M/s Sanraj Engineering Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5988/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3884 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Keywords: Opportunity of being heard; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 143(3); 133(6); 68; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SH.G.D.AGARWAL, HONBLE PRESIDENT AND SH.K.N.CHARY, JUDICIAL MEMBER ITA NO. 5988/DEL/2016 (ASSESSMENT YEAR: 2006 -07) APPELLANT BY SH. ASHWANI KUMAR, ADV. RESPONDENT BY SH. S.S.RANA, CIT DR DATE OF HEARING 11 . 1 0.2017 DATE OF PRONOUNCEMENT 27 . 1 0.2017 ORDER PER K.N.CHARY, JUDICIAL MEMBER AGGRIEVED BY THE ORDER DATED 29.09.2016 IN APPEAL NO.84/13-14 PASSING BY THE COMMISSIONER OF INCOME TAX (APPEAL) [IN SHORT CIT(A)]-28, NEW DELHI FOR 2006-07 ASSESSMENT YEAR, ASSESSEE PREFERRED THIS AP PEAL ON THE FOLLOWING GROUNDS:- THAT THE ORDER DATED 29.09.2016 PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 IS AGAINST LAW AND FACTS ON THE FILE AS HE WAS NOT JUSTIFIED TO PARTLY UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN R ESTRICTING THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 OF RS.71,99,0 70/- (AS AGAINST RS.81,68,916/- IMPOSED BY THE LD. ASSESSING OFFICER ) BY GRANTING RELIEF OF ONLY RS.8,69,846/- FOR ALLEGED CONCEALMENT/FURNISHI NG INACCURATE PARTICULARS OF INCOME, WITHOUT CONSIDERING THE FACTS AND CIRCUM STANCES OF THE CASE AND THE LEGAL POSITION IN MUCH AS NO SUCH PENALTY IS EX IGIBLE IN THE FACTS & CIRCUMSTANCES OF THE CASE. SANRAJ ENGINEERING PVT. L TD., A-4/B-1, MOHAN COOP INDL. ESTATE, NEW DELHI. PAN-AACCS6897E VS ITO, WARD-7(3), NEW DELHI. (APPELLANT) (RESPONDENT) ITA NO. 5988/DEL/2016 2. HOWEVER, SUBSEQUENTLY THE ASSESSEE PLEADED THE F OLLOWING ADDITIONAL GROUNDS:- THAT THE ORDER DATED 29.09.2016 PASSED U/S 250(6) O F THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) 28, NEW DELHI IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO PARTLY UPHOLD THE ACTION OF THE LD. ASSESSING OFFICER IN L EVYING PENALTY OF RS.71,99,070/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 BY IGNORING THE FACT THAT WHILE THE PENALTY PROCEEDINGS HAD BEEN INITIAT ED FOR ALLEGED CONCEALMENT OF INCOME, THE SAME HAD BEEN LEVIED ON GROUNDS OF A LLEGED FURNISHING INACCURATE PARTICULARS OF INCOME THEREBY RENDERING THE SAME VOID AB-INITIO. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A COMPANY, FILED THEIR RETURN OF INCOME ON 30.11.2006 DECLARING THE INCOME AS NIL. DURING THE SCRUTINY PROCEEDINGS, AMONG OTHER THINGS, THE AO FOUND THAT THE ASSESSEE HAS SHOWN TO HAVE TAKEN UNSECURED LOANS OF RS.4,04,30,000/- DURI NG THE RELEVANT YEAR AND AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE A SSESSEE, THE AO CONCLUDED THAT IN RESPECT OF SIX OF THE ELIGIBLE CREDITORS, THE AS SESSEE FAILED TO PROVE THEIR IDENTITY, THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE T RANSACTIONS, AS SUCH THE AO CONCLUDED THAT THE TRANSACTIONS IN RESPECT OF SUCH CREDITORS ARE ALL SHAM AS SUCH BY INVOKING PROVISIONS U/S 68 OF THE ACT, THE AO MA DE AN ADDITION TO THE TUNE OF RS.2,40,00,000/- AMONG OTHER THINGS. THE DETAILS O F SUCH ALLEGED CREDITORS ARE AS FOLLOWS:- 1. SONAL GUPTA RS.35,00,000/- 2. GAURI GUPTA RS.27,25,000/- 3. NAVNEET GUPTA, HUF RS. 5,75,000/- 4. CACTUS MENSWEAR FASHION P LTD. RS.20,00,000/- 5. NIRVANA INDIA P LTD. RS.1,40,00,000/- 6. PARUL GUTPA RS.12,00,000/- RS.2,40,00,000 4. IN APPEAL PREFERRED BY THE ASSESSEE, THE ASSESSE E FILED AN APPLICATION U/S 46A OF THE INCOME TAX RULES, 1962 ON 16.03.2009 AND VIDE ORDER DATED 18.03.2009, THE REMAND REPORT WAS SOUGHT AND VIDE R EMAND REPORT DATED ITA NO. 5988/DEL/2016 19.05.2009, THE AO STATED THAT PURSUANT TO THE REMA ND PROCEEDINGS, NOTICE U/S 133(6) OF THE ACT WAS ISSUED AND IN RESPONSE TO THE SAME, THE ABOVE PERSONS FURNISHED THE COPIES OF THEIR ITRS & BANK STATEMENT S ALONG WITH CONFIRMATION OF HAVING GIVEN THE UNSECURED LOANS. AO FURTHER STATE D THAT ONE MS. PARUL GUPTA STATED THAT SHE HAD GIVEN LOAN ON 13.03.2006 BUT TH E CHEQUE WAS CLEARED ONLY ON 09.05.2006, AS SUCH SHE WAS UNDER THE IMPRESSION TH AT THE LOAN WAS GIVEN IN THE FY 2006-07. HAVING CONSIDERED THE REMAND REPORT AN D REJOINDER THERETO, LD. CIT(A) HELD THAT THE CASH CREDITORS WERE IDENTIFIED AND IT WAS ESTABLISHED THAT IT WAS ESTABLISHED THEIR CAPACITY TO LEND THE MONEY TO THE ASSESSEE AND GENUINENESS OF THE TRANSACTION WAS PROVED, AS SUCH NO RECOURSE COULD BE TAKEN UNDER THE PROVISION OF SECTION 68 OF THE ACT. HOLDING SO, LD .CIT(A) DELETED THE ADDITION OF RS.2,40,00,000/-. ON THAT, WHEN THE REVENUE APPROA CHED THE INCOME TAX APPELLATE TRIBUNAL, A CO-ORDINATE BENCH OF THIS TRI BUNAL VIDE ORDER DATED 14.06.2010 REMITTED MATTER BACK TO THE FILE OF THE LD.CIT(A) OF GIVING SPECIFIC FINDING AS TO WHETHER THE CREDITWORTHINESS OF THESE LOAN CREDITORS WAS ESTABLISHED OR NOT. ON THE MATTER BEING REMANDED, LD. CIT(A) V IDE ORDER DATED 17.01.2013 CONFIRMED THE ADDITIONS MADE IN THE ASSESSMENT ORDE R, HOLDING THAT THE ASSESSEE HAS NOT PROVIDED ANY DETAILS LIKE BALANCE SHEET, RE GULAR SOURCE OF INCOME OR THE REASON WHY SUCH HUGE AMOUNT OF LOAN WAS GIVEN WITHO UT INTEREST AS SUCH THE CREDITWORTHINESS OF THE PARTIES WAS NOT ESTABLISHED . SUBSEQUENT APPEALS BY THE ASSESSEE TO THE ITAT AND HONBLE HIGH COURT WERE DI SMISSED AND THE ADDITION ATTAINED FINALITY. 5. A SHOW CAUSE NOTICE FOR LEVY OF PENALTY U/S 271( 1)(C) OF THE ACT WAS ISSUED BY THE AO AND THE AO HAVING CONSIDERED THE REPLY D ATED 17.04.2013 SUBMITTED BY THE ASSESSEE, PASSED THE ORDER DATED 26.04.2013 LEVYING THE PENALTY OF ITA NO. 5988/DEL/2016 RS.81,68,920/- WHICH WAS CONFIRMED BY THE LD.CIT(A) BY THE IMPUGNED ORDER DATED 29.09.2016 HENCE THIS APPEAL BY THE ASSESSEE. 6. IT IS THE ARGUMENT OF THE LD. AR THAT THERE IS N EITHER CONCEALMENT OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS THEREOF, B UT THE ENTIRE ADDITION OF RS.2.4 CRORES REVOLVES AROUND THE ACCEPTANCE OR NON-ACCEPT ANCE OF THE PLEA OF THE ASSESSEE AND THE SUFFICIENCY OF THE EVIDENCE PRODUC ED BY THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE LOAN CREDITORS AND THE GENU INENESS OF THE TRANSACTIONS. IT IS FURTHER SUBMITTED BY THE LD.AR THAT IN THIS MATT ER IN THE ORDER VIDE 29.12.2008 PASSED U/S 143(3) OF THE ACT BY THE AO MAKING THE A DDITION, AO OBSERVED THAT THE ASSESSEE COMPANY WAS GUILTY OF CONCEALMENT OF PARTI CULARS OF INCOME WHEREAS THE NOTICE ISSUED U/S 274 R.W.S. 271 OF THE ACT, DOES N OT SPECIFY UNDER WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY WAS PROPO SED, BUT THE PENALTY ORDER DATED 26.04.2013 VIDE PARAGRAPH NO.4.2 SAYS THAT THE ASSE SSEE COMPANY HAD FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF R S.96,98,457/-. IT IS THE ARGUMENT OF THE LD.AR THAT IN VIEW OF THE DECISION OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) , DRAWING A PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY CANNOT BE SUSTAINED IN LAW. 7. PER CONTRA, IT IS THE ARGUMENT OF THE LD. DR THA T THE ADDITION MADE BY THE AO, WAS FINALLY CONFIRMED BY THE LD. CIT(A), ITAT A ND ALSO THE HONBLE HIGH COURT AS SUCH THERE CANNOT BE ANY DOUBT THAT EVEN THOUGH THE PARTIES DID NOT HAVE THE CREDITWORTHINESS THE LOANS TO THE ASSESSEE, ONLY IN ORDER TO ROUTE THE ASSESSEES OWN FUNDS THROUGH SUCH CREDITORS, THE ASSESSEE DEVI SED THESE UNSECURED LOANS AND THEREBY THEY ARE GUILTY OF FURNISHING OF INACCU RATE PARTICULARS AS SUCH IN VIEW OF THE ADDITIONS REPORTED IN K.P.MADHUSUDHANAN VS CIT [2001] 118 TAXMAN 324 ITA NO. 5988/DEL/2016 (SC)/[2001] 251 ITR 99 (SC)/ [2001] 169 CTR 489 (SC ); UNION OF INDIA VS DHARAMENDRA TEXTILE PROCESSORS [2007] 295 ITR 244; CIT VS ZOOM COMMUNICATION P.LTD. (191 TAXMAN 179 [DELHI])/[2010] 327 ITR 510 (DELHI)/ [2010]233 CTR 465; MAK DATA P.LTD. VS CIT [38 TAXMANN.COM 448 (SC)/ [2 013] 358 ITR 593 (SC)/(2013) 263 CTR 1]; B.A. BALASUBRAMANIAM & BROS. CO VS CIT [116 TAXMAN 842, 236 ITR 977, 157 CTR 556]; AND CIT VS ESCORTS FINANCE LTD. [183 TAXMAN 453 (DEL)/ 920100 328 ITR 44 (DELHI)/ (2009) 226 CTR 105], WHENEVER THE CLAIM MADE IN THE RETURN OF INCOME WAS FOUND TO BE EX-FACIE BOGUS, SU CH A CASE WOULD BE TREATED AS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS AND THE PENALTY PROCEEDINGS ARE JUSTIFIED. 8. WE HAVE CAREFULLY GONE THROUGH THE CONTENTIONS O F EITHER SIDE AND PERUSED THE MATERIAL PAPERS ON RECORD. ORDER DATED 29.12.2008 PASSED U/S 143(3) OF THE ACT READS THAT SINCE THE ASSESSEE COM PANY HAS CONCEALED PARTICULARS OF INCOME, PENALTY PROCEEDINGS U/S 271( 1)(C) OF THE ACT ARE BEING INITIATED. FURTHER THE PENALTY ORDER DATED 26.04.2 013 VIDE PARA 3.2 SAYS THAT THE AO IS SATISFIED WITH THE ASSESSEE COMPANY HAD F URNISHED INACCURATE PARTICULARS OF ITS INCOME TO THE EXTENT OF RS.2,40, 00,000/- AND RS.96,98,457/-, PROVISIONS U/S 271(1)(C) OF THE ACT ARE CLEARLY ATT RACTED AND, THEREFORE, PENALTY OF RS.81,68,920/- WAS LEVIED. IMPUGNED NOTICE U/S 2 74 R.W. SEC 271 OF THE ACT IS A PRINTED FORM WHEREIN THE RELEVANT PORTION RELA TING TO THE LIMB OF CHARGE IS AS FOLLOWS: .. *HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME IN TERMS OF EXPLANATION 1, 2, 3, 4 AND 5. .. ITA NO. 5988/DEL/2016 9. IT, THEREFORE, IS AMPLY CLEAR THAT THE ASSESSING OFFICER HAS NOT SPECIFIED WHETHER THE NOTICE WAS ISSUED FOR CONCEALMENT OF PA RTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. WE HAVE CAREFULLY PERUSED THE MATERIAL PAPERS ON RECORD IN THE LIGHT OF THE STATE MENTS MADE ON BEHALF OF THE ASSESSEE INCLUDING THE JUDGMENT RELIED UPON BY HIM IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (K AR) . VIDE PARAGRAPH 60, THE HONBLE KARNATAKA HIGH COURT HAS HELD AS FOLLOW S :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRA CT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE T WO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDING S ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDIN GS FOR ONE OFFENCE AND FINDING THE ASSESSEE 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 QUA NON FOR INI TIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. A FTER, 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 O N WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS O THER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FIN AL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTI CAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PE NALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HAND S OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASS ED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, W AS NOT SUSTAINABLE. ITA NO. 5988/DEL/2016 10. THE HONBLE KARNATAKA HIGH COURT IN CIT VS SSAS EMERALD MEADOWS, [2016] 73 TAXMANN.COM 241 (KARNATAKA) HAS FOLLOWED THE DIVISION BENCH JUDGMENT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 (KAR) . HONBLE SUPREME COURT IN SSAS EMERALD MEADOWS (SUPRA) DISMISSED THE SLA PREFERRED AGAINST THE DECISION OF THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS SSAS EMERALD MEADOWS, [2016] 73 TAXMANN.COM 241 (K ARNATAKA) . THE PRINCIPLE LAID DOWN BY THESE DECISIONS IS CLEAR THA T DRAWING UP PENALTY 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 AND THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE A CT SHALL SPECIFY UNDER WHICH LIMB OF SEC. 271(1)(C) OF THE ACT THE PENALTY PROCEEDING S WERE INITIATED, AND IN THE ABSENCE OF SUCH CLARITY, THE PROCEEDINGS ARE BAD IN LAW. WE, THEREFORE, WHILE RESPECTFULLY FOLLOWING THE JUDGEMENTS REFERRED TO A BOVE, HOLD THAT THE IMPUGNED PENALTY PROCEEDINGS ARE BAD IN LAW AND CANNOT BE SU STAINED. WE, THEREFORE, WHILE QUASHING THE PROCEEDINGS, ALLOW THE APPEALS. SINCE WE PROPOSE TO QUASH THE PROCEEDINGS ON THE QUESTION OF LAW, WE DO NOT DEEM IT NECESSARY TO DELVE DEEPER INTO MERITS OF THE CASE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27 TH OCTOBER, 2017. SD/- SD/- (G.D.AGRAWAL) (K.N.CHARY) HONBLE PRESIDENT JUDICIAL MEMBER *AMIT KUMAR* DATE:- 27.10.2017 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI