The DCIT, (Central), Indore V. Shri Mohanlal Chug, Indore

ITA 67/IND/2014

• Counselvise Citation: 6722714 RSA 2014
• Duration Of Justice: 1 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 21-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: ARPIT GAUR CAS
• Keywords: Bogus purchase; Capital asset; Opportunity of being heard; Wrong claim; Onus to prove
• Section: 54F; 133(6); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, J.M. AND SHRI B.C.MEENA, A.M. I.T.A.NO.733/IND/2013 A.Y. : 2008-09 SHRI NITESH CHUGH, DY. CIT, 19, MANISHPURI COLONY, VS 1(1), INDORE INDORE APPELLANT RESPONDENT P.A.N. NO A DKPC7515P I.T.A.NO. 734/ IND/2013 A.Y. : 2008-09 SMT. REENADEVI CHUGH, DY. CIT, 19, MANISHPURI COLONY, VS 1(1), INDORE. INDORE. APPELLANT RESPONDENT P.A.N. NO A BMPC2562Q -: 2: - 2 I.T.A.NO. 67/IND/2014 A.Y. : 2008-09 DY. CIT, (CENTRAL) SHRI MOHANLAL CHUGH, INDORE. VS 19, MANISHPURI COLONY, INDORE. APPELLANT RESPONDENT P.A.N. NO A DOPC2849Q ASSESSEE BY SHRI ANIL KAMAL GARG AND SHRI ARPIT GAUR, CAS DEPARTMENT BY SHRI R. A. VERMA, SR. DR DATE OF HEARING : 20 .08.2015 DATE OF PRONOUNCEMENT : 30. 09.2015 O R D E R PER GARASIA, J.M. THESE TWO APPEALS BY THE ASSESSEES ARE DIRECTED AGA INST THE SEPARATE ORDERS OF CIT(A)-I, INDORE, BOTH DATE D 21.10.2013 -: 3: - 3 FOR THE ASSESSMENT YEAR 2008-09 AND THE APPEAL OF T HE REVENUE IN THE CASE OF SHRI MOHANLAL CHUGH IS DIREC TED AGAINST THE ORDER OF CIT(A)-I, INDORE, DATED 22.11. 2013 SINCE COMMON GROUNDS ARE INVOLVED IN ALL THESE APPEALS EX CEPT CHANGE IN FIGURES, WE ARE DISPOSING OF THESE APPEA LS TOGETHER FOR THE SAKE OF CONVENIENCE. 2. THE GROUND TAKEN IN THE APPEALS OF SHRI NITESH CHUG H AND SMT. REENADEVI CHUGH IS AGAINST THE IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT AT RS. 30,15,000/- AND RS. 31,91,000/-. 3. THE SHORT FACTS IN THE CASE OF SHRI NITESH CHUGH AR E AS UNDER. 4. THE ASSESSEE HAS CLAIMED THE LOSS OF SHARES OF RS. 1,07,63,179/-. DURING THE COURSE OF HEARING, THE AS SESSEE HAS CLAIMED THAT SHORT TERM CAPITAL LOSS FROM SHARES OF RS. 1,07,63,179/-. THE AMOUNT OF LOSS OF SHARES WAS APP EARING IN SUNDRY CREDITORS BY TAKING THE LEAD FROM THE NOTICE U/S 133(6) WAS ISSUED TO SHARE BROKER SHRI VISHAL VIJAY SHAH, MUMBAI. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE BR OKER DID -: 4: - 4 NOT REMAIN PRESENT. THEREFORE, NOTICE WAS HANDED OV ER TO THE ASSESSEE IN THE NAME OF SHARE BROKER VISHAL VIJAY S HAH. THE NOTICE WAS NOT SERVED TO THE SAID BROKER AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS SURREND ERED THE SHORT TERM CAPITAL LOSS OF SAID TRANSACTION AS HIS INCOME AND PAID THE TAX ACCORDINGLY. THEREFORE, THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS FILED INACCURATE PARTICULARS AND CONCEALED HIS INCOME. THEREFORE, THE PENALTY U/S 27 1(1)(C) WAS INITIATED. 5. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. THEREFORE , THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE ASSESSEE HAS FILED THE WRITTEN SUBMISSION FROM PAGE 6 TO 20 OF HIS PAPER BOOK, WHICH READ AS UNDER :- SUBMISSION LEGAL ISSUE AS REGARD TO INITIATION OF THE PENAL TV ON ONE GROUND, IMPOSITION ON SECOND GROUND AND CONFIRMATION BY THE CIT (A) ON FIRST GROUND -: 5: - 5 YOUR HONOURS, UNDER THE CLAUSE (C) OF SUB-SECTION (1) OF SECTION 271 OF THE INCOMETAX ACT, 1961, A PERSON CA N BE MADE LIABLE FOR PENALTY FOR COMMITMENT OF ANY OR BO TH OF THE DEFAULTS A ENJOINED IN SUCH CLAUSE VIZ. (I) THE PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME; OR (II ) THE PERSON HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THUS, IT SHALL BE APPRECIATED THAT THERE AR E TWO LIMBS FOR IMPOSITION OF PENALTY UNDER S.271(1)(C) O F THE ACT AND BOTH THE LIMBS CAN EITHER OPERATE EXCLUSIVELY O R IN SOME CASES, BOTH THE LIMBS CAN CO-EXIST. HOWEVER, WHATEVER THE SITUATION MIGHT BE, THE MANDATORY REQUIREMENT, BEFORE IMPOSITION OF ANY PENALTY, AS I S EVIDENT FROM THE OPENING PARA OF THE PROVISIONS OF SUB- SECTION (1) OF SECTION 27 L IS THAT 'THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER IN T HE COURSE OF ANY PROCEEDINGS UNDER THIS ACT MUST BE SA TISFIED THAT ANY PERSON HAS COMMITTED AN)' OF THE DEFAULTS AS CONTEMPLATED UNDER CLAUSE (C) OF SUB-SECTION (I) OF' SECTION 271 OF THE ACT'. IT THUS FOLLOW THAT WHEN A SATISFA CTION IS -: 6: - 6 ARRIVED AT BY AN AUTHORITY ON ONE GROUND, THE PENAL TY CANNOT BE IMPOSED OR CONFIRMED ON THE OTHER GROUND. YOUR HONOURS, IN THE INSTANT CASE, THE PENALTY PRO CEEDINGS WERE INITIATED AGAINST THE APPELLANT FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, AS IS EVIDENT FRO M THE FIRST PARA AT PAGE NO. 6 OF THE ASSESSMENT ORDER. I T IS SUBMITTED THAT THE TAXING PROVISIONS AND ESPECIALLY THE PROVISIONS RELATING TO THE PENALTIES SHOULD BE CONS TRUED STRICTLY AND SINCE, THE PROVISIONS OF S.271 ARE COM PLETE AND SPECIAL CODE BY THEMSELVES, ANY DEVIATION THEREFROM CANNOT BE LEGALLY PERMITTED. IT IS SUBMITTED THAT A LTHOUGH THE PENALTY WAS INITIATED ON THE ALLEGATION OF FUR NISHING OF INACCURATE PARTICULARS OF INCOME, WHILE PASSING TH E PENALTY ORDER, THE PENALTY WAS ULTIMATELY IMPOSED O N BOTH THE GROUNDS I.E. OF CONCEALMENT OF PARTICULARS OF INCOME AND AS ALSO OF FURNISHING INACCURATE PARTICULARS O F INCOME. SUCH FACT IS EVIDENT FROM PARA (12) OF PAG E NO.20 OF THE PENALTY ORDER. -: 7: - 7 YOUR HONOURS, IN ADDITION TO THE AUTHORITY CITED ABOVE, WE ALSO WISH TO PLACE RELIANCE ON THE FOLLOWING JUDICI AL PRONOUNCEMENTS FOR BUTTRESSING OUR ASSERTION THAT P ENALTY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME CANNOT BE LEVIED! CONFIRMED BY THE CIT(A) FOR CONCE ALMENT OF PARTICULARS OF INCOME: I) CIT VS. LAKHDHIR LALJI (1972) 85 ITR 77 (GUJ.) II) PADMA RAM BHARARI VS. CIT (1977) 110 ITR 54 (G AU) III) CIT VS. CK. NAHA & BROS. (1979) 117 ITR 19 (CAL.) IV) DCIT VS. NEPA LTD. (2014) 24 ITJ 695 (TRIB-INDO RE) V) NITIN JAIN VS. ACIT-4(J), INDORE (TRIA-INDORE) [ ITA NO. 2111ND/2015] (ORDER DATED 03-08-2015) [PARA 8] ANOTHER LEGAL ISSUE AS REGARD TO INAPPROPRIATE ISSUANCE OF SHOW-CAUSE NOTICE UNDER S. 274 OF THE ACT YOUR HONOURS, THE IMPOSITION OF THE IMPUGNED PENAL TY IN THE APPELLANT'S CASE IS WHOLLY UNJUSTIFIED, UNWARRA NTED -: 8: - 8 AND BAD-IN-LAW. IT IS SUBMITTED THAT AS PER THE SPE CIFIC PROVISIONS OF S.274(1) OF THE ACT, NO ORDER IMPOSIN G A PENALTY UNDER CHAPTER XXI, WHICH INTER ALIA, INCLUD ES PENALTY UNDER S. 271, CAN BE PASSED UNLESS THE ASSE SSEE HAS BEEN HEARD OR HAS BEEN GIVEN AN OPPORTUNITY OF BEING HEARD. THE OPPORTUNITY, AS CONTEMPLATED UNDER S.274, IS GIVEN BY WAY OF ISSUANCE OF A NOTICE BY T HE CONCERNING AUTHORITY TO THE PERSON UPON WHOM THE PENALTY IS PROPOSED TO BE IMPOSED. IN THE INSTANT C ASE, ALTHOUGH THE SHOW-CAUSE NOTICE UNDER S.274 WAS ISSU ED BUT IT WAS A VAGUE AND CRYPTIC NOTICE INASMUCH IN T HE SAID NOTICE, NON-APPLICABLE CLAUSES WERE NOT STRUCK -OFF BY THE AO. A COPY OF THE SAID NOTICE IS PLACED AT PAG E NO.13A OF OUR PAPER BOOK. ON A PERUSAL OF THE SAID NOTICE, IT SHALL BE OBSERVED BY YOUR HONOURS THAT T HE LD. AO HAS STATED THAT IT APPEARED TO HIM THAT THE APPE LLANT HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURN ISHED INACCURATE PARTICULARS OF HIS INCOME. FOR A READY REFERENCE, THE RELEVANT CLAUSE OF THE SHOW-CAUSE NO TICE IS BEING REPRODUCED, VERBATIM, AS UNDER :- -: 9: - 9 'WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2008-09, IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR INCOME O R FURNISHED INACCURATE PARTICULARS OF INCOME. ' [EMPHASIS SUPPLIED] YOUR HONOURS. THE ISSUANCE OF SHOW-CAUSE NOTICE U NDER S.274 IS NOT AN EMPTY FORMALITY BUT IT HAS A DEFINI TE PURPOSE TO MAKE THE ACCUSED AWARE OR THE EXACT CHAR GES AGAINST HIM AND THE CASE WHICH HE IS REQUIRED TO ME ET OUT. A CLEAR NOTICE IS NOT ONLY A STATUTORY REQUIRE MENT BUT EVEN FOR THE PURPOSE OF MEETING THE PRINCIPLE OF AU DI ALTERAM PARTEM WHICH REQUIRES THAT NO ONE SHOULD BE CONDEMNED UNHEARD A NOTICE IN CLEAR TERMS SPECIFYIN G THE CLEAR CHARGES AGAINST AN ACCUSED IS REQUIRED TO BE GIVEN BY AN ASSESSING OFFICER BEFORE IMPOSING A PENALTY. IT IS SUBMITTED THAT BY NOT STRIKING OFF THE INAPPLICABLE CLAUSE, THE LEARNED AO HAS LEFT THE MATTER OPEN FOR A COMPL ETE GUESS WORK ON THE PART OF THE APPELLANT FOR PRESUMI NG THE -: 10: - 10 CHARGES LEVELED AGAINST HIM AND IN SUCH A SITUATION , IT CANNOT BE SAID THAT AN EFFECTIVE OPPORTUNITY OR BEI NG HEARD WAS GIVEN TO THE APPELLANT AS CONTEMPLATED UN DER THE PROVISIONS OF S.274 OF THE ACT. IN SUCH CIRCUMS TANCES, A PENALTY ORDER CANNOT BE UPHELD. FOR SUCH PROPOSIT ION, WE WISH TO PLACE RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) CIT VS. MANJUNATHA CALLAN & GINNING FACTORY (2012) 83 CCH 282 (KAR.HC) IT) CIT VS. LAKHDHIR LALJI (1972) 85LTR 77 (GUJ.) III) CIT VS. C.K. NAHA & BROS. (1979) 117 ITR 19 (CAL.) IV) DILIP N. SHROFF VS. JCIT & ANR. (2007) 291 ITR 519 (SC) YOUR HONOURS, THIS HON'BJE BENCH VIDE ITS CONSOLID ATE ORDER PRONOUNCED ON 03-08-2015 IN CASE OF ACIT-2(1) , BHOPAL VS. M.P. TOURISM DEVELOPMENT CORPORATION LTD . AND OTHERS [APPEAL NO. ITA NO. 02/IND/2015 & OTHERS] HAS QUASHED THE PENALTIES IN ALL THE CASES, INTER ALIA, ON THE GROUND THAT THE AO HAD NOT BROUGHT OUT ANY SPECIFIC -: 11: - 11 CHARGE THAT WHETHER THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. YOUR HONOURS, THE PRESENT CASE OF THE APPELLANT IS SQUARELY COVERED BY THE RECENT PRONOUNCEMENT OF THI S HON'BLE TRIBUNAL AS IN THE PRESENT CASE TOO, THE AO HAD ISSUED THE NOTICE WITHOUT SPECIFYING ANY SPECIFIC C HARGE AGAINST THE APPELLANT AS IS EVIDENT FROM PAGE NO. 1 3A OF OUR PAPER BOOK. YOUR HONOURS, IT SHALL FURTHER BE SIGNIFICANT TO N OTE THAT THE ASSESSING OFFICER FRAMING THE ASSESSMENT, FOR INITI ATING THE PENALTY UNDER S.271(1)(C) OF THE ACT AS REGARD TO T HE CLAIM OF SHORT-TERM CAPITAL LOSS OF RS.L,07,63,179/-, REC ORDED HIS SATISFACTION ON THE GROUND THAT THE ASSESSEE HAS FI LED INACCURATE PARTICULAR AND CONCEALED HIS INCOME, HOW EVER, AT THE TIME OF ISSUING THE NOTICE UNDER S.274 LW.S. 271(L)(C), THE ASSESSING OFFICER STATED THAT IT APP EARED TO HIM THAT THE APPELLANT HAD CONCEALED THE PARTICULAR S OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS I NCOME. FINALLY, THE PENALTY WAS IMPOSED BY THE AO ON THE G ROUND -: 12: - 12 OR CONCEALING THE CORRECT PARTICULARS AND FURNISHING INACCURATE PARTICULARS OF INCOME. THUS, IT SHALL BE OBSERVED THAT THE INITIATION OF PENALTY, WHICH IS OBVIOUSLY AFTER SATISFACTION OF THE AO DUR ING THE ASSESSMENT PROCEEDINGS, WAS ON THE ONLY GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME BUT THE PENALTY WAS IMPOSED ON BOTH THE GROUNDS I.E. OF CONCEALING THE CORRECT PARTICULARS AND FURNISHING INACCURATE PARTI CULARS OF INCOME. PENALTY WAS NOT INITIATED QUA THE ADDITION OF RSA,53,956/- BEING THE SHORT-GRANT OF DEDUCTION UNDER SS.54EC & 54F YOUR HONOURS, IN THE INSTANT CASE, THE LEARNED AO VIDE PARA (11) ON PAGE NO. 19 OR THE PENALTY ORDER, HAS ALSO TAKEN INTO CONSIDERATION THE DISALLOWANCE OF DEDUCT ION UNDER S.54EC & 54F AGGREGATING TO RS.4,43,956/- [SIC. RS.4,53,956/-]. ACCORDINGLY, VIDE PARA (12) OF THE ORDER, THE PENALTY WAS IMPOSED QUA THE INCOME OF RS.L,12,07,135/- -: 13: - 13 [I.E. RS.I,0763,179/- SHORT-TERM CAPITAL LOS + R.4,43,956/- SHORT-GRANT OF DEDUCTION UNDER S.54EC & 54F). YOUR HONOURS, THE ADDITION ON ACCOUNT OF SHORT-GR ANT OF DEDUCTION UNDER S.54EC & 54F WAS MADE BY THE LEARNE D AO AT PARA (4) ON PAGE NO.6 OF THE ASSESSMENT ORDER BUT WHILE MAKING THE ADDITION FOR PARTIAL DISALLOWANCE OF DEDUCTION UNDER S.54EC & 54F, THE AO HAS NOT INITIATED ANY PENALTY. YOUR HONOURS, IT IS A SETTLED LAW THAT WITHOUT FOR MING A SATISFACTION AND INITIATING PENALTY ON ANY PARTICUL AR ISSUE, NO ORDER FOR PENALTY CAN BE IMPOSED AND THEREFORE, PENALTY QUA THE ADDITION OF RS.4,43,956/- DESERVES TO BE DELETED ON THIS LEGAL GROUND AS WELL. IMPOSITION OF PENALTY EVEN ON THE FACTS OF THE CASE WAS NOT CALLED FOR I) PENALTY QUA THE ADDITION OF RS.L,07,63,179/- ON ACCOUNT OF CLAIM OF SHORT TERM CAPITAL LOSS -: 14: - 14 AT THE OUTSET, IT IS SUBMITTED THAT THE APPELLANT H AD GENUINELY INCURRED SHORT-TERM CAPITAL LOSS AMOUNTIN G TO RS.L,0763,179/-, AS SHOWN BY HIM IN COMPUTATION OF INCOME. THE APPELLANT HAD PURCHASED SUCH SHARES THR OUGH REGISTERED SEBI BROKER FOR A TOTAL CONSIDERATION OF RS.2,00,58,608/- ON 01-04-2007. HOWEVER, DUE TO STEEP FALL IN THE PRICES OF THE SHARES SO PURCHASED, THE APPEL LANT HAD TO SALE SUCH SHARES FOR A SUM OF RS.92,95,429/- ON 31-03- 2008, AGAIN THROUGH REGISTERED SEBI BROKER. THEREBY RESULTING INTO A HUGE LOSS OF RS.L,07,63,179/- AS CLAIMED IN THE RETURN OF INCOME. IT IS SUBMITTED THAT ENTIRE TRANSACTIONS OF PURCHA SES AND SALES WERE CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUE S ONLY. FURTHER SUCH TRANSACTIONS WERE DULY SUPPORTED BY THE CONTRACT NOTES, BILLS ETC. AND THE ENTIRE DOCUM ENTARY EVIDENCES IN SUPPORT OF' GENUINENESS OF THE LOSS WE RE DULY FURNISHED BEFORE THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE APPELLANT HAD ALSO FURN ISHED A COPY OF HIS ACCOUNT IN THE BOOKS OF THE BROKER. A COPY OF -: 15: - 15 ALL THE DOCUMENTARY EVIDENCES FURNISHED BEFORE THE AO AS WELL AS BEFORE THE LEARNED CIT(A) ARE PLACED AT PAG E NO. 20 TO 30 OF OUR COMPILATION. IT IS SUBMITTED THAT THE ONLY BASIS TAKEN BY THE L EARNED AO FOR MAKING ADDITION ON ACCOUNT OF DISALLOWANCE O F SHORT-TERM CAPITAL LOSS IS BASED ON THE FACT THAT T HE LETTER ISSUED AT HIS END CALLING FOR CERTAIN INFORMATION F ROM THE MUMBAI-BASED BROKER NAMELY SHRI VISHAL VIJAY SHAH, 112/A, STOCK EXCHANGE PLAZA, DALAL STREET, MUMBAI, REMAINED UN-COMPLIED WITH. IT SHALL BE APPRECIATED THAT IT WAS NOT THE CASE OF THE AO THAT THE LETTER ISSUED B Y HIM UNDER S. 133(6) TO THE BROKER RETURNED UNSERVED. SU CH FACT ESTABLISHES THE VERY EXISTENCE OF THE BROKER WITH W HOM THE APPELLANT IS CLAIMING TO HAVE MADE GENUINE TRANSACT IONS OF SALES AND PURCHASES OF SHARES. IT IS SUBMITTED THAT THE AO FRAMING THE ASSESSMENT REQUIRED THE APPELLANT, VIDE LETTER DATED NIL, TO M AKE NECESSARY FOLLOW-UP WITH THE ABOVE NAMED BROKER S 0 THAT -: 16: - 16 NECESSARY INFORMATION, AS REQUIRED BY THE AO MAY BE SUPPLIED BY THE BROKER TO THE AO. THE AO AT THE LAS T PARA OF THE SAID LETTER CAUTIONED THE APPELLANT THAT IT WAS THE LAST OPPORTUNITY FOR HIM TO FURNISH THE DETAILS AND IT WAS ALSO SPECIFICALLY MENTIONED BY THE AO THAT NO FURTH ER TIME LIMIT SHALL BE GIVEN TO THE ASSESSEE [KINDLY REFER PAGE NO. 4 OF THE ASSESSMENT ORDER]. IT IS SUBMITTED THAT THE APPELLANT, WITHIN THE GIV EN TIME LIMIT, FOUND HIMSELF UNABLE TO COMPEL THE BROKER FO R FURNISHING THE DESIRED DETAILS BEFORE THE AO AND UN DER SUCH CIRCUMSTANCES, THE APPELLANT VOLUNTARILY AND I N GOOD FAITH CAME FORWARD TO SURRENDER THE AMOUNT OF SUBJE CT LOSS AND GOT HIMSELF AGREED TO PAY DUE TAXES RESULTING F ROM SUCH SURRENDER. YOUR HONOURS, IT WAS MERELY ON THE BASIS OF THE SU RRENDER OF THE APPELLANT THAT THE ADDITION ON ACCOUNT OF SH ORT-TERM CAPITAL LOSS WAS MADE IN THE ASSESSMENT ORDER. WHIC H WAS PASSED ON 30-12-2010. IT IS SUBMITTED THAT THE -: 17: - 17 ALLEGED LETTER OF BSE, AS REFERRED TO BY THE AO AT PAGE NO. 15 OF THE PENALTY ORDER WAS RECEIVED BY THE AO ON 3 1-12- 2010, I.E. AFTER THE FRAMING OF THE ASSESSMENT. IT IS CATEGORICALLY SUBMITTED THAT THE ADDITION IS NOT BA SED UPON ANY ADVERSE FINDING OR MATERIAL AVAILABLE ON THE RE CORD OF THE AO AT THE TIME OF PASSING THE ASSESSMENT ORDER. YOUR HONOURS, DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE AO AT PARA 9.6 & 9.7 AT PAGE NO. 14 TO 16 OF THE PENALTY ORDER, DISCUSSED NEW FACTS FOR LE VYING THE PENALTY UPON THE APPELLANT. THESE FACTS WERE RE LATING TO THE CASE OF ONE OF THE FAMILY MEMBERS OF THE APP ELLANT NAMELY SMT. REENA DEVI CHUGH. THE ASSESSING OFFICER STATED THAT IN THE SIMILAR CIRCUMSTANCES PREVAILING IN THE CASE OF SM1. REENA DEVI CHUGH, ENQUIRIES WERE CONDU CTED FROM THE BOMBAY STOCK EXCHANGE IN RESPECT OF TRANSACTIONS OF SHARES. IN RESPONSE, THE BOMBAY STO CK EXCHANGE THROUGH ITS LETTER RECEIVED BY THE AO ON 3 1-12-20 I 0 [AFTER THE DATE OF PASSING THE ASSESSMENT ORDER ON 30- 12-2010] INFORMED THAT NO TRADES WERE CARRIED OUT B Y THE -: 18: - 18 APPELLANT AND SMT. RCENA DEVI CHUGH. THE LETTER HAS ALSO BEEN REPRODUCED BY THE AO AT PAGE NO. 15 OF THE PENALTY ORDER. THE AO, AT PARA 9.7 AT PAGE NO. 15 OF THE PENALTY ORDER, PROCLAIMED THAT THE LETTER FROM BSE, THOUGH PROCURE D BY THE REVENUE AFTER PASSING OF THE ASSESSMENT ORDER, WAS A CLINCHING EVIDENCE AND THEREFORE, THE APPELLANT WIT HDREW HIS CLAIM OF SHORTTERM CAPITAL LOSS. YOUR HONOURS, IN THE INSTANT CASE, NEITHER DURING THE COURSE OF THE PENALTY PROCEEDINGS NOR EARLIER, THE APPELLANT WAS EVER CONFRONTED WITH THE EVIDENCE SO OBTAINED B Y THE REVENUE POST-COMPLETION OF ASSESSMENT PROCEEDINGS A ND THE PENALTY WAS IMPOSED BY THE AO IN ISOLATION. IN OTHER WORDS, THE VERY BASIS TAKEN BY THE LEARNED AO FOR IMPOSITION OF PENALTY WAS NOT DISCLOSED TO THE APPE LLANT EITHER IN THE SHOW-CAUSE NOTICE OR THROUGH ANY SUBS EQUENT COMMUNICATION. EVEN THE COPY OF THE ALLEGED LETTER FROM BSE WAS NEVER PROVIDED TO THE APPELLANT. -: 19: - 19 YOUR HONOURS, UNFORTUNATELY, DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LEARNED CIT(A) AT PARA ( 8) ON PAGE NO. 15 OF THE APPELLATE ORDER, ACCEDED TO THE STAND OF THE REVENUE BY STATING THAT IT MADE NO DIFFERENC E IN PENALTY PROCEEDINGS WHETHER SUCH REPLY OF BSE CAME AFTER COMPLETION OF ASSESSMENT PROCEEDINGS. THE LEARNED C IT(A) OUGHT TO HAVE CONSIDERED THAT WITHOUT CONFRONTING T HE SO CALLED LETTER FROM THE BSE, WHICH BECAME A BASIS FO R IMPOSITION OF PENALTY, TO THE APPELLANT, THE ENTIRE ACTION OF THE LEARNED AO WAS IN GROSS VIOLATION OF NATURAL LA W AND JUSTICE. YOUR HONOURS, IN THE INSTANT CASE, THE APPELLANT H AD CLAIMED SHORT-TERM CAPITAL GAIN LOSS IN RESPECT OF SHARE TRANSACTIONS CARRIED OUT BY HIM WITH ONE BROKER NAM ELY SHRI VISHAL VIJAY SHAH OF MUMBAI. IT IS SUBMITTED T HAT THE SIMILAR TRANSACTIONS WERE ALSO CARRIED OUT BY FATHE R OF THE APPELLANT NAMELY SHRI MOHANLAL CHUGH WITH THE SAME BROKER. IT WOULD BE PERTINENT TO NOTE THAT THE LEAR NED AO HAD IMPOSED THE PENALTY IN RESPECT OF TRANSACTIONS CARRIED -: 20: - 20 OUT BY THE APPELLANT AS WELL AS BY HIS FATHER SHRI MOHANLAL CHUGH. THE APPEALS AGAINST BOTH THE ORDERS WERE PREFERRED BEFORE THE SAME CIT(A). IT SHALL BE PERTI NENT TO NOTE THAT WHILE IN THE APPEAL OF THE APPELLANT HAS BEEN DISMISSED, THE APPEAL IN THE CASE OF SHRI MOHANLAL CHUGH WAS ALLOWED BY THE SAME CIT(A) VIDE HIS ORDER PASSE D ON 22-11-2013 IN APPEAL NO. IT-501L11-12. A COPY OF TH E APPEAL ORDER PASSED IN THE CASE OF SHRI MOHANLAL CH UGH IS PLACED AT PAGE NO. 50 TO 71 OF THE PAPER BOOK. IN T HE SAID APPELLATE ORDER, THE LEARNED CIT(A) HAS DELETED THE PENALTY ON THE GROUNDS THAT (I) WHEN THERE IS A CON DITIONAL SURRENDER, NO PENALTY CAN BE IMPOSED' (II) MERE AGR EEMENT TO THE ADDITION MAY ITSELF WOULD NOT ATTRACT PENALT Y. IT IS SUBMITTED THAT THE FACTS OF THE APPELLANT'S CASE AR C ALSO IDENTICAL TO THAT OF SHRI MOHANLAL CHUGH INASMUCH I N THE CASE OF THE APPELLANT TOO, PRIOR TO MAKING THE ADDI TION, NO ADVERSE MATERIAL WAS AVAILABLE ON RECORD. II) PENALTY QUA THE ADDITION OF RS.4,53,956/- ON A CCOUNT OF SHORT ALLOWANCE OF CLAIM OF DEDUCTION UNDER S.54EC AND -: 21: - 21 54F YOUR HONOURS, THE LEARNED AO HAS ALSO IMPOSED THE PENALTY IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF SHORT ALLOWANCE OF CLAIM OF DEDUCTION UNDER S. 54EC & 54F OF THE ACT I.E. AT RS.4,53,956/- WITHOUT ONSIDERING TH E MATERIAL FACT THAT IN THE ASSESSMENT ORDER NO DIREC TION WAS ISSUED TO INITIATE PENALTY PROCEEDINGS IN RESPECT O F SUCH ADDITION. EVEN IN RESPECT OF THIS ADDITION, THE AO AT PARA 1 1 ON PAGE NO. 19 OF THE PENALTY ORDER, STATED THAT THE A SSESSEE HAS NOT OFFERED ANY ARGUMENT. THEREFORE, THE ASSESS EE'S ACTION OF REDUCING THE DEDUCTION UNDER S.54EC AND 54F WAS NOT VOLUNTARY. THE LEARNED CITCA) ALSO AT PARA 13 ON PAGE NO. 16 OF HIS ORDER, ACCEDED THE STAND OF THE AO AND CONFIRMED TH E PENALTY ON THIS COUNT. -: 22: - 22 YOUR HONOURS, IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 271(1)(C) OR THE INCOME-TAX ACT, 1961 COVER THE SIT UATION OF FALSE CLAIM BUT NOT INCORRECT CLAIM. HERE, THE ASSE SSEE MADE A CLAIM OF DEDUCTION UNDER SS.54EC AND 54F OR THE ACT BUT THE AMOUNT OF DEDUCTION WAS NOT CORRECTLY COMPUTED BY THE APPELLANT. THU , IT SHALL BE APPREC IATED THAT MERE MAKING OF CLAIM WHICH WAS NOT SUSTAINABLE IN LAW, BY ITSELF, WOULD NOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME OF THE ASSESSEE. F OR SUCH PROPOSITION RELIANCE IS PLACED ON THE JUDICIAL PRONOUNCEMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 32 2ITR 158 (SC). WITHOUT ANY EVIDENCE OR ADMISSION OF CONCEALMENT MERELY FOR NON-FURNISHING OF EVIDENCES TO PROVE THE GENUINENESS OF TRANSACTIONS, NO PENALTY CAN BE IMPOSED - RULING OF HON'BLE BOMBA Y HIGH COURT AND OTHER HIGH COURTS -: 23: - 23 YOUR HONOURS, IN THE INSTANT CASE, THE APPELLANT, AT NO POINT OF TIME, ADMITTED OR CONCEDED THAT THE CLAIMS MADE IN THE INCOME-TAX RETURN WERE NOT GENUINE OR THESE WERE HIS CONCEALED INCOME. ON THE OTHER HAND, THE APPELL ANT RIGHT FROM BEGINNING AND EVEN AT THE TIME OF MAKING THE LETTER OF SURRENDER HAD FIRMLY MAINTAINED HIS STAND THAT THE CLAIM OF SHORT-TERM CAPITAL LOSS WAS GENUINELY MADE BY HIS BUT DUE TO PASSAGE OF TIME, HE WAS UNABLE TO PR OCURE REQUIRED DOCUMENTARY EVIDENCES FROM THE BROKER. IN SUCH CIRCUMSTANCES, SINCE THERE WAS NO ADMISSION ON PAN OF THE APPELLANT, WITHOUT BRINGING ON RECORD ANY COGENT MA TERIAL OR EVIDENCE THAT THE APPELLANT WAS GUILTY, THE IMPO SITION OF PENALTY WAS NOT JUSTIFIED. FOR SUCH PROPOSITION, RE LIANCE IS PLACED ON THE PRONOUNCEMENT OF THE HON'BLE HIGH COU RT OF BOMBAY IN THE CASE OF CIT VS. BHIMJI BHANJEE & CO. (1984) 146 ITR 145 (BOM.). THE HON'BLE BOMBAY HIGH COURT FOLLOWED THE DECISION IN THE CASE OF BHEEMJI BHANJEE (SUPRA) IN THE CASE OF SHREE NIRMAL COMMERCIAL LTD. VS. CIT (2009) 308 ITR 406 (BAM.). FOR SUCH PROPOSITION, RELIANCE IS -: 24: - 24 ALSO PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENT S: L) CIT VS. JALARAM OIL MILLS (2002) 253 ITR 192 (GUJ.) II) CIT VS. MP. NARAYANAN (2000) 244 ITR 528 (MAD) III) ADDL. CIT VS. RAWALPINDI FLOUR MILLS (P) LTD . 1980) 125 FTR 243 (ALL.) THE AO HAS NOT BROUGHT ON RECORD THAT WHICH SPECIFIC PARTICULAR WAS INACCURATELY FURNISHED BY THE APPELLANT YOUR HONOURS, THE LEARNED AO IN THE ENTIRE BODY OF THE ASSESSMENT ORDER OR EVEN IN THE PENALTY ORDER HAS N OT POINTED OUT ANY SPECIFIC PARTICULAR OF INCOME WHICH THE APPELLANT, IN HIS OPINION, HAD INACCURATELY FURNISH ED IN THE RETURN OF INCOME. IN SUCH CIRCUMSTANCES, AS PER THE RULING OF THE HON 'BLE APEX COURT IN THE CASE OF CIT VS. R ELIANCE PETRO PRODUCTS LTD. (2010) 322 ITR 158 (SC) , NO PE NALTY -: 25: - 25 UNDER S.271(L)(C) CAN BE IMPOSED. YOUR HONOURS, THE WHOLE ACTION OF THE LEARNED AO I N MAKING THE ADDITION I BASED UPON THE APPELLANT'S OW N ADMISSION WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD AT THE TIME OF INITIATION OF PENALTY PROCEED INGS IN THE ORDER OF ASSESSMENT. IN SUCH CIRCUMSTANCES, WITHOUT HAVING ANY RECOURSE TO EXPLANATION-L TO SECTION 271 (L)(C), THE LEARNED AO WAS NOT JUSTIFIED IN INITIATING, MUC H LESS OF IMPOSING THE IMPUGNED PENALTY. FOR SUCH PROPOSITION , RELIANCE IS PLACED ON THE DECISION OF HON'BLE SUPRE ME COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT & ANR. (2007) 29 J ITR 519 (SC) (PARA 68) AND ALSO ON DECISION OF HON' BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS. MP. NARAYANAN (2000) 244 ITR 528 (MAD) IN WHICH IT HAS BEEN HELD THAT WITHOUT HAVING RECOURSE TO EXPLANATION-L TO SECTION 271 (I)( C), MERELY ON THE BASIS OF FINDINGS GIVEN IN THE ASSESSMENT PROCEEDINGS, IMPOSITION OF PENALTY WOULD NOT BE JUSTIFIED. -: 26: - 26 APPELLANT DID NOT ADMIT CONCEALMENT BUT FOR GENUINE INABILITY TO COMPEL THE BROKER TO REPLY THE AO AGRE ED TO TREAT THE SHORT-TERM CAPITAL LOSS AS HIS INCOME YOUR HONOURS, IN SUPPORT OF THE PROPOSITION THAT W HERE AN ASSESSEE VOLUNTARILY ADMIT CERTAIN INCOME, DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS, BY WAY OF FIL ING A LETTER, NO PENALTY CAN BE IMPOSED, WE WISH TO PLACE RELIANCE ON FOLLOWING JUDICIAL PRONOUNCEMENTS: I) RAJESH CHAVLA VS. CIT (2006) 203 CTR (P&H) 209 II) CIT VS. HUKUM CHAND HARI PRASAD (2002) 172 CTR (P&H) 271 III) MAN MOHAN GUPTA VS. A CIT (2005) 274 FTR 179 (RAJ) IV) C1TVS. SURAJ BHAN (2007) 2N FTR -181 (P&H) V] CITVS. RAJESH NATH AGRAWAL (2008) 219 CTR (P&H ) 590 VI) CIT VS. RAJIV GARG & ORS. (2009) 313 FTR 256 (P&H) VII) CIT VS. SURESH KUMAR BANSAL (2002) 25-1ITR 1 30 (P&H) -: 27: - 27 VIII) DCITVS. GREY CAST FOUNDARY WORKS (2006) 101 TTL (AHD) 42 IX) ADD!. CFTVS. PREM CHAND GARG (2009) 123 TTL ( DEL) TM -133 X) ACITVS. MALU ELECTRODES (P) LID. (2010) 127 TT ] (NAG.) 599 XI) ALKA LUTHRA VS. A CIT (2010) 37 SOT 282 (DE!) XII) R. VINIT & CO. VS. ITO (2002) 76 TTL (AHD) 673 XIII) SMT. BRIJBALA CHAUDHARY VS. ITO (2004) 82 TT L (LUCK) 355 XIV) B. DAMODAR VATNAN BALIGA VS.JLC1T (2006) 6 S OT 271 (BANG.) XV) A.P. SAHGAL VS. ACFT (2003) 81 TTL (DEL) 917 YOUR HONOURS, TO BUTTRESS THE ARGUMENT CANVASSED I N THE PRECEDING PARA, WE WISH TO PLACE RELIANCE UPON A DI RECT JUDGMENT OF THE HON. JURISDICTIONAL HIGH COURT OF M ADHYA PRADESH IN THE CASE OF CIT VS. SURESH CHANDRA MITTA L AS REPORTED IN (2000) 241 ITR 124 (MP). IN SUCH CASE, THE HON. COURT WAS PLEASED TO HELD THAT WHEN AN ASSESSEE COM E -: 28: - 28 FORWARD TO SURRENDER ADDITIONAL INCOME WITH A VIEW TO BUY PEACE WITH THE DEPARTMENT AND TO COME OUT OF VEXED LITIGATION THAN NO PENALTY U/S. 271(1)(C) CAN BE IM POSED UPON HIM. AGAINST THE JUDGMENT OF THE HIGH COURT, Y OUR ESTEEMED DEPARTMENT FILED AN APPEAL BEFORE THE HON' BLE SUPREME COURT. THE LION. SUPREME COURT AFFIRMING TH E RATIO LAID DOWN BY THE M.P. HIGH COURT, DECLINE TO MAKE A NY INTERFERENCE. THE RULING OF THE APEX COURT IS CITED AS CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9 (SC). IN THE SIMILAR CIRCUMSTANCES, THE HON'BLE HIGH COURT OF MA DHYA PRADESH, IN THE CASE OF CIT VS. D & H SECHERON ELECTRODES LTD. (2008) 296ITR 193 (MP) AGAIN HELD THE SAME VIE W. IT IS A SETTLED LAW THAT MERE ADMISSION BY AN ASSE SSEE CANNOT RESULT INTO A CONCLU ION THAT THERE WAS DELI BERATE CONCEALMENT. THE HON. SUPREME COURT IN THE CASE OF SIR SHADI/AL SUGAR & GENERAL MILLS LTD. VS. CIT (1987) 64 CTR (SC) J 99 HELD THE SAME VIEW IN FOLLOWING WORDS: -: 29: - 29 'WE FIND THAT THE ASSESSEE ADMITTED THAT THESE WERE THE INCOMES OF THE ASSESSEE BUT THAT WAS NOT AN ADMISSI ON THAT THERE WAS DELIBERATE CONCEALMENT. FROM AGREEIN G TO ADDITIONS, IT DOES NOT FOLLOW THAT THE AMOUNT AGREE D TO BE ADDED WAS CONCEALED INCOME. THERE MAY BE HUNDRED AN D ONE REASONS FOR SUCH ADMISSION. I.E. WHEN THE ASSESSEE REALIZES THE TRUE POSITION, IT DOES NOT DISPUTE DISALLOWANCES BUT THAT DOES NOT ABSOLVED THE REVENU E FROM PROVING THE MENS REA OF A QUASI CRIMINAL OFFEN CE. YOUR HONOURS, IN THE INSTANT CASE, THE APPELLANT H AD VOLUNTARILY COME FORWARD TO MAKE THE SURRENDER OF ADDITIONAL INCOME, WHICH IS THE SUBJECT MATTER OF T HE PENALTY PROCEEDINGS, WITH A CONDITION THAT NO PENAL TY OR PROSECUTION PROCEEDINGS SHALL BE CARRIED OUT AGAINS T HIM. IN SUCH CIRCUMSTANCES IMPOSITION OF PENALTY WOULD N OT BE JUSTIFIED AS HELD BY THE HON. ALLAHABAD HIGH COURT IN CASE OF ADDL. CIT VS. KISHAN SINGH CHAND [J06 ITR 53-1). THE LION. JURISDICTIONAL INDORE BENCH OF ITAT, FOLLOWIN G THE ABOVE STATED RULING OF THE ALLAHABAD HIGH COURT, AL SO -: 30: - 30 DELETED THE PENALTY IMPOSED U/S. 271 (1)( C) IN CAS E OF SUMANT KUMAR LUHADIA, INDORE VS. ITO, INDORE AS REPORTED IN (2004) 1 ITJ 499 (TRIB.). THE HON. BENC H OBSERVED AS UNDER: 'AFTER CONSIDERING THE ARGUMENTS ADVANCES BY PARTIE S IN VIEW OF THE MATERIALS AVAILABLE ON RECORD, ORDERS OFF TH E LOWER AUTHORITIES AS WELL A' THE DECISIONS CITED BY THE P ARTIES, WE FIND FORCE IN THE SUBMISSIONS OF THE LEARNED AR, AS IT IS ALSO EVIDENT FROM LETTER DATED 19.11.1993 WHICH ALSO FIN DS REFERENCE IN THE ASSESSMENT ORDER THAT THE SURRENDE R WAS MADE WITH THE REQUEST NOT TO LEVY PENALTY AS UNDER SOME CIRCUMSTANCES THE ASSESSEE WAS NOT IN A POSITION TO ESTABLISH THE PURCHASES MADE FROM THE PARTIES BY EXAMINING TH EM IN PERSON. IT IS AN ADMITTED POSITION OF LAW THAT MERE AGREEMENT FOR ADDITION DOES NOT MEAN THAT THERE HAS BEEN EITH ER FRAUD OR WILLFUL NEGLECT SO AS TO JUSTIFY LEVY OF PENALTY. I N CASE OF ADDITIONAL CIT VS. KISHAN SINGH CHAND (SUPRA) BEFOR E THE HON'BLE HIGH COURT ACCORDING 10 THE ASSESSEE IF AGR EED TO A HIGHER RATE OF PROFIT ON THE UNDERTAKING GIVEN BY T HE ITO THAT -: 31: - 31 HE WOULD NOT IMPOSE ANY PENALTY. THE INSPECTING ASS ISTANT COMMISSIONER OF INCOME TAX REFUSED TO ACCEPT THIS P LEA ON THE GROUND THAT THE RECORD DID NOR DISCLOSE THAT TH ERE WAS ANY SUCH UNDERSTANDING BETWEEN HIM AND THE INCOMETAX OF FICER. THE HON'BLE HIGH COURT HELD THAT THIS APPROACH WAS WRONG BECAUSE THE UNDERSTANDING WAS ORAL AND IT COULD NOT FIND PLACE IN THE RECORD. HAVING REGARD TO THE NORMAL HU MAN CONDUCT, IT WAS REASONABLE THAT AN ASSESSEE WOULD N OT AGREE TO AN ENHANCED ASSESSMENT UNLESS HE HAD BEEN MOTIVA TED BY A COGENT REASON. THE PETITIONER'S AGREEMENT TO BE A SSESSED AT HIGHER FLAT RATE DID NOT AMOUNT TO CONFESSION OF CO NCEALMENT. THE HON'BLE HIGH COURT JUSTIFIED THE TRIBUNAL IN CA NCELING THE PENALTY. LIKEWISE, IN THE PRESENT CASE IT IS EVIDEN T FROM THE LETTER DATED 19.11.1993 OF THE ASSESSEE ADDRESSED T O THE AO THAT THE SURRENDER WAS MADE WITH THE UNDERSTANDING THAT PENALTY WOULD NO! BE LEVIABLE ON THE SAME. WE THUS DECIDED THE GROUND IN FAVOUR OF THE ASSESSEE WITH THE DIREC TION TO THE AO TO DELETE THE PENALTY LEVIED WHILE SETTING ASIDE THE FIRST APPELLATE ORDER. ' -: 32: - 32 AGAIN, THE HON. INDORE BENCH OF ITAT INDORE IN CASE OF SHRI SANJAY SOMANI VS. ACIT-1 (2) (APPEAL NO. 134 & 135IIND/2010) HAS REITERATED THE VIEW THAT WHERE AN ASSESSEE MAKES SOME DECLARATION OF INCOME TO BUY PE ACE AND TO AVOID LITIGATION AND ALSO WITH A BONA FIDE BELIE F THAT NO PENALTY PROCEEDINGS WOULD BE INITIATED THE IMPOSITI ON OF PENALTY WOULD NOT BE JUSTIFIED. THE HON. BENCH RELY ING UPON THE DECISION IN THE CASE OF A CIT VS. MALU ELECTROD ES (P) LTD. (2010) 33 DRR (NAG) (TRIB.) 487, HELD AS UNDER: 'THE IDENTICAL ISSUE AROSE BEFORE THE TRIBUNAL IN THE CASE OF MALU ELECTRODES (P) LIMITED, TO WHICH ONE OF US I.E. ACCOUNTANT MEMBER IS THE AUTHOR, WHEREIN THE TRIBUNAL AFTER CONSIDERING THE VARIOUS FACETS OF THE PROVISIONS OF SECTION 271(1)(C) HELD THAT PENALTY U/S. 271(1)(C) SHOULD NOT BE LEVIED, WHERE AN ASSESSEE ACTS IN A MANNER WHICH RESULTS INTO AN ADDITIONAL REVENUE IN A SMOOTH MANNER AND COMES OUT CLEAN WITHOUT FEAR OF PENALTY OR PROSECUTION, THUS, NON LEVY OF -: 33: - 33 PENALTY IN SUCH SITUATION WOULD SERVE THE REAL PURPOSE OF PROVISIONS OF SECTION 271(1)(C), BECAUSE THE PURPOSE OF LEVY OF PENALTY U/S 271(1)(C) IS TO DETER THE ASSESSEE FORM CONCEALMENT AND NOT TO COLLECT THE REVENUE. WE ARE FURTHER OF THE VIEW THA T WHETHER IT IS A CASE OF THE YEAR OF SURVEYOR AN EARLIER YEAR, WHEN THE ASSESSEE COMES OUT CLEAN, THEN. NORMALLY, THE PENALTY SHOULD NOT BE LEVIED, PARTICULARLY WHEN THE DUE TAXES WITH INTEREST HAVE BEEN PAID AND THE ASSESSEE, ESPECIALLY WHEN, IF THE ASSESSEE WOULD HAVE PURSUED THE MATTER, HE COULD HAVE AVOIDED THE ADDITIONS ITSELF IN THE PRESENT CASE, ONCE THE SALES HAVE BEEN ACCEPTED, THEN, THERE COULD NOT BE A CASE OF BOGUS PURCHASES TO THIS EXTENT AND ONLY A NORMAL PROFIT COULD HAVE BEEN ASSESSED. IN THIS VIEW OF THE MATTER, WE HOLD THAT IT IS NOT A F IT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, AND, THEREFORE, WE CANCEL THE SAME. ' -: 34: - 34 YOUR HONOURS, AT THE COST OF REPETITION, IT IS SUB MITTED THAT IN THE INSTANT CASE, THE APPELLANT AT NO POINT OF TIME ADMITTED THAT THE CLAIM MADE BY HIM IN HIS RET URN OF INCOME WAS BOGUS, BUT MERELY FOR WANT OF TIME, T HE APPELLANT CHOSE TO SURRENDER THE DISPUTED SUM AS HI S INCOME FOR THE YEAR UNDER CONSIDERATION. IN SUCH CIRCUMSTANCES, IT CANNOT BE CONCLUSIVELY SAID THAT THE APPELLANT HAD EITHER CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME SO AS TO MAKE LIABLE FOR PENALTY UNDER SECTI ON 271(1)(C) OF THE ACT. IT IS FURTHER SUBMITTED THAT SINCE THE APPELLANT HIMSELF HAD SURRENDERED THE INCOME, H E DID NOT CHOOSE TO RETRACT FROM SUCH SURRENDER WITH THE RESULT THAT HE DID NOT FILE ANY APPEAL AGAINST THE ADDITION MADE BY THE LEARNED AO. HOWEVER, MERE NON- TILING OF THE APPEAL BY THE APPELLANT AGAINST THE ADDITION MADE BY THE LEARNED AO SHOULD NOT AUTOMATICALLY BECOME A GROUND FOR THE AO FOR PRESUMING THAT THE APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE INSTANT CASE, EVEN TH E -: 35: - 35 LEARNED AO AT SECOND PARA ON PAGE NO.6 OF THE ASSESSMENT ORDER HAD STATED THAT THE APPELLANT CANNOT FILE ANY APPEAL AGAINST HIS ASSESSMENT ORDER . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, AND RULING OF THE JUDICIAL AUTHORITIES, IT IS SUBMI TTED THAT THE PENALTY SO IMPOSED BY THE LEARNED AO AND CONSEQUENTLY, CONFIRMED BY THE LEARNED CIT(A) DESER VES TO BE DELETED BY YOUR IIONOURS SO AS TO MEET THE ENDS OF JUSTICE. GROUND NO.3 'THAT, WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(APPEALS) GROSSLY ERRED IN CONFIRMING THE PENALTY WITHOUT APP RECIATING THE MATERIAL FACTS THAT PENALTY PROCEEDINGS ARE DIFFERE NT FROM ASSESSMENT PROCEEDINGS AND MERELY ON THE BASIS OF F INDINGS ARRIVED AT IN THE ASSESSMENT PROCEEDINGS, PENALTY U /S. 271 (1)(C) CANNOT BE IMPOSED. ' -: 36: - 36 MERELY FOR THE REASON THAT THE ASSESSEE DID NOT PREFER APPEAL AGAINST THE ADDITION WOULD NOT AUTOMATICALLY BECOME A GROUND FOR IMPOSITION OF PENALTY YOUR HONOURS, THE HON'BLE ITAT, PUNE 'A' BENCH, IN THE CASE OF KANBAY SOFTWARE INDIA (P) LTD. VS. DCIT AS REPORTED IN (2009) 122 TTJ (PUNE) 721. HAS HELD THAT MERELY FOR THE REASON THAT AN ASSESSEE DID NOT PREF ER TO GO IN APPEAL AGAINS T REJECTION OF HIS CLAIM, CANNOT IMPINGE UPON BONA FIDES OF THE CLAIM. IN THE SAID JUDGMENT, THE HON'BLE IT AT, AFTER DISCUSSING THE RULINGS OF VARI OUS JUDICIAL AUTHORITIES, INCLUDING THAT OF THE HON'BLE SUPREME COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT (2007 ) 291 ITR 519 (SC), AND AS ALSO IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2007) 295 ITR 244 (S C) -: 37: - 37 DELETED THE PENALTY BY HOLDING THAT CIVIL LIABILITY OF PENALTY UNDER S. 271(1)( C) CANNOT BE CONSTRUED TO MEAN THA T A PENALTY IS AN AUTOMATIC CONSEQUENCE OF AN ADDITION BEING MADE TO THE INCOME OF THE ASSESSEE; BEFORE ANY PENA LTY UNDER S. 271(1)( C) CAN BE IMPOSED, EACH CASE WILL HAVE TO BE EXAMINED IN THE LIGHT OF THE SCHEME OF THINGS EN VISAGED BY S. 271(1)(C) READ ALONG WITH EXPLANATIONS THERET O: REJECTION OF ASSESSEE'S BONA FIDE CLAIM UNDER S. 10 J\ DID NOT ATTRACT PENALTY UNDER S. 271(1)(C) AS NEITHER T HERE WAS ANY CONCEALMENT, NOR FURNISHING OF INACCURATE PARTI CULARS OF INCOME NOR THE DEEMING FICTION IN EXPLANATION 1 WAS ATTRACTED. THE HON'BLE IIIGH COURT OF PUNJAB & IIAR YANA IN THE CASE OF KRISHAN LA! SHIV CHAND RAI VS. CIT (197 3) 88 ITR 293 (P&H) HELD THAT MERELY FOR THE REASON THAT AN ASSESSEE SURRENDERS CERTAIN AMOUNT REPRESENTING HUN DI LOANS BUT CLAIMING THAT THE CREDITS WERE GENUINE, N O PENALTY CAN BE LEVIED MERELY ON THE BASIS OF SURREN DER. YOUR HONOURS, IN THE RECENT PRONOUNCEMENT OF THE H ON'BLE HIGH COURT OF MADRAS IN CASE OF CIT VS. GEM GRANITE S -: 38: - 38 (2013) 86 CCH 160 (CHEN.HC) HELD THAT MERELY BECAUS E THE ASSESSMENT PROCEEDINGS WERE CONFIRMED BY COURT HOLDING THE ADDITION VALID CANNOT AUTOMATICALLY LEA D TO CONCLUSION THAT THE PENALTY PROCEEDINGS WERE JUSTIF IED. IN THE SAID JUDGMENT, THE HON'BLE HIGH COURT OF MADRAS AFTER REFERRING THE DECISION OF APEX COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSORS (2008) 306 ITR 277 (SC); UNION OF INDIA VS. RAJASTHAN SPINNING AND WEAVING MILLS (2009) 13 SCC 448,' CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC); AND MAK DATA PVT LTD. VS. CIT (2013) 358 1TR 593 (SC) HELD THAT WHEN THERE IS A DIFFERENCE IN THE REPORTED AND ASSESSED INCOME. THE BURDEN IS 011 THE ASSESSEE TO SHOW THE DIFFEREN CE AND WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION HAD BEEN DISCHARGED BY THE ASSESSEE, THE ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME OF THE ASSESSEE AND NOT OTHERWISE. THE COURT FURTHE R HELD THAT ONCE THE ONUS CAST UPON THE ASSESSEE HAS BEEN DISCHARGED BY GIVING A COGENT AND RELIABLE EXPLANAT ION, THE ONUS SHIFTS ON THE REVENUE AND IF THE DEPARTMENT DO ES NOT -: 39: - 39 DISCHARGE ITS ONUS, NO PENALTY CAN BE LEVIED. YOUR HONOURS IN THE INSTANT CASE, THE LEARNED AO I MPOSING THE PENALTY HA HEAVILY RELIED UPON THE ONLY FACT TH AT CERTAIN ADDITIONS IN THE RETURNED INCOME OF THE APP ELLANT WERE MADE. THE LEARNED AO, DURING THE PENALTY PROCEEDINGS. HAS REFERRED TO CERTAIN EVIDENCE SO CL AIMED TO HAVE BEEN OBTAINED AFTER COMPLETION OR THE ASSESSMENT PROCEEDINGS BUT THE APPELLANT HAS NEVER AFFORDED AN Y SINGLE OPPORTUNITY TO THE APPELLANT TO OFFER HIS EX PLANATION IN RESPECT OF THE EVIDENCE SO PROCURED BY THE AO. THAT, WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHE R SUBMITTED THAT IT IS A SETTLED LAW THAT PENALTY PRO CEEDINGS ARE QUASI-CRIMINAL IN NATURE AND FURTHER THAT ASSES SMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO DIFFERE NT PROCEEDINGS AND THEREFORE MERELY ON THE BASIS OF ASSESSMENT PROCEEDINGS NO PENALTY U/S, 271 (1)( C) CAN BE IMPOSED. IN THIS REGARD RELIANCE IS PLACED ON THE R ATIO PRONOUNCED BY HON. SUPREME COURT IN THE CASE OF CIT VS. KHODAY ESWARA & SONS (1972) 83 ITR 369 (SC) , -: 40: - 40 ANANTHARAN VEERASINGHATAH & CO. VS. CIT (1980) 123 ITR 457, BHAJURAM GANPATRAM VS. CIT (1970) 75 ITR 285 A ND MANEY AND CO. VS. CIT (1963) 47 ITR 434. THE HON. SUPREME COURT IN THE CASE OF T ASHOK PAI VS. CIT (2007) 292 ITR 11 (SC) ALSO HELD THAT AN ORDER IMPO SING PENALTY IS QUASI-CRIMINAL IN NATURE AND. THUS, BURD EN LIES ON THE DEPARTMENT TO ESTABLISH THAT THE ASSESSEE HA D CONCEALED HIS INCOME. SINCE BURDEN OF PROOF IN PENA LTY PROCEEDINGS VARIES FROM THAT IN THE ASSESSMENT PROCEEDING, A FINDING IN AN ASSESSMENT PROCEEDING T HAT A PARTICULAR RECEIPT IS INCOME CANNOT AUTOMATICALLY B E ADOPTED, THOUGH A FINDING IN THE ASSESSMENT PROCEED ING CONSTITUTES GOOD EVIDENCE IN THE PENALTY PROCEEDING . IN THE PENALTY PROCEEDINGS, THUS, THE AUTHORITIES MUST CON SIDER THE MATTER AFRESH AS THE QUESTION HAS TO BE CONSIDE RED FROM A DIFFERENT ANGLE. RELIANCE IS ALSO PLACED ON FOLLOWING JUDICIAL -: 41: - 41 PRONOUNCEMENTS: I) ACITVS. VIP INDUSTRIES LTD. (2009) 122 TTJ (MUM) 289 II) CIT VS. RAMKAMAL ENTERPRISES LTD (2001) 167 CTR (DEL) 321 III) KHETRA MOHAN ROY VS. ITO & ORS. (J 983) 139 ITR 441 (CAL) IV) BURMAH SHEL OIL VS. ITO (1978) 112 ITR 592 (ALL) V) ACITVS. ABRIL PHARMACEUTICALS (P) LTD (2001) 70 TTJ (IND) 60 VI) CITVS. RATANLAL MISHRILAL (1983) 143 ITR 929 (MP) VII) LAKSHMI JEWELLERY VS. CIT (1988) 73 CTR (AP) 1 31 VIII) CITVS. R.K. AGRAWAL (1991) 187 ITR 397 (ALL) IX) CITVS. SEN MUKHERJEE & CO. (1985) 49 CTR (CAL) 21 X) CITVS. ANWAR ALI (1970) 76 ITR 696 (SC) XI) CIT VS. APSARA TALKIES (1985) 155 ITR 303 (MAD) XII) CITVS. OMKARNATH AGRAWAL (1992) 108 CTR (ALL) 69 YOUR HONOURS, IT IS RESPECTFULLY SUBMITTED THAT AB OVE -: 42: - 42 JUDICIAL PRONOUNCEMENT STILL HOLDS WATER EVEN AFTER INSERTION OF EXPLANATION TO SECTION 271 OF THE INCO ME-TAX ACT, 1961 BECAUSE STILL THE DEPARTMENT IS BOUND TO POSITIVELY ESTABLISH THE ACT OF CONCEALMENT BY AN A SSESSEE. IN VIEW OF THE ABOVE, IT WOULD BE APPRECIATED BY Y OUR HONOURS THAT THE PENALTY PROCEEDINGS BEING QUASI-CR IMINAL IN NATURE, THE INITIAL ONUS LIES ON THE REVENUE TO ESTABJISH THE DEFAULT OF THE ASSESSEE. IT WOULD FURTHER BE AP PRECIATED THAT EXPLANATION 1 TO SECTION 271 IS A RULE OF EVID ENCE AND NOT A RULE OF SUB TANTIVE LAW AND FURTHER SUCH EXPL ANATION IS REBUTTABLE AND THEREFORE STILL AFTER THE RATIO O F HON. SUPREME COURT IN THE CASE OF CIT VS. MUSSADILAL RAMBHAROSE (1987) 165 ITR 14 (SC), THE ONUS OF PROV ING DEFAULT OF AN ASSESSEE HEAVILY LIES ON THE REVENUE. THAT, WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMIT TED THAT IMPOSITION OF PENALTY U/S. 271(1)(C) IS NOT AUTOMAT IC. THE HON. SUPREME COURT IN CASE OF HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) 83ITR 26 (SC) HELD AS UNDER: -: 43: - 43 'AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMI NAL PROCEEDING, AND PENALTY WILL NOT ORDINARILY BE IMPO SED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF THE LAW ARE WAS GUILTY OF CONDUCT CONTU MACIOUS DISHONEST, ARE ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL DO SO. WHETHER PENALTY SHOULD BE IMPOS ED FOR FAILURE TO PERFORM STATUTORY OBLIGATION IS MATTER O F DISCRETION OF THE AUTHORITY TO BE EXERCISED JUDICIA LLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED THE AUTHORITY COMPETE NT TO IMPOSED THE PENALTY WILL BE JUSTIFIED IN REFUSING T O IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT O/' WHERE THE BREACH FLOWS FR OM BONA FIDE BELIEF THAT THE OFFENDER IS NOT LIABLE TO ACT, IN THE MANNER PRESCRIBED BY THE STATURE. ' IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, THE IMPOSITION OF PENALTY OF RS.30,15,000/-, UNDER S.271(L)(C) -: 44: - 44 OF THE INCOME-TAX ACT, 1961, MADE BY THE LEARNED AO AND CONFIRMED BY THE LEARNED CIT(A) BE DIRECTED TO BE D ELETED IN ITS ENTIRETY. 7. THE LD. AUTHORIZED REPRESENTATIVE ALSO RELIED UPON THE DECISION OF INDORE BENCH IN THE CASE OF ACIT VS. M. P. STATE TOURISM AND OTHERS IN I.T.A.NO. 2/IND/2015, AND SUB MITTED THAT WHEN THE AO HAS NOT MADE OUT ANY CHARGE WHETHE R THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED THE INACCURATE PARTICULARS OF INCOME, THE PENALTY C ANNOT BE LEVIED. THE LD. AUTHORIZED REPRESENTATIVE RELIED UP ON THE DECISION OF NEW SORATHIA ENGINEERING CO. LTD., 282 ITR 642, AS PER WHICH THE AO SHOULD STATE WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICU LARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAS BEEN FURNISHED BY THE ASS ESSEE. THEREFORE, THE PENALTY ORDER SHOULD BE QUASHED. 8. THE LD. SENIOR D.R. SUBMITTED THAT THE ASSESSEE INTRODUCED SHORT TERM CAPITAL LOSS ON SALE OF SHARE S. -: 45: - 45 FIRSTLY, THE ASSESSEE HAS PURCHASED THE SHARES AND NO PAYMENT WAS MADE TO BROKER, WHEREAS IN NORMAL SHARE TRANSACTION PAYMENT IS EITHER MADE IN ADVANCE OR MA DE IT ON SETTLEMENT DATE. THE CONTRACT NOTE OF SUCH SHARE TRANSACTION FURNISHED BY THE ASSESSEE WERE EXAMINED AND IT WAS NOTICED THAT THE CONTRACT NOTE OF THE BROKER DID NOT SHOW THE ORDER NUMBER AND TRADE TIME. THE AO HAS IS SUED THE LETTER TO BOMBAY STOCK EXCHANGE IN THE CASE OF SHRI NITESH CHUGH AND SMT. REENA DEVI CHUGH ASKING THEM AS TO WHETHER SUCH TRANSACTION HAS ACTUALLY BEEN TAKEN PLACE AND BSE HAS INFORMED THAT NO SUCH TRANSACTION WAS CARRIED OUT. THEREFORE, THE ASSESSEE AGREED FOR DISALLOWANCE OF SUCH CAPITAL ASSET. THEREFORE, THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON AND GINNING FACTORY [2013] 359 IT R 565/218 TAXMAN 423/35 TAXMANN.COM 250 (KAR.), IN WH ICH IT WAS HELD THAT IT IS IMPERATIVE THAT THE ASSESSMENT ORDER CONTAINS A DIRECTION. THE USE OF PHRASES LIKE (A) P ENALTY PROCEEDINGS ARE BEING INITIATED SEPARATELY, AND (B) PENALTY -: 46: - 46 PROCEEDINGS UNDER SECTION 271(1)(C) ARE INITIATED S EPARATELY, DO NOT COMPLY WITH THE MEANING OF THE WORD 'DIRECTION' AS CONTEMPLATED EVEN IN THE AMENDED PROVISIONS OF LAW. THE DIRECTION SHOULD BE CLEAR 'AND WITHOUT ANY AMBIGUIT Y. A DIRECTION BY A STATUTORY AUTHORITY IS IN THE NATURE OF AN ORDER REQUIRING POSITIVE COMPLIANCE. WHEN IT IS LEFT TO T HE OPTION AND DISCRETION OF THE INCOME TAX OFFICER WHETHER OR NOT TAKE ACTION, IT CANNOT BE DESCRIBED AS A DIRECTION. IT IS SETTLE D LAW THAT IN THE ABSENCE OF THE EXISTENCE OF THESE CONDITIONS IN THE ASSESSMENT ORDER PENALTY PROCEEDINGS COULD NOT BE P ROCEEDED WITH. THE PROCEEDINGS WHICH ARE INITIATED CONTRARY TO THE SAID LEGAL POSITION ARE LIABLE TO BE SET ASIDE. THEREFOR E, THE APPELLATE AUTHORITY WAS JUSTIFIED IN SETTING ASIDE THE ORDER IMPOSING PENALTY: ACCORDINGLY, THE SUBSTANTIAL QUESTION OF L AW IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. [PARA 7] . THE FURNISHING OF INACCURATE PARTICULARS WITH INTENTION TO AVOID TAX, THEN IT AMOUNTS TO CONCEALM ENT AND ALSO IT AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS. THEREFORE, IN THIS CASE, THE ASSESSEE HAS -: 47: - 47 CLAIMED THE BOGUS CLAIM. THEREFORE, THE PENALTY WAS RIGHTLY LEVIED. HE ALSO RELIED UPON THE DECISION OF DY. DIRECTOR OF INCOME-TAX VS. CHIRAG METAL ROLLING MIL LS LIMITED, (2008) 305 ITR 29 (MP). 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IN THE CASE OF SHRI NITESH CHUGH , DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO FRAMIN G THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS CLA IMED SHORT TERM CAPITAL LOSS FROM SALE OF SHARES AT RS. 1,07,63,179/-. THE AO ISSUED NOTICE U/S 133(6) THRO UGH BROKER TO WHOM THE ASSESSEE HAS CLAIMED TO HAVE CAR RIED OUT CERTAIN TRANSACTION RESULTING INTO SAID LOSS. H OWEVER, THE NOTICE GOT SERVED BUT THE BROKER DID NOT MAKE A NY COMPLIANCE, SO ISSUED NOTICE U/S 133(6). THE ASSESS EE CLAIMED THAT HE WAS GIVEN SHOW CAUSE NOTICE AND THE ASSESSEE IN REPLY TO SHOW CAUSE NOTICE, HE STATED T HAT HE HAS TAKEN THE CONTENTION THAT THE ASSESSEE COULD NO T -: 48: - 48 GATHER THE FULL DETAILS FROM THE BROKER REGARDING T HE SHARE TRANSACTION WITHIN THE TIME ALLOWED BY THE ASSESSIN G OFFICER AND THE ASSESSEE VOLUNTARILY CAME FORWARD T O SURRENDER ENTIRE SHORT TERM CAPITAL LOSS ON SHARE TRANSACTION AS HIS INCOME FOR THE ASSESSMENT YEAR U NDER CONSIDERATION. THE ASSESSEES CLAIM BEFORE US IS TH AT THE ASSESSEE HAD FILED ALL THE PARTICULARS IN HIS RETUR N OF INCOME. THE AO HAS MADE THE ADDITION BASED ON ASSESSEES ADMISSION WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD AT THE TIME OF INITIATION OF PEN ALTY. THE AO HAS LEVIED THE PENALTY SIMPLY ON THE FINDING GIV EN BY THE ASSESSMENT ORDER. WE FIND THAT THE DECISION OF RELIANCE PETROPRODUCTS (P) LIMITED, 230 CTR 320, HA S CONSIDERED THE PHRASE CONCEALMENT OF PARTICULARS AS REFERRED IN SECTION 271(1)(C). THE PENALTY EXISTS B EFORE PENALTY IS IMPOSED. THE RETURN OF INCOME IS THE ONL Y DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICU LARS OF HIS INCOME. WHEN SUCH PARTICULARS ARE FOUND TO B E -: 49: - 49 INACCURATE, THE LIABILITY WOULD ARISE. THE CONCEALM ENT OF INCOME AND FURNISHING INACCURATE PARTICULARS ARE EXPLAINED BY THE VARIOUS COURTS. THE COURT WENT TO HOLD THAT IN ORDER TO ATTRACT THE PENALTY U/S 271(1)(C), MENS REA IS NECESSARY. ACCORDING TO THE COURT, THE WORD INACCURATE SIGNIFIES DELIBERATE ACT OR OMISSION O N BEHALF OF THE ASSESSEE. CLAUSE (IV) OF SECTION 271(1) PRO VIDES FOR AN AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF S UCH CONCEALMENT OF PARTICULARS OF INCOME, BUT IT MAY NO T BE EXCEEDING THREE TIMES THEREOF. IT WAS ALSO POINTED OUT THAT TERM INACCURATE PARTICULARS WAS NOT DEFINED ANYWH ERE IN THE ACT. IT WAS HELD THAT FURNISHING OF ASSESSMENT OF VALUE OF THE PROPERTY MAY NOT ITSELF BE FURNISHING INACCU RATE PARTICULARS. IT WAS ALSO HELD THAT THE AO MUST BE F OUND TO HAVE BEEN FAILED TO PROVE THAT HIS EXPLANATION IS N OT ONLY BONA FIDE BUT ALL THE FACTS RELATING TO SAME AND MA TERIAL TO THE FINDING AS TO HOW AND IN WHAT MANNER THE ASSESS EE HAS FURNISHED PARTICULARS OF HIS INCOME. IN THE CAS E OF -: 50: - 50 DHARMENDRA TEXTILES & PROCESSORS, 306 ITR 277, WHER EIN IT IS HELD THAT MERELY MAKING OF A CLAIM WHICH IS N OT SUSTAINABLE IN LAW WILL NOT AMOUNT FOR FURNISHING INACCURATE PARTICULARS REGARDING INCOME OF THE ASSE SSEE. SUCH CLAIM MADE IN A RETURN CANNOT AMOUNT TO BE INACCURATE PARTICULARS. 10. NOW COMING TO THE FACTS OF THIS CASE, WE FIND THAT THE ASSESSEE IN HIS RETURN OF INCOME HAS MADE A CLA IM OF SHORT TERM CAPITAL LOSS ON SHARES OF RS. 1,07,63,17 9/-. THE NOTICE WAS ISSUED TO THE BOMBAY STOCK EXCHANGE IN THE CASE OF SMT.REENA DEVI CHUGH AND SHRI NITESH CH UGH ASKING WHETHER THE TRANSACTION ACTUALLY TOOK PLACE. BOMBAY STOCK EXCHANGE REPLIED THAT NO ADDRESSES WER E FOUND TO HAVE BEEN EXECUTED BY TRADING NO. VIJAY VI SHAL 77 ON BEHALF OF REENA DEVI CHUGH AND NITESH CHUGH. THE ASSESSEE HAS AGREED FOR DISALLOWANCE OF SUCH CAPITA L LOSS BEFORE THE AO ON THE BASIS OF THIS LETTER. FROM THI S FACT, WHETHER IT CAN BE SAID THAT THE ASSESSEE HAS CONCEA LED -: 51: - 51 ANY PARTICULARS OF INCOME OR NOT. IN OUR OPINION, T HE ASSESSEE HAS DISCLOSED ALL THE RELEVANT PAPERS, WHI LE CLAIMING THE LOSS. THE ASSESSEE HAS PRODUCED ALL TH E DOCUMENTARY EVIDENCES BEFORE THE AO AND ON THE BASI S OF THESE DOCUMENTS, THE AO HAS MADE AN INQUIRY. WE FIN D THAT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA), THE HON'BLE SUPREME COURT HAD OCCASION TO CONSIDER WHET HER THE PENALTY CAN BE LEVIED, WHEN ASSESSEE HAS FILED ALL THE PARTICULARS OF INCOME AND WHEN THE CLAIM OF THE ASS ESSEE WAS NOT PROVED BY THE ASSESSEE. THEREFORE, HE HAS A GREED FOR THE LOSS AND HE HAS OFFERED THIS AMOUNT AS HIS INCOME. IN OUR OPINION, THIS CANNOT BE A GROUND FOR CONCEAL MENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. 11. WE FIND THAT HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. CHENNUPATI TYRE & RUBBER PRO DUCTS, 90 CCH 0181 (A.P.H.C.) HAS CONSIDERED WHETHER THE ASSESSEE HAS ACCEPTED THE ADDITION DURING THE ASSES SMENT PROCEEDINGS AMOUNTS TO CONCEALMENT OF INCOME OR -: 52: - 52 FURNISHING INACCURATE PARTICULARS OF INCOME. THE CONCEALMENT CAN OCCUR ONLY WHEN THE PERSON IS IN FU LL KNOWLEDGE OF THE STATE OF AFFAIRS AND EVEN WHILE BE ING UNDER THE OBLIGATION TO MAKE IT OTHERS KNOWN AND PARTICULAR AUTHORITY UNDER THE ACT FAILS TO AND REF USE TO DO SO, THEN AND THEN ONLY HE CAN HAVE SAID TO HAVE CONCEALED. IN THE INSTANT CASE, THE ASSESSEE HAS AG REED FOR LOSS TO BE TREATED HIS INCOME DUE TO LACK OF MALA F IDE INTENTION ON THE PART OF THE ASSESSEE. WE FIND THAT IN THIS CASE THE ASSESSEE HAD NO INTENTION TO CONCEAL THE I NCOME AND HE HAS AGREED FOR INCOME FOR PURCHASING THE PEA CE AND TO BUY THE PENALTY. WE FIND THAT THE JURISDICTI ONAL HIGH COURT IN THE CASE OF CIT VS. SURESH CHANDRA MI TTAL, 241 ITR 124 (M.P.), WHEREIN IT IS HELD THAT WHEN TH E ASSESSEE CAME FORWARD TO SURRENDER THE ADDITIONAL I NCOME WITH A VIEW TO BUY PEACE WITH THE DEPARTMENT TO COM E OUT OF THE VEXED LITIGATION, NO PENALTY U/S 271(1)(C) CAN BE IMPOSED. THE JUDGMENT OF HON'BLE MADHYA PRADESH HIG H -: 53: - 53 COURT WAS CONFIRMED IN THE CASE OF CIT VS. SURESH CHANDRA MITTAL, 251 ITR 9 (S. C.). WE FIND THAT IN THIS CASE, THE ASSESSEE HAS VOLUNTARILY DISCLOSED ALL TH E FACTS BEFORE THE REVENUE AUTHORITIES. THEREFORE, IN OUR O PINION, NO PENALTY CAN BE LEVIED. THEREFORE, WE SET ASIDE T HE ORDER IMPOSING THE PENALTY. 12. WE FIND THAT THE FACTS OF SMT. REENA DEVI CHUGH IN I.T.A.NO. 734/IND/2013 ARE SIMILAR TO THE FACTS OF THE ABOVE CASE OF SHRI NITESH CHUGH. THEREFORE, WE DELE TE THE PENALTY IN HER CASE ALSO. I.T.A.NO. 67/IND/2013 A. Y. 2008-09 (SHRI MOHANLA L CHUGH) : 13. IN THIS APPEAL, THE LD. CIT(A) HAS DELETED THE PENALTY ON THE GROUND THAT THE FACTS ARE DIFFERENT IN THE CASE OF SHRI NITESH CHUGH AND SMT. REENADEVI CHUGH. IN THE INSTANT CASE, THE AO HAS NOT CARRIED OUT DETAIL ED INVESTIGATION FROM THE BROKER AS WELL AS FROM THE BOMBAY STOCK EXCHANGE, PROVE SUCH TRANSACTION BOGUS IN THE HANDS OF TWO PERSONS. BUT THIS FINDING CANNOT BE AP PLIED -: 54: - 54 IN THE CASE OF THE ASSESSEE. THEREFORE, FOLLOWING T HE DECISION OF HON'BLE MADHYA PRADESH HIGH COURT IN TH E CASE OF SURESH CHANDRA MITTAL, 241 ITR 124 (MP), TH E LD. CIT(A) HAS DELETED THE PENALTY. THEREFORE, RELYING UPON THE FOREGOING FINDING GIVEN ABOVE FOR TWO ASSESSEE SH RI NITESH CHUGH AND SMT. REENA DEVI CHUGH, WE CONFIRM THE ORDER OF THE LD. CIT(A) DELETING THE PENALTY IN THE CASE OF SHRI MOHANLAL CHUGH. 14. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE ALLOWED WHEREAS THE DEPARTMENTAL APPEAL IS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. SD/- (B. C. MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 30 TH SEPTEMBER, 2015. CPU* 309