Hindustan Coca Cola Marketing Company Pvt. Ltd., Gurgaon V. DCIT, Circle-11(2), New Delhi

ITA 7900/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3003 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 12-12-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Application of stay; Initiation of penalty proceedings; Difference of opinion; Change of opinion; TDS
• Section: 271(1)(c); 40(a)(ia)

Judgement Text

FIT FOR PUBLICATION SD/- SD/- (AM) (JM) PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: C: NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO.- 7900/DEL/2018 (ASSESSMENT YEAR: 2006-07) AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/DEL/2018) (ASSESSMENT YEAR: 2006-07) HINDUSTAN COCA COLA MARKETING COMPANY PVT. LTD. UNIT NO. 303-308, 3 RD FLOOR, BAANI ADDRESS ONE, GOLF COURSE ROAD, SECTOR- 56, GURGAON, HARYANA, PIN: 122 011 VS. DCIT CIRCLE- 11(2), NEW DELHI PAN NO: AABCH1541D APPELLANT / APPLICANT RESPONDENT ASSESSEE BY : SH. SACHIT JOLLY, ADV., SH. ROHIT GARG, ADV., SH. AARUJH BHATIA, ADV. REVENUE BY : SMT. APARNA KARAN, CIT(DR) ORDER PER: ANADEE NATH MISSHRA, AM THIS IS AN APPEAL FILED BY ASSESSEE AGAINST IMPUGN ED APPELLATE ORDER DATED 24.09.2018 OF THE COMMISSIONER OF INCOME TAX (APPEALS)[CIT(A) FOR SHORT]-35, DELHI. ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 2 OF 14 1.1. THE GROUNDS OF APPEAL ARE AS UNDER: GROUNDS OF APPEAL 1. GROUND NO. 1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE ORDER PASSED U/S 250(6) R.W.S 271(1)(C) OF THE ACT PASSED BY THE LD. AO/ LD. CIT(A) DISMISSING THE APPEAL FILED BY THE APPELLANT , IGNORING THE SUBMISSIONS MADE BEFORE THE LD. AO/ LD. CIT(A) AND WITHOUT APPRECIATING THE FACTS OF THE CASE AND JUDICIAL PRECEDENTS, IS B AD IN LAW AND IS LIABLE TO BE QUASHED. 2. GROUND. NO 2 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ORDER OF PENALTY PASSE D BY THE LD. AO UNDER SECTION 271 (L)(C) OF THE ACT IS BAD IN LAW AS FROM THE NOTICE ISSUED U/S 274 READ WITH SECTION 271 OF THE ACT, IT IS NOT DISCERN IBLE AS TO WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING O F INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE, BOTH OF WHICH ARE MUTUALLY EX CLUSIVE AND APPLY TO DIFFERENT SET OF FACTS, IS BAD IN LAW AND IS LIABLE TO BE QUASHED; WITHOUT PREJUDICE TO THE ABOVE : 3. GROUND NO. 3 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) / LD. AO HAS FAILED TO APPRECIATE THAT THE APPELLANT HAS DIS CLOSED FULLY AND TRULY ALL THE DETAILS IN THE RETURN OF INCOME, DURING THE COU RSE OF APPELLATE AND ASSESSMENT PROCEEDINGS AND IN THE ABSENCE OF FAILUR E TO FURNISH ACCURATE PARTICULARS, WHICH IS SINE QUA NON FOR INITIATING PENALTY, THE LD. CIT(A) / LD. AO ERRED IN INITIATING PENALTY PROCEEDINGS AND LEVY THEREOF. 4. GROUND NO. 4 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A)/ LD. AO ERRED IN MISINTERPRETING THE FACTS OF THE CA SE, BY STATING THAT THE APPELLANT HAS NOT DISALLOWED THE IMPUGNED AMOUNT OF RS. 13,97,08,721/- (IN ITS RETURN OF INCOME) DESPITE THE AUDITOR HAD Q UANTIFIED THE AMOUNT IN HIS REPORT U/S 44AB OF THE ACT, IGNORING THE FACT T HAT NO SUCH QUANTIFICATION WAS MADE IN THE REPORT U/S 44AB OF T HE ACT AND THE SAME WAS QUANTIFIED ONLY DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 5. GROUND NO. 5 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 3 OF 14 ERRED IN CONFIRMING PENALTY LEVIED BY THE LD. AO IN RESPECT OF DISALLOWANCES MADE UNDER SECTION 40(A)(IA) OF THE A CT, WHICH WERE SUO- MOTO OFFERED BY THE APPELLANT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS AND NOT DETECTED PURSUANT TO ANY INQUIR Y / INVESTIGATION BY THE LD. AO. 6. GROUND NO. 6 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) / LD. AO FAILED TO APPRECIATE THAT THE CLAIM FOR AL LOWANCE OF THE IMPUGNED EXPENDITURE WAS MADE IN THE PROCEEDINGS FOR THE SUB SEQUENT YEAR, AND ACCORDINGLY, THE APPELLANT DID NOT CHALLENGED THE A SSESSMENT ORDER AND MERELY BECAUSE THE APPELLANT HAS NOT CHALLENGED THE ORDER OF ASSESSMENT WOULD NOT ITSELF BE SUFFICIENT TO INITIATE / LEVY P ENALTY. 7. GROUND NO. 7 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE LD. AO PROCEEDED TO PASS THE A NON- SPEAKING PENALTY ORDER WITHOUT APPLICATION OF MIND, IN UNDUE HASTE AND WITHOUT AFFORDING ADEQUATE OPPORTUNITY OF BEING HEA RD TO THE APPELLANT, IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND LIABLE TO BE QUASHED. 2. ASSESSMENT ORDER DATED 30.12.2008 WAS PASSED UNDER SECTION(U/S FOR SHORT) 271(1)(C) OF INCOME TAX ACT(IT ACT FOR SHO RT) WHEREIN CERTAIN ADDITIONS WERE MADE AND PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT WERE INITIATED IN RESPECT OF SOME OF THESE ADDITIONS; WHEREAS PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT WERE NOT INITIATED IN RESPECT OF THE REST OF THE ADDITIONS. A SUMMARY OF THE ADDITIONS MADE, AND WHETHER PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT WERE INITIATED OR NOT, IS CONTAINED IN A TABULAR FO RM AS UNDER: SL. NO. DESCRIPTION OF ADDITION AMOUNT OF ADDITION WHETHER PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITATED 1 CAPITALIZATION OF SERVICE CHARGES 1,38,64,065 / - YES 2 CAPITALIZATION OF ADVERTISEMENT EXPENSES 69,77,437/ - YES 3 CESSATION OF LIABILITY IN 7,61,884/ - NO ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 4 OF 14 CASE OF STATIC CREDITORS 4 DISALLOWANCE U/S 40A(I)(A) 13,97,08,721/ - NO 5 INCORRECT CLAIM U/S 40A(I)(A) 2,43,72,131/ - NO 6 EXCESS SHORTAGE/BREAKAGE 20,89,501/ - NO A NOTICE DATED 30.12.2008 U/S 271(1)(C) WAS ISSUED BY THE ASSESSING OFFICER(AO FOR SHORT) ACCORDINGLY, THEREBY INITIA TING PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT. 2.1. VIDE ORDER DATED 23.03.2016, THE ASSESSING OFFICER (AO FOR SHORT) PASSED PENALTY ORDER U/S 271(1)(C) OF INCOME TAX ACT (IT ACT FOR SHORT) LEVYING PENALTY AMOUNTING OF RS. 5,74,603/- U/S 271(1)(C) OF IT ACT . THE PENALTY HAS BEEN LEVIED IN RESPECT OF DISALLOWANCES OF RS. 13,97,08, 721/- AND RS. 15,07,658/- U/S 40A(I)(A) OF IT ACT, TOTALING RS. 14,12,16,379/ -. 3. AGGRIEVED, THE ASSESSEE FILED APPEAL AGAINST THE A FORESAID ORDER DATED 23.03.2016, BEFORE THE LD. CIT(A). VIDE ORDER DATED 24.09.2018, THE LD. CIT(A) IS DISMISSED THE ASSESSEES APPEAL. THE RELEVANT PA RT OF THE ORDER OF THE LD. CIT(A) IS REPRODUCED AS UNDER: 4.2.3.1 . THE APPELLANT FILED RETURN FOR AY 2006-07 AT LOSS OF RS. 25,80,27,830/- AND LOSS WAS REDUCED TO RS. 7,02,54,091/- IN THE OR DER U/S 143(3). WITH REGARD TO THE ADDITION OF RS. 15,07,658 UNDER SECTION 40(A)(IA) OF THE ACT, THE APPELLANT HAS SUBMITTED THAT A SUM OF RS. 12,38,99,557 WAS RECORDED AS PROVISION FOR EXPENSES DURING PREVIOUS YEAR FY 2004-05 RELEVANT TO AY 2005-06 IN THE PROFIT AND LOSS ACCOUNT. HOWEVER, IN THE TAX COMPUTATION THE APPELLANT SUO-MOTO DISALLOWED THE AFORESAID SUM IN ACCORDANCE WITH THE NEWLY INSERTED SECTION 40(A)(IA) OF THE ACT FOR FAILURE T O COMPLY WITH THE WITHHOLDING ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 5 OF 14 TAX PROVISIONS. SUBSEQUENTLY, OUT OF THE AFORESAID PROVISIONS OF RS. 12,38,99,557/- THE PROVISIONS WORTH RS. 2,28,64,473 /- WERE REVERSED AND IN RESPECT OF PROVISIONS AMOUNTING TO RS. 15,07,658/- IT WAS FOUND OUT THAT THE EXPENSES IN RESPECT OF WHICH THE PROVISIONS WERE CR EATED WERE NOT LIABLE TO TDS IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII B OF THE ACT AND WERE ERRONEOUSLY INCLUDED IN THE OTHER PROVISIONS LIABLE FOR TDS AND NOT ALLOWABLE AS DEDUCTION (IN AY 2005-06) IN ACCORDANCE WITH THE PR OVISIONS OF SECTION 40(A)(IA) OF THE ACT. IN VIEW OF THE ABOVE FACTS THE AFORESAI D PROVISIONS OF RS. 2,43,72,131/- (I.E. RS. 2,28,64,473 + RS.15,07,658) WERE CLAIMED AS A DEDUCTION WHILE COMPUTING THE TAXABLE INCOME FOR A.Y. 2006-07 . REJECTING THE AFORESAID SUBMISSION, THE LD. AO PROCEEDED TO MAKE A DISALLOW ANCE OF RS. 2,43,72,131 TO THE APPELLANT'S INCOME. THE CIT(A) UPHELD THE ADDITION OF RS. 15,07,658/- O N ACCOUNT OF INCORRECT CLAIM U/S 40 A(I)(A), OUT OF THE TOTAL ADDITION OF RS. 2,43,72,131/- MADE ON THIS ISSUE. THE RELEVANT EXTRACTS OF THE OT(A) ORDER, DATED 29. 09.2014, ON QUANTUM, WITH REGARD TO THE AMOUNT OF RS. 15,07,658/-, ARE R EPRODUCED BELOW: ' ...THE APPELLANTS REPLY AND RECONCILIATION IS DU LY CONSIDERED. REGARDING THE AMOUNT OF RS. 15,07,658/-THE APPELLANT HAS NOT SPEC IFIED THE AMOUNTS ON WHICH TDS PROVISIONS WERE NOT APPLICABLE AND NO DETAILS C OULD BE PROVIDED BY THEM.. IN ABSENCE OF DETAILS, THE APPELLANT'S CLAIM CANNOT BE ENTERTAINED. THE DISALLOWANCE OF RS. 15,07,658/- IS, THEREFORE, PART LY JUSTIFIED AND HENCE UPHELD...' THE APPELLANT DID NOT FILE APPEAL BEFORE ITAT ON TH E AMOUNT OF RS. 15,07,658/- ON ACCOUNT OF INCORRECT CLAIM U/S 40 A( I)(A) WHICH WAS UPHELD BY THE CIT (A). 4.2.3.2. THE AO HAD MADE AN ADDITION OF RS. 13,97,08,721/-O N THE ISSUE OF DISALLOWANCE U/S 40A(I)(A) OF THE I T ACT. THE APPE LLANT DID NOT CONTEST THE ISSUE OF DISALLOWANCE U/S 40A(I)(A) OF RS. 13,97,08,721/- BEFORE CIT(A).IN THE AUDIT REPORT U/S 44AB, THE AUDITOR HAD QUANTIFIED THE REP ORT STATING THAT THE APPELLANT COMPANY HAS NOT FURNISHED THE REQUIRED INFORMATION IN RESPECT OF DEDUCTION OF TDS. AS PER THE SAID REPORT THE AUDITORS HAVE DULY CERTIFIED THAT AN AMOUNT OF RS. 13,97,08,721/- WAS REQUIRED TO BE DISALLOWED ON ACC OUNT OF NON DEDUCTION OF TDS. IN SPITE OF THE ABOVE FINDINGS OF THE AUDITOR, THE APPELLANT DID NOT ADD BACK THIS AMOUNT IN ITS COMPUTATION OF INCOME. FURTHER A PPELLANT COMPANY HAS NOT DISPUTED THIS ISSUE BEFORE THE CIT(A). THUS THE APP ELLANT COMPANY HAS KNOWINGLY NOT DISALLOWED THE EXPENDITURE OF RS. 13,97,08,721/ - WHICH TANTAMOUNT TO THE FILLING OF INACCURATE PARTICULARS OF INCOME. 4.3.2.3. THE ABOVE CLAIMS WOULD HAVE GONE UNNOTICED BUT FOR SCRUTINY AND THIS IS A PRIMARY ISSUE WITH NO DISPUTES AND REFLECTS IP TH E APPELLANT'S ADMISSION TO THE SAME THE CASE IS SQUARELY COVERED FOR LEVY OF PENAL TY AS PER THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ZOOM COMMUNICATION PVT. LTD. ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 6 OF 14 (327 TTR 510 DEL), WHEREIN THE HON'BLE JURISDICTION AL HIGH COURT HAS VERY CLEARLY BROUGHT OUT THAT THE SAME IS LIABLE FOR PENALTY. TH E AO HAS SPECIFICALLY MENTIONED IN THE PENALTY ORDER DATED 23.03.2016, TH AT THE PENALTY U/S 271(1) (C ) HAS BEEN LEVIED ON THE AMOUNT OF RS. 13,97,08,721 /- AND RS. 15,07,658/- FOR FILING INACCURATE PARTICULARS OF INCOME. I FIND NO REASON TO INTERFERE WITH THE AO'S ORDER ON THE IMPOSITION OF PENALTY. THE APPEAL IS D ISMISSED. 4.3. ADDITIONAL GROUND OF APPEAL : IS WITH REGARD TO 'GROUND NO. VI THE ORDER OF PENALTY PASSED U/S 271(L)(C) OF THE ACT IS BAD IN LAW AS FROM THE NOTICE ISSUED U/S 274 READ WITH SECTION 271 OF THE ACT IT IS NOT DISCERNIBLE AS TO WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHI NG OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE AND THEREFORE, THE IMPUGNED PENALT Y ORDER DESERVES TO BE CANCELLED.' 4.3.1. THE GROUND HAS BEEN CONSIDERED AND FOUND TO BE DEVO ID OF MERITS. IN THE PENALTY ORDER DATED 23.03.2016, THE AO HAS SPECIFIC ALLY MENTIONED THAT THE PENALTY U/S 271(1) (C) HAS BEEN LEVIED ON THE AMOUN T OF RS. 13,97,08,721/- AND RS. 15,07,658/- FOR FILING INACCURATE PARTICULARS O F INCOME, APPEAL ON ADDITIONAL GROUND IS DISMISSED. 4. AGGRIEVED, AGAIN, THE ASSESSEE HAS FILED THIS APPE AL IN INCOME TAX APPELLATE TRIBUNAL (ITAT FOR SHORT). 4.1. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSEL F OR ASSESSEE DREW OUR ATTENTION TO THE FACT THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT WERE NOT INITIATED BY THE AO IN RESPECT OF THE AFORESAID ADD ITIONS OF RS. 13,97,08,721/- AND RS. 15,07,658/-, TOTALING RS. 14,12,16,379/- MA DE U/S 40A(I)(A) OF IT ACT. FOR THIS PURPOSE THE LD. COUNSEL FOR ASSESSEE TOOK US THROUGH THE ASSESSMENT ORDER. THE LD. COUNSEL FOR ASSESSEE ALSO CONTENDED THAT IN THE NOTICE U/S 271(1)(C) OF THE IT ACT, THE AO DID NOT MAKE A SPEC IFIC CHARGE WHETHER THE PENALTY PROCEEDINGS WERE BEING INITIATED FOR FURNIS HING OF INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF PARTICU LARS OF INCOME. RELYING ON ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 7 OF 14 ORDER DATED 14.09.2018 OF CO-ORDINATE BENCH OF ITAT , DELHI BENCHES, DELHI IN THE CASE OF M/S TIMES INTERNET LIMITED V/S DCIT IN ITA NO. 1421 /DEL/2015 FOR AY 2008-09 , THE LD. COUNSEL CONTENDED THAT PENALTY LEVIED BY THE AO AND CONFIRMED BY THE LD. CIT(A) SHOULD BE CANCELLED. TH E LD. CIT(DR) RELIED ON THE ORDERS OF THE AO AND LD. CIT(A). SHE DREW OUR ATTEN TION TO THE LAST SENTENCE IN THE ASSESSMENT ORDER DATED 30.12.2008 WHICH READS: PENALTY PROCEEDINGS U/S 271(1)(C) HAVE BEEN INITIATED SEPARATELY, AND SUBM ITTED THAT THIS SENTENCE IN THE ASSESSMENT ORDER SHOULD BE CONSTRUED AS SUFFICI ENT FOR INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT IN RESPECT OF A LL THE ADDITIONS MADE IN THE ASSESSMENT ORDER DATED 30.12.2008. 5. WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED MATERIALS ON RECORD. ALSO, WE HAVE CONSIDERED JUDICIAL PRECEDENTS BROUGHT TO OUR NOTICE AT THE TIME OF HEARING, AND WHICH HAVE BEEN REFERRED IN THE ORDERS OF THE LOWER AUTHORITIES [NAMELY THE AO AND THE LD. CIT(A)]. ON PERUSAL OF T HE ASSESSMENT ORDER DATED 30.12.2008 WE FIND THAT THE AO SPECIFICALLY RECORDE D INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT IN RESPECT OF C ERTAIN ADDITIONS. THESE ARE ADDITION OF RS. 1,38,64,065/- TOWARDS CAPITALIZATIO N OF SERVICE CHARGES (IN PARAGRAPH 3 OF THE ASSESSMENT ORDER); AND ADDITION OF RS. 69,77,437/- ON ACCOUNT OF CAPITALIZATION OF ADVERTISEMENT EXPENSES (IN PARAGRAPH 4 OF THE ASSESSMENT ORDER). HOWEVER, ON PERUSAL OF THE ASSES SMENT ORDER DATED 30.12.2008, THERE IS NO INITIATION OF PENALTY PROCE EDINGS IN RESPECT OF ADDITIONS ON ACCOUNT OF CESSATION OF LIABILITY IN CASE OF STA TIC CREDITORS AMOUNTING TO RS. ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 8 OF 14 7,61,884/- (IN PARAGRAPH 5 OF THE ASSESSMENT ORDER) ; DISALLOWANCE U/S 40A(I)(A) OF IT ACT AMOUNTING TO RS. 13,97,08,721/- (IN PARAG RAPH 6 OF THE ASSESSMENT ORDER); INCORRECT CLAIM U/S 40A(I)(A) OF IT ACT AMO UNTING TO RS. 2,43,72,131/-; AND ADDITION ON ACCOUNT OF EXCESS SHORTAGE/BREAKAGE AMOUNTING TO RS. 20,89,501/- (IN PARAGRAPH 8 OF THE ASSESSMENT ORDER ). THUS IT IS OBVIOUS THAT AS FAR AS ADDITIONS ON ACCOUNT OF DISALLOWANCES U/S 40A(I)(A) OF IT ACT, AMOUNTING TO AFORESAID RS. 13,97,08,721/- AND 15,07 ,658/-, TOTALING TO RS. 14,12,16,379/- IS CONCERNED, AO HAS NOT RECORDED SA TISFACTION FOR INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT. WHEN THE AO SPECIFICALLY INITIATES PENALTY PROCEEDINGS IN RESPECT OF CERTAIN ADDITIONS IN THE ASSESSMENT ORDER, BUT DOES NOT RECORD INITIATION OF PENALTY PROCEEDING IN RESPECT OF THE OTHER ADDITIONS; IT HAS TO BE INFERR ED THAT THE ADDITIONS IN RESPECT OF WHICH PENALTY PROCEEDINGS WERE NOT INITI ATED WERE NOT INTENDED TO BE CONSIDERED FOR SUBSEQUENT ORDER IMPOSING PENA LTY U/S 271(1)(C) OF IT ACT. WHEN CERTAIN THINGS ARE SPECIFICALLY INCLUDED AND REMAINING THINGS ARE NOT INCLUDED THEREIN, IT HAS TO BE INFERRED THA T WHAT WAS NOT SPECIFICALLY INCLUDED WAS NOT INTENDED TO BE INCLUD ED AT ALL. SCOPE OF PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT CANNOT BE WIDENED LATER TO INCLUDE WITHIN ITS SCOPE SUCH ADDITIONS WHICH WERE NOT SOUGHT TO BE COVERED WITHIN THE SCOPE OF PENALTY U/S 271(1)(C) O F IT ACT, AT THE TIME WHEN PENALTY PROCEEDINGS WERE INITIATED AND ASSESSM ENT ORDER WAS PASSED. THE RETROSPECTIVE WIDENING OF THE SCOPE OF PENALTY, TO INCLUDE THOSE ITEMS FOR LEVY OF PENALTY U/S 271(1)(C) OF IT ACT WHICH WERE NOT ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 9 OF 14 INCLUDED FOR THIS PURPOSE AT THE TIME WHEN PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT WERE INITIATED AND ASSESSMENT O RDER WAS PASSED; AMOUNTS TO REVIEW AND CHANGE OF OPINION BY THE AO, TO THE DETRIMENT OF THE ASSESSEE; WHICH HAS NO AUTHORITY OF LAW . IN THIS CONTEXT, IT WILL BE USEFUL TO REFER TO STATUTORY PROVISIONS U/S 271(1)( C) OF IT ACT. ON ITS PERUSAL, IT IS OBVIOUS THAT INITIATION OF PENALTY PROCEEDINGS BY THE AO IS VALI D ONLY IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDING S , THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME. WHEN THIS SATISFACTION FOR INITIATION OF PE NALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT IS RECORDED BY THE AO IN ASSESS MENT ORDER IN RESPECT OF CERTAIN ADDITIONS DURING THE ASSESSMENT PROCEEDINGS ; AND NOT RECORDED IN RESPECT OF CERTAIN OTHER ADDITIONS; IT ACTS AS A BA R AGAINST LEVY OF PENALTY U/S 271(1)(C) OF IT ACT IN RESPECT OF THOSE ADDITIO NS IN RESPECT OF WHICH SUCH SATISFACTION WAS NOT RECORDED IN THE ASSESSMEN T ORDER OR DURING THE ASSESSMENT PROCEEDINGS. 5.1. USEFUL REFERENCE MAY BE MADE TO JUDICIAL PRECEDENTS IN THE CASES OF CIT VS. RAJAN AND CO. (NO. 1) [2007] 291 ITR 340 (DELHI ), CIT VS. VIKAS PROMOTERS P. LTD. [2005] 277 ITR 337 (DELHI), CIT VS. AUTO LAMPS LTD. [2005] 278 ITR 32 (DELHI), CIT VS. RAM COMMERCIAL ENTERPRISES LTD. 24 6 ITR 568 (DELHI), CIT VS. SUPER METAL RE-ROLLERS 265 ITR 82 (DELHI), EVERPLUS SECURITIES AND FINANCE LTD. VS. DCIT [2006] 285 ITR (AT) 112 (DELHI) IN SUPPORT OF THE VIEW TAKEN BY US IN THE FOREGOING PARAGRAPH NO. 5 OF THIS ORDER. IN THE CASE OF CIT VS. RAJAN AND CO. ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 10 OF 14 (NO. 1) (SUPRA), THE HONBLE DELHI HIGH COURT, UPHELD THE D ELETION OF PENALTY BY ITAT WHEN THE AO HAD RECORDED SATISFACTION WITH REG ARD TO ONE SUM WHILE WITH REGARD TO THE OTHER HE MADE NO SUCH INDICATION. IN THE CASE OF CIT VS. VIKAS PROMOTERS P. LTD. (SUPRA), THE AO HAD MENTIONED SIMPLY THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT WERE INITIATED SEPARATELY BUT HAD NOT RECORDED SATISFACTION AS CONTEMPLATED U/S 271(1)(C) OF IT ACT. THE HONBLE DELHI HIGH COURT HELD THAT IT WAS MANDATORY FOR THE AO TO RECORD SATISFACTION BEFORE DRAWING AN INFERENCE FOR THE PURPOSE OF LEVYING PEN ALTY WHILE COMPLETING THE ASSESSMENT. IN THE CASE OF CIT VS. AUTO LAMPS LTD. (SUPRA), THE AO HAD RECORDED IN HIS ORDER THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT FOR FURNISHING INACCURATE PARTICULARS OF THE INCOME HAD BEEN INITI ATED SEPARATELY. HONBLE DELHI HIGH COURT HELD THAT BEFORE INITIATING PENALT Y PROCEEDINGS U/S 271(1)(C) OF IT ACT, 1961, IT IS THE AO WHO HAS TO FORM HIS O WN OPINION AND RECORD HIS SATISFACTION; AND FURTHER THAT MERELY BECAUSE THE P ENALTY PROCEEDINGS HAVE BEEN INITIATED, IT CANNOT BE ASSUMED THAT SUCH A SA TISFACTION WAS ARRIVED AT. IN THE CASE OF CIT VS. RAM COMMERCIAL ENTERPRISES LTD. (SUPRA), THE HONBLE DELHI HIGH COURT HELD THAT THE SATISFACTION AS TO THE ASS ESSEE HAVING CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME IS TO BE ARRIVED AT BY THE AO DURING THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, WHICH WOULD MEAN THE ASSESSMENT PROCEEDINGS, WITHOU T WHICH, THE VERY JURISDICTION TO INITIATE THE PENALTY PROCEEDINGS IS NOT CONFERRED ON THE ASSESSING AUTHORITY BY REFERENCE TO SECTION 271(1)(C) OF IT A CT. RELYING ON CIT VS. ANGIDI CHETTIAR (S.V.) [1962] 44 ITR 739 (SC) AND MANASVI (D.M.) VS. CIT [1972] 86 ITR ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 11 OF 14 557 (SC) THE HONBLE DELHI HIGH COURT HELD THAT A BARE READ ING OF THE PROVISIONS OF SECTION 271 AND THE LAW LAID DOWN BY THE SUPREME COURT MAKES IT CLEAR THAT, IT IS THE ASSESSING AUTHORITY WHO HAS T O FORM HIS OWN OPINION AND RECORD HIS SATISFACTION BEFORE INITIATING THE PENAL TY PROCEEDINGS; AND FURTHER THAT MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BE EN INITIATED IT CANNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT. IN THE CASE OF CIT VS. SUPER METAL RE-ROLLERS (SUPRA), HONBLE DELHI HIGH COURT ONCE AGAIN TOOK T HE VIEW THAT IT IS THE ASSESSING AUTHORITY WHICH HAS TO FORM ITS OWN OPINION AND RECORD ITS SATISFACTION BEFORE INITIATING THE PENALTY PROCEEDI NGS; AND FURTHER THAT MERELY BECAUSE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED , IT CANNOT BE ASSUMED THAT SUCH A SATISFACTION WAS ARRIVED AT, IN THE ABSENCE OF THE SAME BEING SPELT OUT BY THE ORDER OF THE ASSESSING AUTHORITY. THE HONBL E DELHI HIGH COURT, DISMISSING REVENUES APPEAL, HELD IN THIS CASE THAT IT WAS NOT SUFFICIENT THAT THE SATISFACTION OF THE AO AS CONTEMPLATED IN SECTI ON 271(1)(C) OF THE ACT WAS INHERENT IN THE QUERIES RAISED BY HIM DURING THE CO URSE OF THE ASSESSMENT PROCEEDINGS AND THAT THE AO HAD DIRECTED THE ISSUE OF NOTICE FOR LEVY OF PENALTY UNDER THE SECTION AFTER BEING SATISFIED THAT THE AS SESSEE HAD CONCEALED THE PARTICULARS OF ITS INCOME. SIMILAR VIEW WAS TAKEN I N EVERPLUS SECURITIES AND FINANCE LTD. VS. DCIT (SUPRA). 5.2. IN VIEW OF THE FOREGOING PARAGRAPHS 5 AND 5.1 OF T HIS ORDER, WE ARE OF THE VIEW THAT THERE WAS NO VALID INITIATION OF PENALTY PROCEEDING S U/S 271(1)(C) OF IT ACT IN RESPECT OF THE ADDITIONS ON WHICH PENA LTY U/S 271(1)(C) OF IT ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 12 OF 14 ACT WAS LEVIED BY THE AO IN AFORESAID ORDER DATED 2 3.03.2016 U/S 271(1)(C) OF IT ACT. THEREFORE, THE PENALTY LEVIED BY AO UNDER SECTION 271(1)(C) OF IT ACT, AND UPHELD BY THE LD. CIT(A) IN HIS IMPU GNED APPELLATE ORDER DATED 24.09.2018; IS HEREBY CANCELLED. AS REGARDS THE SUB MISSION OF THE LD. COUNSEL FOR ASSESSEE THAT THE AO DID NOT MAKE SPECIFIC CHAR GE AGAINST THE ASSESSEE IN THE NOTICE U/S 271(1)(C) OF IT ACT WHETHER THE PENA LTY PROCEEDING WERE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME, THIS GROUND NEED NOT BE ADJUDICATED AS W E HAVE ALREADY CANCELLED THE PENALTY AND THIS GROUND/CONTENTION IS PURELY AC ADEMIC IN VIEW OF OUR DECISION TO CANCEL THE PENALTY. WHEN THERE IS NO VALID INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF IT ACT IN RESPECT OF C ERTAIN ADDITIONS MADE IN THE ASSESSMENT ORDER; IT IS IMMATERIAL IF THE AO MA DE SPECIFIC CHARGE AGAINST THE ASSESSEE: WHETHER THE PENALTY PROCEEDIN GS WERE FOR CONCEALMENT OF THE PARTICULARS OF INCOME OR FOR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. THEREFORE, GROUND NO. 2 OF THE APPEAL IS NOT ADJUDICATED AND IS LEFT OPEN FOR THE ASSESSEE TO TA KE UP IN FUTURE IF DEEMED FIT. 6. AS THE PENALTY LEVIED U/S 271(1)(C) OF IT ACT HAS ALREADY BEEN CANCELLED BY US IN OUR ADJUDICATION OF ITA NO. 7900/DEL/2018; THE STAY APPLICATION VIDE SA NO. 62/DEL/2019 ARISING FROM ITA NO. 7900/DEL/20 18 HAS BECOME INFRUCTUOUS. THEREFORE, THE STAY APPLICATION VIDE S A NO. 62/DEL/2019 IS HEREBY DISMISSED, BEING INFRUCTUOUS. ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 13 OF 14 6.1. FOR STATISTICAL PURPOSES THE APPEAL IS PARTLY ALLOW ED AND THE STAY APPLICATION IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.02.2019. SD/- SD/- (KULDIP SINGH) (ANADEE NATH MISSHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27.02.2019 BIDHAN COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI ITA NO.- 7900/DEL/2018 AND SA NO.- 62/DEL/2019 (ARISING OUT OF ITA NO.- 7900/D EL/2018) IN THE CASE OF HINDUSTAN COCA COLA MARKETING COMPAN Y PVT. LTD. PAGE 14 OF 14 DATE OF DICTATION DIRECT ON COMPUTER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER