DCIT, Kanpur V. M/s. B.J.D. Paper Products, Kanpur

ITA 493/LKW/2010

• Counselvise Citation: 49323714 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 16-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B AJAJ
• Keywords: Reopening of assessment; Loose papers; Question of law; Reasonable cause; Validity of assessment; Onus to prove; Revised return; Reassessment proceedings
• Section: 143(3); 142(1); 133A; 139(5); 147; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI H.L. KARWA, VICE PRESIDENT AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO.493/LKW/2010 ASSESSMENT YEAR:2005-06 DCIT-II KANPUR V. M/S B.J.D. PAPER PRODUCTS 60-B, DADA NAGAR, KANPUR PAN:AAGFB5999K (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. P. K. BAJAJ, SR. D.R. RESPONDENT BY: SHRI. RAKESH GARG, ADVOCATE DATE OF HEARING: 17.08.2011 DATE OF PRONOUNCEMENT: 25.08.2011 O R D E R PER H. L. KARWA: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) II, KANPUR DATED 12.5.2010 DELETING THE PENALTY OF ` 3,98,209 IMPOSED BY THE ASSESSING OFFICER ON THE CONCEALED INCOME OF ` 10,75,062 UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT IN THIS CASE SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 15.12.2005 BY A.D.I.T (INV.-L), KANPUR AND CERTAIN BOOKS OF ACCOUNTS AND LOOSE PAPERS WERE IMPOUNDED. DURING THE COURSE OF PROCEEDINGS U/S 143(3) OF THE ACT FOR THE A.Y. 2006-07, CERTAIN CREDIT BALANCES WERE FOUND APPEARING IN THE :-2-: IMPOUNDED BOOKS OF ACCOUNTS. THE ASSESSEE WAS REQUIRED TO VERIFY THE OPENING BALANCES OF THE CREDITORS AS APPEARING IN THE BOOKS OF ACCOUNTS. THE ASSESSEE REPLIED THAT THESE BALANCES RELATED TO A.Y. 2005-06 AND ITS GENUINENESS MAY BE EXAMINED IN A.Y. 2005-06, THEREFORE, ACTION U/S 148 OF THE ACT WAS TAKEN FOR THE A.Y. 2005-06. THE ASSESSING OFFICER COMPLETED ASSESSMENT U/S 147/143(3) OF THE ACT ON 20.05.2009 AT THE TOTAL INCOME OF ` 12,30,900 MAKING CERTAIN ADDITIONS AS AGAINST ORIGINAL RETURNED INCOME OF ` 68,960. THE ASSESSING OFFICER INITIATED PENALTY PROCEEDIINGS UNDER SECTION 271(1)(C) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS REVEALED FROM THE REVISED RETURN THAT THE ASSESSEE HAD SURRENDERED VARIOUS CASH CREDITS AND DEPOSITS TOTALING TO ` 10,75,062. IN ORDER TO VERIFY THE AUTHENTICITY OF OTHER VARIOUS CREDITORS GIVEN IN THE LIST OF SUNDRY CREDITORS, THE BOOKS OF ACCOUNTS WERE EXAMINED AND ENQUIRY LETTERS WERE ISSUED FOR CONFIRMATION OF THESE CREDIT BALANCES. ON THE BASIS OF EXAMINATION OF BOOKS OF ACCOUNTS AND DIRECT ENQUIRIES MADE FROM TRADE CREDITORS, FURTHER CERTAIN CREDIT BALANCES WERE NOT FOUND CORRECT. IN THE CASES OF PRAKASH DYE-CHEM AND PRINCESSA OVERSEAS, ENQUIRY LETTERS WERE SENT AND THE SAME WERE RETURNED BACK UN-SERVED AND IN THE CASES OF AJAI ENGINEERING WORKS, GARG TRADING CO., AND MODERN TIN DECORATORS, ENQUIRY LETTERS WERE SENT BUT NO CONFIRMATIONS WERE RECEIVED. IT WAS ALSO FOUND THAT IN THE CASES OF POWER TOOL & INDUSTRIAL CORPN., PERFECT PACKAGING, MAYA ENTERPRISES, BHARAT SILK SCREEN AND AGRAWAL SONS, IN EACH CASE SINGLE BILL WAS RAISED AND THE SAME WERE OUTSTANDING TILL THE END OF THE PREVIOUS YEAR. SINCE IN ALL THE ABOVE CASES, THE TRANSACTIONS WERE NOT CONFIRMED AND THE ASSESSEE HAD STATED THAT PAYMENTS WERE MADE IN CASH BUT THE ASSESSEE FAILED TO SUBSTANTIATE HIS CLAIM, THEREFORE, AN ADDITION OF ` 86,882 WAS MADE. HOWEVER, THE ASSESSMENT WAS COMPLETED U/S 147/143(3) OF THE ACT ON :-3-: 20.05.2009 AT THE TOTAL INCOME OF ` 12,30,900 AFTER MAKING CERTAIN ADDITIONS AS AGAINST ORIGINAL RETURNED INCOME OF ` 68,960 (REVISED INCOME OF ` 11,44,020 INCLUDING SURRENDER OF ` 10,75,062 ON ACCOUNT OF CREDITORS / DEPOSITORS). THE ASSESSING OFFICER OBSERVED THAT SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED THE CONCEALED THE PARTICULARS OF INCOME, A NOTICE U/S 271(1)(C) OF THE ACT WAS ISSUED ON 20.05.2009. AND DULY SERVED UPON THE ASSESSEE. IN COMPLIANCE TO SHOW CAUSE NOTICES, THE ASSESSEE FILED WRITTEN SUBMISSION ON 07.09.2009 WHEREIN THE ASSESSEE HAS STATED AS UNDER:- 'WITH REFERENCE TO ABOVE, WE TO INFORM YOUR HONOUR THAT AT THE TIME OF ISSUANCE OF NOTICE U/S 148 DATED 15.09.2008, DEPARTMENT HAD NO KNOWLEDGE ABOUT ANY CONCEALMENT OR INACCURATE PARTICULARS AND ISSUED THE NOTICE ARBITRARILY AND WITHOUT ANY REASON. YOU CAN VERIFY THIS FACT FROM THE RECORDS. WE HAD FILED RETURN OF INCOME OF RS.11,44,020/- AND SUO MOTO AND VOLUNTARILY SURRENDERED RS.10,75,062/- IN THE RETURN TO BUY PEACE OF MIND AND TO AVOID LITIGATION. HON'BLE SUPREME COURT IN CIT VS. SURESH CHANDRA MITTAL (2001) 119 TAXMAN 433 (SC) HAS HELD THAT DEPARTMENT HAD NOT DISCHARGED ITS BURDEN OF PROVING CONCEALMENT AND HAD SIMPLY RESTED ITS CONCLUSION ON ASSESSEES ACT OF VOLUNTARY SURRENDER, WHICH OBVIOUSLY WAS IN GOOD FAITH AND TO BUY PEACE, HENCE PENALTY COULD NOT BE LEVIED. HON'BLE SUPREME COURT'S IN SIR SHADILAL SUGAR & MILLS LTD. VS. CIT (1987) 168 TTR 705 HAS HELD 'THAT ASSESSEE ADMITTED THAT THESE WERE THE INCOMES OF THE ASSESSEE BUT THAT WAS NOT AN ADMISSION THAT THERE WAS DELIBERATE CONCEALMENT. FROM AGREEING TO ADDITIONS, IT DOES NOT FOLLOW THAT THE AMOUNT AGREED TO BE ADDED WAS CONCEALED INCOME. THERE MAY BE A HUNDRED AND :-4-: ONE REASONS FOR SUCH ADMISSION I.E. WHEN THE ASSESSEE REALIZES THE TRUE POSITION, IT DOES NOT DISPUTE CERTAIN DISALLOWANCES BUT THAT DOES NOT ABSOLVE THE REVENUE FROM PROVING THE MENS-REA OF A QUASI-CRIMINAL OFFENCE...' (P.713). CLAUSE (C) OF SUB- SECTION (1) OF SECTION 271 CATEGORICALLY STATES THAT THE PENALTY WOULD BE LEVIABLE IF THE ASSESSEE CONCEALS THE PARTICULARS OF HIS INCOME OR FURNISHES INACCURATE PARTICULARS THEREOF. IN THE PRESENT CASE, ASSESSEE HIMSELF DISCLOSED THE INCOME IN RESPONSE TO RETURN U/S 148 OF THE I. T. ACT TO BUY PEACE OF MIND AND TO AVOID LITIGATION. FURTHER, IN GEM GRANITES (KARNATKA) VS. DY. CIT (2009) 27(11) ITCL 388 (CHEN 'A' TRIB.), HAS HELD THAT THOUGH SUPREME COURT HELD THAT PENALTY PROVISION IS CIVIL LIABILITY AND WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT, HOWEVER, ONUS TO PROVE THAT THERE WAS A CONCEALMENT OF INCOME WITH A VIEW TO AVOID TAX, IS ON DEPARTMENT. THEREFORE, FOR ATTRACTING PENALTY PROVISION, A STRICT PROOF IS REQUIRED AND ONUS TO PROVE THE SAME IS ON DEPARTMENT. SINCE DEPARTMENT HAD FAILED TO ESTABLISH SAME AND DISCHARGE ITS ONUS, ULTIMATELY, PENALTY IMPOSED BY THE DEPARTMENT WAS NOT WARRANTED AND JUSTIFIED AND DELETED THE PENALTY. 2.1 THE ASSESSING OFFICER DID NOT ACCEPT THE REPLY OF THE ASSESSEE OBSERVING THAT THE DECISIONS RELIED UPON BY THE ASSESSEE WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE ASSESSING OFFICER ALSO OBSERVED THAT IN THIS CASE ORIGINAL RETURN OF INCOME SHOWING INCOME OF ` 68,960 WAS FILED ON 11.12.2005 AND FURTHER HE WAS HAVING OPPORTUNITY TO SURRENDER/DISCLOSE ANY INCOME IN ITS REVISED RETURN UPTO 31.03.2007 BUT NO REVISED RETURN WAS FILED. :-5-: FURTHER, WHEN THE NOTICE UNDER SECTION 148 WAS ISSUED ON 15.09.2008 AND TIME OF 31 DAYS WAS GIVEN FOR FILING RETURN OF INCOME, NO RETURN WAS FILED/ REVISED. SUBSEQUENTLY, THE ASSESSEE HAS FILED HIS REVISED RETURN OF INCOME ON 18.02.2009 MORE THAN 3 YEARS WAS LAPSED AFTER FILING THE ORIGINAL RETURN AND SURVEY OPERATION. THE ASSESSING OFFICER TOOK A VIEW THAT THE ASSESSEE HAD NOT VOLUNTARILY FILED ANY REVISED RETURN. ACCORDING TO HIM, ONLY WHEN NOTICE U/S 148 WAS ISSUED, THE ASSESSEE FILED A REVISED RETURN THAT TOO AFTER 6 MONTHS FROM THE DATE OF ISSUE OF NOTICE U/S 148 OF THE ACT. THEREFORE, THE CONTENTION THAT SURRENDER WAS VOLUNTARY AND TO BUY PEACE OF MIND & AVOID LITIGATION WAS NOT ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO STATED THAT THE ASSESSEE DID NOT FILE APPEAL BEFORE THE APPELLATE AUTHORITIES ACCEPTING THE ADDITIONS AS MADE IN THE ASSESSMENT ORDER BECAUSE HE WAS WELL AWARE OF THE FACT THAT HE HAS NO REASONABLE CAUSE AGAINST THE ADDITIONS MADE BY THE ASSESSING OFFICER AND IN APPEAL HE WOULD LOOSE THE CASE. THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED PARTICULARS OF INCOME TO THE EXTENT OF ` 11,61,944 AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME, THEREFORE, THE ASSESSEE IS LIABLE FOR PENALTY AS PROVIDED IN SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY, THE ASSESSING OFFICER IMPOSED A PENALTY OF ` 4.30 LAKHS UNDER SECTION 271(1)(C) OF THE ACT. 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE PENALTY IN RESPECT OF ADDITION OF ` 86,882 AND CANCELLED THE PENALTY OF ` 3,98,209 IN RESPECT OF THE AMOUNT OF ` 10,75,062 OBSERVING AS UNDER:- CONSIDERING THE FACT OF THE CASE, LEGAL PROVISIONS AND VARIOUS DECISIONS IN THIS CONNECTION, I HOLD THAT THE AO WAS NOT JUSTIFIED TO LEVY THE PENALTY U/S 271(1)(C) ON THE SELF SURRENDERED :-6-: AMOUNT OF RS.10,75,062/-. ON PERUSAL OF THE CASE RECORDS FOR BOTH THE YEARS, I.E. A.Y. 05-06 AND 06-07, IT IS NOWHERE SEEN THAT THE AO HAD EVEN THE MADE THE LIGHTEST OF ATTEMPTS TO MAKE ENQUIRIES IN RESPECT OF THESE CREDITORS TO PROVE THAT THE APPELLANT HAD INDEED CONCEALED INCOME OR HAD FURNISHED INACCURATE PARTICULARS. IT IS A FACT, EVIDENT FROM THE RECORDS THAT IT WAS THE ASSESSEE, WHO HAD OFFERED THE IMPUGNED CREDITORS FOR TAXATION PURPOSES IN THE REVISED RETURN FILED. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF SURESH CHANDRA MITTAL (SUPRA) IS CLEARLY APPLICABLE TO THE FATS OF THE CASE. HOWEVER, AS REGARDS, THE ADDITION OF RS.86,882/- MADE BY THE AO, I FIND THAT THE AO HAD MADE EXTENSIVE ENQUIRIES IN EACH AND EVERY SUCH CASE, AND THE APPELLANT WAS UNABLE TO PROVIDE ANY BONAFIDE EXPLANATION WITH RESPECT TO THOSE TRANSACTIONS. THUS, PENALTY IN RESPECT OF ADDITION OF RS.86,882/- IS HEREBY CONFIRMED. 4. NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE LD. CIT(A) IN CANCELLING THE PENALTY OF ` 3,98,209. 5. BEFORE US, SHRI. P. K. BAJAJ, LD. D.R. VEHEMENTLY ARGUED THAT THE ORDER OF THE LD. CIT(A) IN CANCELLING THE IMPUGNED PENALTY IS NOT SUSTAINABLE IN LAW. ACCORDING TO HIM, IN THIS CASE, ORIGINAL RETURN OF INCOME SHOWING INCOME OF ` 68,960 WAS FILED ON 11.12.2005 AND FURTHER THE ASSESSEE WAS HAVING OPPORTUNITY TO SURRENDER/DISCLOSE ANY INCOME IN ITS REVISED RETURN UPTO 31.03.2007, BUT NO REVISED RETURN WAS FILED. WHEN THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 ON 15.09.2008 AND TIME OF 31 DAYS WAS GIVEN FOR FILING RETURN OF INCOME, NO RETURN WAS FILED/ REVISED. SUBSEQUENTLY, THE ASSESSEE HAS FILED HIS REVISED RETURN OF INCOME ON 18.02.2009 MORE THAN 3 YEARS WAS LAPSED :-7-: AFTER FILING THE ORIGINAL RETURN AND SURVEY OPERATION. SHRI. P. K. BAJAJ, LD. D.R. ARGUED THAT THE ASSESSEE HAS NOT VOLUNTARILY FILED ANY REVISED RETURN. ONLY WHEN NOTICE U/S 148 OF THE ACT WAS ISSUED, THE ASSESSEE FILED A REVISED RETURN THAT TOO AFTER 6 MONTHS FROM THE DATE OF ISSUE OF NOTICE U/S 148 OF THE ACT. THEREFORE, THE CONTENTION THAT SURRENDER WAS VOLUNTARY AND TO BUY PEACE OF MIND & AVOID LITIGATION IS NOT ACCEPTABLE. SHRI. P. K. BAJAJ, LD. D.R. SUBMITTED THAT THE ASSESSEE HAS SURRENDERED A SUM OF ` 10,75,062 ON ACCOUNT OF CREDITORS/DEPOSITS IN THE REVISED RETURN. ACCORDING TO THE LD. D.R., IT IS CLEAR THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS/CONCEALED PARTICULARS OF INCOME IN RESPECT OF A SUM OF ` 10,75,062. SINCE THE ASSESSEE HAS FAILED TO EXPLAIN CASH CREDITS/DEPOSITS AND THE ASSESSEE HAS NO REASONABLE CAUSE REGARDING CASH CREDITS/DEPOSITS, THEREFORE, HE IS LIABLE FOR PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THEREFORE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CANCELLING THE PENALTY WITHOUT ASSIGNING ANY COGENT REASON. HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE LD. CIT(A) MAY BE REVERSED AND RESTORE THAT OF THE ASSESSING OFFICER. RELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISIONS. 5.1 CIT VS. RAKESH SURI, [2010] 233 CTR (ALLD.) 184 WHEREIN IT HAS BEEN HELD THAT THE ASSESSEE HAD DELIBERATELY CONCEALED THE INCOME AND DISCLOSURE BEING NOT VALUNTARY AND BONA FIDE, THE TRIBUNAL WAS NOT JUSTIFIED IN CANCELLING THE PENALTY. 5.2 P. C. JOSEPH & BROTHERS VS. CIT [2000] 243 ITR 818 (KERALA), WHEREIN IT HAS BEEN HELD THAT RETURN IN RESPONSE TO A NOTICE UNDER SECTION 148 WAS NOT TO BE TREATED AT PAR WITH OR COMPARED TO A REVISED RETURN. THAT BEING THE POSITION, THE FILING OF RETURN INCLUDING THE AGREED, CONCEALED INCOME DID NOT CONSTITUTE A MITIGATING CIRCUMSTANCE AND PENALTY HAD BEEN RIGHTLY LEVIED. :-8-: 5.3 CALICUT TRADING CO. VS. CIT, [1989] 178 ITR 430 (KERALA) WHEREIN DISMISSING REFERENCE APPLICATION IT HAS BEEN HELD THAT THE EXPLANATION OF THE ASSESSEE HAD NOT BEEN ACCEPTED BY ANY OF THE AUTHORITIES AND CONCEALMENT OF INCOME, AS A MATTER OF FACT, WAS FOUND BY ALL THE THREE AUTHORITIES. THEREFORE, THE RETURN FILED SO AS TO INCLUDE THE CONCEALED INCOME COULD NOT BE CHARACTERIZED AS A REVISED RETURN WITHIN THE MEANING OF SECTION 139(5) OF THE ACT. THE TRIBUNAL HAD FOUND THAT THE PENALTY PROCEEDINGS HAD BEEN COMMENCED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE EXPLANATION 2 TO SECTION 271(1)(C) APPLIED. THE TRIBUNAL WAS JUSTIFIED IN CONFIRMING THE ORDER OF PENALTY. NO QUESTION OF LAW AROSE FROM ITS ORDER. 