M/s. Shree Vardhman Overseas Ltd., New Delhi V. DCIT, New Delhi

ITA 833/DEL/2013

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5598 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 01-05-2017
• Assessment Year: 1998-1999
• Appeal Filed On: 08-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 144

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH FRIDAY G: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/ 2013 ) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) SHREE VARDHMAN OVERSEAS LTD, LD - 1, PITAMPURA, NEW DELHI PAN: AAACS2142N VS. DCIT, CIRCLE - 8(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAYANK JAIN, ADV SHRI MADHUR JAIN, ADV REVENUE BY: SHRI AMIT JAIN, SR. DR DATE OF HEARING 09/03/2018 DATE OF PRONOUNCEMENT 1 6 /04/2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS MISCELLANEOUS APPLICATION IS FILED BY THE ASSESSEE IN THE ORDER OF THE COORDINATE BENCH IN ITA NO. 883/DEL/2013 DATED 31.07.2017. 2. THE LD AUTHORISED REPRESENTATIVE VEHEMENTLY SUBMITTED THAT THE ORDER OF THE COORDINATE BENCH IN THE ABOVE ITA SUFFERS FROM MISTAKE APPARENT FROM THE RECORD ON FOLLOWING COUNTS: - I. THE PENALTY HAS BEEN CONFIRMED MERELY BECAUSE IN THE SET ASIDE PROCEEDINGS THE ASSESSEE COULD NOT PRODUCE THE B OOKS OF ACCOUNT. II. THE PENALTY WAS CONFIRMED ON ESTIMATED ADDITION III. THE JUDICIAL DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN 360 ITR 580 CIT VS. KRISHI TYRE RE - TRADING AND RUBBER INDUSTRIES WHEREIN, IT HAS BEEN HELD THAT PENALTY FOR CONCEALMENT CANNOT B E LEVIED WHEN ADDITION IS MADE ON ESTIMATE BASIS. SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 2 IV. THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. AERO TRADERS PVT. LTD 322 ITR 316 WAS NOT CONSIDERED THAT PENALTY IS NOT LEVIABLE WHEN INCOME IS BASED ON ESTIMATED PROFIT. V. THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTOR (2013) 359 ITR 565 WAS NOT CONSIDERED FOR THE REASON THAT IN THE ASSESSMENT ORDER THERE IS NO SATISFACTION RECORDED ABOUT THE CHARGE OF THE PENALTY. FURTHER, IN THE SECOND ROUND OF THE PROCEEDINGS ALSO THERE WAS NO CHARGE OF PENALTY. VI. THE DECISION OF THE HIGH COURT WAS NOT CONSIDERED WHEREIN, THE SET ASIDE ASSESSMENT ORDER THE TWIN CHARGES WERE MENTIONED BY THE LD ASSESSING OFFICER OF FURNISHING INACCUR ATE PARTICULARS OF INCOME , AND CONCEALMENT OF INCOME BOTH FOR INITIATING PENALTY. HE REFERRED TO THE PENALTY ORDER DATED 30.03.2011 AND STATED THAT THE PENALTY HAS BEEN LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HE THEREFORE, SUBMITTED THAT TH ERE IS N O SPECIFIC CHARGE BY THE LD ASSESSING OFFICER. HOWEVER, PENALTY HAS BEEN LEVIED ON DIFFERENT CHARGE. VII. HE FURTHER STATED THAT PENALTY IS LEVIED FOR NOT SUBSTANTIATING THE RETURN OF INCOME IN THE SET ASIDE PROCEEDINGS. HOWEVER, IN THE ORIGINAL PROCEE DINGS THE ASSESSEE HAS PRODUCED THE BOOKS OF ACCOUNTS A WELL AS COMPLETE STOCK RECORDS. THEREFORE, THE PENALTY IS LEVIED ON THE NON PRODUCTION OF THE BOOKS ETC FOR ASSESSMENT YEAR 1998 - 99 IN ASSESSMENT AGAIN COMPLETE IN 2007 I.E. ALMOST AFTER 10 YEARS. THE REFORE, WHATEVER IS FURNISHED BY THE ASSESSEE CANNOT BE CONSIDERED AS FURNISHING OF INACCURATE PARTICULARS. VIII. HE SUBMITTED THAT THE DECISION OF THE HON'BLE SUPREME COURT IN CASE OF CIT VS. SS AS EMERALD DATED 05.08.2016 WAS NOT CONSIDERED AS NONE OF THE TWI N CHARGES IN NOTICE U/S 274 WERE STUCK OFF. SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 3 3. HE SUBMITTED THAT NON - CONSIDERATION OF BINDING JUDICIAL PRECEDENTS IS A MISTAKE APPARENT FROM RECORD. HE SUBMITTED THAT THE DECISION IN CASE CIT VS. MANJUNATHA COTTON AND GINNING FACTORY WHICH WAS CITED BEFORE BENCH, WHICH IS ALSO UPHELD BY HON'BLE SUPREME COURT, THE ORDER OF ITAT SUFFERS FROM GROSS MISTAKE. HE ALSO RELIED UPON DECISION OF HONDA SEIL LTD ( 295 ITR 466 ) TO SUPPORT HIS CONTENTION. HE ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPRE ME COURT IN CASE OF SAURASTHRA KUTCH STOCK EXCHANGE ( 305 ITR 337 ) WHEREIN IT HAS BEEN HELD THAT NON CONSIDERATION OF THE DECISION OF THE HONBLE HIGHER FORUM MAKES THE ORDER ERRONEOUS. 4. THE LD DR VEHEMENTLY OBJECTED TO THE ARGUMENT OF THE LD AR AND SUBMITT ED THAT THE DECISIONS STATED BY THE LD AR DOES NOT HAVE ANY IMPLICATION AND HENCE DOES NOT MAKE ORDER ERRONEOUS. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO TEST EACH OF THE ARGUMENTS OF THE ASSESSEE HEREIN AFTER . 6. THE THREE ARGUMENTS OF THE ASSESSEE WHICH CAN BE COUPLED INTO ONE ISSUE THAT NON PRODUCTION OF THE BOOKS OF ACCOUNTS AND ADDITION BASED ON THE ESTIMATE , PENALTY CANNOT BE LEVIED. THIS ARGUMENT OF THE ASSESSEE DOES NOT BRING ANY ERROR IN THE ORDER OF THE COORDINATE BENCH. THE PE NALTY HAS BEEN CONFIRMED , AS THE ASSESSEE COULD NOT SUBSTANTIATE THE BOOKS RESULTS BY PRODUCING THE BOOKS OF ACCOUNTS, PARTIES WITH WHOM IT HAS TRADED AND ALSO COULD NOT SUBSTANTIATE THE VALUATION OF THE STOCKS. IN VIEW OF THIS WE REJECT THESE ARGUMENT OF THE ASSESSEE. WITH RESPECT TO THE ANOTHER ASPECT THAT PENALTY CANNOT BE LEVIED IN CASE OF ESTIMATED ADDITION IS ALSO REJECTED . IT CANNOT BE A RULE THAT ON EACH AND EVERY ESTIMATE IF THE ADDITION IS MADE , PENALTY CANNOT BE LEVIED. IN THE PRESENT CASE THE AS SESSEE HAS NEITHER PRODUCE D THE BOOKS OF ACCOUNT NOR THE PARTIES AND THEREFORE, THE ASSESSEE WAS NO N COMPLIANT BEFORE THE LD ASSESSING OFFICER AND THEREFORE, IN ABSENCE OF BOOKS OF ACCOUNTS THE LD ASSESSING OFFICER HAS TO MAKE AN ESTIMATE OF THE INCOME OF THE ASSESSEE . IN SUCH CASE IT CANNOT BE SAID THAT IMPOSITION OF THE PENALTY IS NOT PROPER. THEREFORE, IN CASE WHERE THE ASSESSEES BOOKS ARE REJECTED AND ASSESSMENT WAS MADE SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 4 ON BEST JUDGMENT AFTER ESTIMATING THE TURNOVER AND THE RATE OF GROSS PROFIT, IT CA NNOT BE SAID THAT PENALTY CANNOT BE IMPOSED. IN EACH CASE OF THE ESTIMATED ADDITION IT IS REQUIRED TO BE EXAMINED WHETHER THERE WAS MATERIAL TO IMPLICATE THE ASSESSEE FOR HAVING CONCEALED OR FURNISHED INACCURATE PARTICULARS OF INCOME. IN FACT ASSESSMENT BY ESTIMATE IS ONE OF THE ACCEPTED METHODOLOGY OF THE TAXATION. WHERE THE ASSESSEE CONCEALS RELEVANT MATERIAL AND EVIDENCE , THE REVENUE HAS NO OPTION BUT TO MAKE THE BEST JUDGMENT BY AN ESTIMATE. AN ADDITION MADE BY ESTIMATION IS AS MUCH LEGAL AS ANY OTHER A SSESSMENT. IN THE PRESENT CASE , HENCE, IT CANNOT BE SAID THAT MERELY BECAUSE THE ESTIMATE OF INCOME PENALTY CANNOT BE LEVIED. THE DECISIONS RELIED UPON BY THE LD AR OF THE JURISDICTION HIGH COURT IN CASE OF 322 ITR 316 DOES NOT APPLY TO THE FACTS OF THE CA SE FOR THE REASON THAT IN THAT PARTICULAR CASE THE RELEVANT RECORDS WERE SEIZED BY THE POLICE AND THEREFORE, SAME COULD NOT BE PRODUCED. HERE, THERE IS NO EXPLANATION BY THE ASSESSEE THAT WHY THE BOOKS OF ACCOUNTS ARE NOT BEEN PRODUCED BY THE ASSESSEE. HEN CE, RELIANCE PLACED ON THAT DECISION DOES NOT SHOW ANY ERROR IN THE ORDER. 7. THE RELIANCE BY THE ASSESSEE IN NOT CONSIDERING THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN CASE OF SS AS EMERALDS MEADOWS ALSO DOES NOT HELP THE CASE OF THE ASSESSEE BECAU SE THE ASSESSEE HAS NOT PRODUCED THE RELEVANT COPIES OF THE NOTICE DURING THE COURSE OF HEARING TO SHOW THAT IRRELEVANT POTION THEREIN HAS NOT BEEN STRUCK OFF. HENCE, ON THIS GROUND THERE IS NO ERROR IN THE ORDER OF COORDINATE BENCH. 8. THE NEXT GROUND OF E RROR WAS WITH RESPECT TO THE NON CONSIDERATION OF THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN CIT VS. MANJUNATHA COTTON AND GINNING FACTORY ( 359 ITR 565 ) WHICH WAS CITED BEFORE THE BENCH BUT WAS NOT CONSIDERED. IT IS TRUE THAT RULE OF PRECEDENT IS AN I MPORTANT ASPECT OF LEGAL CERTAINTY IN THE RULE OF LAW U /S 254(2) , IF A PREJUDICE HAS RESULTED TO THE PARTY WHICH PREJUDICE IS ATTRIBUTABLE TO THE MISTAKE OF THE TRIBUNAL OR ERROR OR OMISSION ON ITS PART WHICH IS MANIFEST FROM THE RECORD ITSELF, THE TRIBUNAL IS DUTY BOUND TO RECTIFY ITS MISTAKE. IN THE PRESENT CASE SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 5 SUCH DECISION WAS CITED BEFORE US, HOWEVER INADVERTENTLY SAME WAS NOT CONSIDERED WHILE DECIDING THE PENALTY APPEAL OF THE ASSESSEE. IN VIEW OF THIS WE ARE OF THE OPINION THAT NOT CONSIDERING THE DECISION OF HON'BLE KARNATAKA HIGH COURT CITED BEFORE US , RENDERS THE ORDER OF THE TRIBUNAL SUFFERING FROM MISTAKE APPARENT FROM RECORD. IN VIEW OF THIS WE RECALL THE ORDER OF THE COORDINATE BENCH IN ITA NO. 883/DEL/2013 FOR AY 1998 - 99. ACCORDINGLY THE MA NO. 44/DEL/2018 IS ALLOWED. 9. A T THE TIME OF HEARING ITSELF IT WAS R EQUESTED BY THE PARTIES THAT AS THE APPEAL OF THE ASSESSEE IS REQUIRED TO BE DECIDED ON A SINGLE LIMITED ISSUE OF THE APPLICABILITY OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) , FOR WHICH NO F RESH FACTS ARE REQUIRED TO BE ARGUED, THEREFORE, IT MAY BE DECIDED ON THE MERITS OF THE CASE. IT WAS SUBMITTED BY BOTH THE PARTIES THAT ALL THE RELEVANT ORDERS ARE ALREADY ON THE RECORD BEFORE THE COORDINATE BENCH. 10. IN VIEW OF THIS , WITH THE CONSENT OF TH E PARTIES , AT THEIR REQUEST , WE PROCEED TO DECIDE THE ISSUE. IN THE PRESENT CASE THE ORDER U/S 144 OF THE INCOME TAX ACT WAS PASSED ON 03.02.2001 WHEREIN, THE RETURN ED LOSS OF RS. 101143384/ - WAS REDUCED TO RS. 6796680/ - . IN THAT ORDER THE ADDITION ON ACC OUNT OF UNACCOUNTED PRODUCTION AND SALES WAS MADE TO THE TUNE OF RS. 90083560/ - . THOUGH PENALTY WAS INITIATED U/S 271(1)(C) OF THE ACT, HOWEVER, AT THE TIME OF INITIATION OF PENALTY PROCEEDINGS, THERE WAS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER T HAT WHETHER THE ASSESSEE HAS CONCEALED OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE MATTER WAS CARRIED UP TO THE COORDINATE BENCH WHO VIDE ORDER DATED 01/11/2006 SET ASIDE THE WHOLE ISSUE BACK TO THE FILE OF THE LD ASSESSING OFFICER. PURSUANT TO THAT , THE LD ASSESSING OFFICER FURTHER FRAMED THE ASSESSMENT ORDER U/S 143(3) READ WITH SECTION 254 OF THE ACT , ON 11.12.2006 MAKING AN ADDITION OF RS. 71526295/ - ON ACCOUNT OF TRADING RESULTS AND ALSO DISALLOWING THE EXPENDITURE OF RS. 19624092/ - . THE LD ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS HOLDING AS UNDER: - SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 6 HAVING REGARD TO THE NATURE OF DISCUSSION/ DISALLOWANCE/ ADDITIONS I AM SATISFIED THAT THE ASSESSEE HAS FURNISHED IN ACCURATE PARTICULARS OF INCOME AND CONCEALED ITS INCOME WHICH ATTR ACT PENALTY PROVISIONS OF SECTION 271(1)(C) OF THE IT ACT . (UNDERLINE SUPPLIED BY US) 11. THE LD ASSESSING OFFICER VIDE ORDER DATED 30.03.2011 PASSED ORDER U/S 271(1)(C) OF THE ACT HOLDING THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ITS IN COME AND LEVIED THE PENALTY. THE FINDING OF THE LD ASSESSING OFFICER IN THE PENALTY ORDER IS AS UNDER: - IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME WITH A VIEW OF EVADE TAXES. A PENALTY OF RS. 25034203/ - IS THEREFORE, IMPOSED U/S 271(1)(C) OF THE ACT AS PER FOLLOWING CALCULATION 12. THE HON'BLE KARNATAKA HIGH COURT IN CIT VS. MANJUNATHA COTTON AND GINNING FACTOR 359 ITR 565 HAS HELD AS UNDER IN PARA NO. 61: - 61. THE ASSESSING OFFICER IS EMPOWERE D UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULA RS OF INCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI R EPORTED IN [2007] 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING WORKS REPORTED IN [1980] 122 ITR 306 (GUJ) AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING P. LTD. REPORTED IN [2008] 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREF ORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON - APPLICATION OF MIND. 13. FURTHER, IN PARA NO. 63 IN CONCLUSION IT HAS BEEN HELD AS UNDER: - SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 7 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER : (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR THE ORDER OF THE APPELLATE AUTHORITY OR THE REVISIONAL AUTHORITY. (F) EVEN IF THER E IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) AND 1(B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BE CAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(1)(C) IS A SINE QUA NON FOR THE ASSESSING OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF T HE DEEMING PROVISION CONTAINED IN SUB - SECTION (1B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF INCO ME - TAX (APPEALS) AND THE COMMIS SIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) THE IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY THE AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMIT TED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 8 (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EX PLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION 1(B) TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SEC TION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMA NATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES J UDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON THE MERITS. HOWEVER, THE VALI DITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDI NGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 9 14. IN THE PRESENT CASE AT THE TIME OF FRAMING THE ASSESSMENT ORDER THE LD ASSESSING OFFICER HAS RECORDED A SATISFACTION THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED ITS INCOME WHICH ATTRACTS THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. WHILE LEVYING THE PENALTY THE LD ASSESSING OFFICER HAS LEVIED IT HOLDING THAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, AS PER PARA NO. 61 OF THE ORDER OF THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT THE LD AO WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IT IS A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS . BOTH THE ABOVE PHRASES HAVE DIFFERENT CONNOTATION. IT HAS FURTHER BEEN HELD THAT THE LEVY OF PENALTY HAS TO BE CLEAR FOR WHICH PENALTY IS LEVIED , THE POSITION IS UNCLEAR THEN PENALTY IS NOT SUSTAINABLE. IN THE PRESENT CASE THE SITUATION IS IDENTICAL WHEN THERE WAS NO CLEAR CHARGE THAT WHETHER THE PENALTY IS BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME BUT LEVIED PENALTY ON FURNISHING OF INACCURATE PARTICULARS OF INCOME RENDERS THE ORDER OF THE PENALTY UNSU STAINABLE. THE HON'BLE KARNATAKA HIGH COURT IN M/S. SSAS EMERALD MEADOWS (ITA NO. 380 OF 2015 ) DATED 23.11.2015 [SLP DISCUSSED BY HON'BLE SUPREME COURT VIDE ORDER DATED 05/08/2016] HAS ALSO HELD IN PARA NO. 3 OF THE ORDER THAT IF AO DOES NOT SPECIFY WHI CH LIMB OF SECTION 271(1)(C) OF THE ACT, PENALTY PROCEEDINGS HAVE BEEN INITIATED, THEN SUCH NOTICE IS BAD. IN THE PRESENT CASE ORDER ITSELF SHOWN THAT LD AO IS NOT CERTAIN ON WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, DEFAULT OF ASSESSEE FALLS INTO. IN V IEW OF THIS WE ARE OF THE VIEW THAT PENALTY LEVIED BY THE LD ASSESSING OFFICER U/S 271(1)(C) OF THE ACT VIDE ORDER DATED 30.03.2011 IS NOT SUSTAINABLE. IN THE RESULT THE PENALTY LEVIED BY THE LD ASSESSING OFFICER U/S 271(1)(C) OF THE ACT AND CONFIRMED BY T HE LD CIT(A) IS DELETED. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 833/DEL/2013 FOR AY 1998 - 99 IS ALLOWED. 15. IN THE RESULT MISCELLANEOUS A P P L I C A T I O N NO. 44/DEL/2018 AND ITA NO. 883/DEL/2013 FILED BY THE ASSESSEE ARE ALLOWED. SHREE VARDHMAN OVERSEAS LTD VS. DCIT, MA NO. 44/DEL/2018 (IN ITA NO. 883/DEL/2013) AND ITA NO. 883/DEL/2013 (ASSESSMENT YEAR: 1998 - 99) PAGE | 10 ORDER PRONOUNCED IN THE OPEN COURT ON 1 6 / 04/2018. - S D / - - S D / - (H.S.SIDHU) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 6 / 04/2018 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI