THE ITO, Visakhapatnam V. M/s Jaya Constructions, Visakhapatnam

ITA 35/VIZ/2015

• Counselvise Citation: 3525314 RSA 2015
• Duration Of Justice: 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 14-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OMKARESWARA RAO
• Keywords: Unexplained investment; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Revised return
• Section: 143(3); 133A; 148; 263; 132

Judgement Text

ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 1 OF 19 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER, & SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NOS.613 & 630/VIZAG/2013 ASSESSMENT YEAR : 2009 - 10 M/S. JAYA CONS TRUCTIONS VISAKHAPATNAM VS. COMMISSIONER OF INCOME TAX-1 VISAKHAPATNAM (APPELLANT) PAN NO: AAFFJ 3272 Q (RESPONDENT) ITA NOS.35/VIZAG/2015 ASSESSMENT YEAR: 2009 - 10 ITO WARD - 1(4) VISAKHAPATNAM VS. M/S. JAYA CONSTRUCTIONS VISAKHAPATNAM ( RESPONDE NT ) PAN NO: AAFFJ 3272 Q ASSESSEE BY: SHRI G.V.N. HARI, CA DEPARTMENT BY: SHRI OMKARESWARA RAO , DR DATE OF HEARING: 26/02/2015 DATE OF PRONOUNCEMENT: 04 / 03 /2015 ORDER PER SAKTIJIT DEY THESE APPEALS HAVE BEEN FILED BOTH BY ASSESSEE AND THE DEPARTMENT. WHILE APPEAL IN ITA NO.613/VIZAG/2013 H AS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER PASSED BY THE LEARNED CIT-1 VISAKHAPATNAM UNDER SECTION 263 OF TH E ACT FOR THE ASSESSMENT YEAR 2009-10, THE OTHER TWO APPEALS BY THE ASSESSEE AND THE DEPARTMENT ARE AGAINST THE ORDER O F THE ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 2 OF 19 LEARNED CIT (A) PASSED FOR THE VERY SAME ASSESSMENT YEAR SUSTAINING THE PENALTY IMPOSED UNDER SECTION 271(1) (C) PARTLY. ITA NO.613/VIZAG/2013 : 2. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED UNDER SECTION 263 OF THE ACT BY THE CIT DIRE CTING THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS DE NOVO UNDER SECTION 2171(1)(C) FOR THE ASSESSMENT YEAR 2009-10. BRIEFLY THE FACTS ARE, ASSESSEE A PARTNERSHIP FORM IS ENGAGED I N THE BUSINESS OF REAL ESTATE. THE ACTIVITY OF THE ASSESS EE IS TO PURCHASE LAND AND AFTER DEVELOPING INTO PLOTS TO SE LL THEM. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ASSESSEE FI LED RETURN OF INCOME ON 15.12.2009 DECLARING INCOME OF RS.11,9 1,090. ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND A NOT ICE WAS ISSUED UNDER SECTION 143(2) BY THE ASSESSING OFFICE R ON 31.8.2011 CALLING UPON THE ASSESSEE TO SUBMIT NECES SARY INFORMATION. DURING THE PENDANCY OF THE ASSESSMENT PROCEEDINGS, A SURVEY UNDER SECTION 133A WAS CONDUC TED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 24.10.11. AS IT APPEARS, ON THE BASIS OF INFORMATION FOUND DURING THE SURVEY OPERATIONS, STATEMENTS WERE RECORDED FROM THE PARTN ERS AND IN COURSE OF WHICH ASSESSEE OFFERED RS.8.28 CRORES FOR CHILIKURI HOUSING PROJECTS AND RS.2.49 CRORES FOR JAYA CONSTR UCTIONS. SUBSEQUENTLY, ASSESSEE OFFERED ADDITIONAL INCOME OF RS.1,47,78,532 VIDE LETTER DATED 16.12.2011 IN COUR SE OF ASSESSMENT PROCEEDINGS. ASSESSING OFFICER NOTICED T HAT THE ASSESSEE HAS ACQUIRED CERTAIN LANDS IN AND AROUND KAPULUPPADA TALUQ TO DEVELOP RESIDENTIAL PLOTS UNDE R A PROJECT NAMED AS CHILUKURI BRINDAVAN ESTATES. HE FURTHER FOUND THAT ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 3 OF 19 ASSESSEE HAS DEVELOPED THE PROJECT IN THREE PHASES I.E. PHASE-I, PHASE-II AND PHASE-III. ON VERIFYING THE TRADING AN D PROFIT & LOSS ACCOUNT IT WAS NOTICED BY THE ASSESSING OFFICE R THAT WHILE THE ASSESSEE HAS ADMITTED OPENING STOCK OF RS.75,99 ,640 BEING THE COST OF LAND OR VALUE OF SITE PROPOSED TO BE DE VELOPED, IT HAS ADMITTED SALES EFFECTED DURING THE YEAR END UNDER T HE THREE PHASES AT RS.3,65,50,852. HE NOTED THAT AFTER LEAVI NG THE DEVELOPMENT EXPENDITURE, ASSESSEE HAS DECLARED GROS S PROFIT OF RS.41,52,125 AND AFTER CLAIMING INDIRECT EXPENSES A NET PROFIT OF RS.8,11,813. ASSESSING OFFICER OBSERVED THAT ON VERIFICATION OF TRADING ACCOUNT IT WAS FOUND THAT THOUGH THE ASS ESSEE HAS NOT SOLD THE ENTIRE PLOTS DEVELOPED, THE CLOSING VA LUE OF UNSOLD PLOT AND THE PROPORTIONATE WORK IN PROGRESS WHICH O UGHT TO HAVE BEEN CREDITED TO THE TRADING ACCOUNT AND SHOWN AS CLOSING WORK IN PROGRESS HAS NOT BEEN SHOWN, WHICH RESULTED IN MIS-STATEMENT OF FACTS IN THE TRADING ACCOUNT. H E FURTHER OBSERVED THAT THE DEVELOPMENT EXPENDITURE DURING TH E YEAR FOR CONVERTING THE LANDS INTO RESIDENTIAL PLOTS WAS CLA IMED AT RS.2,45,99,085 AND THE SAID EXPENDITURE WAS CLAIMED TO HAVE BEEN INCURRED DURING THE YEAR UNDER CONSIDERATION I S ATTRIBUTABLE TO THE ENTIRE AREA OF THE PLOTS DEVELO PED UNDER ALL THE PHASES. THEREFORE, ACCORDING TO THE ASSESSING O FFICER CERTAIN AMOUNT OF EXPENDITURE OUGHT TO HAVE BEEN BR OUGHT FORWARD AS CLOSING WORK IN PROGRESS AS ON 31.3.2009 AS ATTRIBUTABLE TO THE VALUE OF UNSOLD PLOTS. WHEN AS SESSEE WAS POINTED OUT AND ASKED TO EXPLAIN THESE DEFICIENCIES AND MIS- STATEMENTS OF FACTS, IT CAME FORWARD WITH AN ESTIMA TION OF CLOSING VALUE OF UNSOLD PLOTTED AREA OF 30,406 SQ. YARDS AS CLOSING WORK N PROGRESS AT RS.1,47,78,532 WHICH WAS OFFERED AS ADDITIONAL INCOME VIDE LETTER DATED 16.12.2011. ACC ORDINGLY, ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 4 OF 19 ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SE CTION 143(3) OF THE ACT VIDE ORDER DATED 26.12.2011 BY DE TERMINING THE TOTAL INCOME AT RS.1,61,64,924. IN THE ASSESSM ENT ORDER THE ASSESSING OFFICER DIRECTED INITIATION PROCEEDIN GS UNDER SECTION 271(1)(C) OF THE ACT. 3. THE LEARNED CIT WHILE EXAMINING THE ASSESSMENT R ECORDS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR NO TICED THAT THE ASSESSING OFFICER VIDE ORDER SHEET ENTRY DATED 26.09.2012 HAS DROPPED THE PROCEEDINGS INITIATED FOR IMPOSITIO N OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE LEARNED CI T (A) BEING OF THE VIEW THAT THE DROPPING OF PENALTY PROCEEDINGS B Y THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE INVOKING HIS JURISDICTION UNDER SECT ION 263 ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE. 4. IN RESPONSE TO THE SHOW CAUSE NOTICE AS WELL AS IN COURSE OF REVISION PROCEEDINGS, THE ASSESSEE OBJECTED TO T HE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT, BOTH O N THE ISSUE OF JURISDICTION AS WELL AS ON MERITS BY STATING THA T ASSESSING OFFICER HAVING EXAMINED THE EXPLANATIONS OF THE ASS ESSEE AND AFTER BEING SATISFIED DROPPED THE PENALTY PROCEEDIN GS, THE CIT CANNOT HOLD SUCH DECISION OF THE ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE SO AS TO EXERCISE POWERS UNDER SECTION 263 OF THE ACT. IN SUPPORT OF SUCH CONTENTIONS, ASSESSEE ALSO RELIED UPON A NUMBE R OF DECISIONS. THE LEARNED CIT HOWEVER, DID NOT FIND ME RIT IN THE SUBMISSIONS OF THE ASSESSEE. THE LEARNED CIT OBSERV ED THAT SINCE NON DISCLOSURE OF INCOME BY THE ASSESSEE IN T HE ORIGINAL RETURN OF INCOME IS PROVED FROM FURNISHING OF ADDIT IONAL INCOME ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 5 OF 19 BY THE ASSESSEE AT THE TIME OF SURVEY AND DURING TH E ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WAS N OT JUSTIFIED IN DROPPING THE PENALTY PROCEEDINGS. THE LEARNED CI T RELYING UPON THE DECISION OF THE HON'BLE PATNA HIGH COURT I N THE CASE OF M/S. R.A. HIMATSINGHKA & CO. FOR ASSESSMENT YEAR 2004-05 AND THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. TOYOTA MOTORS CORPORATION SET ASIDE THE ORDER OF THE ASSES SING OFFICER FOR DROPPING THE PROCEEDINGS FOR IMPOSITION OF PENA LTY UNDER SECTION 271(1)(C) WITH THE FOLLOWING DIRECTIONS: 6. IN VIEW OF THE FOREGOING DISCUSSION AND ANALYSI S WITH REGARD TO THE ISSUE OF DROPPING OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT BY T HE ASSESSING OFFICER WITHOUT PROPER APPLICATION OF MIN D, WITHOUT HAVING REGARD TO THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND WITHOUT ADVANCING COGENT AND CREDIBLE REASONS, IT IS, HEREBY HELD THA T THE PROCEEDINGS VIDE ORDER SHEET ENTRY DATED 29.05.2012 IS ERRONEOUS IN SO FAR AS IT IS PREJUDIC IAL TO THE INTEREST OF THE REVENUE AND AS SUCH, THE SAM E IS SET ASIDE WITH A DIRECTION TO THE ASSESSING OFFI CER TO TAKE UP THE SAID PENALTY PROCEEDINGS DE NOVO AND PASS APPROPRIATE ORDER AFTER TAKING INTO ACCOUNT AL L THE MATERIAL FACTS IN THE LIGHT OF THE RELEVANT JUD ICIAL PRONOUNCEMENTS AND AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 5. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED BEFORE US THAT THE ASSESSING OFFICER AT THE TIME OF COMPLE TION OF THE ASSESSMENT INITIATED PROCEEDINGS UNDER SECTION 271( 1)(C) OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED UN DER SECTION 271(1)(C) R.W.S. 271 OF THE ACT, ASSESSEE SUBMITTED DETAILED REPLY EXPLAINING WHY PENALTY UNDER SECTION 271(1)(C ) OF THE ACT CANNOT BE IMPOSED AS THERE IS NEITHER ANY CONCEALME NT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. ASSESSING OFFICER AFTER CONSIDERING THE EX PLANATION OF ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 6 OF 19 THE ASSESSEE AND APPLYING HIS MIND TO THE FACTS AND MATERIALS ON RECORD DROPPED THE PENALTY PROCEEDINGS. THEREFOR E, AS THE ASSESSING OFFICER HAS TAKEN A DECISION AFTER DUE AP PLICATION OF MIND, SUCH DECISION TAKEN BY THE ASSESSING OFFICER CANNOT BE CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE SO AS TO ENABLE THE CIT TO INVOKE JURIS DICTION UNDER SECTION 263. THE LEARNED AUTHORISED REPRESENT ATIVE SUBMITTED THAT ONLY BECAUSE THE CIT IS HOLDING A VI EW DIFFERENT FROM THE ASSESSING OFFICER THAT CANNOT BE A REASON TO TERM THE ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LE ARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ADMISS ION OF ADDITIONAL INCOME BY THE ASSESSEE AT THE TIME OF SU RVEY WAS WITH A REQUEST THAT THE PENALTY SHALL NOT BE LEVIED AND THE ASSESSING OFFICER WHILE CONSIDERING THESE ASPECTS A S WELL AS THE PECULIAR FACTS TOOK A CONSCIOUS DECISION TO DROP TH E PROCEEDINGS UNDER SECTION 271(1)(C) AS ACCORDING TO HIM, KEEPING IN VIEW THE PECULIAR FACTS AND CIRCUMSTANCE S, IMPOSITION OF PENALTY WOULD NOT BE PROPER. THE LEAR NED AUTHORISED REPRESENTATIVE SUBMITTED THAT WHEN THE A SSESSING OFFICER AFTER CONSIDERING THE EXPLANATIONS OF THE A SSESSEE ALONG WITH THE FACTS AND MATERIALS RELATING TO THE ISSUE OF CONCEALMENT BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE HAD TAKEN A DECISION NOT TO IMPOSE PENALTY , THE CIT CANNOT OVER TURN SUCH DECISIONS OF THE ASSESSING OF FICER BY INVOKING THE POWER UNDER SECTION 263. IN THIS CONTE XT THE LEARNED AUTHORISED REPRESENTATIVE REFERRED TO A DEC ISION OF THE ITAT HYDERABAD BENCH IN THE CASE OF RAJKUMAR JAIN V S. CIT IN ITA NO.575/HYD/2012 DATED 7.9.2012. ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 7 OF 19 6. THE LEARNED AUTHORISED REPRESENTATIVE REFERRING TO THE FACTS INVOLVED IN CASE OF RAJ KUMAR JAIN VS. CIT SU BMITTED BEFORE US THAT IN THAT CASE ALSO ASSESSING OFFICER MADE ALMOST IDENTICAL ORDER SHEET ENTRY WHILE DROPPING THE PENA LTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) OF TH E ACT. WHEN THE CIT INVOKED HIS JURISDICTION UNDER SECTION 263 FOR SETTING ASIDE THE ORDER OF THE ASSESSING OFFICER, THE TRIBU NAL DISAPPROVED THE SAME BY HOLDING THAT THE ORDER PASS ED BY WAY OF ORDER SHEET ENTRY IN DROPPING THE PENALTY PROCEE DINGS CANNOT BE CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. THE LEARNED AUTHORISED REPRESENTATI VE SUBMITTED THAT THE AFORESAID DECISION OF THE ITAT H YDERABAD BENCH HAS ALSO BEEN UPHELD BY THE HON'BLE JURISDIC TIONAL HIGH COURT IN ITTA NO.147 OF 2013. THE LEARNED AUTHORISE D REPRESENTATIVE ALSO RELIED UPON THE DECISION CITED IN COURSE OF REVISION PROCEEDINGS TO IMPRESS UPON US THAT JURISD ICTION EXERCISES BY THE CIT UNDER SECTION 263 IS INVALID. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND SUBMITTED BEFORE US THAT FROM THE CONDUCT OF T HE ASSESSEE, CONCEALMENT OF INCOME IS CLEARLY PROVED. IT WAS SUBMITTED, THE ASSESSEE HAD ORIGINALLY FILED ITS RE TURN OF INCOME SHOWING A VERY MEAGER INCOME. EVEN IN COURSE OF SCR UTINY ASSESSMENT PROCEEDINGS, THE ASSESSEE DID NOT OFFER ANY ADDITIONAL INCOME INITIALLY. ONLY AFTER HUGE UNACCO UNTED INCOME WAS UNEARTHED DURING THE SURVEY OPERATIONS T HE ASSESSEE CAME FORWARD TO OFFER ADDITIONAL INCOME. T HE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, APART FROM T HE UNACCOUNTED INCOME FOUND AT THE TIME OF SURVEY DURI NG THE ASSESSMENT PROCEEDINGS ALSO THE ASSESSING OFFICER F OUND CLEAR ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 8 OF 19 MISSTATEMENT OF FACTS RESULTING IN SUPPRESSION OF I NCOME. THEREFORE, ASSESSEE WAS COMPELLED TO OFFER ADDITION AL INCOME OF RS.1,47,00,000. THUS, IT WAS SUBMITTED, BUT FOR TH E SURVEY THE ASSESSEE OTHERWISE WOULD HAVE NEVER DISCLOSED ADDIT IONAL INCOME OFFERED BY HIM DURING ASSESSMENT. IT WAS SUB MITTED, IN THESE CIRCUMSTANCES WHEN THE CONCEALMENT OF INCOME WAS PROVED, ASSESSING OFFICER SHOULD NOT HAVE DROPPED T HE PENALTY PROCEEDINGS BY MERELY MAKING AN ORDER SHEET ENTRY I N A CRYPTIC MANNER. IN SUPPORT OF HIS CONTENTION THE LEARNED DE PARTMENTAL REPRESENTATIVE PLACED RELIANCE ON THE DECISIONS REF ERRED TO BY THE LEARNED CIT IN REVISIONAL ORDER. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIAL ON RECORD. THE BASIC ISSUE ARI SING FOR CONSIDERATION IS WHETHER THE EXERCISE OF POWER UNDE R SECTION 263 IN THE PRESENT CASE IS VALID. AS CAN BE SEEN FR OM THE ASSESSMENT ORDER, THE ASSESSING OFFICER WHILE COMPL ETING THE ASSESSMENT ALSO INITIATED PROCEEDING UNDER SECTION 271(1)(C) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER ISSUED A S HOW CAUSE NOTICE IN TERMS OF SEC 274 R.W.S 271 TO THE ASSESSE E TO EXPLAIN WHY PENALTY UNDER SECTION 271(1)(C) SHALL NOT BE IM POSED. IN RESPONSE TO THE SHOW CAUSE NOTICE AS APPEARS FROM T HE RECORD, ASSESSEE ALSO FILED A DETAILED REPLY EXPLAINING WHY PENALTY UNDER SECTION 271(1)(C) SHOULD NOT BE IMPOSED AS NE ITHER THERE IS CONCEALMENT OF INCOME, NOR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME. ASSESSING OFFICER AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF THE F ACTS ON RECORD DROPPED THE PROCEEDINGS INITIATED FOR IMPOSI TION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY MAKIN G THE FOLLOWING ORDER SHEET ENTRY ON 29.06.2012: ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 9 OF 19 SRI S.K.M.K. MURTHY, CHARTERED ACCOUNTANT SUBMITTED WRITTEN EXPLANATION WITH REGARD TO THE PENALTY NOTICES ISSUED UNDER SECTION 271(1)(C). THE SAME IS EXAMINED AND CONSIDERING THE FACTS OF THE CASE, PENALTY INITIATED IS DROPPED. SD/- ASSESSING OFFICER . 9. BEFORE EXAMINING WHETHER THE AFORESAID ORDER PAS SED BY ASSESSING OFFICER CAN BE SAID TO BE ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF THE REVENUE, AS HELD BY THE LEARNE D CIT, IT IS NECESSARY TO LOOK INTO THE PROVISIONS OF SECTIONS 2 71(1)(C) OF THE ACT, WHICH READ AS UNDER: 271. (1) IF THE [ASSESSING] OFFICER OR THE [COMMISSIONE R (APPEALS)] [OR THE [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR [* * *] FURNISHED INACCURATE PARTICULARS OF [SUCH INCOME, OR] [EXPLANATION 1.WHERE IN RESPECT OF ANY FACTS MATER IAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON U NDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE 75 [ASSESSING] OFFICER OR THE 76 [***] 77 [COMMISSIONER (APPEALS)] 78 [OR THE 78A [ PRINCIPAL COMMISSIONER OR ] COMMISSIONER] TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE 79 [AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM], THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHA LL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 10 OF 19 TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICU LARS HAVE BEEN CONCEALED. 10. AS CAN BE SEEN FROM THE AFORESAID PROVISIONS, T HE ASSESSING OFFICER IS EMPOWERED TO IMPOSE PENALTY UN DER SECTION 271(1)(C) OF THE ACT IF HE IS SATISFIED THA T ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME. HOWEVER, EXPLANATION-1 TO SE C 271(1)(C) PROVIDES THAT THE PENALTY IS IMPOSABLE , IF THE ASS ESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE OR THE EXPLANATION IS NOT SUBS TANTIATED OR THE ASSESSEE FAILS TO PROVE THAT SUCH EXPLANATION I S BONAFIDE AND THAT ALL FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THEREFORE, IT IS CLEAR FROM THE AFORESAID PROVISION , THE IMPOSITION OF PENALTY IS PURELY DEPENDENT UPON THE SATISFACTION OF THE PERSON INITIATING THE PENALTY PROCEEDINGS WH ICH IN THE PRESENT CASE IS ASSESSING OFFICER. IT IS FURTHER CL EAR, IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) IS NEITHER MANDA TORY NOR AUTOMATIC. RATHER, SOME AMOUNT OF DISCRETION IS LEF T TO THE AUTHORITY CONCERNED WHETHER TO IMPOSE PENALTY OR NO T BY EXAMINING THE EXPLANATION SUBMITTED BY ASSESSEE. TH EREFORE, IF THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANA TION OF THE ASSESSEE IS SATISFIED THAT IN THE GIVEN FACTS AND C IRCUMSTANCES, IT DOES NOT CALL FOR IMPOSITION OF PENALTY UNDER SE CTION 271(1)(C), THEN SUCH SATISFACTION REACHED BY THE AS SESSING OFFICER CANNOT BE CALLED INTO QUESTION BY THE CIT O NLY BECAUSE HE DOES NOT AGREE WITH THE VIEW OF THE ASSESSING OF FICER. THE SATISFACTION ENVISAGED UNDER SECTION 271(1)(C) OF THE ACT IS THE SATISFACTION OF THE AUTHORITY INITIATING PENALTY PR OCEEDINGS AND NOT OF ANY OTHER AUTHORITY. THEREFORE, IF IN A GIVE N CASE UPON ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 11 OF 19 CONSIDERATION OF THE EXPLANATION OF THE ASSESSEE IN THE CONTEXT OF THE FACTS AND MATERIALS ON RECORD THE ASSESSING OFFICER IS SATISFIED THAT PENALTY UNDER SECTION 271(1)(C) IS N OT IMPOSABLE, CIT CANNOT HOLD SUCH ORDER OF THE ASSESSING OFFICER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, SI NCE IN CITS VIEW IT IS NOT THE CORRECT VIEW. THE CIT CANNOT SUB STITUTE HIS SATISFACTION WITH THE SATISFACTION OF THE ASSESSING OFFICER. WHEN THE ACT EMPOWERS THE ASSESSING OFFICER TO IMPOSE OR NOT TO IMPOSE PENALTY IN A PARTICULAR CASE AND IN TERMS WI TH THAT POWER THE ASSESSING OFFICER TAKES A DECISION NOT TO IMPOSE PENALTY, THE CIT CANNOT REVISE SUCH AN ORDER IN EXE RCISE OF POWER UNDER SECTION 263 OF THE ACT. IN THIS CONTEXT IT IS TO BE NOTED THAT IN THE CASE OF SHRI RAJ KUMAR JAIN VS. C IT (SUPRA) VALIDITY OF POWER EXERCISED UNDER SECTION 263 BY CI T ON IDENTICAL FACTS AND CIRCUMSTANCES CAME UP FOR CONSI DERATION BEFORE THE ITAT HYDERABAD BENCH. IN THE CASE OF RAJ KUMAR JAIN VS. CIT, THE ASSESSING OFFICER HAS ALSO DROPPE D THE PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) BY WAY OF ORDER SHEET ENTRY AS UNDER: THE ASSESSEE FILED A DETAILED EXPLANATION IN RESPONSE TO THE NOTICE UNDER SECTION 271(1)(C) OF T HE ACT READ WITH SECTION 274. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE EXPLANATION FILED, THE PENALTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) OF THE ACT ARE DROPPED. 11. THE LEARNED CIT HOWEVER IN EXERCISE OF POWER UN DER SECTION 263 OF THE ACT HELD THE DROPPING OF PENALTY PROCEEDING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. THE COORDINATE BENCH OF THE TRIBUNAL WHILE CONSIDERING THE VALIDITY OF POWER EXERCISED UNDER SECTION 263 OF THE ACT HEL D AS UNDER: ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 12 OF 19 11. WHILE COMING TO THE ABOVE CONCLUSION THE ASSESS ING OFFICER CONSIDERED THE DETAILED EXPLANATION OFFERED BY THE ASSESSEE. WE HAVE GONE THROUGH THE EXPLANATION OFFE RED BY THE ASSESSEE WHICH IS KEPT ON RECORD AT PAPER BO OK PAGE NOS. 5 TO 10 WHICH IS ALSO PUT BEFORE US BY TH E AR. IN OUR OPINION, EVEN ORDER SHEET ENTRY HAS TO BE CONSI DERED AS AN ORDER IN VIEW OF THE JUDGMENT IN THE CASE OF H.H. RAJDADI SMT. BADAN KANWAR MEDICAL TRUST VS. CIT (214 ITR 130) (RAJ) WHEREIN IT WAS HELD AS UNDER: 'THE PROVISIONS OF S. 25(1) OF THE WEALTH-TAX ACT, 1957, CONTEMPLATE THAT THE COMMISSIONER MAY CALL FOR THE RECORD OF ANY PROCEEDINGS UNDER THE ACT IN WHICH AN ORDER HAS BEEN PASSED BY ANY AUTHORITY SUBORDINATE TO HIM. SUB-S. (3) OF S. 25 BARS THE EXERCISE OF THE POWER AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SO UGHT TO BE REVISED WAS PASSED. THE AUTHORITY MAY ON THE BASIS OF DOCUMENTS SUBMITTED OR EVEN ON VERBAL SUBMISSIONS C OME TO THE CONCLUSION THAT THE PROCEEDINGS ARE DROPPED. IN BOT H THESE CASES, IT IS AN ORDER WHICH HAS CULMINATED IN NIL LIABILIT Y SO FAR AS THE ASSESSING AUTHORITY IS CONCERNED AND SO FAR AS INIT IATION OF THE PROCEEDINGS BY THAT AUTHORITY IS CONCERNED. THEREFO RE, IN SUCH A CASE IT HAS TO BE CONSIDERED THAT THE MATTER OF THE ASSESSEE WITH REGARD TO THE INITIATION OF THE PROCEEDINGS BY ISSU E OF NOTICE HAS RESULTED IN NIL ASSESSMENT. IN THESE CIRCUMSTANCES, RECORDING OF THE WORDS THAT 'PROCEEDINGS ARE DROPPED' AMOUNTS TO AN ORDER. IF AN ASSESSMENT ORDER BY WHICH ANY LIABILITY IS CR EATED ON THE ASSESSEE IS MADE AND IT IS NOT SERVED ON THE ASSESS EE OR HIS RIGHTS ARE AFFECTED THEN, IN THAT CASE, IT CAN BE SAID THA T IT WOULD NOT BE EFFECTIVE UNLESS IT IS COMMUNICATED OR SERVED ON TH E ASSESSEE. BUT IN A CASE WHERE A PLEA RAISED BY AN ASSESSEE IS ACCEPTED AND PROCEEDINGS ARE DROPPED IT IS NOT NECESSARY THAT TH E ORDER SHOULD BE COMMUNICATED AND SERVED ON THE ASSESSEE. HENCE, AN ORDER SHEET ENTRY MADE BY THE WEALTH-TAX OFFICER DROPPING THE PROCEEDINGS WITHOUT COMMUNICATING IT TO THE ASSESSE E AMOUNTS TO AN ORDER WHICH CAN BE REVISED BY THE COMMISSIONE R OF WEALTH-TAX UNDER SECTION 25(2).' 12. IN THE CASE OF NEW JAGAT TEXTILE MILLS P. LTD. V. CIT (282 ITR 399) THE GUJARAT HIGH COURT HELD AS UNDER : ' HELD, THAT THE ACTION OF THE ASSESSING OFFICER IN N OT MAKING A BEST JUDGMENT ASSESSMENT UNDER SECTION 144(A) OF TH E ACT, DESPITE FAILURE OF THE ASSESSEE TO FILE A RETURN OF INCOME UPON BEING SERVED WITH A NOTICE UNDER SECTION 139(2) OF THE ACT, WAS ITSELF AN ACTION WHICH WAS ERRONEOUS IN LAW. THE AS SESSEE ITSELF HAVING SUBMITTED A STATEMENT OF ADVANCE TAX PAYABLE DECLARING INCOME OF MORE THAN RS. 1,35,000 AND HAVING PAID AD VANCE TAX ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 13 OF 19 TO THE TUNE OF RS. 74,001, ITSELF INDICATED THAT TH E ASSESSEE- COMPANY WAS HAVING POSITIVE INCOME IN THE YEAR UNDE R CONSIDERATION. THEREFORE, ALSO, THE ACTION OF THE A SSESSING OFFICER OF DROPPING THE PROCEEDINGS HAD RESULTED IN CAUSING PREJUDICE TO THE INTEREST OF REVENUE AND THE SECOND LIMB OF SECTION 263 OF THE ACT ALSO STOOD SATISFIED. THEREF ORE, ONCE THE TWIN CONDITIONS FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT WERE SHOWN TO BE FULFILLED, THE COMMISSIONE R WAS PERFECTLY JUSTIFIED IN TAKING ACTION UNDER THE SAID PROVISION AND EXERCISING HIS REVISIONAL POWERS.' 13. APART FROM THIS, WE HAVE TO SEE WHETHER DROPPIN G OF PENALTY PROCEEDINGS BY THE ASSESSING OFFICER IS JUS TIFIED AND WHETHER THE CIT CAN DIRECT THE ASSESSING OFFICE R TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT. COMING TO T HE MERIT OF LEVY OF PENALTY, IN OUR OPINION, THE EXPLANATION OFFERED BY THE ASSESSEE HAS TO BE SEEN. IN THE PRESENT CASE , THERE WAS A SEARCH AND SEIZURE OPERATION IN THE CASE OF S RI GOPAL LAL BADRUKA AND M/S. AHURA HOLDINGS ON 26.07.2006, A COPY OF AN AGREEMENT FOR SALE DEED DA TED 26.08.2003 WAS FOUND, ACCORDING TO WHICH THE ASSESS EE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF PLOT ADMEASURING 1529 SQ. YARDS @ 11750/- PER SQ. YARD F ROM M/S. AHURA HOLDINGS. THE TOTAL SALE CONSIDERATION WORKED OUT TO RS.1,79,65,750. BUT AS SEEN FROM THE REGISTERED SALE DEED, THE SALE CONSIDERATION WAS MENTIONED AS RS. 56,20,000 WHICH WORKED OUT @ 4,000 /- PER SQ. YARD. DURING THE ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. AHURA HOLDINGS, SRI GOPAL LAL BADRUKA HAD CONFIRMED THAT HE HAD RECEIVED ENTIRE CONSIDERATION OF RS. 1,65,08,750 FROM THE ASSESSEE FOR 1405 SQ. YARDS @ 11750 PER SQ. YARD. AS THE DIFFERENCE OF RS. 1,08,88,750/ - BETWEEN THE AMOUNT ADMITTED TO HAVE BEEN RECEIVED B Y SRI GOPAL LAL BADRUKA AND THE AMOUNT MENTIONED IN T HE REGISTERED SALE DEED, REPRESENTS THE ASSESSEE'S UNACCOUNTED INVESTMENT IN THE PURCHASE OF PLOT FROM M/S. AHURA HOLDINGS FOR THE A.Y. 2004-05. IN RESPON SE TO THE NOTICE ISSUED U/S. 148 BY THE ASSESSING OFFICER , THE ASSESSEE HAD FILED REVISED RETURN ADMITTING ADDITIO NAL INCOME OF RS. 1,08,88,750. THE ASSESSMENT WAS COMPL ETED BY PASSING AN ORDER U/S. 143(3) R.W.S. 147 ON 28.04 .2010. IT IS SEEN THAT THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME U/S. 271(1)(C ) OF THE INCOME TAX ACT. HOWEVER, IT IS FOUND THAT THE P ENALTY PROCEEDINGS INITIATED HAVE BEEN DROPPED VIDE ORDER SHEET NOTINGS DATED 30.06.2010. THE EVIDENCE IN THIS CASE WHICH HAS RESULTED IN ADMITTING OF ADDITIONAL INCOME IS F OUND AND SEIZED BY THE INCOME TAX DEPARTMENT DURING A SEARCH OPERATION U/S. 132 OF THE IT ACT. FURTHER, I T IS ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 14 OF 19 FOUND THAT THE ASSESSEE HAS FILED THE REVISED RETUR N ADMITTING THE ADDITIONAL INCOME ONLY AFTER THE ISSU E OF NOTICE U/S. 148 BY THE ASSESSING OFFICER. NOTWITHST ANDING, THE ASSESSEE SUBMISSIONS AS PART OF HIS REPLY TO NO TICE U/S. 148 THE ADDITIONAL INCOME IS ONLY ON ACCOUNT OF EVI DENCE AND ALSO THE ACCEPTANCE OF SUCH TRANSACTION BY SRI GOPAL LAL BADRUKA OF M/S. AHURA HOLDINGS. 14. THE REPLY GIVEN BY THE ASSESSEE WAS CONSIDERED BY THE ASSESSING OFFICER AND HIS CONCLUSION IS BASED ON TH E EXPLANATION OFFERED BY THE ASSESSEE AND HE HAS TAKE N ONE POSSIBLE VIEW. IF THE CIT NOT AGREED WITH THAT PRO POSAL HE CANNOT SAY THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN THE CASE CIT VS. GREENWORLD CORPORATION (314 ITR 81) THE SUPREME COURT HELD AS UNDER: 'HELD WITHOUT GOING INTO THE QUESTION OF THE BONA F IDES OF THE AUTHORITIES UNDER THE ACT, THAT THE ORDER OF ASSESS MENT PASSED BY THE ASSESSING OFFICER ON THE DICTATES OF THE HIGHER AUTHORITY, BEING WHOLLY WITHOUT JURISDICTION, WAS A NULLITY. T HEREFORE, WITH A VIEW TO DOING COMPLETE JUSTICE BETWEEN THE PARTIE S THE ASSESSMENT PROCEEDINGS SHOULD BE GONE THROUGH AGAIN.(ACCORDINGLY, THE SUPREME COURT, IN EXERCISE OF ITS JURISDICTION UNDER ARTICLE 142 OF THE CONSTITUTION OF INDIA, DIRECTED THAT THE ASSESSMENT BE REOPENED BY THE COM MISSIONER OF INCOME-TAX, DELHI VII.] THE INCOME-TAX OFFICER, WHILE PASSING AN ORDER OF ASSESSMENT PERFORMS A JUDICIAL FUNCTION. A REVISION APPLICATION LIES BEFORE THE COMMISSIONER. IT IS TRITE THAT THE JURISDICTION EXERCISED BY THE REVISIONAL AUTHOR ITY PERTAINS TO HIS APPELLATE JURISDICTION. THE JURISDICTION UNDER SECTION 263 CAN BE EXERCISED ONLY WHEN BOTH THE FOLLOWING CONDITION S ARE SATISFIED (I) THE ORDER OF THE ASSESSING OFFICER SH OULD BE ERRONEOUS, AND (II) IT SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE. THESE CONDITIONS ARE CONJUNCTIVE. AN ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER SHOULD N OT BE INTERFERED WITH ONLY BECAUSE ANOTHER VIEW IS POSSIB LE. THE COMMISSIONER, FOR THAT MATTER, ANY OTHER HIGHER AUTHORITY, MAY HAVE SUPERVISORY JURISDICTION OVER THE ASSESSIN G OFFICER BUT IT IS DIFFICULT TO CONCEIVE THAT EVEN THE MERIT S OF THE DECISION SHOULD BE DISCUSSED AND SHOULD BE RENDERED BY THE H IGHER AUTHORITY, WHO IS A SUPERVISORY AUTHORITY. IT IS ON E THING TO SAY THAT WHILE MAKING THE ORDERS OF ASSESSMENT THE ASSE SSING OFFICER SHOULD BE BOUND BY THE STATUTORY CIRCULARS ISSUED BY THE CBDT BUT IT IS ANOTHER THING TO SAY THAT THE ASSESS ING AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTIONS, KEEPING IN VIE W THE SCHEME CONTAINED IN THE ACT, WOULD LOSE HIS INDEPENDENCE T O PASS AN ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 15 OF 19 INDEPENDENT ORDER OF ASSESSMENT. WHEN A STATUTE PRO VIDES FOR DIFFERENT HIERARCHIES PROVIDING FOR FORUMS IN RELAT ION TO PASSING OF AN ORDER AS ALSO APPELLATE OR REVISIONAL ORDER, BY NO STRETCH OF IMAGINATION CAN A HIGHER AUTHORITY INTERFERE WITH T HE INDEPENDENCE WHICH IS THE BASIC FEATURE OF ANY STAT UTORY SCHEME INVOLVING ADJUDICATORY PROCESS.' 15. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 ITR 83) THE APEX COURT HELD AS FOLLOWS: 'THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE RE VENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF R EVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TRE ATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE I N LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SUM NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERI NG, THE ORDER PASSED BY THE AO ACCEPTING THE SAME AS SUCH WILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. RA MPYARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) AND IN SMT. T ARA DEVI AGGARWAL VS. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC). IN THE INSTANT CASE, THE CIT NOTED THAT THE I TO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND . INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVES AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSE D BY THE BOARD OF THE APPELLANT COMPANY WAS NOT PLACED BEFORE THE AO. THUS, THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF THE A PPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS O F AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE S TATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE O F ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS THE CONCLUSION THAT THE ORDER OF THE ITO WAS ERRONEOUS IS IRRESISTIBLE. WE ARE, THEREFORE, OF THE OPINION THA T THE HIGH COURT HAS RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICT ION BY THE CIT UNDER S. 263(1) WAS JUSTIFIED.' 16. BEING SO, WE CANNOT SAY THAT THE ORDER PASSED B Y THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. FURTHER, IN OUR OPINION, LEVY OF PENALTY IS A QUASI CRIMINAL PROCEEDINGS. THE ASSESS ING OFFICER MUST HAVE ENOUGH MATERIAL TO PROVE THAT THE RE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 16 OF 19 PARTICULARS OF INCOME. HE CANNOT PRESUME THAT THERE IS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA (83 ITR 26) WHEREIN THE APEX COURT HELD 'AN ORDER IMPOSING PENALTY TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DING, AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS T HE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PEN ALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PE RFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIOUSLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EV EN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE.' 17. FURTHER IT WAS HELD BY THE GUJARAT HIGH COURT I N THE CASE OF CIT VS. PARMANAND M. PATEL (278 ITR 3) THAT THE CIT IS NOT EMPOWERED TO RECORD SATISFACTION BY INVO KING S. 271(1)(C) OF THE ACT AND IF HE IS NOT ENTITLED T O DO SO, ON HIS OWN, HE CANNOT DO IT BY DIRECTING THE ASSESSING AUTHORITY. THE COURT OBSERVED THAT IN OTHER WORDS, WHAT THE CIT HIMSELF CANNOT DO, HE CANNOT GET IT DONE TH ROUGH THE ASSESSING AUTHORITY BY EXERCISING REVISIONAL PO WERS. IN VIEW OF THE ABOVE DISCUSSION, THE DIRECTION OF T HE CIT TO AO TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT IS VAC ATED. 12. THE AFORESAID DECISION OF THE COORDINATE BENCH WAS CHALLENGED BEFORE THE HON'BLE JURISDICTIONAL HIGH C OURT BY THE DEPARTMENT. THE JURISDICTIONAL HIGH COURT WHILE DIS MISSING THE APPEAL OF THE DEPARTMENT IN ITTA NO.147/13 HELD AS UNDER: SHORN OF DETAILS, FACTS OF THE CASE ARE THAT THERE WAS A SEARCH AND SEIZURE PROCEEDINGS IN CASE OF ONE SRI GOPAL LAL BADRUKA AND M/S AHURA HOLDINGS AND IN SEQUEL TO THAT A NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT WAS ISSUED TO THE RESPONDENT. THE ASSESSEE ADMITTED THE ADDITIONAL INCOME AND THEREAFTER, REASSESSMENT WAS MADE BY THE ASSESSING OFFICER. THEN NOTICE TO INITIATE PENALTY ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 17 OF 19 PROCEEDINGS WAS ISSUED TO THE ASSESSEE. THE ASSESSEE REPLIED TO THE NOTICE EXPLAINING HIS POSIT ION THAT THERE WAS NO BUSINESS ACTIVITY AND INCOME. BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSE E, THE ASSESSING OFFICER DROPPED THE PENALTY PROCEEDINGS AND THE CIT (A) HOWEVER, RECORDING HIS DISSATISFACTION, REOPENED THE PENALTY PROCEEDINGS. WHEN THE ASSESSEE PREFERRED APPEAL AGAINST THE AFORESAID ORDER PASSED BY THE CIT (A), THE LEARNED TRIBUNAL CORRECTLY HELD THAT BASING ON THE EARLIER JUDGMENT AND ORDER, WHEN THE ASSESSING OFFICER HAS REACHED SATISFACTION ON A POSSIBLE VIEW, SUCH VIEWS CANNOT BE SUBSTITUTED BY THE CIT (A). WE ARE IN FUL L AGREEMENT WITH THE FINDING OF THE LEARNED TRIBUNAL, WHICH IS BASED ON LEGAL PRINCIPLE LAID DOWN BY THE SC AS WELL AS THE GUJARAT HIGH COURT. IF THE PRE- CONDITIONS FOR THE INITIATION OF PENALTY PROCEEDING S ARE FACTUALLY NOT SATISFIED, SUCH PROCEEDINGS CANNO T BE INITIATED. THE ASSESSING OFFICER IN THIS CASE, A FTER CONSIDERING THE EXPLANATION, FOUND THAT THE PRECONDITIONS ARE NOT SATISFIED AND THUS DROPPED TH E PROCEEDINGS. THE TRIBUNAL HAS CORRECTLY HELD THAT I T IS NOT OPEN FOR THE CIT (A) TO SUBSTITUTE ANOTHER VIEW . THE FINDING OF THE ASSESSING OFFICER IS NOT ABSURD ONE. WE ARE OF THE OPINION THAT THE TRIBUNAL HAS CORRECTLY HELD THAT WHEN A POSSIBLE VIEW IS TAKEN, ANOTHER POSSIBLE VIEW CANNOT BE SUBSTITUTED. THEREFORE, WE HOLD THAT THE TRIBUNAL HAS REACHED A CORRECT CONCLUSION AND WE DO NOT SEE ANY GROUNDS WARRANTING INTERFERENCE. 13. THE RATIO LAID DOWN BY THE COORDINATE BENCH AND THE JURISDICTIONAL HIGH COURT (SUPRA) CLEARLY APPLY TO THE FACTS OF THE PRESENT CASE. IN AS MUCH AS, ASSESSEES CASE ST ANDS STILL ON A BETTER FOOTING AS IN CASE OF CIT VS. RAJ KUMAR JA IN (SUPRA), THE PENALTY PROCEEDINGS INITIATED WAS IN PURSUANCE OF A SEARCH ASSESSMENT, WHEREAS IN CASE OF THE ASSESSEE, NO SEA RCH HAS TAKEN PLACE AND THERE IS ONLY A SURVEY OPERATION. A S FAR AS THE DECISION RELIED UPON BY THE LEARNED CIT IS CONCERNE D, ON EXAMINATION OF THE SAME, WE FIND THAT IT IS FACTUAL LY ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 18 OF 19 DISTINGUISHABLE. AS CAN BE SEEN, IN THE CASE OF CIT VS. TOYOTA MOTORS CORPORATION EXTRACTED IN THE ORDER OF THE CI T, THE ORDER SHEET ENTRY DO NOT REVEAL THAT THE ASSESSING OFFICE R HAS EXAMINED THE EXPLANATION OF THE ASSESSEE AND WAS SA TISFIED. THEREFORE, THE RATIO LAID DOWN WILL NOT APPLY TO TH E PRESENT CASE. ON THE CONTRARY THE DECISION OF THE COORDINAT E BENCH IN THE CASE OF RAJ KUMAR JAIN VS. CIT WHICH HAS BEEN U PHELD BY THE JURISDICTIONAL HIGH COURT BEING IDENTICAL TO TH E FACTS OF THE PRESENT CASE, THE RATIO LAID DOWN THEREIN WILL SQUA RELY APPLY TO THE FACTS OF THE PRESENT CASE. THEREFORE, FOLLOWING THE DECISION OF THE COORDINATE BENCH AND THE JURISDICTIONAL HIGH COURT (SUPRA) WE HOLD THAT THE PROCEEDINGS INITIATED UNDE R SECTION 263 OF THE ACT IN THE PRESENT CASE IS NOT VALID. AC CORDINGLY, WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT AND RESTORE THE ORDER OF THE ASSESSING OFFICER. 14. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ITA NOS.630/VIZAG/2012 AND ITA NO.35/VIZAG/2015 15. THESE TWO APPEALS ARE BY THE ASSESSEE AND THE DEPARTMENT AGAINST THE ORDER PASSED BY LEARNED CIT (A) IN PARTIALLY SUSTAINING PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT. WHILE THE ASSESSEE IS AGGRIEVED WITH THE P ENALTY PARTLY SUSTAINED BY THE LEARNED CIT (A), THE DEPARTMENT IS AGGRIEVED BY THE RELIEF GRANTED BY THE LEARNED CIT (A) TO THE ASSESSEE. 16. SINCE, WHILE DECIDING ASSESSEES APPEAL AGAINST ORDER PASSED U/S 263 IN ITA NO.613/VIZAG/2012, WE HAVE SE T ASIDE THE REVISION ORDER PASSED BY THE CIT UNDER SECTION 263 OF THE ACT AND RESTORED THE ORDER OF THE ASSESSING OFFICER , THE PENALTY ITA NOS. 613 630 AND 35 JAYA CONSTRUCTIONS VISAKHAPAT NAM PAGE 19 OF 19 IMPOSED UNDER SECTION 271(1)(C) IN CONSEQUENCE TO T HE ORDER PASSED UNDER SECTION 263 WILL ALSO NOT SURVIVE. ACC ORDINGLY PENALTY IMPOSED UNDER SECTION 271(1)(C) IS DIRECTED TO BE DELETED. 17. IN THE RESULT, ASSESSEES APPEALS IN ITA NO.613 /VIZAG/2012 AND ITA NO.630/VIZAG/2012 ARE ALLOWED AND DEPARTMEN TAL APPEAL IN ITA NO.35/VIZAG/2015 IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2015 SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 4 TH MARCH, 2015 PVV/SPS CAMP: VISAKHAPATNAM, COPY TO 1 SHRI CHILUKURI SRINIVAS, MANAGING PARTNER, JAYA CONSTRUCTIONS, D.NO.14-3-2A FLAT NO.406 MAHARANIPET A VISAKHAPATNAM 530 002 2 THE CIT - 1 AAYAKAR BHAVAN, DA BAGARDENS, VISAKHAPATNAM 530020 3 INCOME TAX OFFICER, WARD 1(4) VISAKHAPATNAM 4 DEPARTMENTAL REPRESENTATIVE ITAT VISAKHAPATNAM 5 GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM