Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 5357 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
18-03-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2005-2006
Appeal Filed On
10-10-2013
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA -@ ITA NO. 773/JP/2013 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2005-06 RADHA MOHAN MAHESHWARI, PROP.- R.A. GEMS, 302-303, GURUKRIPA BUILDING, TELIPARA KA RASTA, CHAURA RASTA, JAIPUR. CUKE VS. D.C.I.T. CENTRAL CIRCLE-3, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AARPM 0482 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : MRS. NEENA JEPH (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 12/02/2016 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 18/03/2016 VKNS'K@ ORDER PER T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 16/09/2013 OF THE LEARNED CIT(A), CENTRAL, JAIPUR F OR A.Y. 2005-06. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LEVY OF PENALTY U/S 271(1)(C) EVEN WHEN NO SUCH PROCEEDINGS WERE INITIATED FOR THE YEAR UNDER CONSIDERATION WHILE 2 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT RECORDING THE SATISFACTION FOR INITIATION OF PENALT Y IN THE BODY OF ASSESSMENT ORDER. 1.1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LEVY OF PENALTY EVEN WHEN NOTICE ISSUED U/S 271(1)(C) DOES NOT STATE WHETHER THE CHARGE AGAINST THE ASSESSEE IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME AND THE PENALTY ORDER ALSO DO ES NOT SPECIFY AS TO ON WHAT OFFENCE PENALTY IS LEVIED I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCUR ATE PARTICULARS OF INCOME. 1.2 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE LEVY OF PENALTY OF RS. 14,25,187/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. 2. THE SOLE GROUND OF APPEAL IS AGAINST IMPOSITION O F PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). IN THIS CASE, THERE WAS A SEARCH SEIZURE OPERATION CARRIED OUT BY THE DEPARTMENT ON 21-25/06/2007 AT THE BUSINESS PREMISES AND FOUR BAN K LOCKERS OF THE ASSESSEE GROUP. THE LD ASSESSING OFFICER SCRUTINIZE D U/S 153A/143(3) READ WITH SECTION 153B OF THE ACT. THE ASSESSEE FILE D RETURN FOR A.Y. 2005-06 ON 08/09/2005 DECLARING TOTAL INCOME OF RS. 1,56,290/-. IN RESPONSE TO NOTICE U/S 153A, THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING SAME INCOME I.E. RS. 1,56,290/-. DURING T HE COURSE OF SEARCH, THE ASSESSEE DISCLOSED ADDITIONAL INCOME U/S 132(4) OF THE ACT OF RS. 5.00 3 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT CRORES FOR DIFFERENT YEARS I.E. FOR A.Y. 2006-07 RS . 1.00 CRORE, FOR A.Y. 2007-08 RS. 3.00 CRORES, AND FOR A.Y. 2008-09 AT RS . 1.00 CRORE IN TOTAL RS. 5.00 CRORES. THE LD ASSESSING OFFICER SCRUTINIZE D THE SEIZED MATERIAL AND CAME TO CONCLUSION AS UNDER:- A.Y. UNACCOUNTED PROFIT FROM TRADING UNACCOUNTED DEBTORS LOANS RECEIVED BACK UNACCOUNTED ACCRUED INTEREST UNACCOUNTED CASH UNACCOUNTED INCOME OFFERED BY THE ASSESSEE TOTAL UNACCOUNTED INCOME 2002-03 23,00,000/- 86,940 23,00,000 2003-04 --- 1,91,287 1,91,237 2004-05 25,00,000/- 16,00,000 2,47,834 9,00,000 2005-06 53,25,000/- 11,00,000 4,44,474 42,25,000 2006-07 68,44,000 1,41,15,000 75,00,000 11,51,573 1,00,00,000 1,00,00,000 2007-08 2,95,39,000 2,92,99,411/- 10,00,000 26,26,165 3,00,00,000 3,21,65,165 2008-09 85,17,000 10,00,000/- 50,36,637 26,00,000 1,00,00,000 1,34,87,787 TOTAL 4,49,00,000 5,45,39,411 1,12,00,000 97,84,910 26,00,000 5,00,00,000 6,32,69,189 THE LD ASSESSING OFFICER ASSESSED UNACCOUNTED INCOM E ON ACCOUNT OF DEBTORS NOT DISCLOSED BY THE ASSESSEE ON THE BASIS OF DATE MENTIONED ON THE APPROVAL MEMO, WHICH HAS BEEN ACCEPTED BY THE AS SESSEE ALSO AT RS. 42,25,000/-. THE LD ASSESSING OFFICER HAD INITIATED PENALTY PROCEEDINGS ON PAGE NO. 15 CLAUSE (C), HEADING INITIATION OF PENA LTY, WHICH IS REPRODUCED AS UNDER: (A) I AM SATISFIED THAT IT IS A FIT CASE FOR IMPOSI NG OF PENALTY PROCEEDING U/S 271(1)(C) FOR A.Y. 2002-03, 2003-04 AND 2004-05 READ WITH SECTIONS 274 AND 275 OF I.T. ACT FO R CONCEALMENT OF INCOME/FURNISHING OF INACCURATE PART ICULAR OF INCOME. THEREFORE, PENALTY PROCEEDINGS ARE INITIATED SEPARATELY. 4 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT (B) I AM ALSO SATISFIED THAT IT IS A FIT CASE FOR I MPOSING OF PENALTY PROCEEDING U/S 271AAA FOR A.Y. 2007-08 AND 2008-09 READ WITH SECTIONS 274 AND 275 OF I.T. ACT ON ASSESSED UND ISCLOSED INCOME AS THE SEARCH HAS BEEN INITIATED U/S 132 OF I.T. ACT AFTER 01/6/2007. THEREFORE, PENALTY PROCEEDINGS ARE INITIATED SEPARATELY. IN CONCLUDING PARA, THE LD ASSESSING OFFICER INITIA TED PENALTY PROCEEDINGS AS UNDER:- PENALTY NOTICE U/S 271(1)(C) R.W.S. 274/275 IS ISSU ED SEPARATELY FOR CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS OF INCOME THIS QUANTUM ADDITION WAS CHALLENGED BY THE ASSESSEE BEFORE THE APPELLATE AUTHORITY BUT THE QUANTUM ADDITION HAS BE EN CONFIRMED BY THE HONBLE ITAT, WHICH HAS BEEN ACCEPTED BY THE ASSESSEE . THE LD ASSESSING OFFICER IN NOTICE U/S 274 READ WITH SECTION 271-272 OF THE ACT, GAVE NOTICE DATED 30/10/2009 AS UNDER:- U/S 271(1)(C):- CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. 2.1 BEFORE IMPOSING PENALTY, THE LD ASSESSING OFFIC ER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON 30/10/2009. AGAIN OPP ORTUNITY WAS ALLOWED VIDE SHOW CAUSE NOTICED DATED 09/2/2012. THE ASSESSEE REPLIED VIDE 5 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT LETTER DATED 09/3/2012. BRIEF FACTS OF THE CASE HAS BEEN REPRODUCED BY THE ASSESSING OFFICER ON PAGE 1,2,3,4,5 OF THE PENA LTY ORDER. THE LD ASSESSING OFFICER AFTER CONSIDERING THE PENALTY ORD ER HELD AS UNDER:- (A) THE SURRENDER OF INCOME OF RS. 5 CRORES IN THE S TATEMENT U/S 132(4) OF THE IT ACT, 1961 DATED 22/06/2007 WAS MADE FOR THE ASSESSMENT YEAR 2006-07 TO 2008-09. (B) THE SURRENDER OF INCOME WAS TOWARDS INCOME EARNED FROM UNACCOUNTED BUSINESS OF TRADING IN PRECIOUS/SEMIPRE CIOUS STONES. NO SURRENDER WAS MADE FOR INVESTMENT IN UNACCOUNTED DEBTORS/INTEREST INCOME. (C) AS A RESULT OF APPEAL EFFECT TO THE ORDER OF TH E ITAT IN ASSESSMENT YEAR 2008-09 THE SURRENDE R ED INCOME REDUCED TO RS. 85,17,000/- AGAINST SURRENDER OF RS. 1 CRORE. TH EREFORE, THE CLAIM OF THE ASSESSEE THAT OUT OF TOTAL INCOME OF RS. 5 CRORES INCOME OF RS. 4.49 CRORES WAS APPROPRIATED TO WARDS UNACCOUNTED INCOME OF ASSESSMENT YEAR 2006-07 TO 20 08-09 AND SURPLUS INCOME OF RS.51 LAKHS WAS MORE THAN THE ADDITION MADE FOR THE ASSESSMENT YEAR 2002-03 TO 20 05-06. (D) THE ASSESSEE NOT DISCLOSED ANY INCOME IN THE STA TEMENT U/S 132(4) OF THE IT ACT, 1961 FOR THE 'ASSESSMENT YEAR 2005-06. FURTHER NO INCOME WAS OFFERED TO TAX IN THE RETURN OF INCOME FILED IN COMPLIANCE TO NOTICE U/S 153A OF THE IT AC T, 1961. THEREFORE, APPROPRIATION OF SURPLUS INCOME OFFERED T O TAX 6 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT CANNOT BE TREATED AS INCOME OF A.Y. 2005-06 WITHOUT ANY CLAIM IN THE RETURN OF INCOME. (E) FOR THE A.Y. 2005-06 THE ASSESSEE HAS CLAIMED T HAT NO SATISFACTION WAS RECORDED FOR INITIATION OF PENALTY U/S 271(1)(C) OF THE IT ACT, 1961 THOUGH SUCH SATISFACTI ON WAS RECORDED FOR OTHER YEARS INVOLVED IN THE SEARCH ASS ESSMENT PROCEEDINGS. THE ASSESSEE HAS COATED PARA-5(C) OF TH E ASSESSMENT ORDER IN HIS WRITTEN SUBMISSION. THE CLAIM OF THE ASSESSEE IS NOT ACCEPTABLE. THOUGH NO MENTION IS AVA ILABLE IN PARA-5(C) OF THE ASSESSMENT ORDER BUT IN THE CONCLU DING PARA (PAGE-17) OF THE ASSESSMENT ORDER REGARDING INITIAT ION OF PENALTY PROCEEDINGS FOLLOWING FINDING HAS BEEN RECOR DED- PENALTY NOTICE U/S 271(1)(C) OF THE IT ACT, 1961 R .W.S. 274/275 IS ISSUED SEPARATELY FOR CONCEALMENT/FURNIS HING OF INACCURATE PARTICULARS OF INCOME. IT IS PERTINENT TO MENTION HERE THAT THE LEGISLATU RE HAS INSERTED SUB SECTION (1B) IN SECTION 271 BY FINANCE ACT 2008 W.E.F. 1.4.89 WHICH PROVIDES THAT A DIRECTION FOR INI TIATION OF PENALTY PROCEEDING IN THE ORDER OF ASSESSMENT SHALL BE DEEMED TO CONSTITUTE SUCH SATISFACTION. (F) THE ASSESSED INCOME FOR THE ASSESSMENT YEAR 2006 -07 TO 2008-09 IS MORE THAN RS. 5 CRORES I.E. THE INCOME O FFERED TO TAX BY THE ASSESSEE FOR THESE ASSESSMENT YEARS. THE DEPARTMENT HAS FILED APPEALS AGAINST THE ORDERS OF THE ITAT 7 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT ALLOWING RELIEF TO THE ASSESSEE IN THE ORDERS FOR TH ESE THREE ASSESSMENT YEARS. (G) THE ASSESSEE HAS RELIED ON JUDGMENT OF THE RAJAS THAN HIGH COURT IN CASE OF CIT VS. KANHAIYALAL 299 ITR 19 AND MADRAS HIGH COURT IN CASE OF CIT VS. S.D.V. CHANDRU 266 ITR 175. THESE JUDGMENTS RELATES TO OFFER OF INCOME IN THE ST ATEMENT U/S 132(4) OF THE IT ACT, 1961 AND IMMUNITY AVAILAB LE UNDER EXPLANATION 5 TO SECTION 271(1)(C) OF THE IT ACT, 19 61. THE RATIO OF THESE JUDGMENTS IS NOT APPLICABLE TO THE C ASE OF THE ASSESSEE AS THE ASSESSEE HAS OFFERED NO INCOME FOR THE ASSESSMENT YEAR 2005-06 AND REPEATED ORIGINAL INCOM E OF RS. 1,56,290/- IN THE RETURN OF INCOME FILED IN COMPLIA NCE TO NOTICE U/S 153A OF THE IT ACT, 1961. (H) THE ASSESSEE HAS FURTHER RELIED ON FOLLOWING JUDG MENTS- HINDUSTAN STEEL LTD. 83 ITR 26 DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) DILIP N SHROFF VS CIT 291 ITR 519 (SC) ASHOK GRIH UDYOG KENDRA P. LTD. VS. ACIT 313 ITR 200 (AT)(LUCK) CIT V/S MEHTA ENGINEERS LTD. (2008) 300 ITR 308 (P& H) SECTION - 271 (1)(C) CIT VS. AJAIB SINGH & CO. (2001) 253 ITR 630 (PUJ. & HAR.) THE RATIO OF ABOVE JUDGMENTS IS NOT APPLICABLE TO T HE CASE OF THE ASSESSEE. THE CASE OF HINDUSTAN STEEL LTD. 83 I TR 26 AND DHARMENDRA TEXTILE PROCESSORS 306 ITR 277 (SC) HAS BE EN OVER RULED BY THE SUPREME COURT IN THE CASE OF DILI P N SHROFF VS CIT 291 ITR 519 (SC) AND IN FAVOUR OF THE REVENUE . 8 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT (I) THE RATIO OF OTHER JUDGMENTS ARE RELATED TO CLAI M OF EXPENDITURE ETC AND DISTINGUISHABLE FROM THE FACT O F THE CASE. (J) IT WOULD BE APPROPRIATE TO REFER THE LATEST D ECISION OF SC IN THE CASE OF DHARMENDRA TEXTILES (SUPRA) WHEREIN IT HAS BEEN HELD (I) THE EXPLANATIONS APPENDED TO SECTION 271(1)(C) INDIC ATE THE ELEMENT OF STRICT LIABILITY, (II) THE OBJECT BEHIND THE ENACTMENT SHOWS THAT IT PROVIDES FOR REMEDY FOR LOSS OF REVEN UE, (III)THAT PENALTY UNDER THE SECTION IS CIVIL LIABILITY, (IV)W ILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING PENALTY (V) NO DISCRETION WITH THE AUTHORITY IMPOSING PENALTY. HENCE, REVENUE IS NOT REQUIRED TO PROVE THE ELEMENT OF MENS REA ON THE PA RT OF ASSESSEE. THIS DECISION WAS UNDERSTOOD TO MEAN THAT LEVY OF PENALTY IS AUTOMATIC. THE ABOVE DECISION HAS BEEN EXPLAINED BY THE SC IN SUBSEQUENT DECISION IN THE CASE OF UOI-V- RAJASTHAN SPS & WVG MILLS 224 CTR 1 SC WHEREIN IT IS EXPLAINED THAT LEVY OF PENALTY I S NOT AUTOMATIC. IF THE CONDITIONS SPECIFIED IN THE SECTION ARE SATI SFIED THEN ALONE, PENALTY IS LEVIABLE. FACTS OF EACH CASE WOULD DETER MINE WHETHER SUCH CONDITIONS ARE SATISFIED OR NOT. MERE NONPAYME NT OF EXCISE DUTY IN EACH CASE WOULD NOT ENTAIL THE PENALTY. WHE RE EXTENDED PERIOD IS TO BE INVOKED U/S 11AC OF THE CENTRAL EXCI SE ACT THEN, THE REVENUE MUST PROVE THAT NONPAYMENT OF DUTY WAS RESULT OF FRAUD, COLLUSION OR WILLFUL MIS-STATEMENT OR SUPPRE SSION OF FACTS. THE RATIO OF THE JUDGMENT IN THE CASE OF DHARMENDRA TEXTILES (SUPRA) HAS BEEN EXPLAINED AGAIN BY THE APEX COURT RECENTLY IN THE CASE OF RELIANCE PETRO PRODUCTS 322 ITR 158 SC BY O BSERVING THAT THE SAID DECISION IS AN AUTHORITY ONLY FOR THE PROP OSITION THAT ELEMENT OF MENS REA STANDS EXCLUDED FROM THE SCOPE OF THE PROVISIONS OF SECTION 271(L)(C) AND IT IS ONLY TO T HIS EXTENT THE DECISION IN CASE OF DILIP N SHROFF STANDS OVERRULED . IT IS FURTHER HELD THAT CONDITIONS OF THAT SECTION MUST EXIST BEFORE L EVY OF PENALTY. IT IS FOR REVENUE TO ESTABLISH THAT SUCH CONDITIONS EX IST. IT IS ONLY THE ELEMENT OF MENS REA WHICH IS NOT REQUIRED TO BE PRO VED BY THE REVENUE. 9 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT (K) IN THE CASE OF THE ASSESSEE ALL THE CONDITIONS ENUMERATED IN SECTION 271(1)(C) OF THE IT ACT, 1961 ARE SATISFIED AND IT IS A FIT CASE OF LEVY OF PENALTY UNDER THE SAID SECTION. I THEREFORE, IMPOSE A PENALTY OF? 14,25,187/- U/S 271(1)(C) OF T HE IT ACT, 1961. THE WORKING OF THE AMOUNT OF PENALTY HAS BEEN M ADE AS UNDER- 1. TAX ON TOTAL ASSESSED INCOME INCLUDING CONCEALED INCOME RS. 1455716/- 2. TAX ON INCOME EXCLUDING CONCEALED INCOME(156290+30,143 =1,86,433) RS. 30529/- 3. TAX SOUGHT TO BE EVADED (1-2) RS. 1425187/- 4. 100% OF TAX SOUGHT TO BE EVADED RS. 1425187/- 5. 300% OF TAX SOUGHT TO BE EVADED RS. 4275561/- 6. PENALTY IMPOSED EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVADED RS. 1425187/- ISSUE NECESSARY FORMS. THIS ORDER HAS BEEN PASSED A FTER PRIOR APPROVAL OF THE JT. COMMISSIONER OF INCOME-TAX, CENT RAL RANGE, JAIPUR RECEIVED VIDE HER OFFICE LETTER NO. J OINT CIT(C)/ PENALTY/JPR/2011-12/2380 DATED 15.03.2012. THE LD ASSESSING OFFICER IMPOSED MINIMUM PENALTY AT RS. 14,25,187/- U/S 271(1)(C) OF THE ACT, WHICH IS 100% OF TAX SOUGHT TO BE EVADED. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO HAD CON FIRMED THE PENALTY 10 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT ORDER AFTER CONSIDERING THE ASSESSEES REPLY IN GRO UND NO. 2. THE FINDING OF THE LD CIT(A) ARE AS UNDER:- 4.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO, SUBMISSIONS OF THE AR AND EVIDENCE AVAILABLE ON RECORD AND DO NOT CONCUR WITH THE SUBMISSIONS OF THE AR ON THE FOLLOWING GROUN DS: I) ON EXAMINATION OF THE FACTS IT IS SEEN THAT SEAR CH IN THE CASE OF APPELLANT WAS CONDUCTED FROM 21 TO 25 TH JUNE, 2007. THE RETURN OF INCOME U/S 139 FOR THIS A.Y. WAS FILED ON 8.9.2005 DECLARING TOTAL INCOME OF RS. 1,56,290/-. SUBSEQUENTLY RETURN U/S 153A WAS FILED DECLARING TOTAL INCOME OF RS. 1,56,290/-. THE ASSESS MENT ORDER WAS PASSED ON 30.10.2009 DETERMINING THE INCOM E OF THE APPELLANT AT RS. 44,23,148/-. THE CIT(A) AND H ON. ITAT JAIPUR BENCH BOTH CONFIRMED THIS ADDITION ON ACCOUNT UNDISCLOSED INVESTMENT IN DEBTORS. II) IT IS PERTINENT TO NOTE THAT SEARCH AND SEIZURE PROCEEDINGS IN THIS CASE WERE CONDUCTED FROM 21 TO 2 5 TH JUNE 2007 THAT IS AFTER 1.6.2007 AND SO THE CASE IS COVERED UNDER THE DEEMING PROVISIONS OF EXPLANATION - 5A TO SEC. 271(1)(C) AS FOLLOWS: WHERE IN THE COURSE OF SEARCH INITIATED UNDER SECT ION 132 ON OR AFTER THE 1 ST DAY OF JUNE, 2007, THE ASSESSEE IS FOUND TO BE THE OWNER OF 11 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT I) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE A RTICLE OR THING (HEREAFTER IN THIS EXPLANATION REFERRED TO AS ASSETS) AND THE ASSESSEE CLAIMS THAT SUCH ASSETS HAVE BEEN ACQUIRED BY HIM BY UTILIZING (WHOLLY OR IN PART) HI S INCOME FOR ANY PREVIOUS YEAR; OR II) ANY INCOME BASED ON ANY ENTRY IN ANY BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS AND HE CLAIMS THAT SUCH ENTRY IN THE BOOKS OF ACCOUNTS OR OTHER DOCUMENTS OR TRANSACTIONS REPRESENTS HIS INCOME (WHOLLY OR IN PART) FOR ANY PREVIOUS YEAR. WHICH HAS ENDED BEFORE THE DATE OF SEARCH AND A) WHERE THE RETURN OF INCOME FOR SUCH PREVIOUS YE AR HAS BEEN FURNISHED BEFORE THE SAID DATE BUT SUCH INCOME HAS NOT BEEN DECLARED THEREIN; OR B) THE DUE DATE FOR FILING THE RETURN OF INCOME FOR SUCH PREVIOUS YEAR HAS EXPIRED BUT THE ASSESSEE HAS NOT FILED THE RETURN, THEN, NOTWITHSTANDING THAT SUCH INCOME IS DECLARED B Y HIM IN ANY RETURN OF INCOME FURNISHED ON OR AFTER T HE DATE OF SEARCH, HE SHALL, FOR THE PURPOSES OF IMPOS ITION OF A PENALTY UNDER CLAUSE (A) OF SUB-SECTION (1) OF THIS SECTION, BE DEEMED TO HAVE CONCEALED THE PARTICULAR S OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF S UCH INCOME. III) THIS EXPLANATION IS A NON-OBSTANTE CLAUSE AND I T IS A DEEMING PROVISION FOR PURPOSE OF IMPOSITION OF PENA LTY ONCE THE SPECIFIC CONDITIONS ARE FULFILLED. THE FACT S OF THE CASE OF THE APPELLANT ARE EXAMINED WITH REFERENCE TO THE 12 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT CONDITIONS LAID DOWN AS PER EXPLANANTION-5A OF SEC. 271 (L)(C) AS FOLLOWS: A) THE SEARCH WAS CARRIED OUT FROM 21 TO 25 TH JUNE, 2007 I.E AFTER 1.6.2007 SINCE WHEN THE DEEMING PROVISIONS OF EXPLANATION-5A TO SEC. 271(1 )(C) CAM E INTO OPERATION. B) THE RETURN OF INCOME FOR A.Y. 2005-06 U/S 139(1) WAS FILED 8.9.2005 DECLARING INCOME OF RS. 1,56,290/- IN WHICH THE UNDISCLOSED INVESTMENT IN DEBTORS WAS NOT SHOWN. IN FACT THE UNDISCLOSED INCOME WAS NOT EVEN DECLARED IN THE RETURN FILED IN RESPONS E TO NOTICE U/S 153 A. C) DOCUMENTARY EVIDENCE WAS GATHERED DURING THE COURSE OF SEARCH WHICH PROVED THAT THE APPELLANT WAS INDULGING IN BUSINESS OUTSIDE HIS REGULAR BOOKS OF ACCOUNTS INCOME FROM WHICH WAS NOT DECLARED IN HIS RETURN. THIS WAS ADMITTED TO BY HIM. A FINDING OF FA CT REGARDING THE MATTER WAS GIVEN BY HON. ITAT IN QUANTUM APPEAL OF APPELLANT VIDE ORDER ITA NO. 1302 , 1303, 1304/JP/2010 FOR A.Y. 2002- 03, 2005-06 AND 2008-09 DATED 14.7.2011, ON PAGE 9 PARA 2.10 AS FOLLOWS: THE ASSESSEE IS DOING BUSINESS AS, PER REGULAR BOO KS OF ACCOUNTS AND IS ALSO DOING BUSINESS OUTSIDE THE BOO KS OF 13 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT ACCOUNTS FOR WHICH NO REGULAR CASH BOOK OR LEDGER H AS BEEN MAINTAINED. THE INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH SUGGEST THAT THE ASSESS EE WAS INDULGING IN THE BUSINESS OUTSIDE THE BOOKS OF ACCOUNTS AND THIS IS NOT DISPUTED BY THE ASSESSEE. THE YEAR WISE TABLE SHOWING THIS UNACCOUNTED INCOME WAS ALSO MADE PART OF THE ORDER AS FOLLOWS: A A.Y. A A.Y. A A.Y. A A.Y. PR P PR P PR P PR P ROFIT FROM ROFIT FROM ROFIT FROM ROFIT FROM UNDISCLOSED UNDISCLOSED UNDISCLOSED UNDISCLOSED D TRADING D TRADING D TRADING D TRADING U UNDISCLOSED U UNDISCLOSED U UNDISCLOSED U UNDISCLOSED INVESTMENT IN INVESTMENT IN INVESTMENT IN INVESTMENT IN DEBTORS / CASH DEBTORS / CASH DEBTORS / CASH DEBTORS / CASH H HIGHER OF H HIGHER OF H HIGHER OF H HIGHER OF PROFIT/ PROFIT/ PROFIT/ PROFIT/ INVESTMENT INVESTMENT INVESTMENT INVESTMENT U UNDISCLOSED U UNDISCLOSED U UNDISCLOSED U UNDISCLOSED INCOME INCOME INCOME INCOME A AA ASSESSED SSESSED SSESSED SSESSED UNDISCLOSED UNDISCLOSED UNDISCLOSED UNDISCLOSED INCOME OFFERED INCOME OFFERED INCOME OFFERED INCOME OFFERED BY THE BY THE BY THE BY THE 02 - 03 23,00,000 23,00,00 0 23,00,000 03 - 04 04 - 05 9,00,000 9, 00,000 9,00,000 05 - 06 42,25,000 25,000 42,25,000 42,25,000 06 - 07 68 ,44,000 66,15,000 68,44,000 6 8,44,000 100,00,00 0 07 - 08 295,39,000 282,99,411 295,39,000 2 95,39,000 300,00,000 08 - 09 85,17,000 10,00,000 + 26,00,000 (CASH) 85,17,000 85,17,000 100,00,000 TOTAL TOTAL TOTAL TOTAL 449,00,000 449,00,000 449,00,000 449,00,000 459,39,411 459,39,411 459,39,411 459,39,411 523,25,000 523,25,000 523,25,000 523,25,000 52 5252 52 3,25,000 3,25,000 3,25,000 3,25,000 500,00,000 500,00,000 500,00,000 500,00,000 ON THE BASIS OF ABOVE OBSERVATIONS THE ADDITION MAD E BY THE AO TO THE EXTENT OF RS. 42.25 LAKH AS INVESTMEN T IN DEBTORS OUTSIDE THE BOOKS OF ACCOUNTS, WAS NOT INTERFERED WITH BY THE HON. ITAT IN ITS ORDER. THUS THE FACTS OF THE CASE ARE CLEARLY COVERED UNDE R THE PROVISIONS OF EXPLANATION-5 A TO SEC. 271 (1)(C) AN D THE APPELLANT IS DEEMED TO HAVE CONCEALED THE PARTICULA R OF HIS INCOME, SINCE DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH SHOWING UNDECLARED INCOME BY WAY OF INVESTMENT IN UNACCOUNTED DEBTORS. 14 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT IV) THE AR OF THE APPELLANT HAS RAISED THE OBJECTION THAT THE AO HAD SPECIFICALLY MENTIONED THE ASSESSMENT YEARS NAMELY A.Y. 2002-03 TO 2004-05 AND 2007-08 AND 2008 - 09 FOR WHICH HE INTENDED TO INITIATE THE PENALTY PROCEEDINGS U/S 271(L)(C) IN THE ASSESSMENT ORDER B UT FOR THIS A.Y. NO SATISFACTION HAS BEEN RECORDED FOR INITIATION OF PENALTY PROCEEDINGS. RELIANCE WAS PLAC ED ON THE FOLLOWING CASE LAWS: I. MADHU SHREE GUPTA VS. UOL, 317 ITR 107 II. CIT VS. M/S MANJUNATHA COTTON & JINNING FACTORY & ORS. I DO NOT AGREE WITH THE SUBMISSIONS OF THE AR AFTER PERUSAL OF THE ASSESSMENT ORDER, FOR THE SIMPLE REA SON THAT NOWHERE HAS IT BEEN MENTIONED IN EITHER OF THE ORDERS RELIED ON BY HIM WHERE EXACTLY THE SATISFACTI ON FOR INITIATING PROCEEDINGS U/S 271(L)(C) IS REQUIRED TO BE NOTED. THE AO HAS MENTIONED ON PAGE 15, PARA C OF HI S ORDER THAT HE WAS SATISFIED THAT THE CASE OF THE ASS ESSEE IS FIT FOR IMPOSING PENALTY US/ 271 (1 )(C) FOR A.Y . 2002- 03 TO 2004-05 AND WHILE CONCLUDING THE ASSESSMENT ORDER FOR A.Y. 2005-06 HE HAS CATEGORICALLY NOTED A S FOLLOWS: PENALTY NOTICE U/S 271(1)(C) R.W.S 274/275 IS ISSUE D SEPARATELY FOR CONCEALMENT/ FURNISHING OF INACCURAT E PARTICULARS OF INCOME. 15 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT THEREFORE, IT CANNOT BE SAID THAT HE HAS NOT RECORDE D HIS SATISFACTION FOR INITIATING PENALTY U/S 271 (1 )(C) FOR A.Y. 2005-06. IN FACT IN THE CASE OF CIT VS. M/S MANJUNAT HA COTTON & JINNING FACTORY & ORS. RELIED ON BY THE AR OF THE APPELLANT THE HON. KARNATAKA HIGH COURT HAS MAD E THE FOLLOWING OBSERVATIONS REGARDING RECORDING OF SATISFACTION: THOUGH IT IS USUAL FOR THE AO TO RECORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE BEING INITIATED, THIS IS MORE A MATTER OF CONVENIENCE THA N OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRED, SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT THEY SHO ULD BE IMITATED IN THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT. IT IS SUFFICIENT, IF THERE IS SOME RECO RD SOMEWHERE, EVEN APART FROM THE ASSESSMENT ORDER ITSE LF, THAT THE AO HAS RECORDED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OR OTHER DEFAULT FOR WHICH PENALTY ACTION IS CALLED FOR. THE FACT THAT THE AO HAS NOTED HIS SATISFACTION FOR INITIATING PROCEEDINGS U/S 271 (1 )(C) AT THE END O F THE ASSESSMENT ORDER RATHER THAN IN THE MIDDLE WOULD NOT VITIATE THE SATISFACTION NOTE AND THERE IS NO PROCE DURAL LAPSE EVEN AS PER THE ORDER RELIED ON BY THE APPELL ANT. MOREOVER, IT HAS BEEN HELD THAT FOR PENALTY LEVIAB LE ON THE DIFFERENCE OF INCOME DECLARED IN RETURN FILED U /S 153A AND ORIGINAL RETURN, SATISFACTION FOR INITIATI ON OF PENALTY PROCEEDINGS IS TO BE INFERRED FROM THE 16 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT ASSESSMENT ORDER AND NO SPECIFIC RECORDING OF SATISFACTION REQUIRED. IN CASES WHERE SALES WERE FOU ND TO HAVE BEEN MADE OUTSIDE BOOKS AND NOT DISCLOSED IN T HE ORIGINAL RETURN DOCUMENTS RELATING TO UNDISCLOSED S ALES HAVING BEEN FOUND DURING SEARCH, PENALTY U/S 271(1) (C) WAS UPHELD. A. DCIT VS. K. NATARAJAN (ITAT, BANG) 2 ITR (TRIB) 273 B. ACIT VS. KIRIT DAHYABHAI PATEL (ITAT, AHD.-TM) 121 ITD 159 THESE FINDINGS ARE APPLICABLE TO THE FACTS OF THE C ASE OF THE APPELLANT BECAUSE NOT ONLY HAS HE NOT DECLARED THE INCOME IN THE RETURN FILED U/S 153A THE ADDITION MA DE BY THE AO OF THE UNDISCLOSED INCOME ON THE BASIS OF INCRIMINATING DOCUMENTS HAS BEEN CONFIRMED BY THE HON. ITAT, JAIPUR BENCH. V) THE NEXT SUBMISSION OF THE AR OF THE APPELLANT IS THAT THE AO HAS NOT SPECIFIED WHETHER THE ASSESSEE WAS GUILTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT IS SEEN THAT WH ILE RECORDING OF SATISFACTION FOR INITIATING THE PENALT Y PROCEEDINGS U/S 271(L)(C) THE AO HAS RECORDED HIS SATISFACTION BY NOTING THAT THE PENALTY NOTICE BE I SSUED FOR CONCEALMENT/ FURNISHING OF INACCURATE PARTICULA RS OF 17 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT INCOME. HOWEVER WHILE PASSING THE PENALTY ORDER THE A O HAS GIVEN A CATEGORICAL FINDING THAT THE PENALTY WAS BEING IMPOSED ON CONCEALED INCOME. THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S MANJUNATHA COT TON & JINNING FACTORY & ORS. HAS ADMITTED THAT THERE CO ULD BE SOME CASES WHICH WOULD ATTRACT BOTH THE OFFENCES. THE SPECIFIC OBSERVATIONS ARE REPRODUCED BELOW: CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FAC T OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES B UT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEED INGS ALSO MUST BE FOR BOTH THE OFFENCES. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANT IATE HIS CLAIM IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOUL D BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UP ON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE T IME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. THUS IT IS SEEN THAT THE HON. KARNATAKA HIGH COURT I TSELF HAS ACCEPTED THAT THERE MAY BE CASES WHERE THERE MA Y BE OVERLAPPING OF THE TWO OFFENCES AND IN SUCH CASES THE INITIATION OF PENALTY PROCEEDINGS MUST BE FOR BOTH THE OFFENCES. THUS IN THE CASE OF THE APPELLANT THE AO WHILE INITIATING PENALTY PROCEEDINGS U/S 271(1)(C) WAS SAT ISFIED THAT PENALTY WAS MERITED FOR BOTH THE OFFENCES NAMEL Y 18 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT CONCEALMENT AND FILING OF INACCURATE PARTICULARS OF INCOME. HOWEVER, IT IS NOW AN ESTABLISHED PRINCIPLE THAT THE PENALTY PROCEEDINGS ARE SEPARATE PROCEEDINGS FROM T HE ASSESSMENT PROCEEDINGS. DURING THE COURSE OF PENALT Y PROCEEDINGS THE ASSESSEE WAS GIVEN FULL OPPORTUNITY TO EXPLAIN HIS CASE. WHILE PASSING THE PENALTY ORDER U /S 271(1)(C) THE AO AFTER CONSIDERING ALL THE SUBMISSI ONS OF THE APPELLANT CAME TO THE CONCLUSION THAT PENALTY S HOULD BE IMPOSED U/S 271(1 )(C) FOR ONLY CONCEALMENT OF H IS INCOME. THUS THE PRINCIPLE OF NATURAL JUSTICE WAS NOT OFFENDED GIVEN THE FACTS OF THE CASE OF THE APPELLA NT. VI) THE NEXT CONTENTION OF THE AR OF THE APPELLANT I S THAT ON THE BASIS OF THE APPROVAL MEMOS FOUND DURING THE COURSE OF SEARCH THE ASSESSEE SURRENDERED AN AMOUNT OF RS. 5 CR. IN HIS STATEMENT U/S 132(4) IN A.Y. 2006- 07 TO 2008-09. HE ACCEPTED THE TAXABILITY OF DEBTORS IN E ARLIER YEARS ON THE BASIS OF THE DATE MENTIONED ON THE APPROVAL MEMOS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SINCE THE ADDITION OF DEBTORS WAS CONFIRMED IN PARTICULAR A.Y. IT WAS PLEADED THAT IT COULD NOT HELD TO BE THE UNDISCLOSED INCOME OF THAT YEAR. RELIANCE WAS PLACED ON THE FINDING OF THE HON. RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. KANHAIYA LAI 299 ITR 19. 19 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT I HAVE CAREFULLY PERUSED THE CASE LAW RELIED ON BY THE AR. ON PERUSAL OF THE CASE IT IS SEEN THAT THE FACT S OF THE CASE RELIED ON BY THE AR ARE DIFFERENT FROM THOSE O F THE APPELLANT. THE PENALTY IN THE CASE OF CIT VS. KANHAIY A LAI (SUPRA) WAS APPLICABLE AS PER EXPLANATION-5 OF S EC. 271(L)(C). THE HON. HIGH COURT HAS OBSERVED THAT FRO M THE LANGUAGE OF SUB CLAUSE (2) OF EXPLANATION-5 OF SEC. 271(L)(C), IT IS CLEAR THAT IT DOES NOT CONTEMPLATE THE REQUIREMENT OF THE ASSESSEE PAYING TAX IN RESPECT O F SUCH INCOME, IN ANY PARTICULAR A.Y. ONLY. IT WAS CLA RIFIED THAT THE IMMUNITY AS PER SUCH CLAUSE (2) OF EXPLANA TION- 5 WOULD NOT BE LOST, SIMPLY BECAUSE OF THE SPREADING OF THE INCOME OVER MORE YEARS. IT IS PERTINENT TO NOTE THAT IN THE CASE OF APPELLANT THE PENALTY IS APPLICABLE UNDER EXPLANATION-5A OF SEC. 271(1)(C) AND NOT EXPLANATIO N-5. EXPLANATION-5A AND EXPLANATION-5 TO SEC. 271(1)(C) ARE INHERENTLY DIFFERENT IN SO FAR THAT NO IMMUNITY IS GRANTED AS PER SUB CLAUSE (2) OF EXPLANATION-5 IN EXPLANATI ON-5A AND THEREFORE THE OBSERVATIONS OF THE HON. JURISDIC TIONAL HIGH COURT ARE NOT APPLICABLE TO THE FACTS OF THE C ASE OF THE APPELLANT. VII) DURING THE COURSE OF APPELLATE PROCEEDINGS THE AR OF THE APPELLANT HAS FILED SUBMISSIONS THAT THE AO HAD PAS SED AN ORDER U/S 154 DATED 28.1.2011 DETERMINING THE TA X ON THE TOTAL ASSESSED INCOME OF RS. 44,11,435/- AT RS. 14,39,632/- AS AGAINST RS. 14,55,716/- MENTIONED IN 20 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT PENALTY ORDER. RELIEF WAS SOUGHT TO THIS EXTENT WHILE DETERMINING QUANTUM OF PENALTY. THE AO IS DIRECTED TO VERIFY THE SUBMISSIONS OF THE AR AND DETERMINE THE CORRECT TAX ON THE CONCEALED INCO ME AND THEREAFTER CALCULATE THE PENALTY @ 100% OF THE T AX SOUGHT TO BE EVADED. THE PENALTY AS PER EXPLANATION- 5A TO SEC. 271(1)(C) IS CONFIRMED. 4. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS REITERATED THE ARGUMENTS MADE BEFORE THE LD CIT (A) AND SUBMITTED THAT THE CONDITION PRECEDENT FOR INITIATION OF PENA LTY PROCEEDING IS THAT THE AO IS SATISFIED THAT ASSESSEE HAS EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE PRESENT CA SE, AO IN THE ASSESSMENT ORDER HAS SPECIFICALLY RECORDED HIS SATI SFACTION FOR THE ASSESSMENT YEARS FOR WHICH HE INTENDED TO INITIATE THE PENALTY PROCEEDINGS. THIS SATISFACTION HE HAS RECORDED FOR A Y 2002-03, 03-04, 04- 05, 07-08 & 08-09 ONLY. FOR AY 2005-06 & 2006-07, N O SATISFACTION IS RECORDED FOR INITIATION OF PENALTY PROCEEDINGS. THER EFORE ONLY BECAUSE AT THE END OF THE ASSESSMENT ORDER, THE AO HAS STATED TO HAVE ISSUED PENALTY NOTICE U/S 271(1)(C) OF THE ACT, THE SAME C ANNOT BE TAKEN AS THE SATISFACTION OF THE AO OF HAVING INITIATED THE PENA LTY PROCEEDINGS. IT MAY BE NOTED THAT FOR AY 2006-07, NEITHER ANY PENALTY P ROCEEDINGS WERE 21 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT INITIATED NOR ANY PENALTY WAS IMPOSED ON THE ASSESSE E. HE FURTHER ARGUED THAT ON SECTION 271 (IB) WHICH PROVIDES THAT WHERE A N ASSESSMENT ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROC EEDINGS, THE SAME SHALL BE DEEMED TO CONSTRUE THE SATISFACTION OF THE AO. C ONSTITUTIONAL VALIDITY OF THIS SUB-SECTION WAS CHALLENGED BEFORE THE HONB LE DELHI HIGH COURT IN CASE OF MADHU SHREE GUPTA YS. UOI IN 317 ITR 107, WHE REIN IT HAS BEEN HELD THAT THE SATISFACTION SHOULD BE ARRIVED AT DURING THE C OURSE OF ANY PROCEEDINGS. IT IS A SETTLED LAW THAT LEX SPECIALIS DEROGAT LEGI GENERALI I.E. MORE SPECIFIC PROVISIONS PREVAIL OVER GENERAL. IN THE PRESENT CASE THE ASSESSING OFFICER HAS SPECIFICALLY MENTIONED THE AS SESSMENT YEARS FOR WHICH HE INTENDS TO INITIATE THE PENALTY PROCEEDINGS . THEREFORE, ONLY MENTIONING AT THE END OF THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE INITIATED WITHOUT RECORDING SUCH SATISFACTION IN THE SPECIFIC PARA OF THE ORDER WHERE HE HAS DEALT REGARDING INITIATION OF PEN ALTY PROCEEDINGS, CANNOT BE SAID AS RECORDING OF SATISFACTION BY THE AO TO INITIATE THE PENALTY PROCEEDINGS. THE LD CIT(A) ALSO NOT JUSTIFIED THE FINDING OF THE ASSESSING OFFICER THAT, IT WOULD BE SUFFICIENT TO IN FER THE SATISFACTION RECORDED BY THE ASSESSING OFFICER. 4.1 HE FURTHER ARGUED THAT NOT ONLY THE LD ASSESSIN G OFFICER SPECIFIED IN INITIATING THE PENALTY PROCEEDINGS BUT IN ISSUING T HE NOTICE U/S 274 AND 22 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT HAD NOT SPECIFIED FOR ISSUE OF NOTICE EITHER CONCEA LMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HO NBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. M/S MANJUNATHA COTTON & GINNING FACTORY & ORS.(2013) 359 ITR 565 (KARN) HAS HELD THAT IN PENAL TY NOTICE ISSUED BY THE ASSESSING OFFICER, IT SHOULD BE SPECIFIC IN THE NOTICE ITSELF THAT PENALTY EITHER ISSUED FOR CONCEALMENT OF INCOME OR FURNISHI NG INACCURATE PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE A LL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SAT ISFY THE REQUIREMENT OF LAW. THE DEEMING PROVISIONS MADE IN SE CTION (1B) IN SECTION 271(1)(C) OF THE ACT, THESE CONDITIONS ARE SINE QUA NON. THE LD ASSESSING OFFICER AT LEAST GIVES THE DIRECTION TO I NITIATE PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. HE FURTHER AR GUED THAT IN CASE OF ASHOK PAI 292 ITR 11, THE HON'BLE SUPREME COURT HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE HONBLE GUJARAT HI GH COURT IN THE CASE OF MANU ENGINEERING 122 ITR 306 AND THE HONBLE DELH I HIGH COURT IN THE CASE OF VIRGO MARKETING 171 TAXMAN 156 HAVE HELD THA T LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEV IED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, IN IS SUING THE NOTICE U/S 274, THE ASSESSING OFFICER SHOULD BE SPECIFIC EITHE R ON CONCEALMENT OF 23 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. THE LD ASSESSING OFFICER IN THE PRESENT CASE HAS NOT INITI ATED PENALTY PROCEEDINGS BY ISSUING NOTICE SPECIFICALLY FOR CONCEALMENT OF P ARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. HE FUR THER RELIED ON THE FOLLOWING CASE LAWS:- (I) CIT VS MANU ENGINEERING WORKS 122 ITR 306 (GUJ) (HC). (II) NEW SORATHIA ENGINEERING CO. VS CIT 282 ITR 642 (GUJ.)(HC) (III) CIT VS JYOTI LTD. 216 TAXMAN 64 (GUJ) (HC) (MA GZ). (IV) CIT VS VIRGO MARKETING PVT. LTD. 171 TAXMAN 156 (DEL.)(HC). ALTERNATIVELY, IT IS ALSO SUBMITTED BY THE LD AR TH AT THE APPROVAL MEMO ON THE BASIS OF WHICH ADDITION IS MADE REPRESENTS THE O UTSTANDING DEBTORS AS ON THE DATE OF SEARCH. THE ASSESSEE IN HIS STATEMENT U/S 132(4) HAS CATEGORICALLY STATED THAT IN HIS TRADE THE GOODS AR E GENERALLY PURCHASED AND SOLD IN CASH BUT WHERE THE PAYMENT IS NOT RECEIV ED IN CASH, IT IS RECORDED ON SUCH APPROVAL MEMO. THUS, THESE APPROVAL MEMO INDICATE OUTSTANDING AMOUNT ON THE PARTICULAR DATE MENTIONED THEREIN. THE YEAR IN WHICH SALES IS MADE WHICH HAS RESULTED INTO SUCH DEBT ORS (NOTED IN APPROVAL MEMO) IS NOT ASCERTAINABLE AND IT MAY RELA TE TO AN EARLIER YEAR. HOWEVER TO END THE MATTER THE ASSESSEE ACCEPTED THE TAXABILITY OF THESE DEBTORS ON THE BASIS OF DATE OF APPROVAL MEMO. FURT HER, ASSESSEE IN TERMS OF HIS STATEMENT U/S 132(4) OFFERED INCOME OF RS. 5 CRORE IN A.Y. 24 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT 06-07 TO 08-09 THOUGH ON ACTUAL WORKING SUCH INCOME IS ARRIVED AT RS. 4.49 CRORES. THEREFORE, HE ACCEPTED THE TAXABILITY O F DEBTORS IN EARLIER YEARS ON THE BASIS OF DATE MENTIONED ON SUCH APPROV AL MEMO THOUGH SUCH DEBTORS HAVE ARISEN AS A RESULT OF TRADING TRA NSACTION OF EARLIER YEARS. EXCEPT THESE APPROVAL MEMOS, THERE IS NO MAT ERIAL ON RECORD TO HOLD THAT IT IS OUT OF THE INCOME OF THAT PARTICULA R YEAR. HENCE, ONLY BECAUSE THE ADDITION OF DEBTORS IS CONFIRMED IN A P ARTICULAR ASSESSMENT YEAR IT CANNOT BE HELD TO BE UNDISCLOSED INCOME OF THAT YEAR SO AS TO ATTRACT LEVY OF PENALTY U/S 271(1)(C) IGNORING THAT THE ASSESSEE HAS PAID TAX ALONG WITH INTEREST ON SUCH INCOME OFFERED IN TH E STATEMENT U/S 132(4). THESE FACTS ARE NOT DISPUTED BY THE LOWER AUT HORITIES AND THEREFORE ALSO PENALTY ON SUCH ADDITION CANNOT BE L EVIED IN THE YEAR UNDER CONSIDERATION. THEREFORE, HE PRAYED TO DELETE THE PE NALTY CONFIRMED BY THE LD CIT(A). 5. AT THE OUTSET, THE LD DR HAS VEHEMENTLY SUPPORTE D THE ORDER OF THE LD CIT(A) AND ARGUED THAT THE HON'BLE SUPREME COURT IN THE CASE OF MAK DATA LTD. VS CIT (2013) 358 ITR 593 (SC) HAS HELD THA T THERE IS NO SET STANDARD FOR INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. A REFERENCE OF INITIATION OF PENALTY IS SUFFICIENT SA TISFACTION OF THE ASSESSING OFFICER. HE FURTHER ARGUED THAT AS PER SECTION (1B) OF SECTION 271(1)(C), 25 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT THE DEEMING PROVISION HAS BEEN INSERTED IN THE ACT AS PER THIS SECTION ONLY INITIATION OF PENALTY PROCEEDINGS IS REQUIRED TO BE USED FOR ASSESSING OFFICERS SATISFACTION. THEREFORE, HE PRAYED TO CONF IRM THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE LD ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS IN ASSESSMENT ORD ER ON PAGE NO. 15 IN PARAGRAPH NO. C FOR A.Y. 2002-03, 2003-04 AND 2004- 05 FOR CONCEALMENT OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IN LAST PARA OF THE ASSESSMENT ORDER, THE SATISFACTION OF THE ASSES SING OFFICER HAS BEEN AS UNDER:- PENALTY NOTICE U/S 271(1)(C) R.W.S. 274/275 IS ISSU ED SEPARATELY FOR CONCEALMENT/FURNISHING OF INACCURATE PARTICULARS OF INCOME IN NOTICE U/S 274 READ WITH SECTION 271-272 OF THE ACT DATED 30/10/2009 ISSUED AS UNDER:- U/S 271(1)(C):- CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. IT IS APPARENT FROM THE INITIATION AS WELL AS ISSUE OF NOTICE THAT ASSESSING OFFICER HAS NOT SPECIFICALLY SPECIFIED THAT PENALTY PROCEEDINGS EITHER ISSUED 26 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT FOR CONCEALED PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME. THE AMENDED PROVISIONS OF SECTION (1B) WAS CH ALLENGED BEFORE THE HON'BLE DELHI HIGH COURT IN THE CASE OF MADHU SHREE GUPTA VS. UOL (SUPRA) WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS, THE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS A VIS EAC H AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHER ED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. IT WOULD BE SUFFICIENT COMPLIANCE WITH THE LAW THAT THERE IS A PRIMA FACIE EVIDENCE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. U/S 271(1)(C) TO INITIATE PENALTY PROCEEDINGS, THE PRE- REQUISITES SHOULD OBTAIN (I) THE ASSESSING OFFICER SHOULD BE SATISFIED THA T: (A) THE ASSESSEE HAS EITHER CONCEALED PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF INCOME; OR (C) INFRACTED BOTH (A) & (B). (II) THIS SATISFACTION SHOULD BE ARRIVED AT DURING THE COUR SE OF ANY PROCEEDINGS. THESE COULD BE ASSESSMENT, REASSESSMENT OR RECTIFICA TION PROCEEDINGS, BUT NOT PENALTY PROCEEDINGS. (III) IF INGREDIENTS C ONTAINED IN (I) & (II) ARE PRESENT A NOTICE TO SHOW CAUSE U/S 274 OF THE ACT SH ALL ISSUE SETTING OUT THEREIN THE INFRACTION THE ASSESSEE IS SAID TO HAVE COMMITTED. THE NOTICE U/S 274 OF THE ACT CAN BE ISSUED BOTH PRE OR AFTER THE COMPLETION OF 27 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT ASSESSMENT PROCEEDINGS. THE POSITION OF LAW BOTH PRE AND POST AMENDMENT IS SIMILAR INASMUCH AS THE ASSESSING OFFI CER WILL HAVE TO ARRIVE AT A PRIMA FACIE SATISFACTION DURING THE COURSE OF PROCEEDINGS WITH REGARD TO THE ASSESSEE HAVING CONCEALED PARTICULARS OF INC OME OR FURNISHED INACCURATE PARTICULARS BEFORE HE INITIATED PENALTY PROCEEDINGS. THE SATISFACTION OF THE ASSESSING OFFICER SHOULD BE DIS CERNIBLE FROM THE ORDER PASSED DURING THE COURSE OF PROCEEDINGS. AFTER CONS IDERING THE VARIOUS DECISIONS ON THIS ISSUE AND AMENDED PROVISIONS ON I NITIATION OF PENALTY PROCEEDINGS U/S (1B) OF SECTION 271(1)(C) WE HAVE CO ME TO CONCLUSION THAT THE ASSESSING OFFICER HAS NOT RECORDED SATISFA CTION SPECIFICALLY FOR CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME AND ON BOTH. THE VARIOUS COURTS HAVE HELD THA T THIS SATISFACTION CAN BE FOR BOTH THE PURPOSES I.E. FOR CONCEALED PAR TICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME JOIN TLY AS BOTH THE SATISFACTION ARE OVERLAPPING, WHICH IS ALSO NOT FOUN D PLACE IN THE CASE BEFORE US. THE ASSESSING OFFICER EVEN HAS NOT TICKE D SPECIFIC SATISFACTION IN NOTICE U/S 274 OF THE ACT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS M/S MANJUNATH COTTON & GINNING FACTOR Y & ORS. (SUPRA) HAS HELD THAT SENDING PRINTED FORM WHERE ALL THE GRO UNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQU IREMENT OF LAW. THE 28 ITA NO. 773/JP/2013 RADHA MOHAN MAHESHWARI VS DCIT ASSESSEE SHOULD KNOW THE GROUND WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE, THE PRINCIPLE OF NATURAL JUSTICE IS OFFEN DED ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASS ESSEE. TICKING OF THE PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASS ESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW, THEREFORE, WE DELETE THE PENALTY CONFIRMED BY THE LD CIT(A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/03/2016. SD/- SD/- YFYR DQEKJ VH-VKJ-EHUK (LALIET KUMAR) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 18 TH MARCH, 2016 RANJAN* VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI RADHA MOHAN MAHESHWARI, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE DCIT, CENTRAL CIRCLE-3, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 773/JP/2013) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR
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