MUTHA PARASRAM DHANAJI & CO, KALYAN V. DCIT CEN CIR 1, THANE

ITA 4032/MUM/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1745 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H N MOTIWALLA; M P CHHAJED
• Assessee Lawyers: SINCE FACTS ARE IDENTICAL; ISSUES
• Keywords: Invalid notice; Gift; Business income; Income from undisclosed sources; Loose papers; Document seized; Question of law; Initiation of penalty proceedings; Difference of opinion; Revised return; Documents seized; Change of opinion; Set aside
• Section: 271(1)(c); 143(3); 133A; 153A; 274; 27; 132

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI , . , , BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER, ITA NOS.4030 TO 4032/MUM/2015 ASSESSMENT YEARS: 2004-05, 2005-06 & 2007-08 M/S MUTHA PARASRAM DHANAJI & CO. 201, NARAYANWADI, STATION ROAD, KALYAN (W) / VS. DCIT, CENTRAL CIRCLE-1 THANE, ( !' /ASSESSEE) ( !# / REVENUE) P.A. NO.AAFFM5521R $ #%'! / DATE OF HEARI NG : 01/05/2019 %'! / DATE OF ORDER: 24/05/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST SEPARATE, BUT IDENTICAL ORDER OF THE LD. CIT(A)-11, PUNE, ALL DAT ED 31/03/2015 AND THEY PERTAINS TO ASSESSMENT YEARS 2004-05, 2005-06 AND 2007-08. SINC E, FACTS ARE IDENTICAL AND ISSUES !' !' / ASSESSEE BY SHRI H. N. MOTIWALLA & SHRI M. P. CHHAJED !# !' / REVENUE BY SHRI D.G. PANSARI CIT - DR 2 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. ARE COMMON, FOR THE SAKE OF CONVENIENCE, THESE APPE ALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE ASSESSEE, HAS MORE OR LESS FILED COMMON GRO UNDS OF APPEAL FOR ALL ASSESSMENT YEARS. FOR THE SAKE OF BREVITY, GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2004-05 ARE REPRODUCED HEREUNDER:- THE GROUNDS MENTIONED HEREUNDER ARE WITHOUT PREJUD ICE TO ONE ANOTHER:- 1 ) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING PENALTY ON ADDITION MADE ON ACCOUNT OF STOCK OF JEWELLERY AMOU NTING TO RS. 16,96,044/- RECEIVED BY WAY OF LOAN AND SECURITY DE POSIT, WITHOUT APPRECIATING THE FACT THAT THE APPELLANT FIRM HAD F ILED GOLD LOAN AGREEMENTS, BALANCE CONFIRMATION OF SECURITY DEPOSI T AND ALSO PRODUCED THE PARTIES AND THEIR WRITTEN STATEMENTS WERE RECOR DED BEFORE THE LEARNED ASSESSING OFFICER. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE PENALTY WITHOUT APPRECIATING THAT THE LEARNED ASSESSING OFF ICER HAD NO JURISDICTION TO LEVY PENALTY, ON INCOME ENHANCED BY COMMISSIONER OF INCOME TAX (APPEALS) BASED ON TORN LOOSE PAPER. 3) ON THE TACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME 'FAX (APPEALS) ERRED IN CONF IRMING THE PENALTY ON ADDITION OF RS.10,05,568/- BASED ON TORN LOOSE PAPE RS,. WITHOUT APPRECIATING THAT THE ASSESSING OFFICER MADE ADDITI ON IN THE HANDS OF PARTNERS OF APPELLANT FIRM, WHICH WAS DELETED BY CO MMISSIONER OF INCOME TAX ( APPEALS) AND ENHANCED THE INCOME OF THE APPEL LANT FIRM. THE QUANTUM ADDITION ITSELF IS SUBJECT MATTER OF DISPUT E IN REGARD TO ITS TAXABILITY AND CHANGE OF OPINION AND THEREFORE NO P ENALTY IS IMPOSABLE 3. THE ASSESSEE HAS FILED REVISED FORM NO.36 ALONG WITH REVISED GROUNDS OF APPEAL VIDE ITS LETTER DATED 26/11/2018 FOR ALL ASSESSMENT YEARS. THE RELEVANT REVISED GROUNDS TAKEN BY THE ASSESSEE FOR ASSESSMENT YEAR 2004-05 A RE REPRODUCED HEREUNDER:- THE GROUNDS MENTIONED HEREUNDER ARE WITHOUT PREJUD ICE TO ONE ANOTHER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE NOTICE U/S.274 R.W.S. 271(L)(C) OF THE INCOME TAX ACT, 1961 DOES NOT MENT IONS AS TO WHY THE 3 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. PENALTY IS INITIATED, IN REGARD TO CONCEALMENT OR F URNISHING OF INACCURATE PARTICULARS AND THEREFORE THE SAME IS VOID - AB INI TIO AND CONSEQUENTLY THE ORDER IMPOSING PENALTY IS BAD IN LAW. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE T HAT THE SUBSTANTIAL QUESTION OF LAW HAS BEEN ADMITTED BY HONOURABLE BOMBAY HIGH COURT IN THE QUANTUM PROCEEDINGS AND THEREFORE NO PENALTY IS IMPOSABLE U/S.271(L)(C) AS HELD BY THE HONOURABLE BOMBAY HIGH COURT IN CASE OF NAYAN BUILDERS & DEVELOPERS, 368 ITR 722 . 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING PENALTY ON ADDITION MADE ON ACCOUNT OF STOCK OF JEWELLERY AMOU NTING TO RS. 16,96,0447- RECEIVED BY WAY OF LOAN AND SECURITY DEPOSIT, WITHO UT APPRECIATING THE FACT THAT THE APPELLANT FIRM HAD F ILED GOLD LOAN AGREEMENTS, BALANCE CONFIRMATION OF SECURITY DEPOSI T AND ALSO PRODUCED THE PARTIES AND THEIR WRITTEN STATEMENTS WERE RECOR DED BEFORE THE LEARNED ASSESSING OFFICER. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE PENALTY WITHOUT APPRECIATING THAT THE LEARNED ASSESSING OFF ICER HAD NO JURISDICTION TO LEVY PENALTY, ON INCOME ENHANCED BY COMMISSIONER OF INCOME TAX (APPEALS) BASED ON TORN LOOSE PAPER. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFI RMING THE PENALTY ON ADDITION OF RS.10,05,568/- BASED ON TORN LOOSE PAPE RS, WITHOUT APPRECIATING THAT THE ASSESSING OFFICER MADE ADDITI ON IN THE HANDS OF PARTNERS OF APPELLANT FIRM, WHICH WAS DELETED BY CO MMISSIONER OF INCOME TAX ( APPEALS) AND ENHANCED THE INCOME OF THE APPEL LANT FIRM. THE QUANTUM ADDITION ITSELF IS SUBJECT MATTER OF DISPUT E IN REGARD TO ITS TAXABILITY AND CHANGE OF OPINION AND THEREFORE NO PENALTY IS I MPOSABLE. 4. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSESS EE IS PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF GOLD JEWELLERY AND MONEY LENDING BUSINESS. THE BUSINESS PREMISES OF THE ASSESSEE WAS SURVEYED U/S 133A AND ALSO SEARCH ACTION U/S 132 WAS CARRIED OUT AT THE RESIDE NTIAL PREMISES OF THE PARTNERS ON 07/12/2006. CONSEQUENT TO SEARCH AND SURVEY, THE AS SESSEE HAS FILED ITS RETURN ON INCOME FOR ASSESSMENT YEAR 2004-05 ON 30/05/2008, D ECLARING TOTAL INCOME AT RS.1,01,370/-. THE ASSESSMENT HAS BEEN COMPLETED U/ S 143(3) R.W.S 153A OF THE ACT, 4 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. ON 31/12/2008, DETERMINING TOTAL INCOME OF RS.22,09 ,530/- AFTER MAKING ADDITIONS TOWARDS UNACCOUNTED INCOME FROM MONEY LENDING BUSIN ESS FOR RS.4,07,918/- AND ADDITION ON ACCOUNT OF UNACCOUNTED STOCK OF JEWELLE RY OF RS.16,96,044/-. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY. THE LD. CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSEE AND CONF IRMED THE ADDITIONS MADE BY THE AO TOWARDS UNACCOUNTED INCOME FROM MONEY LENDING BU SINESS AND ADDITION ON ACCOUNT OF UNACCOUNTED STOCK OF JEWELLERY. THE LD. CIT(A) ENHANCED THE INCOME OF THE ASSESSEE TOWARDS UNACCOUNTED INCOME FROM MONEY LEND ING BUSINESS FOR RS.10,05,568/- FOR THE DETAILED REASONS RECORDED IN HIS APPELLATE ORDER DATED 30/10/2009. THE ASSESSEE HAS CARRIED THE MATTER IN FURTHER APPEAL BEFORE ITAT. THE ITAT, FOR THE DETAILED REASONS RECORDED IN ITS ORDE R DATED 31/12/2014, PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE, WHERE ADDITIONS MADE BY THE AO TOWARDS UNACCOUNTED INCOME FROM MONEY LENDING BUSINESS HAS BEEN SCALED DOWN AND DIRECT THE AO TO SUSTAIN THE ADDITION TO THE EXTENT OF 50% ADDITION MADE TOWARDS UNACCOUNTED INCOME FROM MONEY LENDING BUSINESS. IN SO FAR AS, ADDITION S TOWARDS DIFFERENCE IN VALUE OF CLOSING STOCK, CONFIRMED THE ADDITIONS MADE BY THE AO ALONG WITH ENHANCEMENT MADE TOWARDS INCOME FROM MONEY LENDING BUSINESS. THE ASS ESSEE HAS CHALLENGED THE ORDER OF THE TRIBUNAL BEFORE THE HONBLE BOMBAY HIGH COUR T. THE SUBSTANTIAL QUESTION OF LAW RAISED BY THE ASSESSEE BY WAY OF ITS APPEAL, HAS BE EN ADMITTED FOR ADJUDICATION BY THE HONBLE HIGH COURT. 5 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. 5. THEREAFTER, THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, IN RESPECT OF ADDITIONS MADE TOWARDS UNACCOUNTED INCOM E FROM MONEY LENDING BUSINESS, ADDITIONS ON ACCOUNT OF UNACCOUNTED STOCK OF JEWELL ERY AND ALSO ADDITIONS ON ACCOUNT OF ENHANCEMENTS OF INCOME MADE BY THE LD. CIT(A) AND C ALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHALL NOT BE LEVIED FOR F URNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF PARTICULARS OF SUCH INCOM E. IN RESPONSE, THE ASSESSEE VIDE ITS LETTER DATED 24/03/2011 SUBMITTED THAT IT HAS N EITHER CONCEALED PARTICULARS OF INCOME NOR FURNISHED INACCURATE PARTICULARS OF INCOME WHIC H WARRANTS LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE FURTHER SUBMITTE D THAT THE AO HAS MADE ADDITIONS TOWARDS UNACCOUNTED INCOME FROM MONEY LENDING BUSIN ESS ON THE BASIS OF LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH WHICH SUGG ESTED CHARGING INTEREST FROM MONEY LENDING BUSINESS @ 3%, WHEREAS THE ASSESSEE H AS ACCOUNTED INTEREST ON REGULAR INTERVALS IN ITS BOOKS OF ACCOUNTS AT LESSO R RATE. THE ASSESSEE HAS EXPLAINED WHY NO ADDITIONS COULD BE MADE ON THE BASIS LOOSE P APERS. THE AO WITHOUT CONSIDERING THE EXPLANATION FILED BY THE ASSESSEE, MADE ESTIMAT ION ON UNACCOUNTED INCOME BY EXTRAPOLATION OF INFORMATION AVAILABLE IN THE LOOSE PAPERS AND EXTENDED IT TO WHOLE YEAR. THEREFORE, THE SAME CANNOT BE CONSIDERED AS FURNISH ING ACCURATE PARTICULARS OF INCOME. SIMILARLY, THE ASSESSEE HAS FILED ITS EXPLANATION I N RESPECT OF ADDITIONS MADE TOWARDS DIFFERENCE IN VALUE OF STOCK AND ALSO ENHANCEMENT O F INCOME MADE BY THE LD. CIT(A). THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASS ESSEE AND ALSO TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS FAILED TO OFFER ANY EXPL ANATION TO THE SATISFACTION OF THE AO IN 6 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. ORDER TO ESCAPE FROM LEVY OF PENALTY AND HENCE OPIN ED THAT IT IS A FIT CASE FOR LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS OF IN COME AND ALSO FOR CONCEALMENT OF PARTICULARS OF INCOME, ACCORDINGLY, LEVIED PENALTY OF RS.11, 15,543/- WHICH IS EQUIVALENT TO 100% TAX SOUGHT TO BE EVADED U/S 271(1)(C) OF TH E ACT. 6. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), THE ASSESSEE REITERATED ITS SUBMISSIONS MADE BEFORE THE AO TO ARGUE THAT UNDER GIVEN FACTS AND C IRCUMSTANCES OF THE CASE, LEVY OF PENALTY U/S 271(1)(C) OF THE ACT IS UNWARRANTED, BE CAUSE THE AO HAS MADE ADDITIONS TOWARDS UNACCOUNTED INCOME FROM MONEY LENDING BUSIN ESS ON ESTIMATION BASED ON LOOSE PAPERS FOUND DURING THE COURSE OF SEARCH. SIM ILARLY, HE AO HAS MADE ADDITIONS TOWARDS DIFFERENCE IN VALUE OF STOCK DISREGARDING E XPLANATION FILED BY THE ASSESSEE. LIKEWISE, THE LD. CIT(A) ENHANCED THE INCOME FROM M ONEY LENDING BUSINESS ON THE BASIS OF LOOSE PAPERS, THEREFORE, THE SAME CANNOT B E CONSIDERED AS FURNISHING INACCURATE PARTICULARS OF INCOME. 7. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO TAKING NOTE OF FINDINGS OF THE ITAT IN QUANTUM APPE LLATE PROCEEDINGS, PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE, WHERE DELETED THE PEN ALTY LEVIED BY THE AO TOWARDS ADDITION ON ACCOUNT OF UNDISCLOSED INCOME FROM MONE Y LENDING BUSINESS, BUT CONFIRMED PENALTY LEVIED IN RESPECT OF EXCESS STOCK OF GOLD J EWELLERY AND DIAMONDS AND INCOME ENHANCE BY THE LD. CIT(A). THE RELEVANT FINDINGS OF THE LD. CIT(A) ARE AS UNDER:- 7 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. 4.3 THE VARIOUS PROPOSITIONS CANVASSED BY THE APP ELLANT ARE CAREFULLY EXAMINED WITH REFERENCE TO THE RELEVANT S EIZED DOCUMENTS, OTHER MATERIAL PLACED ON RECORD AND THE PROVISIONS OF SEC. 271(1)(C). SECTION 271(1)(C) VISUALIZES IMP OSITION OF PENALTY WHEN THE ASSESSEE HAS CONCEALED INCOME OR W HEN THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF IN COME. IN ADDITION TO THESE TWO SITUATIONS, PENALTY CAN ALSO BE IMPOSED, INTER ALIA, WHEN ASSESSEE IS DEEMED TO HAVE CONCEAL ED PARTICULARS OF INCOME UNDER EXPLANATIONS TO SEC. 27 1(1)(C). IN THIS BACKGROUND, IT IS NOW EXAMINED WHETHER THE ASS ESSING OFFICER IS JUSTIFIED IN IMPOSING THE PENALTY IN RES PECT OF VARIOUS ADDITIONS MADE IN THE ASSESSMENT ORDER OR NOT. (I) ADDITION ON ACCOUNT OF DIFFERENTIAL INTEREST (G ROUND OF APPEAL NO. 1): 4.3.1 THE FIRST ADDITION TO THE TOTAL INCOME MADE I N THE ASSESSMENT ORDER, IN RESPECT OF WHICH PENALTY WAS L EVIED BY THE ASSESSING OFFICER, IS ON ACCOUNT OF DIFFERENTIA L INTEREST OF RS. 4,07,980/- ON THE BASIS OF THE DOCUMENTS SEIZED AND IMPOUNDED DOCUMENTS FOUND DURING THE SEARCH AND SUR VEY OPERATION IN THE APPELLANT GROUP OF CASES. AS ALREA DY MENTIONED, THE DOCUMENTS FOUND AND SEIZED DURING TH E SEARCH INDICATED THAT THE APPELLANT WAS CHARGING INTEREST 3% BUT WAS RECORDING ONLY @1 .5% IN THE BOOKS OF A/C AND T HE RETURN OF INCOME. ACCORDINGLY, THE DIFFERENCE IN INTEREST OF RS. 4,07,980/-, WHICH IS DOUBLE THE INTEREST SHOWN BY T HE APPELLANT IN THE RETURN OF INCOME, WAS ADDED TO THE TOTAL INC OME IN THE ASSESSMENT ORDER AND PENALTY WAS LEVIED. THE CONTEN TION OF THE APPELLANT IN THIS REGARD WAS THAT THE ASSESSING OFFICER IS NOT AT ALL JUSTIFIED IN MAKING THE ADDITION ON THE BASIS OF THE CASH RECEIPTS AND PAYMENTS NOTED ONLY FOR THE PERIO D FROM 23/10/2006 TO 6/12/2006. IT IS THE SUBMISSION OF TH E APPELLANT THAT WHEN THE ADDITION ITSELF WAS MADE ON EXTRAPOLA TION WITHOUT ANY POSITIVE MATERIAL INDICATING CHARGING O F INTEREST KB 3% P. A. FOR THIS YEAR, THE PENALTY IN RESPECT OF S UCH ADDITION IS WHOLLY UNJUSTIFIED. THERE IS MERIT IN THE CONTENTIO N OF THE APPELLANT. ON PERUSAL OF THE RECORD, IT IS FOUND TH AT SIMILAR ADDITION WAS MADE FOR A.Y. 2002-03 AND A.Y. 2003-04 AND ON 8 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. APPEAL FILED BY THE APPELLANT, THE ITAT SMC BENCH V IDE ITS ORDER DATED 30/11/2010 HAS DELETED THE QUANTUM ADDI TION MADE FOR THESE YEARS ON THE GROUND THAT ALL THE TRA NSACTIONS RECORDED IN THE SEIZED DOCUMENTS RELATE TO F.Y.2006 -07 RELEVANT TO A.Y. 2007-08 AND THERE WAS NO DOCUMENT SEIZED BY THE DEPARTMENT TO SUBSTANTIATE THAT THE APPELLANT W AS IN RECEIPT OF MORE INTEREST THAN WHAT HAS BEEN DISCLOS ED OR RETURNED IN THE YEAR 2002-03 AND 2003-04 ALSO AND T HEREFORE THE ADDITION IS NOT JUSTIFIED. IN CONTRAST TO THIS, FOR THE YEAR UNDER CONSIDERATION, THE ITAT DIVISION BENCH HAS TA KEN A DIFFERENT VIEW IN THE MATTER AND REDUCED THE ADDITI ON MADE ON THIS GROUND TO THE EXTENT OF 50% VIDE ITS ORDER DAT ED 31/12/2014. THE RELEVANT OBSERVATIONS OF THE ITAT A RE EXTRACTED BELOW FOR READY REFERENCE: 19....WE HAVE CONSIDERED THE RIVAL CONTENTIONS. TH E AO HAS MADE THE ADDITIONS ON THE BASIS OF THE INCRIMINATIN G MATERIAL FOUND RELATING TO F. Y. 2006- 07. THE ADDITIONS FOR THE YEAR UNDER CONSIDERATION I.E. A. Y. 2004-05 HAVE BEEN MA DE ASSUMING THAT SIMILAR MODUS OPERANDI MIGHT HAVE BEE N ADOPTED BY THE ASSESSEE DURING THIS YEAR. 20. WE FIND FORCE IN THE CONTENTION OF THE LD. DR T HAT WHEN SOME INCRIMINATING MATERIAL IS FOUND AGAINST THE AS SESSEE SHOWING SOME METHOD OR MODUS OPERANDI ADOPTED BY TH E ASSESSEE LEADING TO CONCEALMENT OR UNDERASSESSMENT OF INCOME, THEN IN SUCH A CASE, THE BURDEN IS ON THE A SSESSEE TO PROVE THAT SIMILAR MODUS OPERANDI WAS NOT ADOPTED I N THE PAST. HOWEVER THE FACT WHICH CANNOT BE IGNORED IN THIS CA SE IS THAT THE AO HAD CORRELATED THE ENTRIES RELATING TO SIX P ERSONS ONLY. WHEREAS AS PER THE ASSESSEE, THERE WERE ABOUT 500 T O 600 PERSONS TO WHOM THE ADVANCES WERE MADE. IN OUR VIEW , IT WILL NOT BE JUSTIFIED TO ASSUME THAT ADVANCES WERE MADE AT THE DOUBLE RATE OF INTEREST THAN SHOWN IN THE BOOKS OF ACCOUNTS IN RELATION TO ALL THE BORROWERS. THE CHARGEABILITY OF RATE OF INTEREST ALSO DEPENDS UPON TIME TO TIME MARKET COND ITIONS AS WELL ON THE PREVALENT BANK INTEREST RATES. THERE IS ALSO NO DIRECT EVIDENCE ON THE FILE THAT THE ASSESSEE IN THE PAST HAD CHARGED THE INTEREST AT THE DOUBLE RATE THAN SHOWN IN THE B OOKS OF 9 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. ACCOUNT FROM ALL THE PERSONS WITH WHOM HE HAD MADE SUCH TRANSACTIONS. HENCE, IN VIEW OF THE OVERALL FACTS A ND CIRCUMSTANCES OF THE CASE, IN OUR VIEW, THE INTERES T OF JUSTICE WILL BE BEST SERVED IF THE ADDITIONS ARE REDUCED CO NSIDERING THE SUBMISSION OF THE ASSESSEE THAT IT IS NOT POSSIBLE THAT THE ASSESSEE HAD BEEN CHARGING SAME RATE OF INTEREST FR OM ALL THE BORROWERS IN THE PAST. WE ACCORDINGLY REDUCE THE AD DITION MADE BY THE LOWER AUTHORITIES ON THIS ISSUE TO THE EXTENT OF 50% OF THE ADDED AMOUNT. THIS GROUND IS ACCORDINGLY PAR TLY ALLOWED IN FAVOR OF THE ASSESSEE.' 4.3.2 FROM THE ABOVE EXTRACT OF THE ORDER, IT COULD BE SEEN THAT THERE IS DIFFERENCE OF OPINION BETWEEN THE ITAT SMC AND ITAT DIVISION BENCH ON THE TAXABILITY OF THE SAID DIFFER ENTIAL INTEREST ON EXTRAPOLATION BASIS WHEN THERE WAS NO DOCUMENT S EIZED BY THE DEPARTMENT TO SUBSTANTIATE THAT THE APPELLANT W AS IN RECEIPT OF MORE INTEREST THAN WHAT HAS BEEN DISCLOS ED OR RETURNED FOR THIS YEAR. CONSIDERING THE FACT THAT T HE QUANTUM ADDITION ITSELF WAS MADE ON EXTRAPOLATION BASIS AND THERE IS DIFFERENCE OF OPINION ON TAXABILITY OF SUCH INTERES T FOR YEARS OTHER THAN A.Y. 2007-08 TO WHICH SEIZED DOCUMENT RE LATES, I AM OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICE R IS NOT JUSTIFIED IN LEVYING THE PENALTY UNDER SEC. 271(1)( C) ON ADDITION MADE ON ACCOUNT OF DIFFERENTIAL INTEREST OF RS. 4,0 7,918/-, WHICH WAS SUBSEQUENTLY RESTRICTED TO RS. 2,03,959/- BY THE ITAT. GROUND OF APPEAL NO. 1 SUCCEEDS. (II) EXCESS STOCK OF GOLD JEWELLERY AND DIAMONDS (G ROUND OF APPEAL NO.2) 4.3.3 THE NEXT ADDITION MADE TO THE TOTAL INCOME IN THE ASSESSMENT ORDER, WHICH IS SUBJECT MATTER OF PENALT Y UNDER SEC. 271(1)(C), IS IN RESPECT OF EXCESS STOCK OF JE WELLERY AMOUNTING TO RS. 16,96,044/-. DURING THE SEARCH OPE RATIONS, IT WAS FOUND THAT THERE WAS A DIFFERENCE OF RS. 16,96, 044/- IN THE CLOSING STOCK OF GOLD JEWELLERY AS PER GS-12 REGIST ER AND CLOSING STOCK SHOWN IN THE RETURN OF INCOME. THE CLAIM OF T HE APPELLANT IN THIS REGARD WAS THAT THIS DIFFERENCE A ROSE DUE TO 1,400 GMS. OF JEWELLERY RECEIVED UNDER LOAN SCHEME FROM 10 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. VARIOUS PARTIES AND ANOTHER 2300 GMS. OF JEWELLERY RECEIVED AS SECURITY DEPOSITS FROM KARIGARS WHICH HAD NOT BEEN SHOWN IN THE RETURN OF INCOME. THE ASSESSING OFFICER DID NOT HOWEVER, AGREE WITH THIS CONTENTION OF THE APPELLANT ON THE PREMISE THAT THE SAID PARTIES WERE NOT HAVING CREDITWORTHINESS T O ADVANCE GOLD JEWELLERY TO THE APPELLANT THOUGH THEY ADMITTE D TO HAVE GIVEN GOLD JEWELLERY TO THE APPELLANT FIRM. THE ASS ESSING OFFICER ALSO FOUND THAT THOUGH APPELLANT CLAIMED INTEREST @ 6% AS GIVEN TO GOLD LOAN PARTIES, THE SAME WAS NOT REFLEC TED IN THE BOOKS OF A/C AND EVEN THE GOLD LOAN WAS NOT REFLECT ED IN THE BALANCE SHEET. THE CIT(A) CONCURRED WITH THE VIEW O F THE ASSESSING OFFICER AND ON FURTHER APPEAL BY THE APPE LLANT, THE HON'BLE. ITAT SUSTAINED THE ADDITION WITH THE FOLLO WING OBSERVATIONS: 27. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO GONE THROUGH THE EVIDENCES PRODUCED ON THE FILE. THE ASSESSEE HAS EXPLAINED THE DIFFERENCE OF 3692.53 GMS. OF GOLD STATING THAT OUT OF THE SAID QUANTITY 100 GMS WERE THE DEPOS ITS MADE BY THE DEPOSITORS UNDER THE GOLD LOAN SCHEME. THE REMA INING 2300 GMS WERE OUT OF SECURITY DEPOSITS FROM KARIGARS (SK ILLED LABORERS EMPLOYED FOR MAKING OF GOLD JEWELLERY). THE AS SESSEE HAS PLACED ON FILE THE COPIES OF THE GOLD LOAN AGREE MENT AS WELL AS THE CONFIRMATIONS REGARDING DEPOSIT OF THE GOL D BY THE KARIGARS. BOTH THE LOWER AUTHORITIES HAVE DISBELIEVED T HE SAID DOCUMENTS. EVEN THE SAID PARTIES TO THE GOLD LOAN AG REEMENT AND THE KARIGARS WERE ALSO EXAMINED BY THE AO. THE AO DISBELIEVED THEIR STATEMENTS HOLDING THAT THE KARIGARS WERE OF SMALL MEANS AND DID NOT HAVE CREDITWORTHINESS TO DEP OSIT SUCH HIGH QUANTITY OF THE GOLD WITH. THE ASSESSEE. THE A O ALSO OBSERVED THAT THOUGH THE ASSESSEE HAD CLAIMED TO HAV E BEEN GIVING INTEREST AT THE RATE OF 6% TO THE PARTIES TO T HE GOLD LOAN AGREEMENT, HOWEVER, THE SAME WAS NOT FOUND DEBITED I N THE BOOKS OF ACCOUNT. EVEN THE GOLD LOAN WAS ALSO NOT RE FLECTED IN THE BALANCE SHEET. HE THEREFORE HELD THAT IT WAS AN AFTERTHOUGHT OF THE ASSESSEE. WE HAVE PERUSED THE COP IES OF THE GOLD LOAN AGREEMENT PLACED ON PAPER BOOK AT PAGE NO. 2 TO 29. A PERUSAL OF THE ABOVE STATED COPIES OF THE G OLD LOAN AGREEMENT REVEALS THAT ALL THE GOLD LOAN AGREEMENTS HA VE BEEN WRITTEN ON STAMP PAPER OF THE VALUE OF RS.50/ -. THE ASSESSEE HAS PLACED 8 COPIES OF THE SAID GOLD LOAN AGREEMENTS 11 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. ENTERED INTO WITH DIFFERENT PERSONS. SURPRISINGLY, EVERY STAMP PAPER FOR RS.50/ - FOR EACH OF THE GOLD LOAN AGREEMENT BEARS THE SAME SERIAL NUMBER I.E. 7545. THAT MEANS ALL THE 8 STAMP PAPERS HAVE BEEN SHOWN TO BE PURCHASED BY THE ASSESSE E AGAINST THE ONE AND THE SAME ENTRY IN THE REGISTER OF THE STAMP VENDOR. THOUGH THE AGREEMENTS HAVE BEEN SHOWN T O HAVE BEEN ENTERED ON DIFFERENT DATES OF THE MONTH OF OCTOBER AND NOVEMBER 2003 BUT THE STAMP PAPERS FOR ALL THE AGREEMENTS HAVE BEEN PURCHASED IN THE NAME OF THE PART NER OF THE ASSESSEE FIRM NAMELY SHRI RAMESH H. SNAKLESHA ON THE SAME DATE I.E. 03.10.03. THE ASSESSEE HAS NOT PRODUC ED ANY EVIDENCE ABOUT THE GOLD LOAN SCHEME LAUNCHED BY IT. AFTER CONSIDERING THE PECULIAR FACT OF PURCHASING OF ALL THE STAMP PAPERS AGAINST THE SINGLE ENTRY AND THEREAFTER EXECUTIO N OF AGREEMENTS SHOWS THAT THE SAID AGREEMENTS ARE AN AFTERTHOUGHT ACTION OF THE ASSESSEE. THE ASSESSEE EV EN HAD NOT DEBITED THE PAYMENT OF INTEREST TO THE BOOKS OF ACCO UNTS AT THE RATE OF 6% AS HAS BEEN ALLEGED BY IT. NO LOAN HA D BEEN REFLECTED IN THE BALANCE SHEET. HENCE, WE DO NOT FIN D ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES IN DISB ELIEVING THE EXPLANATION OF THE ASSESSEE REGARDING THE GOLD LO AN AGREEMENT. 28. WITH REGARD TO THE EXPLANATION GIVEN BY ASSESSEE REGARDING THE REMAINING 2300 GMS OF GOLD ALLEGED TO BE RECEIVED FROM KARIGARS AS SECURITY DEPOSIT, WE FOUND THA T ASSESSEE HAS FILED LETTERS BY ITS KARIGARS IN THE MONT H OF NOVEMBER, 2008 TO THE EFFECT THAT THESE KARIGARS HAVE DEPOSITED GOLD RANGING BETWEEN 100 TO 200 GMS WITH THE ASSESSEE M/S MUTHA PARASRAIN DHANAJI & CO. AS ON 1-4- 2003. AS PR THESE LETTERS, GOLD WAS GIVEN AS A SECURITY DEPO SIT TO REMAIN WITH THE FIRM TILL THE KARIGAR CONTINUES TO WORK WITH ASSESSEE FIRM AND SAME WAS RETURNABLE ON HIS DISCONTIN UING OF WORK WITH ASSESSEE. ALL THESE 10 LETTERS ARE GIVEN BY THE KRIGARS WERE TYPED ON THE LETTER PAD OF THE ASSESSEE A ND ALL ARE DATED NOV. 2008, WHEREIN GOLD WAS ALLEGED TO BE G IVEN BY KARIGARS TO THE ASSESSEE BETWEEN 1ST TO 8TH APRIL, 200 3. LANGUAGE USED IN ALL THE LETTERS WAS EXACTLY SAME. T HE AO EXAMINED THE KARIGARS AND OBSERVED THAT THESE KARIGARS W ERE OF SMALL MEANS AND DID NOT HAVE CREDITWORTHINESS TO D EPOSIT SUCH QUANTITY OF GOLD WITH THE ASSESSEE. THE AO HAS ALSO ASKED FURTHER DETAILS LIKE PROOF OF PURCHASES FROM VARIOUS PARTI ES BUT 12 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. THE ASSESSEE FAILED TO PRODUCE ANY EVIDENCE. THE AO RECORDED A CATEGORICAL FINDING THAT NONE OF THE KARIGARS COULD PROVE THE SOURCE OF THEIR PURCHASES OF GOLD RANGING FROM 100 TO 20 0 GMS AND THE INVESTMENT BY THESE PERSONS RANGING FROM RS. 1,20,000/- TO RS. 1,40,000/-. VIDE LETTER DATED 24-1 0-2008) THE ASSESSEE WAS AGAIN ASKED TO PRODUCE THE PURCHASE OF GOLD BY THESE PERSONS, HOWEVER, NOTHING WAS FILED BY ASSESSE E. AS PER THE LETTERS OF KARIGARS SO FILED BY ASSESSEE BEFORE AO IN NOV., 2008 WHICH MENTIONS THAT GOLD WAS GIVEN IN APRIL, 20 03, HOWEVER, NOTHING WAS BROUGHT ON RECORD BY ASSESSEE TO SUBSTANTIATE THAT THESE KARIGARS WERE WORKING WITH THE ASSESSEE SINCE APRIL, 2003. AS PER THE LETTER, THE GO LD WAS TO REMAIN WITH THE ASSESSEE TILL HE WORKS WITH HIM AND W AS RETURNABLE THEREAFTER. HOWEVER, NOT HINA WAS BROUGHT ON RECORD BY ASSESSEE TO THE EFFECT THAT THESE KARIGARS CO NTINUED TO WORK WITH ASSE.SSEE FIRM SINCE 2003 TILL 2014, INS OFAR AS NO GOLD WAS RETURNED BY ASSESSEE FIRM TO THESE KARIGARS. AL L THE GOLD ALLEGED TO HE GIVEN BY THESE KARIGARS WERE USED B Y ASSESSEE FIRM FOR MAKING JEWELLERY WHICH WAS ALSO FOUN D DURING PHYSICAL TAKING OF INVENTORY AT THE TIME OF SEARCH/SURVEY. IT IS ALSO NOT THE CASE OF.-THE ASSESS EE THAT THE ALLEGED GOLD WAS RETURNED TO THE KARIGARS EVEN AFTER MORE THAN 10 YEARS. SINCE APRIL, 2003, MORE THAN 11 YEARS HAD EXP IRED, BUT NOTHING WAS SHOWN EITHER BEFORE THE LOWER AUTHORITI ES OR BEFORE US TO CONTEND THAT GOLD WAS AGAIN RETURNED TO T HE KARIGARS OR CONTINUED TO BE USED BY ASSESSEE FIRM ON TH E PLEA OF SAME KARIGAR CONTINUED TO WORK WITH THE ASSESSEE F IRM. IN A JEWELLERY BUSINESS, THE JEWELER GIVES GOLD TO THE KARI GAR FOR MAKING JEWELLERY, IN THE CONTRAST, THE ASSESSEE HAS C LAIMED THAT KARIGARS HAD GIVEN GOLD TO THE ASSESSEE WHICH WA S USED BY IT FOR MAKING JEWELLERY AND SELLING THE SAME IN HIS S HOWROOM. THUS, THE STORY OF ASSESSEE WAS NOT GENUINE. ACCORDIN GLY WE UPHOLD THE DECISION OF LOWER AUTHORITIES THAT ASSESSE E HAD BROUGHT UNACCOUNTED GOLD JEWELLERY INTO BUSINESS DURIN G THE PREVIOUS YEAR RELEVANT TO A.Y 2004-05 AND THE SAME WA S ADDED TO THE INCOME AS UNDISCLOSED INCOME OF THE ASSESSEE FIRM.. NOTHING WAS BROUGHT ON RECORD BY LD. AR TO PERSUADE US TO DEVIATE FROM THE FINDINGS RECORDED BY THE LOWER AUTHORIT IES TO THE EFFECT THAT NO GOLD WAS GIVEN BY KARIGAR TO THE A SSESSEE IN THE YEAR 2003. SINCE THE FINDING OF FACT RECORDED BY L OWER AUTHORITIES WHICH ARE AS PER MATERIAL ON RECORD, COULD NO T BE CONTROVERTED BY ID. AR BY BRINGING ANY POSITIVE MATERIA L, WE DO 13 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORD ED BY LOWER AUTHORITIES TO JUSTIFY THE ALLEGED DEPOSIT OF 2 300 GRNS OF GOLD BY KARIGARS. ACCORDINGLY, WE CONFIRM THE ACTION OF CIT(A) WITH REGARD TO THE ADDITION SUSTAINED ON ACCOUNT OF E XCESS GOLD NOT DISCLOSED IN THE AUDITED ACCOUNTS AND RETURN OF INCOME FILED WITH THE DEPARTMENT. 4.3.4 AS COULD BE SEEN FROM THE ABOVE EXTRACT OF TH E ORDER, THE ITAT HAS CATEGORICALLY HELD THAT WHATEVER DOCUMENT PRODUCED BY THE APPELLANT TO SUBSTANTIATE ITS CLAIM LIKE GOL D LOAN AGREEMENT, LETTERS OF KARIGARS ETC. ARE AN AFTERTHO UGHT AND NOT GENUINE AND THE APPELLANT HAS NOT EVEN DEBITED THE PAYMENT OF INTEREST IN THE BOOKS OF ACCOUNTS AT THE RATE OF 6% AS HAS BEEN ALLEGED BY IT AND NO LOAN HAD BEEN REFLECTED I N THE BALANCE SHEET. IT IS OBSERVED BY THE HONRBLE BENCH THAT THERE IS NO INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES IN DISBELIEVING THE EXPLANATION OF THE ASSESSEE REGARD ING THE GOLD LOAN AGREEMENT AND GOLD FROM KARIGARS. THUS, THE CL AIM OF THE APPELLANT FOR THE DIFFERENCE IN STOCK REFLECTED IN GS 12 REGISTER IS CLEARLY AN AFTERTHOUGHT TO EXPLAIN AWAY THE UNDI SCLOSED STOCK AND THEREFORE THE ASSESSING OFFICER IS JUSTIFIED ON FACTS AND IN LAW IN HOLDING THAT APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME IN THE RETURN OF INCOME FILED FOR THE YEAR. FURTHER, AS THE APPELLANT FAILED TO PROVE THAT THE EXPLANATION FURNISHED BY THE APPELLANT FOR THE DISCREPANCY IN THE STOCK IS B ONAFIDE, THE APPELLANT IS ALSO DEEMED TO HAVE FURNISHED INACCURA TE PARTICULARS OF INCOME UNDER EXPLANATION-1 TO SEC. 2 71(1)(C). ACCORDINGLY, IN SO FAR AS LEVY OF PENALTY ON ADDITI ON OF RS, 16,96,044/- IS CONCERNED, THERE IS NO INFIRMITY IN THE ORDER OF THE ASSESSING OFFICER AND THE PENALTY IS HEREBY END ORSED. GROUND OF APPEAL NO 2 IS REJECTED. (III) INCOME ENHANCED BY CIT(A) (GROUNDS OF APPEAL NO. 3 AND 4): 4.3.5 THE NEXT ADDITION TO THE TOTAL INCOME, IN RES PECT OF WHICH PENALTY WAS LEVIED' BY THE ASSESSING OFFICER, IS ON ACCOUNT OF INCOME OF RS. 10,05,568/- ENHANCED BY THE CIT(A) IN THE APPELLATE ORDER PASSED BY THE CIT(A) ON 30/10/2009 . THE 14 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. CONTENTIONS OF THE APPELLANT IN THIS REGARD ARE TWO FOLD. THE FIRST LEGAL PLEA RAISED BY THE APPELLANT IS THAT SI NCE THE INCOME IN QUESTION WAS ENHANCED BY THE CIT(A), THE ASSESSI NG OFFICER IS NOT CORRECT IN LAW IN INITIATING AND LEVYING PENALT Y UNDER SEC. 271(1)(C) IN RESPECT OF SUCH ENHANCEMENT OF INCOME. THE SECOND ARGUMENT OF THE APPELLANT IS THAT EVEN ON ME RITS THE PENALTY IS NOT SUSTAINABLE AS THE NOTING MADE ON TH AT TORN PAPER COULD NOT BE CORROBORATED WITH ANY OTHER SEIZ ED MATERIAL AND THEREFORE, NO ADDITION COULD BE MADE O N THE BASIS OF THE TORN PAPER WHICH HAD NOTHING TO DO WITH THE BUSINESS INCOME OF THE APPELLANT. 4.3.6 AS REGARDS THE FIRST CONTENTION THAT THE INCO ME WAS ENHANCED BY THE CIT(A) AND IT IS NOT LEGALLY CORREC T ON THE PART OF THE ASSESSING OFFICER TO LEVY PENALTY UNDER SEC. 271(1)(C) IN RESPECT OF SUCH ENHANCEMENT, IT IS TO BE MENTIONED THAT THIS IS NOT A CASE WHERE PROCEEDINGS UNDER SEC. 271(1)(C) W ERE INITIATED BY THE CIT(A) IN THE COURSE OF THE APPELL ATE PROCEEDINGS. THE PROCEEDINGS UNDER SEC. 271(1)(C) W ERE INITIATED BY THE ASSESSING OFFICER WHILE GIVING EFF ECT TO THE ORDER OF THE CIT(A) AS THE ASSESSING OFFICER IS SAT ISFIED THAT THERE WAS PRIMA FACIE CASE FOR INITIATING THE PROCE EDINGS UNDER SEC. 271(1)(C). THEREFORE, IT IS NOT CORRECT TO SAY THAT THE ASSESSING OFFICER HAS NO POWER TO LEVY PENALTY UNDE R SEC. 271(1)(C) ON THE INCOME ENHANCED BY THE CIT(A). THU S, THIS IS NOT A CASE WHERE PROCEEDINGS ARE INITIATED BY CIT(A ) BUT PENALTY IS LEVIED BY THE ASSESSING OFFICER OR SATIS FACTION IS RECORDED BY THE ASSESSING OFFICER BUT PENALTY IS LE VIED BY THE CIT(A). IN SUCH CIRCUMSTANCES, THE DECISIONS RELIED UPON BY THE APPELLANT, WHICH WERE RENDERED IN A DIFFERENT FACTU AL CONTEXT, CANNOT BE APPLIED TO THE FACTS OF THE PRESENT CASE AND THE PENALTY WAS RIGHTLY INITIATED BY THE ASSESSING OFFI CER. 4.3.7 AS REGARDS THE MERITS OF THE CASE, THE SEIZED DOCUMENT I.E. TORN PAPER CONTAINS RECEIPTS AND PAYMENTS CLEA RLY NOTED IN THE PAPER AND IT IS NOT A DUMB DOCUMENT AND THEREFO RE, NO FURTHER EVIDENCE IS NECESSARY TO CORROBORATE THE SA ME. IT IS ALSO NEEDS TO BE APPRECIATED THAT WHILE ENHANCING THE IN COME ON THIS GROUND, THE CIT(A) HAS CONSIDERED THE EVIDENCE IN TOTALITY 15 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. DULY TAKING INTO CONSIDERATION BOTH RECEIPTS AND PA YMENTS RECORDED ON THE PAPER AND ALSO GRANTED TELESCOPIC B ENEFIT TO THE EXTENT OF THE AMOUNT WHICH WAS ALREADY ENHANCED IN THE PRECEDING YEAR. THE ORDER OF THE CIT(A) WAS ALSO EN DORSED BY THE HON'BLE ITAT VIDE ITS ORDER DATED 31/12/2014 WI TH THE FOLLOWING OBSERVATIONS: 'WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH THE PA RTIES AND HAVE ALSO GONE THROUGH THE RECORDS. THE LD. A.R. OF THE ASSESSEE HAS CONTENDED THAT THE ALLEGED LOOSE SLIP WAS IN FACT NOT PART OF THE SEIZED MATERIAL DURING THE SEARCH ACTIO N. IT WAS ADDED SUBSEQUENTLY IN THE PANCHNAMA RELATING TO THE CASE OF SHRI RAMESH H. SANKLESHA. IT WAS A DUMB DOCUMENT AND CANNOT BE SAID TO BE REPRESENTING ANY RECEIPT OF ADDIT IONAL INCOME. AT THE TIME OF PREPARATION OF PANCHNAMA, THE ANNEXURE HAD ONLY 19 ITEMS OF SEIZED MATERIALS. THE L OOSE SLIP IN QUESTION WAS NOT FOUND TO HE REFLECTED IN THE ANN EXURE TO THE PCINCHNAMA AT THAT POINT OF TIME WHICH WAS LATE R ON ADDED IN THE LIST AT SERIAL NO. 20. THERE WAS NO IDENTIFICA TION MARK PLACED ON THE SAID LOOSE SLIPS. HENCE, PROPOSED ADDI TION BASED ON THE SEIZED MATERIAL WAS UNJUSTIFIED AND AGAINST T HE PRINCIPLE OF LAW. IT HAS BEEN FURTHER CONTENDED THAT SHRI RARNESH H. SHANKLESHA WAS NOT INTERROGATED ON THIS DOCUMENT WHIL E DETAILED STATEMENT WAS RECORDED OF HIM ON OTHER ISSUES . THE SEIZED DOCUMENT WAS IN TORN CONDITION AND WAS FOUND IN DUSTBIN. WITHOUT PREJUDICE, THE FIGURES FOUND RECORDED IN DOCUMENTS WERE SIMILAR TO THE FIGURES OF SALES RECORDED IN THE REGULAR BOOKS OF ACCOUNT AND THE FIGURES ON THE DOCUME NT WERE LIKELY TO BE REVENUE GENERATED BY SALES FOR THIS P ERIOD. THE LD. AR HAS FURTHER STATED THAT THE ASSESSEE TO B UY PEACE AND SETTLE THE MATTER HAD AGREED BEFORE THE LOWER AUTHO RITIES TO TREAT RS. 13,37,007/- AND RS.14,76,7091- AS UNRECO RDED SALES FOR THE YEAR 2003 AND 2005 RESPECTIVELY TO BE AS SESSED AT 20 96 THEREON IN THE HANDS OF THE FIRM. ON THE OTHER H AND, THE LD. D.R. HAS RELIED UPON THE _FINDINGS OF THE LD. CI T(A). 33.. WE FIND THAT IN THE CASE OF THE PARTNERS OF SHRI RAMESH H. SANKLESHA AND SHRI AMRITLAL H. SAN KIESHA, THE SAID P ARTNERS HAVE TAKEN A PLEA BEFORE THE ASSESSING OFFICER THAT T HE UNDISCLOSED INCOME ON THE BASIS OF THE SAID LOOSE P APERS WAS LIABLE TO BE ASSESSED AT THE HANDS OF THE FIRM. IN C ONTRAST TO 16 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. THEIR STAND TAKEN IN THEIR OWN CASE, WHILE REPRESENTING THE FIRM, THE SAID PARTNERS HAVE TAKEN THE PLEA THAT THE I NCOME, IF LIABLE TO BE ASSESSED, THEN THE SAME IS LIABLE TO B E ASSESSED IN THE HANDS OF THE PARTNERS. AS OBSERVED ABOVE BY US, TH E FIRM IS REPRESENTED AND CONTROLLED BY THE PARTNERS. WITHOUT PARTN ERS THE FIRM CANNOT EXIST. THE ACTS OF THE FIRM ARE DONE BY THE PARTNERS OF THE FIRM. THE PARTNERS OF THE FIRM ARE NOT DIF FERENT PERSONS OR THIRD PARTIES. THE PARTNERS IN THIS CASE ARE TRY ING TO BLOW HOT AND COLD IN THE SAME BREATH. THEY ARE TAKIN G ONE PLEA IN THEIR OWN CASE AND CONTRADICTORY PLEA IN THE CASE OF THE FIRM WHICH IS BEING REPRESENTED THROUGH THEM ONLY. SO FAR S O, THE CONTENTION THAT THE DOCUMENT WAS A DUMB DOCUMENT, W E DO NOT FIND ANY MERIT IN THE SAID PLEA. THE ENTRIES HAVE BEEN FOUND MENTIONED AGAINST THE NAME OF PARTNERS, SOME OF THE E NTRIES ARE ON THE LEFT SIDE AND SOME OF THE ENTRIES ARE ON TH E RIGHT SIDE, WHICH ACCORDING TO LOWER AUTHORITIES ARE RECEIPTS AND PAYMENTS. THE LD. CIT(A) HAS OBSERVED THAT THE DOCUM ENT SEIZED FROM THE PREMISES OF SHRI RAMESH H. SANKLESHA, ONE OF THE PARTNERS OF THE ASSESSEE FIRM REPRESENTS THE RECEIPT AND PAYMENT ARISING OUT OF THE BUSINESS OF FIRM WHICH WA S THE UNACCOUNTED PAYMENT TO THE PARTNERS BY THE FIRM. THE ARGUMENT THAT THE SAID DOCUMENT HAS BEEN ADDED SUBSEQUENTLY, IN OUR VIEW, DOES NOT HAVE ANY FORCE. NO MALAFIDE ACT OR INTENTION OR ENMITY CAN BE ATTRIBUTED ON THE PART OF SEARCH PARTY IN THIS RESPECT. NOW COMING TO THE INCRIMINATING MATERIAL IN THE FORM O F LOOSE SHEETS WAS FOUND AT THE PREMISES OF PARTNER RAMESH H. SHANKHLECHA. THE AO HAS ADDED INCOME ON THE BASIS O F THIS DOCUMENT IN THE HANDS OF RAMESH H. SHANKHLECH.A. TH E CIT(A) AFTER OBSERVING THAT AMOUNT INVOLVED IN THE SEIZED MA TERIAL IS PART OF THE UNACCOUNTED INCOME GENERATED FROM THE FIRM IN WHICH ASSESSEE AS A PARTNER AND IT HAS BEEN USED AS A DVANCE TO VARIOUS PARTIES, ADDED THE SAME IN THE HANDS OF TH E ASSESSEE FIRM. AFTER DISCUSSING THE ISSUE AT GREAT LENGTH AT PA RA. 12 OF HIS APPELLATE ORDER, HE HELD THAT THE DIFFERENCE IN T HE DEBIT CREDIT AMOUNTING TO RS. 17,52,092/ - AS INCOME OF TH E ASSESSEE FIRM. AFTER GIVING BENEFIT OF TELESCOPING FOR A SUM OF RS. 7,46,544/- QUANTIFIED TO BE ASSESSED IN THE ASSESSM ENT YEAR 2003- 04, AN AMOUNT OF RS. 10,05,568/ - WAS ADDED I N THE INCOME OF THE ASSESSEE FIRM. NOTHING WAS BROUGHT ON RECORD BY THE ID. AR TO SUBSTANTIATE ITS CONTENTION THAT E NTRIES FOUND 17 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. RECORDED IN THE LOOSE PAPER WAS UNACCOUNTED SALES OF T HE FIRM. ONCE IT IS HELD THAT ENTRIES SO RECORDED WAS ACTUALLY INCOME OF THE FIRM, WE DO NOT FIND ANY .INFIRMITY IN THE ORDER OF CIT(A) FOR ENHANCING THE INCOME OF THE ASSESSEE FIRM AFTER GIVIN G BENEFIT OF TELESCOPING IN RESPECT OF SIMILAR INCOME ASSESSED IN THE ASSESSMENT YEAR 2003-04 AMOUNTING TO RS. 7,46,544/ - . THE DETAILED FINDING RECORDED BY THE CNN ARE AS PER MATERIAL ON RECORD, THEREFORE, DO NOT REQUIRE ANY INTERFERENCE ON OUR PART. ACCORDINGLY, WE CONFIRM THE ACTION OF CIT(A) IN ENHAN CING THE INCOME OF ASSESSEE FIRM BY RS. 10,05,568/ - IN THE ASSESSMENT YEAR 2003-2004.' 4.3.8 FROM THE ABOVE TEXT OF THE ORDER, IT COULD BE NOTICED THAT HONBLE ITAT CATEGORICALLY HELD THAT NOTHING WAS BR OUGHT ON RECORD BY THE APPELLANT TO SUBSTANTIATE ITS CONTENT ION THAT ENTRIES FOUND RECORDED IN THE LOOSE PAPER WERE UNAC COUNTED SALES OF THE FIRM. IT IS ALSO OBSERVED THAT ONCE IT IS HELD THAT ENTRIES SO RECORDED WAS ACTUALLY INCOME OF THE FIRM , THERE IS NO INFIRMITY IN THE ORDER OF CIT(A) FOR ENHANCING THE INCOME OF THE ASSESSEE FIRM AFTER GIVING BENEFIT OF TELESCOPING I N RESPECT OF SIMILAR INCOME ASSESSED IN THE ASSESSMENT YEAR 2003 -04 AMOUNTING TO RS. 7,46,544/-. IN VIEW OF THE OBSERVA TIONS OF THE HON'BLE ITAT AND CONSIDERING THE NATURE OF TRANSACT IONS RECORDED IN THE SEIZED PAPERS, THE ASSESSING OFFICE R IS JUSTIFIED ON FACTS AND IN LAW IN CONCLUDING THAT THE APPELLAN T FURNISHED INACCURATE PARTICULARS IN THE RETURN OF INCOME IN R ESPECT OF THIS ADDITION TOO. FURTHER, AS THE EXPLANATION FURNISHED BY THE APPELLANT THAT THE TORN PAPER IN QUESTION IS A DUMB DOCUMENT IS FOUND TO BE NOT BONA-FIDE, THE APPELLANT IS ALSO DEEMED TO HAVE FURNISHED INACCURATE PARTICULARS OF INCOME UND ER EXPLANATION-1 TO SEC. 271(1)(C). ACCORDINGLY, THE A SSESSING OFFICER IS JUSTIFIED IN LEVYING THE PENALTY UNDER S EC. 271(1)(C) IN RESPECT OF INCOME ENHANCED BY THE CIT(A). GROUNDS O F APPEAL NO. 3 AND 4 FAIL. 4.4 IN THE COURSE OF THE PRESENT PROCEEDINGS, AS AL READY MENTIONED, THE APPELLANT VIDE ITS SUBMISSION DATED 19/12/2013 RAISED AN ADDITIONAL GROUND OF APPEAL ST ATING THAT THE ASSESSING OFFICER ERRED IN LEVYING THE PENALTY ON THE INCOME OF RS. 1,05,570/- SUO MOTTO DECLARED BY THE APPELLANT 18 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. FIRM IN THE RETURN OF INCOME FILED U/S 153A OF THE INCOME TAX ACT 1961, WHICH WAS DECLARED DUE TO MISTAKES OBSERV ED AND ALSO ON CERTAIN SEIZED DOCUMENTS. IN THIS RESPECT, LD. COUNSEL RELIED ON THE FOLLOWING AUTHORITIES: I) SURESH CHANDRA MITTAL (251 ITR 9) (SC) 'PENALTY UNDER S. 271(1)(C)CONCEALMENTREVISED RET URN FILED SHOWING HIGHER INCOME - ASSESSEE SURRENDERED THE INCOME AFTER PERSISTENT QUERIES BY AO---HOWEVER, RE VISED RETURNS HAVE BEEN REGULARIZED BY REVENUE EXPLANATI ON OF THE ASSESSEE THAT HE HAS DECLARED ADDITIONAL INCOME TO BUY PEACE AND TO COME OUT OF VEXED LITIGATION COULD BE TREATE D AS BONA FIDE PENALTY RIGHTLY CANCELLEDNO INTERFERENCE WAR RANTED' II) SURESH CHAND BANSAL, 223 CTR (CAL) 128 'PENALTY UNDER S. 271(1)(C)CONCEALMENTDISCLOSURE OF ADDITIONAL INCOME AFTER SEARCH IN REVISED RETURN UN DER SEC. 153AASSESSEE OFFERED ADDITIONAL INCOME FOR VARIOUS ASSESSMENT YEARS WHICH WAS ACCEPTED IN ENTIRETYCIT (A) FOUND THAT NO ADDITIONAL FACTS WERE BROUGHT ON RECO RD AND THERE. IS NOTHING TO INDICATE THAT THE ASSESSEE HAD NO EXPLANATION REGARDING THE SEIZED DOCUMENTSCONTENTS OF SAID DOCUMENTS ARE NOWHERE DISCUSSEDTHERE WAS NO ATTEMP T TO OBTAIN THE EXPLANATION OF THE ASSESSEECONCLUSION T HAT SUCH INCOME BELONGED TO THE ASSESSEE IS BASED ON THE OFF ER OF THE ASSESSEE AND NOT ENTIRELY ON THE SEIZED DOCUMENTSO FFER IS SAID TO HAVE BEEN MADE TO AVOID LITIGATION AND IS A N ESTIMATE OF INCOME THAT MIGHT NOT HAVE BEEN TAXEDNO ATTEMPT WA S MADE EVEN TO FIND OUT THE LOCUS OF THE EARNING AND THE PERSON WHO CONCEALED SUCH EARNINGPENALTY UNDER S. 271(1)( C) RIGHTLY CANCELLEDNO SUBSTANTIAL QUESTION OF LAW ARISES' III) SHABBIR A. LATIWALA VS. DCIT (RAJOK ITAT) 16 T AXMANN.COM 177 THERE WAS NOTHING PLACED ON RECORD WHICH MIGHT EVEN REMOTELY INDICATE ABOUT SPECIFIC NATURE OF ADDITIONAL INCOME OFFERED BY ASSESSEE WHILE FURNISHING RETURNS IN RESPONSE TO A NOTICE ISSUED 19 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. UNDER SECTION 153A, AND THERE WAS NO DIRECT OR INDI RECT LINKAGE BROUGHT ON RECORD WITH REFERENCE TO ANY OF SPECIFIC SEIZED MATERIALS SO AS TO ESTABLISH CHARGE FOR WHICH PENAL TY HAD BEEN LEVIED - WHETHER IN VIEW OF AFORESAID, IMPUGNED PEN ALTY ORDER WAS TO BE SET ASIDE - HELD, YES IV) PREM CHAND GARG, 119 ITD 97 'VOLUNTARY OFFER OF INCOME IN ORDER TO BUY PEACE AN D AVOID LITIGATION BEFORE TAKING UP ASSESSMENT BY THE AO DC HORS ANY MATERIAL WITH THE AO CANNOT AMOUNT TO CONCEALMENT; ASSESSEE HAVING SURRENDERED THE AMOUNT OF NRI GIFT ON A GENE RAL QUERY RAISED BY AO. ON THE CONDITION OF NOT INITIATING PE NALTY PROCEEDINGS BEFORE ASSESSMENT WAS TAKEN UP, AO COUL D NOT HAVE IMPOSED PENALTY UNDER S. 271(1)(C) WHEN THERE WAS NO MATERIAL WITH THE AO TO ARRIVE AT SATISFACTION ABOU T CONCEALMENT.' 4.4.1. RELYING ON THE ABOVE PRECEDENTS, LD. COUNSEL SUBMITTED THAT THE PENALTY PROCEEDINGS NEED TO BE DROPPED ON THE INCOME RETURNED SINCE THE APPELLANT HAD SUO MOTTO D ECLARED THE ADDITIONAL INCOME IN THE RETURN FILED U/S. 153A AND BEFORE THE ASSESSMENT PROCEEDINGS COMMENCED. 4.4.2 HOWEVER, IN THE COURSE OF THE HEARING OF THE CASE ON 12/03/2015, LD. COUNSEL FOR THE APPELLANT SUBMITTED THAT APPELLANT DOES NOT INTEND TO PRESS THIS ADDITIONAL GROUND OF APPEAL. IN ANY CASE, THE TAX ATTRIBUTABLE TO INCOME RETURNED OF RS. 1,05,570/- WAS DULY EXCLUDED BY THE ASSESSING O FFICER WHILE COMPUTING THE TAX SOUGHT TO BE EVADED BY THE APPELL ANT. ACCORDINGLY, THE ADDITIONAL GROUND OF APPEAL IS REJ ECTED AS NO PENALTY WAS LEVIED BY THE ASSESSING OFFICER IN RESP ECT OF THIS INCOME. 4.5 TO SUM UP, IN THE CASE OF THE APPELLANT, THE SE QUENCE OF EVENTS CLEARLY SHOWS THAT BUT FOR SEARCH AND SURVEY OPERATION IN THE CASE OF APPELLANT GROUP OF CASES, THE CORREC T INCOME EARNED BY APPELLANT FOR THE YEAR UNDER CONSIDERATIO N WOULD HAVE REMAINED UNDISCLOSED AND ESCAPED TAXATION. FUR THER, THIS 20 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. IS NOT A CASE WHERE THE UNDISCLOSED INCOME WAS BROU GHT TO TAX ON ESTIMATE BASIS OR IN RESPECT OF A DEBATABLE LEGA L ISSUE TO BUY PEACE OR TO AVOID LITIGATION. SPECIFIC EVIDENCES CO NTAINING UNACCOUNTED TRANSACTIONS WERE FOUND DURING THE SEAR CH AND SURVEY AND THE ADDITIONS, WHICH ARE SUBJECT-MATTER OF PENALTY, WERE BASED ON COGENT EVIDENCES. THE OMISSION OF SUC H RECEIPTS/INCOME IN THE REGULAR BOOKS OF A/C OR RETU RN .OF INCOME WAS NOT DUE TO ANY BONA FIDE OR INADVERTENT MISTAKE ON THE PART OF THE APPELLANT. THUS, THIS IS A FIT CASE FOR LEVY OF PENALTY UNDER SEC. 271(1)(C) OF THE I T ACT FOR FUR NISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF THE FOLLOWING ADDITIONS MADE TO THE TOTAL INCOME: I) EXCESS STOCK OF GOLD JEWELLERY AND DIAMONDS RS. 16,96,044/- II) INCOME ENHANCED BY THE CIT(A) RS. 10,05,568/- 4.6 ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO RE-COMPUTE THE PENALTY IMPOSABLE UNDER SEC. 271(1)(C) ON THE T AX SOUGHT TO BE EVADED IN RESPECT OF ADDITION OF RS. 16,96,044/- ON ACCOUNT OF EXCESS STOCK AS PER GS-12 REGISTER AND THE ADDIT ION OF RS. 10,05,568/- ON ACCOUNT OF ENHANCEMENT OF INCOME BY THE CIT(A). 8. AGGRIEVED BY THE ORDER OF THE OF THE LD. CIT(A), THE ASSESSEE IN APPEAL BEFORE US. 9. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM REVISED GROUNDS OF APPEAL OF THE ASSESSEE IS VALIDITY OF PENALTY ORDER PASSED BY THE LD. AO CONSEQUENT TO VAGUE NOTICE ISSUED U/S 274 R.W.S. 271(1) OF THE ACT. TH E LD. AR FOR THE ASSESSEE REFERRING TO COPY OF PENALTY NOTICE ISSUED BY THE AO U/S 274 R.W .S 271(1) OF THE ACT, SUBMITTED THAT THE AO HAS ISSUED VAGUE NOTICE WITHOUT STRIKING OF IRRELEVANT PORTION OF THE NOTICE TO FRAME SPECIFIC CHARGE ON THE ASSESSEE, WHETHER THE ASSESSEE HAS CONCEALED 21 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. THE LD. AR FURTHER SUBMITTED THAT THE AO HAS ISSUED PRINTED FORM OF NO TICED WITHOUT SPECIFYING CHARGE UNDER WHICH PENALTY IS PROPOSED TO BE INITIATED, TH EREFORE, IT IS CLEAR CASE OF NON- APPLICATION OF MIND BY THE AO BEFORE INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT. THE LD. AR FURTHER SUBMITTED THAT THE PROVISIONS OF SEC TION 271(1)(C) DEALS WITH TWO TYPES CASES FOR WHICH PENALTY CAN BE LEVIED. THE FIRST TY PE OF CASES IS PENALTY IN RESPECT OF CONCEALMENT OF PARTICULARS OF INCOME AND SECOND TYP E OF CASES ARE PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE REFORE, WHILE LEVYING PENALTY, THE AO SHALL FRAME SPECIFIC CHARGE UNDER WHICH HE HAS PROP OSED TO LEVY PENALTY IN RESPECT ADDITION MADE IN THE ASSESSMENT PROCEEDINGS. IN AB SENCE OF ANY CHARGE MADE ON THE ASSESSEE, IT IS DIFFICULT FOR THE ASSESSEE TO JUSTI FY ITS CASE UNDER WHICH LIMB, THE AO IS PROPOSED TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. THEREFORE, ANY PENALTY PROCEEDINGS INITIATED CONSEQUENT TO VAGUE NOTICE IS BAD IN LAW AND LIABLE TO BE QUASHED. IN THIS REGARD, HE RELIED UPON THE FOLLOWING JUDICIAL PRECE DENCE. I. SAMSON PERINCHERY (2017) 88 TAXMANN.COM 413(BOM) II. MEHERJEE CASSINATH HOLDING (P.) LTD. 88 TAXMANN.COM 777 (MUM. TRIB.) III. SSAS EMERALS MEADOWS (2016) 73 TAXMANN.COM 248(SC) IV. SSAS EMERAL MEADOWS (2016) 73 TAXMANN.COM 248(SC) V. CHENNAKESAVA PHARMACEUTICALS (2013) 30 TAXMANN.COM 385(AP) 22 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. 10. THE LD. DR, ON THE OTHER HAND, STRONGLY SUPPORT ING THE ORDER OF THE LD. CIT(A), SUBMITTED THAT BEFORE INITIATION OF PENALTY U/S 271 (1)(C) OF THE ACT, THE AO HAS RECORDED HIS SATISFACTION, THEREFORE, THERE IS NO RELEVANCE FOR THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) WHEN A CLEAR SATISFACTION HAS BEEN ARRIVE D AT BEFORE INITIATING PENALTY U/S 271(1)(C) OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT ONCE THERE IS A CLEAR SATISFACTION ABOUT CHARGE FOR WHICH PENALTY IS PROPOSED TO BE LE VIED THEN, ISSUE OF NOTICE IS A FORMALITY TO COMMUNICATE THE ASSESSEE ABOVE THE PRO CEEDINGS, THEREFORE, MERELY FOR THE REASON NON-STRIKING OF INAPPLICABLE PORTION OF NOTICE, THE WHOLE PENALTY PROCEEDINGS CANNOT BE VITIATED. IN THIS REGARD, HE RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SMT. KAUSHALYA & ORS. ( 1995) (216 ITR 660) (BOM). 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE PENALTY PROCEEDINGS U/S 271(1)(C) IS A CIVIL LIABILITY WHICH IS BASED ON THE SHOW-CAU SE NOTICE ISSUED BY THE AO U/S 274 R.W.S. 271(1)(C) BEFORE TAKING UP THE PROCEEDINGS F OR LEVY OF PENALTY. THE AO SHALL ISSUE A NOTICE SPECIFYING CHARGE UNDER WHICH HE HAS PROPO SED TO LEVY PENALTY U/S 271(1)(C) OF THE ACT, I.E. WHETHER THE PENALTY IS PROPOSED FOR C ONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN ABSENCE OF ANY SPECIFIC CHARGE ON THE ASSESSEE, THEN IT WOULD BE DIFFICULT FOR THE AS SESSEE TO JUSTIFY ITS CASE BEFORE THE AO, WHETHER THE PENALTY PROCEEDINGS HAS BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. IN THE ABOVE LEGAL BACKGROUND, IF YOU EXAMINE THE CASE OF THE ASSESSEE IT IS ABUNDANT LY CLEAR THAT THE AO HAS ISSUED 23 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. STANDARD FORMAT OF NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT, WHICH IS AVAILABLE IN PAGE NO.1 TO 3 OF THE PAPER BOOK FILED BY THE ASSESSEE, WHERE IT IS CLEARLY PROVED THAT THE AO HAS NOT STRUCKOUT INAPPLICABLE PORTION OF THE NOTIC E. WE FURTHER NOTED THAT EVEN IN ASSESSMENT PROCEEDINGS, THE AO HAS SIMPLY STATED IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT HAS B EEN INITIATED WITHOUT ARRIVING AT A CLEAR SATISFACTION ABOUT THE CHARGE/LIMB UNDER WHIC H PENALTY IS PROPOSED TO BE LEVIED IN RESPECT OF ADDITION MADE IN ASSESSMENT PROCEEDING. FURTHER, IN THE PENALTY ORDER, THE AO HAS CLEARLY STATED THAT PENALTY HAS BEEN LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF PARTICULARS OF INCOME. FROM THE ABOVE, IT IS ABUNDANTLY CLEAR THAT THE AO HAS INITIATED PENALTY CONSEQUENT TO INVALID NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT, WITHOUT STRIKING OUT INAPPROP RIATE PORTION OF THE NOTICE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT IT IS A CLEAR CA SE OF NON-APPLICATION OF MIND BY THE AO BEFORE INITIATION OF PENALTY PROCEEDINGS U/S 271 (1)(C), WHETHER PENALTY IS PROPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISH ING INACCURATE PARTICULARS OF INCOME. WE FURTHER NOTED THAT THIS ISSUE HAS BEEN SUBJECT M ATTER OF DELIBERATIONS BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNAT HA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN.) WHERE THE HONBLE HIGH C OURT HAS DISCUSSED THE ISSUE OF VAGUE NOTICE AND AFTER CONSIDERING THE RELEVANT FAC TS, HELD THAT PENALTY PROCEEDING INITIATED CONSEQUENT TO INVALID NOTICE IS VOID AB-I NITIO AND LIABLE TO BE QUASHED. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SSAS E MERALD MEADOWS (2016) 242 TAXMAN 180 (SC) DISMISSED SLP FILED BY THE DEPARTME NT AND CONFIRMED THE FINDINGS OF 24 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA). FURTHER, HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SAMSON PERINCHERY (2017) 392 ITR 4(BOM.), HELD THAT CONCEA LMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1)( C) CARRIES DIFFERENT MEANINGS/CONNOTATIONS AND, THEREFORE, THE SATISFACT ION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BRANCHES MENTIONED UN DER SECTION 271(1)(C) FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/PERMIT PENA LTY BEING IMPOSED FOR THE OTHER. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ME HERJEE CASSIINATH HOLDINGS (P.) LTD. VS ACIT (2017) 187 TTJ 722 HAS CONSIDERED AN IDENTI CAL ISSUE AND HELD THAT NON- STRIKING OF THE IRRELEVANT LIMB IN THE SAID NOTICE DID NOT COMMUNICATE TO THE ASSESSEE AS TO WHICH OF THE TWO CHARGES IT HAD TO RESPOND. THE AFORESAID INFIRMITY IN THE NOTICE WAS REFLECTION OF NON-APPLICATION OF MIND BY THE AO, TH EREFORE, THE NOTICE ISSUED BY THE AO U/S 274 R.W.S. 271(1)(C) WAS UNTENABLE AS IT SUFFER ED FROM THE VOICE OF NON-APPLICATION OF MIND. THUS, THE WHOLE PENALTY PROCEEDINGS CONSEQUE NT TO INVALID NOTICE IS VOID AB-INITO AND IS LIABLE TO BE QUASHED. 12. IN THIS VIEW OF THE MATTER AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASES, WE ARE OF THE CONSIDERED VIEW THAT PENALTY P ROCEEDING INITIATED BY THE AO CONSEQUENT TO INVALID NOTICE ISSUED NOTICE U/S 274 R.W.S. 271(1)(C) IS VOID AB-INITO AND IS LIABLE TO BE QUASHED. HENCE, WE QUASHED THE ORDER O F PENALTY PASSED BY THE AO. 13. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. 25 ITA NOS.4030 TO 4032/MUM/2015 M/S MUTHA PARASRAM DHANAJI &CO. ITA NOS.4031 AND 4032/MUM/2015 14. THE FACTS AND ISSUES INVOLVED IN THESE TWO APPE AL ARE IDENTICAL TO THE ISSUES WHICH WE HAVE ALREADY CONSIDERED IN ITA NO.4030/MUM /2015. THE REASONS GIVEN BY US IN PRECEDING PARAGRAPHS FOR ITA NO.4030/MUM/2015 SH ALL MUTATIS MUTANDIS APPLY TO THESE APPEALS ALSO. THEREFORE, FOR THE DETAILED REA SONS RECORDED IN PRECEDING PARAGRAPHS, WE QUASHED THE ORDER PASSED BY THE AO U /S 271(1)(C) FOR ABOVE ASSESSMENT YEAR. 15. AS A RESULT, ALL APPEALS FILED BY THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/05/2019 . SD/- SD/- ( SANDEEP GOSAIN ) (G. MANJUNATHA) #'$ /JUDICIAL MEMBER %'$ / ACCOUNTANT MEMBER $ /MUMBAI; ' DATED : 24/05/2019 F{X~{T? F{X~{T? F{X~{T? F{X~{T? P.S / /. . . &#'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. ( )* / THE APPELLANT (RESPECTIVE ASSESSEE) 2. +,)* / THE RESPONDENT. 3. -!- $ .' ( ( ) / THE CIT, MUMBAI. 4. -!- $ .' / CIT(A)- , MUMBAI, 5. 0#1 +'2 , -!((2!3 , $ / DR, ITAT, MUMBAI 6. 4 / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI