Amit Khemka, Kolkata V. ITO, Ward - 43(1), Kolkata

ITA 636/KOL/2024

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 5477 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 27-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR PATI
• Assessee Lawyers: VIKASH KUMAR AGARWAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Additional evidence; Competent authority; Onus to prove; Set aside
• Section: 147; 68; 69; 271(1)(c); 153A; 250; 274; 271B; 44AB; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH KOLKATA BEFORE SHRI SONJOY SARMA, JUDICIAL MEMBER AND SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA Nos.635 & 636/KOL/2024 Assessment Years: 2012-13 Amit Khemka 114/1B, Cotton Street, Kolkata- 700007. (PAN: AFYPK4310E) Vs ITO, Ward-43(1), Kolkata (assessee ) (Respondent) Present for: assessee by : Shri Vikash Kumar Agarwal, FCA Respondent by : Shri Manoj Kumar Pati, Addl. CIT, Sr. DR Date of Hearing :20.06.2024 Date of Pronouncement :20.08.2024 O R D E R PER BENCH: Both these appeals filed by the assessee are against the separate orders of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) vide Order Nos. ITBA/NFAC/S/250/2023- 24/1060387478(1) and ITBA/NFAC/S/250/2023-24/1060393621(1) for AY 2012-13 dated 01.02.2024. However, since both the appeals relate to the same assessee, hence for the sake of brevity and convenience, they are being decided vide this common order. I. ITA No. 635/Kol/2024 (AY 2012-13) 2. The assessee has raised the following grounds of appeal in ITA No. 635/Kol/2024: 2 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 “1. That on the facts and under circumstances of the case, the penalty order passed by the learned Assessing Officer as confirmed by the learned CIT (Appeals)-NFAC is not tenable being no fact for initiation of penalty proceeding u/s 271B was mentioned in the Original Assessment Order passed u/s 147/143(3) dated 26-03-2015. 2. That the learned CIT (Appeals) has erred in law and on facts in sustaining the penalty levied u/s. 271B of the Act by the learned Assessing Officer when no opportunity of being heard was given by the Assessing Officer to the assessee as no show-cause notice was issued in this regard. 3. That on the facts and under circumstances of the case, the learned CIT(A) erred in observing that assessee has not pressed Ground of Appeal No. 1 and 2, whereas in the written submission filed by the assessee through online mode, the submission regard to Ground No. 1 and 2 was duly made along with supporting documents and the same is available online on record.” 3. During the course of the hearing, the assessee has also raised the legal ground which could not be taken up earlier on account of inadvertence: “that on the facts and under circumstances of the case, the penalty order passed by the learned assessing officer u/s 271B is unjustifiable in view of the fact that books of accounts are not required to be maintained by the assessee.” It is stated that due to paucity of time in filing the appeal, the appeal was filed in a hurry from which one important ground was omitted to be taken. By virtue of ground no. 3 of the appeal filed and in elaboration thereof, the above additional ground no. 4 is being taken up. It is stated that all facts necessary for adjudication of the aforesaid additional grounds are borne out from the records of the assessing officer and the said ground goes to the root of the matter and gives rise to a question of law. The assessee has relied upon the decisions of B.R. Bamasi v CIT 83 ITR 225 (Bombay) and also of the Hon’ble Supreme Court in the cases of Jute Corporation of India Ltd. v CIT 187 ITR 688 and National Thermal Power Corporation Ltd. v CIT 229 ITR 383 besides others and has requested for admission of the aforesaid additional ground and adjudication of the same in the interest of justice. Ld. Sr. DR did not oppose the prayer of the assessee for admission of additional ground of appeal. Considering the facts of the case that the omission of this ground from Form No. 36 was not deliberate/mala fide nor intentional nor does 3 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 the omission give rise to any undue benefit to the assessee, it is purely a legal ground and does not require any additional evidence, the additional ground of appeal is also admitted for adjudication as it goes to the root of the matter and is necessary in deciding the appeal. 4. The facts of the case are that the return of income showing total income of Rs.6,58,970/- was filed and the assessment under section 147/143 (3) of the Act was made in which the cash deposit of Rs.1,32,78,248/- and other deposits of Rs.93,19,076/- with the total amount of Rs.2,25,97,324/- were added. These deposits were in the assessee’s savings bank account no. 911010025080997 in Axis Bank during the FY 2011-12. The assessment order was passed u/s 147/143(3) of the Income Tax Act, 1961 on 26.03.2015 assessing the total income at Rs.2,32,56,294/- as against the returned income of Rs.6,58,970/- and the addition on account of unexplained cash credit u/s 68 of the Act was made. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A)-13, Kolkata. The Ld. CIT(A) observed that the sum of actual cash and other deposits in the bank account no. 911010025080997 in Axis Bank was Rs.2,32,34,819/- and not Rs.2,25,97,324/- as considered by the Assessing Officer and considered such deposits of Rs.2,32,34,819/- as trading receipts and thereby calculated the income at Rs.18,58,785/- being @8% of 2,32,34,819/-, as additional income over and above the income disclosed in the return. No appeal was preferred by the assessee against the addition confirmed. While giving effect to the appeal order, the Assessing Officer, suo moto also issued a penalty notice u/s 274 read with 271B of the Act dated 29.10.2018 and passed a penalty order u/s 271B of the Act on 23.04.2019 imposing a penalty of Rs. 1,50,000/- for failure to get the books of account audited as per the provisions of section 44AB of the Income Tax Act, 1961. Aggrieved by the said penalty order, the assessee filed an appeal before the Ld. CIT(A), NFAC who dismissed the appeal of 4 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 the assessee and confirmed the penalty of Rs. 1,50,000/- imposed by the Assessing Officer. Aggrieved by the order of the Ld. CIT(A) the assessee has filed the appeal before the Tribunal. 5. We have heard the rival contentions and also considered the submissions filed. It is argued by the Ld. AR that the Assessing Officer had not applied his mind while imposing the penalty u/s 271B and did not calculate the penalty amount as per the provisions of section 271B which is 0.50% of Turnover or Rs. 1,50,000/- whichever is less; but the total turnover figure considered by the Assessing Officer was Rs.2,32,34,819/-. Thus, maximum penalty u/s 271B should have been only Rs.1,16,174/- being 0.5% of Rs.2,32,34,819/- and not Rs.1,50,000/- as imposed by the Ld. AO. Thus, it is submitted that the penalty order u/s 271B passed by Ld. AO lacks application of mind and is not sustainable and thus the penalty imposed on the assessee may be deleted in full. The Ld. SR. DR relied on the order of the Ld. CIT(A). Since the appeal is being decided on legal ground subsequently, this issue becomes academic in nature and is not being adjudicated upon. 6. As regards Ground No. 1, it is submitted by the assessee that the Ld. CIT(A) did not consider the fact that neither in the original assessment order passed by the assessing officer on 26.03.2015 was there any specific mention about the initiation of penalty proceeding u/s 271B nor did the Ld. CIT(A) issue any direction to the assessing officer to initiate such penalty. During the course of the original assessment proceedings completed on 26.03.2015, there was no whisper about initiation of proceedings u/s 271B of the Act. Thus, the act of assessing officer in issuing a fresh notice under section 271B at this juncture is not acceptable. Further, the Ld. CIT(A) while adjudging the appeal against the assessment order did not issue any direction to the assessing officer to initiate any such penalty u/s 271B. Therefore, all the proceedings initiated in pursuance to such defective notice are not only void ab initio 5 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 but illegal as well. Hence, according to the assessee, the penalty order u/s 271B is barred by limitation and is liable to cancelled. The Ld. DR, on the other hand, relied upon the order of the Ld. CIT(A). 6.1 We have considered the rival submissions made. The assessee has relied upon several judicial pronouncements in this regard; however the facts and the issues mentioned in those cases are different from the facts and the issues in the case of the assessee and, therefore, they are not applicable to the facts of the case of the assessee. section 271B of the Act nowhere requires that unlike the penalty under section 271(1)(c) which has to be initiated in the course of any proceeding, the penalty under section 271B also has to be initiated in the course of any proceeding. The penalty under section 271B relates to not getting the accounts audited under the Act and as the same is not related to the quantum of income assessed but to the turnover, therefore the proceeding can be initiated independent of the assessment proceeding, as regards section 271B. In the case of Madan Roller Flour Mills vs. Commissioner of Income-tax [2008] 171 Taxman 70 (Punjab & Haryana) it has been held that in all cases where penalty proceedings are not required to be initiated during course of any proceedings, there is no limitation prescribed under section 275 (prior to its amendment with effect from 1.4.1989) for passing penalty order and since section 271B does not require that initiation of penalty proceedings can only be during course of some proceedings, limitation prescribed under section 275 would not be applicable to order passed under section 271B. Hence, ground no. 1 of the appeal is rejected. 7. Ground Nos. 2 and 3 were not pressed and therefore they are dismissed as not pressed. 8. Regarding ground No. 4, it is submitted that the assessing officer did not consider the fact that the assessee throughout the assessment and 6 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 appellate proceeding contended that the deposits in the bank account were nothing but the collection on behalf of suppliers which were subsequently remitted to the suppliers and he acted as an agent and earned only commission income which was disclosed in his return of income. The matter was settled by the Ld. CIT(A) wherein he considered the deposits in the bank account as turnover of the assessee and worked out the income of the assessee @ 8%. Thus, there cannot be any question of maintaining books of account and getting them audited. It is a judicially settled principle that penalty cannot be imposed for not getting books of account audited if no books are maintained as per section 44AA. The assessee has relied upon various judicial pronouncements in this regard and has submitted that the penalty order is void ab initio and liable to be quashed as in the present case the assessee was not required to maintain the books of account and thus there cannot be any question of maintaining books of account and getting them audited. Further, the assessing officer had not applied his mind while imposing the penalty u/s 271B, which is also evident from his actions that while calculating the penalty amount, the assessing officer did not adhere to the provisions of 271B and has requested that the penalty imposed on the assessee may be deleted in full. 8.1 We have considered the submissions made. In Surajmal Parsuram Todi vs. Commissioner of Income-tax [1996] 222 ITR 691 (Gauhati), it has been held that when a person commits an offence by not maintaining books of account as contemplated by section 44AA, the offence is complete and after that, there can be no possibility of any offence as contemplated by section 44AB and therefore, in the instant case, imposition of penalty under section 271B was erroneous on account of violation of section 44AA by assessee, as penalty was prescribed under section 271A. In Commissioner of Income-tax, Bareilly vs. Bisauli Tractors [2007] 165 Taxman 1 (Allahabad) it has been held that section 7 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 271B is not attracted in a case where no account has been maintained and instead recourse under section 271A can be taken. Further in the case of Commissioner of Income-tax vs. S.K. Gupta and Co. [2010] 322 ITR 86 (Allahabad), it has been held that requirement of getting books of account audited could arise only where books of account are maintained. If for some reason the assessee had not maintained books of account, penalty could not be imposed under section 271B. Hence in view of these judicial pronouncements, the additional ground of appeal is allowed and since the assessee had not maintained any books of account, the same could not have been audited and, therefore, the penalty of Rs. 1,50,000/- imposed under section 271B is hereby deleted. 9. In the result, the appeal is partly allowed. II. ITA No. 636/Kol/2024 (AY 2012-13) 10. The assessee has raised the following grounds of appeal in ITA No. 636/Kol/2024: “1. That on the facts and under circumstances of the case, penalty order p assed by th e le arned assessin g off icer as conf ir med by the le arned C IT ( Ap peals)-NF AC is no t ten able as no tice issued u/s 274/271( 1)(c) d ate d 29-10-2018 is void ab ini tio being def ec tive as th e no tice does not spec if y as to wh e ther it is f or conce almen t of in come or f or f urnishing of incorre c t p ar ticul ars of income. 2. Th at on the f ac ts and under c ircum s tances of the c ase th e pen al ty order p assed b y th e le arned Assessin g Of f icer as conf ir med by the le arned C IT (A ppe al s)-NF AC is no t ten able as the assessin g off icer in th e Orig in al Assessmen t order u/s 147 d ated 26-03-2015 h ad in i ti ated the pen al ty f or f urnish ing in ac cur ate p ar ticul ar s of income where as the Assessing Of f icer conclude d the impug ned Pen al ty Order U/S 271(1)( c) by im posing the pen al ty f or conce almen t of income. 3. Th at the le arne d C IT (Ap pe als) h as erred in l aw and on f ac ts in sus tain ing the penal ty levied U/S 271 (1)(c) of the Ac t b y the lear ned Assessing Of f icer when no oppor tun i ty of being heard was g iven by the Assessing Of f icer to the asse ssee as no show-c ause no tice was issued in th is reg ard. 4. Th at the le arne d C IT (Ap pe als) h as erred in l aw an d on f ac ts by sus tain ing the pen al ty lev ied U /S 27 1(l)(c) of the A c t by the le arned 8 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 Assessing Of f icer even when the add ition was m ade on es tim ation basis.” 11. Brief facts of the case have been mentioned in para 4 and are not repeated here. The Ld. AO gave effect to the appeal order and also issued a notice under section 271(1)(c) of the Act and thereafter imposed penalty for concealment of income at Rs. 10,54,733/- being @100% of the tax sought to be evaded. The assessee thereafter filed an appeal before the Ld. CIT(A), NFAC who dismissed the appeal of the assessee but reduced the penalty amount to Rs. 5,59,838/- on account of calculation error. Hence the present appeal before the Tribunal. 12. We have heard the rival contentions and also gone through the facts of the case. In the written submissions filed, it is stated by the assessee that no penalty can be levied on the estimated income but the Ld. CIT(A) made two contradictory observations in two subsequent paragraphs leading the assessee to believe that he has erroneously dismissed the appeal instead of allowing the appeal as per page 8 of his order which is reproduced as under:- 8. Looking at the above f ac ts and c irc ums tances of the c ase and the previous orders p assed by the AO an d C IT (A) on the s ame g rounds presen ted by the assessee I am of the view that n o penalty can be levied on estimates or assumptions, what is required is that the element of concealment of income or inaccurate particulars of income must be established and brought on records which the AO has not done so. 9. Accord ing ly I am of the cons idered vie w th at the pen al ty levied of Rs. 10, 54, 733 is to be reduced an d is c alcul ated as per the assessee's con te n tions in the s tatem en t of f ac ts an d the pen al ty rec al cul ated at Rs. 5, 59, 838/- ( i. e. , T ax on assessed inc ome at Rs. 6, 25, 545/- less tax on re turned in come of Rs. 65, 710/-). 10. Accord ing ly, th e ap pe al of the ass essee is dismissed. {emphasis supplied} 9 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 12.1 We have perused the order of the Ld. CIT(A) and observed that the Ld. CIT(A) on the one hand in para 8 is of the view that penalty cannot be imposed on estimated income, but on the other hand in para 10, the appeal of the assessee has been dismissed by recalculating the penalty amount and reducing the penalty amount and, therefore, the order is contradictory and erroneous to this extent and the penalty is liable to be cancelled only on this ground. 13. Ground No. 1 is relating to the notice under section 271(1)(c) being defective as it did not specify whether penalty was being imposed for concealment or furnishing of inaccurate particulars. The appellant has relied upon the decisions in the cases of SSA’S Emeral Meadows [2016] 73 taxmann.com 248 (SC), orders of the ITAT Kolkata Benches in Ambey Retailers Pvt. Ltd. ITA 2104/Kol/2017 & Jeetmal Choraria [2018] 91 taxmann.com 311 and also the case of Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka). 13.1 We have gone through the submission made and the decisions cited. In Principal Commissioner of Income-tax vs. Thakur Prasad Sao & Sons (P.) Ltd. [2024] 163 taxmann.com 449 (Calcutta) where the facts were that after search and seizure operations assessee declared certain undisclosed income which was added to the income disclosed in returns filed in response to notice issued under section 153A and the assessment orders were followed by notices under section 271(1)(c) read with section 274 and after considering assessee’s submissions, the assessing officer levied penalty under section 271(1)(c) but on appeal, the Tribunal cancelled penalty on the ground that the show cause notice under section 274 was defective as it did not spell out grounds on which penalty was 10 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 sought to be imposed. It has been held by the Hon’ble jurisdictional High Court that when assessing officer had recorded in the assessment order particulars of concealed income/undisclosed income of the assessee and on that basis initiated penalty proceeding under section 271(1)(c) then consequential notice under section 274 issued by the assessing officer to the assessee to afford him opportunity of hearing, was specifically a notice for penalty for concealment of particulars of income/undisclosed income and such a notice complied with principles of natural justice and was a valid notice under section 274 and the Tribunal had committed a manifest error of law by setting aside penalty orders on ground that the grounds for imposition of penalty were not mentioned in show cause notice under section 274 of Act and thus, show cause notice was defective. Hence, following the order of the Hon’ble jurisdictional High Court, this ground of appeal is rejected. 14. Ground No. 2 is against the order of the Ld. CIT(A) for not considering the fact that in the original assessment order u/s 147, the Ld. AO had initiated the penalty alleging the assessee to have furnished inaccurate particulars of income whereas in the penalty order u/s 271(1)(c), the penalty was imposed alleging the assessee to have concealed the income. The assessee has submitted as under in this regard: a) The assessing officer in the assess ment order u/s 14 7/143(3) o f the Act dated 26-03-2015 , initiate d the penalty all eging the assessee to have furnished the inac curate particulars of income. However, in the p enalty order dated 23-04-2 019 , the assessing officer imposed the penalty alleging th e assessee to have concealed income. b) In this regard , t his is to state that it has been judicially upheld that the AO cannot initiate pen alty on the charge of conc ealment of particulars of income, but ultimately find the assessee g uilty in the penalty order of furnishing inaccurate particulars o f in come (and vice versa). In the same manner, he cannot be uncertain in the 11 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 penalty order as to concealment or furnishing of inaccurate particulars of inco me by using slash between the two expressions. The error renders the penalty order unsustainable in l aw. c) The legal position in relation to the above matter can b e discussed with reference to c ase decisions o f A mritsar Bench of ITAT in the case of HPCL Mittal Energy Ltd (ITA Nos.554 & 555/Asr/2014) wherein it was held that "The AO c annot initiate penal ty on the charge of 'conceal ment of p articulars of income', but ultimately find the assessee guilty in the penalty order of 'furnishing inaccurate particulars of inco me’ (and vice vers a). In the s ame m anner, he cannot be uncertain in the penalty order as to concealment or furnishing of inac curate particulars of income by using slash between the two ex pressions. Such error is not procedural but goes to the root of the matter and is not saved by s . 2 928 . The error renders the penalt y order unsustain able in l aw" (page nos. 9 0 to 114 o f P aper Book) In consideration of the fac ts and case decision cited above, it is submitted that the Penalty Order is v oid-ab-initio and li able to be quashed. 14.1 This ground of appeal is allowable as per the subsequent discussions made. 15. As regards ground no. 3, the assessee has not pressed this ground of appeal and is the same is rejected as not pressed. 16. Ground No. 4 is against the action of the Hon'ble CIT(A) in sustaining the penalty levied u/s 271(1)(c) of the Act by the learned assessing officer even when the addition was made on estimation basis. The assessee has submitted as under: a) The assesse e st ates that the CIT(A) while perusing th e ad dition made in the 147 Order, presumed the entire deposits as tr ading receipts and by ap plying 8% es timated margin derived the additional tot al inc ome at Rs. 18 ,58 ,7 85/-. b) The assessee w ould like to st ate t hat such c alculati on is made on an ad-hoc b asis and is construed to be an act on t he basis of certain presumption, conjecture and s urmise. The assess ee had not filed any further appeal in respec t of such ad-hoc addi tion as to avoid to be dragged into long-drawn lit igation involved in the appeal Procedure. Such st ep of the assessee should not be con sidered as submission of any ill doing and used as a pe destal to impose penalty on it and such principal h as been se ttled by v arious courts time and again . The ass essing officer failed to take cognizance of the fact 12 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 that the both asses sment and pen alty proceedings are se parate and distinct from each other. Mere addit ion in the Assessment order does no: ipso facto makes the penalt y imposable in nat ure. Thus, the Act of the as sessing officer o f imposing the penalty on the estimated additional income is not ju stified. c) The legal position in relation to the above matter can b e discussed with reference to case decision of Del hi Bench of ITAT i n the case of Rai Industrial Power Pvt. Ltd. Vs DCIT (ITA 4862/Del/2013) wherein it was held that simply because the ad ditions made were not challenged by the assessee this fact by itsel f is not a good enough reason to confirm or impose penalty. It also held that there can be many reaso ns which may prevail on the mind o f an assessee on account of which the assessee may not challenge th e ad ditions in a certain ye ar and the mere fac t o f accep ting the addi tions ipso facto does not lead to the conclusion that the assessee h as nothing to say . (p age nos. 115 to 120 of P ape r Book) d) In the c ase o f Subhash Tradin g Co [1996] 86 Taxman 30 (Gujarat), the Hon'ble Gujarat High C ourt has upheld that when the addition has been made on the basis of estimate and not on any concrete evidence of concealment, pe nalty under section 271(1)(c) of the Act is not le viable. (page nos. 121 to 125 of P ape r Book) In consideration of the fac ts and case decision cited above, it is submitted that th e penalty should not be imposed o n estimated additional income and thereby may b e deleted in full. 16.1 It is further mentioned in the summation as under: 1. That the asses sing officer did n ot consider the fact th at the assessment and pe nalty proceedings are separ ate and di stinct from each other. An ad dition in the Assessment does not automatically makes the pen alty leviable. The asses sing officer did not bring any positive material s howing intentional concealment. Mere allegation without any material whatsoever ten ds the Penalty Order Inv alid. The Addition is th e present case is an estimation made by the Ld . CIT(A) for which the assessee should not be pen alized . 2. That the notice i ssued under sectio n 271(1)(c) re ad with 274 is a defective notice as both the option of concealment / furnishing of inaccurate p articulars has been ke pt open and nothing has been strike out. 3. Th at the Penalty Order is void-ab-initio and liable to be quashed as in the assessme nt order, the Ld . A O initiated the pen alty alleging the assessee to have furnished inaccurate particulars of income whereas in the Penalty Order u/s 2 71( 1)(c), the pen alty w as imposed alleging the assess ee to h ave conceale d income. This all substantiates that the assessi ng officer had not applied his mind while imposing the penalty u/s 271(1)(c) which is also evident from his actions that while calculat ing the penalty amount, the assessing officer also considered t he interest component while 13 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 calculating the tax sought to be ev ad ed. This issue was settled by the Hon'ble C IT(A) in his Order. Thus, it is humbly submitted be fore your Honour that t he penalty order passed by Ld . AO u/s 271(1)(c) lacks application o f mind, is unsustainable and thus the penalty i mposed on the ass essee may be deleted in full. 17. Having heard the rival submissions and the arguments, it is essential to understand the legal position on the facts of the case. In the case of National Textiles v. CIT [2001] 249 ITR 125 (Guj.), it has been held that the provisions of section 68 permitting the Assessing Officer to treat unexplained cash credit as income are enabling provisions for making certain additions where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer. However, the addition made on this count would not automatically justify the imposition of penalty under section 271(1)(c) by recourse only to Explanation 1 below section 271(1)(c). No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, the Explanation cannot help the department because there will be no material to show that the amount in question was the income of the assessee. 17.1 Further, in CIT v. Indian Metals & Ferro Alloys Ltd. [1994] 117 CTR (Ori.) 378, It has been held that the expressions 'has concealed the particulars of income' and 'has furnished inaccurate particulars of income' have not been defined either in section 271(1)(c) or elsewhere in the Act. One thing is certain that these two circumstances are not identical in details although they may lead to the same effect, namely, keeping off a certain portion of income. The former is direct and the latter may be indirect in its 14 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 execution. The word 'conceal' is derived from the Latin word 'concolare' which implies 'to hide'. Webster's New International Dictionary equates its meaning to 'hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of'. The offence of concealment is thus a direct attempt to hide an item of income or a portion thereof from the knowledge of the income-tax authorities. In furnishing its return of income, as assessee is required to furnish particulars and accounts on which such returned income has been arrived at. These may be particulars as per its books of account if it has maintained them, or any other basis upon which it has arrived at the returned figure of income. Any inaccuracy made in such books of account or otherwise which results in keeping off or hiding a portion of its income is punishable as furnishing inaccurate particulars of its income. . . . The penalty under section 271(1)(c ) is not automatic on the basis of the addition made or part of the addition sustained in appeal. In assessment, addition can be made on the basis of presumption. But, in penalty, the Assessing Officer has to establish that there is conscious concealment. 17.2 In CIT v. K.R. Chinni Krishna Chetty [2000] 246 ITR 121 (Mad.) it has been held that under section 271(1)(c) of the Act the authority is given the discretion to levy a penalty if there is concealment of particulars of income and even as regards the quantum of the penalty there is a discretion. Of greater importance is the necessity for a definite finding that there is concealment, as without such a finding of concealment, there can be no question of imposing any penalty. The mere revision of the income to a higher figure by the assessing authority does not automatically warrant an inference of concealment of 15 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 the expenditure on the construction. The addition to the income of the assessee based on the report of the valuer was rightly regarded by the Tribunal as being insufficient for recording a finding of concealment of income. Concealment implies some deliberate act on the part of the assessee in withholding the true facts from the authorities. The fact that the valuer assessed the building at a figure higher than the one reported by the assessee does not by itself lead to the inference that there had been concealment. 17.3 As regards penalty on the estimated income, in Harigopal Singh v. CIT [2002] 125 Taxman 252 (Punj. & Har.) where the assessee had not maintained any accounts but had filed his return of income on estimate basis, and the Assessing Officer made his own estimate with which the Tribunal did not agree, it could not be said that the assessee had 'concealed' his income so as to attract penalty. There has to be a positive act of concealment on the assessee's part and the onus to prove this is on the department. 17.4 In Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka) there was a bunch of appeals involving various facets of imposition of penalty. It has been held as under: ▪ Penalty under section 271(1)(c) is a civil liability. Therefore, mens rea is not an essential element for imposing penalty for breach of such civil obligations or lia- bilities. Wilful concealment is not an essential ingredient for attracting civil liabil- ity. [Para 63] ▪ Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initia- tion of penalty proceedings under section 271. The existence of such conditions should be discernible from the assessment order or order of the Appellate Author- ity or Revisional Authority. Even if there is no specific finding regarding the exist- ence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and (B) should be discernible from the said order, which would, by a legal fiction, constitute concealment because of deeming provision. Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under section 271(1)(c) is a sine qua non for the Assessing Officer to initiate the proceedings because of the deeming provision contained in 16 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 section 1(B). The said deeming provisions are not applicable to the orders passed by the Commissioner (Appeals) and the Commissioner. [Para 63] ▪ The imposition of penalty is not automatic, i.e., imposition of penalty even if the tax liability is admitted, is not automatic. Even if the assessee has not challenged the order of assessment levying tax and interest and has paid the same, that by itself would not be sufficient for the authori- ties either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such un- earthing or enquiry concluded by authorities which has resulted in pay- ment of such tax or such tax liability came to be admitted, and if not, it would have escaped from tax net as opined by the Assessing Officer in the assessment order. Only when no explanation is offered or the explanation of- fered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty can be passed. If the explana- tion offered, even though not substantiated by the assessee, is found to be bona fide and all facts relating to the same and material for the computation of his total income have been disclosed by him, no penalty can be imposed. [Para 63] ▪ The direction referred to in Explanation 1B to section 271 should be clear and without any ambiguity. If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings in appeal, but the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. ▪ Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. [Para 63] ▪ The penalty proceedings are distinct from the assessment proceedings. The pro- ceedings for imposition of penalty, though emanate from proceedings of assess- ment, are independent and separate aspect of the proceedings. The findings rec- orded in the assessment proceedings in so far as 'concealment of income' and 'furnishing of incorrect particulars' would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assess- ment or reassessment cannot be declared as invalid in the penalty proceedings. [Para 63] In respect of individual cases, it was held in Case 1 that: ▪ Therefore, it is clear that merely because the assessee agreed for addition and accordingly assessment order was passed on the basis of this addition and when the assessee had paid the tax and the interest thereon in the absence of any material on record to show the concealment of income, it cannot be inferred that the said addition was on account of concealment. Moreover, the assessee had offered the explanation. The said explanation was not found to be false. On the contrary, it was held to be bona fide. In fact, in the assessment proceedings, there is no whisper about these concealment. Under these circumstances, the entry found in the rough cash book could have been reflected in the accounts for the said financial year in which the survey took place, as the last date for closing the account was still not over. The very fact that the assessee agreed to pay tax and did not challenge the assessment order, cannot be construed as mala fide. There- fore, the Tribunal was justified in setting aside the orders passed by the Appellate Authority as well as the Assessing Authority. [Para 64] Further, it was held in Case 3 of the bunch of appeals that: In the instant case, the penalty proceedings were initiated by the Assessing Authority initially on the basis of his assessment order. During the pendency of 17 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 the said penalty proceedings, the assessment order was challenged by way of an appeal. In appeal the Appellate Authority deleted the additions made under section 69 by the Assessing Authority. Instead, he sustained additions under new grounds of under valuation of the closing stock. However, the Assessing Authority, in the penalty proceedings, took note of the Appellate order and suitably amended the penalty proceedings and proceeded further in the matter and then imposed penalty. Therefore, it is clear, that the subject matter of the penalty proceedings was the order of the Appellate Authority and not the order passed by the Assessing Authority. If the Appellate Authority was satisfied that the addition had to be made on the ground of under valuation of the closing stock, which was not the finding recorded by the Assessing Authority, on which penalty proceedings had been initiated by the Assessing Authority, then, it was the Appellate Authority who should have initiated penalty proceedings and issued notice to the assessee to show cause why penalty should not be imposed. The said procedure was not followed, and therefore, though for different reasons, the first Appellate Authority set aside the order levying penalty, the Tribunal correctly appreciated the facts in a proper perspective and was justified in not interfering with the order passed by the Appellate Authority, setting aside the penalty order. In that view of the matter, there is no justification to interfere with the well-considered order passed by the Tribunal. Thus, the substantial questions of law are answered in favour of the asses 18. In the instant case, the order of the Ld. AO was modified by the Ld. CIT(A) who did not initiate the penalty nor issued any directions for the same. Hence, the Ld. AO was not the competent authority to impose the penalty. Further, the income was estimated and hence penalty was also not imposable automatically. Hence, considering the totality of facts of the case and the attending circumstances, the penalty imposed cannot be upheld and is hereby deleted as the same does not stand the test of judicial pronouncements. Ground nos. 2 and 4 of the appeal are allowed. 19. In the result, the appeal is partly allowed. Order pronounced in the open court on 20 th August, 2024. Sd/- Sd/- (Sonjoy Sarma) (Rakesh Mishra) Judicial Member Accountant Member 18 ITA Nos. 635 & 636/Kol/2024 Amit Khemka AYs: 2012-13 Dated: 20 th August, 2024 AK, PS Copy to: 1. The assessee : 2. The Respondent. 3. CIT(A), NFAC, Delhi 4. The CIT, 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata