Sh. Satyendra Nath, New Delhi V. ITO, New Delhi

ITA 2898/DEL/2013

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 8301 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 10-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI SENIOR
• Assessee Lawyers: RINKY SHARMA S; V K BINDAL MS SWEETY KOTHARI
• Keywords: Principle of natural justice; Reasonable cause
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.2898/DEL./2013 (ASSESSMENT YEAR : 2009-10) ITA NO.2973/DEL./2015 (ASSESSMENT YEAR : 2009-10) SHRI SATYENDRA NATH KUKREJA, VS. ITO, WARD 32 (1), 23, SUNDER NAGAR, NEW DELHI. NEW DELHI 110 003. (PAN : AFVPK4378R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. BINDAL, MS. SWEETY KOTHARI & MS. RINKY SHARMA, ADVOCATES REVENUE BY : SHRI V.K. JIWANI, SENIOR DR DATE OF HEARING : 19.09.2018 DATE OF ORDER : 03.10.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE BOTH THE AFORESAID APPEALS, ONE QUANTUM APPEA L AND ANOTHER PENALTY APPEAL, HAVE EMANATED FROM ONE ASSE SSMENT ORDER, THE SAME ARE BEING DISPOSED OFF BY WAY OF CONSOLIDA TED ORDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, SHRI SATYENDRA NATH KUKREJA (HERE INAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESE NT APPEAL (ITA ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 2 NO.2898/DEL/2013), SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 25.02.2013 PASSED BY LD. CIT (APPEALS)-XXVI, NEW D ELHI QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER AL IA THAT:- 1. THAT THE ORDER OF COMMISSIONER (APPEALS) IS CON TRARY TO LAW AND THE FACTS OF THE CASE. 2. THAT THE COMMISSIONER (APPEALS) ERRED IN HOLDING THE SUM OF RS.113,03,320/- AS INCOME WITHOUT CONSID ERATION AS PER THE PROVISION OF SECTION 56(2)(VII)(A) OF TH E INCOME TEL X ACT, 1961. 3. THAT THE COMMISSIONER (APPEALS) ERRED IN NOT HOLDING THE SUM OF RS.1,13,03,320/- AS ANY SUM OF M ONEY OR ANY PROPERTY RECEIVED IN CONTEMPLATION OF DEATH OF PAYER OR DONOR. 4. WITHOUT PREJUDICE TO THE FOREGOING, THE COMMISSIONER (APPEALS) FAILED TO RECOGNIZE THE LETT ER WRITTEN BY THE DE CEASED NOMINATING THE ASSESSEE AN D CONSEQUENT LETTERS OF MILTON KEYNES COUNCIL ON DIST RIBUTION OF ASSETS TO THE ASSESSEE. 5. WITHOUT PREJUDICE TO THE FOREGOING, HE COMMISSIO NER (APPEALS) ERRED IN IGNORING THE DOCUMENTS SUBMITTED , HOLDING THAT THERE IS NO ELEMENT OF PERSONAL INTIMA CY BETWEEN THE ASSESSEE AND PAYER AND THAT THE MONEY H AS NOT BEEN GIVEN TO THE ASSESSEE ON WILL OR ON CONTEMPLAT ION OF DEATH. 6. WITHOUT PREJUDICE TO THE FOREGOING, THE COMMISSIONER (APPEALS) ERRED IN IGNORING THE FACT T HAT 2/3RD OF THE SUM OF RS.1,13,03,320/- WAS DISTRIBUTE D TO OTHER TWO BROTHERS AS PER THE WILL OF LATE SHRI T.C. BHAR DWAJ AND CONTINUED TO MAKE AN ADDITION OF THE ENTIRE RS.1,13 ,03,320/- IN THE INCOME OF THE ASSESSEE. 7. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN INITIATING T HE PENALTY PROCEEDINGS U/S 271 (1)(C) OF THE INCOME TAX ACT, 1 961. ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 3 3. THE APPELLANT, SHRI SATYENDRA NATH KUKREJA (HERE INAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESE NT APPEAL (ITA NO.2973/DEL/2015), SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 26.02.2015 PASSED BY LD. CIT (APPEALS)-18, NEW DEL HI AFFIRMING THE PENALTY ORDER DATED 26.09.2013 PASSED U/S 271(1 )(C) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT), QUA THE ASSESSMENT YEAR 2009-10 ON THE GROUNDS INTER ALIA THAT :- 1.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) HAS ERRED, ON THE FACTS OF THE CASE AND IN LAW, IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER LEVYING THE PENA LTY UNDER SECTION 271 (1)(C) OF THE ACT, WITHOUT CONSIDERING THE SUBMISSIONS OF THE APPELLANT. 1.1 THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED, ON THE FACTS OF THE CASE AND IN LAW, IN CONF IRMING THE PENALTY OF RS.36,60,000 LEVIED ON THE APPELLANT UND ER SECTION 271 (1 )(C) OF THE ACT. 1.2 THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED, ON THE FACTS OF THE CASE AND IN LAW, IN DISM ISSING THE APPEAL ALLEGING THAT THE APPELLANT FURNISHED INACCU RATE PARTICULARS AS THE SOURCE OF DEPOSITS IN THE BANK A RE NOT PROVED. 1.3 ON THE FACTS OF THE CASE AND IN LAW, THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE. ITA NO.2973/DEL/2015 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : THE ASSESSEE FILED RETURN OF INCOME ON 23.07.2009 DECLARING INCOME AT RS.5,58,225/- WHICH WAS PUT UNDER SCRUTINY. IT WAS GATHERED BY AO THAT THE ASSESSEE HAS MADE ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 4 INVESTMENT IN MUTUAL FUND AND SHARES AMOUNTING TO R S.64,15,000/- AND ON QUERY, ASSESSEE FILED COPY OF BANK ACCOUNT O F STANDARD CHARTERED BANK CONTAINING THE FACT THAT THE INVESTM ENT WAS MADE THROUGH BANKING CHANNEL. AO NOTICED THAT THE ASSES SEE HAS RECEIVED AN AMOUNT OF RS.1,13,03,320/- FROM LATE SH RI TEK CHAND BHARDWAJ, ALLEGEDLY HIS CHILDHOOD FRIEND LIKE BROTH ER AFTER HIS DEATH, FROM UNITED KINGDOM (UK) AND CLAIMED THE SAM E AS NON- TAXABLE INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES. DECLINING THE CONTENTIONS RAISED BY THE ASSESSEE, A O PROCEEDED TO CONCLUDE THAT THE ASSESSEE HAS USED A COLOURING DEV ICE TO AVOID PAYMENT OF INCOME-TAX AND THE ASSESSEE HAS FAILED T O PROVE ANY PERSONAL INTIMACY WITH THE PAYER AND TREATED THE SA ME AS INCOME WITHOUT ANY CONSIDERATION AND THEREBY ADDED THE SAM E TO THE TOTAL INCOME OF THE ASSESSEE WHICH IS ASSESSED AT RS.1,19 ,09,045/-. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING AN APPEAL WHO HAS PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIB UNAL BY WAY OF FILING THE PRESENT APPEAL. 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 5 7. UNDISPUTEDLY, THE AMOUNT OF RS.1,13,03,320/- (GB P 158000) WAS CREDITED IN THE ASSESSEES ACCOUNT ON 15.12.200 8 PURSUANT TO THE CHEQUE DATED 13.11.2008 ISSUED BY MILTON KEYNES COUNCIL AND ANOTHER CHEQUE OF GBP 640 WAS ALSO SENT BY MILTON K EYNES COUNCIL TO THE ASSESSEE ON BEHALF OF ONE SHRI TEK C HAND BHARDWAJ. IT IS ALSO NOT IN DISPUTE THAT SHRI TEK CHAND BHARD WAJ WHO WAS PERSON OF INDIAN ORIGIN (PIO) AS A CITIZEN OF UK, E XPIRED ON 11.10.2008 AT THE AGE OF 87 YEARS. 8. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FACT S, ARGUMENTS ADDRESSED BY THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE LOWER REVENUE AUTHORITIES, THE SOLE QUESTION ARISES FOR D ETERMINATION IN THIS CASE IS :- AS TO WHETHER AO/CIT (A) HAVE ERRED IN TREATING THE AMOUNT OF RS.1,13,03,320/- (GBP 158000) RECEIVED VIDE CHEQUE DATED 13.11.2008 ON THE BASIS OF SOME NOMINATION LETTER A LLEGEDLY FILED BY TEK CHAND BHARDWAJ WITH MANAGER, HALIFON PLC., M ILTON KEYNES, UK REGARDING SAVING ACCOUNT NO.D/37707619-9 AS INCOME OF THE ASSESSEE FROM OTHER SOURCES? 9. LD. AR FOR THE ASSESSEE CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT (A) CONTENDED THAT SINCE THE ASSE SSEE HAS RECEIVED THE AMOUNT IN QUESTION AS A NOMINEE OF SHR I TEK CHAND BHARDWAJ AFTER HIS DEATH BEING A CHILDHOOD FRIEND, THE SAME IS NOT LIABLE TO BE TAXED; THAT AO AS WELL AS CIT (A) HAVE WRONGLY TREATED THE AMOUNT AS INCOME WITHOUT CONSIDERATION U/S 56(2 )(VII)(A) OF THE ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 6 ACT WHICH PERTAINS TO IMMOVABLE PROPERTY ONLY; THAT THE ASSESSEES CASE IS COVERED U/S 56(2)(VI) OF THE ACT. 10. HOWEVER, ON THE OTHER HAND, TO REPEL THE ARGUME NTS ADDRESSED BY THE LD. AR FOR THE ASSESSEE, THE LD. D R FOR THE REVENUE CONTENDED THAT NOMINATION LETTER RELIED UPO N BY THE ASSESSEE IS A COLOURABLE DEVICE USED BY THE ASSESSE E TO EVADE THE PAYMENT OF TAX; THAT THERE IS A COLLUSION BETWEEN A SSESSEE AND THE COUNCIL TO TRANSFER THE HUGE AMOUNT; THAT NO EVIDEN CE WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE ASSESSEE IF HE HA S ANY RELATION WITH SHRI TEK CHAND BHARDWAJ OR HE WAS THE BENEFICI ARY OF THE AMOUNT IN QUESTION BY WAY OF ANY WILL. 11. BARE PERUSAL OF THE NOMINATION LETTER, COPY OF WHICH IS AVAILABLE AT PAGE 4 OF THE PAPER BOOK VOL.I, SHOWS THAT THE SAME IS UNDATED, INITIALLY PURPORTED TO BE WRITTEN IN FAVOU R OF SHRI R.N. KUKREJA AND SHRI S. KUKREJA BY RECORDING THEIR DRIV ING LICENCE NUMBER BUT SUBSEQUENTLY THE NAME OF ASSESSEE HAS BE EN ENTERED WITHOUT HIS DRIVING LICENCE NUMBER OR PASSPORT NUMB ER ETC. EVEN WORD BOTH HAS BEEN STRUCK OFF AND OVER-WRITTEN WI TH WORD ALL, AND THESE CIRCUMSTANCES SHOW THAT THE NOMINATION IS SHROUDED BY SUSPICIOUS CIRCUMSTANCES. 12. MOREOVER ALLEGED NOMINATION IS A VAGUE AND AMBI GUOUS DOCUMENT AND DOES NOT INSPIRE ANY CONFIDENCE TO BEL IEVE IT. IT DOES ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 7 NOT DISCLOSE AS TO WHEN IT WAS EXECUTED BY SHRI TEK CHAND BHARDWAJ. FURTHERMORE, SHRI TEK CHAND BHARDWAJ WAS ADMITTEDLY A RETIRED CIVIL SERVANT AND HE WOULD HAVE EXECUTED A WILL IN FAVOUR OF THE ASSESSEE BEQUEATHING HIS MOVABLE ASSETS IN F AVOUR OF THE ASSESSEE, IF HE SO DESIRED. ASSESSEE HAS ALSO NOT BROUGHT ON RECORD EVEN IN IOTA OF EVIDENCE IN THE FORM OF SOME PHOTOG RAPHS WHILE ATTENDING THE FAMILY FUNCTIONS ETC. TO PROVE HIS AF FINITY OR CLOSENESS WITH SHRI TEK CHAND BHARDWAJ NOR HE HAS PROVED THAT HE HAS EVER VISITED HIM IN UK. ASSESSEE HAS BASED HIS ENTIRE C ASE ON THE UNDATED NOMINATION LETTER OTHERWISE REQUIRED TO BE EXECUTED IN PRESCRIBED PROFORMA IN ALL PROBABILITY AND APPARENT LY APPEARS TO BE A COLOURING DEVICE TO EXTRACT THE UNDUE BENEFIT IN COLLUSION WITH MILTON KEYNES COUNCIL. 13. ASSESSEE HAS ALSO NOT PRODUCED ANY CORRESPONDEN CE BY WAY OF TEXT MESSAGES OR LETTERS BETWEEN HIM AND SHRI TE K CHAND BHARDWAJ TO PROVE HIS CHILDHOOD FRIENDSHIP RATHER B ASED HIS ENTIRE CASE ON ALLEGED NOMINATION LETTER. LD. CIT (A) HAS RIGHTLY OBSERVED THAT MILTON KEYNES COUNCIL HAS RECORDED IN THE LETTER ISSUED TO THE ASSESSEE THAT THEY BEING NEXT KIN OF SHRI TEK CHAND BHARDWAJ HAVE BEEN NOMINATED TO RECEIVE HIS MOVABLE ASSETS AND TO PROVE THE FACT THAT THE ASSESSEES NEXT KIN HAS NOT BROUGHT ON RECORD ANY EVIDENCE IF HE HAS CLOSE RELATIVE BY WAY OF BLOOD OR ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 8 MARRIAGE OF SHRI TEK CHAND BHARDWAJ. ENTIRE EXERCI SE AS TO TRANSFER OF THE AMOUNT IN QUESTION BY MILTON KEYNES COUNCIL TO THE ASSESSEE IS BASED UPON BALD DOCUMENT WHICH HAS NOT BEEN SUPPORTED WITH ANY EVIDENCE EITHER BY THE MILTON KE YNES COUNCIL OR BY THE ASSESSEE TO PROVE HIS CLOSE RELATIONS WIT H SHRI TEK CHAND BHARDWAJ. SO, IN THE GIVEN CIRCUMSTANCES, WE ARE O F THE CONSIDERED VIEW THAT AO AS WELL AS LD. CIT (A) HAVE RIGHTLY TREATED THE AMOUNT IN QUESTION AS INCOME OF THE ASSESSEE WI THOUT CONSIDERATION. HENCE, QUESTION FRAMED IS DETERMINE D AGAINST THE ASSESSEE. SO, FINDING NO ILLEGALITY OR PERVERSITY IN THE IMPUGNED ORDER, PRESENT APPEAL BEING ITA NO.2898/DEL/2013 FI LED BY THE ASSESSEE IS DISMISSED. ITA NO.2973/DEL/2015 14. ON THE BASIS OF COMPLETED ASSESSMENT U/S 143 (3 ), PENALTY PROCEEDINGS HAVE BEEN INITIATED AGAINST THE ASSESSE E U/S 271(1)(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME RESULTING IN CONCEALMENT OF INCOME TO WHICH THE ASSESSEE HAS NOT FILED ANY REPLY. AO, BY RELYING UPON THE ASSESSMENT ORDER AF FIRMED BY THE LD. CIT (A), PROCEEDED TO CONCLUDE THAT THE ASSESSE E HAS FURNISHED INACCURATE PARTICULARS OF INCOME DELIBERATELY AND W ILLFULLY RESULTING IN CONCEALMENT OF INCOME AND DUE TAXES THEREON AND THEREBY LEVIED THE PENALTY OF RS.36,60,000/- U/S 271(1)(C) OF THE ACT. ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 9 15. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT (A) BY WAY OF FILING AN APPEAL WHO HAS CONFIRMED THE PENALTY BY D ISMISSING THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME U P BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 16. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE S OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 17. UNDISPUTEDLY, ADDITION MADE BY AO TO THE TUNE OF RS.1,13,03,320/- ON ACCOUNT OF INCOME WITHOUT ANY C ONSIDERATION HAS BEEN CONFIRMED. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS NOT CONTESTED THE PENALTY PROCEEDINGS BEFORE AO. I N THE BACKDROP OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CAS E, ARGUMENTS ADDRESSED BY THE LD. ARS OF THE PARTIES AND DOCUMEN TS RELIED UPON, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER THE ASSESSEE HAS CONCEALED PARTICULA RS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME DURING ASSESSMENT PROCEEDINGS WHILE INTERPRETING THE PROVISIONS CONTAINED U/S 271(1)(C) OF THE ACT? 18. THE LD. AR FOR THE ASSESSEE CHALLENGING THE PEN ALTY ORDER CONTENDED INTER ALIA THAT SHOW-CAUSE NOTICE ISSUED BY THE AO U/S 274, AVAILABLE AT PAGE 35 OF THE PAPER BOOK IS NOT A VALID NOTICE TO ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 10 INITIATE THE PENALTY PROCEEDINGS AS THE ASSESSEE CO MPANY HAS NOT BEEN MADE AWARE IF IT HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME AND RELIED UPON THE DECISION RENDERED BY THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY & ORS . 359 ITR 565 (KARN) ; THAT EVEN AT THE TIME OF PASSING THE ASSESSMENT ORDER, THE AO HAS FAILED TO SPECIFY HIMSELF IF THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHE D INACCURATE PARTICULARS OF INCOME RATHER BARELY STATED THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT IS INITIATED SEPARATELY; THAT EVEN AT THE TIME OF LEVYING THE PENALTY, THE AO WAS NOT CATEGOR IC ENOUGH IF HE IS LEVYING THE PENALTY FOR CONCEALMENT OF PARTICULA RS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF SUCH IN COME. 19. HOWEVER, LD. DR FOR THE REVENUE TO REPEL THE AR GUMENTS ADDRESSED BY THE LD. AR FOR THE ASSESSEE COMPANY CO NTENDED INTER ALIA THAT THE NOTICE ISSUED BY THE AO U/S 274 OF TH E ACT IS NOT STANDALONE DOCUMENT WHICH IS BASED ON ASSESSMENT OR DER; THAT THE NOTICE HAS BEEN ISSUED IN RESPECT OF FURNISHING INA CCURATE PARTICULARS OF INCOME AND RELIED UPON THE CASE OF TRIMURTI ENGINEERING WORKS 25 TAXMANN.COM 363 . 20. TO PROCEED FURTHER, WE WOULD LIKE TO REPRODUCE NOTICE ISSUED U/S 271(1)(C) OF THE ACT FOR READY PERUSAL :- ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 11 NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961 INCOME TAX OFFICE, NEW DELHI DATED : 28.1.2014 TO SHRI SATENDRA NATH KUKREJA, 23, SUNDER NAGAR, NEW DELHI-110 003. WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2009-10 IT APPEARS TO ME THAT Y OU:- HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WIT H A NOTICE UNDER SECTION 142 (1)/143(2) OF THE INCOME TAX ACT, 1961 DATED.. HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME IN TERMS OF EXPLANATION 1,2,3,4 AND 5 YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 11.30 AM/PM ON 16.01.2012 AND SHOW CAUSE WHY AN ORD ER IMPOSING A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEAR D IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW C AUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CO NSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271(1)( C). SD/- ASSESSING OFFICER INCOME TAX OFFICER, WARD 32 (1), ROOM NO.332-B, C.R. BUILDING, NEW DELHI. 21. UNDISPUTEDLY, ADDITIONS MADE AGAINST THE ASSESS EE DURING QUANTUM PROCEEDINGS HAVE ALREADY BEEN CONFIRMED. I T IS SETTLED PRINCIPLE OF LAW THAT THE PENALTY CANNOT BE IMPOSED MERELY ON THE GROUND THAT ADDITIONS MADE IN THE INCOME OF THE ASS ESSEE HAS BEEN ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 12 CONFIRMED RATHER TO PROCEED WITH IMPOSITION OF PENA LTY U/S 271(1)(C), THE AO HAS TO PROVE THAT THERE WAS CONCE ALMENT OF PARTICULARS OF INCOME OR ASSESSEE HAS FURNISHED INA CCURATE PARTICULARS OF SUCH INCOME. 22. BARE PERUSAL OF THE NOTICE ISSUED TO THE ASSESS EE U/S 271(1)(C) OF THE ACT REPRODUCED ABOVE GOES TO PROVE THAT ASSESSEE HAS NOT BEEN CALLED UPON TO EXPLAIN IF HE HAS CONCE ALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF SUCH INCOME RATHER A TICK HAS BEEN MARKED AGAINST BOTH T HE CHARGES MENTIONED IN THE PRINTED PROFORMA. HONBLE KARNATA KA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY & ORS. (SUPRA) DEALT WITH THE IDENTICAL ISSUE THREADBARE A ND CAME TO THE FOLLOWING CONCLUSION :- 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABI LITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILIT IES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENAL TY PROCEEDINGS UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF T HE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 13 F) EVER IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 27 1(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BEC AUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO I NITIATE PROCEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA N ON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AN D 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 ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSME NT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIR Y CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND I F NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR WHEN TH E ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE B ONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 14 N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INI TIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AU THORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE AS SESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF I NCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SA TISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATU RAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSIT ION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSME NT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDIN GS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHIN G OF INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUD ICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDI TY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. 23. SO, FOLLOWING THE LAW LAID DOWN BY HONBLE HIGH COURT AFFIRMED BY HONBLE SUPREME COURT, WE ARE OF THE CO NSIDERED VIEW ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 15 THAT WHEN THE ASSESSEE HAS NOT BEEN SPECIFICALLY MA DE AWARE OF THE CHARGES LEVELED AGAINST HIM AS TO WHETHER THERE IS A CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME ON HIS PART, THE PENALTY U/S 271(1)(C) OF THE ACT IS NOT S USTAINABLE. THE CASE LAW RELIED UPON BY THE LD. DR ARE NOT APPLICAB LE TO THE FACTS AND CIRCUMSTANCES OF THIS CASE IN THE FACE OF THE D ECISIONS RENDERED BY THE HONBLE HIGH COURT IN MANJUNATHA COTTON AND GINNING FACTORY & ORS. (SUPRA). 24. FURTHERMORE, EVEN THE PENALTY ORDER HAS BEEN PA SSED IN THIS CASE IN A MECHANICAL MANNER WHICH IS TOTALLY BASED UPON THE ASSESSMENT ORDER, THE OPERATIVE PART OF WHICH IS EX TRACTED FOR READY PERUSAL AS UNDER : IN VIEW OF THE ABOVE MENTIONED FACTS AND DECIDED C ASE LAW IT IS CRYSTAL CLEAR THAT ASSESSEE HAS FURNISHED INA CCURATE PARTICULARS OF INCOME DELIBERATELY AND WILLFULLY RE SULTING IN CONCEALMENT OF INCOME AND DUE TAXES THEREON. I AM SATISFIED THAT IT IS FIT CASE FOR LEVY OF PENALTY U /S 271(1)(C) OF THE INCOME TAX ACT, 1961. THE MAXIMUM PENALTY WORKS OUT TO BE RS.1,09,36,847/- @ 300% OF THE TAX SOUGHT TO BE EVADED AND MINIMUM PENALTY WORKS OUT TO RS.36,58,94 9/- @ 100% OF THE TAX SOUGHT TO BE EVADED. ACCORDINGLY, I LEVY PENALTY OF RS.36,60,000/- U/S 271(1)(C) F THE INCOM E TAX ACT, 1961. ISSUE DEMAND NOTICE U/S 156 OF THE INCO ME TAX ACT, ITNS-150 AND CHALLAN. 25. OPERATIVE PART OF THE PENALTY ORDER SHOWS THAT EVEN AT THE TIME OF LEVYING THE PENALTY, THE AO WAS NOT CATEGOR IC ENOUGH IF THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME OR HAS ITA NO.2898/DEL./2013 ITA NO.2973/DEL./2015 16 CONCEALED PARTICULARS OF INCOME. EVEN LD. CIT (A) IN THE IMPUGNED ORDER HAS NOT PREFERRED TO CLARIFY WHILE CONFIRMING THE PENALTY ORDER (IF THE ASSESSEE HAS FURNISHED INACCURATE PAR TICULARS OR HAS CONCEALED PARTICULARS OF SUCH INCOME) RATHER UPHELD THE PENALTY ORDER PASSED BY THE AO IN MECHANICAL MANNER. 26. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT AO/CIT (A) HAVE ERRED IN LEVYI NG/CONFIRMING THE PENALTY OF RS.36,60,000/- WHICH IS NOT SUSTAINA BLE IN THE EYES OF LAW, HENCE ORDERED TO BE DELETED. CONSEQUENTLY, THE APPEAL (ITA NO.2973/DEL/2015) FILED BY THE ASSESSEE IS HER EBY ALLOWED. 27. RESULTANTLY, ITA NO.2898/DEL/2013 FILED BY THE ASSESSEE IS DISMISSED AND ITA NO.2973/DEL/2015 IS HEREBY ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON THIS 3 RD DAY OF OCTOBER, 2018. SD/- SD/- (PRASHANT MAHARISHI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 3 RD DAY OF OCTOBER , 2018 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A) 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.