Raajkumar Jain, Secunderabad V. Asst. Commissioner of Income Tax, Circle-16(3), Hyderabad

ITA 575/HYD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66261 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 19-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Keywords: Unexplained investment; Search and seizure; Initiation of penalty proceedings; Assessment record; Revised return
• Section: 143(3); 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 575/HYD/2012 ASSESSMENT YEAR 2004-05 SRI RAAJKUMAR JAIN SECUNDERABAD PAN: AEDPK3398E VS. ASST. CIT CIRCLE 16(3) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI K.C. DEVDAS RESPONDENT BY: SRI V. SRINIVAS DATE OF HEARING: 07.08.2012 DATE OF PRONOUNCEMENT: 07.09.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT-IV, HYDERABAD PASSED U/S. 263 OF THE ACT DATED 29.3.2012. 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WIT H REGARD TO ASSUMPTION OF JURISDICTION BY THE CIT U/S. 263 O F THE INCOME- TAX ACT, 1961 AND THEREBY HOLDING THAT DROPPING OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 3. THE LEARNED AR SUBMITTED THAT THERE IS NO ORDER TO TAKE UP THE ISSUE U/S. 263 BY THE CIT. THE PENALTY PROC EEDINGS WERE DROPPED BY THE ASSESSING OFFICER BY ORDER-SHEET ENT RY WHICH WAS NEVER COMMUNICATED TO THE ASSESSEE. WHEN THERE WAS NO SERVICE OF ORDER TO THE ASSESSEE THE ORDER-SHEET EN TRY ITSELF CANNOT BE CONSTRUED AS AN ORDER TO TAKE UP ACTION U /S. 263 OF THE ACT. FOR THIS PROPOSITION, HE RELIED ON THE JU DGEMENT OF I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 2 KERALA HIGH COURT IN THE CASE OF CIT V. SREE NARAYA NA CHANDRIKA TRUST, 212 ITR 456 SPECIFICALLY AT PAGE 471 WHICH R EADS AS FOLLOWS: 'THE ORDER OF ANY AUTHORITY CANNOT BE SAID TO BE PA SSED UNLESS IT IS IN SOME WAY PRONOUNCED OR PUBLISHED OR THE PA RTY AFFECTED HAS THE MEANS OF KNOWING IT. IT IS NOT ENOUGH IF TH E ORDER IS MADE, SIGNED, AND KEPT IN THE FILE, BECAUSE SUCH OR DER MAY BE LIABLE TO CHANGE AT THE HANDS OF THE AUTHORITY WHO MAY MODIFY IT, OR EVEN DESTROY IT, BEFORE IT IS MADE KNOWN, BA SED ON SUBSEQUENT INFORMATION, THINKING OR CHANGE OF OPIN ION. TO MAKE THE ORDER COMPLETE AND EFFECTIVE, IT SHOULD BE ISSUED, SO AS TO BE BEYOND THE CONTROL OF THE AUTHORITY CONCER NED; FOR ANY POSSIBLE CHANGE OR MODIFICATION THEREIN. THIS SHOUL D BE DONE WITHIN THE PRESCRIBED PERIOD, THOUGH THE ACTUAL SER VICE OF THE ORDER MAY BE BEYOND THAT PERIOD.' 4. FURTHER HE SUBMITTED THAT THE ASSESSING OFFICER AFT ER SATISFYING HIMSELF THAT THERE IS NO FURNISHING OF I NACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME, DRO PPED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. HE RELIED ON THE DECISION OF APEX COURT IN THE CASE OF CIT VS. GREEN WORLD CORPORATION (314 ITR 81). FURTHER HE SUBMITTED THA T THE ASSESSMENT THUS COMPLETED WAS THE SUBJECT MATTER OF INITIATION OF PENALTY PROCEEDINGS U/S. 274 READ WITH SECTION 2 71(1)(C) OF THE ACT, WITH REFERENCE TO THE FACTS AS EMERGING FR OM THE RETURN OF INCOME. THE VARIATION AS NOTICEABLE FROM THE ASS ESSMENT ORDER WAS ON ACCOUNT OF THE FACTS BROUGHT ON RECORD IN TERMS OF THE COVERING LETTER ANNEXED TO THE RETURN OF INCOME SUBMITTED IN RESPONSE TO NOTICE U/S. 148 AND ACCEPTED. 