DCIT, Circle-15(1), V. Roger Enterprises (P) Ltd.,

ITA 569/DEL/2006

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65356 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 22-08-2012
• Assessment Year: 1983-1984
• Appeal Filed On: 15-02-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: AJAY VOHRA ROHIT JAIN S
• Keywords: Income from undisclosed sources; Opportunity of cross examination; Retrospective amendment; Question of law; Initiation of penalty proceedings; Wrong claim; Agreed addition
• Section: 260A

Judgement Text

ITA NOS. 567, 568 & 569/DEL/2006 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NOS. 567, 568 & 569 /DEL/2006 A.Y.RS. 1981-82, 1982-83 & 1983-84 DY. COMMISSIONER OF INCOME TAX, VS. M/S ROGER ENTERPRISES (P) LTD., CIR. 15(1), ROOM NO. 412, CR BUILDING, FLAT NO. L, 1 ST FLOOR, C-3, KAILASH I.P. ESTATE, NEW DELHI COLONY, NEW DELHI (PAN: AAA CR 0234J) (APPELLANTS ) (APPELLANTS ) (APPELLANTS ) (APPELLANTS ) (RESPONDENTS ) (RESPONDENTS ) (RESPONDENTS ) (RESPONDENTS ) ASSESSEE BY : SH. AJAY VOHRA, ROHIT JAIN, ADVOCATES AND ASHWANI SETA, CA, DEEPASHREE RAO, CAS DEPARTMENT BY : DR. B.R.R. KUMAR, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM PER SHAMIM YAHYA : AM THESE THREE APPEALS ARE PREFERRED BY THE REVENUE AGAINST A COMMON ORDER OF LD. COMMISSIONER OF INCOME TAX (A)-XVI II, NEW DELHI DATED 22.11.2005 WHEREBY HE CANCELLED THE PENALTIES OF ` 18,32,996/-, ` 35,00,189/- AND ` 9,16,213/- IMPOSED BY THE ASSESS ING OFFICER U/S. 271(1)(C) FOR A.Y.RS. 1981-82, 1982-83 & 1983-84 RE SPECTIVELY. 2. THE RELEVANT FACTS OF THE CASE GIVING RISE TO T HESE APPEALS ARE AS FOLLOWS. THE ASSESSEE IS A PRIVATE LIMITED COMPANY W HICH FILED ITS RETURN OF INCOME FOR A.Y. 1981-82, 82-83 AND 83-84 ON 30.6.1981, 30.6.1982 AND 10.8.1983 RESPECTIVELY. ON THE BASIS OF THE SAID ITA NOS. 567, 568 & 569/DEL/2006 2 RETURNS, ASSESSMENTS WERE ORIGINALLY COMPLETED BY TH E ASSESSING OFFICER U/S. 143(3). THE ASSESSMENTS SO COMPLETE D, HOWEVER, WERE SUBSEQUENTLY REOPENED FOR ALL THESE THREE YEARS ON THE BASIS OF INFORMATION RECEIVED BY HIM THAT THE COMMISSION CLAIM ED TO HAVE BEEN PAID BY THE ASSESSEE COMPANY TO THREE COMPANIES, VIZ. , M/S EXCAVATORS INDIA PVT. LTD., M/S TRIVENI INTERNATIONA L PRODUCTS PVT. LTD. AND M/S BAHARI & COMPANY PVT. LTD. IN THE SAID YEARS W AS BOGUS AND THE AMOUNTS PAID TO THE SAID COMPANIES BY CHEQUES TO WARDS COMMISSION HAD BEEN ACTUALLY RECEIVED BACK BY THE AS SESSEE COMPANY IN CASH. 3. THE STATEMENT OF MR. M.K. MEATTLE, MANAGING DIR ECTOR OF THE ABOVE THREE COMPANIES WAS RECORDED U/S. 131 ON 8.3 .1990 AND IN HIS STATEMENT MR. M.K. MEATTLE INFORMED THE ASSESSING OFF ICER THAT COMMISSION PAID TO M/S ROGER ENTERPRISES PVT. LTD. BY THE THREE COMPANIES WERE HAVALA ENTRIES. MR. M.K. MEATTLE INFO RMED THAT THE MODUS OPERANDI WAS THAT MR. JHUNJHUNWALA USED TO FIL L UP THE PAYING SLIP FOR DEPOSITING THE CHEQUES ISSUED BY M/S ROGER ENTERPRISES PVT. LTD. IN THE NAME OF THESE THREE COMPANIES AND M/S ROG ER ENTERPRISE HAD ACCOUNTS IN THE SAME BRANCH OF THE BANK. 3.1 MR. JHUNJHUNWALA USED TO TAKE BLANK CHEQUES SIGN ED BY SH. M.K. MEATTLE FILL UP THE AMOUNTS IN HIS OWN HANDWRITING AN D WITHDRAW THE CASH AS THE CHEQUES WERE BEARER CHEQUES AND THE CAS H WITHDRAWN WAS RETURNED TO M/S ROGER ENTERPRISES PVT. LTD AND SHR I MEATTLE NEVER GOT 1% COMMISSION PROMISED TO HIM. SH. M.K. MEATTLE ALS O STATED THAT SHRI A.K. JHUNJHUNWALA USED TO TAKE HIS SIGNATURES ON SOME PAPERS WHICH WERE IN THE NATURE OF CORRESPONDENCE MADE IN T HE NAME OF THREE COMPANIES. THE ASSESSING OFFICER FURTHER OBSER VED THAT SH. M.K. ITA NOS. 567, 568 & 569/DEL/2006 3 MEATTLE WAS ASKED TO APPEAR AGAIN ON 13.3.1990 A T 10 AM FOR CROSS EXAMINATION AND A COPY OF STATEMENT OF SH. MEATTLE W AS FORWARDED TO THE COMPANY AND TO APPEAR ON 13.3.90 FOR CROSS EXAMI NING. HOWEVER, THE ASSESSEE COMPANY FILED LETTER REQUESTIN G FOR SIX WEEKS TIME FOR CROSS EXAMINING SHRI MEATTLE. HENCE, TH E ASSESSEE COMPANY DID NOT AVAIL THE OPPORTUNITY TO CROSS EXAMINE HIM W HICH ESTABLISHED CONTENTIONS OF SH. MEATTLE AS GIVEN IN HIS STATEME NT ON OATH. ASSESSING OFFICER FURTHER OBSERVED THAT COPIES OF CORRESPONDENCE PURPORTED TO HAVE BEEN MADE WITH THESE THREE COMPAN IES REGARDING PAYMENT OF COMMISSION TO THESE COMPANIES WERE FILED B UT THERE WAS NO REASONABLE BASIS FOR PAYMENT OF THESE COMMISSIONS. 3.2 THE ADDITIONS MADE TOWARDS PAYMENT OF COMMISSION TO ABOVE THREE COMPANIES WAS CONFIRMED BY LD. COMMISSIONER OF INCOME TAX (A). ASSESSEE FILED AN APPEAL BEFORE THE ITAT ON THE ISSUE OF DISALLOWANCE OF PAYMENT OF COMMISSION TO ABOVE THRE E PARTIES AND THE ITAT VIDE ORDER DATED 24.12.93 THE ASSESSMENT W ERE SET ASIDE WITH THE DIRECTIONS TO AFFORD REASONABLE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS ON WHOSE STATEMENTS THE AD DITIONS WERE MADE. IN THE SET ASIDE PROCEEDINGS THE ADDITIONS W ERE AGAIN CONFIRMED BY THE ASSESSING OFFICER. THE ADDITIONS OF THIS COMMISSION WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX ( A). THE ITAT VIDE COMMON ORDER FOR ASSESSMENT YEARS 1981-82, 82-83 & 83-84 DISMISSED THE APPEAL OF THE ASSESSEE, AFTER ELABORAT ELY DISCUSSING THE SEQUENCE OF THE EVENTS AND FACTS IN THE BODY OF TH E ORDER. SUBSEQUENT TO THE ABOVE ITAT ORDER PENALTY PROCEEDI NGS WERE INITIATED. ITA NOS. 567, 568 & 569/DEL/2006 4 THE AO. OBSERVED THAT THE ISSUE OF CROSS EXAMINING THE TWO WITNESSES OF THE CASE AND THAT NO OPPORTUNI TY WAS PROVIDED FOR CROSS EXAMINING HAS BEEN REJECTED BY ITAT AND THE ASSESSEE HAD ALSO CATEGORICALLY REFUSED TO CROSS EXAMINE SHRI AK. JHUNJHUNWALA ON 27.02.1996 STATING THAT HE WAS STRANGER TO THE TRANSACTION. THE HON'BLE ITAT DISCUSSED THE ENTIRE CONTENTS OF THE STATEMENT OF MR. M.K. MEATLLE AND SHR I AK. JHUNJHUNWALA AND HELD THAT BOTH THE WITNESSES WERE WITNESSES OF TRANSACTION AND WERE WITNESSES OF FACT AND REJECTED THE PLEA OF THE ASSESSEE THAT SHR I JHUNJHUNWALA WAS STRANGER TO THE TRANSACTION. THE HON'BLE ITAT HELD THAT IN THE LIGHT OF PROVISIONS O F SECTION 33 OF THE EVIDENCE ACT, STATEMENT OF SHRI M.K.MEATLLE RECORDED EARLIER IN THE COURSE OF ASSESSMENT PROCEEDINGS STANDS AS THE ASSESSEE DID NOT CROSS EXAMINE HIM DESPITE BEEN PROVIDED AN OPPORTUNITY TO DO SO AND HENCE THE EVIDENCE OF MR. M.K.MEATLLE WAS COMPLETE AND CAN BE READ IN AND THUS THE PROBLEM LIED AT THE HANDS OF THE ASSESSEE WHO H AD NOT AVAILED OF THE OPPORTUNITY GIVEN TO IT AND HAVI NG NOT AVAILED OF THIS OPPORTUNITY WAS UNNECESSARILY TRYING TO BLAME THE REVENUE AND THAT THE ONUS OF THE PROOF THAT COMMISSION PAID WAS GENUINE WAS ON THE ASSESSEE. MERELY BECAUSE PAYMENT WAS MADE BY CHEQUE MAY PERSUADE THE AUTHORITIES TO HOLD THE PAYMENT BE GENUINE BUT IN THIS CASE THE SITUATION IS TOTALLY REVERSE AS PARTIES TO WHOM THE PAYMENT MADE ITA NOS. 567, 568 & 569/DEL/2006 5 BY CHEQUE ALLEGED TO HAVE BEEN MADE HAS HIS OWN STORY TO TELL. THE EVIDENCES PLACED BY THE ASSESSEE DID NOT DEMONSTRATE THE NATURE OF SERVICES RENDERED BY THE THREE COMPANIES AND ACCORDINGLY THE ASSESSEE HAS FAILED TO DEMONSTRATE THE SERVICES RENDERED AND THUS FAILED TO DISCHARGE THE ONUS AND ACCORDINGLY THE IT AT DISMISSED THE APPEAL OF THE ASSESSEE. THE A.O. FURTHER IN THE PENALTY PROCEEDINGS CONCLUD ED THAT THERE IS NO DOUBT THAT THE ASSESSEE COMPANY DELIBERATELY NOT CROSS EXAMINED THE WITNESS DESPITE BEEN PROVIDED OPPORTUNITY TO DO SO ON ONE PRETEXT O R THE OTHER AND THE HON'BLE ITAT CONCLUSIVELY HELD TH AT BY NO STRETCH OF IMAGINATION CAN IT BE SAID THAT THE AUTHORITIES BELOW HAVE NOT GIVEN PROPER OPPORTUNITY TO THE ASSESSEE TO PROVE HIS CASE AND THEREFORE THE ASSESSING OFFICER AFTER EXAMINE ALL THE FACTS AND RECORDS TOOK A SIMILAR VIEW AND DO NOT AGREE WITH T HE ASSESSEE THAT IT WAS NOT PROVIDED AN OPPORTUNITY TO CROSS EXAMINE THE WITNESSES. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE ASSESSEE HAD FILED PAPER BOOKS CONTAINING PAPERS CLAIMED TO BE THE CORRESPONDENCE WITH THREE COMPANIES AS EVIDENCE OF SERVICES RENDERED BY THESE COMPANIES AND GENUINENESS OF THE PAYMENTS. HOWEVER THE ROLE OF THE THREE COMPANIES IN THE WORK DOES NOT GET SUBSTANTIATED AND IN THE CORRESPONDENC E WITH THE PRINCIPALS OF THE CLIENTS THERE IS NO MENT ION ITA NOS. 567, 568 & 569/DEL/2006 6 ABOUT ANY ROLE OF THE THREE COMPANIES WHO HAVE CLAIMED AS SUB AGENT FOR LIAISON WORK AND THE CORRESPONDENCE HAS BEEN PUT IN BETWEEN THE CLIENTS/PRINCIPALS FOR JUSTIFYING THE ROLE OF PAYMEN T OF 75-80% OF THE COMMISSION RECEIVED BY IT. THE COMPANIES HAVE HIGHLY QUALIFIED AND EXPERIENCED PERSONNEL BUT THE CORRESPONDENCE DO NOT SHOW ANY EVIDENCE AND THE ASSESSEE COMPANY EVER TRIED TO FIND OUT ABOUT THE GENUINENESS OF THE CLAIM WHICH PROVES THAT THE CORRESPONDENCE BETWEEN M/S. ROGER ENTERPRISES PVT. LTD. AND ALL THE THREE COMPANIES WER E NOT GENUINE. THUS THE ASSESSING OFFICER CONCLUDED THAT THIS CORROBORATES THE CLAIM OF SHRI MEATTLE THAT HE HAD SIGNED THE PAPERS PURPORTEDLY CLAIMED AS CORRESPONDENCE WITHOUT ACTUALLY UNDERTAKING ANY WOR K FOR THE ASSESSEE AND THEREFORE PAPERS FILED BY THE ASSESSEE CANNOT BE RELIED UPON. THE AO HAS STATED THAT THE ASSESSEE COMPANY HAS GIVEN PARAWISE REPLY CLAIMING THE COMMISSION WAS GENUINE NOT WITHSTANDING THE STATEMENT GIVEN BY SHRI MEATTLE AND SHRI JHUNJHUNWALA WHICH DID NOT SUBSTANTIATE THE SA ME AND HAS NOT AGREED WITH THE CONTENTIONS OF THE ASSESSEE. THE ASSESSING OFFICER CONFIRMED THAT THE ASSESSEE VIDE HIS LETTER DATED 29.12.2003 HAS ASKED FOR ALLO WING OPPORTUNITY TO CROSS EXAMINE BOTH SHRI MEATTLE AND ITA NOS. 567, 568 & 569/DEL/2006 7 SHRI JHUNJHUNWALA AND THE SAME REQUEST WAS REITERATED VIDE LETTER DT. 21.01.2004 BUT SUCH PLEA AT THIS STAGE OF PROCEEDINGS APPEAR TO BE DELIBERATE ATTEMPTS OF THE ASSESSEE TO DELAY THE PROCEEDINGS. THUS THE AO FINALLY CONCLUDED THAT HE IS OF CONSIDE RED VIEW THAT THE ASSESSEE HAS DELIBERATELY MADE A WRONG CLAIM OF EXPENDITURE BY WAY OF BOGUS COMMISSION WITH AN INTENTION OF CONCEALING THE ACTUAL INCOME AND LEVIED PENALTY @120% OF THE TAX SOUGHT TO BE D AND LEVIED THE PENALTIES AS UNDER:- A.Y. CONCEALED INCOME I.TAX SURCHARGE THEREON MIN. PENALTY 100% PENALTY LEVIED AT 120% 1981-82 2186042 1527497 1527497 1832996 1982-83 4377973 2916824 2916824 3500190 1983-84 1145983 763511 763511 916213 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A) ASSE SSEE MADE ELABORATE SUBMISSIONS. CONSIDERING THE ABOVE LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT NOWHERE IN THE ASSESSM ENT ORDER THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C). LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT ASSESSING OFFICER HAS PR IMARILY AND SUBSTANTIALLY RELIED UPON THE FINDING OF THE ITAT AND NO NEW FACTS HAVE BEEN PLACED ON RECORD JUSTIFYING THAT THE ASSES SEE COMPANY HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICU LARS OF INCOME. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT ON GOING THROUGH THE PENALTY ORDER AND REPLIES FURNISHED BY THE COMPANY, IT IS FOUND THAT EXPLANATION OFFERED BY THE COMPANY WAS N OT FOUND TO BE MALAFIDE OR FALSE, BUT THE SAME COULD NOT BE SUBSTANT IATED ON ACCOUNT ITA NOS. 567, 568 & 569/DEL/2006 8 OF LACK OF OPPORTUNITY TO CROSS EXAMINE THE PERSONS WHOSE EX-PARTY STATEMENTS HAVE BEEN USED FOR MAKING THE DISALLOWANC E. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THA T IN THE SET ASIDE PROCEEDINGS MR. MEATTLE COULD NOT BE PRODUCED FOR C ROSS EXAMINATION AND THE ASSESSING OFFICER HIMSELF IN THE ORDER HAS ADMITTED THAT THE ISSUE OF CROSS EXAMINATION OF MR. MEATTLE HAS COME TO DEAD END. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT THE ADDITION HAS BEEN MADE ON THE EXPARTE STATEMENT OF MR. MEATTLE AND MR. A.K. JHUNJHUNWALA RECORDED BY THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS AND / OR OTHER PROCEEDINGS. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT AS THE EXP LANATIONS FURNISHED BY THE ASSESSEE ARE BONAFIDE AND THEREFORE MERELY B ECAUSE DISALLOWANCE HAS BEEN MADE AND CONFIRMED BY ITAT NO PENALTY IS LEVIABLE. LD. COMMISSIONER OF INCOME TAX (A) FURTHER NOTED THAT DURING THE COURSE OF PENALTY PROCEEDINGS ASSESSEE C OMPANY REQUESTED THE ASSESSING OFFICER TO CROSS EXAMINE SH. MEATTLE A ND MR. JHUNJHUNWALA WHOSE STATEMENT WAS RELIED UPON BY THE ASSESSING OFFICER IN DISALLOWING THE COMMISSION PAID BY THE CO MPANY. LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT PENALTY PR OCEEDINGS ARE SEPARATE PROCEEDINGS AND ASSESSING OFFICER SHOULD HAVE ALLOWED CROSS EXAMINATION OF BOTH THE PERSONS WHICH HAVE BEEN DENI ED DUE TO TIME BARING MATTER WHEN THE SET ASIDE ORDER WAS PASSED ON 25.3.1996. LD. COMMISSIONER OF INCOME TAX (A) OPINED THAT IN THE IN TEREST OF JUSTICE SUCH OPPORTUNITY SHOULD HAVE BEEN ALLOWED. THE WHOLE ASSESSMENT / REASSESSMENT IS BASED UPON THE STATEMENT OF TWO PERSO NS MENTIONED ABOVE AND NO OPPORTUNITY WAS ALLOWED IN THE PENALT Y PROCEEDINGS TO CROSS EXAMINE THEM. IT WAS FURTHER OBSERVED THAT TH E STATEMENT OF MR. MEATTLE AND MR. A.K. JHUNJHUNWALA ARE ALTOGETHER CONTRADICTORY AND ITA NOS. 567, 568 & 569/DEL/2006 9 THE ANSWERS TO THE QUESTIONS PUT IN SEPARATELY HAVE BEEN ANSWERED IN A CASUAL WAY WITHOUT CONFIRMING THE ENTIRE FACTS AND THEREFORE SUCH STATEMENT WITHOUT CROSS EXAMINATION HAS NO MEANING IN THE EYES OF LAW. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OB SERVED THAT IN THE SET ASIDE PROCEEDINGS, THE ASSESSING OFFICER COULD NOT PRODUCE MR. MEATTLE FOR CROSS EXAMINATION BY THE ASSESSEE. THE NOTICE SENT TO MR. MEATTLE AND MR. A.K. JHUNJHUNWALA TO APPEAR FOR CROSS EXAMINATION HAS RETURNED UNSERVED. THE EXAMINATION OF MR. JHUNJHU NWALA ON 27.2.1996 DENIED BY THE COMPANY WAS NOT ADEQUATE ENO UGH BECAUSE HE IS NOT CONNECTED WITH THE COMPANIES OF MR. MEATTL E OR THE ASSESSEE COMPANY AND THEREFORE THE ASSESSEE COMPANY IS APPAREN TLY CORRECT IN SAYING THAT WITHOUT CROSS EXAMINATION OF MR. MEATTLE NO PURPOSE WOULD HAVE BEEN SERVED BY SIMPLY CROSS EXAMINING MR. A.K. JHUNJHUNWALA. LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE PENA LTY LEVIED WITHOUT ALLOWING OPPORTUNITY TO THE COMPANY FOR CROS S EXAMINATION OF BOTH THE PERSONS ARE LIABLE TO BE CANCELLED. LD. COMMISSIONER OF INCOME TAX (A) FURTHER RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF SONA ELECTRIC COMPANY VS. C.I.T. 152 ITR 507. THE LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT PENALTY LEVIED ON THE BASIS OF BALD STATEMENT RENDERED BEHIND THE BACK OF THE ASSESSEE AND WITHOUT PROVIDING ANY EFFECTIVE OPPORTUNITY FOR CRO SS EXAMINATION ARE NOT LEGALLY SUSTAINABLE. LD. COMMISSIONER OF INCOM E TAX (A) FURTHER NOTED THAT IT IS TRITE LAW THAT NO ADDITION / ADVER SE INFERENCE AGAINST THE ASSESSEE CAN DRAWN ON THE BASIS OF STATEMENT O F ANY THIRD PARTY UNLESS AN OPPORTUNITY OF CROSS EXAMINATION HAS BEEN GRANTED TO HIM. LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT SUCH A VIEW HAS ALSO BEEN HELD IN THE FOLLOWING CASES:- CBI VS. V.C. SHUKLA : AIR 2000 SC 426. ITA NOS. 567, 568 & 569/DEL/2006 10 KISHAN CHADN CHELLARAM : 125 ITR 713 (SC) ATUL KUMAR JAIN VS. DCIT : 64 TTJ 786 (DEL.) PIONEER PUBLICITY CORPORATION VS. DCIT 67 TTJ 471 T.S. VENKATESAN VS. ASSTT. C.I.T. : 74 ITD 298 (C AL.) 4.1 LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSE RVED THAT HE HAS CONSIDERED THE PAPER BOOK FILED BY THE ASSESSEE WH EREIN THE DETAILED CORRESPONDENCE ENTERED INTO BY THE COMPANY ON DAY TO DAY BASIS HAS BEEN PLACED ON RECORD. LD. COMMISSIONER OF INCOME T AX (A) FURTHER OBSERVED THAT THE PAYMENT OF COMMISSION IS FURTHER S UPPORTED BY THE BANK STATEMENT OF THE COMPANY WHERE THE PAYMENTS HA VE BEEN MADE BY ACCOUNT PAYEE CHEQUES/ DRAFTS AND DULY ADMITT ED OF THE RECIPIENTS AND THE STAMPED RECEIPTS HAS ALSO BEEN FI LED ALONGWITH OTHER NECESSARY DOCUMENTS EVIDENCING PAYMENT OF COM MISSION. THEREFORE, LD. COMMISSIONER OF INCOME TAX (A) HELD THA T EXPLANATIONS OF THE ASSESSEE HAS BEEN BONAFIDE AND THE ADDITION S MADE JUST ON THE STATEMENTS OF THE TWO PERSONS MENTIONED ABOVE DOES NOT AMOUNT TO CONCEALMENT OR FILING OF INACCURATE PARTICULARS OF I NCOME. IN THE BACKGROUND OF THE AFORESAID DISCUSSION, LD. COMMISSI ONER OF INCOME TAX (A) DELETED THE LEVY OF PENALTY FOR THE THRE E YEARS. 5. AGAINST THE ABOVE ORDER THE LD. COMMISSIONER OF IN COME TAX (A), ASSESSEE FILED APPEAL BEFORE THE ITAT. ITAT CONSID ERED THE CASE VIDE ORDER DATED 11.12.2006 AND HELD AS UNDER:- 4. AT THE TIME OF HEARING BEFORE US, NOBODY HAS PU T IN APPEARANCE ON BEHALF OF THE ASSESSEE AND EVEN THE NOTICE OF HEARING SENT BY REGISTERED POST AT THE ADDRESS GIVEN HAS COME BACK ITA NOS. 567, 568 & 569/DEL/2006 11 UNDELIVERED FORM THE POSTAL AUTHORITIES. THESE APPEALS ARE, THEREFORE, BEING DISPOSED OF EX- PARTE QUA THE RESPONDENT ASSESSEE AFTER HEARING THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE. IT IS OBSERVED THAT THERE WAS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDERS ABOUT THE CONCEALMENT OF INCOME BY THE ASSESSEE COMPANY OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME BY IT AS RIGHTLY HELD BY THE LD. COMMISSIONER OF INCOME TAX (A) AND EVEN THE LD. DEPARTMENTAL REPRESENTATIVE HAS NOT BEEN CONTROVERT/ REBUT THIS POSITION CLEARLY EVIDENT FROM THE SAID ASSESSMENT ORDERS. 5. IN THE CASE OF RAM COMMERCIAL ENTERPRISES (SUPRA), IT WAS HELD BY THE HONBLE DELHI HIGH COURT THAT A BARE BREADING OF PROVISIONS OF SECTION 271 AND THE LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF D.M. MANASVI 86 ITR 557 MAKES IT CLEAR THAT THE ASSESSING AUTHORITY HAS TO FORM ITS OWN OPINION ABOUT THE CONCEALMENT OF INCOME BY THE ASSESSEE AND ALSO RECORD ITS SATISFACTION TO THIS EFFECT BEFORE INITIATING THE PENALTY PROCEEDINGS. MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED, IT CANNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT IN THE ABSENCE OF THE SAME BEING SPELT OUT BY THE ORDER OF THE ITA NOS. 567, 568 & 569/DEL/2006 12 ASSESSING AUTHORITY. IN THE CASE OF C.I.T. VS. VIKAS PROMOTERS PVT. LTD. 277 ITR 337, HONBLE DELHI HIGH COURT, WHILE REITERATING THE SIMILAR VIEW, HAS FURTHER HELD THAT THE PROVISIONS OF SECTION 271(1)(C) BEING PENAL IN NATURE MUST BE STRICTLY CONSTRUED AND THE ELEMENT OF SATISFACTION SHOULD BE APPARENT FROM THE ORDER OF THE ASSESSING OFFICER ITSELF. IN BOTH THESE CASES BEFORE THE HONBLE DELHI HIGH COURT, NO SUCH SATISFACTION, HOWEVER, WAS FOUND TO BE RECORDED BY THE ASSESSING OFFICER IN HIS ORDER AND THIS BEING SO, THE ACTION OF THE TRIBUNAL IN CANCELLING THE PENALTY IMPOSED U/S. 271(1)(C) WAS UPHELD BY THEIR LORDSHIPS OBSERVING THAT THE SAME WAS NOT SUSTAINABLE IN LAW IN THE ABSENCE OF VALID INITIATION. TO THE SIMILAR EFFECT ARE THE OTHER DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASES OF C.I.T. VS. SUPER METAL RE-ROLLERS 265 ITR 82, C.I.T. VS. B.R. SHARMA 275 ITR 303 AND C.I.T. VS. AUTO LAMPS LTD. 278 ITR 32. 6. AS ALREADY NOTED, A PERUSAL OF THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER FOR THE YEARS UNDER CONSIDERATION CLEARLY SHOWS THAT NO SATISFACTION AS CONTEMPLATED BY THE HONBLE DELHI HIGH COURT IN THE AFORESAID DECISIONS WAS RECORDED BY THE ASSESSING OFFICER BEFORE INITIATING THE PENALTY PROCEEDINGS U/S. 271(1)(C) AND THIS BEING THE UNDISPUTED POSITION, WE HOLD ITA NOS. 567, 568 & 569/DEL/2006 13 THAT THE IMPOSITION OF PENALTIES BY THE ASSESSING OFFICER WAS NOT SUSTAINABLE IN LAW. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) CANCELLING THE SAID PENALTIES IMPOSED BY THE ASSESSING OFFICER U/S. 271(1)(C) ON THIS PRELIMINARY ISSUE AND DISMISS THESE APPEALS FILED BY THE REVENUE. 6. AGAINST THE ABOVE ORDER THE REVENUE APPEALED BEF ORE THE HONBLE HIGH COURT OF DELHI. IN THE APPEAL FOR AS SESSMENT YEAR 1982- 83 VIDE ORDER DATED 12.9.2008, THE HONBLE HIGH CO URT HAS HELD AS UNDER:- THIS APPEAL PERTAINS TO THE ASSESSMENT YEAR 1982-83 AND ARISES OUT OF THE TRIBUNALS ORDER DATED 11.12.2006. SECTION 271(1B) HAS BEEN INSERTED IN THE INCOME TAX ACT, 1961 BY THE? FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FORM 1 ST APRIL, 1989. THE INSERTED PROVISION READS AS FOLLOWS:- (1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS. UNDER CLAUSE (C) OF SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ITA NOS. 567, 568 & 569/DEL/2006 14 ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C). IN VIEW OF THE AMENDMENT, LEARNED COUNSEL FOR THE PARTIES ARE AGREED THAT THE MATERS NEEDS TO BE RECONSIDERED BY THE TRIBUNAL ON MERITS. UNDER THE CIRCUMSTANCE, WE SET ASIDE THE IMPUGNED ORDER AND REMAND THE MATTER TO THE TRIBUNAL FOR RECONSIDERATION ON MERITS. THE PARTIES WILL APPEAR BEFORE THE TRIBUNAL ON 06.10.2008 FOR DIRECTIONS. THE APPEAL IS DISPOSED OF. 7. FOR THE ASSESSMENT YEAR 1981-82 THE HONBLE HIGH COURT HAS SET ASIDE THE IMPUGNED ORDER OF THE TRIBUNAL AND REMANDED THE MATTER BACK TO THE TRIBUNAL FOR CONSIDERATION ON MERITS, I N VIEW OF THE RETROSPECTIVE AMENDMENT OF SECTION 271(1B) AS INSERT ED BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 1989. 8. FOR THE ASSESSMENT YEAR 1983-84 ALSO THE MATTER WAS REMANDED BACK TO THE TRIBUNAL BY THE DELHI HIGH COURT VIDE OR DER DATED 28.5.2008. IN THIS CASE ALSO HONBLE HIGH COURT HA S NOTED THE INSERTION OF SECTION 271B, THE HONBLE HIGH COURT H AD HELD THAT THE INSERTED PROVISION READS AS FOLLOWS:- (1B) WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS ITA NOS. 567, 568 & 569/DEL/2006 15 UNDER CLAUSE (C) OF SUB-SECTION (1), SUCH AN ORDER OF ASSESSMENT OR REASSESSMENT SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE (C). 9. THE HONBLE HIGH COURT FURTHER HELD THAT IN VIEW OF THE AMENDMENT LD. COUNSEL OF THE PARTIES AGREE THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE TRIBUNAL ON MERITS. ACCORDI NGLY, THE IMPUGNED ORDER OF THE TRIBUNAL WAS REMANDED TO THE TRIBUNAL FOR CONSIDERATION ON MERITS. 10. PURSUANT TO THE AFORESAID REMAND THE APPEALS WER E HEARD BY US. 11. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. DEPARTME NTAL REPRESENTATIVE SUBMITTED THAT LD. COMMISSIONER OF IN COME TAX (A) IS TOTALLY WRONG IN OBSERVING THAT NO OPPORTUNITY HA S BEEN GIVEN TO THE ASSESSEE TO CROSS EXAMINE THE PERSONS WHOSE STATEMENT S HAS BEEN RELIED UPON BY THE REVENUE. LD. DEPARTMENTAL REPRE SENTATIVE SUBMITTED THAT ASSESSING OFFICERS ORDER IS SUFFICI ENT AND COGENT ENOUGH. HE FURTHER SUBMITTED THAT THE QUANTUM APPEAL S HAVE BEEN DISMISSED BY THE TRIBUNAL. HENCE, HE PLEADED THAT PENALTY IN THIS REGARD SHOULD BE SUSTAINED. IN THIS REGARD, LD. DEP ARTMENTAL REPRESENTATIVE RELIED UPON THE FOLLOWING CITATIONS: - ACIT VS. JASUBHAI BUSINESS SERVICES P LTD. - 5 SOT 36 - KAMAL CHAND JAIN VS. ITO - 277 ITR 429 - UNION OF INDIA VS. DHARMENDRA TEXTILE & PROCESSORS - 306 ITR 277 - C.I.T. VS. SOMNATH OIL MILLS - 214 ITR 32 ITA NOS. 567, 568 & 569/DEL/2006 16 - WESTERN AUTOMOBILES (INDIA) VS. C.I.T. - 112 ITR 1048 - C.I.T. VS. PRATHI HARDWARE STORE - 203 ITR 641 - C.I.T. VS. UNITED COMMERCIAL & INDUSTRIAL CO. LTD. - 187 ITR 596 - SUMATI DAYAL VS. C.I.T. - 214 ITR 801 11.1 LD. AUTHORISED REPRESENTATIVE ON THE OTHER HA ND SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (A) HAS PASSED A REASONABLE ORDER. HE SUBMITTED THAT PROPER OPPORTUNITY TO CROS S EXAMINE ALL THE PERSONS ON WHOSE STATEMENTS, ADDITION HAS BEEN MADE IN THIS REGARD HAS NOT BEEN ALLOWED TO THE ASSESSEE. HE FURTHER S UBMITTED THAT THE QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. IT CANNOT BE SAID THAT THE PENALTY IS AUTOMATIC ON CONFIRMATION OF QUANTUM ADDITION. LD. COUNSEL FURTH ER SUBMITTED THAT THE APPEAL HAS BEEN ADMITTED AGAINST THE TRIBUNAL OR DER IN QUANTUM PROCEEDINGS BEFORE THE HIGH COURT. HE SUBMITTED T HAT SINCE THE MATTER IS ADMITTED BY THE HIGH COURT FOR HEARING. IT MEANS THAT THERE IS A DEBATABLE POSITION AND HENCE PENALTY LEVIED IS NOT SUSTAINABLE U/S. 271(1)(C). LD. COUNSEL OF THE ASSESSEE RELIED UPON THE FOLLOWING CATENA OF CASE LAWS IN THIS REGARD:- - C.I.T. VS. RELIANCE PETROPRODUCTS PVT. LTD. : 322 ITR 158 (SC) - C.I.T. VS. THE BASI SUGAR MILLS CO. LTD. : I.T.A. NO. 232/2005 (DELHI HIGH COURT) - DCIT VS. SARAYA INDUSTRIES LTD. : 104 TTJ 23 1 (DEL) (TRIBUNAL) - SH. RAHUL MEHTA (I.T.A. NO. 14/DEL/2010) (DEL.) (TRIBUNAL) - SH. PUNEET SEHGAL : (I.T.A. NO. 2869 TO 2873/DEL/2 008) (DEL. (TRIBUNAL) ITA NOS. 567, 568 & 569/DEL/2006 17 - BHANDARI SPINNING MILLS LTD. VS. I.T.O. (I.T.A. NO . 1109/BANG./2007) (BANGALORE) (TRIBUNAL). - C.I.T. VS. LIQUID INVESTMENTS LTD. : I.T.A. NO. 2 40/2009 (DEL. H.C.) - RAHUL MEHTA IN I.T.A. NO. 523/2011 (DEL. H.C.) - SMT. RAMILA RATILAL SHAH VS. ACIT : 60 TTJ 171 (AH D.) - RUPAM MERCANTILE : 91 ITD 237 (AH.D) (TM) - DCIT VS. HERO HONDA MOTORS LTD. : 2698/DEL/2010 (DE L.) - ACIT VS. SH. VIJAY KUMAR JINDAL : I.T.A. NO. 4237/D EL/2009 (DEL.) - NAYAN BUILDERS & DEVELOPERS P. LTD. VS. I.T.O. : I .T.A. NO. 2379/MUM/2009 (MUM). - C.I.T. VS. ARETIC INVESTMENT (P) LIMITED 190 TAXMAN 157 (DEL. H.C.) - C.I.T. VS. RAHULJEE & CO. : 250 I.T.R. 225 (DEL. H.C.) - NATIONAL TEXTILES VS. C.I.T. : 249 ITR 125 (GUJ.) - C.I.T. VS. KAS MOVI (P) LTD. IN I.T.A. NO. 793 OF 2011 ORDER DATED 18.11.2011 (DEL. H.C.) - KARAN RAGHAV EXPORTS (P) LTD. VS. C.I.T. IN I.T.A. NO. 1152/2011 ORDER DATED 14.3.2012 (DEL. H.C.) - C.I.T. VS. SOCIETEX IN I.T.A. NO. 1190/2011 ORDE R DATED 19.7.2012 (DEL. H.C.) ITA NOS. 567, 568 & 569/DEL/2006 18 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. W E FIND THAT ADDITION IN THIS CASE HAS BEEN PRIMARILY MADE ON THE BASIS OF STATEMENT GIVEN BY MR. MEATTLE AND JHUNJHUNWALA. L D. COMMISSIONER OF INCOME TAX (A) HAS HELD THAT ASSESSING OFFICER HAS PRIMARILY AND SUBSTANTIALLY RELIED UPON THE FINDING OF THE ITAT A ND NO NEW FACTS HAVE BEEN PLACED ON RECORD JUSTIFYING THAT THE ASSESSEE COMPANY HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICU LARS OF INCOME. WE AGREE WITH THE LD. COUNSEL OF THE ASSESSEE THAT EXPLANATION OFFERED BY THE COMPANY WAS NOT FOUND TO BE MALAFIDE OR FALSE, BUT THE SAME COULD NOT BE SUBSTANTIATED ON ACCOUNT OF LACK OF OP PORTUNITY TO CROSS EXAMINE THE PARTIES WHOSE WHOSE EX-PARTE STATEMENTS HAVE BEEN USED FOR MAKING THE DISALLOWANCE. WE FIND THAT IN THE S ET ASIDE PROCEEDINGS MR. MEATTLE COULD NOT BE PRODUCED FOR C ROSS EXAMINATION AND THE ASSESSING OFFICER HIMSELF IN THE ORDER HAS ADMITTED THAT THE ISSUE OF CROSS EXAMINATION OF MR. MEATTLE HAS COME T O DEAD END. 12.1 WE FURTHER FIND THAT DURING THE COURSE OF PENA LTY PROCEEDINGS ASSESSEE COMPANY REQUESTED THE ASSESSING OFFICER TO CROSS EXAMINE SH. MEATTLE AND MR. JHUNJHUNWALA WHOSE STATEMENT WA S RELIED UPON BY THE ASSESSING OFFICER IN DISALLOWING THE COMMISSIO N PAID BY THE COMPANY. IN THIS REGARD, WE AGREE WITH THE LD. COM MISSIONER OF INCOME TAX (A)S OBSERVATION THAT PENALTY PROCEE DINGS IS SEPARATE PROCEEDINGS AND ASSESSING OFFICER SHOULD HAVE ALLO WED CROSS EXAMINATION OF BOTH THE PERSONS WHICH HAS BEEN DENIE D DUE TO TIME BARING MATTER WHEN THE SET ASIDE ORDER WAS PASSED O N 25.3.1996. THUS, THE WHOLE ASSESSMENT / REASSESSMENT IS BASED U PON THE STATEMENT OF TWO PERSONS MENTIONED ABOVE AND NO OP PORTUNITY WAS ALLOWED IN THE PENALTY PROCEEDINGS TO CROSS EXAMINE THEM. THUS, WE AGREE WITH THE OBSERVATION OF THE LD. COMMISSIONER OF INCOME TAX (A) ITA NOS. 567, 568 & 569/DEL/2006 19 THAT PENALTY LEVIED WITHOUT ALLOWING OPPORTUNITY TO THE COMPANY FOR CROSS EXAMINATION OF BOTH THE PERSONS ARE LIABLE TO BE CANCELLED. WE FURTHER FIND THAT LD. COMMISSIONER OF INCOME TAX (A) H AS GIVEN A FINDING THAT THE PAPER BOOK FILED BY THE ASSESSEE CONTAIN THE DETAILED CORRESPONDENCE ENTERED INTO BY THE COMPANY REGARDING THE PAYMENT OF COMMISSION. WE FURTHER FIND THAT PAYMENT OF CO MMISSION IS SUPPORTED THE BANK STATEMENT OF THE COMPANY AND THE P AYMENTS HAVE BEEN MADE BY THE ACCOUNT PAYEE CHEQUES/DRAFTS AND D ULY ADMITTED BY THE RECIPIENTS AND STAMP RECEIVED HAVE ALSO BEEN FIL ED ALONGWITH NECESSARY DOCUMENTS EVIDENCING OF PAYMENT OF COMMISSIO N. 12.2 HENCE, IN THE BACKGROUND OF THE AFORESAID DISC USSION, WE FIND THAT ASSESSEE COMPANY HAS GIVEN DOCUMENTS IN SUPPOR T OF THE COMMISSION PAYMENTS AND THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES ALSO. REVENUE HAS HELD THAT PENALT Y IS LEVIABLE ON THE BASIS OF TWO STATEMENTS GIVEN BY SH. MEATTLE AND MR . JHUNJHUNWALA. IT IS APPARENT THAT IN THE PENALTY PROCEEDINGS ASSESSE E HAS DULY SOUGHT OPPORTUNITY TO CROSS EXAMINE THOSE TWO PERSONS, THE SAME WAS NOT PROVIDED BY THE ASSESSING OFFICER. UNDER THE CIRC UMSTANCES, IN OUR CONSIDERED OPINION, CONDUCT OF THE ASSESSEE IS NOT CONTUMACIOUS ENOUGH TO WARRANT THE LEVY OF PENALTY U/S. 271(1)(C ). 13. WE FURTHER FIND THAT LD. COUNSELS PROPOSITION THAT IN CASES WHERE CASES AGAINST THE TRIBUNAL ORDER HAS BEEN ADMITTED B Y THE HONBLE HIGH COURT, IT IS EVIDENT THAT THE ISSUE WAS CONTRO VERSIAL AND EXISTENCE OF TWO OPINIONS CANNOT BE RULED OUT. WE REFER T O HONBLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF C .I.T. VS. LIQUID INVESTMENTS LTD. IN I.T.A. NO. 240/2009 ORDER DATED 05.10.2010 SUPPORTS THE CASE OF THE ASSESSEE. IN THIS CASE IT WAS HELD THAT ITA NOS. 567, 568 & 569/DEL/2006 20 AGAINST THE QUANTUM ASSESSMENT ASSESSEE HAS PREFERRED AN APPEAL TO THE HIGH COURT U/S. 260A OF THE ACT WHICH HAS ALSO BEEN ADMITTED AND SUBSTANTIAL QUESTION OF LAW FRAMED. THE COURT IN THIS REGARD HELD THAT THIS ITSELF SHOWS THAT THE ISSUE IS DEBATABLE. FOR T HESE REASONS, ACCORDINGLY, IT WAS HELD THAT NO QUESTION OF LAW A RISES IN THE PRESENT CASE. 14. WE FURTHER FIND THAT DELHI TRIBUNAL IN I.T.A. NO. 4237/DEL/2009 IN THE CASE OF ACIT VS. VIJAY KUMAR JINDAL HAD CONFIRME D THE DELETION OF PENALTY INTERALIA ON THE GROUND THAT APPEAL AGAINST THE ITAT ORDER HAS BEEN ADMITTED BY THE HONBLE HIGH COURT AND THE MATT ER WAS DEBATABLE. 15. WE FURTHER FIND THAT MUMBAI BENCH OF THE TRIBUNAL IN I.T.A. NO. 2379/MUM/2009 IN THE CASE OF NAYAN BUILDERS AND DEVEL OPERS P LTD. VS. ITO VIDE ORDER DATED 18.3.2011 HAS NOTED THAT T HE TRIBUNAL HAD AFFIRMED IN THIS CASE THE ADDITION IN QUANTUM PROCE EDINGS FOR WHICH THE PENALTY HAS BEEN HELD TO BE IMPOSABLE. THE TRIBUN AL HAS HELD AS UNDER:- IT IS, THEREFORE, ABUNDANTLY CLEAR THAT THE ADDITI ONS IN RESPECT OF WHICH PENALTY WAS CONFIRMED HAVE BEEN ACCEPTED BY THE HONBLE BOMBAY HIGH COURT LEADING TO SUBSTANTIAL QUESTION OF LAW. WHEN THE HIGH CO URT ADMITS SUBSTANTIAL QUESTION OF LAW ON AN ADDITION, I T BECOMES APPARENT THAT THE ADDITION IS CERTAINLY DEBATABLE. IN SUCH CIRCUMSTANCES PENALTY CANNOT B E LEVIED U/S. 271(1)(C) AS HAS BEEN HELD IN SEVERAL C ASES INCLUDING RUPAM MERCANTILE VS. DCIT [2004] 91 ITD 237 (AHD) (TM)] AND SMT. RAMILA RATILAL SHAH VS. ACIT ITA NOS. 567, 568 & 569/DEL/2006 21 [(1998) 60 TTJ (AHD) 171]. THE ADMISSION OF SUBSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COU RT LENDS CREDENCE TO THE BONA FIDES OF THE ASSESSEE IN CLAIMING DEDUCTION. ONCE IT TURNS OUT THAT THE CLAI M OF THE ASSESSEE COULD HAVE BEEN CONSIDERED FOR DEDUCTION AS PER A PERSON PROPERLY INSTRUCTED IN LA W AND IS NOT COMPLETELY DEBARRED AT ALL, THE MERE FACT OF CONFIRMATION OF DISALLOWANCE WOULD NOT PER SE LEAD T O THE IMPOSITION OF PENALTY. SINCE THE ADDITIONS, IN RESPECT OF WHICH PENALTY HAS BEEN UPHELD IN THE PRESENT PROCEEDINGS, HAVE BEEN HELD BY THE HONBLE HIGH COURT TO BE INVOLVING A SUBSTANTIAL QUESTION OF LAW, IN OUR CONSIDERED OPINION, THE PENALTY IS NO T EXIGIBLE UNDER THIS SECTION. WE, THEREFORE, ORDER FOR THE DELETION OF PENALTY. 16. NOW WE EXAMINE THE PRESENT CASE ON THE TOUCHSTON E OF THE AFORESAID DECISIONS. IN THE PRESENT CASE, WE FIND THAT HONBLE HIGH COURT IN I.T.A. NO. 439/2003 VIDE ORDER DATED 27.3 .2008 IN THE QUANTUM PROCEEDINGS HAS ADMITTED THE ASSESSEES APPE AL AGAINST THE ORDER OF THE TRIBUNAL IN CONFIRMATION OF THE ADDITIO N AS UNDER:- AFTER HEARING THE LD. COUNSEL OF THE PARTIES, WE ADMIT THIS APPEAL AND FRAMED THE FOLLOWING SUBSTANTIAL QUESTIO N OF LAW FOR CONSIDERATION. - WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN LAW IN PROCEEDINGS IN THE APPEAL FILED B Y THE ASSESSEE IN THE ABSENCE OF MR. MEATTLE HAVING ITA NOS. 567, 568 & 569/DEL/2006 22 SERVED OR MADE AVAILABLE FOR CROSS EXAMINATION OF THE ASSESSEE. - WHETHER THE INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN LAW IN PLACING RELIANCE OF SECTION 33 OF THE INDIAN EVIDENCE ACT WHILE DENYING THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE MR. MEATTLE. 17. FROM THE ABOVE, WE FIND THAT AGAINST THE ABOVE CO NFIRMATION BY THE TRIBUNAL IN THIS CASE IN QUANTUM PROCEEDINGS THE HONBLE JURISDICTIONAL HIGH COURT HAS ADMITTED THE APPEAL. THUS, WE FIND THAT ON THE TOUCH STONE OF THE ABOVE AFORESAID DECISION IN THIS CASE ALSO THE PENALTY IS NOT LEVIABLE, AS THE ISSUE IS DEBTABLE. IN THIS REGARD, WE ALSO FIND SUPPORT FROM THE HONBLE APEX COURT DECISION I N THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. IN CIVIL APPEAL NO. 2463 OF 2010. IN THIS CASE VIDE ORDER DATED 17.3.2010 IT HAS BEEN HELD T HAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS T O THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTIL E CASE WAS ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD TH AT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE APEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE R EVENUE IS ACCEPTED THEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY THE ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WI LL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NOT THE INTENDMENT OF LEGISLATURE. 18. WE FURTHER FIND THAT CASE LAWS RELIED UPON BY T HE REVENUE ARE NOT APPLICABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NOS. 567, 568 & 569/DEL/2006 23 - IN ACIT VS. JASUBHAI BUSINESS SERVICES P LTD. - 5 SOT 36, IT WAS HELD THAT THE WHEN ASSESSEE FILED INACCURATE PA RTICULARS FOR CLAIMING DEDUCTION AND EXPLANATION FURNISHED BY ASSESSEE WAS NOT BONAFIDE PENALTY U/S. 271(1)(C) WA S LEVIABLE. - IN KAMAL CHAND JAIN VS. ITO - 277 ITR 429, IT WAS THE CASE THAT ASSESSEE WAS NOT ABLE TO OFFER ANY SATISFACTOR Y EXPLANATION FOR CERTAIN SUM AS SURRENDERED BY IT, I N REGARD TO THE SOURCE. - IN UNION OF INDIA VS. DHARMENDRA TEXTILE & PROCES SORS - 306 ITR 277, IT WAS HELD THAT SECTION 11AC OF THE CENTR AL EXCISE ACT, 1944 CANNOT BE READ TO CONTAIN MENS REA AS AN ESSENTIAL INGREDIENTS AND THERE WAS NO SCOPE FOR LE VYING PENALTY BELOW PRESCRIBED MINIMUM LIMIT. - IN C.I.T. VS. SOMNATH OIL MILLS - 214 ITR 32, THE ISSUE PERTAINED TO PENALTY IN THE CASE WHERE BASED ON DOC UMENTS SEIZED BY THE SALES TAX AUTHORITIES, ASSESSEE WAS H ELD TO HAVE INCOME FROM UNDISCLOSED SOURCES ON ACCOUNT OF UNACCOUNTED PURCHASES. - IN WESTERN AUTOMOBILES (INDIA) VS. C.I.T. - 112 ITR 1048, THE ISSUE RELATED TO PENALTY PURSUANT TO ASSESSEE S AGREED ADDITION OF AMOUNT REPRESENTING HUNDI LOANS. - IN C.I.T. VS. PRATHI HARDWARE STORE - 203 ITR 6 41, THE ISSUE RELATED TO CASE WHERE IN RESPECT OF AN ITEM OF CRE DIT ASSESSEES EXPLANATION WAS CONSIDERED TO BE FALSE O R ITA NOS. 567, 568 & 569/DEL/2006 24 ASSESSEE HAD OFFERED AN EXPLANATION WITHOUT ANY MA TERIAL OR EVIDENCE THE SUBSTANTIATE IT. - IN C.I.T. VS. UNITED COMMERCIAL & INDUSTRIAL CO. L TD. - 187 ITR 596, THE ISSUE RELATED TO ADDITION U/S. 68 OF T HE I.T. ACT. - IN SUMATI DAYAL VS. C.I.T. - 214 ITR 801, THE ISSU E RELATED ADDITION U/S. 68 CONSIDERED IN THE LIGHT OF HUMAN PROBABILITIES. 19. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE AFFIRM THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) IN THIS CASE AND CONFIRMED THE DELETION OF PENALTY. 20. IN THE RESULT, ALL THE THREE APPEALS FILED BY T HE REVENUE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/9/201 2. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [C.M. GARG] [C.M. GARG] [C.M. GARG] [C.M. GARG] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 07/9/2012 SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR,I TAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES*