N.Srinivas Reddy, Visakhapatnam V. THE ITO, Visakhapatnam

ITA 578/VIZ/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9530 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SARISH KUMAR
• Keywords: Principle of natural justice; Bonafide belief; Question of law; Initiation of penalty proceedings; Revised return
• Section: 143(3); 133A; 147; 27; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH : VISAKHAPATNAM BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO.578/VIZAG/2014 ASSESSMENT YEAR 2010-2011 MR. N. SRINIVASA REDDY, VISAKHAPATNAM PAN AAGPN0089G VS. INCOME TAX OFFICER, WARD 1(4) VISAKHAPATNAM (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. I. KAMA SASTRY FOR REVENUE : MR. SARISH KUMAR DATE OF HEARING : 23.02.2015 DATE OF PRONOUNCEMENT : 03.03.2015 ORDER PER SAKTIJIT DEY, J.M. THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER DATED 09.09.2014 OF LD. CIT(A), VISAKHAPATNAM FOR A SSESSMENT YEAR 2010-2011. ASSESSEE IS AGGRIEVED OF THE PENALT Y IMPOSED UNDER SECTION 271(1)(C) OF THE ACT BY THE ASSESSING OFFICER AND CONFIRMED BY LD. CIT(A). 2. BRIEFLY THE FACTS ARE, ASSESSEE IS AN INDIVIDUA L. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSESSEE FILED ITS RETURN OF INCOME ON 25.03.2011 DECLARING NIL INCOME . A SURVEY WAS CONDUCTED UNDER SECTION 133A IN THE BUSI NESS PREMISES OF M/S. SRINIVASA CHITS ON 21.09.2011 WHER EIN ASSESSEE IS A PARTNER. ON THE BASIS OF INFORMATION AVAILABLE DURING SURVEY ASSESSMENT FOR THE IMPUGNED ASSESSMEN T YEAR WAS REOPENED BY ISSUING A NOTICE UNDER SECTION 148 ON 26.12.2011. AS APPEARS FROM RECORD, IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148, ASSESSEE FILED REVISED RE TURN OF INCOME DECLARING TOTAL INCOME OF RS.77,47,709 ON 04 .04.2012. 2 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. IN THE COURSE OF ASSESSMENT PROCEEDINGS WHICH ENSUR ED IN PURSUANCE OF NOTICE UNDER SECTION 148, ASSESSEE SUB MITTED INFORMATIONS AS WERE CALLED FOR BY THE ASSESSING OF FICER. AFTER EXAMINING THE INFORMATIONS SUBMITTED, ASSESSING OFF ICER NOTED THAT UNSECURED LOANS OF RS. 1 LAKH, RS. 1 LAKH AND RS. 2 LAKH FROM MR. A. JAGADISH, MR. A. VENKATA REDDY AND MR. SUBHASH REDDY RESPECTIVELY THOUGH WERE RECEIVED THROUGH ACC EPTABLE MODE BUT ASSESSEE COULD NOT ESTABLISH THE BONAFIDE OF THE TRANSACTIONS OR THE CREDITWORTHINESS OF THE LOAN CR EDITORS TO THE SATISFACTION OF THE DEPARTMENT. THEREFORE, HE TREAT ED THE AMOUNT OF RS. 4 LAKHS AS INCOME OF THE ASSESSEE AND DETERMINED THE TOTAL INCOME AT RS.81,47,709/-. AS I T APPEARS FROM RECORD, ASSESSEE DID NOT CHALLENGE THE ADDITIO N MADE BY THE ASSESSING OFFICER BY PREFERRING APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY. BE THAT AS IT MAY, THE ASSESSI NG OFFICER ISSUED A SHOW CAUSE NOTICE FOR IMPOSITION OF PENALT Y UNDER SECTION 271(1)(C) OF THE ACT. IN RESPONSE TO THE SH OW CAUSE NOTICE THOUGH, THE ASSESSEE EXPLAINED THAT HE ALL A LONE HAS COOPERATED WITH THE DEPARTMENT BY FURNISHING ALL NE CESSARY INFORMATION AND ACCEPTED THE ADDITION PROPOSED DURI NG THE ASSESSMENT PROCEEDINGS TO BUY PEACE WITH THE DEPART MENT. RATHER, THE ASSESSEE, EVEN IN ABSENCE OF ANY INCRIM INATING MATERIAL OR EVIDENCE VOLUNTARILY HAS OFFERED THE AD DITIONAL INCOME. THE DEPARTMENT HOWEVER, DID NOT FIND MERIT IN THE EXPLANATION OF THE ASSESSEE. ASSESSING OFFICER WAS OF THE VIEW THAT THE ADDITIONAL INCOME DISCLOSED BY THE ASSESSE E IN THE REVISED RETURN WAS ONLY ON ACCOUNT OF INFORMATION G ATHERED BY THE DEPARTMENT AS A RESULT OF SURVEY, WHICH THE ASS ESSEE WOULD OTHERWISE, HAVE NEVER DISCLOSED. ACCORDINGLY, ASSES SING OFFICER PASSED AN ORDER IMPOSING PENALTY OF RS.24,18,762 UN DER SECTION 271(1)(C) OF THE ACT. BEING AGGRIEVED OF TH E PENALTY IMPOSED, ASSESSEE PREFERRED APPEAL BEFORE THE LD. C IT(A). 3 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. 3. BEFORE THE FIRST APPELLATE AUTHORITY, IT WAS SUBMITTED BY THE ASSESSEE THAT THOUGH, ORIGINALLY A SSESSEE HAD FILED THE RETURN OF INCOME DECLARING TOTAL INCOME A T RS. NIL BUT SUBSEQUENTLY, DURING SURVEY, ASSESSEE HAD OFFERED A DDITIONAL INCOME OF RS.77.47 LAKHS WHICH WAS ALSO SHOWN IN TH E REVISED RETURN FILED BY THE ASSESSEE IN RESPONSE TO THE NOT ICE ISSUED UNDER SECTION 148 OF THE ACT. IT WAS SUBMITTED, THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTI ON 143(3) READ WITH SECTION 147 OF THE ACT, HAS ACCEPTED THE INCOME DECLARED IN THE REVISED RETURN AND HAS MADE A FURTH ER ADDITION OF RS. 4 LAKHS TOWARDS UNSECURED LOAN. THUS, IT WAS SUBMITTED BY THE ASSESSEE THAT WHEN THE ASSESSEE HAS VOLUNTAR ILY COME FORWARD AND OFFERED THE ADDITIONAL INCOME, EVEN IN ABSENCE OF ANY INCRIMINATING EVIDENCE ONLY FOR THE PURPOSE OF BUYING PEACE WITH THE DEPARTMENT, PENALTY SHOULD NOT HAVE BEEN IMPOSED. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HA S NOT RECORDED HIS SATISFACTION AS TO WHETHER THE INITIAT ION OF PENALTY WAS TOWARDS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. HE ALSO SUBMI TTED THAT THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271(1)(C ) WAS VAGUE AS THE ASSESSING OFFICER HAS NOT SPECIFICALLY STATED WHETHER PENALTY IS FOR CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. IT WAS SUBMITTED THAT MERELY MENTIONING THAT PENALTY PROCEEDINGS ARE INITIATED S EPARATELY IN THE ASSESSMENT ORDER DOES NOT COMPLY WITH THE REQUI REMENT OF SUB-SECTION (1B) OF SECTION 271(1) AS SUBSTITUTION, IF ASSESSING OFFICER MUST BE DISCERNIBLE FROM ASSESSMENT ORDER. IN THIS CONTEXT, ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNA TH COTTON AND ZINNING FACTORY 359 ITR 565. IT WAS SUBMITTED B Y THE 4 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. ASSESSEE THAT THE PENALTY IMPOSED IN PURSUANCE TO S HOW CAUSE NOTICE, WHICH IS VAGUE, CANNOT BE SUSTAINED AS THE ASSESSEE COULD NOT HAVE BEEN OFFERED HIS EXPLANATION IN RESP ONSE TO SUCH A VAGUE NOTICE. IN THIS CONTEXT, ASSESSEE RELI ED UPON THE DECISION OF ITAT, VISAKHAPATNAM BENCH IN THE CASE O F M/S. GODAVARI TOWN SHIPS P. LTD., VS. DCIT ITA.NO.54/VIZ AG/2012 DATED 29.01.2014. APART FROM THIS, IT WAS ALSO SUB MITTED BY THE ASSESSEE THAT THE ADDITIONAL INCOME OFFERED IN THE REVISED RETURN CANNOT BE CONSIDERED AS CONCEALED INCOME AS THE ASSESSING OFFICER HAS ACCEPTED THE ENTIRE INCOME AN D HAS STARTED HIS COMPUTATION FROM THE INCOME OFFERED BY THE ASSESSEE. IN THIS CONTEXT, HE RELIED ON THE DECISIO N OF HONBLE A.P. HIGH COURT IN THE CASE OF V.V. PROJECTS & INVE STMENTS P. LTD., VS., DCIT 300 ITR 40. AS FAR AS THE ADDITION OF RS. 4 LAKHS IS CONCERNED, IT WAS SUBMITTED THAT THE ADDITION PR OPOSED DURING THE SURVEY OPERATION AS WELL AS IN THE COURS E OF ASSESSMENT PROCEEDINGS WERE ACCEPTED BY THE ASSESSE E ONLY TO BUY PEACE AND TO AVOID PROTRACTED LITIGATION. THE L D. CIT(A), HOWEVER, AFTER CONSIDERING THE SUBMISSIONS OF THE A SSESSEE DID NOT FIND ANY MERIT IN THE SAME AND UPHELD THE IMPOS ITION OF PENALTY ON THE GROUND THAT AS A RESULT OF INFORMATI ON FOUND DURING THE COURSE OF SURVEY OPERATION ASSESSEE WAS COMPELLED TO OFFER ADDITIONAL INCOME IN THE REVISED RETURN FI LED IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED UNDER SECT ION 148 OF THE ACT. BEING AGGRIEVED, ASSESSEE IS IN APPEAL BEF ORE US. 4. THE LEARNED A.R. MORE OR LESS REITERATED THE SUBMISSIONS MADE BEFORE THE FIRST APPELLATE AUTHORI TY. THE SUBMISSIONS MADE BY THE LEARNED A.R. BRIEFLY ARE AS FOLLOWS : (I) THE ASSESSING OFFICER WHILE DIRECTING INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN THE ASSESSMENT ORDER HAS NOT RECORDED HIS 5 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. SATISFACTION THAT THE ADDITION/DISALLOWANCE IS DUE TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME AS MANDATED BY SECTION 271(1B) OF THE ACT. (II) THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271(1)(C) IS VAGUE AS THE ASSESSING OFFICER HAS NOT POINTED OUT WHETHER PENALTY PROPOSED TO BE IMPOSED IS FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. (III) THE ASSESSING OFFICER HAVING ACCEPTED THE INCOME OFFERED BY THE ASSESSEE IN THE REVISED RETURN, THER E IS NO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. HENCE, PENALTY IS NOT IMPOSABLE UNDER SECTION 271(1)(C). (IV) THE ADDITION MADE OF RS. 4 LAKHS BY THE ASSESSING OFFICER ALSO CANNOT BE SAID TO BE CONCEALMENT OF INCOME SO AS TO VISIT THE ASSESSEE WITH PENALTY UNDER SECTION 271(1)(C). IN SUPPORT OF SUCH CONTENTION, LEARNED A.R. RELIED UPON THE FOLLOWING DECISIONS. (A) CIT VS. MANJUNATH COTTON & GINNING FACTORY 359 ITR 565. (B) CIT VS. TRIVENI ENGINEERING & INDUSTRIES LTD., INCOME TAX APEAL NO. 103 OF 2014. (C) K. PRAKASH SHETTY VS. ACIT, ITA.NO. 265 TO 277/BANG/2014 DATED 05.06.2014. (D) VIJAY KUMAR SURANA VS. ACIT, ITA.NO.812/BANG/ 2013 DATED 30.09.2014. 5. LEARNED D.R. ON THE OTHER HAND STRONGLY SUPPORTING THE IMPOSITION OF PENALTY, SUBMITTED BEF ORE US THAT ASSESSEE ORIGINALLY HAD FILED THE RETURN OF INCOME DECLARING NIL INCOME. ONLY AFTER SURVEY WAS CONDUCTED AND INFORMA TION 6 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. CAME TO THE NOTICE OF THE DEPARTMENT THAT ASSESSEE HAS NOT DISCLOSED CORRECT INCOME, ASSESSEE OFFERED ADDITION AL INCOME IN THE COURSE OF SURVEY. HOWEVER, THE ASSESSEE DID NOT FILE ANY RETURN POST SURVEY DECLARING THE ADDITIONAL INCOME. ONLY AFTER A NOTICE WAS ISSUED UNDER SECTION 148, ASSESSEE CAM E FORWARD TO FILE REVISED RETURN BY DECLARING THE ADDITIONAL INCOME. LEARNED D.R. FURTHER SUBMITTED THAT EVEN DURING THE PENALTY PROCEEDING ALSO ASSESSEE HAS NOT EXPLAINED THE REAS ON WHY THE ADDITIONAL INCOME WAS NOT DISCLOSED ORIGINALLY. THE REFORE, THE CONCEALMENT BY THE ASSESSEE HAS BEEN PROVED. IN THE SE CIRCUMSTANCES, THE EXEMPTION OF PENALTY UNDER SECTI ON 271(1)(C) IS JUSTIFIED. LEARNED D.R. SUBMITTED THAT THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS HAVING DIRECTED FOR INITIATION OF PROCEEDING FOR IM POSITION OF PENALTY UNDER SECTION 271(1)(C) IT HAS TO BE ACCEPT ED AS A DEEMED SATISFACTION IN TERMS WITH SECTION 271(1B). LEARNED D.R. SUBMITTED THAT EVEN THE ASSESSEES ALLEGATIONS WITH REGARD TO DEFECT SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER IS UNACCEPTABLE AS CONCEALMENT OF INCOME IS OTHERWISE PROVED FROM THE CONDUCT OF THE ASSESSEE. IN SUPPORT OF SUC H CONTENTION, LEARNED D.R. RELIED UPON THE FOLLOWING DECISIONS : (I) CIT & ANOTHER VS. S.V. ANGIDI CHETTIAR 44 ITR 739 (SC) (II) MAK DATA P. LTD., VS. CIT 358 ITR 593 (S.C.) (III) CIT VS. K.P. SAMPATH REDDY 197 ITR 232 (KAR.) (HC) (IV) SMT. KUSUM JAISWAL VS. CIT 273 ITR 369 (ALLHD.) (HC) (V) LMP PRECISION ENGG. CO. LTD., VS. DCIT 330 ITR 93 (GUJ.) (HC) 7 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. 6. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE MATERIALS ON RECORD. WE HAVE ALSO CAREF ULLY APPLIED OUR MIND TO THE DECISION RELIED UPON BY THE PARTIES BEFORE US. BEFORE DECIDING WHETHER IMPOSITION OF PE NALTY IN THE PRESENT CASE IS VALID, IT IS NECESSARY TO NOTE CERT AIN FACTS. UNDISPUTEDLY, THE ASSESSEE ORIGINALLY HAS FILED ITS RETURN OF INCOME DECLARING NIL INCOME. IT IS ALSO A FACT ON R ECORD THAT AT THE TIME OF SURVEY IN THE BUSINESS PREMISES OF THE PARTNERSHIP FIRM, WHEREIN ASSESSEE IS A PARTNER, ASSESSEE CAME FORWARD TO OFFER CERTAIN ADDITIONAL INCOME. IT IS ALSO A FACT ON RECORD THAT IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT, THE ASSESSEE FILED A REVISED RETURN SHOWING ADDITIO NAL INCOME AS WAS OFFERED BY HIM AT THE TIME OF SURVEY. IT IS ALSO TO BE NOTED THAT WHILE COMPLETING THE ASSESSMENT UNDER SE CTION 143(3) READ WITH SECTION 147 OF THE ACT, THE ASSESS ING OFFICER HAS ACCEPTED THE INCOME OFFERED IN THE REVISED RETU RN. OF COURSE, THE ASSESSING OFFICER HAS MADE A FURTHER AD DITION OF RS. 4 LAKHS TOWARDS UNSECURED LOAN FROM THREE PERSO NS. 6.1. IT IS THE CONTENTION OF THE ASSESSEE THAT SATISFACTION OF THE ASSESSING OFFICER IN TERMS WITH SECTION 271(1B) WHILE DIRECTING INITIATION OF PROCEEDINGS U NDER SECTION 271(1)(C) MUST BE DISCERNIBLE FROM THE ASSESSMENT O RDER. MERELY MENTIONING THAT PENALTY PROCEEDING IS INITIA TED SEPARATELY DOES NOT MEET THE STATUTORY REQUIREMENTS . IN THIS CONTEXT, IT IS PROFITABLE TO REFER TO THE OBSERVATI ONS MADE BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA). THE HONBLE KARNATAKA HIGH COURT AFTER EXAMINING THE IMPORT OF SECTION 271(1B) OBSERVED AS UNDER : 49. BY THE AFORESAID DEEMING PROVISION A LEGAL FIC TION IS CREATED. WHEN THE ASSESSMENT ORDER CONTAINS A DIREC TION 8 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. FOR INITIATION OF PENALTY PROCEEDINGS SUCH ORDER SH ALL DEEM TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEEDINGS UNDER SUB-CLAUSE (C) OF SECTION 271 OF THE ACT. AS THE LANGUAGE OF SECTION 271 MAKES IT CLEAR BEFORE A DIRECTION IS ISSUED TO PAY PENALTY, THE PERSON ISSUING THE DIRECTION MUST BE SATISFIED ABOUT THE CONDITION MENTIONED IN CLAUSE (C) OF SECTION 27 1(1). THE QUESTION IS, WHETHER SUCH SATISFACTION SHOULD BE IN WRITING. AS THE SATISFACTION HAS TO BE IN THE COURS E OF ANY PROCEEDINGS AND IT IS AT THE TIME OF COMPUTATION OF THE TOTAL INCOME OF ANY PERSON AND AS IT RESULTS IN A ASSESSMENT ORDER WHICH HAS TO BE MANDATORILY IN WRI TING, THE SATISFACTION SHOULD BE FOUND IN THE SAID ORDER. THE EXISTENCE OF THESE FACTS IS A CONDITION PRECEDENT F OR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . THIS PROVISION IS ATTRACTED ONCE IN ANY SUCH ASSESSMENT ORDERS, A DIRECTION FOR INITIATION OF PENALTY PROCE EDINGS UNDER CLAUSE (C.) OF SUB-SECTION (1) IS MADE. THERE BY, IT MEANS EVEN IF THE ORDER DOES NOT CONTAIN A SPECIFIC FINDING THAT THE ASSESSEE HAS CONCEALED INCOME OR HE IS DEE MED TO HAVE CONCEALED INCOME BECAUSE OF THE EXISTENCE O F FACTS WHICH ARE SET OUT IN EXPLANATION-1, IF A MERE DIREC TION TO INITIATE PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SU B-SECTION (1) IS FOUND IN THE SAID ORDER, BY LEGAL FICTION, I T SHALL BE DEEMED TO CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FOR INITIATION OF PENALTY PROCEEDINGS UNDER SAID CL AUSE (C). THE SAID PROVISION CAME UP FOR INTERPRETATION BY TH E DELHI HIGH COURT IN THE CASE OF MADHUSHREE GUPTA REPORTED IN 317 ITR 107 WHEREIN THE DELHI HIGH COURT HELD THAT THE SATISFACTION SHOULD BE DISCERNABLE IN THE ASSESSMEN T ORDER. POSITION POST AMENDMENT IS NOT IN MUCH VARIA NCE WITH PRE-AMENDMENT. THEY HELD THAT PROVISIONS WILL FALL FOUL OF ARTICLE 14 OF CONSTITUTION IF THE SAME IS N OT READ IN THE MANNER IT HAS READ AND IN FACT HAS READ DOWN TH E PROVISIONS TO HOLD IT CONSTITUTIONAL. THEREFORE, AC CORDING TO DELHI HIGH COURT, IN POST AMENDMENT AND PRE AMENDME NT THERE IS NOT MUCH DIFFERENCE AND THE SATISFACTION I S REQUIRED TO ARRIVED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND SHOULD BE DISCERNABLE IN THE ASSESS MENT ORDER. THEREFORE, THIS PROVISION MAKES IT ABUNDANTL Y CLEAR THAT SATISFACTION OF THE ASSESSING OFFICER BEFORE I NITIATION OF PENALTY PROCEEDINGS IS A MUST. THE SATISFACTION SHOULD BE THAT HE HAS CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULAR OF SUCH INCOME AND EVEN IN THE ABSENCE OF THOSE EXPRESSED WORDS OR FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS, IF A DIRECT ION AS AFORESAID IS MENTIONED, IT CONSTITUTES SATISFACTION OF THE ASSESSING OFFICER. 9 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. 50. A READING OF SECTION CLEARLY INDICATES THAT TH E ASSESSMENT ORDER SHOULD CONTAIN A DIRECTION FOR INI TIATION OF PENALTY PROCEEDINGS. THE MEANING OF THE WORD DIR ECTION IS OF IMPORTANCE. MERELY, SAYING THAT PENALTY PROCE EDINGS ARE BEING INITIATED WILL NOT SATISFY THE REQUIREMEN T. THE DIRECTION TO INITIATE PROCEEDINGS SHOULD BE CLEAR A ND NOT BE AMBIGUOUS. IT IS WELL SETTLED LAW THAT FISCAL STATU TES ARE TO BE CONSTRUED STRICT AND MORE SO THE DEEMING PROVISI ONS BY WAY OF LEGAL FICTION ARE TO BE CONSTRUED MORE STRIC TLY. THEY HAVE TO BE INTERPRETED ONLY FOR THE SAID ISSUE FOR WHICH IT HAS DEEMED AND THE MANNER IN WHICH THE DEEMING HAS BEEN CONTEMPLATED TO BE RESTRICTED IN THE MANNER SO UGHT TO BE DEEMED. AS THE WORDS USED IN THE LEGAL FICTIO N OR THE DEEMING PROVISIONS OF SECTION 271(B) IS DIRECTION, IT IS IMPERATIVE THAT THE ASSESSMENT ORDER CONTAINS A DIR ECTION. USE OF THE PHRASES LIKE (A) PENALTY PROCEEDINGS ARE BEING INITIATED SEPARATELY AND (B) PENALTY PROCEEDINGS UN DER SECTION 271(1)(C) ARE INITIATED SEPARATELY, DO NOT COMPLY WITH THE MEANING OF THE WORD DIRECTION AS CONTEMPLA TED EVEN IN THE AMENDED PROVISIONS OF LAW. THE DIRECTIO N SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. THE WORD DIRECTION HAS BEEN INTERPRETED BY THE DECISION OF THE APEX COURT IN THE CASE OF RAJENDRANATH REPORTED IN 120 ITR PG. 14, WHERE IT HAS BEEN HELD THAT IN ANY EVEN T WHATEVER ELSE IT MAY AMOUNT TO, ON ITS VERY TERMS T HE OBSERVATION THAT THE ITO IS FREE TO TAKE ACTION, TO ASSESS THE EXCESS IN THE HAD OF THE CO-OWNERS CANNOT BE DESCRIBED AS A DIRECTION. A DIRECTION BY A STATUTOR Y AUTHORITY S IN THE NATURE OF AN ORDER REQUIRING POS ITIVE COMPLIANCE. WHEN IT IS LEFT TO THE OPTION AND DISCR ETION OF THE ITO WHETHER OR NOT TAKE ACTION, IT CANNOT BE DE SCRIBED AS A DIRECTION. 51. THEREFORE, IT IS SETTLED LAW THAT IN THE ABSEN CE OF THE EXISTENCE OF THESE CONDITIONS IN THE ASSESSM ENT ORDER PENALTY PROCEEDINGS COULD NOT BE PROCEEDED WI TH. THE PROCEEDINGS WHICH ARE INITIATED CONTRARY TO THE SAID LEGAL POSITION ARE LIABLE TO BE SET ASIDE. 6.2. SIMILARLY, THE HONBLE ALLAHABAD HIGH COURT I N THE CASE OF CIT VS. M/S. TRIVENI ENGINEERING INDUSTRIES LTD., (SUPRA) OBSERVED AS UNDER : 10 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. IN ORDER THAT THE DEEMING FICTION IN SUB-SECTION ( 1B) MUST APPLY, TWO REQUIREMENTS MUST BE FULFILLED. THE FIRS T REQUIREMENT IS THAT AN AMOUNT MUST HAVE BEEN ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSESSMENT OR REASSESSMENT . THE SECOND IS THAT THE ORDER OF ASSESSMENT OR REASSESSMENT MUST CONTAIN A DIRECTION FOR THE INITI ATION OF PENALTY PROCEEDINGS UNDER CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271. WHERE BOTH THE CONDITIONS AS AFORESAID ARE FULFILLED, THE ORDER OF ASSESSMENT MUST BE DEEMED T O CONSTITUTE SATISFACTION OF THE ASSESSING OFFICER FO R INITIATING PENALTY PROCEEDINGS UNDER CLAUSE (C). IN THE PRESENT CASE, WE HAVE DULY PERUSED THE ENTIRE ORDER OF ASSESSMENT UNDER SECTION 143(3) WHICH HAS BEEN PLAC ED ON RECORD. FROM THE ORDER, IT IS ABUNDANTLY CLEAR T HAT IN RESPECT OF THOSE HEADS WHERE THE ASSESSING OFFICER CONSIDERED IT APPROPRIATE TO INITIATE PENALTY PROCE EDINGS UNDER SECTION 271(1)(C), HE MADE A SPECIFIC DIRECTI ON TO THAT EFFECT. IN RESPECT OF THE CLAIM OF INTEREST ON THE SDF LOAN, THERE IS NO DIRECTION BY THE ASSESSING OFFICE R. THE ONLY OBSERVATION BY THE ASSESSING OFFICER IN RESPEC T OF THAT COMPONENT IS AS FOLLOWS : .. 5.2. .. 5.3. .. THE ABSENCE OF A REFERENCE TO THE INITIATION OF PRO CEEDINGS UNDER SECTION 271(1)(C) IS NOT AN INADVERTENT OMISS ION SINCE IT IS CLEAR THAT IN RESPECT OF SEVERAL OTHER HEADS, WHERE THE ASSESSING OFFICER DID CONSIDER IT APPROPR IATE TO INITIATE PENALTY PROCEEDINGS, HE MADE AN OBSERVATIO N TO THAT EFFECT. IN FACT, EVEN IN THE CONCLUDING PART O F HIS ORDER, THE ASSESSING OFFICER ISSUED A DIRECTION FOR INITIA TING PENALTY NOTICE UNDER SECTION 271(1)(C) AS DISCUSSE D ABOVE. THE EXPRESSION AS DISCUSSED ABOVE IS MATE RIAL BECAUSE IT REFERS TO THOSE HEADS IN RESPECT OF WHIC H A SPECIFIC DIRECTION WAS ISSUED BY HIM FOR INITIATING STEPS UNDER SECTION 271(1)(C). UNDOUBTEDLY, AS HELD IN TH E DECISION OF THE SUPREME COURT IN MAK DATA P. LTD., VS. CIT-1, THE ASSESSING OFFICER HAS TO SATISFY HIMSELF WHETHER PENALTY PROCEEDINGS SHOULD BE INITIATED OR NOT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND HE IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTIC ULAR MANNER OR REDUCE IT INTO WRITING. HOWEVER, IN THE P RESENT CASE, THERE IS NO DIRECTION WHATSOEVER BY THE ASSES SING OFFICER IN RESPECT OF THE SPECIFIC HEAD OF INTEREST ON THE SDF LOAN, ON WHICH THE PENALTY WAS DELETED BY THE 11 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. TRIBUNAL. THIS OMISSION IN THE CASE OF THE SDF LOAN STANDS IN SHARP CONTRAST TO THOSE ITEMS WHERE THE ASSESSIN G OFFICER HAS SPECIFICALLY DIRECTED THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C.). CONSEQUENTLY, AND FOR THIS REASON, WE ARE OF THE VIEW THAT THE TRIBUN AL WAS JUSTIFIED IN DELETING THE PENALTY UNDER SECTION 271 (1)(C) IN RESPECT OF THE SDF LOAN. THE APPEAL, THEREFORE, WIL L NOT RAISE ANY SUBSTANTIAL QUESTION OF LAW, IT IS, ACCOR DINGLY DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 6.3. THE PRINCIPLE OF LAW WHICH EMERGES FROM AFORE SAID OBSERVATIONS OF THE HONBLE HIGH COURTS ARE, THE SA TISFACTION OF THE ASSESSING OFFICER WITH REGARD TO FACTUM OF CONC EALMENT OF A PARTICULAR INCOME MUST BE DISCERNIBLE FROM THE ASSE SSMENT ORDER IN TERMS WITH SECTION 271(1B). IN OTHER WORDS , THOUGH, THE ASSESSING OFFICER WHILE DIRECTING INITIATION OF PROCEEDINGS UNDER SECTION 271(1)(C) IN COURSE OF ASSESSMENT PRO CEEDINGS IS NOT REQUIRED TO RECORD IN DETAIL HIS SATISFACTION O N CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME, HOWEVER, THE DISCUSSIONS MADE IN THE ASSESSMENT ORD ER PRIMA FACIE MUST PROVE IT. ON A PERUSAL OF THE IMPUGNED A SSESSMENT ORDER, IT IS EVIDENT, ASSESSING OFFICER HAS NOT MAD E ANY DISCUSSION WITH REGARD TO THE INCOME OFFERED BY THE ASSESSEE IN THE REVISED RETURN. THE ONLY DISCUSSION MADE BY ASS ESSING OFFICER IS WITH REFERENCE TO THE ADDITION OF UNSECU RED LOAN OF RS. 4 LAKHS. IN THE ASSESSMENT ORDER, ASSESSING OFF ICER HAS ALSO NOT SPECIFIED THE QUANTUM OF INCOME WHICH ACCO RDING TO HIM WAS CONCEALED OR IN RESPECT OF WHICH IN ACCURAT E PARTICULARS WERE FURNISHED BY ASSESSEE. SATISFACTIO N OF THE ASSESSING OFFICER IN TERMS WITH SECTION 271(1B) IS THEREFORE, NOT DISCERNIBLE FROM THE ASSESSMENT ORDER, AT LEAST , TO THE EXTENT OF INCOME DECLARED BY THE ASSESSEE IN THE RE VISED RETURN OF INCOME. THAT BEING THE CASE, APPLYING THE RATIO OF THE DECISIONS REFERRED TO BY US, HEREIN BEFORE, PENALTY UNDER 12 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. SECTION 271(1)(C) COULD NOT HAVE BEEN IMPOSED AT LE AST, ON THE QUANTUM OF INCOME DECLARED BY THE ASSESSEE IN THE R EVISED RETURN. 6.4. ANOTHER CONTENTION OF THE LEARNED A.R. IS, TH E SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 271 READ WITH SECTION 274 OF THE ACT IS VAGUE AS IT DOE S NOT SPECIFY WHETHER THE PENALTY TO BE IMPOSED UNDER SECTION 271 (1)(C) IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. UNDISPUTEDLY, IN THE PRESENT CASE ASSESSING OFFICER HAS IMPOSED PENALTY UNDER SE CTION 271(1)(C) ALLEGING CONCEALMENT OF INCOME. ON A PERU SAL OF THE SAID NOTICE, A COPY OF WHICH IS PLACED AT PAGE-1 OF THE PAPER BOOK, IT IS TO BE NOTED THAT THE ASSESSING OFFICER IN THE SAID NOTICE HAS NOT DISCLOSED HIS MIND AS TO WHETHER HE PROPOSED TO IMPOSE PENALTY UNDER SECTION 271(1)(C) FOR CONCEALI NG PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF CIT AND ANOTHER VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA), WHILE CONSIDERING IDENTICAL ISSUE HELD AS UNDER: 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHI CH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HA S PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORD ER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CON TAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH P ENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, I N FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTONED IN SECTION 271 S HOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEN D 13 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDIN GS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LI ABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM HERE ALL THE GROUNDS MENTIONED IN SEC TION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED , NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINC IPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FAC TS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDING S ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE G ROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QU A NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDI NGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SA ID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE I S CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON T HE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE, THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALT Y SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS N OT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS 14 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE A CT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIE D IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THU S THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PA L REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJRAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLE AR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASS ESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING OF INACC URATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOU T STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON-APPLICATION OF MIND. 7. AS COULD BE SEEN, THE HONBLE KARNATAKA HIGH COURT (SUPRA), IN VERY CLEAR TERMS HELD THAT UNLESS SHOW CAUSE NOTICE IS CLEAR AS TO WHETHER THE PENALTY PROPOSED TO BE IMPOSED IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME NO P ENALTY CAN BE IMPOSED UNDER SECTION 271(1)(C) AS THE NOTICE IS SUED IS DEFECTIVE. THE HONBLE HIGH COURT HELD THAT IN ABSE NCE OF CLARITY IN THE SHOW CAUSE NOTICE, THE ASSESSEE COUL D NOT BE 15 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. EXPECTED TO FURNISH HIS EXPLANATION IN AN EFFECTIVE MANNER. THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT (SUPRA) CLEARLY APPLY TO THE FACTS OF THE PRESENT CASE. AS ALREADY STATED, IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 271(1 ) READ WITH SECTION 274, THE ASSESSING OFFICER HAS NOT SPECIFIE D WHETHER THE PENALTY PROPOSED TO BE IMPOSED UNDER SECTION 27 1(1)(C) IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. NEITHER THERE IS ANY MENTION IN THE SAID SHOW CAUSE NOTICE AS TO WHETHER PENALTY PROPOSED TO BE IMPOSED IS WITH REFERENCE TO ADDITION MADE IN THE ASSESSMENT ORDER OR EVEN WITH REFERENCE TO INCOME D ECLARED BY THE ASSESSEE IN THE REVISED RETURN OF INCOME. THERE FORE, IN ABSENCE OF A SPECIFIC MENTION OF QUANTUM OF INCOME WHICH, ACCORDING TO ASSESSING OFFICER IS SUBJECT MATTER OF CONCEALMENT, THE SHOW CAUSE NOTICE IS DEFECTIVE. HE NCE, THE PENALTY IMPOSED IN CONSEQUENCE THERETO IS ALSO INVA LID. THIS VIEW IS IN TERMS WITH THE RATIO LAID DOWN BY THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUATHA COTTO N & GINNING MILLS (SUPRA) AS WELL AS THE FOLLOWING DECI SIONS OF THE ITAT. (I) SAMSON PERINCHERY VS. ACIT, C.C. 18 & 19, MUMBAI, ITA.NO.4625 TO 4630/MUM/2013 DATED 11.10.2013. (II) MR. K. PRAKASH SHETTY VS. ACIT, C.C.1(3), BANGALORE ITA.NOS. 265 TO 267/BANG/2014 AND S.P.NOS. 86 TO 88/BAG/2014 DATED 05.06.2014 (III) MR. VIJAY KUMAR SURANA VS. ACIT, CIRCLE 7(2) BANGALORE ITA.NO.812/BANG/2013 DATED 30.09.2014. 8. HAVING HELD THAT THE IMPOSITION OF PENALTY UNDE R SECTION 271(1)(C) TO BE INVALID ON THE AFORE-STATED TECHNICAL GROUNDS, WE WILL NOW EXAMINE WHETHER PENALTY IS SUS TAINABLE 16 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. ON MERITS. AS DISCUSSED EARLIER, ASSESSEE IN THE RE VISED RETURN HAS OFFERED INCOME OF RS.77,47,709. AS EVIDENT FROM THE IMPUGNED ASSESSMENT ORDER, ASSESSING OFFICER HAS ST ARTED HIS COMPUTATION FROM THE INCOME OFFERED BY THE ASSESSEE . THE ONLY ADDITION MADE BY ASSESSING OFFICER IS THE UNSECURED LOAN OF RS. 4 LAKHS. IN THESE CIRCUMSTANCES, THE INCOME OFF ERED IN THE REVISED RETURN OF INCOME CANNOT BE TREATED AS CONCE ALED INCOME BY MAKING A REFERENCE TO THE ORIGINAL RETURN , THE EFFECT OF WHICH IS EFFACED AFTER ACCEPTANCE OF REVISED RET URN. SINCE THE IMPUGNED ASSESSMENT ORDER AS WELL AS THE SUBSEQUENT PENALTY PROCEEDINGS ARE WITH REFERENCE TO INCOME DECLARED I N REVISED RETURN AND NOT THE ORIGINAL RETURN, THE INCOME OFFE RED IN THE REVISED RETURN CANNOT BE CONSIDERED AS THE CONCEALE D INCOME. AS FAR AS THE ADDITION OF RS. 4 LAKHS IS CONCERNED, AS CAN BE SEEN THE ASSESSING OFFICER HAS ADMITTED IN THE ASSE SSMENT ORDER THAT IT IS THROUGH ACCEPTABLE MODE, HOWEVER, ALLEGING THAT THE ASSESSEE HAS NOT BEEN ABLE TO PRESENT GENU INENESS AND CREDITWORTHINESS HE HAS MADE THE ADDITION OF RS . 4 LAKHS. HOWEVER, IT IS TO BE NOTED THAT ONCE THE LOAN IS TH ROUGH ACCEPTABLE MODE, IT CANNOT BE CONSIDERED TO BE NOT GENUINE. ONLY THING REQUIRED TO BE ESTABLISHED IS THE CREDIT WORTHINESS OF THE CREDITOR AS THE IDENTITY OF THE CREDITOR IS ALS O ESTABLISHED. IT IS NOT FORTHCOMING FROM THE ASSESSMENT ORDER WHETHE R ANY ENQUIRY WAS CONDUCTED TO ESTABLISH THAT CREDITORS A RE NOT CREDITWORTHY. MAY BE FOR SOME REASON OR THE OTHER T HE ASSESSEE AGREED TO THE ADDITION OF THE AFORESAID AMOUNT. HOW EVER, THAT DOES NOT IFSO FACTO PROVE THAT THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. MAY BE FOR AVOIDING PROTRACTED LITIGATION OR BUYING PEACE WITH THE DEPARTMENT, THE ASSESSEE HAD ACCEPTED ADDITION OF R S. 4 LAKHS. BUT, THAT BY ITSELF DOES NOT PROVE CONCEALMENT OF I NCOME. IT IS RELEVANT TO NOTE IN THE PENALTY ORDER ASSESSING OFF ICER HAS 17 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. ALLEGED THAT ASSESSEE HAS NOT OFFERED ANY EXPLANATI ON WITH RESPECT TO ADDITIONAL INCOME OF RS. 77 LAKHS. HOWEV ER, AS STATED HEREINABOVE, ASSESSING OFFICER WHILE COMPLET ING THE ASSESSMENT HAS ACCEPTED THE INCOME DECLARED BY THE ASSESSEE WITHOUT ANY DEMUR. IN THE SHOW CAUSE NOTICE UNDER S ECTION 271 READ WITH SECTION 274 ALSO THE ASSESSING OFFICE R HAS NOT MADE ANY REFERENCE TO THE INCOME OFFERED IN THE REV ISED RETURN. THEREFORE, WHEN THE REVISED RETURN WAS ACCEPTED, TH E ASSESSEE MUST BE HAVING A BONAFIDE BELIEF THAT PENALTY PROCE EDING IS ONLY WITH REFERENCE TO ADDITION OF RS. 4 LAKHS AND NOT THE ENTIRE INCOME. 9. THE LEARNED D.R. HAS RELIED UPON THE DECISION O F HONBLE SUPREME COURT IN THE CASE OF MAC DATA P. LT D., VS. CIT 358 ITR 593. HOWEVER, THE SAID DECISION IS COMPLET ELY ON DIFFERENT SET OF FACTS. AS IS EVIDENT FROM THE SAID DECISION THE HONBLE SUPREME COURT UPHELD THE IMPOSITION OF PENA LTY ON CONSIDERING THE FACT THAT EVEN THOUGH THERE WAS SUF FICIENT INFORMATION AVAILABLE AS A RESULT OF SURVEY THAT AS SESSEE HAS NOT DISCLOSED THE INCOME EARNED BY HIM BUT THE ASSE SSEE NEITHER OFFERED ANY INCOME NOR FILED ANY REVISED RE TURN OF INCOME. ONLY IN THE COURSE OF ASSESSMENT PROCEEDING S WHEN THE ASSESSING OFFICER AFTER REFERRING TO THE INCRIM INATING MATERIAL WAS ON THE VERGE OF MAKING ADDITION THE AS SESSEE CAME FORWARD TO OFFER ADDITIONAL INCOME. IN THIS CO NTEXT, THE HONBLE SUPREME COURT HELD THAT AS THE ADDITIONAL I NCOME OFFERED BY THE ASSESSEE IS NOT VOLUNTARY, PENALTY I MPOSED WAS CORRECT. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE IN TERMS OF OFFER MADE BY HIM AT THE TIME OF SURVEY HAS FILED T HE REVISED RETURN OFFERING ADDITIONAL INCOME WHICH HAS ALSO BE EN ACCEPTED BY THE ASSESSING OFFICER WITHOUT MAKING ANY ADVERSE OBSERVATION. AS FAR AS OTHER DECISIONS REFERRED TO BY LEARNED 18 ITA.NO.578/VIZAG/2014 MR. N. SRINIVASA REDDY, VISAKHAPATNAM. D.R. ON CAREFUL EXAMINATION OF THE SAME THEY WERE F OUND TO BE FACTUALLY DISTINGUISHABLE AS IN NONE OF THESE CASES INTERPRETATION OF SECTION 271(1B) WAS INVOLVED. IN THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE DEPARTMENT HAVING FAILED TO PROVE CONCEALMENT OF IN COME BY ASSESSEE, IMPOSITION OF PENALTY IS NOT JUSTIFIED. A CCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.03.20 15. SD/- SD/- (J. SUDHAKAR REDDY) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER VISAKHAPATNAM, DATED 03 RD MARCH, 2015. VBP/- COPY TO 1. MR. N. SRINIVASA REDDY, D.NO.46-15-26/2, DONDAPA RTHI, VISAKHAPATNAM. 2. INCOME TAX OFFICER, WARD 1(4), PRATYAKSHAKAR BHA VAN, MVP COLONY DOUBLE ROAD, VISAKHAPATNAM 530 017. 3. CIT(A), 2 ND FLOOR, DIRECT TAXES BUILDING, OPP. RAITU BAZAR, DOUBLE ROAD, MVP COLONY, VISAKHAPATNAM 4. CIT-1, VISAKHAPATNAM 5. D.R. ITAT, VISAKHAPATNAM BENCH, VISAKHAPATNAM. //BY ORDER // ASST. REGISTRAR ITAT, VISAKHAPATNAM.