ZAKI AHMED FAROOQUI, Jaipur V. DCIT, Jaipur

ITA 849/JPR/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7850 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 27-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT DHK
• Assessee Lawyers: S L PODDAR
• Keywords: Unexplained cash credit; Recovery proceedings; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NOS. 848 & 849/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2005-06 & 07-08. SHRI ZAKKI AHMED FAROOQUI, D-55, RAM NAGAR, SHASTRI NAGAR, JAIPUR. CUKE VS. THE DCIT, CIRCLE-4, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ADNPA 4418 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADVOCATE) JKTLO DH VKSJ LS@ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 18.06.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 14/08/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST TWO SEPARATE ORDERS OF LD. CIT (A)-2, JAIPUR BOTH DATED 29 TH AUGUST, 2016 ARISING FROM PENALTY ORDERS PASSED UNDER SECTION 271(1)(C) OF THE IT ACT FOR TH E ASSESSMENT YEARS 2005-06 & 07-08 RESPECTIVELY. THE ASSESSEE HAS RAISED IDENTI CAL GROUNDS IN THESE APPEALS EXCEPT THE QUANTUM OF PENALTY. THE GROUNDS FOR THE ASSESSMENT YEAR 2005-06 ARE REPRODUCED AS UNDER :- 1. THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 BY THE LEARNED CIT (A) IS VOID AB-INITIO AND D ESERVES TO BE QUASHED. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 72,4 50/- U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 WITHOUT CONSI DERING THE 2 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. SUBMISSION OF THE ASSESSEE AND OTHER EVIDENCES FILE D IN SUPPORT OF CREDITORS OF RS. 2,41,500/-. 3. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD, AMEN D OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2. THE ASSESSEE HAS ALSO FILED AN APPLICATION UNDER RULE 11 OF INCOME TAX APPELLATE TRIBUNAL RULES, 1963 FOR ADMISSION OF AN ADDITIONAL GROUND FOR BOTH THE ASSESSMENT YEARS. THE COMMON ADDITIONAL GROUND RAI SED BY THE ASSESSEE READS AS UNDER :- IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LE ARNED ASSESSING OFFICER HAS NOT RECORDED HIS SATISFACTION FOR INITI ATION OF PENALTY THAT THE ASSESSEE HAS COMMITTED FAULT FOR FILLING OF WRO NG PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THEREFORE, THE PEN ALTY ORDER PASSED BY THE LEARNED A.O. IS VOID AB-INITIO. 3. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R ON THE ADMISSION OF ADDITIONAL GROUND. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ADDITIONAL GROUND IS PURELY LEGAL IN NATURE AND GOES TO THE RO OT OF THE MATTER. FURTHER THE ADDITIONAL GROUND IS ARISING FROM THE ORDERS PASSED BY THE AUTHORITIES BELOW AND DOES NOT REQUIRE ANY INVESTIGATION OF NEW FACTS BUT THE SAME CAN BE ADJUDICATED ON THE BASIS OF THE FACTS AND MATERIAL ON RECORD OF TH E ASSESSMENT PROCEEDINGS. THUS THE LD. A/R HAS SUBMITTED THAT WHEN THE RELEVANT MA TERIAL FOR DECIDING THE ISSUE RAISED IN THE ADDITIONAL GROUND IS READILY AVAILABL E ON RECORD THEN THERE IS NO LEGAL BAR ON ADMITTING THE ADDITIONAL GROUND AND DECIDING THE SAME ON MERITS. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT, 229 ITR 383 (SC) AS WELL AS T HE DECISION OF MUMBAI BENCH OF 3 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. THE TRIBUNAL IN CASE OF MAHINDRA & MAHINDRA LTD. VS . DCIT, 122 TTJ 577 (MUMBAI) (SPECIAL BENCH). THUS THE LD. A/R HAS PLEADED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE MAY BE ADMITTED FOR ADJUDICATION. 3.1. ON THE OTHER HAND, THE LD. D/R HAS VEHEMENTLY OPPOSED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE AT THIS STAGE AND SUBMITTED THAT WHEN THE ASSESSEE HAS NOT EXPLAINED THE REASONS WHICH HAD PREVENTED THE ASSES SEE FROM RAISING THE SAME BEFORE THE AUTHORITIES BELOW THEN THE ASSESSEE CANN OT BE PERMITTED TO RAISE SUCH ISSUE FIRST TIME AT THIS STAGE. 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT THE ISSUE RAISED BY THE ASSESS EE IN ADDITIONAL GROUND IS LEGAL IN NATURE AND THE ADJUDICATION OF THE SAME DOES NOT RE QUIRE ANY CONSIDERATION OF FRESH FACTS OR MATERIAL BUT IT CAN BE DECIDED ON THE BASI S OF MATERIAL ALREADY AVAILABLE ON THE RECORD. THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF NTPC VS. CIT (SUPRA), THIS TRIBUNAL CAN CONSIDER THE QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD AND SHOULD ALLOW THE PARTIES TO RAISE SUCH A PLEA, IF IT IS NECESSARY TO CONSIDER THE QUESTION IN ORDER TO CORR ECTLY ASSESS THE TAX LIABILITY OF THE ASSESSEE. HENCE WE ADMIT THE ADDITIONAL GROUND RAIS ED BY THE ASSESSEE FOR ADJUDICATION ON MERITS. ADJUDICATION OF ADDITIONAL GROUND ON MERITS : 5. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE AO HAS INITIATED THE PENALTY PROCEEDINGS BY ISSUING SHOW CAUSE NOTICE UN DER SECTION 274 READ WITH SECTION 271 OF THE IT ACT DATED 31 ST DECEMBER, 2007. HOWEVER, THE AO HAS NOT SPECIFIED THE LIMB FOR LEVY OF THE PENALTY UNDER SE CTION 271(1)(C). SIMILARLY, FOR THE 4 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. ASSESSMENT YEAR 2007-08 IDENTICAL NOTICE WAS ISSUED WITHOUT SPECIFYING THE LIMB WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INC OME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO WHILE ISSUING THE NO TICE HAS TO SPECIFY THE LIMB FOR WHICH THE PENALTY IS PROPOSED TO BE LEVIED UNDER SE CTION 271(1)(C) WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THUS THE AO AT THE TIME OF INITIATION OF PENALTY PR OCEEDINGS HAS TO COME TO THE CONCLUSION THAT WHETHER IT IS A CASE OF CONCEALMENT OR IT IS A CASE OF FURNISHING INACCURATE PARTICULARS OF INCOME. THE PENALTY PROC EEDINGS ARE SEPARATE AND INDEPENDENT FROM THE ASSESSMENT PROCEEDINGS AND THE JURISDICTION UNDER PENALTY PROCEEDINGS CAN ONLY BE LIMITED TO THE ISSUE OF PEN ALTY. THE IMPOSITION OF PENALTY IS NOT AUTOMATIC AND, THEREFORE, EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ASSESSMENT ORDER, THE AO HAS TO TAKE A DECISION ON IMPOSITION OF PENALTY AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE ON A SP ECIFIC DEFAULT OR CHARGE. ONLY WHEN NO EXPLANATION WAS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR THAT THE EXPLANATION IS NOT BONAFIDE, AN ORDER IMPO SING PENALTY COULD BE PASSED. THEREFORE, THE NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C) THAT WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCO ME. IN THE ABSENCE OF SPECIFYING THE GROUNDS, WOULD RESULT DENIAL OF THE PROPER OPPO RTUNITY TO THE ASSESSEE TO FURNISH THE EXPLANATION. THE ASSESSEE SHOULD KNOW THE GROU ND WHICH HE HAS TO MEET SPECIFICALLY OTHERWISE THE PRINCIPLES OF NATURAL JU STICE ARE VIOLATED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY , 359 ITR 565 (KAR.). THE LD. 5 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. A/R HAS FURTHER SUBMITTED THAT IN A SUBSEQUENT DECI SION THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS HAS FOLLOWED THE DECISION IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA). THE SLP FILED BY THE REVENUE AGAINST THE SAID ORDER HAS BEEN DISMISSED B Y THE HONBLE SUPREME COURT REPORTED IN 242 TAXMAN 180 (SC). HENCE THE LD. A/R HAS SUBMITTED THAT THE INITIATION OF PROCEEDINGS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) IS NOT VALID AND CONSEQUENTLY THE PENALTY ORDER PASSED BY THE AO IS NOT IN ACCORDANCE WITH LAW. 5.1. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED T HAT ONCE THE ADDITION MADE BY THE AO HAS BEEN CONFIRMED AND ATTAINED THE FINALITY , THE DEFAULT OF THE ASSESSEE WAS VERY WELL KNOWN TO THE ASSESSEE. FURTHER, THE AO I N THE ASSESSMENT ORDER HAS CLEARLY RECORDED HIS SATISFACTION THAT NOTICE UNDER SECTION 271(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURA TE PARTICULARS OF INCOME IS ISSUED. THE AO HAS SPECIFIED THE GROUNDS IN THE ASSESSMENT ORDER FOR INITIATION OF PENALTY UNDER SECTION 271(1)(C). HE HAS RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. DURING THE ASSESSMENT PROCEEDINGS, THE AO INTER ALIA MADE ADDITIONS ON ACCOUNT OF CASH CREDIT UNDER SECTION 68 OF THE ACT FOR BOTH THE ASSESSMENT YEARS, THOUGH THERE IS ANOTHER ADDITION FOR THE ASSESSMENT YEAR 2007-08 ON ACCOUNT OF UNEXPLAINED SOURCE OF ADDITION TO THE CAPITAL ACCOU NT OF RS.70,000/-. FOR THE ASSESSMENT YEAR 2005-06, THE AO HAS RECORDED THE SA TISFACTION IN THE ASSESSMENT ORDER AS UNDER :- PENALTY PROCEEDINGS INITIATED SEPARATELY. NOTICE UNDER SECTION 271(1)(C) FOR CONCEALING PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ISSUED. 6 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. FOR THE ASSESSMENT YEAR 2007-08, THE AO HAS RECORDE D THE SATISFACTION IN THE ASSESSMENT ORDER AS UNDER :- PROCEEDINGS UNDER SECTION 271(1)(C) FOR CONCEALME NT OF INCOME/FURNISHING OF INACCURATE PARTICULARS OF INCO ME HAVE SEPARATELY BEEN INITIATED. THEREFORE, THE AO HIMSELF HAS RECORDED SEPARATE GRO UNDS FOR INITIATION OF PENALTY UNDER SECTION 271(1)(C) WHILE RECORDING THE SATISFA CTION IN THE ASSESSMENT ORDERS FOR THESE TWO ASSESSMENT YEARS. AS REGARDS THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271 OF THE ACT, AN IDENTICAL PRINTED N OTICE WAS ISSUED BY THE AO WHEREIN THE RELEVANT GROUNDS FOR LEVY OF PENALTY ARE AS UND ER :- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT MANIFEST FROM THE RECORD THAT THE AO HAS GIVEN I NCONSISTENT GROUNDS FOR INITIATION OF PENALTY IN THE ASSESSMENT ORDERS FOR THE TWO ASS ESSMENT YEARS AND FURTHER THE GROUNDS GIVEN IN THE SHOW CAUSE NOTICE ARE ALSO VAG UE WITHOUT SPECIFYING THE LIMB FOR WHICH THE PENALTY WAS PROPOSED TO BE LEVIED UND ER SECTION 271(1)(C). FURTHER, THE NOTICES WERE ISSUED IN THE PRINTED PROFORMA BY FILLING THE PARTICULARS OF ASSESSEE. IT IS PERTINENT TO NOTE THAT THE ADDITION IN THE AS SESSMENT ORDERS FOR BOTH THE YEARS 7 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. WERE MADE ON ACCOUNT OF UNEXPLAINED CASH CREDIT AND FOR THE ASSESSMENT YEAR 2007-08 ANOTHER ADDITION ON ACCOUNT OF UNEXPLAINED SOURCE TO THE CAPITAL ACCOUNT WAS MADE. THESE ADDITIONS WERE MADE BY THE AO BY R EJECTING THE CLAIM OF THE ASSESSEE. THEREFORE, IT IS NOT A CASE OF SUPPRESSI ON OF PARTICULARS OF INCOME OR DETAILS OF THE INCOME BUT THE CLAIM OF THE ASSESSEE SHOWING THE CASH CREDIT IN THE BOOKS AS WELL AS THE CAPITAL INCLUSION WAS DISALLOW ED BY THE AO IN THE ASSESSMENT PROCEEDINGS. ALL THE PARTICULARS OF THESE CLAIMS W ERE DULY RECORDED IN THE BOOKS OF ACCOUNT AND, THEREFORE, IT CANNOT BE A CASE OF SUPP RESSION OF PARTICULARS OF INCOME OR ANY INCOME OUT OF THE BOOKS WHICH WAS DETECTED B Y THE AO DURING HIS INVESTIGATION OR ENQUIRY. HENCE THE CASE OF THE AS SESSEE WOULD NOT FALL IN THE CATEGORY OF CONCEALMENT OF PARTICULARS OF INCOME AN D THE INITIATION OF PENALTY CAN BE ONLY ON THE GROUND OF FURNISHING INACCURATE PARTICU LARS OF INCOME. THE AO HIMSELF WAS NOT SURE ABOUT THE CHARGE FOR WHICH THE PENALTY WAS PROPOSED TO BE LEVIED AT THE TIME OF RECORDING SATISFACTION IN THE ASSESSMEN T ORDER AND FURTHER WHILE ISSUING THE SHOW CAUSE NOTICE UNDER SECTION 274 READ WITH S ECTION 271(1)(C) OF THE ACT. THEREFORE, ONCE THE ASSESSEE WAS NOT MADE KNOWN ABO UT THE SPECIFIC DEFAULT/CHARGE FOR WHICH THE PENALTY WAS PROPOSED TO BE LEVIED, TH EN THE INITIATION OF PENALTY WAS NOT IN ACCORDANCE WITH LAW. FURTHER, THE ASSESSEE W AS ALSO DEPRIVED OF THE PROPER OPPORTUNITY TO MEET THE GROUNDS ON WHICH THE PENALT Y WAS PROPOSED TO BE LEVIED. EVEN IN THE PENALTY ORDER PASSED UNDER SECTION 271( 1)(C), THE AO HAS GIVEN THE FINDING THAT THE ASSESSEE HAS CONCEALED THE INCOME AND FILED INACCURATE PARTICULARS OF INCOME, THEREFORE LIABLE TO BE PENALIZED UNDER SECTION 271(1)(C) OF THE ACT. THIS FINDING OF THE AO IN THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) IS CONTRARY TO 8 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. THE FACTS AS IT IS NOT THE CASE OF SUPPRESSION OF P ARTICULARS OF INCOME BUT THE ADDITIONS WERE MADE BY THE AO BY DISALLOWING THE CL AIM OF CASH CREDITS INTRODUCED IN THE BOOKS OF ACCOUNTS AND FOR WANT OF SATISFACTORY EXPLANATION ON BEHALF OF THE ASSESSEE. HENCE WHEN THE AO HIMSELF WAS NOT SURE A BOUT THE CHARGE FOR WHICH THE PENALTY WAS PROPOSED TO BE LEVIED, THEN THE INITIAT ION OF PENALTY AS WELL AS CONSEQUENT ORDERS PASSED UNDER SECTION 271(1)(C) AR E NOT VALID AND LIABLE TO BE QUASHED. THE HONBLE KARNATAKA HIGH COURT IN THE C ASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) HAS DISCUSSED THIS ISSUE ELABORATELY AND THE CONCLUDING PART OF THE DECISION IN PARA 60 TO 66 AR E AS UNDER :- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CAS ES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF TH E PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCE EDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING H IM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(L )(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALL Y STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. I T IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON T HE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEE DINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSI TION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY I MPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT T O INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDIN GS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME ARE DIFFERENT. THUS THE 9 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. 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 T. ASHOK PAI V. CIT [2007] 292 ITR 11/161 TAXMAN 340 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 CIT V. MANU ENGG. [1980] 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING (P.) LTD. [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. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE N OTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. INDEPENDENT PROCEEDING 62. THE PENALTY PROCEEDINGS ARE DISTINCT FROM ASSESSME NT PROCEEDINGS, AND INDEPENDENT THEREFROM. THE ASSESSMENT PROCEEDINGS A RE TAXING PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT ING FROM PROCEEDINGS OF ASSESSMENT ARE INDEPENDENT AND SEPARATE ASPECTS OF THE PROCEEDING. SEPARATE PROVISION IS MADE FOR THE IMPOSITION OF PENALTY AND SEPARATE NOTICES OF DEMAND ARE MADE FOR RECOVERY OF TAX AND AMOUNT OF PENALTY. ALS O SEPARATE APPEAL IS PROVIDED AGAINST ORDER OF IMPOSITION OF PENALTY. ABOVE ALL, NORMALLY, ASSESSMENT PROCEEDINGS MUST PRECEDE PENALTY PROCEEDINGS. ASSESSEE IS ENTIT LED TO SUBMIT FRESH EVIDENCE IN THE COURSE OF PENALTY PROCEEDINGS. IT IS BECAUSE PENALT Y PROCEEDINGS ARE INDEPENDENT PROCEEDINGS. THE ASSESSEE CANNOT QUESTION THE ASSES SMENT JURISDICTION IN PENALTY PROCEEDINGS. JURISDICTION UNDER PENALTY PROCEEDINGS CAN ONLY BE LIMITED TO THE ISSUE OF PENALTY, SO THAT VALIDITY OF THE ASSESSMENT OR R EASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER IN PENALTY PROCEEDINGS. IT IS NOT POSSIBLE TO GIVE A FINDING THAT THE REASSESSMENT IS INVALID IN SUCH PENALTY PROCEEDINGS. CLEARLY, THERE IS NO IDENTITY BETWEEN THE ASSESSMEN T PROCEEDINGS AND THE PENALTY PROCEEDINGS. THE LATTER ARE SEPARATE PROCEEDINGS TH AT MAY, IN SOME CASES, FOLLOW AS A CONSEQUENCE OF THE ASSESSMENT PROCEEDINGS. THOUGH I T IS USUAL FOR THE ASSESSING OFFICER TO RECORD IN THE ASSESSMENT ORDER THAT PENA LTY PROCEEDINGS ARE BEING INITIATED, THIS IS MORE A MATTER OF CONVENIENCE THAN OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRES, SO FAR AS THE PENALTY PROCEEDINGS ARE CON CERNED, IS THAT THEY SHOULD BE INITIATED IN THE COURSE OF THE PROCEEDINGS FOR ASSE SSMENT. IT IS SUFFICIENT, IF THERE IS SOME RECORD SOMEWHERE, EVEN APART FROM THE ASSESSME NT ORDER ITSELF, THAT THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION THA T THE ASSESSEE IS GUILTY OF CONCEALMENT OR OTHER DEFAULT FOR WHICH PENALTY ACTI ON IS CALLED FOR. INDEED, IN CERTAIN CASES, IT IS POSSIBLE FOR THE ASSESSING OFFICER TO ISSUE A PENALTY NOTICE OR INITIATE PENALTY PROCEEDINGS EVEN LONG BEFORE THE ASSESSMENT IS COMPLETED. THERE IS NO STATUTORY REQUIREMENT THAT THE PENALTY ORDER SHOULD PRECEDE OR BE SIMULTANEOUS WITH THE ASSESSMENT ORDER. IN POINT OF FACT, HAVING REGA RD TO THE MODE OF COMPUTATION OF PENALTY OUTLINED IN THE STATUTE, THE ACTUAL PENALTY ORDER CANNOT BE PASSED UNTIL THE ASSESSMENT IS FINALISED. CONCLUSION 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: 10 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. (A) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIABILIT Y. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING P ENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(L )(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTH ORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LE GAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESS MENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECA USE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO T HE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. (K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER O F 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 O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCL UDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF S UCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD H AVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. (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 EXPLANATI ON OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTAN TIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME A ND 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 IB TO SECT ION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS 11 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. SATISFACTION, THEN THE PENALTY PROCEEDINGS HAV E TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFIC ALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETHER IT IS FOR CONCEALM ENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, PRINC IPLES 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 FI NDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEE DINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT E FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROC EEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' W OULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN TH E PENALTY PROCEEDINGS. IN ITA NOS. 2564 & 2565/2005 64. IN THE LIGHT OF WHAT WE HAVE STATED ABOVE, IT IS C LEAR THAT MERELY BECAUSE THE ASSESSEE AGREED FOR ADDITION AND ACCORDINGLY ASSESS MENT ORDER WAS PASSED ON THE BASIS OF THIS ADDITION AND WHEN THE ASSESSEE HAS PA ID THE TAX AND THE INTEREST THEREON IN THE ABSENCE OF ANY MATERIAL ON RECORD TO SHOW TH E CONCEALMENT OF INCOME, IT CANNOT BE INFERRED THAT THE SAID ADDITION IS ON ACCOUNT OF CONCEALMENT. MOREOVER, THE ASSESSEE HAS OFFERED THE EXPLANATION. THE SAID EXPL ANATION IS NOT FOUND TO BE FALSE. ON THE CONTRARY, IT IS HELD TO BE BONAFIDE. IN FACT IN THE ASSESSMENT PROCEEDINGS THERE IS NO WHISPER ABOUT THESE CONCEALMENT. UNDER THESE CIR CUMSTANCES, THE ENTRY FOUND IN THE ROUGH CASH BOOK COULD HAVE BEEN REFLECTED IN TH E ACCOUNTS FOR THE SAID FINANCIAL YEAR IN WHICH THE SURVEY TOOK PLACE AS THE LAST DAT E FOR CLOSING THE ACCOUNT WAS STILL NOT OVER. THE VERY FACT THAT THE ASSESSEE AGREED TO PAY TAX AND DID NOT CHALLENGE THE ASSESSMENT ORDER, IT IS CLEAR THE CONDUCT OF THE AS SESSEE CANNOT BE CONSTRUED AS MALAFIDE. THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDERS PASSED BY THE APPELLATE AUTHORITY AS WELL AS THE ASSESSING AU THORITY. 65. INSOFAR AS THE IMPOSITION OF PENALTY IS CONCERNED, IT IS NOT IN ACCORDANCE WITH LAW. NO FAULT COULD BE FOUND WITH THE TRIBUNAL FOR DELET ING THE PENALTY. THUS, WE ANSWER THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE AS SESSEE AND AGAINST THE REVENUE. 12 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. IN ITA NO. 5020/2009 66. IN VIEW OF THE AFORESAID LAW, WE ARE OF THE VIEW T HAT THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ENTIRE PROCEEDINGS ARE VITIATED AS THE NOTICE ISSUED IS NOT IN ACCORDANCE WITH LAW AND ACCORDINGLY JUSTIFIED IN IN TERFERING WITH THE ORDER PASSED BY THE APPELLATE AUTHORITY AS WELL AS THE ASSESSING AU THORITY AND IN SETTING ASIDE THE SAME. HENCE, WE ANSWER THE SUBSTANTIAL QUESTIONS OF LAW FRAMED IN THIS CASE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. HENCE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT, WHICH WAS SUBSEQUENTLY CHALLENGED BY THE REVENUE BEFORE THE HONBLE SUPREME COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS (SUPRA) BUT THE HONBLE SUPREME COURT HAS D ISMISSED THE SLP FILED BY THE REVENUE, WE HOLD THAT THE INITIATION OF PENALTY PRO CEEDINGS AND CONSEQUENTIAL ORDERS PASSED UNDER SECTION 271(1)(C) OF THE ACT ARE BAD I N LAW AND ACCORDINGLY THE SAME ARE QUASHED. ON MERITS LEVY OF PENALTY : 7. WE HAVE HEARD THE LD. A/R AS WELL AS THE LD. D/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ADDITION WAS MADE BY THE A O ON ACCOUNT OF UNEXPLAINED CASH CREDIT WHICH WERE CLAIMED BY THE ASSESSEE AS L OAN TAKEN FROM VARIOUS PARTIES. THE ASSESSEE THOUGH FILED THE CONFIRMATIONS AND AFF IDAVITS OF THE CREDITORS AND, THEREFORE, THE IDENTITY AND EXISTENCE OF THE CREDIT ORS WAS PRIMA FACIE PROVED BY THE ASSESSEE WHICH WAS NOT CONTRADICTED BY THE AO BY BR INGING ANY CONTRARY FACTS OR MATERIAL ON RECORD. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE FAILED TO PRODUCE THE CREDITORS IN PER SON FOR EXAMINATION BY THE AO. IT MAY BE A CASE OF UNSATISFACTORY EXPLANATION BY THE ASSESSEE LEADING TO ADDITION BUT WHEN THE ASSESSEE FURNISHED THE EXPLANATION ALONG W ITH AFFIDAVITS IN ALL THE CASES OF 13 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. CASH CREDITORS AND ALSO FURNISHED THE EVIDENCE OF R EPAYMENT OF THE AMOUNT IN PART OF THE LOAN CREDITORS THEN THE SAID EXPLANATION OF THE ASSESSEE CANNOT BE TURNED DOWN WITHOUT CONSIDERING THE BONAFIDENESS. THEREFORE, E VEN IF THE ASSESSEE FAILED TO SUBSTANTIATE HIS EXPLANATION BUT IF IT IS FOUND TO BE BONAFIDE AS PER THE CLAUSE-B OF EXPLANATION-2 TO SECTION 271(1)(C), THEN THE PENALT Y IN SUCH CASE IS NOT WARRANTED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE WHERE THE ADDITIONS WERE MADE BY THE AO SOLELY ON THE GROUND THAT THE ASSESSEE HA S FAILED TO PRODUCE THE CREDITORS FOR EXAMINATION BUT THE AO HAS NOT CONTRADICTED THE EVIDENCES WHICH WERE PRODUCED BY THE ASSESSEE IN SUPPORT OF THE CLAIM, WE FIND TH AT THE EXPLANATION OF THE ASSESSEE THOUGH MAY NOT BE ACCEPTED FOR WANT OF SUBSTANTIATI ON BUT THE SAME CANNOT BE REGARDED AS MALAFIDE AND HENCE THE BENEFIT OF THE B ONAFIDENESS OF THE EXPLANATION AS PER EXPLANATION-2 TO SECTION 271(1)(C) OF THE AC T SHOULD BE ALLOWED TO THE ASSESSEE. ACCORDINGLY, THE PENALTY LEVIED BY THE A O IS NOT SUSTAINABLE AND THE SAME IS DELETED. 8. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PARTL Y ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 14/08/2 018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 14/08/2018. DAS/ 14 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR. VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI ZAKKI AHMED FAROOQUI, JAIPUR . 2. THE RESPONDENT THE DCIT, CIRCLE-4, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 848 & 849/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 15 ITA NOS. 848 & 849/JP/2016 SHRI ZAKKI AHMED FAROOQUI, JAIPUR.