5. THE AR SUBMITTED THAT THE ASSESSEE HAS NEITHER CONC EALED ANY INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE AR SUBMITTED ON MERITS OF ASSESSEE'S CASE, AS F OLLOWS: I) THE UNDISPUTED FACT ON RECORD IS THAT THE RETURN OF INCOME SUBMITTED CONSISTING OF THE COMPUTATION WAS BASED ON THE FACTS THAT WERE BROUGHT ON I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 3 ASSESSMENT RECORDS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INFORMATION THAT WAS NOTICED IN THE ASSESSMENT PROCEEDINGS OF M/S. AHURA HOLDINGS, ON THE BASIS OF WHICH THE ASSESSMENT PROCEEDINGS WERE REOPENED THOUGH CONSIDERED IN THE RETURN SUBMITTED IN RESPONSE TO NOTICE U/S. 148 AND WAS ACCORDINGLY SUBJECTED TO ASSESSMENT CANNOT BE ACCEPTED TO BE THE BONA-FIDE ACTION ON TH E PART OF THE ASSESSEE. II) IT WAS NOT THE CASE OF THE ASSESSING OFFICER THAT THERE WAS ANY EVIDENCE IN THE POSSESSION OF THE ASSESSING OFFICER THAT COULD BE GATHERED FROM THE ASSESSEE INDEPENDENTLY EXCEPT THE STATEMENT FROM THE CONCERN OF M/S. AHURA HOLDINGS. EQUALLY IT WAS THE CASE OF THE ASSESSING OFFICER THAT RELIANCE WAS PLACED ON THE STATEMENT OF GOPAL BADRUKA, OBTAINED IN THE SEARCH PROCEEDINGS OF THE CORPORATE ENTITY. IT IS EQUALLY AS OBTAINING IN THE ASSESSMENT ORDER AND THE CIRCUMSTANCES AS STATED IN THE COVERING LETTER ANNEXED TO THE RETURN THAT LEAD TO ACCEPTING THE AMOUNT AS INCOME IN THE ASSESSMENT. III) IT IS NOT THE CASE THAT THE SUBMISSION MADE OR THE DETAILS FILED IN THE RETURN OF INCOME SUBMITTED IN RESPONSE TO NOTICE U/S. 148 WERE FOUND TO BE INCORRECT. ACCORDINGLY PRIMA-FACIE THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING THE INACCURATE PARTICULARS. THE AR SUBMITTED THAT THE TOTALITY OF THE MATTER SHOULD BE CONSIDERED, BEFORE DRAWING AN INFERENCE THAT THERE WAS- CONCEALMENT OF INCOME AND/OR FURNISHING OF INACCURATE PARTICULARS. THE FACTS OF THE CASE CLEARLY SUGGEST THAT THE SPECIFIC I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 4 EVIDENCES MENTIONED IN THE ASSESSMENT ORDER WOULD HEAVILY WEIGH IN FAVOUR OF THE ASSESSEE TO CONCLUDE THAT THE ASSESSEE ACTED BONA-FIDE IN THE SUBMISSION OF THE RETURN OF INCOME AND THEREFORE THE PENALTY PROCEEDINGS BEING QUITE DISTINCT THE BENEFIT OF DOUBT MAY PLEASE BE CONSIDERED IN ASSESSEE'S FAVOUR. IV) THE AR SUBMITTED, THAT THE ULTIMATE COMPUTATION OF THE INCOME BY THE ASSESSING OFFICER AS PER THE RETU RN OF INCOME SUBMITTED EXPLAINING ASSESSEE'S BONA-FIDE CONDUCT. THE FACT REMAINS THAT THE ASSESSEE IS NOT INTERESTED IN ANY FURTHER LITIGATION WHICH COULD BE VEXATIOUS AND UNENDING AND WOULD ONLY BE TO THE DETRIMENT OF ASSESSEE'S CONSIDERED BUSINESS INTEREST. V) THE AR SUBMITTED FOR THE KIND CONSIDERATION OF THE ASSESSING OFFICER THAT ON THE MERITS OF THE CASE AS EXPLAINED ABOVE, THERE CAN BE NO REASON TO COME TO THE CONCLUSION THAT THERE WAS ANY CONCEALMENT OF INCOME AND/OR FURNISHING OF ANY INACCURATE PARTICULARS. IT IS THEREFORE NOT CORRECT TO CHARGE THE ASSESSEE ON THE PREMISE OF CONCEALMENT OF INCOME AND/OR FURNISHING OF INACCURATE PARTICULARS AND THEREFORE TO COME TO ANY CONCLUSION THAT PENALTY IS IMPOSABLE SINCE THE FACTS DO NOT WARRANT SO. 6. THE LEARNED AR PLACED HIS RELIANCE ON THE FOLLOWING JUDGEMENTS: I) THE SUPREME COURT IN THE CASE OF DILIP N. SHROFF VS . JOINT CIT (2001) 291 ITR 519 , HELD THAT THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. NOT ONLY IS THE I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 5 LEVY OF PENALTY DISCRETIONARY IN NATURE BUT THE DECISION IS ALSO REQUIRED TO BE EXERCISED ON THE PA RT OF THE REVENUE KEEPING THE RELEVANT FACTORS IN MIND. 'CONCEALMENT OF INCOME' AND 'FURNISHING INACCURATE PARTICULARS' REFERS TO DELIBERATE ACTS ON THE PART OF THE ASSESSEE. IN THE FACTS OF THIS CASE THERE IS NO DELIBERATE AC T OF SUPPRESSION VARI OR SUGGESTION FALSI . THE APEX COURT FURTHER OBSERVED THAT THE EXPLANATION APPENDED TO SECTION 271(1)(C) IS AN EXCEPTION TO THE GENERAL RU LE. IT RAISES A LEGAL FICTION AND THE LEGAL FICTION, HO WEVER, AS IS WELL KNOWN- MUST BE GIVEN FULL EFFECT IF CONDITIONS PRECEDENT THEREOF IS SATISFIED AND NOT OTHERWISE. THE SUPREME COURT FURTHER OBSERVED THAT THE WORD 'INACCURATE' SIGNIFIES A DELIBERATE ACT OR OMISSION ON THE PART OF THE ASSESSEE. DELIBERATE ACT MUST BE EITHER FOR THE PURPOSE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. I HAVE NEITHE R CONCEALED ANY INCOME NOR FURNISHED INACCURATE PARTICULARS. THE REVISED RETURN WAS VOLUNTARILY FILED IN THE SEN SE THE ASSESSEE DID NOT CONTEST AFTER THE INITIATION O F PROCEEDINGS BY RECOURSE TO THE PROVISIONS OF SECTIO N 148 OF THE I.T. ACT. IN OTHER WORDS, THE MATTER STA NDS REGULARIZED BY THE ISSUANCE OF NOTICE U/S. 148. THE ADDITIONAL INCOME WAS OFFERED TO HAVE PEACE OF MIND AND TO AVOID LITIGATION. IT WAS IN GOOD FAITH. II) THE INCOME TAX APPELLATE TRIBUNAL, PUNE BENCH IN THE CASE OF KANBAY SOFTWARE VS. DCIT (REPORTED IN I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 6 122 TTJ, PAGE 721) HELD AS FOLLOWS. (A) ON FIRST PRINCIPLES, PENALTY U/S. 271(1)(C) IS NOT SIMPLY A CONSEQUENCE ARISING OUT OF AN ADDITION BEING MADE TO THE INCOME OF THE ASSESSEE. PENALTY U/S 271(1)(C), IRRESPECTIVE OF WHETHER IT IS A CIVI L LIABILITY OR A CRIMINAL LIABILITY CAN ONLY BE IMPOS ED WHEN THE SCHEME OF THE ACT PERMITS OR REQUIRES SO. IT IS NOT AN AUTOMATIC CONSEQUENCE ONCE AN ADDITION WAS MADE TO THE INCOME, AND THEREFORE AN ADDITION MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BY ITSELF, CANNOT BE ENOUGH TO INITIAT E, LEAVE ASIDE CONCLUDE, PENALTY PROCEEDINGS U/S 271(1)(C). (B) AN ASSESSEE'S STATUTORY OBLIGATION U/S 139 (1) IS T O GIVE CORRECT AND COMPLETE INFORMATION WITH THE RETURN OF INCOME. IF .THIS IS COMPLIED WITH, THEN THERE IS NO CONTRAVENTION WHICH CAN ATTRACT EVEN A CIVIL LIABILITY. MERELY THERE WAS VARIATION IN THE INCOME COMPUTED BY THE ASSESSING OFFICER, IT DOES NOT MEAN THAT THERE IS A BREACH OF THE OBLIGATION. THE PROPOSITION THAT JUST BECAUSE PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY, IT MUST MEA N THAT THE PENALTY CAN AUTOMATICALLY BE LEVIED ON THE BASIS OF ANY VARIATION TO THE INCOME IS NOT CORRECT. IT IS NOT THE CASE THAT A PENALTY CAN BE IMPOSED AS AN AUTOMATIC CONSEQUENCE FOR VARIATION TO THE RETURNED INCOME, GIVEN THE SCHEME OF S. 271(1)(C); (C) THAT PENALTY IS NOT AN AUTOMATIC CONSEQUENCE OF AN ADDITION AND I OR VARIATION BEING MADE TO THE I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 7 INCOME OF THE TAXPAYER WHETHER IT IS A CIVIL LIABIL ITY OR A CRIMINAL LIABILITY. IT IS MY SUBMISSION THAT M Y CONDUCT AND EXPLANATION IS BONA-FIDE AND WHERE ONCE IT IS ESTABLISHED THAT MY CONDUCT AND EXPLANATION IS BONA-FIDE, IT IS NOT CORRECT TO SUGG EST THAT STILL PENALTY CAN BE LEVIED. (D) THE EXPRESSION 'CONCEALMENT OF INCOME' IMPLIES THAT AN INCOME IS BEING HIDDEN, CAMOUFLAGED OR COVERED UP SO AS IT CANNOT BE SEEN, FOUND, OBSERVED OR DISCOVERED. THE EXPRESSION 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' IMPLIES FURNISHING OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH. (E) WHEN THE ASSESSEE OFFERS AN EXPLANATION IN DISCHARGE OF THE ONUS CAST UPON HIM BY EXPL. 1 TO S. 271(1)(C), THE REVENUE MUST CONSIDER THE EXPLANATION OBJECTIVELY AND UNLESS HE FINDS THE SAME AGAINST THE HUMAN PROBABILITIES OR UNLESS THERE ARE ANY REAL INCONSISTENCIES OR FACTUAL ERRORS IN SUCH AN EXPLANATION, THE REVENUE NEED TO ACCEPT THE SAME. THE ASSESSEE CANNOT BE EXPECTED TO PROVE THE CLAIM OF BONA FIDES TO THE HILT; III) THE ITAT, MUMBAI BENCH IN THE CASE OF ACIT VS. VIP INDUSTRIES (REPORTED IN 122 TTJ 389) HELD THAT: (A) THE MERE FACT THAT AN ADDITION WAS CONFIRMED IN ANY PROCEEDINGS CANNOT PER SE LEAD TO THE CONFIRMATION OF THE PENALTY BECAUSE THE QUANTUM AND PENALTY PROCEEDINGS ARE INDEPENDENT OF EACH OTHER; I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 8 (B) IN ORDER THE DEEMING PROVISION OF EXPLANATION 1 TO S. 271(1)(C) TO APPLY IT MUST BE SHOWN EITHER THAT (A) THE ASSESSEE FAILS TO OFFER AN EXPLANATION, OR (B) HE OFFERS AN EXPLANATION WHICH CANNOT BE SUBSTANTIATED OR SHOWN TO BE BONA FIDE. IN ORDER TO ATTRACT SECTION 271(1)(C), THERE MUST BE 'CONCEALMENT'. MY EXPLANATION AS REVEALING FROM THE FACTS IS BONA FIDE. 7. CONSIDERING THE ABOVE SUBMISSIONS BOTH ON MERITS AN D ON LEGAL PRINCIPLES ENUNCIATED IN SUBSTANCE THE AR SUB MITTED THAT HE HAS EXPLAINED AS TO HOW HIS EXPLANATION WAS BONA -FIDE. THE CONSEQUENCE OF THE ASSESSMENT BY ITSELF DOES NOT EN ABLE THE REVENUE TO CHARGE THE ASSESSEE WITH CONSEQUENCE OF PENALTY. THE MATTER AT ISSUE SHOULD BE CONSIDERED IN TOTALIT Y. THE PENALTY IS NOT EXIGIBLE AUTOMATICALLY. THE AR SUBMITTED TH AT HIS SUBMISSION WAS NOT IMPROBABLE IN THE LIGHT OF THE E XPLANATION THAT HAS BEEN NOTICEABLE FROM THE ASSESSMENT RECORD S. AS A CONSEQUENCE INVARIABLY, THE EXPLANATION BEING BONA- FIDE, THE BENEFIT OF DOUBT BE CONFERRED ON THE ASSESSEE BY TH E REVENUE, BY CONCLUDING THAT THERE WAS NO CONCEALMENT OF INCOME AND/OR FURNISHING OF INACCURATE PARTICULARS ON THE GIVEN F ACTS OF THE CASE AND BASED ON THE LEGAL PRINCIPLES AS ENUNCIATE D BY JUDICIAL PRECEDENTS. ACCORDINGLY, THE AR PRAYED THAT THE PEN ALTY PROCEEDINGS INITIATED MAY KINDLY BE DROPPED. 8. FURTHER HE RELIED ON THE JUDGEMENTS OF SUPREME COUR T IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL (251 ITR 9) AND HINDUSTAN STEEL LTD. V. STATE OF ORISSA (83 ITR 26) . 9. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E CIT IN THIS CASE NOT LEVIED ANY PENALTY U/S. 271(1)(C) OF THE ACT. HE I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 9 ONLY GAVE A DIRECTION FOR INITIATION OF PENALTY PRO CEEDINGS AFRESH AS THE ASSESSING OFFICER DROPPED THE PENALTY PROCEE DINGS WITHOUT DUE APPLICATION OF MIND. HE SUBMITTED THAT IF ANY PENALTY IS LEVIED U/S. 271(1)(C) THE REMEDY TO THE ASSESSEE LIES ELSEWHERE. AS THERE IS NO APPLICATION OF MIND WHIL E DROPPING THE PENALTY PROCEEDINGS BY THE ASSESSING OFFICER, T HE ACTION OF THE ASSESSING OFFICER IS ERRONEOUS SO FAR AS PREJUD ICIAL TO THE INTEREST OF REVENUE. THE SHORT AND SWEET ORDER SHEE T ENTRY BY WHICH THE ASSESSING OFFICER DROPPED THE PENALTY PRO CEEDINGS IS HAVING NO LEGS TO STAND. IT IS A CRYPTIC ORDER HAV ING NO FINDING THEREIN WHICH WARRANTS INTERFERENCE BY THE CIT. HE DREW OUR ATTENTION TO THE ORDER SHEET ENTRY WHICH WAS MENTIO NED IN THE CIT ORDER FOR THE PROPOSITION THAT THERE IS NO FIND ING THEREIN REGARDING CONCEALMENT OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME BY THE ASSESSEE. FURTHER HE SUBMITTED THAT THE ASSESSING OFFICER NOT MENTIONED WHAT MATERIAL HE HA S CONSIDERED AND HOW IT IS RELATED TO DROP THE PENALT Y PROCEEDINGS. ACCORDING TO THE DR THERE IS NO MATER IAL EVIDENCE TO DROP THE PENALTY PROCEEDINGS AND SO THAT THE CIT GAVE A DIRECTION TO EXAMINE THE ISSUE AFRESH. REGARDING N ON- COMMUNICATION OF ORDER SHEET ENTRY, HE SUBMITTED TH AT EVEN ORDER SHEET ENTRY MADE BY THE ASSESSING OFFICER BEI NG HAVING ITS OWN CONSEQUENCES AND IT IS AN ORDER THOUGH IT IS NO T COMMUNICATED. FOR THIS PROPOSITION, HE RELIED ON J UDGEMENT IN THE CASE OF H.H. RAJDADI SMT. BADAN KANWAR MEDICAL TRUST VS. CWT (214 ITR 130) (RAJ.) AND SHABBIR T. CHASS V. AC IT [4 ITR (TRIB) 297] (HYD). ACCORDING TO THE DR THERE IS NO DIFFERENCE BETWEEN ISSUANCE OF NOTICE AND SERVICE OF NOTICE. FURTHER HE SUBMITTED THAT AS SOON AS THE ASSESSING OFFICER SIG NS THE ORDER SHEET ENTRY BY DROPPING PENALTY PROCEEDINGS U/S. 27 1(1)(C) OF THE ACT IT IS AN ORDER AND IT IS PRONE TO SCRUTINY/ REVISION BY CIT U/S. 263 OF THE ACT. FURTHER HE RELIED ON THE DECI SION IN THE CASE I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 10 OF R.A. HIMMATSINGKA AND CO. V. CIT (2012) 340 ITR 253 (PATNA) (HIGH COURT), CIT VS. SARA ENTERPRISES (224 ITR 169 ) (MAD), CIT VS. BRAJ BHUSHAN COLD STORAGE (275 ITR 360) (ALL.) AND NEW JAGAT TEXTILE MILLS P. LTD. V. CIT (282 ITR 399) (GUJ.). 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THIS CASE THE ASSESSING OFFICER DROP PED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT BY OR DER SHEET NOTING AS FOLLOWS: THE ASSESSEE FILED A DETAILED EXPLANATION IN RESPO NSE TO THE NOTICE U/S. 271(1)(C) OF THE ACT READ WITH SECTION 274. CONSID ERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF THE E XPLANATION FILED, THE PENALTY PROCEEDINGS INITIATED U/S. 271(1)(C) OF THE ACT ARE DROPPED 11. WHILE COMING TO THE ABOVE CONCLUSION THE ASSESSING OFFICER CONSIDERED THE DETAILED EXPLANATION OFFERED BY THE ASSESSEE. WE HAVE GONE THROUGH THE EXPLANATION OFF ERED BY THE ASSESSEE WHICH IS KEPT ON RECORD AT PAPER BOOK PAGE NOS. 5 TO 10 WHICH IS ALSO PUT BEFORE US BY THE AR. IN OUR O PINION, EVEN ORDER SHEET ENTRY HAS TO BE CONSIDERED AS AN ORDER IN VIEW OF THE JUDGEMENT IN THE CASE OF H.H. RAJDADI SMT. BADAN KA NWAR MEDICAL TRUST VS. CIT (214 ITR 130) (RAJ) WHEREIN I T WAS HELD AS UNDER: 'THE PROVISIONS OF S. 25(1) OF THE WEALTH-TAX ACT, 1957, CONTEMPLATE THAT THE COMMISSIONER MAY CALL FOR THE RECORD OF AN Y PROCEEDINGS UNDER THE ACT IN WHICH AN ORDER HAS BEEN PASSED BY ANY AUTHORITY SUBORDINATE TO HIM. SUB-S. (3) OF S. 25 BARS THE EX ERCISE OF THE POWER AFTER THE EXPIRY OF TWO YEARS FROM THE END OF THE F INANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. THE AUT HORITY MAY ON THE BASIS OF DOCUMENTS SUBMITTED OR EVEN ON VERBAL SUBM ISSIONS COME TO THE CONCLUSION THAT THE PROCEEDINGS ARE DROPPED. IN BOTH THESE CASES, IT IS AN ORDER WHICH HAS CULMINATED IN NIL LIABILITY S O FAR AS THE ASSESSING AUTHORITY IS CONCERNED AND SO FAR AS INITIATION OF THE PROCEEDINGS BY THAT AUTHORITY IS CONCERNED. THEREFORE, IN SUCH A C ASE IT HAS TO BE CONSIDERED THAT THE MATTER OF THE ASSESSEE WITH REG ARD TO THE INITIATION OF THE PROCEEDINGS BY ISSUE OF NOTICE HAS RESULTED IN NIL ASSESSMENT. IN THESE CIRCUMSTANCES, RECORDING OF THE WORDS THAT 'P ROCEEDINGS ARE DROPPED' AMOUNTS TO AN ORDER. IF AN ASSESSMENT OR DER BY WHICH ANY LIABILITY IS CREATED ON THE ASSESSEE IS MADE AND IT IS NOT SERVED ON THE ASSESSEE OR HIS RIGHTS ARE AFFECTED THEN, IN THAT C ASE, IT CAN BE SAID THAT I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 11 IT WOULD NOT BE EFFECTIVE UNLESS IT IS COMMUNICATED OR SERVED ON THE ASSESSEE. BUT IN A CASE WHERE A PLEA RAISED BY AN ASSESSEE IS ACCEPTED AND PROCEEDINGS ARE DROPPED IT IS NOT NECESSARY THA T THE ORDER SHOULD BE COMMUNICATED AND SERVED ON THE ASSESSEE. HENCE, AN ORDER SHEET ENTRY MADE BY THE WEALTH-TAX OFFICER DROPPING THE P ROCEEDINGS WITHOUT COMMUNICATING IT TO THE ASSESSEE AMOUNTS TO AN ORDER WHICH CAN BE REVISED BY THE COMMISSIONER OF WEALTH-TAX UN DER SECTION 25(2).' 12. IN THE CASE OF NEW JAGAT TEXTILE MILLS P. LTD. V. C IT (282 ITR 399) THE GUJARAT HIGH COURT HELD AS UNDER: 'HELD , THAT THE ACTION OF THE ASSESSING OFFICER IN NOT M AKING A BEST JUDGMENT ASSESSMENT UNDER SECTION 144(A) OF TH E ACT, DESPITE FAILURE OF THE ASSESSEE TO FILE A RETURN OF INCOME UPON BEING SERVED WITH A NOTICE UNDER SECTION 139(2) OF THE ACT, WAS ITSELF AN ACTION WHICH WAS ERRONEOUS IN LAW. THE A SSESSEE ITSELF HAVING SUBMITTED A STATEMENT OF ADVANCE TAX PAYABLE DECLARING INCOME OF MORE THAN RS. 1,35,000 AND HAVING PAID AD VANCE TAX TO THE TUNE OF RS. 74,001, ITSELF INDICATED THAT TH E ASSESSEE- COMPANY WAS HAVING POSITIVE INCOME IN THE YEAR UNDE R CONSIDERATION. THEREFORE, ALSO, THE ACTION OF THE A SSESSING OFFICER OF DROPPING THE PROCEEDINGS HAD RESULTED IN CAUSING PREJUDICE TO THE INTEREST OF REVENUE AND THE SECOND LIMB OF SECTION 263 OF THE ACT ALSO STOOD SATISFIED. THEREF ORE, ONCE THE TWIN CONDITIONS FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE ACT WERE SHOWN TO BE FULFILLED, THE COMMISSIONE R WAS PERFECTLY JUSTIFIED IN TAKING ACTION UNDER THE SAID PROVISION AND EXERCISING HIS REVISIONAL POWERS.' 13. APART FROM THIS, WE HAVE TO SEE WHETHER DROPPING OF PENALTY PROCEEDINGS BY THE ASSESSING OFFICER IS JUS TIFIED AND WHETHER THE CIT CAN DIRECT THE ASSESSING OFFICER TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT. COMING TO THE MERIT OF LEVY OF PENALTY, IN OUR OPINION, THE EXPLANATION OFFERED BY THE ASSE SSEE HAS TO BE SEEN. IN THE PRESENT CASE, THERE WAS A SEARCH AND SEIZURE OPERATION IN THE CASE OF SRI GOPAL LAL BADRUKA AND M/S. AHURA HOLDINGS ON 26.07.2006, A COPY OF AN AGREEMENT FOR SALE DEED DATED 26.08.2003 WAS FOUND, ACCORDING TO WHICH THE ASSESSEE HAD ENTERED INTO AN AGREEMENT FOR PURCHASE OF PLOT ADMEASURING 1529 SQ. YARDS @ 11750/- PER SQ. YARD FROM M/S. AHU RA HOLDINGS. THE TOTAL SALE CONSIDERATION WORKED OUT T O RS. I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 12 1,79,65,750. BUT AS SEEN FROM THE REGISTERED SALE D EED, THE SALE CONSIDERATION WAS MENTIONED AS RS. 56,20,000 WHICH WORKED OUT @ 4,000/- PER SQ. YARD. DURING THE ASSESSMENT PROCE EDINGS IN THE CASE OF M/S. AHURA HOLDINGS, SRI GOPAL LAL BADR UKA HAD CONFIRMED THAT HE HAD RECEIVED ENTIRE CONSIDERATION OF RS. 1,65,08,750 FROM THE ASSESSEE FOR 1405 SQ. YARDS @ 11750 PER SQ. YARD. AS THE DIFFERENCE OF RS. 1,08,88,750/- BE TWEEN THE AMOUNT ADMITTED TO HAVE BEEN RECEIVED BY SRI GOPAL LAL BADRUKA AND THE AMOUNT MENTIONED IN THE REGISTERED SALE DEE D, REPRESENTS THE ASSESSEE'S UNACCOUNTED INVESTMENT IN THE PURCHASE OF PLOT FROM M/S. AHURA HOLDINGS FOR THE A .Y. 2004-05. IN RESPONSE TO THE NOTICE ISSUED U/S. 148 BY THE AS SESSING OFFICER, THE ASSESSEE HAD FILED REVISED RETURN ADMI TTING ADDITIONAL INCOME OF RS. 1,08,88,750. THE ASSESSMEN T WAS COMPLETED BY PASSING AN ORDER U/S. 143(3) R.W.S. 14 7 ON 28.04.2010. IT IS SEEN THAT THE ASSESSING OFFICER H AS INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME U/S. 271(1)(C) OF THE INCOME TAX ACT. HOWEVER, IT IS FOUND THAT THE P ENALTY PROCEEDINGS INITIATED HAVE BEEN DROPPED VIDE ORDER SHEET NOTINGS DATED 30.06.2010. THE EVIDENCE IN THIS CASE WHICH HAS RESULTED IN ADMITTING OF ADDITIONAL INCOME IS FOUND AND SEIZED BY THE INCOME TAX DEPARTMENT DURING A SEARCH OPERAT ION U/S. 132 OF THE IT ACT. FURTHER, IT IS FOUND THAT THE A SSESSEE HAS FILED THE REVISED RETURN ADMITTING THE ADDITIONAL INCOME ONLY AFTER THE ISSUE OF NOTICE U/S. 148 BY THE ASSESSING OFFICER. NOTWITH- STANDING, THE ASSESSEE SUBMISSIONS AS PART OF HIS R EPLY TO NOTICE U/S. 148 THE ADDITIONAL INCOME IS ONLY ON ACCOUNT OF EVIDENC E AND ALSO THE ACCEPTANCE OF SUCH TRANSACTION BY SRI GOPAL LAL BADRUKA OF M/S. AHURA HOLDINGS. 14. THE REPLY GIVEN BY THE ASSESSEE WAS CONSIDERED BY T HE ASSESSING OFFICER AND HIS CONCLUSION IS BASED ON TH E EXPLANATION OFFERED BY THE ASSESSEE AND HE HAS TAKEN ONE POSSIB LE VIEW. IF I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 13 THE CIT NOT AGREED WITH THAT PROPOSAL HE CANNOT SAY THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE. IN THE CASE CIT VS. GREENW ORLD CORPORATION (314 ITR 81) THE SUPREME COURT HELD AS UNDER: 'HELD WITHOUT GOING INTO THE QUESTION OF THE BONA F IDES OF THE AUTHORITIES UNDER THE ACT, THAT THE ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER ON THE DICTATES OF THE HIGHER AUTHORITY, BEING WHOLLY WITHOUT JURISDICTION, WAS A NULLITY. THEREFORE, WITH A VIEW TO DOING COMPLETE JUSTICE BETWEEN THE PARTIES THE ASSESSMENT PROCEEDINGS SHOULD BE GONE THROUGH AGAIN. [ACCORDINGLY, THE SUPREME COURT, IN EXERCISE OF ITS JURISDICTION UNDER ARTICLE 142 OF THE CONSTITUTION OF INDIA, DIRECTED THAT THE ASSESSMENT BE REOPENED BY THE COMMISSIONER OF INCOME-TAX, DELHI VII.] THE INCOME-TAX OFFICER, WHILE PASSING AN ORDER OF A SSESSMENT PERFORMS A JUDICIAL FUNCTION. A REVISION APPLICATION LIES BEF ORE THE COMMISSIONER. IT IS TRITE THAT THE JURISDICTION EXERCISED BY THE REVISI ONAL AUTHORITY PERTAINS TO HIS APPELLATE JURISDICTION. THE JURISDICTION UNDER SECT ION 263 CAN BE EXERCISED ONLY WHEN BOTH THE FOLLOWING CONDITIONS ARE SATISFI ED (I) THE ORDER OF THE ASSESSING OFFICER SHOULD BE ERRONEOUS, AND (II) IT SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE. THESE CONDITIONS ARE CONJUNCTI VE. AN ORDER OF ASSESSMENT PASSED BY THE ASSESSING OFFICER SHOULD NOT BE INTER FERED WITH ONLY BECAUSE ANOTHER VIEW IS POSSIBLE. THE COMMISSIONER, FOR THAT MATTER, ANY OTHER HIGHER AUTHORITY, MAY HAVE SUPERVISORY JURISDICTION OVER THE ASSESSING OFFICER BUT IT IS DIFFICULT TO CONCEIVE THAT EVEN THE MERITS OF THE DECISION SHOUL D BE DISCUSSED AND SHOULD BE RENDERED BY THE HIGHER AUTHORITY, WHO IS A SUPER VISORY AUTHORITY. IT IS ONE THING TO SAY THAT WHILE MAKING THE ORDERS OF ASSESS MENT THE ASSESSING OFFICER SHOULD BE BOUND BY THE STATUTORY CIRCULARS ISSUED BY THE CBDT BUT IT I S ANOTHER THING TO SAY THAT THE ASSESSING AUTHORITY E XERCISING QUASI-JUDICIAL FUNCTIONS, KEEPING IN VIEW THE SCHEME CONTAINED IN THE ACT, WOULD LOSE HIS INDEPENDENCE TO PASS AN INDEPENDENT ORDER OF ASSESS MENT. WHEN A STATUTE PROVIDES FOR DIFFERENT HIERARCHIES PROVIDING FOR FO RUMS IN RELATION TO PASSING OF AN ORDER AS ALSO APPELLATE OR REVISIONAL ORDER, BY NO STRETCH OF IMAGINATION CAN A HIGHER AUTHORITY INTERFERE WITH THE INDEPENDE NCE WHICH IS THE BASIC FEATURE OF ANY STATUTORY SCHEME INVOLVING ADJUDICAT ORY PROCESS.' 15. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 ITR 83) THE APEX COURT HELD AS FOLLOWS: 'THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW. IT HAS BEEN HELD BY THIS COURT THAT WHERE A SU M NOT EARNED BY A PERSON IS ASSESSED AS INCOME IN HIS HANDS ON HIS SO OFFERING, THE I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 14 ORDER PASSED BY THE AO ACCEPTING THE SAME AS SUCH W ILL BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. RA MPYARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) AND IN SMT. T ARA DEVI AGGARWAL VS. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC). IN THE INSTANT CASE, THE CIT NOTED THAT THE ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY H IS MIND TO THE CASE IN ALL PERSPECTIVES AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEARS THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT COMPANY WAS NOT PLACED BEFORE THE AO. THUS, THERE W AS NO MATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS OF AGRICULTURAL I NCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS THE CONCLUSION T HAT THE ORDER OF THE ITO WAS ERRONEOUS IS IRRESISTIBLE. WE ARE, THER EFORE, OF THE OPINION THAT THE HIGH COURT HAS RIGHTLY HELD THAT T HE EXERCISE OF THE JURISDICTION BY THE CIT UNDER S. 263(1) WAS JUSTIFI ED.' 16. BEING SO, WE CANNOT SAY THAT THE ORDER PASSED BY TH E ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. FURTHER, IN OUR OPINION, LEVY OF PENALTY IS A QUASI CRIMINAL PROCEEDINGS. THE ASSESSING OFFICER MUST H AVE ENOUGH MATERIAL TO PROVE THAT THERE IS CONCEALMENT OF INCO ME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HE CANNOT PRESUME THAT THERE IS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE CASE OF HINDUSTAN ST EEL VS. STATE OF ORISSA (83 ITR 26) WHEREIN THE APEX COURT HELD 'AN ORDER IMPOSING PENALTY TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPO SED UNLESS THE PARTY OBLIGED EITHER ACTED DELIBERATELY IN DEFIANCE OF LA W OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DI SREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EXERCIS ED JUDICIOUSLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. E VEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPETENT TO IMPOSE THE P ENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNIC AL OR VENIAL BREACH OF THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRI BED BY THE STATUTE.' I.T.A. NO. 575/HYD/2012 SRI RAAJKUMAR JAIN ==================== 15 17. FURTHER IT WAS HELD BY THE GUJARAT HIGH COURT IN TH E CASE OF CIT VS. PARMANAND M. PATEL (278 ITR 3) THAT THE CIT IS NOT EMPOWERED TO RECORD SATISFACTION BY INVOKING S. 271 (1)(C) OF THE ACT AND IF HE IS NOT ENTITLED TO DO SO, ON HIS OWN, HE CANNOT DO IT BY DIRECTING THE ASSESSING AUTHORITY. THE COURT OBS ERVED THAT IN OTHER WORDS, WHAT THE CIT HIMSELF CANNOT DO, HE CAN NOT GET IT DONE THROUGH THE ASSESSING AUTHORITY BY EXERCISING REVISIONAL POWERS. IN VIEW OF THE ABOVE DISCUSSION, THE DIREC TION OF THE CIT TO AO TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT IS VACATED. 18. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER, 2012. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 7 TH SEPTEMBER, 2012 TPRAO COPY FORWARDED TO: 1. SRI RAAJKUMAR JAIN, FLAT NO. 105, SURYA TOWERS, S.P. ROAD, SECUNDERABAD. 2. THE ACIT, CIRCLE 16(3), HYDERABAD. 3. THE CIT-IV, HYDERABAD. 4. THE ADDL. CIT, RANGE-16, HYDERABAD 4. THE DR B BENCH, ITAT, HYDERABAD