5.4 RAVI & CO. VS. ACIT, [2004] 271 ITR 286 (MADRAS), WHEREIN IT HAS BEEN HELD THAT THE TRIBUNAL FOUND THAT THE REVISED RETURNS HAD NOT BEEN FILED VOLUNTARILY IN A BONA FIDE MANNER, BUT WITH A VIEW TO ESCAPE FROM THE CONSEQUENCES OF NOT FILING A PROPER RETURN. IN THE REPLY TO THE NOTICE UNDER SECTION 271(1)(C) OF THE ACT, THE ASSESSEE DID NOT OFFER ANY CREDIBLE EXPLANATION INDICATING THE REASONS FOR WHICH THE AMOUNT HAD NOT BEEN DISCLOSED IN THE ORIGINAL RETURN. THE TRIBUNAL WAS RIGHT IN UPHOLDING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 6. ON THE OTHER HAND, SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE ORDER SHEET ENTRY DATED 15.9.2008 WHEREIN THE REASONS FOR REOPENING OF THE ASSESSMENT WAS RECORDED. THE REASONS RECORDED BY THE ASSESSING OFFICER ON 15.9.2008 READ AS UNDER:- 15.9.2008 - SURVEY OPERATION U/S 133A OF I.T. ACT 1961 WAS CONDUCTED ON 15.12.2005 BY ADIT (INV)-I, KANPUR AND CERTAIN BOOKS OF ACCOUNTS AND LOOSE PAPER WERE IMPOUND. ON EXAMINATION OF SAID MATERIAL AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) FOR A. Y. 2006-07, :-9-: WHICH WAS THE SURVEY YEAR, IT IS FOUND THAT CERTAIN CREDIT BALANCES WERE THERE. SINCE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS OF THE CASE FOR A.Y. 2006-07 COULD NOT EXPLAIN SATISFACTORILY THE OPENING BALANCE, I HAVE THEREFORE REASONS TO BELIEVE THAT INCOME PERTAINING TO A.Y. 2005-06 HAS ESCAPED ASSESSMENT. ISSUE NOTICE AS 148. 6.1 SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE REASONS RECORDED FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT IS BASED ON THE PREMISES OF SUSPICION ONLY. ON ANALYSIS OF THE REASONS RECORDED, IT WOULD BE FOUND THAT THE RECORD/FILE OF ASSESSMENT YEAR 2005-06 HAVE NOT BEEN EXAMINED OR LOOKED INTO. ON MERE SUSPICION THAT THE OPENING BALANCE FOR ASSESSMENT YEAR 2006-07 OF THE CREDITORS COULD NOT BE PROPERLY EXPLAINED BY THE ASSESSEE, A PRESUMPTION HAS BEEN DRAWN THAT THE INCOME FOR ASSESSMENT YEAR 2005- 06 HAS ESCAPED ASSESSMENT. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE THERE IS NO ALLEGATION THAT THE OPENING BALANCES OF THE CREDITORS FOR ASSESSMENT YEAR 2006-07 DO NOT TALLY WITH THE CLOSING BALANCES OF THE CREDITORS FOR ASSESSMENT YEAR 2005-06. FURTHER, THERE IS NO MENTION THAT WHICH PARTICULAR CREDIT BALANCE IS NOT EXPLAINABLE SATISFACTORILY. THERE IS NO MENTION OF ANY AMOUNT OR NAME OF THE PARTY IN THE REASON RECORDED. WHAT TO SAY, THERE IS NO WHISPER IN THE ENTIRE REASONS RECORDED AS TO WHETHER RETURN FOR ASSESSMENT YEAR 2005-06 HAVE EVER SEEN BY THE ASSESSING OFFICER BEFORE OR AT THE TIME OF RECORDING THE REASONS. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE REASON RECORDED ARE VAGUE AND ARE BASED ON CONJECTURES AND SURMISES. HE FURTHER POINTED OUT THAT THE REASONS :-10-: SUFFER AND ARE DEVOID OF HONEST BELIEF. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE REASONS HAVE BEEN RECORDED WITHOUT LOOKING INTO THE FILE OR FACTS OF THE CASE. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE SO CALLED REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT SPEAK OF NON-APPLICATION OF MIND. THE ASSESSING OFFICER HAS NOT DEMONSTRATED AS TO HOW THE OPENING BALANCES ARE NOT EXPLAINABLE, WHETHER WITH REFERENCE TO NAME OR AMOUNT. THERE IS NO ATTEMPT ON THE PART OF THE AO TO DEMONSTRATE THAT THE CLOSING BALANCE OF THE A.Y. 2005-06 IS NOT CORRECT. IT MAY BE THAT THE FRESH CREDITS FOR A.Y. 2006-07 MAY HAVE BEEN THEMSELVES SHOWN AS OPENING BALANCES INSTEAD OF FRESH DEPOSITS. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE ALSO POINTED OUT THAT THE ASSESSING OFFICER IN THE REASONS HAS MENTIONED THAT IT WAS DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2006-07 THAT IT CAME TO THE SUSPECT THE GENUINENESS OF THE OPENING CREDIT BALANCES. AS PER SECTION 142(1) PROVISO (B) THE ASSESSING OFFICER COULD HAVE CALLED FOR PRODUCTION OF ANY ACCOUNTS RELATING TO A PERIOD UPTO THREE YEARS PRIOR TO THE YEAR UNDER ASSESSMENT. THE ASSESSING OFFICER DID NOT CALL FOR THE ACCOUNTS AND AS SUCH FAILED TO APPLY HIS MIND TO THE FACTS OF THE CASE. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE ABOVE, INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT WAS ILLEGAL AND BAD IN LAW. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF JAI DAYAL PYARE LAL VS. CIT, 1972 UPTC 596 (ALLD) AND SUBMITTED THAT IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE QUESTION OF VALIDITY OF ASSESSMENT IN THE APPEAL AGAINST LEVY OF PENALTY. HE ALSO RELIED ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF TIDEWATER MARTINE INTERNATIONAL INC. VS. DCIT, [2005] 96 ITD 406 (DEL.), WHEREIN THE TRIBUNAL RELYING ON THE DECISION OF THE HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF JAI DAYAL :-11-: PYARE LAL VS. CIT (SUPRA) HELD THAT IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE QUESTION OF VALIDITY OF ASSESSMENT IN THE APPEAL AGAINST LEVY OF PENALTY. SINCE QUESTION OF VALIDITY OF ASSESSMENT MADE IN THE MATTER WAS RAISED, WHICH WAS A PURE QUESTION OF LAW AND NOT INVOLVING ANY INVESTIGATION INTO THE FACTS AS THE SAME WERE ON RECORD, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE WAS ADMITTED FOR DECISION. SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ITAT DELHI BENCH IN THE CASE OF TIDEWATER MARTINE INTERNATIONAL INC. VS. DCIT (SUPRA) ALSO RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF DEEP CHAND KOTHARI VS. CIT [1988] 171 ITR 381 (RAJ.) WHEREIN IT HAS BEEN HELD THAT AN ORDER PASSED BY AN AUTHORITY WITHOUT JURISDICTION IS A NULLITY AND ITS INVALIDITY CAN BE CHALLENGED WHENEVER AND WHEREVER IT IS SOUGHT TO BE ENFORCED OR RELIED UPON. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE IN THE INSTANT CASE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT HAS EMANATED FROM THE ASSESSMENT PROCEEDINGS AND THEREFORE VALIDITY OF ASSESSMENT IF NOT ALREADY CHALLENGED CAN BE CHALLENGED IN THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. HE, THEREFORE, SUBMITTED THAT SINCE REASSESSMENT ORDER ITSELF WAS NOT VALID AND THEREFORE ON THE BASIS OF INVALID ASSESSMENT, NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE LEVIED. ACCORDING TO HIM, ON THIS SCORE ALONE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE VALIDLY LEVIED. 6.2 SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION TO PARA 13 OF THE PENALTY ORDER WHICH READS AS UNDER:- 13. IN VIEW OF THE ABOVE FACTS, I HOLD THAT ASSESSEE HAS CONSCIOUSLY CONCEALED PARTICULARS OF INCOME TO THE EXTENT OF ` 11,61,944 AND FURNISHED INACCURATE PARTICULARS OF ITS INCOME, :-12-: THEREFORE, ASSESSEE IS LIABLE FOR PENALTY AS PROVIDED IN SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961. 6.3 SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE ALSO INVITED OUR ATTENTION TO PARA 2 OF THE ASSESSMENT ORDER WHICH READS AS UNDER:- 2. IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 THE ASSESSEE HAS FILED REVISED RETURN OF INCOME OF ` 11,44,020 SURRENDERING THEREIN A SUM OF ` 10,75,062 ON ACCOUNT OF CREDITORS/DEPOSITORS. THE ASSESSEE HAS SURRENDERED ` 10,75,062 DUE TO SURVEY OPERATION AND HAS FILED REVISED RETURN AFTER THE SERVICE OF NOTICE UNDER SECTION 148 OF THE ACT. SINCE THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND DELIBERATELY CONCEALED THE FACTS IN THE ORIGINAL RETURN OF INCOME, THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ARE INITIATED. 6.4 SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN A CRIMINAL CASE OR A QUASI CRIMINAL CASE, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR CUT FINDING WAS REACHED BY THE ASSESSING OFFICER AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE ASSESSING OFFICER WAS LIABLE TO BE STRUCK DOWN. RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS:- 1. CIT VS. MANU ENGG. WORKS [1980] 122 ITR 306 (GUJ.) 2. NEW SORATHIA ENGINEERING CO. VS. CIT [2006] 282 ITR 642 (GUJ.) 3. PADMA RAM BHARALI VS. CIT [1977] 110 ITR 54 (GAUHATI) :-13-: 7. IN REJOINDER, SHRI. P. K. BAJAJ, LD. D.R. HEAVILY RELIED ON THE DECISION OF HON'BLE JAMMU & KASHMIR HIGH COURT IN THE CASE OF CIT VS. HOTEL HIGHLAND PARK [2000] 246 ITR 130 (J&K), WHEREIN IT HAS BEEN HELD THAT APPELLATE AUTHORITY CANNOT ENTERTAIN ANY CHALLENGE TO THE VALIDITY OF THE ASSESSMENT ORDER IN AN APPEAL AGAINST THE ORDER OF PENALTY. HE, THEREFORE, SUBMITTED THAT IN VIEW OF THE ABOVE DECISION, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE REGARDING VALIDITY OF REOPENING UNDER SECTION 147 OF THE ACT IN THE PRESENT APPEAL MAY NOT BE ENTERTAINED. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD AND HAVE ALSO CONSIDERED THE DECISIONS RELIED UPON BY THE PARTIES. AT THE VERY OUTSET, WE MAY OBSERVE THAT NONE OF THE CASE LAW REFERRED TO IN PARAS 5.1 TO 5.4 (SUPRA), RELIED UPON BY THE LD. D.R. ARE APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN FACT THESE CASES ARE RELATED TO DISCLOSURE BEING NOT VOLUNTARY AND BONA FIDE. IN SUCH CASES, PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT WERE HELD TO BE JUSTIFIED. IN THE INSTANT CASE, THE PLEA TAKEN BY THE LD. COUNSEL FOR THE ASSESSEE ARE TWO FOLD. FIRSTLY, HIS CONTENTION IS THAT IN PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, IT IS OPEN TO THE ASSESSEE TO RAISE QUESTION OF VALIDITY OF ASSESSMENT. SECONDLY, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN A PENALTY ORDER IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO ARGUMENT WAS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE AS TO WHETHER DISCLOSURE WAS VOLUNTARY AND BONA FIDE AND THE SURRENDER WAS MADE BEFORE ANY DETECTION OF CONCEALMENT BY THE REVENUE. :-14-: 8.1 NOW THE QUESTION BEFORE US IS THAT AS TO WHETHER THE ASSESSEE CAN RAISE QUESTION OF VALIDITY OF ASSESSMENT IN APPEAL AGAINST LEVY OF PENALTY. THE LD. D.R. RELIED ON THE DECISION OF HON'BLE JAMMU & KASHMIR HIGH COURT IN THE CASE OF CIT VS. HOTEL HIGHLAND PARK [2000] 246 ITR 130 (J&K) WHEREIN THE HON'BLE COURT HAS HELD (HEAD NOTE) AS UNDER:- PENALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. AN APPEAL IS PROVIDED IN SECTION 246 OF THE ACT BOTH AGAINST THE ORDER OF ASSESSMENT AND THE ORDER OF PENALTY. ANY PERSON OBJECTING TO ANY PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271 MAY APPEAL TO THE APPELLATE ASSISTANT COMMISSIONER UNDER CLAUSE (O) OF SECTION 246(1) (AS IT STOOD AT THE MATERIAL TIME). THERE IS A SEPARATE PROVISION IN CLAUSE (E) OF SECTION 246(1) FOR APPEAL AGAINST AN ORDER OF ASSESSMENT UNDER SECTIONS 143(3) AND 147. APPEAL AGAINST AN ORDER OF REASSESSMENT OR RECOMPUTATION UNDER SECTION 147 OR 150 IS PROVIDED IN CLAUSE (E) OF SECTION, 246(1). IF AN ORDER OF ASSESSMENT OR REASSESSMENT IS NOT CHALLENGED, IT BECOMES FINAL AND CANNOT BE CHALLENGED IN AN APPEAL AGAINST AN ORDER OF PENALTY. THE CHALLENGE IN SUCH APPEAL IS CONFINED TO THE IMPOSITION OF PENALTY. THE SCOPE AND AMBIT OF THE APPEAL IS RESTRICTED, TO THE ORDER OF PENALTY. THE VALIDITY OF AN ASSESSMENT ORDER WHICH HAS ATTAINED FINALITY, CANNOT BE CHALLENGED IN SUCH AN APPEAL. THE APPELLATE AUTHORITY CANNOT ENTERTAIN ANY CHALLENGE TO THE VALIDITY OF THE ASSESSMENT ORDER IN AN APPEAL AGAINST THE ORDER OF PENALTY. :-15-: 8.2 IN THE ABOVE JUDGMENT HON'BLE JAMMU & KASHMIR HIGH COURT HAS CATEGORICALLY HELD THAT VALIDITY OF ASSESSMENT ORDER CANNOT BE CHALLENGED IN APPEAL AGAINST ORDER OF PENALTY. HOWEVER, THERE IS A DIRECT DECISION ON THE POINT BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF JAI DAYAL PYARE LAL VS. CIT (SUPRA) WHEREIN THE JURISDICTIONAL HIGH COURT HELD, WITH REFERENCE TO A NEW PLEA TAKEN IN THE PENALTY PROCEEDINGS WHICH WAS NOT TAKEN IN THE REGULAR ASSESSMENT PROCEEDINGS, AS UNDER:- IT IS THUS CLEAR THAT REGULAR ASSESSMENT ORDER IS NOT A FINAL WORD UPON THE PLEA TAKEN THEREIN OR WHICH MIGHT HAVE BEEN TAKEN AT THIS STAGE. THE ASSESSEE IS ENTITLED TO SHOW CAUSE IN PENALTY PROCEEDINGS AND TO ESTABLISH THE ABOVE MATERIAL AND RELEVANT FACTS WHICH MAY GO TO EFFECT HIS LIABILITY OR THE QUANTUM OF PENALTY. HE CANNOT BE HELD TO BE DEBARRED FROM TAKING APPROPRIATE PLEA SIMPLY ON THE GROUND THAT SUCH A PLEA WAS NOT TAKEN IN THE REGULAR ASSESSMENT PROCEEDINGS. 8.3 IN THE CASE OF DEEP CHAND KOTHARI VS. CIT [1988] 171 ITR 381 (RAJ.), THE HON'BLE RAJASTHAN HIGH COURT HELD THAT AN ORDER PASSED BY AN AUTHORITY WITHOUT JURISDICTION IS A NULLITY, AND THAT ITS INVALIDITY COULD BE SET UP WHENEVER AND WHEREVER IT IS SOUGHT TO BE ENFORCED OR RELIED UPON. 8.4 THERE IS A DIRECT DECISION ON THE POINT RENDERED BY THE ITAT DELHI BENCH IN THE CASE OF TIDEWATER MARTINE INTERNATIONAL INC. VS. DCIT (SUPRA). THE TRIBUNAL RELYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT [1998] 229 ITR 383 (SC), HELD THAT IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT, WE ARE OF THE VIEW THAT IT IS OPEN TO THE ASSESSEE TO SET UP/RAISE THE QUESTION OF VALIDITY OF ASSESSMENT IN THE APPEAL AGAINST THE LEVY OF :-16-: PENALTY. SINCE THE QUESTION OF VALIDITY OF ASSESSMENT MADE IN THE MATTER IS RAISED, WHICH IS A PURE QUESTION OF LAW AND NOT INVOLVING ANY INVESTIGATION INTO THE FACTS AS THE SAME ARE ON RECORD, WE ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR DECISIONS. 8.5 IT IS RELEVANT TO STATE THAT SINCE THERE IS A DIRECT DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAI DAYAL PYARE LAL VS. CIT (SUPRA) ON THE ISSUE IN HAND AND THEREFORE WE ARE BOUND TO FOLLOW THE SAME AND THEREFORE IN PREFERENCE TO THE DECISION OF HON'BLE JAMMU & KASHMIR HIGH COURT RELIED UPON BY THE LD. D.R., WE PREFER TO FOLLOW THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF JAI DAYAL PYARE LAL VS. CIT (SUPRA). FURTHER MORE, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (SUPRA) CAN ALSO BE RELIED UPON. IN THE SAID CASE, THE HON'BLE SUPREME COURT HAS OBSERVED THAT UNDOUBTEDLY, THE TRIBUNAL HAS THE DISCRETION TO ALLOW OR NOT TO ALLOW A NEW GROUND TO BE RAISED. BUT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER THE QUESTION OF LAW ARISING FROM FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS, THERE IS NO REASON WHY SUCH A QUESTION SHOULD NOT BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTION IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. IN THE INSTANT CASE, THE VALIDITY OF REOPENING OF ASSESSMENT CHALLENGED BY THE ASSESSEE IS A PURE QUESTION OF LAW AND NOT INVOLVING INVESTIGATION INTO THE FACTS AS THE SAME ARE ON RECORD AND THEREFORE THE SAME SHOULD BE CONSIDERED WHILE DECIDING THE PENALTY APPEAL. 8.6 WE HAVE ALREADY DISCUSSED HEREINABOVE THAT THE DECISION OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF DEEP CHAND KOTHARI VS. CIT (SUPRA) IS ALSO IN FAVOUR OF THE ASSESSEE AND THEREFORE WE ARE OF THE VIEW THAT THE VALIDITY OF ASSESSMENT PROCEEDINGS CAN BE LOOKED INTO :-17-: DURING THE PENALTY PROCEEDINGS EVEN THOUGH THE ASSESSMENT ITSELF HAS NOT BEEN CHALLENGED BY THE ASSESSEE. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS SUBMISSION OF THE LD. D.R. THAT VALIDITY OF ASSESSMENT ORDER CANNOT BE CHALLENGED IN APPEAL AGAINST THE ORDER OF PENALTY. 8.7 IN VIEW OF THE ABOVE DISCUSSION, NOW WE WILL CONSIDER AS TO WHETHER REOPENING OF ASSESSMENT WAS LEGALLY TENABLE OR NOT. IT IS RELEVANT TO POINT OUT THAT WE HAVE REPRODUCED THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT IN PARA 6 (SUPRA). AT THE VERY OUTSET WE MAY OBSERVE THAT THE REASONS RECORDED ARE BASED ON THE PREMISES OF SUSPICION ONLY. ON ANALYSIS OF THE REASONS, IT WOULD BE FOUND THAT RECORD/FILE OF ASSESSMENT YEAR 2005-06 HAVE NOT BEEN EXAMINED OR LOOKED INTO. ON MERE SUSPICION THAT THE OPENING BALANCE FOR ASSESSMENT YEAR 2006-07 OF THE CREDITORS COULD NOT BE PROPERLY EXPLAINED BY THE ASSESSEE, A PRESUMPTION HAS BEEN DRAWN THAT THE INCOME FOR ASSESSMENT YEAR 2005-06 HAS ESCAPED ASSESSMENT. WE FIND SUBSTANCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE IS NO ALLEGATION THAT THE OPENING BALANCES OF THE CREDITORS FOR ASSESSMENT YEAR 2006-07 DO NOT TALLY WITH THE CLOSING BALANCES OF THE CREDITORS FOR ASSESSMENT YEAR 2005-06. FURTHER MORE, THERE IS NO MENTION THAT WHICH PARTICULAR CREDIT BALANCE IS NOT EXPLAINABLE SATISFACTORILY. THE ASSESSING OFFICER HAS FAILED TO MENTION ANY PARTICULAR AMOUNT OR NAME OF THE PARTY IN THE REASON RECORDED. WHAT TO SAY, THERE IS NO WHISPER IN THE ENTIRE REASONS RECORDED AS TO WHETHER RETURN FOR ASSESSMENT YEAR 2005-06 HAVE EVER SEEN BY THE ASSESSING OFFICER BEFORE OR AT THE TIME OF RECORDING THE REASONS. WE MAY ALSO ADD HERE THAT THERE IS NO ATTEMPT ON THE PART OF THE ASSESSING OFFICER TO DEMONSTRATE THAT THE CLOSING BALANCE OF THE A.Y. 2005-06 IS NOT CORRECT. :-18-: IT MAY BE THAT THE FRESH CREDITS FOR A.Y. 2006-07 MAY HAVE BEEN THEMSELVES SHOWN AS OPENING BALANCES INSTEAD OF FRESH DEPOSITS. THE SO CALLED REASONS RECORDED BY THE ASSESSING OFFICER SPEAK OF NON- APPLICATION OF MIND. IT SEEMS THAT THE REASONS HAVE BEEN RECORDED WITHOUT LOOKING INTO THE FILE OR FACTS OF THE CASE. LOOKING TO THE FACTS, WE ARE OF THE OPINION THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED ON SUSPICION AND FOR MAKING ROVING ENQUIRIES AND SINCE IT IS SETTLED LAW THAT PROCEEDINGS UNDER SECTION 147 OF THE ACT CANNOT BE INITIATED EITHER ON THE BASIS OF MERE SUSPICION OR MAKING FISHING OR ROVING ENQUIRIES, INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT IN THE PRESENT CASE WAS ILLEGAL AND BAD IN LAW. IN THAT VIEW OF THE MATTER, THE VERY BASIS OF IMPOSITION OF PENALTY SINCE CEASED TO EXIST BY VIRTUE OF INVALID ASSESSMENT ORDER, THE PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE ACT IS NOT LEVIABLE. 8.8 AS REGARDS THE SECOND LIMB OF ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE, WE FIND THAT THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT AND LEVIED PENALTY BY RECORDING AS UNDER:- 13. IN VIEW OF THE ABOVE FACTS, I HOLD THAT ASSESSEE HAS CONSCIOUSLY CONCEALED PARTICULARS OF INCOME TO THE EXTENT OF ` 11,61,944 AND FURNISHED INACCURATE PARTICULARS OF ITS INCOME, THEREFORE, ASSESSEE IS LIABLE FOR PENALTY AS PROVIDED IN SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961. 8.9 SHRI. RAKESH GARG, LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF CIT VS. MANU ENGG. WORKS (SUPRA) AND SUBMITTED THAT PENALTY COULD NOT BE SUSTAINED IN THE ABSENCE OF CLEAR CUT FINDING BY THE ASSESSING OFFICER WHILE LEVYING PENALTY, I.E. WHILE PASSING THE ORDER :-19-: OF PENALTY, IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO STATE WHETHER PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE, AND HENCE IMPOSITION OF PENALTY WAS BAD IN LAW. 8.10 IN THE CASE OF CIT VS. MANU ENGG. WORKS (SUPRA), THE HON'BLE GUJARAT HIGH COURT OBSERVED AS UNDER:- WE FIND FROM THE ORDER OF THE INSPECTING ASSISTANT COMMISSIONER, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA. 4 OF THE ORDER: 'I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME'. NOW, THE LANGUAGE OF 'AND/OR' MAY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI-CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE INSPECTING ASSISTANT COMMISSIONER TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDING WAS REACHED BY THE INSPECTING ASSISTANT COMMISSIONER AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE INSPECTING ASSISTANT COMMISSIONER WAS LIABLE TO BE STRUCK DOWN. 8.11 IN THE INSTANT CASE ALSO PENALTY ORDER SHOW THAT THE ASSESSING OFFICER HAS NOT REACHED ON ANY CLEAR CUT FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE :-20-: PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. IT IS SETTLED LAW THAT IF ANY PERSON HAS CONCEALED PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME ARE DIFFERENT THINGS. ONE THING IS CERTAIN THAT THESE TWO CIRCUMSTANCES ARE NOT IDENTICAL IN DETAILS ALTHOUGH THEY MAY LEAD TO THE SAME EFFECT, NAMELY, KEEPING OFF CERTAIN PORTION OF INCOME. FURTHERMORE, FIRST IS DIRECT AND LATER MAY BE INDIRECT, IN ITS EXECUTION. 8.12 IN THE CASE OF PADMA RAM BHARALI VS. CIT (SUPRA), THE TRIBUNAL HELD AS UNDER:- IN VIEW OF OUR FINDINGS ABOVE IT IS EVIDENT THAT THE ASSESSEE HAS CONCEALED INCOME TO THE EXTENT OF RS.28,742 BY FURNISHING INACCURATE PARTICULARS OF INCOME AND SO THE PENALTY HAS TO BE IMPOSED TO THE EXTENT OF RS.28,742. UNDER THE CIRCUMSTANCES WE RESTRICT THE PENALTY TO RS.28,742 ONLY.' 8.13 ON A REFERENCE, THE HON'BLE GAUHATI HIGH COURT HELD AS UNDER:- THUS, IT IS FOUND THAT THE INITIATION OF THE PENALTY PROCEEDING WAS FOR CONCEALMENT OF THE PARTICULARS OF INCOME. BUT THE TRIBUNAL FINALLY HELD THAT THE ASSESSEE WOULD BE DEEMED TO HAVE CONCEALED THE PARTICULARS OF INCOME OR TO HAVE FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT IS THUS FOUND THAT THE BASIS OF THE INITIATION OF PENALTY PROCEEDING IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY HAS BEEN IMPOSED AND THIS MUST HAVE DEPRIVED THE ASSESSEE OF REASONABLE OPPORTUNITY OF SHOWING :-21-: CAUSE AGAINST THE PENALTY PROCEEDING WHICH IS AFTER ALL A QUASI CRIMINAL PROCEEDING. IT ALSO HAS TO BE REMEMBERED THAT CLAUSE (C) OF SUB SECTION (1) OF SECTION 271 DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME . NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES, BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP A PENALTY PROCEEDING FOR ONE OFFENCE AND FINDING GUILTY FOR ANOTHER OFFENCE OR FINDING GUILTY FOR EITHER THE ONE OR THE OTHER OFFENCE, AS HAS BEEN DONE BY THE TRIBUNAL IN THE INSTANT CASE, CANNOT BE SUSTAINED IN LAW . THIS VIEW IS SUPPORTED BY THE DECISION OF THE GUJARAT HIGH COURT IN COMMISSIONER OF INCOME TAX V. LAKHDHIR LALJI [1972] 85 ITR 77 (GUJ). IN THE RESULT WE FIND THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS NOT JUSTIFIED IN LAW IN UPHOLDING THE PENALTY IMPOSED BY THE INSPECTING ASSISTANT COMMISSIONER RELATING TO THE AMOUNT OF RS. 28,742. THE QUESTION OF LAW REFERRED IS ANSWERED IN THE NEGATIVE AND AGAINST THE DEPARTMENT. 8.14 FROM THE ABOVE DECISION, IT IS CLEAR THAT SECTION 271(1)(C) OF THE ACT DEALS WITH TWO SPECIFIC OFFENCES I.E. TO SAY, CONCEALING OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE, THE ACTION OF THE ASSESSING OFFICER CANNOT BE HELD :-22-: JUSTIFIABLE AND TENABLE BECAUSE THERE CANNOT BE TWO OFFENCES I.E. TO SAY, THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME AND/OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME IN RELATION TO A SINGLE ITEM OF ADDITION MADE IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER WAS NOT CLEAR AS TO WHETHER THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THUS, IN VIEW OF THE DECISIONS OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MANU ENGG. WORKS (SUPRA) AND NEW SORATHIA ENGINEERING CO. VS. CIT (SUPRA), WE HOLD THAT IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. NO SUCH CLEAR CUT FINDING WAS REACHED BY THE ASSESSING OFFICER AND, ON THAT GROUND ALONE THE ORDER OF PENALTY PASSED BY THE ASSESSING OFFICER IS LIABLE TO BE STRUCK DOWN. 8.15 VIEWED FROM ANY ANGLE, NO PENALTY CAN BE VALIDLY LEVIED IN THIS CASE. WE, THEREFORE, DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.08.2011. SD/- SD/- [ N. K. SAINI] [H. L. KARWA] ACCOUNTANT MEMBER VICE PRESIDENT DATED:25.8.2011 JJ:2308 :-23-: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR