K.P. Pan Flavours (P) Ltd., Kanpur V. DCIT, New Delhi

ITA 73/DEL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5765 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2004-2005
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M L JAIN SH SANTOSH AGRAWAL
• Keywords: Search and seizure; Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. G.D. AGRAWAL, PRESIDENT AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.73/DEL/2016 (ASSESSMENT YEAR: 2004-05) K.P.PAN FLAVOURS (P) LTD. 24/36, BIRHANA ROAD KANPUR PAN: AABCK7310B VS. DCIT CENTRAL CIRCLE-8 NEW DELHI APPELLANT RESPONDENT ASSESSEE BY : SH. M.L.JAIN, SH. SANTOSH AGRAWAL, ADV. REVENUE BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 24.04.2018 DATE OF PRONOUNCEMENT : 28.06.2018 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE AGAINST ORDER DATED 29.10.2015 PASSED BY THE LD. CIT (APPEALS)-27 , NEW DELHI FOR ASSESSMENT YEAR 2004-05 WHEREIN, VIDE THE IMPUGN ED ORDER, THE LD. CIT (APPEALS) HAS UPHELD IMPOSITION OF PENA LTY OF RS. 2,65,132/- U/S 271(1)(C) OF THE INCOME TAX ACT, 196 1 (HEREINAFTER CALLED AS THE ACT) 2 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE BE LONGS TO THE CHAURASIA GROUP AND IS ENGAGED IN THE BUSINESS OF M ANUFACTURING OF PAN MASALA AND GUTKA . A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT WAS CONDUCTED IN THE BUSINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 29.04.2008. NO INCRIMINATING MATERIAL OR UNDISCLOSED ASSET OR INVE STMENT WAS FOUND DURING THE COURSE OF SEARCH. SUBSEQUENTLY, TH E ASSESSEE FILED THE RETURN OF INCOME U/S 153A OF THE ACT AT A TOTAL INCOME OF RS. 52,69,856/-. THE ASSESSMENT WAS COMPLETED U/S 153A R EAD WITH SECTION 143(3) OF THE ACT WHEREIN A TRADING ADDITION OF RS. 7,39,037/- WAS MADE TO THE INCOME OF THE ASSESSEE AS UNDISCLOSED INCOME. THE ADDITION OF RS. 7,39,037/- WAS MADE BECA USE ON 25.06.2004 THE PREMISES OF THE ASSESSEE AND ITS TRA NSPORTERS HAD BEEN SEARCHED BY THE DGCEI, DELHI AND A DEMAND OF E XCISE DUTY OF RS. 2,20,39,725/- HAD BEEN CREATED TOWARDS EVASI ON OF EXCISE DUTY. THE ASSESSEE HAD APPROACHED THE HONBLE SETTL EMENT COMMISSION OF CUSTOM AND CENTRAL EXCISE AND THE SET TLEMENT COMMISSION, VIDE ITS ORDER DATED 28.08.2008, HAD RE DUCED THE DEMAND TO RS. 47,67,175/-. THIS AMOUNT PERTAINED TO ASSESSMENT 3 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) YEARS 2004-05, 2005-06. THE AMOUNT PERTAINING TO AS SESSMENT YEAR 2004-05 I.E. THE YEAR UNDER CONSIDERATION WAS R S. 27,55,000/-. SINCE THE RATE OF EXCISE DUTY IN THE YEAR WAS 63% OF THE TURNOVER, THE SUPRESSED TURNOVER OF THE ASSESSE E WAS DETERMINED AT RS. 43,73,000/-. THEREAFTER, GROSS PR OFIT RATE OF 16.90% (AS DECLARED BY THE ASSESSEE FOR THE YEAR) W AS APPLIED AND AMOUNT OF 7,39,037/- WAS ADDED TO THE INCOME OF THE ASSESSEE AS PROFIT FROM UNDISCLOSED SALES. PENALTY WAS IMPOSED U /S 271(1)(C) OF THE ACT ON THIS AMOUNT. THE APPEAL OF THE ASSESSEE AGAINST THIS IMPOSITION OF PENALTY WAS DISMISSED BY THE LD. CIT ( A) AND NOW THE ASSESSEE HAS APPROACHED THE ITAT CHALLENGING THE IM POSITION OF PENALTY BY RAISING THE FOLLOWING GROUNDS OF APPEAL : - 1. 1. BECAUSE THE LEARNED CIT(A) WAS WRONG IN LAW & ON FACTS IN CONFIRMING THE PENALTY OF RS. 265132/- IMPOSED U/S 271(L)(C) OF THE ACT BY THE LEANED A.O FOR A.Y. 2004-05. 2. BECAUSE THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THERE WAS NEITHER ANY CONCEALMENT NOR FILING OF INACCURATE PARTICULARS OF INCOME AS EXPLAINED IN THE REPLY FILED BEFORE THE A.O. 3. BECAUSE IN THE ASSTT. ORDER AS WELL AS IN THE SHOW CAUSE NOTICE ISSUED BY THE A.O. THERE WAS NO FINDING AS TO WHETHER THERE WAS ANY 4 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) CONCEALMENT OF INCOME OR FILING OF INACCURATE PARTICULARS OF INCOME. 4. BECAUSE THE ASSTT. ORDER AS WELL AS IN THE PENALTY ORDER THERE HAS BEEN NO FINDING ABOUT POSITIVE CONCEALMENT OF ANY INCOME. THE ADDITION MADE BY THE A.O. WAS BASED ON ESTIMATE BASIS AND NO INCRIMINATING MATERIAL RELATING TO EARNING O F ANY INCOME WAS FOUND IN SEARCH. 5. BECAUSE THE PROVISIONS OF SECTION 271(L)(C) OF THE INCOME TAX ACT WERE NOT APPLICABLE TO THE FACTS OF THE CASE. 6. THAT IN ANY CASE & WITHOUT PREJUDICE TO THE ABOVE GROUNDS THE QUANTUM OF PENALTY IMPOSED IS MUCH TOO HIGH & EXCESSIVE. 7. THAT THE ORDERS OF THE LOWER AUTHORITIES ARE AGAINST LAW, FACTS & PRINCIPLES OF NATURAL JUSTICE. 8. THAT THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALTER OR MODIFY ANY OF THE GROUNDS STATED HEREINAFTER ANY TIME WHETHER DURING THE COURSE OF HEARING OF APPEAL OR EVEN EARLIER. 3. THE LD. AUTHORISED REPRESENTATIVE, AT THE OUTSET , SUBMITTED THAT THE NOTICE U/S 274 READ WITH SECTION 271 OF THE ACT DID NOT SPECIFY AS TO WHETHER THE PENALTY U/S 271(1)(C) OF T HE ACT WAS PROPOSED TO BE IMPOSED FOR CONCEALING PARTICULARS O F INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF THE INCOME. IT WAS ALSO 5 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) SUBMITTED THAT THE PENALTY ORDER ALSO DID NOT MAKE IT CLEAR WHETHER THE PENALTY WAS IMPOSED ON THE ASSESSEE FOR CONCEALI NG PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. OUR ATTENTION WAS DRAWN TO COPY OF NOTICE ISSUED U/S 274 , DATED 30.12.2010, AND IT WAS SUBMITTED THAT THE IRRELEVANT PORTIONS HAD NOT BEEN CROSSED OUT IN THE NOTICE. OUR ATTENTION WA S ALSO DRAWN TO THE PENALTY ORDER WHEREIN THE PENALTY WAS STATED TO BE IMPOSED U/S 271(1)(C) OF THE ACT WITHOUT SPECIFYING WHETHER THE PENALTY WAS BEING IMPOSED FOR FURNISHING INACCURATE PARTICUL ARS OF INCOME OR FOR CONCEALING THE INCOME. RELIANCE WAS PLACED ON NUMBER OF JUDICIAL PRECEDENTS FOR THE CONTENTION THAT WHERE TH E CHARGE IS NOT SPECIFIC, PENALTY COULD NOT BE IMPOSED. 4. IN RESPONSE, THE LD. SR. DEPARTMENTAL REPRESENTA TIVE PLACED RELIANCE ON THE CONCURRENT FINDINGS OF THE LOWER AU THORITIES AND SUBMITTED THAT THE PENALTY HAD BEEN IMPOSED AS THER E WAS A FINDING OF SUPPRESSED SALES BY THE CUSTOM AND CENTRAL EXCIS E DEPARTMENT AND THE DEMAND DUE TOWARDS EXCISE DUTY PAYABLE HAD A LSO BEEN FINALLY SETTLED BY THE HONBLE SETTLEMENT COMMISSIO N. IT WAS SUBMITTED THAT IT WAS A CLEAR CASE FOR IMPOSITION OF PENALTY AND IT 6 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) DID NOT REALLY MATTER THAT THE CHARGE WAS NOT SPECI FICALLY MENTIONED. THE LD. SR. DR ALSO SUBMITTED THAT THIS GROUND OF D EFECT IN THE NOTICE WAS NOT RAISED BEFORE THE LD. CIT (A). 5. WE HAVE GONE THROUGH THE FACTS AND RECORDS OF TH E CASE AND HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS MADE BEF ORE US. A PERUSAL OF THE NOTICE ISSUED U/S 274 READ WITH SECTI ON 271(1)(C) AS APPEARING ON PAGE 6 OF THE PAPER BOOK SHOWS THAT NOT ICE HAS BEEN ISSUED IN MECHANICAL MANNER BY MERELY FILLING UP THE FORMAT OF THE NOTICE AND IT IS NOT CLEAR AS TO WHETHER THE PENALTY IS PROPOSED TO BE IMPOSED FOR CONCEALMENT OR FOR FURNI SHING INACCURATE PARTICULARS AS THE RELEVANT PORTIONS IN THE NOTICE HAVE BEEN CROSSED OUT. THE ASSESSMENT ORDER DATED 30.12. 2010 PASSED U/S 143(3) / 153A OF THE ACT MENTIONS INITIATION OF PENALTY PROCEEDINGS U/S 271(L)(C) OF THE ACT FOR CONCEALMEN T OF INCOME AND FURNISHING OF INACCURATE PARTICULARS. THE PENAL TY ORDER DATED 20.03.2014 PASSED U/S 271(L)(C) OF THE ACT MENTIONS THAT THE ASSESSEE IS LIABLE TO BE PENALIZED U/S 271(1)(C) OF THE ACT BUT DOES NOT SPECIFY WHETHER THE PENALTY IS BEING IMPOSED FOR CONCEALMENT OR FOR FURNISHING INACCURATE PARTICULARS. IT IS OUR CONSIDERED OPINION THAT THE AO IS EMPOWERED TO INITIATE PENALT Y PROCEEDINGS 7 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDIN GS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. C ONCEALMENT AND FURNISHING INACCURATE PARTICULARS ARE DIFFERENT . THE AO, WHILE ISSUING NOTICE, HAS TO COME TO THE CONCLUSION AS TO WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR WHETHER IT IS A CAS E OF FURNISHING OF INACCURATE PARTICULARS. THE HON'BLE A PEX COURT IN THE CASE OF T. ASHOK PAI VS. CIT REPORTED IN 292 IT R 11 (SC) HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INAC CURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MANU ENGI NEERING WORKS REPORTED IN 122 ITR 306 (GUJ.) AND THE HON'BL E DELHI HIGH COURT IN THE CASE OF CIT VS. VIRGO MARKETING LTD. R EPORTED IN 171 TAXMAN 156 (DELHI) HAVE HELD THAT LEVY OF PENALTY H AS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITI ON BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. MERE FILLING UP OF THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WIL L LEAD TO INFERENCE AS TO NON APPLICATION OF MIND. RELIANCE I S PLACED ON THE DECISION OF THE HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF COMMISSIONER OF INCOME TAX & ANOTHER VS. MANJUNATHA COTTON & 8 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) GINNING FACTORY (2012) 83 CCH 0282 (KAR.) WHEREIN TH E HON'BLE KARNATAKA HIGH COURT HAS HELD : '(1) NOTICE U/S 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E. WHETHER IT IS FOR CONCEALME NT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME; ( II )SENDING PRINTED FORM WHERE ALL THE GROUND MEN TIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW; (III) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE PRINCIPLE OF NATURAL JUSTIC E IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPO SED TO THE ASSESSEE.' 5.1 THEREFORE, ON THE FACTS OF THE PRESENT CASE AN D RESPECTFULLY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX & ANOTHER VS. MANJUNA THA COTTON & GINNING FACTORY (SUPRA) WE HOLD THAT THE PENALTY IM POSED U/S 271(1)(C) OF THE ACT WAS IMPROPERLY IMPOSED BY THE A O. WHILE ACCEPTING THE ASSESSEES LEGAL GROUND, WE ARE NOT GO ING INTO THE MERITS OF THE PENALTY OF THE PENALTY. 9 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.) 6. IN THE FINAL RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE, 2018). SD/- SD/- (G.D.AGARWAL) (SUDHANSHU SRIVASTAVA ) PRESIDENT JUDICIAL MEMBER DATE: 28 TH .06.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI 10 ITA NO.73/DEL/2016 (K.P.PAN FLAVOURS (P) LTD.)