SHRI RAM DAS MAHESHWARI, JAIPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX, JAIPUR

ITA 421/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3689 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA DHK
• Assessee Lawyers: S L PODDAR; ISHA KANOONGO
• Keywords: Transfer pricing; Search and seizure; Principle of natural justice; International transaction; Question of law; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 205; 27; 263; 63; 132

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA-@ ITA NO. 421/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 SHRI RAM DAS MAHESHWARI, 69, SUKH SAGAR, SARDAR PATEL MARG, DHULESHWAR GARDEN, JAIPUR. CUKE VS. PR. COMMISSIONER OF INCOME TAX, JAIPUR-1, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ADAPM 3717 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADV) & SHRI ISHA KANOONGO (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07/06/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 14/06/2018 VKNS'K@ ORDER PER: BHAGCHAND, A.M. THE APPEAL FILED BY THE ASSESSEE EMANATES FROM THE ORDER PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE AC T) BY THE LD. PR. CIT, JAIPUR-1, JAIPUR DATED 27/03/2018 FOR THE A.Y. 2013 -14. 2. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM CAPITAL GAIN AND OTHER SOURCES. THE ORIGINAL RETURN OF INCOME WAS E-FILED ON 31/10/2013 DECLARING TOTAL INCOME OF RS. 15,04,61,8 90/-, WHICH INCLUDES ADDITIONAL INCOME OFFICER TO TAX RS. 14,97,82,023/- UNDER THE HEAD CASH ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 2 ADVANCES, INTEREST RECEIVED ON CASH ADVANCES TO VAR IOUS PERSONS AND UNDISCLOSED INVESTMENT IN THE STOCK OF FIRMS, WHERE IN THE ASSESSEE IS A PARTNER. A SEARCH WAS CONDUCTED ON 18/07/2012 IN TH E CASE OF NUWAL GROUP, JAIPUR TO WHICH THE ASSESSEE BELONGS. DURING THE COURSE OF SEARCH, VARIOUS ASSETS/BOOKS OF ACCOUNT AND DOCUMENTS WERE F OUND AND SEIZED. THE ASSESSING OFFICER PASSED PENALTY ORDER ON 20/08/ 2015 U/S 271AAB OF THE ACT AND LEVIED THE PENALTY @ 10% AT RS. 1,49,78 ,202/- ON TOTAL UNDISCLOSED INCOME OF RS. 14,97,82,023/-. THE LD. PR .CIT, JAIPUR-1, JAIPUR, HAS PASSED ORDER U/S 263 OF THE ACT AND PENALTY IMP OSED BY THE ASSESSING OFFICER IS ENHANCED BY RS. 2,99,56,404/-. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE THE ITAT BY T AKING FOLLOWING GROUNDS OF APPEAL: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED PR. CIT, JAIPUR- 1, JAIPUR HAS ERRED IN PASSING THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 WHICH IS VOID AB-INITIO DESERVES TO BE QU ASHED. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED PR. CIT, JAIPUR- 1, JAIPUR HAS ERRED IN PASSING THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 AFTER ISSUING FINAL CERTIFICATE BY THE PR . CIT- CENTRAL IN FORM- 5 UNDER THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2 016 WHICH IS ULTRA-VIRUS AND AGAINST THE PRINCIPLE OF NATURAL JU STICE AND WITHOUT HAVING ANY JURISDICTION OVER THE ISSUE. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED PR.CIT, JAIPUR- 1, JAIPUR HAS ERRED IN PASSING THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 BY HOLDING THAT THE ORDER PASSED BY LEARN ED ASSESSING OFFICER U/S 271AAB OF THE INCOME TAX ACT, 1961 DATE D 20.08.2015 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF TH E REVENUE. ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 3 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED PR. CIT, JAIPUR- 1, JAIPUR HAS ERRED IN HOLDING THAT THE ASSESSEE HA S NOT SUBSTANTIATE THE MANNER OF EARNING OF INCOME IN THE STATEMENT RE CORDED U/S 132(4) OF THE INCOME TAX ACT, 1961. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED PR. CIT, JAIPUR- 1, JAIPUR HAS ERRED IN HOLDING THAT THE PENALTY US/ 271AAB OF THE INCOME TAX ACT, 1961 IS LEVIABLE @ 30% INSTEAD OF 1 0% IMPOSED BY THE LEARNED ASSESSING OFFICER IN THE GIVEN CIRCUMST ANCES. 4. THE MAIN ISSUE INVOLVED IN THE APPEAL IS PASSING ORDER U/S 263 OF THE ACT BY THE LD. PR.CIT AND CONFIRMING THE PENALT Y U/S 271AAB OF THE ACT. THE LD. PR.CIT HAS PASSED ORDER U/S 263 OF THE A CT, THE MAIN CONTENTS OF HIS ORDER IS REPRODUCED HEREUNDER: 11. WHILE IMPOSING THE PENALTY U/S 271AAB OF THE A CT IT IS SEEN THAT THE AO HAS ALSO ARRIVED AT THE CONCLUSION THAT THE ASSESSE E HAS NOT SUBSTANTIATED THIS INCOME AS DURING ASSESSMENT PROCEEDINGS THE AS SESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF THE INCOME AND COULD NOT PRODUCE ANY EVIDENTIARY DOCUMENTS IN ITS FAVOR. HOWEVER WHILE I MPOSING THE PENALTY HE HAS GROSSLY ERRED IN LEVYING IT @10% INSTEAD OF @30% WHICH WAS MANDATED BY THE ACT. THE ACT LEAVES NO DISCRETION W ITH THE AO U/S 271AAB REGARDING THE QUANTUM OF PENALTY TO BE APPLI ED ONCE IT IS ESTABLISHED THAT THE UNDISCLOSED SURRENDERED INCOME CANNOT BE SUBSTANTIATED. WHERE THE INCOME TAX ACT LEAVES NO D ISCRETION WITH THE AO THERE CAN BE NO QUESTION OF AN OPINION BEING FORMED THAT CAN BE DEBATED. WHAT COULD BE DEBATED WAS WHETHER THE ASSESSEE HAS SUBSTANTIATED HIS UNDISCLOSED INCOME. ON THIS QUESTION IT IS SEEN THA T THE AO HAS FORMED AN OPINION THAT THE ASSESSEE HAS NOT DONE SO AND THIS OPINION OF THE AO STANDS ACCEPTED. WHAT IS TERMED ERRONEOUS HERE IS T HE APPLICATION OF ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 4 WRONG CLAUSE WHICH HAS LED TO SHORT LEVY OF PENALTY . WRONG APPLICATION OF THE CLAUSES IN THE SAID SECTION WOULD RENDER THE OR DER AS ERRONEOUS AND IF THERE IS SHORT LEVY OF TAX IT WOULD BE CONSIDERED A S PREJUDICIAL TO THE INTEREST OF REVENUE ALSO. THE HON'BLE SUPREME COURT IN SEVERAL JUDGMENTS INCLUDING THAT OF MALABAR INDUSTRIAL CO. LTD. V. CI T [2000] 243 ITR 831 HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORREC T APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR W ITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. IN THIS CASE IT IS SEEN THAT THE AO HAS NOT CONSID ERED HIS OWN FINDINGS AVAILABLE ON RECORDS WHILE IMPOSING PENALTY @ 10% U NDER CLAUSE (A) OF SEC. 271AAB THE ACT. THE AO HAS WITHOUT APPLICATION OF MIND APPLIED THE WRONG PROVISION/CLAUSE OF SEC. 271AAB TO THE FACTS AVAILABLE ON RECORD WHICH HAS CAUSED REVENUE LOSS TO THE MINIMUM EXTENT OF RS. 2,99,56,404/- AS CLAUSE (C) OF SECTION 271AAB WAS TO BE APPLIED T O THE FACTS OF THE CASE. THIS OMISSION AS MADE BY THE ASSESSING OFFICER RESU LTING IN AN ORDER WHICH IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. IT HAS NECESSITATED THE INITIATION OF PROCEEDINGS UNDER SE CTION 263 OF THE INCOME TAX ACT. THIS HAS BEEN DONE IN A VERY MECHANICAL WA Y. THIS ACTION OF THE AO HAS RESULTED IN AN ERRONEOUS PENALTY ORDER UNDER SECTION 271AAB OF THE INCOME TAX ACT, WHICH IS CLEARLY PREJUDICIAL TO THE INTEREST OF REVENUE AND CLEARLY CALLS FOR INVOCATION OF SECTION 263 OF THE INCOME TAX ACT 1961. 12. KEEPING THE ABOVE DISCUSSION IN VIEW BY THE VIR TUE OF THE POWERS CONFERRED ON THE UNDERSIGNED UNDER THE PROVISIONS O F SECTION 263 OF THE IT ACT 1961, I HOLD THAT THE ORDER UNDER SECTION 271AA B DATED 20/8/2015 FOR ASSESSMENT YEAR 2013-14 PASSED BY THE ASSESSING OFF ICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF REV ENUE AS THE ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER IN A ROUTINE AND PE RFUNCTORY MANNER BY APPLYING THE INCORRECT CLAUSE OF SECTION 271AAB IN THE CASE OF THE ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 5 ASSESSEE FOR IMPOSING PENALTY. IT IS THEREFORE LIAB LE TO REVISION UNDER EXPLANATION (2) CLAUSE (A), CLAUSE (B) OF SECTION 2 63 OF THE INCOME TAX ACT. THEREFORE HOLDING THAT THERE HAS BEEN SHORT LEVY OF PENALTY OF RS. 2 , 99 , 56 , 404/- THE PENALTY ORDER DATED 20/8/2015 IS SET ASID E ON THIS ISSUE WITH A DIRECTION TO THE ASSESSING OFFICER TO PASS T HE SAME IN THE CASE OF THE ASSESSEE DE NOVO IN ACCORDANCE WITH LAW AFTER M AKING THE NECESSARY EXAMINATION AND VERIFICATION REGARDING THE ISSUE UN DER DISCUSSION .THE AO IS DIRECTED TO FINALIZE THE PENALTY ORDER KEEPING I N VIEW THE FACTS OF THE CASE AND CORRECT APPLICATION OF LAW. HOWEVER AN OPP ORTUNITY TO THE ASSESSEE TO STATE ITS CASE IS TO BE ALLOWED IN THE INTEREST OF NATURAL JUSTICE. 5. WHILE PLEADING ON BEHALF OF THE ASSESSEE, THE L D AR HAS SUBMITTED AS UNDER:- A SEARCH WAS CONDUCTED ON 18.07.2012 IN THE CASE OF NUWAL GROUP, JAIPUR TO WHICH THE ASSESSEE BELONGS TO. THE ORIGINAL RETURN OF INCOME WAS FILED ON 31.10.2013 FOR THE ABOVE ASSESSMENT YEAR DECLARING A TOTAL INCOME OF RS. 15,04,61,890/- WHICH INCLUDED SURRENDERED INCOME OF RS. 14,97,82,023/- OFFERED TO TAX ON A/C OF UNDISCLOSED CASH ADVANCES, INTERES T ON THE CASH ADVANCES, AND UNDISCLOSED INVESTMENT IN STOCKS OF FIRMS WHEREIN T HE ASSESSEE IS A PARTNER. THE LEARNED ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143(3)/153B(1)(B) ON 13.03.2015 ALMOST ACCEPTING THE RETURNED INCOME. HO WEVER WHILE COMPLETING THE ASSESSMENT THE LEARNED ASSESSING OFFICER INITIA TED PENALTY PROCEEDINGS U/S 271AAB WITHOUT SPECIFYING ANY CLAUSE (A), (B) OR (C ) OF SECTION 271AAB(1). FURTHER IN THE ASSESSMENT ORDER NO SATISFACTION HAS BEEN RE CORDED BY THE LEARNED ASSESSING OFFICER WITH RESPECT TO ANY DEFAULT OF TH E ASSESSEE IN TERMS OF CLAUSE (A), (B) OR (C) OF SECTION 271AAB(1). SUBSEQUENTLY A PENALTY HAS BEEN IMPOSED BY THE LEARNED ASSESSING OFFICER U/S 271AAB OF RS. 1,4 9,71,202/- BEING 10% OF THE UNDISCLOSED INCOME OF RS. 14,97,82,023/-. EVEN WHIL E PASSING THE PENALTY ORDER THE LEARNED ASSESSING OFFICER HAS NOT SPECIFIED THE DEFAULT OF THE ASSESSEE WITH ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 6 RESPECT OF CLAUSE (A), (B) OR (C) OF SECTION 271AAB (1). THE PENALTY ORDER HAS BEEN PASSED U/S 271AAB. IT IS THIS PENALTY ORDER WHICH H AS BEEN SUBJECTED TO PROCEEDINGS U/S 263 BY THE LEARNED PR. CIT-1 AND SH E HAS QUASHED THE PENALTY ORDER PASSED BY THE LEARNED ASSESSING OFFICER VIDE ORDER DATED 27.03.2018 AND HAS DIRECTED TO IMPOSE PENALTY MORE BY RS. 2,99,56, 404/-. THE DIRECTIONS OF THE PR. CIT-1 ARE SCANNED BELOW: - THE PERUSAL OF THE AFORESAID CONCLUDING PARA OF THE ORDER U/S 263 PASSED BY PCIT-1 REVEALS THE FOLLOWING: - (I) THE LEARNED ASSESSING OFFICER HAS PASSED THE PENALT Y ORDER WITHOUT APPLICATION OF MIND AND APPLIED THE WRONG PROVISION S/CLAUSE OF SECTION 271AAB. (II) THE PENALTY ORDER HAS BEEN PASSED BY THE LEARNED PC IT IN A ROUTINE AND PERFUNCTORY MANNER BY APPLYING THE INCORRECT CLAUSE OF SECTION 271AAB. IT IS SUBMITTED THAT THE ORDER PASSED U/S 263 BY TH E LEARNED PCIT IS ERRONEOUS AND UNLAWFUL. IN THE PENALTY ORDER THE LE ARNED ASSESSING OFFICER HAS NOT REFERRED TO ANY CLAUSE OF SECTION 2 71AAB(1). AS SUCH THE ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 7 LEARNED PR. CIT IS WRONG IN OBSERVING THAT THE LEAR NED ASSESSING OFFICER HAS IMPOSED PENALTY BY APPLYING WRONG CLAUSE/INCORR ECT CLAUSE. THE ENTIRE PROBLEM IN THE PENALTY IS THAT NO CLAUSE HAS BEEN QUOTED. NOT ONLY IN THE PENALTY ORDER EVEN IN THE ASSESSMENT ORDER W HILE INITIATING PENALTY PROCEEDINGS U/S 271AAB THE SPECIFIC CLAUSE (A), (B) OR (C) OF SUB-SECTION (1) HAVE NOT BEEN QUOTED. IN VIEW OF THIS THE ORDER U/S 263 IS ASSAILED AS UNDER: - 2. INITIATION OF PENALTY PROCEEDINGS IS UNLAWFUL: - THE ASSESSMENT WAS COMPLETED U/S 143(3) R.W.S. 153B (1)(B) OF THE IT ACT, 1961 ALMOST ACCEPTED THE INCOME DISCLOSED BY THE ASSESSE E. HOWEVER THE LEARNED ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S 271AAB OF THE INCOME TAX ACT, 1961 AS PER PARA 5 OF THE ASSESSMENT ORDER SCA NNED BELOW: - THE PERUSAL OF THE AFORESAID PARAS OF THE ASSESSMEN T ORDER DISCLOSED THAT THE LEARNED ASSESSING OFFICER HAS INITIATED THE PENALTY U/S 271AAB WITHOUT SPECIFYING CLAUSE (A), (B) OR (C) OF SECTION 271AAB . FURTHER THERE IS NO SATISFACTION ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 8 OF THE LEARNED ASSESSING OFFICER FOR INITIATING PEN ALTY PROCEEDINGS U/S 271AAB. THE PROVISIONS OF SECTION 271AAB ARE QUOTED BELOW: - SECTION - 271AAB. PENALTY WHERE SEARCH HAS BEEN INITIATED. (1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYT HING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHER E SEARCH HAS BEEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, ( A ) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF TH E UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE ( I ) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDE R SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; ( II ) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSE D INCOME WAS DERIVED; AND ( III ) ON OR BEFORE THE SPECIFIED DATE ( A ) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; AND ( B ) FURNISHES THE RETURN OF INCOME FOR THE SPECIFIED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; ( B ) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE ( I ) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDE R SUB-SECTION (4) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND ( II ) ON OR BEFORE THE SPECIFIED DATE ( A ) DECLARES SUCH INCOME IN THE RETURN OF INCOME FUR NISHED FOR THE SPECIFIED PREVIOUS YEAR; AND ( B ) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; ( C ) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CE NT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIO NS OF CLAUSES ( A ) AND ( B ) .' THE PERUSAL OF THE AFORESAID PROVISIONS REVEALS THA T THERE ARE THREE DIFFERENT DEFAULTS MENTIONED IN CAUSE (A), (B) & (C). IT WAS INCUMBENT UPON THE LEARNED ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 9 ASSESSING OFFICER TO HAVE MENTION THE SPECIFIC CLAU SE OF SECTION 271AAB(1) WHILE INITIATING THE PENALTY PROCEEDINGS. BEFORE THAT THE LEARNED ASSESSING OFFICER WAS ALSO REQUIRED TO HAVE RECORDED HIS SATISFACTION IN THE ASSESSMENT ORDER REGARDING THE SPECIFIC DEFAULT COMMITTED BY THE ASSESSEE. NON E OF THIS HAS BEEN DONE BY THE LEARNED ASSESSING OFFICER. THEREFORE THE VERY I NITIATION OF THE PENALTY PROCEEDINGS WAS UNLAWFUL. SIMILARLY WHILE ISSUING P ENALTY NOTICE THE LEARNED ASSESSING OFFICER HAS AGAIN NOT SPECIFIED THE CLAUS E OF SECTION 271AAB(1) FOR WHICH PENALTY WAS INITIATED. THE PENALTY NOTICE IS SCANNED BELOW: - THUS IN VIEW OF THE AFORESAID FACTS IT IS CLEAR THA T INITIATION OF PENALTY PROCEEDINGS WAS WRONG ON THE FOLLOWING COUNTS: - ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 10 (I) THE LEARNED ASSESSING OFFICER DID NOT RECORD ANY SA TISFACTION WITH REFERENCE TO THE SPECIFIC CLAUSE OF SECTION 271AAB( 1). COPY OF ASSESSMENT ORDER IS AVAILABLE ON PAPER BOOK PAGE NUMBER 10 TO 13. (II) IN THE ASSESSMENT ORDER THE LEARNED ASSESSING OFFIC ER ALSO DID NOT INITIATED PENALTY PROCEEDING WITH REFERENCE TO ANY SPECIFIC CLAUSE (A) TO (C) OF SECTION 271AAB(1). (III) THE NOTICE ISSUED U/S 274 READ WITH SECTION 271 ON 13.03.2015 ALONG WITH THE ASSESSMENT ORDER ALSO DID NOT MENTION ANY SPECI FIC CLAUSE OF SECTION 271AAB SUCH AS 271AAB(1)(A), 271AAB(1)(B) OR 271AAB (1)(C). IN VIEW OF THE AFORESAID FACTS ON RECORD THERE WAS NO CASE FOR LEVY OF ANY PENALTY SUBSEQUENTLY ON SUCH UNLAWFUL INITIATION OF THE PENALTY PROCEEDINGS. AS THE VERY INITIATION OF THE PENALTY PROCEEDINGS IS UNLAWFUL THE SUBSEQUENT IMPOSITION OF PENALTY IS AUTOMATICAL LY VOID. THE LEARNED PCIT HAS SET ASIDE THE ORDER OF PENALTY PASSED U/S 271AAB WITH THE DIRECTION TO LEVY PENALTY @ 30% IN PLACE OF 10% IMP OSED BY THE LEARNED ASSESSING OFFICER. THE CASE OF THE ASSESSEE IS THAT THE LEARNED PR. CI T HAS SET ASIDE THE PENALTY AND NOT THE ASSESSMENT ORDER WHICH STILL EXISTS. THE PENALTY PROCEEDINGS HAVE BEEN EMANATED FROM THE ASS ESSMENT ORDER WHICH STANDS AS ON DATE. SINCE THE VERY INITIATION OF THE PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER ITSELF IS DEFEC TIVE AND UNLAWFUL THERE WAS NO CASE FOR LEVY OF ANY PENALTY LEAVE ASIDE @ 1 0% OR 30%. THUS IN THE FACE OF UNLAWFUL INITIATION OF PENALTY PROCEEDINGS AND WHEN SUCH ASSESSMENT ORDER FROM WHERE SUCH UNLAWFUL INITIATIO N OF PENALTY PROCEEDING EMANATED STILL EXISTS, THE DIRECTION OF THE LEARNED PCIT TO IMPOSE PENALTY AFRESH U/S 271AAB(1)(C) IS UNLAWFUL AND ILLEGAL. IN FACT WHAT WAS REQUIRED ON THE PART OF PR. CIT WAS TO HAV E MODIFIED THE ASSESSMENT ORDER ITSELF SO AS TO CORRECT THE INITIA TION OF THE PENALTY PROCEEDINGS. THIS HAVING NOT BEEN DONE, PENALTY IS NOT AT ALL IMPOSABLE IN THE CASE OF THE ASSESSEE DESPITE THE DIRECTION OF T HE PR. CIT GIVEN U/S 263 ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 11 OF THE INCOME TAX ACT, 1961 AND HENCE THE ORDER U/S 263 DESERVES TO BE QUASHED. IT IS SUBMITTED THAT THE ABOVE PROPOSITION IS THE S ETTLED POSITION OF LAW THAT PENALTY PROCEEDING SHOULD BE INITIATED LAWFULL Y UNDER THE SPECIFIC PROVISIONS OF THE ACT/SPECIFYING THE PARTICULAR LIM B OF THE SECTION AND INTIMATING THE ASSESSEE THE SPECIFIC CLAUSE/LIMB FO R WHICH HIS DEFENSE/EXPLANATION IS SOUGHT. THE FOLLOWING CASE L AWS ARE QUOTED IN SUPPORT: - (I) AUTORIDERS INDIA PVT. LTD. VS. ASSISTANT COMMISSION ER OF INCOME TAX (BOMBAY TRIBUNAL (2018) 161 DTR 0217 (MU MBAI)(TRIB), PENALTY U/S 271(1)(C)CONCEALMENT OF INCOMEFURNISH ING OF INACCURATE PARTICULARS OF INCOMEVALIDITY OF PENALTY ORDERAPP ELLANT-ASSESSEE COMPANY WAS INCORPORATED UNDER PROVISIONS OF COMPAN IES ACT, 1956 ASSESSEE FILED RETURN OF INCOME AT LOSS WHICH WAS S UBJECTED TO SCRUTINY U/S 143(3) AND SUBSEQUENTLY DISALLOWANCE WAS MADE O N ACCOUNT OF FOREIGN TRAVELLING EXPENSES, INTEREST PAYMENT, CASH CREDITS AND INTEREST ON INVESTMENTS, THUS, TOTAL DISALLOWANCE MADE IN OR IGINAL ORDER WAS WITHIN MEANING OF SECTION 271(1)(C)BY VIRTUE OF DI SALLOWANCE WHICH WAS DISALLOWED WAS DEEMED TO REPRESENT INCOME IN RESPEC T OF WHICH PARTICULARS HAD BEEN CONCEALEDMINIMUM PENALTY 100% OF TAX EVADED ON ACCOUNT OF CONCEALED INCOME WAS WORKED OUT AND P ENALTY WAS LEVIED U/S 271(1)(C)CIT(A) UPHELD PENALTY U/S 271(1)(C)A PPELLANT-ASSESSEE CHALLENGED IMPOSITION OF PENALTY U/S 271(1)(C)HELD , SECTION 271(1)(C) EMPOWERED AO TO IMPOSE PENALTY TO EXTENT SPECIFIED IF, IN COURSE OF ANY PROCEEDINGS UNDER THE ACT, HE WAS SATISFIED THAT AN Y PERSON HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOMEPENALTY COULD BE LEVIED ON EXISTENCE OF ANY OF TWO SITUATIONS, NAMELY, FOR CONCEALING PARTICULA RS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOMETHEREFO RE, IMPOSITION OF PENALTY WAS INVITED ONLY WHEN CONDITIONS PRESCRIBED U/S 271(1)(C) EXIST CONCEALMENT OF PARTICULARS OF INCOME' AND FURNISH ING OF INACCURATE PARTICULARS OF INCOME' REFERRED TO IN SECTION 271(1 )(C) DENOTE DIFFERENT CONNOTATIONSIN NOTICE ISSUED U/S 274 R.W.S. 271(1) (C) OF EVEN DATE, BOTH LIMBS OF SECTION 271(1)(C) WERE REPRODUCED IN PROF ORMA NOTICE AND IRRELEVANT CLAUSE HAD NOT BEEN STRUCK-OFFOBSERVATI ON OF AO IN ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 12 ASSESSMENT ORDER AND NON-STRIKING OFF OF IRRELEVANT CLAUSE IN NOTICE CLEARLY BRINGS OUT DIFFIDENCE ON PART OF AO AND THE RE WAS NO CLEAR AND CRYSTALLIZED CHARGE BEING CONVEYED TO ASSESSEE U/S 271(1)(C), WHICH HAD TO BE MET BY AOQUASI-CRIMINAL PROCEEDINGS U/S 271( 1)(C) OUGHT TO COMPLY WITH PRINCIPLES OF NATURAL JUSTICECHARGE BE ING MADE AGAINST ASSESSEE QUA SECTION 271(1)(C) WAS NOT FIRM AND, TH EREFORE, PROCEEDINGS SUFFERED FROM NON-COMPLIANCE WITH PRINCIPLES OF NAT URAL JUSTICE INASMUCH AS AO WAS HIMSELF UNSURE AND ASSESSEE WAS NOT MADE AWARE AS TO WHICH OF TWO LIMBS OF SECTION 271(1)(C) HE HAD TO RESPOND NOTICE ISSUED BY AO U/S 274 R.W.S. 271(1)(C) WAS UNTENABLE AS IT SUFFER ED FROM VICE OF NON APPLICATION OF MINDPENALTY IMPOSED U/S 271(1)(C) L IABLE TO BE DELETED ASSESSEES APPEAL ALLOWED. (II) MUNINAGA REDDY VS. ASSISTANT COMMISSIONER OF INCOME TAX (HIGH COURT OF KARNATAKA) (2017) 396 ITR 0398 (KARN ) PENALTYVALIDITY OF PENALTY U/S 271(1)(C)NOTICEIN ASSESSMENT PROCEEDINGS ASSESSMENT ORDER CAME TO BE PASSED BY A SSESSING AUTHORITY AND ULTIMATELY PENALTY OF RS.1,78,35,511 WAS IMPOSE D U/S 271(1)(C) BY ORDERCOMMISSIONER DID NOT INTERFERE WITH ORDER OF IMPOSITION OF PENALTYTRIBUNAL CONFIRMED DECISION OF CIT(A) IN LE VY OF PENALTY U/S 271(1)(C)HELD, DURING COURSE OF HEARING ASSESSEE T ENDERED COPY OF NOTICE ISSUED TO ASSESSEE U/S 271(1)(C) FOR IMPOSIT ION OF PENALTY, WHICH AS PER ASSESSEE WAS PART OF RECORD IN PROCEEDINGS BEFO RE TRIBUNALREVENUE WAS UNABLE TO DISPUTE THAT NOTICE WAS ISSUED BY REV ENUE FOR IMPOSITION OF PENALTY U/S 271(1)(C)HENCE, SAID NOTICE FOR PURPOS E OF CONSIDERATION WAS TAKEN ON RECORDSAID NOTICE DISCLOSED THAT IT W AS PRINTED NOTICE AND FURTHER NO SPECIFIC GROUND WAS MENTIONED, WHICH MIG HT SHOW THAT PENALTY COULD BE IMPOSED ON PARTICULAR GROUND FOR W HICH SAID NOTICE WAS ISSUEDIN CASE OF M/S.MANJUNATHA COTTON AND GINNING FACTORY, IT WAS HELD THAT NOTICE WOULD HAVE TO SPECIFICALLY STATE G ROUND MENTIONED IN S 271(1)(C) AS TO WHETHER IT WAS FOR CONCEALMENT OF I NCOME OR FURNISHING INCORRECT PARTICULARS OF INCOME SAID PENALTY PROCE EDINGS WAS BEING INITIATEDTHAT SENDING OF PRINTED FORM WHEREIN GROU NDS MENTIONED IN S 271 OF THE ACT WOULD NOT SATISFY REQUIREMENT OF LAW FURTHER, ASSESSEE SHOULD KNOW GROUND WHICH HE HAD TO MEET SPECIFICALL Y OTHERWISE PRINCIPLES OF NATURAL JUSTICE WOULD BE VIOLATED AND CONSEQUENTLY, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE IF THERE W AS NO SPECIFIC GROUND MENTIONED IN NOTICETRIBUNAL AT ONE POINT OF TIME D ID OBSERVE THAT SINCE SPECIFIC CONTENTION WAS NOT RAISED BY ASSESSEE BEFO RE APPELLATE ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 13 AUTHORITY, IT WAS MIXED QUESTION OF LAW AND FACT AN D SAME MIGHT ALSO BE PERMISSIBLERELEVANT OBSERVATIONS OF TRIBUNAL WERE REFERRED IN ORDER PASSED IN M.A.NO.62/BANG/15 FOR RECTIFICATION AND T RIBUNAL, HAD NOT ACCEPTED CONTENTION RAISED THEREINIT WAS HARDLY RE QUIRED TO BE STATED THAT IF QUESTION OF LAW WAS RAISED WHICH GOES TO RO OT OF MATTER AND FOR WHICH NO UNDERTAKING OF FACTUAL EXAMINATION WAS REQ UIRED, SAME COULD BE PERMITTED BY TRIBUNALHAD IT BEEN CASE WHERE NOT ICE FOR PENALTY WAS NOT ON RECORD IN PROCEEDINGS OF ASSESSMENT, MATTER MIGHT STAND ON DIFFERENT FOOTINGIN ANY CASE, WHERE NOTICE FOR IMP OSITION OF PENALTY U/S 271(1)(C) WAS ALREADY THERE ON RECORD AND WHEN TRIB UNAL WAS TO EXAMINE APPLICABILITY OF THIS COURT DECISION IN CASE OF M/S MANJUNATHA COTTON AND GINNING FACTORY AND LAW LAID DOWN, IT WAS CASE WHER E CONTENTION OUGHT TO HAVE BEEN CONSIDERED AND EXAMINEDAS OBSERVED HE REIN ABOVE, DECISION IN CASE OF M/S MANJUNATHA COTTON AND GINNI NG FACTORY WOULD APPLY AND IF NOTICE WAS FOUND TO BE ILLEGAL AND WAS FOUND TO BE UNSUSTAINABLE IN LAW, CONSEQUENCES WOULD BE THAT TH ERE WAS BREACH OF NATURAL JUSTICEHENCE, ULTIMATE ORDER FOR IMPOSITIO N OF PENALTY COULDNT BE SUSTAINEDQUESTION WAS ANSWERED IN FAVOUR OF ASS ESSEE, AGAINST REVENUEIT WAS HELD THAT ORDER OF TRIBUNAL IN MAIN APPEAL AS WELL AS IN M.A.NO.62/BANG/15 INSOFAR AS IT RELATED TO NOT INTE RFERING WITH ORDER FOR IMPOSITION OF PENALTY WAS SET-ASIDEIT WAS FURTHER OBSERVED AND DECLARED THAT AS QUESTION WAS ANSWERED IN FAVOUR OF ASSESSEE AND AGAINST REVENUE, ORDER FOR IMPOSITION OF PENALTY SHOULD REM AIN SET-ASIDE APPEALS WERE ALLOWED TO THE AFORESAID EXTENT (III) CIT VS. SAMSON PERINCHERY (BOMBAY HIGH COURT) (INCOME TAX APPEAL NO. 1154 OF 2014 DATE : 5TH JANUARY, 2017 (III) MRADULA AGARWAL VS. INCOME TAX OFFICER IN ITA NO. 1 76/JP/2016 DATED 16.09.2016 (IV) MANJUNATHA COTTON & GINNING FACTORY 259 ITR 565. TH IS DECISION HAS GOT THE APPROVAL OF THE APEX COURT OF THE COUNTRY. SLP FILED BEFORE THE HON'BLE SUPREME COURT BY THE REVENUE STANDS DISMISS ED IN THE CASE SSA'S EMERALD MEADOWS [2016] 73 TAXMANN.COM 248 (SC ) SPECIAL LEAVE TO APPEAL (C) NO. 11485 OF 2016 AUGUST 5, 201 6. 3. ORDER LEVYING PENALTY U/S 271AAB OF THE INCOME TAX ACT, 1961 IS UNLAWFUL: - IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER U/S 271AAB. IN THE ENTIRE PENALTY ORDER THE LEARNED ASS ESSING OFFICER HAS NOT ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 14 DISCUSSED UNDER WHICH CLAUSE (A), (B) OR (C) OF SEC TION 271AAB THE ASSESSEE HAS DEFAULTED OR WHICH CLAUSE (A), (B) OR (C) OF SECTIO N 271AAB IS APPLICABLE IN THE CASE FOR THE ASSESSEE AND IN WHAT MANNER. THE RELEV ANT PARAS OF THE PENALTY ORDER ARE SCANNED BELOW: - THE PERUSAL OF THE AFORESAID PARAS REVEAL THAT THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER IN A ROUTINE MANNER. IT IS SUBMITT ED THAT ON THE BASIS OF THE OBSERVATIONS OF THE LEARNED ASSESSING OFFICER THAT ' THE ASSESSEE HAS NOT SUBSTANTIATED THIS INCOME. DURING ASSESSMENT PROCEE DINGS THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF THE INCOME AND COULD NTO PRODUCE ANY EVIDENTIARY DOCUMENTS IN ITS FAVOUR' . THE PR. CIT HAS OBSERVED IN PARA 11 OF HER ORDER AS UNDER: - ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 15 THE PERUSAL OF THE AFORESAID OBSERVATION OF THE PR. CIT REVEALS THAT ENTIRE ORDER IS BASED ON THE OBSERVATION OF THE LEARNED ASSESSING O FFICER IN THE PENALTY ORDER THAT ASSESSEE FAILED TO SUBSTANTIATE HIS INCOME DUR ING THE ASSESSMENT PROCEEDINGS. BUT THERE IS NO SUCH FINDING IN THE AS SESSMENT ORDER THAT ASSESSEE FAILED TO SUBSTANTIATE HIS INCOME. THE COPY OF THE ASSESSMENT ORDER IS AVAILABLE ON PAPER BOOK PAGE NUMBER 10 TO 13. IT IS ONLY DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS THAT ASSESSEE SHOULD HAVE BEEN AFFORDED OPPORTUNITY TO SUBSTANTIATE HIS INCOME. THIS WAS NOT DONE. THEREFO RE THE OBSERVATION OF THE LEARNED ASSESSING OFFICER IN THE PENALTY ORDER IS F ALSE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FAILED TO SUBST ANTIATE HIS INCOME. NOT ONLY THIS EVEN IN THE PROLONGED STATEMENT RECORDED U/S 1 32(4) ON 18.07.2012, THE ASSESSEE WAS NOT PUT ANY QUESTION REGARDING SUBSTAN TIATING THE INCOME. HE WAS NEVER PUT TO EXPLAIN THE SOURCE OF INCOME DISCLOSED BY HIM. COPY OF STATEMENT IS ENCLOSED WITH THE SUBMISSION. THEREFORE IT IS WRONG ON THE PART OF THE LEARNED ASSESSING OFFICER TO HAVE OBSERVED IN THE PENALTY O RDER THAT THE ASSESSEE FAILED TO SUBSTANTIATE HIS INCOME. AND EVEN IT IS FAR WORS E THAT THE LEARNED PR. CIT WAS GUIDED AND LED BY THIS FALSE OBSERVATION OF THE LEA RNED ASSESSING OFFICER IN THE PENALTY ORDER. SHE COULD HAVE RATHER SHE SHOULD HAV E PERUSED THE ASSESSMENT ORDER HERSELF AND SHOULD HAVE ASCERTAINED WHETHER A T ANY STAGE ASSESSEE WAS REQUIRED TO SUBSTANTIATE HIS INCOME. IN VIEW OF THE SE FACTS THE PR. CIT HAS ERRED IN ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 16 PASSING THE ORDER U/S 263 AND GIVING DIRECTION FOR LEVY OF PENALTY @ 30% INSTEAD OF 10%. THE SUBMISSION OF THE ASSESSEE THAT THE PEN ALTY ORDER WAS UNLAWFUL, ILLEGAL AND HAS NO LEGS. THE OBSERVATION IN THE PEN ALTY ORDER AS DISCUSSED ABOVE IS FALSE. ON SUCH FALSE OBSERVATION THE LEARNED PR. CI T HAS BASED HER ORDER AND HENCE THE ORDER IS AB-INITIO VOID. THE FOLLOWING CA SE LAWS ARE QUOTED IN SUPPORT: - (I) ASSISTANT COMMISSIONER OF INCOME TAX VS. SHREE NARA YAN SITARAM MUNDRA (2017) 166 ITD 0047 (AHEMDABAD TR IB) LEVY OF PENALTY U/S.271AAAPENALTY WHERE SEARCH HAS BEEN INITIATED DELETION OF PENALTYASSESSEE ADMITTED UNACCOUNTED I NCOME AND INCLUDED SAME WHILE FILING RETURN OF INCOME PURSUAN T TO NOTICE UNDER S.153A OF THE ACTINCOME RETURNED UNDER S.153A OF T HE ACT WAS ASSESSED AT SAME FIGURE AND PENALTY UNDER S.271AAA WAS IMPOSED BY AO ON GROUND THAT CONDITIONS SPECIFIED IN SECTION 271A AA FOR EXONERATION FROM PENALTY HAD NOT BEEN SATISFIED BY ASSESSEEAO ACCORDINGLY IMPOSED PENALTY ON UNDISCLOSED INCOMECIT(A) DELETE D PENALTY HOLDING THAT EXCEPTION PROVIDED IN SECTION 271AAA FOR NON-I MPOSITION OF PENALTY HAD DULY FULFILLEDHELD, AS PER SECTION 271AAA(2)(I ), ONE OF CONDITIONS FOR OBTAINING RELIEF FROM IMPOSITION OF PENALTY UND ER S.271AAA WAS THAT ASSESSEE IN STATEMENT RECORDED UNDER S.132(4) OF TH E ACT ADMITTED UNDISCLOSED INCOME AND SPECIFIES MANNER IN WHICH SUCH INCOME WAS DERIVEDREVENUE ADMITTED THAT ASSESSEE HAD NOT FAIL ED TO SUBSTANTIATE MANNER IN WHICH UNDISCLOSED INCOME DERIVEDASSESSEE HAD NOT FAILED TO SPECIFY MANNER AT FIRST PLACE WHEN SUBSTANTIATION T HEREOF HAD NOT BEEN CALLED INTO QUESTION BY REVENUETHUS, CASE OF REVEN UE REQUIRED TO BE SUMMARILY DISMISSED ON THIS GROUND ALONEINCOME CON SIDERED AS UNDISCLOSED INCOME IN STATEMENT UNDER S.132(4) HAD BEEN DULY INCORPORATED IN RETURN FILED PURSUANT TO SEARCHREV ENUE COULD NOT PLEAD DEFICIENCY ON PART OF ASSESSEE TO SPECIFY MANNER WH ICH HAD NOT BEEN CALLED INTO QUESTION AT TIME OF SEARCHNOWHERE IN A SSESSMENT ORDER OR IN PENALTY ORDER, REVENUE MADE OUT CASE THAT MANNER OF EARNING UNDISCLOSED INCOME WAS ENQUIRED INTO POST SEARCH ST AGE EITHERREVENUE HAD NOT POINTED OUT ANY QUERY WHICH REMAINED UNREPL IED OR EVADED IN COURSE OF SEARCH OR POST SEARCH INVESTIGATIONREVEN UES APPEAL DISMISSED. (II) ASSISTANT COMMISSIONER OF INCOME TAX VS. RITU SINGA L (DELHI TRIBUNAL) (2016) 49 ITR (TRIB) 0664 (DELHI) ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 17 PENALTY FOR FAILURE TO KEEP AND MAINTAIN INFORMATIO N AND DOCUMENT IN RESPECT OF INTERNATIONAL TRANSACTION DELETION OF P ENALTY SEARCH AND SEIZURE ACTION U/S 132 WAS CARRIED OUT IN CASE OF C OMPANY B CASE OF ASSESSEE WAS ALSO COVERED U/S. 132 ASSESSEE HAD FI LED RETURN OF INCOME FOR AY 2010-11, ELECTRONICALLY, DECLARING INCOME OF RS. 20,47,14,190 DURING COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOT ICED BY AO THAT ASSESSEE HAD MADE DISCLOSURE OF UNDISCLOSED INCOME EARNED DURING FINANCIAL YEAR 2009-10 (RELEVANT TO ASSESSMENT YEAR 2010-11) TO EXTENT OF RS. 20 CRORES DURING COURSE OF SEARCH AND POST SEAR CH PROCEEDINGS ON BASIS OF SEIZED MATERIAL FOUND DURING COURSE OF SEA RCH IT WAS FURTHER NOTED BY AO THAT PROVISIONS OF SECTION 271AAA WERE APPLICABLE WITH RESPECT TO UNDISCLOSED INCOME FOUND DURING COURSE O F SEARCH AND DECLARED BY ASSESSEE IN HER RETURN OF INCOME FOR AS SESSMENT YEAR 2010- 11 AO INITIATED PENALTY PROCEEDINGS U/S. 271AAA DU RING ASSESSMENT PROCEEDINGS ON GROUND THAT ASSESSEE HAD NOT SPECIFI ED MANNER IN WHICH UNDISCLOSED INCOME WAS EARNED ALSO FAILED TO SUBSTA NTIATE, IT AND ACCORDINGLY, IMPOSED PENALTY OF RS. 2 CRORE ON ASSE SSEE FOR SUCH FAILURE CIT(A) DELETED PENALTY AND ALLOWED APPEAL OF ASSESS EE HELD , IN CASE OF MOTHERS PRIDE EDUCATION PERSONNA PVT. LTD. VS DC IT IT HELD THAT DURING COURSE OF SEARCH PROCEEDINGS AUTHORIZED OFFICER OF DEPARTMENT HAD NOT RAISED ANY SPECIFIC QUERY REGARDING MANNER IN WHICH UNDISCLOSED INCOME HAD BEEN DERIVED AND ON CONTRARY ASSESSEE HAD TRIED TO EXPLAIN EARNING OF UNDISCLOSED INCOME IN QUESTION IN ITS REPLY DURI NG COURSE OF RECORDING OF HIS STATEMENT U/S 132(4) IT HELD THAT IN ABSENC E OF QUERY RAISED BY AUTHORIZED OFFICER DURING COURSE OF RECORDING OF ST ATEMENT U/S 132(4) ABOUT MANNER IN WHICH UNDISCLOSED INCOME HAD BEEN D ERIVED AND ABOUT ITS SUBSTANTIATION, AO WAS NOT JUSTIFIED IN IMPOSIN G PENALTY U/S 271 AAA SPECIALLY WHEN OFFERED UNDISCLOSED INCOME HAD BEEN ACCEPTED AND DUE TAX THEREON HAD BEEN PAID BY ASSESSEE CIT(A) WHILE DELETING PENALTY IN DISPUTE, PASSED WELL REASONED ORDER AND SAME DID NO T NEED ANY INTERFERE THEREFORE, RESPECTFULLY FOLLOWING PRECED ENTS OF ITAT AS MENTIONED IN CIT(A)S ORDER, ITAT UPHELD ORDER OF C IT(A) WHEREIN CIT(A) DELETED PENALTY IN DISPUTE REVENUES APPEAL DISMIS SED. (III) NEERAT SINGAL VS. ASSISTANT COMMISSIONER OF INCOME TAX (DELHI TRIBUNAL) (2014) 101 DTR 0238 (DEL) SEARCH WAS CARRIED OUT AT PREMISES OF ASSESSEE IN W HICH CERTAIN DOCUMENTS WERE SEIZED, ASSESSEE HAD SURRENDERED CER TAIN AMOUNT AS AN UNDISCLOSED INCOME WHICH WAS ALSO DECLARED IN HIS R ETURN OF INCOME FOR ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 18 AY 2010-11DUE TAXES THEREON WAS ALSO PAID BEFORE F ILING OF RETURN AND SAME WAS ACCEPTEDIN STATEMENT U/S 132 (4) ASSESSEE STATED THAT SAID INCOME WAS DERIVED FROM FORWARD / SPECULATIVE AND P ROPERTY TRANSACTIONS CARRIED OUT BY HIM DURING FINANCIAL YEAR 2009-10AO BEING NOT SATISFIED WITH EXPLANATION OF ASSESSEE IMPOSED PENALTY U/S 27 1AAACIT(A) UPHELD FINDINGS OF AOHELD, PENALTY U/S 271AAA IS N OT LEVIABLE WHERE ASSESSEE SPECIFY MANNER IN WHICH AN UNDISCLOSED INC OME WAS DERIVED AND ALSO SUBSTANTIATE MANNERIN INSTANT CASE NO QUERY W AS RAISED BY AUTHORIZED OFFICER DURING COURSE OF RECORDING OF ST ATEMENT OF ASSESSEE U/S 132 (4) ABOUT MANNER IN WHICH UNDISCLOSED INCOM E HAS BEEN DERIVED AND ABOUT ITS SUBSTANTIATIONIN ABSENCE OF QUERY RA ISED BY AUTHORIZED OFFICER, AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U /S 271AAA SPECIALLY WHEN OFFERED UNDISCLOSED INCOME HAD BEEN ACCEPTED A ND DUE TAX HAD BEEN PAID BY ASSESSEEPENALTY IMPOSED U/S 271AAA SE T ASIDE ASSESSEES APPEAL ALLOWED 4. DISPUTE RESOLUTION SCHEME UNDER FINANCE ACT, 2016- ORDER U/S 204(2) R.W.S. 206 OF THE FINANCE ACT, 2016 DATED 09.11.2016 BY PR . CIT (CENTRAL), JAIPUR - OVER AND ABOVE THE SUBMISSION MADE IN THE FORGOING PARAS IT IS SUBMITTED THAT DURING THE COURSE OF PROCEEDINGS U/S 263 IT WAS BRO UGHT TO THE KIND NOTICE OF THE LEARNED PR. CIT THAT THE ASSESSEE HAS AVAILED BENEF IT OF THE DIRECT TAX DISPUTE RESOLUTION SCHEME-2016. IN THIS REGARD COPIES OF OR DER PASSED BY PR. CIT(CENTRAL), JAIPUR DATED 18.10.2016 AND 09.11.2016 WERE PRODUCE D BEFORE HIM. UNDER THE DISPUTE RESOLUTION SCHEME THE ASSESSEE WAS REQUIRED TO ONLY RS. 37,44,551/- IN PLACE OF PENALTY LEVIED U/S 271AAB OF RS. 1,49,78,2 02/-. THE MATTER THUS GOT FINALITY AFTER THE PAYMENT MADE BY THE ASSESSEE OF RS. 37,44,551/-. DURING THE COURSE OF PROCEEDINGS U/S 263 THE ASSESSEE FURNISHE D REPLY UNDER LETTER DATED 20.03.2018 COPY OF WHICH IS AVAILABLE ON PAPER BOOK PAGE NO. 53 TO 61 . THE RELEVANT PORTION IS QUOTED BELOW: - '5. SUBSEQUENTLY THE LEARNED ASSESSING OFFICER HAS IMPOSED THE PENALTY U/S 271AAB OF THE INCOME TAX ACT, 1961 BY ORDER DATED 20.08.2015 @ 10% OF SURRENDERED INCOME BY CONSIDERING THAT THE ASSES SEE FULFILLED ALL THE CONDITION AS MENTIONED IN CLAUSE (A) OF SUB-SECTION (1) SECTION 271AAB OF THE INCOME TAX ACT, 1961. HOWEVER THE ASSESSEE HAS NOT RECEIVED ANY NOTICE AS MENTIONED IN PENALTY ORDER FOR SHOW CAUSE NOTICE DATED 10.07.2015. ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 19 6. THE ASSESSEE SUBSEQUENTLY FILED APPEAL AGAINST T HE LEVY OF PENALTY U/S 271AAB OF THE INCOME TAX ACT, 1961 TO THE CIT(A)-4, JAIPUR ON 01.09.2015. AGAINST LEVY OF PENALTY OF RS. 1,49,78, 202/-. 7. THEREAFTER IN THE FINANCE ACT 2016, THE DIRECT T AX DISPUTE RESOLUTION SCHEME-2016 WAS INTRODUCED AND THE ASSESSEE FILED A PPLICATION UNDER DRS SCHEME AND WHICH WAS ACCEPTED BY THE PR. CIT-CE NTRAL, JAIPUR VIDE CERTIFICATE DATED 09.11.2016. COPY OF CERTIFICATE I S ENCLOSED HEREWITH. 8. THEREAFTER THE CIT(A) HAS ALSO DECIDED THE APPEA L OF THE ASSESSEE COPY OF ORDER DATED 11.11.2016 IS ENCLOSED HEREWITH. FROM THE ABOVE FACTS IT IS CLEARLY EMERGES THAT THE MATTER OF IMPOSING PENALTY GOT FINALITY BY ISSUE OF CERTIFICATE IN FOR M NO. 5 OF THE DIRECT TAX DISPUTE RESOLUTION RULES 2016 BY THE ORDER F.NO. PR . CIT(CENTRAL)/TECH/2016-17/2347 DATED 18.10.2016 AND THE ASSESSEE HAS ALSO GRANTED IMMUNITY FROM PROSECUTION FOR THE ABOV E PENALTY PROCEEDINGS. IN THE DIRECT TAX DISPUTE RESOLUTION SCHEME 2016 SU B-SECTION (3) OF SECTION 204 WHICH READS AS UNDER: - 'EVERY ORDER PASSED UNDER SUB-SECTION (2), DETERMIN ING THE SUM PAYABLE UNDER THIS SCHEME, SHALL BE CONCLUSIVE AS TO THE MA TTERS STATED THEREIN AND NO MATTER COVERED BY SUCH ORDER SHALL BE RE-OPE NED IN ANY OTHER PROCEEDING UNDER THE INCOME TAX ACT OR THE WEALTH-T AX ACT OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE, OR AS TH E CASE MAY BE, UNDER ANY AGREEMENT, WHETHER FOR PROTECTION OF INVESTMENT OR OTHERWISE, ENTERED INTO BY INDIA WITH ANY OTHER COUNTRY OR TER RITORY OUTSIDE INDIA.' SO WHEN THE PENALTY LEVIED U/S 271AAB OF THE INCOME TAX ACT, 1961 OF THE ASSESSEE HAS BEEN FINALIZED BY PASSING ORDER UNDER SUB-SECTION(2) OF SECTION 204 OF THE DIRECT DISPUTE RESOLUTION SCHEME 2016 THERE IS NO QUESTION OF ANY REVISION U/S 263 OF THE INCOME TAX ACT, 1961 WHICH IS CLEAR VIOLATION OF SECTION 204 OF THE ACT.' IN HER ORDER THE LEARNED PR. CIT HAS OBSERVED THAT ASSESSEE WRONGLY AVAILED THE BENEFIT UNDER THE DISPUTE RESOLUTION SCHEME 2016 AS HE WAS NOT ENTITLED FOR THE SAME, IT BEING A CASE OF SEARCH. IN THIS REGARD THE SUBMISSION OF THE ASSESSEE IS THAT THE ASSESSEE IS NOT EXPECTED TO KNOW THE SC HEME BETTER THAN THE OFFICERS OF THE DEPARTMENT OF THE LEVEL OF PR. CIT (CENTRAL) . THE ORDER PASSED U/S 204(2) ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 20 R.W.S. 205 OF THE FINANCE ACT 2016 DATED 09.11.2016 IS NONE OTHER THAN BY PR. CIT (CENTRAL), JAIPUR WHO DEALS ONLY WITH SEARCH CASES. THE JURISDICTION OF PR. CIT (CENTRAL) IS EXCLUSIVELY WERE SEARCH AND SEIZURE CA SES. FURTHER THE MATTER OF PENALTY U/S 271AAB WHICH IS ALSO DIRECTLY RELATED W ITH SEARCH CASES AND SUCH PENALTY IS IMPOSED ONLY IN SUCH ASSESSMENTS. THE FA CTS BEING SO HOW COULD IT BE THAT THE DISPUTE RESOLUTION SCHEME WAS NOT APPLICAB LE TO THE ASSESSEE DESPITE THE LEARNED PR. CIT (CENTRAL) JAIPUR GRANTED THE CE RTIFICATE. THERE IS NO FAULT OF THE ASSESSEE IN AVAILING SCHEME. ONCE A CERTIFICATE U/S 204(2) R.W.S. SECTION 205 HAS BEEN GRANTED, THE LEARNED PR. CIT-1 WAS PRECLUD ED IN PASSING ORDER U/S 263 OF THE INCOME TAX ACT, 1961. THE ORDER PASSED U/S 2 63 DESERVES TO BE QUASHED. 6. ON THE OTHER HAND, THE LD CIT DR HAS RELIED ON TH E ORDER OF THE LD. PR.CIT AND PRAYED TO UPHOLD THE ORDER. 7. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE H AVE ALSO PERUSED THE LACE LAWS RELIED UPON BOTH THE SIDES. WE HAVE AL SO GONE THROUGH THE VARIOUS RELEVANT MATERIALS AVAILABLE ON THE RECORD. THE ORIGINAL RETURN WAS E-FILED 31/10/2013 DECLARING TOTAL INCOME OF RS. 15 ,04,61,890/-. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON 18/07/2012, THUS THE SEARCH WAS CONDUCTED DURING THE FINANCIAL YEAR RELEVANT TO ASS ESSMENT YEAR 2013-14. THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDI NGS U/S 271AAB BY ISSUING NOTICE U/S 274 READ WITH SECTION 271 OF THE I.T. ACT, 1961 ON 13/03/2015 WHEREIN THE PENALTY HAS BEEN INITIATED O N ASSESSED UNDISCLOSED INCOME AS EVIDENT FROM COPY OF NOTICE SCANNED AT PAGE NO. 9 ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 21 OF THIS ORDER. THE ASSESSING OFFICER HAS NOT SPECIFI ED UNDER WHICH SUB CLAUSE OF SECTION THE NOTICE HAS BEEN ISSUED. THUS, IT IS CLEAR FROM RECORDS THAT THE ASSESSEE HAS NOT BEEN SUFFICIENTLY NOTICED ABOUT THE SUB CLAUSE OF THE PROVISIONS OF SECTION 271AAB OF THE ACT. THE ASS ESSING OFFICER HAS LEVIED THE PENALTY @ 10%. THIS FACT ESTABLISHES THAT PENALTY HAS BEEN LEVIED U/S 271AAB (1)(A) OF THE ACT. THE ASSESSEE H AS FILED AN APPEAL AGAINST THE ORDER OF LEVY OF PENALTY BY THE ASSESSI NG OFFICER ON 01/09/2015. DURING THE PENDENCY OF APPEAL BEFORE TH E LD. CIT(A), THE ASSESSEE FILED AN APPLICATION UNDER THE DIRECT TAX D ISPUTE RESOLUTION SCHEME, 2016. THE LD. PR.CIT (CENTRAL), JAIPUR HAS AC CEPTED THE APPLICATION UNDER THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 AND ISSUED CERTIFICATE DATED 09/11/2016. THIS FACT ESTAB LISHES THAT THE ISSUE REGARDING LEVY OF PENALTY ATTAINED FINALITY. THIS CE RTIFICATE ISSUED BY THE LD. PR.CIT(CENTRAL), JAIPUR DATED 09/11/2016 HAS NOT BEE N WITHDRAWN TILL DATE. BY THE CERTIFICATE, THE ASSESSEE HAS BEEN GRANTED I MMUNITY FROM PROSECUTION ALSO. SUB-SECTION(3) OF SECTION 204 OF THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 ALSO PROVIDES THAT EVERY O RDER PASSED UNDER SUB-SECTION (2), DETERMINING THE SUM PAYABLE UNDER THIS SCHEME, SHALL BE CONCLUSIVE AS TO THE MATTERS STATED THEREIN AND NO MATTER COVERED BY SUCH ORDER SHALL BE REOPENED IN ANY OTHER PROCEEDINGS UN DER THE INCOME TAX ACT OR THE WEALTH TAX OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE, ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 22 OR AS THE CASE MAY BE, UNDER ANY AGREEMENT, WHETHER FOR PROTECTION OF INVESTMENT OR OTHERWISE, ENTERED INTO BY INDIA WITH A NY OTHER COUNTRY OR TERRITORY OUTSIDE INDIA. THUS, THE CERTIFICATE ISSUE D IN TERMS OF CLAUSES OF DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016, THE ISSU E REGARDING LEVY OF PENALTY U/S 271AAB OF THE ACT GOT FINALIZE. FURTHER IT HAS BEEN ALSO OBSERVED FROM THE ORDER OF THE LD. PR.CIT THAT DURIN G THE PROCEEDINGS U/S 263 OF THE ACT, LD. PR.CIT HAS NOT ARRIVED AT A CLEA R AND FINAL CONCLUSION THAT PENALTY LEVIED BY THE ASSESSING OFFICER @ 10% WA S NOT JUSTIFIED IN VIEW OF THE MATERIALS COLLECTED AND STATEMENT RECORD ED DURING THE SEARCH. LD. PR.CIT IN HIS ORDER U/S 263 OF THE ACT HAS DIREC TED THAT THE PENALTY ORDER DATED 20/08/2015 IS SET ASIDE ON THIS ISSUE WI TH A DIRECTION TO THE A.O. TO PASS THE SAME IN THE CASE OF ASSESSEE DE NO VO IN ACCORDANCE WITH LAW AFTER MAKING THE NECESSARY EXAMINATION AND VERIF ICATION REGARDING ISSUE UNDER DISCUSSION. THUS, THE LD PR.CIT HAD NOT G IVEN CLEAR FINDING ON THE ISSUE. THE ASSESSING OFFICER HAVE LEVIED PENALTY @ 10% AND LD. PR.CIT WANTS TO LEVY 30% OF PENALTY U/S 271AAB OF THE ACT. THE A.O. HAS NOT SPECIFIED THE SUB CLAUSE IN NOTICE. IN SUCH A FACTU AL SITUATION, IN OUR CONSIDERED VIEW, THE RATIO LAID DOWN BY THE HON'BLE S UPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. CIT (SUPRA) T HAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLICATION OF L AW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS, SHALL NOT BE APPLICABLE IN THIS ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 23 CASE. IN ABSENCE OF A CLEAR CUT FINDING OF LD. PR.C IT ON THE BASIS OF DOCUMENTS FOUND AND SEIZED AND STATEMENTS RECORDED DURING THE SEARCH, THE PR.CIT. WAS NOT JUSTIFIED IN ISSUING SUCH DIRECT ION. THE PR.CIT CANNOT REACH AT A CONCLUSION THAT THE PROVISIONS OF SECTIO N 271AAB (1)(C) ARE APPLICABLE IN ASSESSEES CASE WITHOUT CLEAR AND FINA L FINDING ON THIS ISSUE. WE WOULD ALSO LIKE TO HOLD THAT ONCE THE ASSESSEE HA S PREFERRED THE APPEAL AGAINST THE ORDER OF ASSESSING OFFICER FOR LEVY OF PENALTY U/S 271AAB OF THE ACT, THERE IS NO SCOPE FOR THE LD. PR.CIT TO INV OKE THE PROVISIONS OF SECTION 263 OF THE ACT TO COVER ANY LEGAL LACUNA. M OREOVER, IN A SITUATION WHERE THE ASSESSEE HAS BEEN GRANTED CERTIFICATE UNDE R THE DIRECT TAX DISPUTE RESOLUTION SCHEME, 2016 WHICH CONTINUES TO BE VALID THEN ALSO PROVISIONS OF SECTION 263 COULD NOT BE INVOKED. WE WOULD ALSO LIKE TO MENTION THAT ONCE THE CERTIFICATE ISSUED UNDER DRS SCHEME IS WITHDRAWN IN FUTURE THEN THE APPEAL OF ASSESSEE BEFORE CIT(A) SHALL REVIVE. IN SUCH A SITUATION ALSO THE PR.CIT SHALL NOT HAVE JURISDICTIO N TO INVOKE PROVISIONS OF SECTION 263 OF THE ACT. THERE IS NO SCOPE FOR TREA TING THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE ORDER U/S 263 OF THE ACT PASSED BY THE LD. PR.CIT IS HEREBY QUASHED. ITA 421/JP/2018_ SHRI RAM DAS MAHESHWARI VS PR.CIT 24 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14/06/2018. SD/- SD/- FOT; IKY JKO HKKXPAN (VIJAY PAL RAO) (BHAGCHAND) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 14 TH JUNE, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI RAM DAS MAHESHWARI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE PR.C.I.T. JAIPUR-1, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 421/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR