT CERTAIN WHEREAS THE LEVY OF PENALTY IN THE IMPUGNED ORDER IS FOR BOTH THE LIMBS WHICH IS INCONSISTENT WITH THE CHARGE AS MENTIONED IN THE SHOW CAUSE NOTICE. THE FINDINGS OF THE ASSESSING OFFICER IN TH E ORDER PASSED U/S 271(1)(C) HOLDING THE ASSESSEE GUILTY OF CHARGE OF FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME IS ALSO CONTRARY TO THE ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 12 FACTS OF THE CASE. THE PENALTY IN THIS CASE WAS LEVIE D AGAINST THE ADDITION MADE ON ACCOUNT OF BIFURCATION OF CAPITAL GAIN INTO TWO PARTS ONE AS LONG TERM CAPITAL GAIN AND OTHER AS BUSINESS INCOME. THIS ACTION OF THE ASSESSING OFFICER BIFURCATING IS BASED ON THE PREMI SES THAT THE DEVELOPMENT WORK ON THE LAND AND CARVING OUT OF PLOT S AMOUNT TO CONVERTING THE CAPITAL ASSET INTO STOCK IN TRADE. TH EREFORE, IT IS NOT A CASE OF SUPPRESSION OF PARTICULARS OR DETAILS OF INCOME BUT IT IS ONLY DIFFERENT OF VIEW ON THE MATTER BEFORE THE ASSESSING OFFICER. HEN CE IT IS NOT A CASE OF CONCEALMENT OF PARTICULARS OF INCOME BUT AT THE MOS T CAN BE A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. AS REG ARDS THE FAIR MARKET VALUE AS ON 01/4/1981, IT IS MATTER OF ESTIMATION A ND CANNOT BE REGARDED BY SUPPRESSION OF PARTICULARS OF INCOME AND CONSEQU ENTLY CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME. THE CLAIM OF D EDUCTION U/S 80C OF THE ACT REGARDING THE TUITION FEE AND LIC PREMIUM I S ALSO NOT A BOGUS CLAIM AND DISALLOWANCE OF SAME FOR WANT OF PAYMENT RE CEIPT CAN ONLY BE CONSIDERED AS FURNISHING THE INACCURATE PARTICULARS OF INCOME BUT NOT AS CONCEALMENT OF INCOME WHEN THE FACT REGARDING THE CH ILDREN OF ASSESSEE STUDYING AND THE ASSESSEE IS HAVING LIC POLICY IS N OT FOUND TO BE FALSE. HENCE, THE FINDINGS OF THE A.O. HOLDING THE ASSESSE E GUILTY OF CONCEALMENT OF PARTICULARS OF INCOME IS CONTRARY TO THE FACTS OF THE CASE. ACCORDINGLY, WHEN THE ASSESSING OFFICER IS NOT ALLOWE D TO LEVY THE PENALTY, ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 13 WHICH IS CONTRARY TO THE CHARGE MENTIONED IN THE SHO W CAUSE NOTICE THEN THE IMPUGNED ORDER PASSED BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. 7. ON THE MERITS OF THE PENALTY, WE HAVE HEARD THE LD AR AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON R ECORD. THE ASSESSING OFFICER MADE ADDITION IN RESPECT OF GAIN ARISING FR OM SALE OF ANCESTRAL LAND HELD BY THE ASSESSEE BY ESTIMATING THE COST OF ACQU ISITION AS ON 01/4/1981 WHICH IS DIFFERENT FROM THE ESTIMATION OF COST OF ACQUISITION BY THE ASSESSEE. THE SECOND ADDITION WAS MADE BY TREATIN G THE DEVELOPMENT WORK AND CARVING OUT THE PLOT OF THE LAND AS CONVERS ION OF THE CAPITAL ASSET INTO STOCK IN TRADE. IT IS NOT THE CASE OF TH E ASSESSING OFFICER THAT THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE BUT CLEARLY STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IS DOING AGRICUL TURAL ACTIVITIES. THEREFORE, EVEN IF THE ASSESSEE HAS CARRIED OUT SOME DEVELOPMENT WORK AND CARVING OUT THE PLOTS PRIOR TO THE SALE, THE SA ME WOULD NOT AMOUNT TO A TRADING OR BUSINESS ACTIVITY WHEN THE LAND IN QUES TION WAS OTHERWISE ACCEPTED BY THE ASSESSING OFFICER UP TILL THIS YEAR AS CAPITAL ASSET. FURTHER THE ASSESSEE WAS HOLDING THIS LAND AS A SUCCESSOR AN D THE COST OF ACQUISITION WAS DETERMINED BY ESTIMATION OF FAIR MAR KET VALUE AS ON 01/4/1981, THEREFORE, THE ADDITION MADE BY THE ASSE SSING OFFICER ON BOTH ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 14 THE COUNTS WOULD NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. EVEN OTHERWISE IT IS A BONAFIDE CLAIM OF ASSESSEE TO OFFER THE ENTIRE GAIN AS LONG TERM CAPI TAL GAIN ARISING FROM SALE OF THE LAND IN QUESTION WHICH IS THE ONLY TRAN SACTION OF SALE AND NO TRANSACTION OF PURCHASE. SO FAR AS THE PENALTY LEVI ED ON ACCOUNT OF ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT O F SALE OF LAND IN QUESTION, THE SAME IS OTHERWISE NOT SUSTAINABLE ON T HE MERITS OF THE CASE. 7.1 AS REGARDS THE PENALTY LEVIED FOR DISALLOWANCE O F CLAIM U/S 80C OF THE ACT OF RS. 16,000/-, THE ASSESSING OFFICER HAS DISALLOWED THE SAME FOR WANT OF PRODUCTION OF EVIDENCE. THOUGH, IT WAS NOT A CASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS MADE BOGUS CLAIM BUT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE BEING THE AGRI CULTURISTS COULD NOT PRODUCE THE EVIDENCE ON ACCOUNT OF PAYMENT OF TUITI ON FEE OF RS. 6,000/- AND LIFE INSURANCE PREMIUM OF RS. 10,000/-. ACCORDI NGLY, ONLY BECAUSE THE ASSESSEE COULD NOT PRODUCE THE RECEIPT OF PREMI UM AS WELL AS THE TUITION FEE WOULD NOT LEAD TO THE CONCLUSION THAT TH E ASSESSEE HAS NOT PAID LIC PREMIUM OR TUITION FEE FOR THE CHILDREN. ACCORD INGLY, EVEN IF THE SAID DISALLOWANCE IS MADE FOR WANT OF REQUISITE RECEIPT, T HE CLAIM OF THE ASSESSEE CANNOT BE CONSIDERED AS BOGUS CLAIM. HENCE , THE PENALTY LEVIED BY THE ASSESSING OFFICER WITHOUT GIVING A CONCLUDING FINDING THAT IT WAS A ITA 229/JP/2018_ KAILASH CHAND JAT VS ITO 15 FALSE CLAIM, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR WANT OF RELEVANT EVIDENCE WOULD NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCE ALED THE PARTICULARS OF INCOME. HENCE, THE PENALTY LEVIED BY THE ASSESSING OFFICER IS LIABLE TO BE CANCELED. WE ORDER ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/08/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 09 TH AUGUST, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI KAILASH CHAND JAT, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE ITO, WARD-7(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 229/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR