M/s. Chintels India Ltd., New Delhi V. ACIT, New Delhi

ITA 3792/DEL/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6303 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 28-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH CHANDRA DUBEY
• Keywords: Depreciation; Search and seizure; Principle of natural justice; Initiation of penalty proceedings; Accommodation entries; Onus to prove
• Section: 143(3); 153A; 27; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D BENCH DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3791/DEL/2016 ASSTT. YEAR: 2008-09 ITA NO. 3792/DEL/2016 ASSTT. YEAR: 2009-10 ITA NO. 3793/DEL/2016 ASSTT. YEAR: 2010-11 CHINTELS INDIA LTD., VS ACI T, A-11, KAILASH COLONY, CENTRAL CIRCLE-8, NEW DELHI. NEW DELHI. (PAN: AAACC0897N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KAPIL GOEL, ADV. SHRI MUKUL GUPTA, ADV. RESPONDENT BY: SHRI UMESH CHANDRA DUBEY, SR. DR DATE OF HEARING: 05.01.2017 DATE OF ORDER: ORDER PER SUDHANSHU SRIVASTAVA, J.M. THESE THREE APPEALS HAVE BEEN PREFERRED BY THE ASSE SSEE AGAINST THE ORDER CONFIRMING THE PENALTY U/S 271(1) (C) OF THE INCOME TAX 2 ACT, 1961. ITA NO. 3791 PERTAINS TO AY 2008-09, ITA NO. 3792 PERTAINS TO AY 2009-10 & ITA NO. 3193 PERTAINS TO A Y 2010-11. THESE THREE APPEALS EMANATE FROM THE ANALOGOUS ORDE RS DATED 30.03.2016 PASSED BY THE LD. CIT (A)-25, NEW DELHI. FOR SAKE OF CONVENIENCE, THESE THREE APPEALS ARE DISPOSED BY TH IS COMMON ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN BUSINESS OF HORTICULTURE, AGRICULTURE AN D REAL ESTATE. ON 26.03.2010 A SEARCH U/S 132 OF THE INCOME TAX ACT, 1961 (THE ACT) WAS CARRIED OUT AT THE BUSINESS AND RESIDENTI AL PREMISES OF THE ASSESSEE WHO BELONGS TO ASHOK SOLOMEN AND CHINTELS GROUP OF CASES. ON POST SEARCH ENQUIRY, IT WAS FOUND THAT ON E SHRI TARUN GOYAL WAS SUBJECTED TO SEARCH U/S 132 OF THE ACT ON 1 ST SEPTEMBER 2008 WHEREIN IT WAS FOUND THAT HE HAD CREATED MORE THAN 90 COMPANIES WHICH WERE ENGAGED IN THE BUSINESS OF BOG US BILLS AND PROVIDING ACCOMMODATION ENTRIES SUCH AS SHARE CAPIT AL, SHARE APPLICATION MONEY, LOANS AND ADVANCES AND WHO CHARG ED COMMISSION ACCORDINGLY. DURING THE ENQUIRY IT WAS N OTED THAT SHRI TARUN GOYAL HAD MORE THAN 120 BANK ACCOUNTS AND THA T HE HAD DEPOSITED MORE THAN RS.250 CRORES AS CASH IN THOSE BANK ACCOUNTS. 3 IT WAS ALSO FOUND THAT THE DIRECTORS OF THOSE COMPA NIES WERE BOGUS AND THE ADDRESSES OF THOSE COMPANIES WERE ALSO BOGU S. STATEMENT OF SHRI TARUN GOYAL WAS RECORDED U/S 132(4) OF THE ACT , WHEREIN HE ACCEPTED THAT HE WAS ENGAGED IN PROVIDING ACCOMMODA TION ENTRIES AND BOGUS BILLS TO VARIOUS PERSONS. DURING THE COUR SE OF INVESTIGATION IT WAS FOUND THAT ONE COMPANY M/S MAC RO INFOTECH LTD. WAS ALSO FORMED BY SHRI TARUN GOYAL, WHICH WAS ENGAGED IN ISSUING BOGUS BILLS AND WHICH DID NOT HAVE ANY EXPE RTISE IN SOFTWARE BUSINESS. DURING THE ENQUIRY AFTER THE SEARCH AND S EIZURE OPERATION IT WAS FOUND THAT THE ASSESSEE HAD PURCHASED SOFTWA RE OF RS. 42,424,550/- FROM M/S. MACRO INFOTECH LTD. IT WAS A LLEGED BY THE AO THAT THE ASSESSEE HAD TAKEN THE BOGUS BILLS TO I NFLATE THEIR EXPENDITURE. FURTHER VIDE LETTER DATED 19.08.2011 T HE ASSESSEE WAS FURTHER ASKED ABOUT THE MACRO INFOTECH LTD AND ITS TRANSACTION WITH THE ASSESSEE FROM ASSESSMENT YEARS 2003-04 TO 2009- 10 AND THE ASSESSEE WAS ALSO ASKED TO PROVE THE GENUINENESS OF THE TRANSACTION MADE WITH M/S. MACRO INFOTECH LTD. IN RESPONSE TO T HIS THE ASSESSEE SUBMITTED ON 28.11.2011 THAT M/S. MACRO INFOTECH LT D WAS ENGAGED IN THE BUSINESS OF SUPPLY OF VARIOUS KINDS OF THE C OMPUTER SOFTWARE, GRAPHICS AND OTHER ELITE PRODUCTS AND THAT DURING F Y 2007-08, THE 4 ASSESSEE HAD PURCHASED SOFTWARE OF RS. 42,424,550/- FROM THE COMPANY AND PAYMENT FOR WHICH WAS MADE THROUGH ACCO UNT PAYEE CHEQUES. IT WAS FURTHER SUBMITTED THAT THESE SOFTWA RE WERE INSTALLED IN THE ASSESSEEE COMPANY AND WERE RECORDED IN THE B OOKS OF ACCOUNT. THE ASSESSEE SUBMITTED THAT THE SOFTWARE W AS SOPHISTICATED AND WAS MOST EFFECTIVELY USED AS MARK ETING AND SALES TOOL. IT WAS FURTHER SUBMITTED THAT THE SOFTWARE WA S LATER HANDED OVER TO M/S SOBHA DEVELOPERS LIMITED FOR JOINT USE OF DEVELOPING AND MARKETING UPON THE ASSESSEE ENTERING INTO A JOINT D EVELOPMENT AGREEMENT DATED 25TH SEPTEMBER, 2008 WITH M/S SOBHA DEVELOPERS LTD. FOR 32 ACRES OF GROUP HOUSING PROJECT. IT WAS FURTHER SUBMITTED BEFORE THE AO THAT LATER ON THIS PROJECT WAS CANCEL LED VIDE AGREEMENT DATED 08.10.2011 AND ASSESSEE WAS INFORMED BY M/S S OBHA DEVELOPERS LTD. THAT THE SOFTWARE HAD BEEN DAMAGED AND DESTROYED AND, THEREFORE, THE SAME CANNOT BE RETURNED. IT WAS ALSO SUBMITTED BEFORE THE AO THAT THE BILLS HAD BEEN DEBITED IN TH E BOOKS OF ACCOUNT AND DEPRECIATION HAD BEEN CLAIMED. 2.1 AS THE AO WAS NOT SATISFIED WITH THE EXPLANATIO N OF THE ASSESSEE, THE DEPRECIATION ON THE SOFTWARE AMOUNTIN G TO 5 RS.84,84,910/- BEING 20% DEPRECIATION ON THE COST O F SOFTWARE OF RS.42,424,550/- WAS DISALLOWED. 2.2 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS), WHO CONFIRMED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAD FA ILED TO ESTABLISH THE OWNERSHIP AND THE USE OF THE ALLEGED SOFTWARE. 2.3 IN APPEAL BEFORE THE ITAT, THE APPEAL OF THE A SSESSEE WAS DISMISSED VIDE ORDER DATED 10.03.2016, IN ITA NO. 4 808/2012 TO 4810/2012. THE RELEVANT FINDINGS ARE CONTAINED IN P ARAGRAPHS 32, 33, 34 AND 35 OF THE SAID ORDER IN WHICH THE ITAT H AS OBSERVED THAT THE ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE SO FTWARE PURCHASED WAS USED IN THE BUSINESS OF THE ASSESSEE. 2.4 IN THE MEAN WHILE, THE AO STARTED PENALTY PRO CEEDINGS U/S 271(1)(C) OF THE ACT AND WHEN THE ASSESSEES APPEAL S IN THE QUANTUM PROCEEDINGS GOT DISMISSED BY THE LD. CIT (APPEALS), THE AO PROCEEDED TO LEVY THE PENALTY AMOUNTING TO RS. 28,8 4,021/-, RS. 45,80,882/- AND RS. 27,68,661/- FOR ASSESSMENT YEAR S FROM 2008- 09, 2009-10 AND 2010-11 RESPECTIVELY . 2.5 CHALLENGING THE PENALTY ORDERS, THE ASSESSEE FILED APPEALS BEFORE THE LD. CIT (A). THE ASSESSEE ALSO RAISED AD DITIONAL GROUND 6 VIDE LETTER DATED 16/03/2016 STATING THAT THE UNDER LYING ASSESSMENTS U/S 153A WERE BAD FOR WANT OF INCRIMINA TING MATERIAL WHICH IN TURN MADE THE PENALTY ORDERS INVALID IN LA W. FURTHER, THE ASSESSEE ALSO SUBMITTED BEFORE THE LD. CIT (A) THAT THE AO HAD IMPOSED THE PENALTY IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. IT WAS ALSO ARGUED BEFORE THE LD. CIT (A) THAT NO I NDEPENDENT ENQUIRY FROM ANY EXTERNAL SOURCE WAS MADE IN THE QU ANTUM PROCEEDINGS TO ESTABLISH THAT THE ASSESSEE HAD RECE IVED THE CASH BACK AS ALLEGED. THE ASSESSEE REITERATED IN THE PEN ALTY APPEALS BEFORE THE LD. CIT (A) THAT NO CASH HAD BEEN RECEIV ED BACK BY ASSESSEE FROM MICRO INFOTECH LTD. REQUEST WAS AGAIN MADE BY THE ASSESSEE TO SUMMON SHRI TARUN GOYAL DURING THE COUR SE OF HEARING OF THE PENALTY APPEALS BEFORE THE LD. CIT (A). THE ASSESSEE ALSO CONTENDED BEFORE THE LD. CIT (A) THAT PENALTY ORDER S WERE INVALID BECAUSE THE AO HAD FAILED TO MENTION AS TO WHETHER THE PENALTY WAS LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 2.6 HOWEVER, THE LD CIT (A) CONFIRMED THE PENALTIE S BY FIRSTLY REJECTING THE ADDITIONAL LEGAL GROUND BEING NOT BONA FIDE AND 7 CONFIRMING THE PENALTIES ON MERITS BY OBSERVING THA T ASSESSEE HAD MADE BOGUS SOFTWARE PURCHASES. 2.7 NOW, THE ASSESSEE HAS APPROACHED THE ITAT AND HAS CHALLENGED THE IMPOSITION OF PENALTY IN ALL THE THR EE YEARS BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 2.8 GROUNDS OF APPEAL IN ITA 3791/DEL/2016 (A.Y. 200 8-09) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (CITA) UPHOLDING THE LEVY OF PENALTY BY THE AO U/S 271(1)( C) OF THE ACT IS BAD, BOTH IN THE EYES OF LAW AS WELL AS ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING TH E LEVY OF PENALTY OF RS. 28,84,021/- ON ACCOUNT OF DISALLOWANCE OF DEPRE CIATION SOFTWARE MADE BY THE AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING TH E LEVY OF PENALTY DESPITE THE FACT THAT THE AO HAS NOT RECORDED SATIS FACTION AS WHETHER THE PENALTY BE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HE PENALTY DESPITE THE FACT THAT THE DISALLOWANCE MADE BY AO ITSELF IS NOT SUSTAINABLE IN VIEW OF THE FACT THAT IN THE ABSENCE OF ANY INCRIMI NATING MATERIAL FOUND DURING THE COURSE OF SEARCH NO SUCH ADDITION CAN BE MADE IN ASSESSMENT UNDER SECTION 153A OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND LAW IN UPHOLDING THE L EVY OF PENALTY DESPITE THE FACT THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) ITSELF IS NOT SUSTAINABLE ON MERITS ALSO. 8 6. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY DES PITE THE FACT THAT THE ASSESSEE HAS DULY DISCHARGED THE ONUS CAST UPON IT TO PROVE THE PURCHASE OF SOFTWARE. (II) THAT THE LEARNED CIT(A), BOTH ON FACTS AND IN LAW, IN UPHOLDING THE LEVY OF PENALTY, IGNORING THE FACT THAT THE PEN ALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS, AND AS SUCH, MERE DISALLOW ANCE OR ADDITION COULD NOT LEAD TO THE LEVY OF PENALTY. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HE LEVY OF PENALTY, DESPITE THE FACT THAT THE DISALLOWANCE OF DEPRECIAT ION CLAIMED BY THE ASSESSEE CANNOT PER SE BE TREATED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2.9 GROUNDS OF APPEAL IN ITA 3792/DEL/2016 (A.Y. 2009 -10) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (CITA) UPHOLDING THE LEVY OF PENALTY BY THE AO U/S 271(1)( C) OF THE ACT IS BAD, BOTH IN THE EYES OF LAW AS WELL AS ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING TH E LEVY OF PENALTY OF RS. 45,80,882/- ON ACCOUNT OF DISALLOWANCE OF DEPRE CIATION SOFTWARE MADE BY THE AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING TH E LEVY OF PENALTY DESPITE THE FACT THAT THE AO HAS NOT RECORDED SATIS FACTION AS WHETHER THE PENALTY BE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HE PENALTY DESPITE THE FACT THAT THE DISALLOWANCE MADE BY AO ITSELF IS NOT SUSTAINABLE IN VIEW OF THE FACT THAT IN THE ABSENCE OF ANY INCRIMI NATING MATERIAL 9 FOUND DURING THE COURSE OF SEARCH NO SUCH ADDITION CAN BE MADE IN ASSESSMENT UNDER SECTION 153A OF THE ACT. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND LAW IN UPHOLDING THE L EVY OF PENALTY DESPITE THE FACT THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) ITSELF IS NOT SUSTAINABLE ON MERITS ALSO. 6. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY DES PITE THE FACT THAT THE ASSESSEE HAS DULY DISCHARGED THE ONUS CAST UPON IT TO PROVE THE PURCHASE OF SOFTWARE. (II) THAT THE LEARNED CIT(A), BOTH ON FACTS AND IN LAW, IN UPHOLDING THE LEVY OF PENALTY, IGNORING THE FACT THAT THE PEN ALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS, AND AS SUCH, MERE DISALLOW ANCE OR ADDITION COULD NOT LEAD TO THE LEVY OF PENALTY. 7. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HE LEVY OF PENALTY, DESPITE THE FACT THAT THE DISALLOWANCE OF DEPRECIAT ION CLAIMED BY THE ASSESSEE CANNOT PER SE BE TREATED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 2.10 GROUNDS OF APPEAL IN ITA 3793/DEL/2016 (A.Y. 2010- 11) 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) (CITA) UPHOLDING THE LEVY OF PENALTY BY THE AO U/S 271(1)( C) OF THE ACT IS BAD, BOTH IN THE EYES OF LAW AS WELL AS ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING TH E LEVY OF PENALTY OF RS. 27,68,661/- ON ACCOUNT OF DISALLOWANCE OF DEPRE CIATION SOFTWARE MADE BY THE AO. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN UPHOLDING TH E LEVY OF PENALTY DESPITE THE FACT THAT THE AO HAS NOT RECORDED SATIS FACTION AS WHETHER 10 THE PENALTY BE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND LAW IN UPHOLDING THE L EVY OF PENALTY DESPITE THE FACT THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LEARNED CIT(A) ITSELF IS NOT SUSTAINABLE ON MERITS ALSO. 5. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY DES PITE THE FACT THAT THE ASSESSEE HAS DULY DISCHARGED THE ONUS CAST UPON IT TO PROVE THE PURCHASE OF SOFTWARE. (II) THAT THE LEARNED CIT(A), BOTH ON FACTS AND IN LAW, IN UPHOLDING THE LEVY OF PENALTY, IGNORING THE FACT THAT THE PEN ALTY PROCEEDINGS ARE INDEPENDENT PROCEEDINGS, AND AS SUCH, MERE DISALLOW ANCE OR ADDITION COULD NOT LEAD TO THE LEVY OF PENALTY. 6. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEA RNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW IN CONFIRMING T HE LEVY OF PENALTY, DESPITE THE FACT THAT THE DISALLOWANCE OF DEPRECIAT ION CLAIMED BY THE ASSESSEE CANNOT PER SE BE TREATED AS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME 3. THE LD. AR SUBMITTED THAT THE IMPUGNED PENALTY ORDERS ARE BAD IN LAW BECAUSE NOTICES ISSUED U/S 274 IN ALL TH E THREE YEARS ARE VAGUE AND MECHANICAL AS THE IRRELEVANT COLUMNS HAVE NOT BEEN STRUCK OFF. IT WAS SUBMITTED THAT NOWHERE HAS IT BE EN CLEARLY SPELT OUT AS TO UNDER WHICH LIMB THE EXTANT PENALTY WAS S OUGHT TO BE LEVIED I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. REL IANCE WAS PLACED ON THE HONBLE KARNATAKA HIGH COURTS DECISION IN T HE CASE OF 11 MANJUNATH COTTON GINNING FACTORY 359 ITR 565. IT WA S SUBMITTED THAT THIS DECISION OF THE HONBLE KARNATAKE HIGH CO URT WAS NOT CHALLENGED BEFORE THE HONBLE APEX COURT AS RECORDE D IN THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MAGNUR BUILDERS IN ITA 616/2015 DATED 28/07/2016 IN PARA 5. RELIANC E WAS ALSO PLACED ON THE DECISION OF THE HONBLE KARNATAKA HIG H COURT IN THE CASE OF SSAS EMERALD MEADOWS 73 TAXMANN.COM 241 WH EREIN THE SLP WAS DISMISSED BY THE HONBLE APEX COURT AND REP ORTED IN 73 TAXMANN.COM 248). FURTHER RELIANCE WAS PLACED ON TH E ORDER OF THE LUCKNOW BENCH OF THE ITAT IN THE CASE OF LAL CHAND AGARWAL IN ITA 314/LKW/2014 DATED 30/10/2015. COPIES OF ALL THESE DECISIONS ARE PLACED ON RECORDS. 3.1 FURTHER, THE LD. AR DREW OUR ATTENTION TO THE A SSESSMENT ORDERS AND THE PENALTY ORDERS FOR THE YEARS INVOLVE D AND SUBMITTED THAT THE SAME DISCREPANCY EXISTED IN AS MUCH AS THE EXACT LIMB UNDER WHICH PENALTY IS INITIATED AND LEVIED REMAINE D UNSPECIFIED. CONTINUING HIS ARGUMENTS, THE LD. AR SUBMITTED THAT THE ONLY BASIS FOR ADDITION AND IMPOSITION OF PENALTY WAS A) POST SEARCH ENQUIRIES, B) SEARCH AND SEIZURE OF SHRI TARUN GOYAL AND C) UN -CONFRONTED 12 STATEMENT OF SHRI TARUN GOYAL. IT WAS VEHEMENTLY SU BMITTED THAT NO INCRIMINATING MATERIAL WAS EVER FOUND FROM THE PREM ISES OF ASSESSEE. FURTHER IT WAS HIGHLIGHTED THAT THERE WAS A THOROUGH LACK OF CROSS EXAMINATION OF SHRI TARUN GOYAL. ADDRESSIN G HIS ARGUMENTS ON ITAT QUANTUM ORDER FINDINGS, THE LD. AR SUBMITTE D THAT THIS CAN BE A CASE OF FACT NOT PROVED BUT NOT FACT DISPROVED . HIGHLIGHTING THIS, THE LD. AR SUBMITTED THAT NO PENALTY CAN BE IMPOSED FOR FACTS NOT PROVED WHICH ARE NOT DISPROVED. RELIANCE WAS PLACED ON HONBLE GUJARAT HIGH COURTS DECISION IN THE CASE OF NATION AL TEXTILES REPORTED IN 249 ITR 125. FURTHER, THE LD. AR PLACED HIS RELIANCE ON THE VERY RECENT HONBLE APEX COURTS DECISION IN TH E CASE OF GOPAL SONS HUF (ORDER DATED 4/1/2017) TO HIGHLIGHT THAT D EEMING FICTION NEEDS STRICT INTERPRETATION AND ANY DOUBT MUST GO T O THE BENEFIT OF TAXPAYER. 3.2 FURTHER, THE LD. AR DREW OUR ATTENTION TO THE PAGE 4 OF THE EARLY HEARING PETITION OF THE ASSESSEE, DATED 15/11 /2016, FILED BEFORE THE HONBLE VP ITAT DELHI ZONE TO ARGUE THAT LACK OF CROSS EXAMINATION OF SHRI TARUN GOYAL MADE THE ENTIRE PEN ALTY 13 PROCEEDINGS NULLITY, IN SPITE OF THE FACT THAT QUAN TUM WAS CONFIRMED. RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRECE DENTS: A) PUNE BENCH ITAT IN CHANDRABHAN MUGALE ORDER DATE D 30.10.2015 B) SHRI NIRMAL COMMERCIAL LTD VS CIT 308 ITR 406 ( BOM) C) CALCUTTA HIGH COURT CIT VS RATAL LAL SUREKHA 61 TAXMANN 133 D) APEX COURTS DECISION IN THE CASE OF ANDAMAN TIM BER INDUSTRIES VS CCE 281 CTR 472. 4. THE LD. DR STRONGLY COUNTERED THE SUBMISSIONS O F THE LD. AR. THE LD. DR SUBMITTED THAT NOT MENTIONING THE EX ACT LIMB UNDER WHICH THE PENALTY IS LEVIED IS A MERE TECHNICAL DEF ECT AND CANNOT INVALIDATE THE PENALTY PROCEEDINGS/ORDERS. FURTHER, THE LD. DR PLACED HEAVY RELIANCE ON FINDINGS RETURNED BY THE I TAT IN THE QUANTUM ORDER, HIGHLIGHTING THAT ONCE SOFTWARE PURC HASE STANDS REJECTED, AND IS DENIED, THE ASSESSEE CANNOT ESCAPE FROM PENALTY. THE LD. DR ARGUED THAT NO CASE IS MADE OUT BY THE A SSESSEE TO ESCAPE FROM CLUTCHES OF PENALTY PROVISIONS. LD. DR PRAYED FOR TOTAL CONFIRMATION OF PENALTY RELYING ON ORDERS OF LOWER AUTHORITIES. 14 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE HONBLE SUPREME COURT, IN THE CASE OF HINDUSTAN STEEL LTD. V. STATE OF ORISSA 83 ITR 26, HAD LAID DOWN THE POSITION OF LAW BY HOLDING THAT THE ASSESSING OFFIC ER IS NOT BOUND TO LEVY PENALTY AUTOMATICALLY SIMPLY BECAUSE THE QUANT UM ADDITION HAS BEEN SUSTAINED. ALSO, IN CASE OF CIT V. KHODAY ESWA RA (83 ITR 369) (SC), INCIDENTALLY REPORTED IN SAME ITR VOLUME, IT IS HELD THAT PENALTY CANNOT BE LEVIED SOLELY ON BASIS OF REASONS GIVEN IN ORIGINAL ORDER OF ASSESSMENT. THE HONBLE SUPREME COURT HAS ALSO REITERATED THE LAW IN THE CASE OF DILIP N. SHROFF V. JT. CIT [ 2007] 291 ITR 519 BY HOLDING IN PARA 62 THAT FINDING IN ASSESSMENT PROCE EDINGS CANNOT AUTOMATICALLY BE ADOPTED IN PENALTY PROCEEDINGS AND THAT THE AUTHORITIES HAVE TO CONSIDER THE MATTER AFRESH FROM DIFFERENT ANGLE. THE STATUTE REQUIRES A SATISFACTION ON THE PART OF THE ASSESSING OFFICER. HE IS REQUIRED TO ARRIVE AT A SATISFACTION SO AS TO SHOW THAT THERE IS PRIMARY EVIDENCE TO ESTABLISH THAT THE ASS ESSEE HAD CONCEALED THE AMOUNT OR FURNISHED INACCURATE PARTIC ULARS AND THIS ONUS IS TO BE DISCHARGED BY THE DEPARTMENT. WHILE C ONSIDERING WHETHER THE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS BURDEN, THE ASSESSING OFFICER SHOULD NOT BEGIN WITH THE PRESUMP TION THAT HE IS 15 GUILTY. SINCE THE BURDEN OF PROOF IN PENALTY PROCEE DINGS VARIES FROM THAT IN THE ASSESSMENT PROCEEDINGS, A FINDING IN TH E ASSESSMENT PROCEEDINGS THAT A PARTICULAR RECEIPT IS INCOME CAN NOT AUTOMATICALLY BE ADOPTED, THOUGH A FINDING IN THE ASSESSMENT PROC EEDINGS CONSTITUTES GOOD EVIDENCE IN THE PENALTY PROCEEDING S. IN THE PENALTY PROCEEDINGS THE AUTHORITIES MUST CONSIDER THE MATTE R AFRESH AS THE QUESTION HAS TO BE CONSIDERED FROM A DIFFERENT ANGL E. IT IS IMPORTANT TO KEEP IN MIND THE FUNDAMENTAL LEGAL PROPOSITION T HAT ASSESSMENT PROCEEDINGS ARE NOT CONCLUSIVE. ASSESSMENT PROCEEDI NGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. FINDINGS IN THE ASSESSMENT PROCEEDINGS DONT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. FOR THIS PROPOSITION RELIANCE IS PLACED ON THE DECI SION IN CIT VS. DHARAMCHAND L. SHAH (1993) 204 ITR 462 (BOM). IN VI JAY POWER GENERATORS LTD VS. ITO (2008)6 DTR 64 (DEL) IT WAS HELD THAT IT IS WELL SETTLED THAT THOUGH THEY CONSTITUTE GOOD EVIDE NCE DO NOT CONSTITUTE CONCLUSIVE EVIDENCE IN PENALTY PROCEEDIN GS. DURING PENALTY PROCEEDINGS, THERE HAS TO BE REAPPRAISAL OF THE VERY SAME MATERIAL ON THE BASIS OF WHICH THE ADDITION WAS MAD E AND IF FURTHER MATERIAL IS ADDUCED BY THE ASSESSEE IN THE COURSE O F THE PENALTY PROCEEDINGS, IT IS ALL THE MORE NECESSARY THAT SUCH FURTHER MATERIAL 16 SHOULD ALSO BE EXAMINED IN AN ATTEMPT TO ASCERTAIN WHETHER THE ASSESSEE CONCEALED HIS INCOME OR FURNISHED INACCURA TE PARTICULARS. THUS, UNDER PENALTY PROCEEDINGS ASSESSEE CAN DISCHA RGE HIS BURDEN BY RELYING ON THE SAME MATERIAL ON THE BASIS OF WHI CH ASSESSMENT IS MADE BY CONTENDING THAT ALL NECESSARY DISCLOSURES W ERE MADE AND THAT ON THE BASIS OF MATERIAL DISCLOSED THERE CANNO T BE A CASE OF CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. FURTHER IF THERE IS ANY MATERIAL OR ADDITIO NAL EVIDENCE WHICH WAS NOT PRODUCED DURING ASSESSMENT PROCEEDINGS, SAM E CAN BE PRODUCED IN PENALTY PROCEEDINGS AS BOTH ASSESSMENT AND PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE. IN CIT VS. M /S SIDHARTHA ENTERPRISES (2009) 184 TAXMAN 460 (P & H)(HC) IT WA S HELD THAT THE JUDGMENT IN DHARMENDRA TEXTILE CANNOT BE READ AS LA YING DOWN THAT IN EVERY CASE WHERE PARTICULARS OF INCOME ARE INACC URATE, PENALTY MUST FOLLOW. EVEN SO, THE CONCEPT OF PENALTY HAS NO T UNDERGONE CHANGE BY VIRTUE OF THE SAID JUDGMENT. PENALTY IS I MPOSED ONLY WHEN THERE IS SOME ELEMENT OF DELIBERATE DEFAULT. 5.1 AT THIS JUNCTURE IT MAY ALSO BE APPOSITE TO REFER TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. RELIANCE PETROPRODUCTS (P.) LTD . [2010] 322 ITR 158/189 TAXMAN 322, WHEREIN 17 THE HONBLE APEX COURT, WHILE INTERPRETING THE PROV ISIONS OF SECTION 271(1)( C ) OF THE ACT, HAS HELD THAT A GLANCE AT THE SAID PR OVISION WOULD SUGGEST THAT IN ORDER TO BE COVERED BY IT, TH ERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURA TE PARTICULARS OF HIS INCOME. IN THE FACTS OF THAT CASE, THE COURT FOUND THAT IT WAS NOT A CASE OF CONCEALMENT OF THE PARTICULARS OF THE INCOME, NOR WAS IT THE CASE OF THE REVENUE EITHER. HOWEVER, THE COU NSEL FOR THE REVENUE SUGGESTED THAT BY MAKING AN INCORRECT CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THE COURT OBSERVED THAT IT H AD TO ONLY SEE AS TO WHETHER IN THAT CASE, AS A MATTER OF FACT, THE A SSESSEE HAD GIVEN INACCURATE PARTICULARS. THE COURT NOTED THAT AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DET AILS (IN THE PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPARATE ITE MS OF AN ACCOUNT. THEREFORE, THE WORD 'PARTICULAR' USED IN SECTION 27 1(1) ( C ) WOULD EMBRACE THE MEANING OF THE DETAILS OF THE CLAIM MAD E. THE COURT FURTHER OBSERVED THAT IN WEBSTER'S DICTIONARY, THE WORD 'INACCURATE' HAS BEEN DEFINED AS: 'NOT ACCURATE, NOT EXACT OR CO RRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STA TEMENT, COPY OR 18 TRANSCRIPT.' THE COURT OBSERVED THAT READING THE WO RDS 'INACCURATE' AND 'PARTICULARS' IN CONJUNCTION, THEY MUST MEAN TH E DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. THE COURT NOTE D THAT IT WAS AN ADMITTED POSITION THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT WAS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCOR RECT AND ACCORDINGLY, HELD THAT, PRIMA FACIE , THE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE CO URT REPELLED THE CONTENTION RAISED BY THE COUNSEL FOR THE REVENUE TH AT 'SUBMITTING AN INCORRECT CLAIM IN LAW FOR THE EXPENDITURE ON INTER EST WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INCOME'. T HE COURT HELD THAT IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY, UNL ESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROV ISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN I NCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PART ICULARS. THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THAT THE CONDITIONS UNDER SECTION 271(1)( C ) MUST EXIST BEFORE THE PENALTY IS IMPOSED. THE COURT FURTHER OBSERVED THAT THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BECAUSE THAT IS THE ONLY 19 DOCUMENT, WHERE THE ASSESSEE CAN FURNISH THE PARTIC ULARS OF HIS INCOME. 5.2 REVERTING TO THE FACTS OF THE PRESENT CASE, THE AO, IN THE ASSESSMENT ORDERS, IN THE NOTICES ISSUED U/S 27 4 AND IN THE PENALTY ORDERS, HAS NOT STATED THE EXACT LIMB (CONC EALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME) UNDER WHICH THE PENALTY IS INITIATED AND LE VIED. WE HAVE VERY CAREFULLY CONSIDERED THIS ASPECT. WE HAVE NO H ESITATION IN ACCEPTING ASSESSEES CONTENTION THAT NOWHERE HAS TH E EXACT LIMB OF PENALTY BEEN SPECIFIED. THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY & ORS . (SUPRA) DEALT WITH THE IDENTICAL ISSUE THREADBARE AND 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 IMPOSIN G PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 27 1(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. 20 E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCE RNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORIT Y OR REVISIONAL AUTHORITY. F) EVER IF THERE IS NO SPECIFIC FINDING REGARDING T HE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(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 CON CEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASS ESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAI NED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE T O THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. 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 ORDE R OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTER EST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERN IBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNE ARTHING OR ENQUIRY 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 21 HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSE SSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLA NATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PRO VE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOS ING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBS TANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL I NCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO S ECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SA TISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEE DINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, TH EN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE A UTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECI FICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIO NED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HA S TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLE OF NATURAL JUSTI CE IS OFFENDED. ON 22 THE BASIS 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 AS SESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDI NGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PR OCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDING S ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSM ENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. 5.3 RESPECTFULLY FOLLOWING THE LAW LAID DOWN B Y HONBLE HIGH COURT, WE ARE OF THE CONSIDERED VIEW THAT WHEN THE ASSESSEE HAS NOT BEEN SPECIFICALLY MADE AWARE OF THE CHARGES LEVELED AGAINST HIM AS TO WHETHER THERE IS A CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON HIS PART, THE P ENALTY U/S 271(1)(C) OF THE ACT IS NOT SUSTAINABLE. WE ARE ALS O SUPPORTED IN OUR CONCLUSION BY THE HONBLE KARNATAKA HIGH COURTS DE CISION IN THE CASE OF SSA EMERALD MEADOWS (SUPRA) AGAINST WHICH T HE 23 DEPARTMENTS SLP WAS DISMISSED BY THE HONBLE APEX COURT. IN REACHING THIS CONCLUSION WE ALSO FIND SUPPORT FROM THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF ASHOK PAI REP ORTED IN 292 ITR 11 (RELIED UPON IN MANJUNATH COTTON GINNING FACTORY (SUPRA) WHEREIN IT HAS BEEN OBSERVED THAT CONCEALMENT OF IN COME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME CARR Y DIFFERENT MEANINGS/CONNOTATIONS. 5.4 WE WOULD ALSO LIKE TO UNDERLINE THE SETTLED P OSITION OF LAW THAT PENALTY PROCEEDINGS ARE INDEPENDENT OF ASS ESSMENT PROCEEDINGS AND THAT A MERE CONFIRMATION OF ADDITIO N CANNOT BE THE SOLE GROUND TO LEVY PENALTY. IN THE PENALTY ORDERS, THE AO HAS HIMSELF OBSERVED THAT THE ENTIRE PROCEEDINGS OF ASS ESSMENTS WERE BASED ON A) POST SEARCH ENQUIRIES B) STATEMENT OF S HRI TARUN GOYAL, WHICH HAVE BEEN THE KEY FACTORS TO IMPOSE THE PENAL TY U/S 271(1)(C). IN THE PRESENT APPEALS, IT IS UNDISPUTED THAT NO IN CRIMINATING MATERIAL WAS UNEARTHED DURING ASSESSSEES SEARCH U/ S 132 OF THE ACT, THAT NO INDEPENDENT ENQUIRY AND EXAMINATION TO OK PLACE DURING ASSESSMENT PROCEEDINGS QUA SHRI TARUN GOYAL AND MICRO INFOTECH LTD, THAT ONLY POST SEARCH ENQUIRIES WERE MADE THE BASIS OF THE ENTIRE ASSESSMENT AND PENALTY PROCEEDINGS/ORDERS, T HAT NO CROSS 24 EXAMINATION OF SHRI TARUN GOYAL TOOK PLACE, THAT NO EFFORT WAS MADE TO FIND OUT THE STATUS OF THE SUPPLIER INDEPENDENTL Y, THAT THE ASSESSEES CONTENTION THAT SOFTWARE PURCHASE WAS GE NUINE WAS DISCOUNTED ON THE BASIS OF PREPONDERANCE OF PROBABI LITIES AND INFERENCES, THAT NO MATERIAL WAS BROUGHT ON RECORD TO ESTABLISH THAT CASH FOUND ITS WAY BACK TO THE COFFERS OF THE ASSES SEE. IT IS APPARENT THAT NO INDEPENDENT INQUIRY WAS MADE FROM THE CONCE RNED PARTY BY ISSUING NOTICES U/S 133(6)/131 AND THE ENTIRE FOUND ATION IS LAID ON POST SEARCH ENQUIRIES, SEARCH AND SEIZURE OPERATION OF SHRI TARUN GOYAL AND STATEMENT OF SHRI TARUN GOYAL. ON AN OVE RALL CONSIDERATION OF ALL THESE FACTS, WE ARE INCLINED T O AGREE WITH THE LD. ARS ARGUMENT THAT THE PRESENT CASE MAY LIE IN THE REALM OF FACTS NOT PROVED BUT CANNOT FALL IN THE REALM OF FACTS DISPROVED . WE HAVE GONE THROUGH THE ORDERS OF THE CO-ORDINATE BENCH OF THE ITAT IN THE QUANTUM PROCEEDINGS CONFIRMING THE ADDITIONS. HOWEV ER, SINCE THE SCALES ARE DIFFERENT IN PENALTY AND QUANTUM PROCEED INGS AND PENALTY CANNOT BE AUTOMATIC TO THE CONFIRMATION OF ADDITION IN THE QUANTUM PROCEEDINGS, WE ARE DISINCLINED TO AGREE WITH THE C ONTENTION OF THE DEPARTMENT THAT THE CONFIRMATION OF THE QUANTUM BY THE ITAT WOULD AUTOMATICALLY RESULT IN CONFIRMATION OF THE PENALTY . WE ARE OF THE 25 CONSIDERED OPINION THAT MERE PROBABILITY CAN, AT MO ST, BE THE BASIS OF ADDITION BUT SAME CANNOT BE GOOD ENOUGH IN PENAL TY PROCEEDINGS. FURTHER, THE FINDINGS IN THE QUANTUM ORDER OF THE I TAT ON MERITS DO NOT REFLECT ANY INCRIMINATING MATERIAL UNEARTHED FR OM THE SEARCH OF THE ASSESSEE. THIS FACT ASSUMES SIGNIFICANCE BECAUS E ASSESSMENTS WERE FRAMED U/S 153A R.W.S. 143(3) OF THE ACT. THER EFORE, WE ACCEPT THE ARGUMENTS OF THE LD. AR AND DIRECT THE AO TO DE LETE THE PENALTIES IN ALL THE THREE YEARS. ORDER PRONOUNCED IN THE OPEN COURT ON 31.03.2017. SD/- SD/- (N.K. SAINI) (SUDHANSHU SRIVASTAV A) ACCOUNTANT MEMBER JUDICIAL MEMBE R DT. 31ST MARCH, 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR