THE DCIT (CENTRAL), Indore V. M/S Keti Construction (India) Ltd. , Indore

ITA 877/Ind/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4734 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 18-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNIT KUNAR
• Assessee Lawyers: SHALINI MEHTA CAS
• Keywords: Reopening of assessment; Unexplained cash credit; Depreciation; Search and seizure; Loose papers; Peak credit; Question of law; Initiation of penalty proceedings; Revised return; Set aside
• Section: 271(1)(c); 143(3); 153A; 14A; 274; 251; 139(1); 43; 73; 13; 22; 132; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.878/IND/2019 ASSESSMENT YEAR 2010-11 DCIT, CENTRAL-2, INDORE : REVENUE V/S M/S. KALYAN TOLL INFRASTRUCTURE LTD, 15/3, VIDHYADEEP, MANORAMAGANJ, INDORE PAN : AACCK1840M : RESPONDENT ITA NO.877/IND/2019 ASSESSMENT YEAR 2008-09 DCIT, CENTRAL-2, INDORE : REVENUE V/S M/S. KETI CONSTRUCTION (INDIA) LTD, 15/3, VIDHYADEEP, MANORAMAGANJ, INDORE PAN : AABCK5930D : RESPONDENT REVENUE BY SHRI PUNIT KUNAR , SR.DR ASSESSEE BY SHRI AJAY TULSIYAN & MS. SHALINI MEHTA, CAS DATE OF HEARING 25.08.2020 DATE OF PRONOUNCEMENT 23. 0 9 . 2020 KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 2 O R D E R PER MANISH BORAD THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE O F THE REVENUE PERTAINING TO ASSESSMENT YEARS 2010-11 & 20 08-09 IN THE CASE OF M/S. KALYAN TOLL INFRASTRUCTURE PVT. LT D & M/S. KETI CONSTRUCTION (INDIA) LTD RESPECTIVELY ARE DIRECTED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-3 (IN S HORT LD.CIT(A)], BHOPAL EVENLY DATED 25.06.2019 WHICH ARE ARISING OU T OF THE ORDER U/S 271(1)(C) OF THE INCOME TAX ACT 1961(IN SHORT T HE ACT) DATED 25.06.2019 FRAMED BY DCIT, OSD(CENTRAL)-1, INDORE. 2. REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; M/S KALYAN TOLL INFRASTRUCTURE PVT. LTD, ITA NO.878/IND/2019 ASSESSMENT YEAR 2010-11 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN DELETING THE PENALTY OF RS.1,60,00,000/- LEV IED BY ASSESSING OFFICER FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INA CCURATE PARTICULARS OF INCOME IN RESPECT OF UNDISCLOSED INCOME DELETED DUR ING SEARCH AND EXCESS CLAIM OF DEPRECIATION. M/S KETI CONSTRUCTIONS(INDIA), LTD, ITA NO.877/IND/2019 ASSESSMENT YEAR 2008-09 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW IN DELETING THE PENALTY OF RS.50,00,000/- LEVIE D BY ASSESSING OFFICER KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 3 FOR CONCEALMENT OF INCOME AND FOR FURNISHING OF INA CCURATE PARTICULARS OF INCOME IN RESPECT OF UNDISCLOSED INCOME DELETED DUR ING SEARCH AND DISALLOWANCE OF CLAIM U/S 36(V) OF THE INCOME TAX A CT, 1961. 3. AS BOTH THE ASSESEE(S) IN THESE TWO APPEALS RELATES TO THE SAME GROUP, THEY WERE HEARD TOGETHER AND ARE BEING DISPO SED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. 4. WE WILL FIRST TAKE UP ITA NO.878/IND/2019 IN THE CASE OF M/S. KALYAN TOLL INFRASTRUCTURE PVT. LTD FOR ASSESSMENT YEAR 2010-11. SOLE GRIEVANCE OF THE REVENUE IS AGAINST THE FINDIN G OF LD. CIT(A) DELETING THE PENALTY LEVIED U/S 271(1)(C) OF THE AC T AT RS. 1,60,00,000/-. 5. BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE R ECORDS AND NARRATED BY LD. COUNSEL FOR THE ASSESSEE ARE THAT T HE APPELLANT IS A COMPANY OF KALYAN (GARG) GROUP OF INDORE ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION CONTRACTS AND BUILD-OPERATE-T RANSFER (BOT CONTRACTS). SEARCH AND SEIZURE OPERATIONS WERE CARR IED OUT U/S 132 ON THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF KALYAN GROUP COVERING VARIOUS CONCERNS AND INDIVIDUAL OF THE GRO UPS ON 05.05.2011 WHEREIN SUBSTANTIAL DISCLOSURE OF ADDITI ONAL INCOME WAS MADE BY THE GROUP. FRESH ASSESSMENT PROCEEDING S WERE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 4 INITIATED AND NOTICE U/S 153A WERE ISSUED IN RESPON SE TO WHICH FRESH RETURNS WERE FILED BY THE APPELLANT DECLARIN G ADDITIONAL INCOMES, WHICH WERE DECLARED BY IT U/S 132(4). IN R ESPONSE TO THE NOTICE ISSUED U/S 153A, THE APPELLANT FILED THE RET URN OF INCOME OF RS.8,60,48,030/- INCLUDING ADDITIONAL INCOME OFFERE D U/S 132(4) OF RS.5,08,55,709/-. THE AO COMPLETED THE ASSESSMENT PROCEEDINGS U/S 143(3) R.W.S. 153A ON 26.03.2014 AT A TOTAL INC OME OF RS.41,97,07,950/- BY MAKING VARIOUS ADDITIONS AND D ISALLOWANCES. THE ADDITIONS MADE BY THE LD. A.O WERE PARTLY DELET ED BY LD. CIT(A) AND REMAINING WERE DELETED BY THE TRIBUNAL EXCEPT F OR THE ADDITION OF RS.2,28,103/- SUSTAINED ON ACCOUNT OF ADDITIONAL CLAIM OF DEPRECIATION. 6. SUBSEQUENTLY PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) OF THE ACT. ASSESSEES SUBMISSIONS WERE NOTED IN TH E PENALTY PROCEEDINGS ALONG WITH THE CONTENTIONS MADE BY THE ASSESSEE FOR NOT LEVYING THE PENALTY BUT THE SAME WERE NOT ACCEP TED. LD. A.O LEVIED PENALTY OF RS.1,60,00,000/-. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 5 7. AGAINST THE ORDER OF THE LD. A.O ASSESSEE WENT I N APPEAL BEFORE AN APPEAL BEFORE LD. CIT(A) AND CHALLENGED T HE LEVY OF PENALTY ON MERITS AS WELL AS LEGAL GROUND. IT WAS SUBMITTED BY THE ASSESSEE THAT THE PENALTY NOTICE ISSUED U/S 274 R.W .S. 271(1)(C) OF THE ACT WAS NOT VALID IN THE EYES OF LAW SINCE THE CHARGE AGAINST THE ASSESSEE WAS NOT SPECIFIED. RELIANCE WAS PLACED ON VARIOUS JUDGMENTS INCLUDING THE JUDGMENT OF HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF PR. CIT V/S KULWANT SINGH BHATIA IT NO. 9 TO 14 OF 2018 ORDER DATED 9.5.2018 . LD. CIT(A) ACCORDINGLY APPLIED THE JUDGMENTS REFERRED AND RELIED BY LD. COUNSEL FOR TH E ASSESSEE AND ALLOWED LEGAL GROUND AND HELD THE NOTICE ISSUED U/ S 274 R.W.S. 271(1)(C) OF THE ACT AS A DEFECTIVE NOTICE NOT SUST AINABLE IN LAW. ON MERITS ALSO LD. CIT(A) ALLOWED ASSESSEES GROUND OB SERVING THAT WHEN THE BASIC PREMISES ON WHICH THE APPELLANTS OFF ERED INCOME WAS REJECTED BY LD. A.O AND LATER ON WHEN THE ADDIT IONS MADE IN THE ASSESSMENT ORDE3R WERE DELETED IN THE APPELLATE PROCEEDINGS, THE LD. A.O MERELY FOR THE PURPOSE OF LEVY OF PENAL TY TOOK THE BASIS OF ADDITIONAL INCOME OFFERED BY THE APPELLANT. LD. CIT(A) ALSO OBSERVED THAT SINCE THE LD. A.O HAD BEEN UNABLE TO MAKE ANY PROPER SATISFACTION IN THE PENALTY ORDER, THE PENAL TY SO LEVIED WAS KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 6 NOT IN ACCORDANCE WITH LAW. 8. AGGRIEVED REVENUE IS NOW IN APPEAL BEFORE THE TR IBUNAL RAISING SOLE ISSUE OF DELETION OF PENALTY MADE U/S 274 R.W. S. 271(1)(C) OF THE ACT AT RS.1,60,00,000/- 9. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUE D SUPPORTING ORDER OF LD. A.O. CONTENDING THAT HAD TH E SEARCH NOT TAKEN PLACE THE ASSESSEE WOULD NOT HAVE OFFERED TH E ADDITIONAL INCOME, THEREFORE PENALTY U/S 271(1)(C) OF THE ACT WAS RIGHTLY LEVIED. 10. PER CONTRA LD. COUNSEL FOR THE ASSESSEE REFERRE D TO THE WRITTEN SUBMISSIONS PLACED ON RECORD RUNNING FROM PAGE 1 TO 28, REFERRED TO THE PAPER BOOK DATED 20.8.2020 RUNNING FROM PAGE 1 TO 186 AND ALSO REFERRING TO VARIOUS JUDGMENTS REFERRED AND RE LIED IN SUPPORT OF THE FINDING OF LD. CIT(A). 11 LD. COUNSEL FOR THE ASSSESSEE ALSO SUBMITTED THA T THE PENALTY PROCEEDINGS WERE VOID AB-INITIO SINCE IN THE ASSESSMENT ORDER NO CHARGE WAS SPECIFIED BEFORE INITIATING PENALTY PROC EEDINGS. THE PENALTY NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF T HE ACT HAVE ALSO BEEN ISSUED IN CYCLOSTYLED PROFORMA MENTIONING BOTH THE LIMBS OF KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 7 CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME WITHOUT STRIKING OFF THE INAPPLICABLE CLAUSE . IN SUPPORT OF SETTLED PROPOSITION THAT BOTH THE LIMBS CARRIED DIF FERENT CONNOTATIONS, RELIANCE WAS PLACED ON THE JUDGMENT O F HONBLE SUPREME COURT IN THE CASE OF T ASHOK PAI V/S CIT (2007) 292 ITR 12. RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF HO NBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KULWANT SINGH BHATIA (SUPRA) . REFERENCE WAS ALSO MADE TO VARIOUS DECISIONS OF BENCH OF INDORE TAKING SIMILAR VIEW. 13. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO TWO DECISIONS OF THE INDORE TRIBUNAL IN THE CASE OF SMT . SHRUTI GARG V/S DCIT ITA NO. 988/IND/2016 DATED 28.06.2017 AND KETI SANGA, INFRASTRUCTURE (I) LTD & OTHERS ITA NO.1343 & 601/I ND/2016 DATED 27.06.2018. BOTH THESE CASES ARE OF THE ASSESSEES BELONGING TO THE SAME KALYAN GROUP WHEREIN ALSO ADDITIONAL INCOME WA S OFFERED IN THE SAME SEARCH AND SUBSEQUENTLY THE PENALTY LEVIED WAS DELETED BY THE TRIBUNAL. 14. ON MERITS OF THE INSTANT CASE LD. COUNSEL FOR T HE ASSESSEE REFERRED TO THE WRITTEN SUBMISSIONS AND THE RELEVAN T PART OF THE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 8 WRITTEN SUBMISSION IS REPRODUCED BELOW:- IMPOSITION OF PENALTY OF RS.L,60,OO,OOO/- IS WRONG AND UNCALLED FOR: 10. THE LEARNED AO ERRED IN IMPOSING OF PENALTY ON ACCO UNT OF ADDITIONAL INCOME OFFERED U/S 132(4) AND ALSO IN TH E RETURN OF INCOME FILED U/S 153A AND ALSO IN RESPECT OF ADDITION OF EXCESS DEPRECIATION CLAIMED U / S 153A OF RS.2,28, 103/-. 11. PURSUANT TO SEARCH OPERATIONS, NOTICES U/S 153A WAS I SSUED TO THE RESPONDENT IN RESPONSE TO WHICH RETURN WAS F ILED ON 12.10.2013 OFFERING A TOTAL INCOME OF RS. 8,60,48,03 0/- INCLUDING ADDITIONAL INCOME OF RS, 5,08,55,709/ _ OFFERED U / S 132(4). THE BREAKUP OF THE ADDITIONAL INCOME IS AS UNDER: (I) RS.28,90,450 / _ WAS OFFERED ON THE BASIS OF N OTINGS MADE ON VARIOUS LOOSE PAPER SEIZED AT THE TIME OF SEARCH WHICH COULD NOT BE IDENTIFIED IN BOOKS OF ACCOUNTS. (II) RS. 3,58,72,460/- WAS OFFERED ON ACCOUNT OF P EAK CREDIT OFFERED ON THE BASIS OF CASH FLOW STATEMENT PREPARE D TO EXPLAIN THE SOURCE OF SHARE APPLICATION MONEY INTRODUCED IN BOOKS OF ACCOUNTS (III) RS.L,03,87,500/_ WAS OFFERED ON ACCOUNT OF AS COMMISSION ON THE SHARE APPLICATION MONEY. (IV) RS. 17,05,300/ - WAS OFFERED ON ACCOUNT OF P ROPORTIONATE DEPRECIATION FORGONE BY SPREADING OVER THE TOTAL IN FLATED PROJECT COST OVER THE PERIOD/ LIFE OF THE PROJECTS. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 9 12. PENALTY PROCEEDINGS WERE ALSO INITIATED IN RESPECT OF A CLAIM OF DEPRECIATION OF RS.2,28,103/ _ WHICH WAS MADE IN THE RETURN FILED U / S 153A AND WHICH WAS INADVERTENTLY SHORT C LAIMED IN THE RETURN FILED U/S 139(1). THE AO DID NOT ALLOWED THE SAID CLAIM MADE IN THE RETURN FILED U / S 153A AND INITIA TED PENALTY PROCEEDINGS. THE CONTENTIONS OF THE RESPONDENT IN RESPECT OF THE PENALTY LEVIED U/ S 271(1)(C) ARE AS UNDER:- 17.1 NO PENALTY WAS INITIATED IN THE ASSESSMENT ORDER IN RESPECT OF ADDITIONAL INCOME OFFERED OF RS. 3,58,72,4 60/ - ON ACCOUNT OF PEAK CREDIT. SINCE NO PENALTY PROCEEDINGS WERE INITIATED IN RESPECT OF THIS INCOME, THE RESPONDENT DID NOT MADE ANY SUBMISSIONS ON THE SAME IN ITS WRITTEN SUBMISSI ON FILED DURING THE PRESENT PENALTY PROCEEDINGS. THE AO HAS ALSO NOT DISCUSSED THE SAID ITEM IN THE PRESENT PENALTY ORDER , BUT SURPRISINGLY STILL LEVIED PENALTY UNDER EXPLANATION 5 A OF 271(1)(C) WHICH IS TOTALLY UNJUSTIFIED AND BAD IN LAW. ALSO OT HERWISE THE PENALTY IS NOT LEVIABLE ON THE SAME DUE TO FOLLOWIN G REASONS: 17.2 THE ADDITIONAL INCOME OFFERED OF RS. 3,58,72,4 60/ - WAS ON ACCOUNT OF PEAK CREDIT TO EXPLAIN THE SOURCE OF SHA RE APPLICATION MONEY INTRODUCED IN BOOKS OF ACCOUNTS. 17.3 IN RESPECT OF ABOVE ADDITIONAL INCOME OFFERED U/S 132(4) AND ALSO IN THE RETURN FILED U/S 153A R.W.S. 139, THE RESPONDENT WISH TO SUBMIT AS UNDER:- BASIC FACTS OF THE CASE RESULTING INTO OFFERING OF ADDITIONAL INCOME: 17.3.1 THE RESPONDENT HAS RAISED CERTAIN SHARE CAPI TAL IN KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 10 VARIOUS YEARS, ALONG WITH OTHER GROUP COMPANIES WHI CH WAS NOT FOUND TO BE PROPER, WHICH FACT WAS ALSO ACCEPTED BY THE RESPONDENT GROUP DURING THE SEARCH PROCEEDINGS. HOWE VER, THE RESPONDENT GROUP EXPLAINED THE SOURCE OF SHARE CAPIT AL INTRODUCED IN THE BOOKS OF ACCOUNTS, OUT OF AMOUNTS G ENERATED FROM INFLATION OF PROJECT COSTS IN SOME OF THE GROU P COMPANIES THROUGH A DATE WISE CASH FLOW STATEMENT WHICH WAS P REPARED SCIENTIFICALLY AND SYSTEMATICALLY ON THE BASIS OF L OOSE PAPER FOUND FOR ALL THE YEARS COVERED U/S 153A. THE MAJOR SOURCE OF SHARE CAPITAL WAS GENERATED THROUGH INFLATION OF PR OJECT COST OF VARIOUS TOLL PROJECTS IN THE GROUP. AMOUNTS RECEIVE D FROM THE INFLATION OF PROJECT COST WERE UTILIZED FOR GENERAT ING SHARE CAPITAL. THIS FACT WAS PROPERLY EXPLAINED AND DULY SUBSTANTIA TED DURING THE SEARCH PROCEEDINGS ITSELF AND A DETAILED WORKIN G IN THE FORM OF CASH NOW STATEMENT WAS FILED TO EXPLAIN THE SOURC E OF SHARE CAPITAL. IN THE CASH FLOW STATEMENT SOME NEGATIVE P EAK CREDIT AROSE, WHICH WAS OFFERED AS INCOME IN THE RESPECTIV E YEAR. 17.3.2 THE RESULTANT PEAK CREDIT IN THE CASH FLOW ST ATEMENT WAS OFFERED AS INCOME IN THE RESPECTIVE YEARS AND THE D EPRECIATION CLAIMED IN RESPECT OF THE INFLATED PROJECT COST WAS WITHDRAWN IN THE RESPECTIVE GROUP COMPANIES. THESE AMOUNTS WERE OFFERED AS ADDITIONAL INCOME U/S 132(4) BEFORE THE INVESTIGATI ON WING, WHICH WERE ALSO OFFERED IN THE RETURN FILED VI] S 153A AND DUE TAXES ALONG WITH INTEREST WAS ALSO PAID. IN THIS RE SPECT THE RESPONDENT PLACES RELIANCE ON ITS DETAILED EXPLANAT ION AND WORKINGS ON THE BASIS OF WHICH THESE AMOUNTS WERE OF FERED U/S 132(4) AND ALSO ON THE WRITTEN SUBMISSIONS FILED BE FORE THE INVESTIGATION WING AND ALSO DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, WHICH HAVE ALSO BEEN ABSTRACTED IN THE ASSESSMENT ORDER. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 11 THE ASSESSMENT PROCEEDINGS: 17.3.3 IT IS SUBMITTED THAT THE LEARNED AO IN THE A SSESSMENT ORDER REJECTED THE PEAK THEORY AND CONSEQUENTIALLY A LSO REJECTED THE CASH FLOW STATEMENT AS DISCUSSED IN PARA 12.8.1 OF THE ASSESSMENT ORDER AND PROCEEDED TO ADD THE ENTIRE SH ARE CAPITAL RAISED BY THE COMPANY BY TREATING IT AS UNEXPLAINED CASH CREDIT U/S 68. HOWEVER, THE ADDITION ON ACCOUNT OF SHARE C APITAL RECEIVED WAS MADE AFTER REDUCING THERE FROM, THE IN COME ALREADY OFFERED BY THE RESPONDENT ON ACCOUNT OF PEAK CREDIT AS DISCUSSED IN PARA 12.9 OF THE ASSESSMENT ORDER. PENALTY PROCE EDINGS IN RESPECT OF THE ADDITION SO MADE BY THE AO WERE INIT IATED IN PARA 12.10 OF THE ASSESSMENT ORDER. COPY OF THE ASSESSME NT ORDER IS ENCLOSED AT PAGE NO. 29 TO 59 OF THE PAPER BOOK. THUS THE CRUX OF THE MATTER IS THAT THE INCOME OFFERED BY THE RES PONDENT ON ACCOUNT OF PEAK CREDIT ARISING OUT OF THE CASH FLOW STATEMENT PREPARED TO EXPLAIN THE SOURCE OF SHARE CAPITAL WAS REJECTED AND ADDITION OF ENTIRE SHARE CAPITAL WAS MADE BY THE AO . FIRST APPELLATE PROCEEDINGS~ 17.3.4 THE LD. CIT(A) HAS DISCUSSED THIS ISSUE IN PA RA 6 TO PARA 6.13 OF THE ORDER. THE LD. CIT(A) ACCEPTED THE CASH FLOW STATEMENT IN PARA 6.7 AND 6.10 OF THE ORDER AND ALS O ACCEPTED THE FACT THAT THE SOURCE OF GENERATING THE SHARE CA PITAL WAS INFLATION OF PROJECT COST IN PARA 6.10 AND 6.11 OF THE ORDER. HOWEVER, THE LDE CIT(A) ALLOWED CREDIT OF CASH UTILI ZATION TO THE EXTENT, THE CASH GENERATED FROM INFLATION OF PROJEC T COST WAS UTILIZED WITHIN A PERIOD OF 15 DAYS FOR AUGMENTING THE SHARE CAPITAL AND THUS ACCEPTED THE SOURCE OF SHARE CAPIT AL TO THIS EXTENT. THUS PART OF THE ADDITION MADE BY THE AO ON ACCOUNT OF SHARE CAPITAL RECEIVED WAS DELETED AND BALANCE ADDI TION WAS KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 12 CONFIRMED. THE LD. CIT(A) HOWEVER, DID NOT ACCEPTED THE THEORY OF PEAK CREDIT AS DISCUSSED IN PARA 6.9 OF HER ORDE R. COPY IS ENCLOSED AT PAGE NO. 60 TO 81 OF THE PAPER BOOK. SECOND APPELLATE PROCEE DINGS: 17.3.5 THE RESPONDENT AND THE DEPARTMENT BOTH FILED SECOND APPEALS BEFORE THE HONOURABLE ITAT. THE HONOURABLE ITAT HAS DISCUSSED THIS ISSUE IN PARA 4 TO 15 OF ITS ORDER A ND DELETED THE ADDITION, WHICH WAS CONFIRMED BY THE CIT(A), THUS AL LOWED THE APPEAL OF THE RESPONDENT AND DISMISSED THE APPEAL O F THE DEPARTMENT ON THIS ISSUE. THE HONOURABLE !TAT WHILE DISMISSING THE DEPARTMENTAL APPEAL ALSO RENDERED A CATEGORICAL FINDING ON INTERNAL PAGE 36 OF THE ORDER THAT THE SOURCE OF SH ARE CAPITAL WAS THE INFLATION OF PROJECT COST AND THEREFORE NO SEPERARATE ADDITION WAS WARRANTED ON ACCOUNT OF SHARE CAPITAL. THE HONOURABLE ITAT WHILE DECIDING THE APPEAL FILED BY THE RESPONDENT, ACCEPTED THE PEAK THEORY AND REJECTED T HE CONTENTIONS OF THE AO ON INTERNAL PAGE 38 HOLDING T HAT THE OBSERVATIONS FORMED BY THE AO IS TOTALLY OUT OF CON TEXT AND THE AO REJECTED THE PEAK THEORY JUST FOR THE SAKE OF RE JECTION WITHOUT ANY COGENT REASONS AND IGNORING THE CLEAR F ACTS OF THE CASE. IT WAS ALSO HELD ON INTERNAL PAGE 40 OF THE O RDER THAT THE CIT(A) WAS NOT JUSTIFIED IN NOT ACCEPTING THE PEAK WORKING WHICH OUGHT TO HAVE BEEN ACCEPTED ON THE FACTS OF THE CAS E. THE HONOURABLE ITAT ALSO REJECTED THE THEORY PROPOUNDED BY THE LEARNED CIT(AI OF UTILIZATION OF CASH WITHIN 15 DAY S OF ITS GENERATION AND HELD ON INTERNAL PAGE 41 THAT ONCE T HE CASH WAS AVAILABLE WITH THE RESPONDENT FROM INFLATION OF PRO JECT COST, TELESCOPING OF THE SAME SHOULD HAVE BEEN ALLOWED UN LESS SOME OTHER UTILIZATION OF THE SAME IS ON RECORD. THE HONOURABLE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 13 ITAT FINALLY CONCLUDED ON INTERNAL PAGE 42 OF THE ORDER THAT 'WE HOLD THAT AO WAS NOT JUSTIFIED IN REJECTING THE PEAK THEORY OF THE RESPONDENT AND LEARNED CIT(A) WA S NOT JUSTIFIED IN RESTRICTING THE SAME TO THE EXTENT OF UTILIZATION OF WITHIN 15 DAYS. THEREFORE, THE ADDITION TO THE EXTENT CONFIRMED BY THE LEARNED CIT(A) IS DIREC TED TO BE DELETED. ACCORDINGLY, ASSESSEE'S GROUNDS OF APPE AL IN THIS ISSUE ARE ALLOWED.' 17.3.6 IT WAS ALSO EXPLAINED DURING THE SEARCH AND ALSO DURING THE ASSESSMENT PROCEEDINGS THAT THE ENTIRE EXERCISE OF GENERATING SHARE CAPITAL WAS UNDERTAKEN SOLELY WITH THE PURPOSE OF GENERATING MORE BUSINESS AND TO AUGMENT HIGHER FINANCES FOR THE PURPOSE OF BUSINESS, WHICH WERE IN VESTED IN THE ONGOING PROJECTS FOR GENERATING MORE BUSINESS AND W AS NOT DONE WITH THE MOTIVE OF EVADING TAX. IT WAS ALSO EXPLAIN ED THAT THE INFLATION OF PROJECT COST IN GROUP COMPANIES EVENTU ALLY DID NOT RESULTED IN LOWERING THE TAXABLE INCOME SINCE ALL T HESE PROJECTS QUALIFIED FOR DEDUCTION U/ S 80LA AND THE ENHANCED DEPRECIATION ON THE INFLATED PROJECT COST WOULD HAVE ONLY REDUCE THE DEDUCTION U/S 8OLA WITHOUT AFFECTING THE TAXABLE IN COME. IT WAS CATEGORICALLY STATED EVEN BEFORE THE INVESTIGATION WING AND ALSO DURING THE ASSESSMENT PROCEEDINGS THAT THE ENTIRE A SSERTION OF THE RESPONDENT WAS WITH THE SOLE OBJECT OF COMING C LEAN AND TO AVOID PENALTIES AND PROTECTED LITIGATION WITH THE D EPARTMENT. ALL THESE CONTENTIONS OF THE RESPONDENT GROUP HAVE BEEN DISCUSSED AT LENGTH IN THE ORDER OF THE HONOURABLE ITAT AND H AVE BEEN ACCEPTED. THUS, THE CASH FLOW STATEMENT AND THE PEAK INCOME O N THE BASIS OF WHICH THE RESPONDENT SURRENDERED ADDITIONA L KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 14 INCOME AND WHICH WAS REJECTED BY THE AO IN THE ASSE SSMENT PROCEEDINGS FINALLY STAND ACCEPTED IN THE APPELLATE PROCEEDINGS. THUS IN A NUTSHELL THE CASH FLOW STATE MENT AND THE PEAK INCOME OFFERED, ARISING OUT OF THE CASH FLO W STATEMENT TO EXPLAIN THE SOURCE OF SHARE CAPITAL, W AS REJECTED IN THE ASSESSMENT PROCEEDINGS AND ADDITIONS OF THE ENTIRE SHARE CAPITAL WERE MADE BY THE AO. THE HON'BLE CIT( A) ACCEPTED THE CASH FLOW STATEMENT BUT REJECTED THE P EAK THEORY AND ALLOWED PARTIAL RELIEF ON AN ALTOGETHER DIFFERENT THEORY OF UTILIZATION OF AVAILABLE AMOUNT WITHIN 15 DAYS OF ITS GENERATION. ON THIS ISSUE, THE HON'BLE ITAT DISMISS ED THE APPEAL FILED BY THE DEPARTMENT AND IN THE APPEALS F ILED BY THE RESPONDENT, ACCEPTED THE PEAK THEORY AND ALSO D ELETED THE BALANCE ADDITIONS OF SHARE CAPITAL, MADE IN THE RESPECTIVE YEARS, WHICH WAS SUSTAINED BY THE CIT(A) . 17.3.7 WITHOUT PREJUDICE TO THE BASIC CONTENTION OF THE RESPONDENT THAT IN VIEW OF ABOVE FACTS AND CIRCUMST ANCES, THE ADDITIONAL INCOME OFFERED IS NOT LIABLE FOR PENAL C ONSEQUENCES, IT IS SUBMITTED THAT PENALTY IN RESPECT OF THE ADDITIO NAL INCOME OFFERED ON ACCOUNT OF PEAK CREDIT IS EVEN OTHERWISE NOT WARRANTED FOR THE FOLLOWING REASONS: THE INCOME OFFERED BY THE RESPONDENT WAS REJECTED IN THE ASSESSMENT. (I) THE ADDITIONAL INCOME OF RS.3,58,72,460/- ON ACCOUN T OF PEAK CREDIT OF THE CASH FLOW STATEMENT OFFERED BY THE RE SPONDENT IN THE RETURN FILED U/S 153A WAS NOT ACCEPTED AND WAS CATEGORICALLY REJECTED IN THE ASSESSMENT PROCEEDING S. SINCE THE INCOME OFFERED BY THE RESPONDENT AND THE THEORY PRO POUNDED TO EXPLAIN THE SHARE CAPITAL, ITSELF WAS REJECTED, THE QUESTION OF KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 15 INITIATING PENALTY PROCEEDINGS ON THE SAME DOES NOT ARISE AND WAS RIGHTLY NOT SO INITIATED. AT THE FIRST INSTANCE PENALTY PROCEEDINGS WERE NOT INITIATED ON THIS ISSUE AND HE NCE THE LEVY OF THE PENALTY ON THE SAME IS UNCALLED FOR. EVEN OTH ERWISE, ONCE THE INCOME OFFERED BY THE RESPONDENT AND THE METHOD OLOGY ADOPTED BY THE RESPONDENT OF WORKING SUCH INCOME, W AS REJECTED BY THE AO AND ADDITIONS WERE MADE ON AN ALTOGETHER DIFFERENT PREMISE, THE QUESTION OF LEVYING PENALTY IN RESPECT OF INCOME OFFERED BY THE RESPONDENT DOES NOT ARSE. THE ADDITION MADE BY THE AO STAND DELETED. (II) AFTER REJECTING THE CASH FLOW STATEMENT AND T HE PEAK INCOME OFFERED BY THE RESPONDENT, THE ADDITION WAS MADE ON ACCOUNT OF SHARE APPLICATION MONEY AND PENALTY PROCEEDINGS WER E INITIATED IN RESPECT OF THE SAID ADDITION. THE SAID ADDITION STA ND DELETED IN ITS ENTIRETY IN THE SUBSEQUENT APPELLATE PROCEEDINGS, T HEREFORE PENALTY IS EVEN OTHERWISE NOT ATTRACTED IN RESPECT OF THIS ISSUE AND HAS RIGHTLY BEEN LEVIED BY THE AO. (III] FURTHER, THE ADDITION OF SHARE CAPITAL WAS MADE ON AN ALTOGETHER DIFFERENT PREMISE REJECTING THE CASH FLO W STATEMENT AND THE INCOME OFFERED BY THE RESPONDENT. THE INCOME OF FERED BY THE RESPONDENT AND ITS WORKING WAS ACCEPTED ONLY IN THE APPELLATE PROCEEDINGS, WHEREIN THE THEORY PROPOUNDED BY THE A O WAS REJECTED AT THE FIRST APPELLATE STAGE ITSELF AND TH E ADDITION MADE ON ACCOUNT OF SHARE CAPITAL WAS DELETED. THUS THE VERY PREMISES ON WHICH THE ADDITIONS WERE MADE BY THE AO DID NOT SUR VIVED, THE QUESTION OF LEVYING PENALTY DOES NOT ARISE. THEREFORE, IN THE HUMBLE OPINION OF THE RESPONDENT, NO PENALTY U/S 271 (L)(C) IS ATTRACTED IN THIS CASE IN RESPECT OF THE INCOME KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 16 OFFERED BY THE RESPONDENT ON THE BASIS OF CASH FLOW STATEMENT AND PEAK INCOME THEORY. THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THE BASIC PREMISES. ON WHICH THE RESPONDENT OFFERED THE INCOME WAS REJECTE D BY THE LEARNED AO IN THE ASSESSMENT PROCEEDINGS AND THE LE ARNED AO MERELY FOR THE PURPOSE OF LEVYING PENALTY CANNOT RE VERT BACK TO THE INCOME OFFERED BY THE RESPONDENT WHICH WAS REJECTED IN THE ASSESSMENT ORDER. THEREFORE, THE GROUND RAISED BY T HE DEPARTMENT MAY PLEASE BE DISMISSED ON THIS GROUND. 17.4 ADDITIONAL INCOME WAS ALSO OFFERED IN RESPECT OF PROPORTIONATE DEPRECIATION FORGONE OF RS. 17,05,300/ - IN RESPECT OF THE INFLATED PROJECT COST. IT IS SUBMITTED THAT, AS EXPLAINED AB OVE THE PROJECT COST OF' VARIOUS TOLL PROJECTS WAS INFLATED AND THE AMOUNT SO GENERATED WAS UTILIZED FOR SOURCING THE SHARE CAPIT AL. THEREFORE, THE RESPONDENT REDUCED ITS CLAIM OF DEPRECIATION IN THE RETURNS FILED U / S 153A IN RESPECT OF THE PROJECT COST SO INFLATED. THE ISSUE IS DISCUSSED IN PARA 14 TO 14.5 OF THE ASSESSMENT O RDER, WHEREIN THE DEPRECIATION FORGONE BY THE RESPONDENT IN VARIO US YEARS WAS ACCEPTED WITHOUT ANY VARIATION AND WITHOUT ANY ADVE RSE COMMENT. IT IS SUBMITTED THAT PENALTY HAS BEEN LEVI ED MERELY ON THE BASIS OF THE OFFER OF ADDITIONAL INCOME MADE AN D HONOURED BY THE RESPONDENT. THERE IS NO SATISFACTION DRAWN B Y THE AO MUCH LESS ANY REQUISITE SATISFACTION, AS TO WHY AND HOW THE INCOME OFFERED BY THE RESPONDENT WAS LIABLE FOR FUR THER PENALTY. THE LEARNED CIT(A) HAS RIGHTLY HELD THAT THE BASIC PREMISES ON WHICH THE RESPONDENT OFFERED THE INCOME WAS REJECTE D BY THE LEARNED AO IN THE ASSESSMENT PROCEEDINGS AND THE LE ARNED AO MERELY FOR THE PURPOSE OF LEVYING PENALTY CANNOT RE VERT BACK TO THE INCOME OFFERED BY THE RESPONDENT WHICH WAS REJE CTED IN THE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 17 ASSESSMENT ORDER. THEREFORE, THE GROUND RAISED BY TH E DEPARTMENT MAY PLEASE BE DISMISSED ON THIS GROUND. 17.5 SIMILARLY ADDITIONAL INCOME WAS ALSO OFFERED O F RS. 1,03,87,500/- IN RESPECT OF THE COMMISSION FOR ARRA NGING THE SHARE CAPITAL. IN THIS RESPECT IT IS SUBMITTED THAT THE SAID INCOME WAS SUOMOTO OFFERED BY THE RESPONDENT WITHOU T THERE BEING ANY INCRIMINATING MATERIAL FOUND DURING THE S EARCH TO THIS EFFECT. IT IS SUBMITTED THAT THE RESPONDENT ON ITS OWN CALCULATED SUCH COMMISSION @ 2.5% OF THE SHARE CAPITAL INTRODUCED AND OFFERED THE SAME FOR TAXATION BEFORE THE INVESTIGATION WING. IT IS REITERATED THAT NO NOTING WAS FOUND INDICATING ANY ACTUAL PAYMENT OF ANY SUCH NATURE RE LATING TO THIS ITEM AND THE SAME WAS OFFERED ONLY ON THE PRET EXT THAT SUCH EXPENDITURE IS GENERALLY REQUIRED TO BE INCURR ED IN SIMILAR CIRCUMSTANCES. IT IS SUBMITTED THAT THE RESPONDENT OTHERWISE HAD SUFFICIENT CASH AVAILABLE IN THE CASH FLOW STAT EMENT PREPARED BY IT (AS DISCUSSED ABOVE) AND THE RESPOND ENT COULD HAVE VERY WELL CLAIMED TELESCOPING OF THIS ESTIMATE D EXPENDITURE OUT OF THE SAME. HOWEVER, THE SAID INCOME WAS STILL SEPARATELY OFFERED SOLELY TO HONOUR THE OFFER MADE AT THE TIME OF SEARCH AND TO AVOID CONFRONTATION AND LONG DRAWN LITIGATION. THE RELEVANT DISCUSSION IN THIS REGARD IS IN PARA 1 3 OF THE ASSESSMENT ORDER, FROM WHERE IT IS EVIDENT THAT THE INCOME OFFERED BY THE RESPONDENT HAS BEEN ACCEPTED SOLELY ON THE BASIS OF OFFERING IT BY THE RESPONDENT WITHOUT BRINGING A NYTHING ON RECORD AND WITHOUT REFERENCE TO ANY NOTING OR ANY O THER INCRIMINATING MATERIAL SEIZED DURING THE SEARCH. TH EREFORE. THE OFFER OF SAID INCOME DOES NOT ATTRACT THE DEEMED PE NAL PROVISIONS OF EXPLANATION 5A TO SECTION 271. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 18 17.6ADDITIONAL INCOME OF RS. 28,90,450/- WAS OFFERE D ON ACCOUNT OF CERTAIN NOTINGS FOUND ON LOOSE PAPERS, W HICH THE RESPONDENT COULD NOT READILY RECONCILE WITH ITS BOOK S OF ACCOUNTS. THIS INCOME WAS OFFERED SUO-MOTO BY THE RE SPONDENT DURING THE SEARCH WITHOUT HAVING BEEN POINTED OUT B Y THE SEARCH TEAM. LATER ON WHEN THE CASH FLOW STATEMENT WAS PRE PARED, THE RESPONDENT HAD AMPLE OPPORTUNITY TO COVER THE EFFEC T OF THESE NOTINGS/LPS IN THE CASH FLOW STATEMENT AND TO CLAIM TELESCOPING OF THE SAME HOWEVER, THE SAME WAS NOT DONE TO MEREL Y TO HONOUR THE OFFER OF ADDITIONAL INCOME MADE DURING THE SEARCH PROCEEDINGS AND THE SAID INCOME WAS OFFERED IN THE RETURNS FILED U/S 153A WITHOUT ANY MODIFICATION. IN FACT THE ACTIO N OF OFFERING THIS INCOME SEPARATELY AND NOT CLAIMING THE TELESCO PING OF THE SAME, THE RESPONDENT HAS ALREADY SUFFERED DOUBLE TAX ATION TO THIS EXTENT. THE INCOME SO OFFERED STAND ACCEPTED W ITHOUT ANY MODIFICATION OR ANY ADVERSE COMMENT DURING THE ASSE SSMENT. PROCEEDINGS AS EVIDENT FROM THE ASSESSMENT ORDER. T HEREFORE, THE RESPONDENT OUGHT NOT. TO HAVE BEEN SADDLED WITH ADDITIONAL PENAL CONSEQUENCES IN RESPECT OF THIS INCOME. 15. RELIANCE WAS PLACED ON FOLLOWING DECISIONS; FOR THE PROPOS ITION THAT THE NOTICE U/S 274 R.W.S. 271(1)(C) WAS VAGUE AS THE SAME WAS ISSUED WITHOUT DRAWING R EQUISITE SATISFACTION AND WITHOUT MENTIONING THE SPECIFIC CH ARGE AGAINST THE APPELLANT:- (I) HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S SSAS EMERALD MEADOWS (2015) 99 CCH 0334 (II) HONBLE SUPREME COURT IN THE CASE OF CIT V/S SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 248 (III) HONBLE HIGH OF MADHYA PRADESH IN THE CASE OF CIT V /S KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 19 KULWANT SINGH BHATIA (2018) 304 CTR 0103. (IV) HONBLE INDORE ITAT IN THE CASE OF SHRI BANSIDHAR SOMANI V/S DCIT ITA NO.169 TO 624/IND/2017 DATED 17.12.2018. (V) HONBLE INDORE ITAT IN THE CASE OF SMT. SHRUTI GARG V/S DCIT ITA NO.988/IND/2016 DATED 28.06.2017 (VI) HONBLE INDORE ITAT IN THE CASE OF KETI SANGAM INFRASTRUCTURE (I) LTD & OTHERS V/S DCIT ITA NO.516/IND/2017 DATED 27.06.2018. (VII) HONBLE BOMBAY TRIBUNAL IN THE CASE OF INDRANI SUN IL PILLAI V/S ACIT (2018) 52 CCH 0056. (VIII) HONBLE DELHI TRIBUNAL IN THE CASE OF ABRAUTO PVT. LTD V/S ACIT (2017) 51 CCH 0477. 16. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE WRI TTEN SUBMISSION AND DECISIONS REFERRED AND RELIED BY THE LD. COUNSE L FOR THE ASSESSEE. REVENUES SOLE GRIEVANCE IS AGAINST THE DELETION OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT AT RS. 1,60 ,00,000/- IN THE CASE OF ASSESSEE NAMELY M/S KALYAN TOLL INFRASTRUCT URE LIMITED ITA NO.948/IND/2019. 17. WE OBSERVE THAT A SEARCH WAS CONDUCTED AT THE P REMISES OF M/S. KALYAN TOLL INFRASTRUCTURE LIMITED FROM 5.5.20 11 TO 7.5.2011 KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 20 ALONG WITH OTHER PERSONS OF KALYAN GROUP. IN THE R ETURN OF INCOME FILED SUBSEQUENT TO ISSUE OF NOTICE U/S 153A OF THE ACT ASSESSEE OFFERED ADDITIONAL INCOME. LD. A.O DID NOT ACCEPTE D THE INCOME OFFERED BY THE ASSESSEE AND WENT AHEAD MAKING VARIO US OTHER ADDITIONS AND COMPLETED THE ASSESSMENT. ALL THE ADD ITIONS SO MADE BY THE LD. A.O EXCEPT FOR THE ADDITIONAL CLAIM OF D EPRECIATION OF RS.2,28,103/- STOOD DELETED PARTLY AT THE STAGE OF FIRST APPELLATE AUTHORITY AND REMAINING BY THE TRIBUNAL. SUBSEQUEN TLY LD. A.O INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) WHI LE COMPLETING THE ASSESSMENT WITHOUT SATISFYING HIMSELF AS TO WHETHER THE PROCEEDINGS ARE TO BE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. LD. A. O CARRIED OUT THE PENALTY PROCEEDINGS AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE AND LEVIED THE PENALTY U/S 271(1)(C) OF TH E ACT ON THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE RE TURN OF INCOME. THIS FACT IS NOT DISPUTED AT THE END OF REVENUE THA T FIRSTLY IN THE RETURN, THE ADDITIONAL INCOME OFFERED BY ASSESSEE W AS NOT ACCEPTED BY LD. A.O, SECONDLY ALL THE ADDITIONS MADE BY THE LD.A.O EXCEPT ONE WERE DELETED PARTLY BY LD. CIT(A) AND BY TRIBUN AL, INDORE BENCH AND THIRDLY NO SPECIFIC CHARGE WAS LEVELLED IN THE ASSESSMENT ORDER. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 21 IT IS ALSO PERTINENT TO NOTE THAT AT THE FIRST APPE LLATE STAGE ASSESSEE ALONG WITH RAISING GROUNDS ON MERITS HAS ALSO CHALL ENGED THE LEGALITY OF THE NOTICE ISSUED U/S 274 R.W.S. 271(1) (C) OF THE ACT CONTENDING IT TO BE BAD IN LAW. WE OBSERVE THAT LD . CIT(A) HAS DEALT BOTH THE LEGAL ISSUE AS WELL AS THE MERITS OF THE C ASE REGARDING LEVY OF PENALTY U/S 271(1)(C) DECIDING IN FAVOUR OF THE ASSESSEE OBSERVING AS FOLLOWS :- 4.1 GROUND NO. 1 & 2 - THROUGH THESE GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY OF RS. 1 ,60,00,000/- U/S 271(1)(C) OF THE INCOME TAX ACT AND ALSO THE INITIATION OF THE PENA LTY PROCEEDINGS U/S 271(1)(C) AND ALSO THE PENALTY SHOW CAUSE NOTICE I SSUED U/S 274. IT IS SEEN THAT THE APPELLANT FILED ITS RETURN OF INCOME U/S 139(1) ON 23.09.2008 DECLARING AN INCOME OF RS. 3,54,20,430/-. IN RESPONSE TO NOTICE ISSUED U/S 153A, THE APPELLANT FILED THE RETURN ON 12.10,2013 DECLARING AN INCOME OF RS. 8,60,48,030/-. THE AO COMPLETED, THE ASSESSMENT ON 26.03.2014 ON A N INCOME OF RS, 41,97,07,950/- BY MAKING VARIOUS ADDITIONS AND DISALLOWANCES. HOWEVER, ALL THE ADDITIONS AND DISA LLOWANCES SO MADE HAVE BEEN DELETED EITHER IN THE FIRST APPEAL OR IN THE SECOND APPEAL EXCEPT FOR A NOMINAL ADDITION OF RS. 2,28,103 /- WHICH WAS MADE BY THE APPELLANT IN THE RETURN FILED U/S 153A. IN THE ASSESSMENT OR DER, THE AO INITIATED PENALTY U/S 271(1)(C). THE AO ALSO ISSUED A NOTICE U/S 274 R.W.S. 271(1)(C) DATED 26.03.2014 STATING THAT THE APPELLANT HAS CO NCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF I NCOME. AFTER CONSIDERING THE REPLY OF THE APPELLANT, THE AO PASSED THE IMPU GNED PENALTY ORDER U/S 271 (1)( C) ON 31.03.2018 LEVYING A PENALTY OF RS. 1,60,00,000/- FOR THIS YEAR. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 22 12. THE PENALTY HAS BEEN LEVIED IN RESPECT OF ADDITIONA L INCOME OF RS. 5,06,02,159/-(5,08,55,710 -2,28,103 ADDITIONAL CLAI M OF DEPRECIATION IN 153A) OFFERED BY THE ASSESSEE AND ALSO IN RESPECT OF THE DISALLOWANCES MADE BY THE AO OF RS. 2,28,103/--. THERE IS NO DIS CUSSION IN THE PENALTY ORDER PASSED BY THE AO REGARDING THE NATURE OF ADDI TIONAL INCOME OFFERED BY THE APPELLANT ON WHICH THE AO HAS LEVIED THE PEN ALTY. HOWEVER, THE APPELLANT HAS EXPLAINED THAT IT HAS OFFERED ADDITIO NAL INCOME OF RS. 3,58,72,460/- ACCOUNT OF PEAK CREDIT WORKED OUT ON THE BASIS OF THE CASH FLOW STATEMENT PREPARED BY IT TO EXPLAIN THE SOURCE OF SHARE CAPITAL GENERATED BY THE APPELLANT AND RS. 17,05,300/- ON A CCOUNT OF DEPRECIATION FORGONE AND RS.1,03,87,500/- ON ACCOUNT OF EXPENSES INCURRED FOR SHARE CAPITAL AND RS.28,90,450/- ON ACCOUNT OF LOOSE PAPE RS. THE INCOME SO OFFERED BY THE ASSESSEE U/S 132(4) WAS ALSO OFFERED IN THE RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S 153A AND DUE TAXES WE RE ALSO PAID BEFORE FILING THE RETURN OF INCOME. THE APPELLANT HAS CHALLENGED THE INITIATION OF THE PENALTY PROCEEDINGS ON THE CONTENTION THAT NO SATISFACTION WAS DRAWN IN TH E ASSESSMENT ORDER WHILE INITIATING THE PENALTY PROCEEDINGS AS NO CHAR GE WAS MENTIONED IN THE ASSESSMENT ORDER AND THE NOTICE ISSUED UNDER SECTIO N 274 WAS ALSO A DEFECTIVE NOTICE AS NO SPECIFIC CHARGE WAS MENTIONE D AGAINST THE APPELLANT. THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY U/S 271 (1)( C) ON THE GROUND THAT THERE WAS NO SATISFACTION IN THE PENALTY ORDER AS WELL, AS BOTH THE CHARGES WERE REITERATED IN THE PENALTY ORDER. IT IS ALSO CONTENDED THAT THE PENALTY ORDER IS VAGUE AS ON ONE HAND EXPLANATION 5A TO SECTION 271(1)(C) HAS BEEN REFERRED IN PARA 3.3 OF THE PENALTY ORDER AND ON OTHER HAND EXPLANATION 1 TO SECTION 271(1)(C) HA S ALSO BEEN INVOKED IN PARA 3.4 STATING THAT WHEN THERE IS DIFFERENCE BETW EEN THE ASSESSED INCOME AND THE RETURNED INCOME, THERE IS PRESUMPTIO N OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. IT IS CONTEND ED THAT SINCE BOTH THE EXPLANATIONS OPERATE UNDER ALL TOGETHER DIFFERENT S ITUATIONS, INVOKING BOTH KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 23 THE EXPLANATION AT THE SAME TIME, SHOWS THAT PENALT Y HAS BEEN LEVIED UNDER CONFUSED STATE OF MIND. THE APPELLANT HAS ALS O CONTENDED THAT NO PENALTY WAS INITIATED IN THE ASSESSMENT ORDER IN RE SPECT OF THE INCOME OFFERED ON THE BASIS OF PEAK CREDIT, STILL PENALTY HAS BEEN LEVIED ON THE SAME WITHOUT MAKING ANY DISCUSSION IN THE PENALTY O RDER. THE APPELLANT FURTHER CONTENDED THAT THE CASH FLOW STATEMENT PREP ARED BY IT, WHICH WAS ALSO FILED BEFORE THE INVESTIGATION WING, AND THE I NCOME OFFERED ON THE BASIS OF PEAK CREDIT WORKING WAS REJECTED BY THE AO IN THE ASSESSMENT ORDER AND SEPARATE AND INDEPENDENT ADDITIONS WERE M ADE BY THE AO. HOWEVER, THE CASH, FLOW STATEMENT AND THE PEAK CRED IT WORKING OF THE. APPELLANT WAS ACCEPTED IN THE APPELLATE PROCEEDINGS AND ALL ADDITIONS MADE BY THE AO WERE DELETED IN THE APPELLATE PROCEE DINGS. THEREFORE, IT IS CONTENDED THAT WHEN THE INCOME OF PEAK CREDIT OFFER ED BY THE APPELLANT WAS ITSELF REJECTED BY THE AO IN THE ASSESSMENT ORD ER, NO PENALTY U/S 271(1)(C) OUGHT TO HAVE BEEN LEVIED ON THE SAME. FI NALLY THE, APPELLANT CONTENDED THAT SINCE ALL THE ADDITIONS MADE HAVE BE EN DELETED AND THE INCOME RETURNED BY THE APPELLANT FINALLY STAND ACCE PTED, NO PENALTY OUGHT TO HAVE BEEN LEVIED. AFTER TAKING CONSIDERATION THE ASSESSMENT ORDER AND ALSO THE PENALTY ORDER AND ALL THE CONTENTIONS OF THE APPELLANT CARE FULLY IT IS SEEN THAT WHILE INITIATING THE PENALTY PROCEEDINGS IN THE ASSESSMEN T ORDER THE AO HAS SIMPLY STATED THAT PENALTY PROCEEDINGS ARE INITIATE D U/S 271(L)(C) AND NO CHARGE OF EITHER CONCEALMENT OF INCOME OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME WAS MENTIONED IN THE ASSESSME NT ORDER. THEREFORE, NO REQUISITE SATISFACTION WAS DRAWN IN THE ASSESSME NT ORDER. FROM A PERUSAL OF THE NOTICE DATED 20.03.2014 ISSUED ULS 2 74 WHICH IS AT PAGE 115 OF THE PAPER BOOK, IT IS SEEN THAT BOTH THE CHA RGES I.E. CONCEALMENT OF PARTICULARS /OF INCOME OR FURNISHING INACCURATE PAR TICULARS OF INCOME ARE MENTIONED THEREIN. SIMILARLY A PERUSAL OF THE PENAL TY ORDER SHOWS THAT AGAIN BOTH THE CHARGES ARE MENTIONED IN THE HEADING IN PARA 3 AND ALSO IN KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 24 CONCLUDING PARA 5 & 6 OF THE PENALTY ORDER. AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THERE ARE TWO DIFFERENT CHARGES I.E. THE CONCEALMENT OF PARTICULA RS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. PENALTY CAN BE IMPOSED FOR A SPECIFIC CHARGE. IN VIEW OF THE DECISION OF HONOURABLE SUPRE ME COURT IN THE CASE OF T. ASHOK PAI VIS CIT (2007) 292 ITR 11 (SC) IT IS N OW A SETTLED PROPOSITION THAT CONCEALMENT OF INCOME AND FURNISHING INACCURAT E PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATION. IT IS EQUALLY SETTLED PROPOSITION THAT WHERE THE CHARGE FOR LEVYING PENALTY IS NOT SPECIFIC, THE NOT ICE U/S 271 (1)( C) IS BAD IN LAW AS IT DOES NOT MENTIONED THE SPECIFIC LIMB OF S ECTION 271 (1)( C) OF THE ACT UNDER WHICH IT HAS BEEN INITIATED. WHEN THE NOT ICE DOES NOT SPECIFY THE CHARGE FOR LEVY OF PENALTY, IT HAS BEEN HELD THAT T HE PENALTY CANNOT BE LEVIED. THE HON'BLE SUPREME COURT IN DILIP N. SHROF F V/S JCIT (2007) 291 ITR 519 (SC),.HAS OBSERVED THAT WHILE ISSUING THE N OTICE UNDER SECTION 274 R.W.S. 271, IN THE STANDARD FORMAT, THE ASSESSING. OFFICER SHOULD DELETE THE INAPPROPRIATE WORDS OR PARAGRAPH, OTHERWISE, IT MAY INDICATE THAT THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHE R HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOM E OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THE HONOURABLE C OURT FURTHER OBSERVED THAT THE AO HAS NOT STRUCK DOWN THE RELEVANT WORD/S ENTENCE IN THE CYCLOSTYLED PROFORMA OF THE PENALTY SHOW CAUSE NO TICE, THEREFORE, THE AO WAS NOT SURE THAT ON WHAT GROUND HE IS LEVYING THE PENALTY. THE PENALTY PROCEEDINGS IN THIS CASE WERE INITIATED WITHOUT MENTIONING ANY CHARGE' IN THE ASSESSMENT ORDER. THE PENALTY NO TICE WAS. ALSO ISSUED IN MECHANICAL MANNER WITHOUT SPECIFYING THE SPECIFI C CHARGE AS TO WHETHER THE APPELLANT IS FOUND GUILTY OF CONCEALING THE PAR TICULAR OF INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. THUS TH E VERY INITIATION OF THE PENALTY PROCEEDING IN THIS CASE IS NOT IN ACCORDANC E WITH LAW AND HAS LED TO VITIATION OF ENTIRE PENALTY PROCEEDINGS. VERY RE CENTLY THE HON'BLE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 25 JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V/S KULWANT SINGH BHATIA DATED 09.05.2018 (ITA 9 TO 14 OF2018) HAS HELD THAT THE PENALTY U/S 271(1)(C) OF THE ACT OF 1 961 IS NOT SUSTAINABLE IN LAW AS THE NOTICE WAS NOT SPECIFIC, OBSERVING AS FO LLOWS:- 'ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LEARN ED COUNSEL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THAT TH E GROUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SATISFY THE REQUIREM ENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT LE ARNED TRIBUNAL HAS RIGHTLY RELYING ON THE DECISION OF CIT VIS MANJ UNATHA COTTON GINNING FACTORY AND CIT VIS SSA'S EMERALD MEADOWS R IGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE TH E ORDER OF PENALTY IMPOSED BY THE AUTHORITIES. NO SUBSTANTIAL QUESTION OF LAW IS ARISING IN THESE APPEALS. ITA. NO(S) 9/2018, 10/201 8, 11/2018, 12/2018, 13/2018 AND 14/2018, FILED BY THE APPELLAN T HAVE NO MERIT AND ARE HEREBY DISMISSED. ' IT IS OBSERVED THAT FACTS OF THE PRESENT CASE UNDER APPEAL BEFORE ME ARE IDENTICAL TO THAT OF THE CASE OF KULWANT SINGH BHAT IA (SUPRA) IN SO FAR AS ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE IN TH E RETURNS FILED AFTER THE SEARCH AND PENALTIES U/S 271(1)(C) WERE LEVIED ON THE BASIS OF SHOW CAUSE NOTICE ISSUED WITHOUT, STRIKING OFF EITHER OF THE TWO CHARGES, WHICH FACTS ARE IDENTICAL IN THE PRESENT APPEAL. IN THE C ASE OF KULWANT SINGH BHATIA ALSO, IT, WAS THE OBSERVATION OF THE AO THAT -THE ASSESSEE HAS OFFERED ADDITIONAL INCOME ONLY DUE TO SEARCH AND TH E ADDITIONAL INCOME WAS NOT DECLARED IN THE RETURN FILED U/S 139 AND TH EREFORE, PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED, WHICH FAC T IS ALSO IDENTICAL WITH THE PRESENT APPEAL. FURTHER IN THE CASE OF KULWANT SINGH BHATIA PENALTIES WERE LEVIED BY INVOKING EXPLANATION SA TO SECTION 2 71(1)(C) AND IN THE - INSTANT CASE ALSO THE SAME EXPLANATION HAS BEEN INV OKED. IN THE CASE BEFORE THE HONOURABLE HIGH COURT, THE PENALTIES WER E DELETED BY THE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 26 TRIBUNAL HOLDING THAT THE SAME AS NOT SUSTAINABLE I N LAW, AS NO SPECIFIC CHARGE WAS LEVIED IN PENALTY SHOW CAUSE NOTICE, LAT ER THE ORDER OF THE HONOURABLE IT AT WAS AFFIRMED BY THE HONOURABLE JUR ISDICTIONAL HIGH COURT. THEREFORE, THE PROPOSITION LAID DOWN BY THE HONOURABLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IS APPL ICABLE IN THE PRESENT APPEAL ALSO AND IT IS HELD THAT THE PENALTY PROCEED INGS INITIATED IN THIS CASE ARE NOT AS PER LAW AND THE PENALTY SO LEVIED I S WRONG. THE APPELLANT HAS STATED THAT IN ITS OTHER GROUP CA SES ALSO, WHEREIN PENALTIES WERE LEVIED U/S 271 (1)( C) IN THE ASSESS MENT PROCEEDINGS CARRIED OUT AS A RESULT OF THE SAME SEARCH, WHEREIN ALSO PE NALTY PROCEEDINGS WERE INITIATED IN AN IDENTICAL MANNER, IN WHICH THE SAME WERE INITIATED IN THE PRESENT APPEAL, HAVE BEEN DELETED BY THE HONOURABLE IT AT INDORE BENCH IN THE CASES OF M/S KETI SANGAM INFRASTRUCTURE (I) LTD. AND OTHER GROUP COMPANY APPEALS AND ALSO IN THE CASE OF SHRUTI GARG AND OTHER INDIVIDUAL CASES OF THE GROUP, COPIES OF SUCH ORDERS HAVE ALSO BEEN FILED AT PAGE NO. 61 TO 115 AND AT PAGE NO. 38 TO 60 RESPECTIVELY OF THE CASE LAW PAPER BOOK. A PERUSAL OF THE ORDER PASSED IN THE CASE OF KETI SANGAM INFRASTRUCTURE (I) LTD. IN IT NO. 516/IND/20 17 AND OTHER CASES BY THE HONOURABLE JURISDICTIONAL IT AT ON 27.06.2018 IT IS SEEN THAT THE PENALTIES LEVIED U/S 271(1)(C) OF THE ACT HAS BEEN DELETED. A FTER DISCUSSING THE ISSUE AT LENGTH AND AFTER ANALYZING THE VARIOUS DEEISIONS.JHE HONOURABLE ITAT IN PARA 13 ON INTERNAL PAGE 32 OF THE ORDER HELD TH AT; 'FROM THE PERUSAL OF THE ABOVE JUDGMENT AND EXAMINI NG THE FACTS OF THE INSTANT NINE APPEALS, WE FIND THAT IN ALL THESE CASES THE ASSESSING OFFICER HAS NOT STRUCK DOWN THE RELEVANT WORD FROM THE SENTENCE IN THE CYCLOSTYLED PROFORMA OF PENALTY SH OW CAUSE NOTICE WHICH MEANS THAT THE ASSESSING OFFICER WAS NOT SURE AS TO ON WHAT GROUND HE HAS INITIATED THE PENALTY PROCEED INGS AND IN SUCH A CASE THE ALLEGED NOTICE IS NOT SUSTAINABLE IN LAW AND IS KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 27 LIABLE TO BE QUASHED. BE, THEREFORE, RESPECTFULLY F OLLOWING THE JUDGMENTS AND DECISIONS REFERRED TO ABOVE, ALLOW T HIS COMMON LEGAL GROUND OF THE ASSESSEE'S IN THESE NINE APPEAL S AND DELETE THE PENALTIES LEVIED U/S 271 (L)(C) OF THE ACT IN A LL THESE CASES. ' THEREFORE, FOLLOWING THE DECISION OF THE HONOURABLE ITA T INDORE BENCH RENDERED ON 27.06.2018 IN THE APPELLANT GROUP CASES ITSELF, IT IS HELD THAT THE PENALTY LEVIED BY THE AO IN THE IMPUGNED ORDER IS INVALID. IT IS ALSO SEEN THAT THE INCOME OFFERED BY THE APP ELLANT ON ACCOUNT OF PEAK CREDIT WORKED OUT ON THE BASIS OF CASH FLOW STATEME NT PREPARED BY THE APPELLANT WAS REJECTED BY THE AO AS EVIDENT FROM PA RA 13.7 OF THE ASSESSMENT ORDER. FURTHER THE SAID CASH FLOW STATEM ENT AND ALSO THE INCOME OFFERED BY THE APPELLANT WAS ACCEPTED IN THE APPELLATE PROCEEDINGS AND ALL THE ADDITIONS MADE BY THE AO WERE DELETED. THEREFORE, WHEN THE BASIC PREMISES ON WHICH THE APPELLANT OFFERED THE I NCOME, WAS REJECTED BY THE AO IN THE ASSESSMENT PROCEEDINGS, LATER ON WHEN THE ADDITIONS MADE IN THE ASSESSMENT ORDER WERE DELETED IN THE APPELLA TE PROCEEDINGS THE AO MERELY FOR THE PURPOSE OF LEVY OF PENALTY, CANNOT R EVERT BACK TO THE INCOME OFFERED BY THE .APPELLANT WHICH WAS REJECTED IN THE ASSESSMENT ORDER AND THE ADDITIONAL IN~;;;OFFERED BY THE APPELLANT CANNO T ATTRACT PENAL PROVISION. FURTHER, THE APPELLANT HAS RIGHTLY CONTENDED THAT N O PROPER SATISFACTION HAS BEEN DRAWN IN THE PENALTY ORDER, WHERE EXPLANAT ION SA AS WELL AS EXPLANATION 1 OF SECTION 271(1)(C ), BOTH HAVE BEEN INVOKED AND THE APPELLANT HAS BEEN HELD TO BE GUILTY OF CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME, WHICH IS ALSO NOT IN ACCORDANCE WITH LAW. THE APPELLANT ALSO GET SUPPORT FROM THE DECISION OF HONOURABLE M. P. HIGH COURT WHICH HAS ALSO BEEN UPHELD BY THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VIS SURESH CHAND MITTAL (2001) 251 ITR 9, HEREIN IT WAS HELD THAT WHERE THE ASSESSEE FILED REVISED RETURN SHOWING HIGHER INCOME KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 28 AFTER SEARCH AND NOTICE FOR REOPENING OF ASSESSMENT AND THE DEPARTMENT SIMPLY RESTED ITS CONCLUSIONS ON THE ACTION OF SURR ENDER MADE BY THE ASSESSEE, NO PENALTY U/S 271(1)(C) COULD BE LEVIED. THROUGH IN THE PRESENT APPEAL BEFORE ME, THE AO MADE VARIOUS ADDITIONS, HO WEVER, THE SAME WERE DELETED AND THE INCOME RETURNED BY THE APPELLA NT ONLY SURVIVED. THE AO EVEN WHILE VERIFYING THE PENALTY HAS NOT RECORDE D ANY SATISFACTION AND HAS LEVIED THE PENALTY MERELY ON THE BASIS OF THE A DDITIONAL INCOME WAS OFFERED BY THE APPELLANT. FOR THIS REASON ALSO THE PENALTY LEVIED U/S 271 (1)( C) IN THE PRESENT APPEAL IS HELD TO BE WRONG. IN VIEW OF THE ABOVE DISCUSSIONS THE PENALTY LEVIED IS HELD TO BE WRONG. ACCORDINGLY THE PENALTY LEVIED BY THE AO U/S 271(1) (C) IS DELETED AND THE APPEAL FILED BY THE APPELLANT IS ALLOWED. 18. AFTER PERUSAL OF THE ABOVE DETAILED FINDING OF LD. CIT(A), LET US FIRST DEAL WITH THE LEGAL ISSUE AS TO WHETHER THE N OTICE ISSUED FOR LEVY OF PENALTY U/S 274 R.W.S. 271(1)(C) OF THE ACT WAS DEFECTIVE IN NATURE SO AS TO RENDER THE PENALTY PROCEEDINGS U/S 274 R.W.S. 271(1)(C) OF THE ACT AS VOID AB-INITIO. TO ADJUDICATE THE ISSUE WE WILL FIRST GO THROUGH THE PENALTY NOTICE ISSUED TO THE A SSESSEE WHICH IS REPRODUCED BELOW:- OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL), INDOR E PAN. AACCCK1840M DATE: 26/03/2014 TO M/S. KALYAN TOLL INFRASTRUCTURE PVT. LTD, 15/3 VIDHYA DEEP, MANORAMAGANJ INDORE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 29 NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C ) OF THE INCOME TAX ACT, 1961 WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2010-11 IT APPEARS TO ME THAT YOU :- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 3.3 0 PM ON 24/04/2014 AND SHOW CAUSE WHY AN ORDER IMPOSING A P ENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271(1)(C) OF THE I NCOME TAX ACT 1961 IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNI TY OF BEARING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SIDE DATE WHICH WILL BE CO NSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271(1)(C). SD/- (RAM KUMAR YADAV) DY. COMMISSIONER OF INCOME TAX (CENTRAL) INDORE 19. FROM GOING THROUGH THE ABOVE NOTICE IT IS WELL EVIDENT THAT IN THE NOTICE THE SPECIFIC CHARGE/LIMB U/S 271(1)(C) O F THE ACT WAS NOT MENTIONED. THE LD. A.O HAS NOT STRIKED OFF ONE OF THE CHARGE WHICH IS NOT RELEVANT TO THE ASSESSEE. IT IS NOT CLEAR AS TO WHETHER THE PENALTY HAS BEEN LEVIED FOR CONCEALMENT OF INCOME O R FURNISHING OF INACCURATE PARTICULARS OF INCOME. THOUGH VARIOUS J UDGMENTS AND DECISIONS HAVE BEEN REFERRED BY LD. CIT(A) IN ITS O RDER AND ALSO BY THE LD. COUNSEL FOR THE ASSESSEE, HOWEVER THE JUDGM ENT OF HONBLE HIGH COURT IN THE CASE OF PR. CIT V/S KULWANT SINGH BHATIA (SUPRA) IS SQUARELY APPLICABLE ON THIS ISSUE WHEREIN THE RE VENUES APPEAL KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 30 HAS BEEN DISMISSED BY THE HONBLE HIGH COURT OBSERV ING AS FOLLOWS:- ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LEARNE D COUNSEL OF THE RESPONDENT, SO ALSO CONSIDERING THE FACT THAT THE G ROUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SATISFY THE REQUIREMENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT THE LEARNED T RIBUNAL HAS RIGHTLY RELYING ON THE DECISION OF CIT V/S MANJUNATH COTTON GINNING FACTORY (SUPRA) AND CIT V/S SSAS EMERALDS MEADOWS (SUPRA) RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ORDER OF P ENALTY IMPOSED BY THE AUTHORITIES. 20. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE TRIBUNA LS DECISION APPLYING THE JUDGMENTS AND MORE PARTICULARLY IN O THER CASES OF SAME KALYAN GROUP NAMELY SMT. SHRUTI GARG V/S DCIT (SUPRA ) AND KT SANGAM INFRASTRUCTURE (I) LTD V/S AND OTHERS (SU PRA) . IN LIGHT OF THE ABOVE JUDGMENTS SQUARELY APPLYING ON THE CASE O F THE ASSESSEE AND ALSO THE CONSISTENT VIEW TAKEN BY THIS TRIBUNAL IN SUCH CASES WHERE DEFECTIVE NOTICE HAS BEEN ISSUED WITHOUT SPEC IFYING THE CHARGE AGAINST THE ASSESSEE WHICH THUS FAILS TO PRO VIDE REASONABLE OPPORTUNITY TO ASSESSEE TO DEFEND ITS CASE AT THE S TAGE OF ISSUE OF NOTICE U/S 274 OF THE ACT. WE THUS FIND NO REASON T O INTERFERE IN THE FINDING OF LD. CIT(A) DECIDING THE LEGAL GROUND IN FAVOUR OF THE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 31 ASSESSEE THEREBY HOLDING THE PENALTY PROCEEDINGS U/ S 271(1)(C) OF THE ACT AS VOID AB-INITIO AND THUS THE PENALTY OF RS.1,60,00,000/- LEVIED U/S 271(1)(C) OF THE ACT HAS BEEN RIGHTLY D ELETED BY LD. CIT(A). 21. THOUGH WE HAVE ALREADY CONFIRMED THE FINDING OF LD. CIT(A) AND HELD THE PENALTY PROCEEDINGS U/S 274 R.W.S. 271 (1)(C) AS VOID AB-INITIO STILL FOR ACADEMIC PURPOSE WE WANT TO ADJUDICATE ISSUE ON MERITS. WE OBSERVE THAT SUBSEQUENT TO SEARCH WHEN THE ASSESSEE FILED THE RETURN IN COMPLIANCE TO NOTICE U/S 153A O F THE ACT IT OFFERED THE ADDITIONAL INCOME OF RS.5,08,55,709/-. THE BRAKE UP OF THIS ADDITIONAL INCOME IS AS FOLLOWS; (I) RS.28,90,450/_ WAS OFFERED ON THE BASIS OF NOTINGS MADE ON VARIOUS LOOSE PAPER SEIZED AT THE TIME OF SEARCH WHICH COULD NOT BE IDENTIFIED IN BOOKS OF ACCOUNTS. (II) RS. 3,58,72,460/- WAS OFFERED ON ACCOUNT OF P EAK CREDIT OFFERED ON THE BASIS OF CASH FLOW STATEMENT PREPARED TO EXPLAIN THE SOURCE OF SHARE APPLICATION MONEY INTRODUCED IN BOOKS OF ACCOUNTS. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 32 (III) RS.L,03,87,500/_ WAS OFFERED ON ACCOUNT OF A S COMMISSION ON THE SHARE APPLICATION MONEY. (IV) RS. 17,05,300/- WAS OFFERED ON ACCOUNT OF PROPORTIONATE DEPRECIATION FORGONE BY SPREADING OVER THE TOTAL INFLATED PROJECT COST OVER THE PERIOD/ LIFE OF THE PROJECTS. 22. BUT SURPRISINGLY THE LD. A.O DID NOT ACCEPTED T HE ADDITIONAL INCOME OFFERED BY THE ASSESSEE UNDER THE HEAD PEAK CREDIT AND OTHER HEADS AND MADE VARIOUS ADDITIONS FOR UNEXPLAI NED SHARE CAPITAL, DISALLOWANCE U/S 14A AND EXCESS CLAIM OF D EPRECIATION THEREBY ASSESSING THE INCOME AT RS.41,97,07,950/- A S AGAINST THE INCOME SHOWN IN THE RETURN FILED U/S 153A OF THE AC T AT RS.3,54,20,430/-. AGAINST THE ADDITION MADE BY THE LD. A.O ASSESSEE FILED APPEALS AND UP TO THE STAGE OF TRIBU NAL ALL THE ADDITIONS MADE BY THE LD. A.O WERE DELETED EXCEPT F OR THE PAYMENT FOR DEPRECIATION AT RS.2,28,103/-. THIS MEANS THAT THE ADDITIONS ON WHICH THE PENALTY PROCEEDINGS WERE INITIATED IN THE PENALTY PROCEEDINGS STOOD DELETED AND THUS NO PENALTY WAS L EVIABLE ON THE ADDITIONS SO MADE BY THE LD. A.O. THE VERY BASIS OF THE INITIATION OF PENALTY PROCEEDINGS DO NOT MATERIALIZE SINCE THE AD DITIONS WERE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 33 DELETED WHEN THE PENALTY PROCEEDINGS WERE CARRIED O UT AND PENALTY WAS LEVIED BY LD. A.O ON THE ADDITIONAL INCOME OFFE RED BY THE ASSESSEE IN THE RETURN OF INCOME. 23. IN OUR CONSIDERED VIEW LD. A.O WAS NOT JUSTIFIE D IN LEVYING THE PENALTY ON THE ADDITIONAL INCOME OFFERED BY THE ASS ESSEE SINCE THE BASIC PREMISES ON WHICH THE ASSESSEE OFFERED THE AD DITIONAL INCOME WAS REJECTED BY LD.A.O AND ADDITION MADE IN THE AS SESSMENT ORDER WERE DELETED IN THE APPELLATE PROCEEDINGS, WHICH TH US LEAVES NO ROOM FOR THE LD. A.O TO LEVY THE PENALTY U/S 271(1) (C) OF THE ACT ON THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE WHICH LD. A.O HIMSELF HAS NOT ACCEPTED WHILE COMPLETING THE ASSESSMENT. THEREFORE ON MERITS ALSO THE LD. CIT(A) HAS RIGHTLY DELETED THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. WE THEREFORE IN THE GIVEN FAC TS AND CIRCUMSTANCES OF THE CASE AND OUR DISCUSSIONS MADE HEREIN ABOVE CONFIRM THE FINDING OF LD. CIT(A) DELETING THE PENA LTY OF RS.1,60,00,000/- LEVIED U/S 271(1)(C) OF THE ACT BY THE LD. A.O. GROUND RAISED BY THE REVENUE ARE DISMISSED. REVENUE S APPEAL NO.878/IND/2019 STANDS DISMISSED. 24. NOW WE TAKE UP REVENUES APPEAL NO.877/IND/2019 IN THE CASE OF KETI CONSTRUCTION (INDIA) LTD WHEREIN ALSO SIMILAR ISSUE OF KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 34 PENALTY U/S 271(1)(C) OF THE ACT AT RS.50,00,000/- HAS BEEN TAKEN UP BY THE REVENUE CHALLENGING THE FINDING OF LD. CI T(A) DELETING THE LEVY OF PENALTY. 25. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ISSUE IS SQUARELY COVERED IN THE CASE OF KETI SANGA M INFRASTRUCTURE (I) LTD ITA NO.1343 & 601/IND/2016 AS WELL AS OTHER DECISIONS OF THE TRIBUNAL IN THE CASE OF SMT. SHRUTI GARG V/S DC IT ITA NO.988/IND/2016. HE ALSO SUBMITTED THAT THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT IS DEFECTIVE AS CHA RGE IS NOT SPECIFIED AGAINST THE ASSESSEE. 26. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTING ORDER OF LD. A.O. 27. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. REVENUE IS AGGRIEVED WITH THE DE LETION OF PENALTY U/S 271(1)(C) OF THE ACT LEVIED AT RS.50,00,000/- B Y THE LD. A.O ON THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN TH E RETURN FILED IN RESPONSE TO NOTICE U/S 153A OF THE ACT. WE FIND TH AT LD. CIT(A) HAS HELD THAT THE PENALTY PROCEEDINGS IS BAD IN LAW AND VOID AB-INITIO AS THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE A CT IS DEFECTIVE. ON ARRIVING ON THIS FINDING LD. CIT(A) OBSERVED AS FOL LOWS:- KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 35 4.1 GROUND NO. 1 & 2 - THROUGH THESE GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY OF RS. 50,00,0001- U/S 271(1)(C) OF THE INCOME TAX ACT AND ALSO THE INITIATION OF THE PENAL TY PROCEEDINGS U/S 271(1)(C) AND ALSO THE PENALTY SHOW CAUSE NOTICE IS SUED U/S 274. IT IS SEEN THAT THE APPELLANT FILED ITS RETURN OF INCOME U/S 1 39(1) ON 30.09.2008 DECLARING AN INCOME OF RS. 3,94,53,9101-. IN RESPONSE TO NOTICE ISSUED U/S 153A, THE APPELLANT FILED THE RETURN ON 28.05.2012 DECLARING AN INCOME OF RS. 5,50,52,505/-. THE AO COMPLETED, THE ASSESSMENT ON 20.03.2014 ON A N INCOME OF RS, 14,56,31,7601- BY MAKING VARIOUS ADDITIONS AND DISALLOWANCES. HOWEVER, ALL THE ADDITIONS AND DISAL LOWANCES SO MADE HAVE BEEN DELETED EITHER IN THE FIRST APPEAL OR IN THE SECOND APPEAL EXCEPT FOR A NOMINAL ADDITION OF RS. 67,484/- MADE U/S 36(1)(VA). IN THE ASSESSMENT ORDER, THE AO INITIATED PENALTY U/S 271( 1)(C). THE AO ALSO ISSUED A NOTICE U/S 274 R.W.S. 271(1)(C) DATED 20.0 3.2014 STATING THAT THE APPELLANT HAS CONCEALED THE PARTICULARS OF INCOME O R FURNISHED INACCURATE PARTICULARS OF INCOME. AFTER CONSIDERING THE REPLY OF THE APPELLANT, THE AO PASSED THE IMPUGNED PENALTY ORDER U/S 271 (1)( C) O N 31.03.2018 LEVYING A PENALTY OF RS. 50,00,000/- FOR THIS YEAR. THE PENALTY HAS BEEN LEVIED IN RESPECT OF ADDITIONA L INCOME OF RS. 1,56,66,079/- OFFERED BY THE ASSESSEE AND ALSO IN RESPECT OF THE DISALLOWANCES MADE BY THE AO U/S 36(1)(VA) OF RS. 6 7,484/-. THERE IS NO DISCUSSION IN THE PENALTY ORDER PASSED BY THE AO RE GARDING THE NATURE OF ADDITIONAL INCOME OFFERED BY THE APPELLANT ON WHICH THE AO HAS LEVIED THE PENALTY. HOWEVER, THE APPELLANT HAS EXPLAINED THAT IT HAS OFFERED ADDITIONAL INCOME OF RS. 46,12,992/- ON ACCOUNT OF PEAK CREDIT WORKED OUT ON THE BASIS OF THE CASH FLOW STATEMENT PREPARE D BY IT TO EXPLAIN THE SOURCE OF SHARE CAPITAL GENERATED BY THE APPELLANT AND RS. 95,53,087/- ON ACCOUNT OF LOOSE PAPERS AND AN AMOUNT OF RS. 15,00, 000/-- WAS OFFERED TO COVER OTHER DISCREPANCIES THAT MAY BE FOUND AND ALS O TO 'COVER TECHNICAL DISALLOWANCES. THE INCOME SO OFFERED BY THE ASSESSE E U/S 132(4) WAS KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 36 ALSO OFFERED IN THE RETURN FILED IN RESPONSE TO NOT ICE ISSUED U/S 153A AND DUE TAXES WERE ALSO PAID BEFORE FILING THE RETURN O F INCOME. THE APPELLANT HAS CHALLENGED THE INITIATION OF THE PENALTY PROCEEDINGS ON THE CONTENTION THAT NO SATISFACTION WAS DRAWN IN TH E ASSESSMENT ORDER WHILE INITIATING THE PENALTY PROCEEDINGS AS NO CHAR GE WAS MENTIONED IN THE ASSESSMENT ORDER AND THE NOTICE ISSUED UNDER SECTIO N 274 WAS ALSO A DEFECTIVE NOTICE AS NO SPECIFIC CHARGE WAS MENTIONE D AGAINST THE APPELLANT. THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY U/S 271 (1)( C) ON THE GROUND THAT THERE WAS NO SATISFACTION IN THE PENALTY ORDER AS WELL, AS BOTH THE CHARGES WERE REITERATED IN THE PENALTY ORDER. IT IS ALSO CONTENDED THAT THE PENALTY ORDER IS VAGUE AS ON ONE HAND EXPLANATION 5A TO SECTION 271(1)(C) HAS BEEN REFERRED IN PARA 3.3 OF THE PENALTY ORDER AND ON OTHER HAND EXPLANATION 1 TO SECTION 271(1)(C) HA S ALSO BEEN INVOKED IN PARA 3.4 STATING THAT WHEN THERE IS DIFFERENCE BETW EEN THE ASSESSED INCOME AND THE RETURNED INCOME, THERE IS PRESUMPTIO N OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. IT IS CONTEND ED THAT SINCE BOTH THE EXPLANATIONS OPERATE UNDER ALL TOGETHER DIFFERENT S ITUATIONS, INVOKING BOTH THE EXPLANATION AT THE SAME TIME, SHOWS THAT PENALT Y HAS BEEN LEVIED UNDER CONFUSED STATE OF MIND. THE APPELLANT HAS ALS O CONTENDED THAT NO PENALTY WAS INITIATED IN THE ASSESSMENT ORDER IN RE SPECT OF THE INCOME OFFERED ON THE BASIS OF PEAK CREDIT, STILL PENALTY HAS BEEN LEVIED ON THE SAME WITHOUT MAKING ANY DISCUSSION IN THE PENALTY O RDER. THE APPELLANT FURTHER CONTENDED THAT THE CASH FLOW STATEMENT PREP ARED BY IT, WHICH WAS ALSO FILED BEFORE THE INVESTIGATION WING, AND THE I NCOME OFFERED ON THE BASIS OF PEAK CREDIT WORKING WAS REJECTED BY THE AO IN THE ASSESSMENT ORDER AND SEPARATE AND INDEPENDENT ADDITIONS WERE M ADE BY THE AO. HOWEVER, THE CASH, FLOW STATEMENT AND THE PEAK CRED IT WORKING OF THE. APPELLANT WAS ACCEPTED IN THE APPELLATE PROCEEDINGS AND ALL ADDITIONS MADE BY THE AO WERE DELETED IN THE APPELLATE PROCEE DINGS. THEREFORE, IT IS CONTENDED THAT WHEN THE INCOME OF PEAK CREDIT OFFER ED BY THE APPELLANT KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 37 WAS ITSELF REJECTED BY THE AO IN THE ASSESSMENT ORD ER, NO PENALTY U/S 271(1)(C) OUGHT TO HAVE BEEN LEVIED ON THE SAME. FI NALLY THE, APPELLANT CONTENDED THAT SINCE ALL THE ADDITIONS MADE HAVE BE EN DELETED AND THE INCOME RETURNED BY THE APPELLANT FINALLY STAND ACCE PTED, NO PENALTY OUGHT TO HAVE BEEN LEVIED. AFTER TAKING CONSIDERATION THE ASSESSMENT ORDER AND ALSO THE PENALTY ORDER AND ALL THE CONTENTIONS OF THE APPELLANT CARE FULLY IT IS SEEN THAT WHILE INITIATING THE PENALTY PROCEEDINGS IN THE ASSESSMEN T ORDER THE AO HAS SIMPLY STATED THAT PENALTY PROCEEDINGS ARE INITIATE D U/S 271(L)(C) AND NO CHARGE OF EITHER CONCEALMENT OF INCOME OR FURNISHIN G OF INACCURATE PARTICULARS OF INCOME WAS MENTIONED IN THE ASSESSME NT ORDER. THEREFORE, NO REQUISITE SATISFACTION WAS DRAWN IN THE ASSESSME NT ORDER. FROM A PERUSAL OF THE NOTICE DATED 20.03.2014 ISSUED ULS 2 74 WHICH IS AT PAGE 115 OF THE PAPER BOOK, IT IS SEEN THAT BOTH THE CHA RGES I.E. CONCEALMENT OF PARTICULARS /OF INCOME OR FURNISHING INACCURATE PAR TICULARS OF INCOME ARE MENTIONED THEREIN. SIMILARLY A PERUSAL OF THE PENAL TY ORDER SHOWS THAT AGAIN BOTH THE CHARGES ARE MENTIONED IN THE HEADING IN PARA 3 AND ALSO IN CONCLUDING PARA 5 & 6 OF THE PENALTY ORDER. AS PER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT, THERE ARE TWO DIFFERENT CHARGES I.E. THE CONCEALMENT OF PARTICULA RS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. PENALTY CAN BE IMPOSED FOR A SPECIFIC CHARGE. IN VIEW OF THE DECISION OF HONOURABLE SUPRE ME COURT IN THE CASE OF T. ASHOK PAI VIS CIT (2007) 292 ITR 11 (SC) IT IS N OW A SETTLED PROPOSITION THAT CONCEALMENT OF INCOME AND FURNISHING INACCURAT E PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATION. IT IS EQUALLY SETTLED PROPOSITION THAT WHERE THE CHARGE FOR LEVYING PENALTY IS NOT SPECIFIC, THE NOT ICE U/S 271 (1)( C) IS BAD IN LAW AS IT DOES NOT MENTIONED THE SPECIFIC LIMB OF S ECTION 271 (1)( C) OF THE ACT UNDER WHICH IT HAS BEEN INITIATED. WHEN THE NOT ICE DOES NOT SPECIFY THE CHARGE FOR LEVY OF PENALTY, IT HAS BEEN HELD THAT T HE PENALTY CANNOT BE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 38 LEVIED. THE HON'BLE SUPREME COURT IN DILIP N. SHROF F V/S JCIT (2007) 291 ITR 519 (SC),.HAS OBSERVED THAT WHILE ISSUING THE N OTICE UNDER SECTION 274 R.W.S. 271, IN THE STANDARD FORMAT, THE ASSESSING. OFFICER SHOULD DELETE THE INAPPROPRIATE WORDS OR PARAGRAPH, OTHERWISE, IT MAY INDICATE THAT THE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHE R HE HAD PROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOM E OR HAD FURNISHED INACCURATE PARTICULARS OF INCOME. THE HONOURABLE C OURT FURTHER OBSERVED THAT THE AO HAS NOT STRUCK DOWN THE RELEVANT WORD/S ENTENCE IN THE CYCLOSTYLED PROFORMA OF THE PENALTY SHOW CAUSE NO TICE, THEREFORE, THE AO WAS NOT SURE THAT ON WHAT GROUND HE IS LEVYING THE PENALTY. THE PENALTY PROCEEDINGS IN THIS CASE WERE INITIATED WITHOUT MENTIONING ANY CHARGE' IN THE ASSESSMENT ORDER. THE PENALTY NO TICE WAS. ALSO ISSUED IN MECHANICAL MANNER WITHOUT SPECIFYING THE SPECIFI C CHARGE AS TO WHETHER THE APPELLANT IS FOUND GUILTY OF CONCEALING THE PAR TICULAR OF INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. THUS TH E VERY INITIATION OF THE PENALTY PROCEEDING IN THIS CASE IS NOT IN ACCORDANC E WITH LAW AND HAS LED TO VITIATION OF ENTIRE PENALTY PROCEEDINGS. VERY RE CENTLY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V/S KULWANT SINGH BHATIA DATED 09.05.2018 (ITA 9 TO 14 OF2018) HAS HELD THAT THE PENALTY U/S 271(1)(C) OF THE ACT OF 1 961 IS NOT SUSTAINABLE IN LAW AS THE NOTICE WAS NOT SPECIFIC, OBSERVING AS FO LLOWS:- 'ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LEARN ED COUNSEL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THAT TH E GROUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SATISFY THE REQUIREM ENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT LE ARNED TRIBUNAL HAS RIGHTLY RELYING ON THE DECISION OF CIT VIS MANJ UNATHA COTTON GINNING FACTORY AND CIT VIS SSA'S EMERALD MEADOWS R IGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE TH E ORDER OF PENALTY IMPOSED BY THE AUTHORITIES. NO SUBSTANTIAL QUESTION OF LAW IS KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 39 ARISING IN THESE APPEALS. ITA. NO(S) 912018, 101201 8, 1112018, 12/2018, 13/2018 AND 14/2018, FILED BY THE APPELLAN T HAVE NO MERIT AND ARE HEREBY DISMISSED. ' IT IS OBSERVED THAT FACTS OF THE PRESENT CASE UNDER APPEAL BEFORE ME ARE IDENTICAL TO THAT OF THE CASE OF KULWANT SINGH BHAT IA (SUPRA) IN SO FAR AS ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE IN TH E RETURNS FILED AFTER THE SEARCH AND PENALTIES U/S 271(1)(C) WERE LEVIED ON THE BASIS OF SHOW CAUSE NOTICE ISSUED WITHOUT, STRIKING OFF EITHER OF THE TWO CHARGES, WHICH FACTS ARE IDENTICAL IN THE PRESENT APPEAL. IN THE C ASE OF KULWANT SINGH BHATIA ALSO, IT, WAS THE OBSERVATION OF THE AO THAT -THE ASSESSEE HAS OFFERED ADDITIONAL INCOME ONLY DUE TO SEARCH AND TH E ADDITIONAL INCOME WAS NOT DECLARED IN THE RETURN FILED U/S 139 AND TH EREFORE, PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED, WHICH FAC T IS ALSO IDENTICAL WITH THE PRESENT APPEAL. FURTHER IN THE CASE OF KULWANT SINGH BHATIA PENALTIES WERE LEVIED BY INVOKING EXPLANATION SA TO SECTION 2 71(1)(C) AND IN THE - INSTANT CASE ALSO THE SAME EXPLANATION HAS BEEN INV OKED. IN THE CASE BEFORE THE HONOURABLE HIGH COURT, THE PENALTIES WER E DELETED BY THE TRIBUNAL HOLDING THAT THE SAME AS NOT SUSTAINABLE I N LAW, AS NO SPECIFIC CHARGE WAS LEVIED IN PENALTY SHOW CAUSE NOTICE, LAT ER THE ORDER OF THE HONOURABLE IT AT WAS AFFIRMED BY THE HONOURABLE JUR ISDICTIONAL HIGH COURT. THEREFORE, THE PROPOSITION LAID DOWN BY THE HONOURABLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IS APPL ICABLE IN THE PRESENT APPEAL ALSO AND IT IS HELD THAT THE PENALTY PROCEED INGS INITIATED IN THIS CASE ARE NOT AS PER LAW AND THE PENALTY SO LEVIED I S WRONG. THE APPELLANT HAS STATED THAT IN ITS OTHER GROUP CA SES ALSO, WHEREIN PENALTIES WERE LEVIED U/S 271 (1)( C) IN THE ASSESS MENT PROCEEDINGS CARRIED OUT AS A RESULT OF THE SAME SEARCH, WHEREIN ALSO PE NALTY PROCEEDINGS WERE INITIATED IN AN IDENTICAL MANNER, IN WHICH THE SAME WERE INITIATED IN THE PRESENT APPEAL, HAVE BEEN DELETED BY THE HONOURABLE IT AT INDORE BENCH KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 40 IN THE CASES OF MLS KETI SANGAM INFRASTRUCTURE (I) LTD. AND OTHER GROUP COMPANY APPEALS AND ALSO IN THE CASE OF SHRUTI GARG AND OTHER INDIVIDUAL CASES OF THE GROUP, COPIES OF SUCH ORDERS HAVE ALSO BEEN FILED AT PAGE NO. 61 TO 115 AND AT PAGE NO. 38 TO 60 RESPECTIVELY OF THE CASE LAW PAPER BOOK. A PERUSAL OF THE ORDER PASSED IN THE CASE OF KETI SANGAM INFRASTRUCTURE (I) LTD. IN IT NO. 516/IND/20 17 AND OTHER CASES BY THE HONOURABLE JURISDICTIONAL IT AT ON 27.06.2018 IT IS SEEN THAT THE PENALTIES LEVIED U/S 271(1)(C) OF THE ACT HAS BEEN DELETED. A FTER DISCUSSING THE ISSUE AT ILENGTH AND AFTER ANALYZING THE VARIOUS DEEISIONS.JHE HONOURABLE ITAT IN PARA 13 ON INTERNAL PAGE 32 OF THE ORDER HELD TH AT; 'FROM THE PERUSAL OF THE ABOVE JUDGMENT AND EXAMINI NG THE FACTS OF THE INSTANT NINE APPEALS, WE FIND THAT IN ALL THESE CASES THE ASSESSING OFFICER HAS NOT STRUCK DOWN THE RELEVANT WORD FROM THE SENTENCE IN THE CYCLOSTYLED PROFORMA OF PENALTY SH OW CAUSE NOTICE . WHICH MEANS THAT THE ASSESSING OFFICER WAS NOT SURE AS TO ON WHAT GROUND HE HAS INITIATED THE PENALTY PROCEED INGS AND IN SUCH A CASE THE ALLEGED NOTICE IS NOT SUSTAINABLE IN LAW AND IS LIABLE TO BE QUASHED. BE, THEREFORE, RESPECTFULLY F OLLOWING THE JUDGMENTS AND DECISIONS REFERRED TO ABOVE, ALLOW T HIS COMMON LEGAL GROUND OF THE ASSESSEE'S IN THESE NINE APPEAL S AND DELETE THE PENALTIES LEVIED U/S 271 (L)(C) OF THE ACT IN A LL THESE CASES. ' THEREFORE, FOLLOWING THE DECISION OF THE HONOURABLE ITA T INDORE BENCH RENDERED ON 27.06.2018 IN THE APPELLANT GROUP CASES ITSELF, IT IS HELD THAT THE PENALTY LEVIED BY THE AO IN THE IMPUGNED ORDER IS INVALID. IT IS ALSO SEEN THAT THE INCOME OFFERED BY THE APPELLANT ON AC COUNT OF PEAK CREDIT WORKED OUT ON THE BASIS OF CASH FLOW STATEMENT PREP ARED BY THE APPELLANT WAS REJECTED BY THE AO AS EVIDENT FROM PARA 13.7 OF THE ASSESSMENT ORDER. FURTHER THE SAID CASH FLOW STATEMENT AND ALS O THE INCOME OFFERED BY THE APPELLANT WAS ACCEPTED IN THE APPELLATE PROCEED INGS AND ALL THE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 41 ADDITIONS MADE BY THE AO WERE DELETED. THEREFORE, W HEN THE BASIC PREMISES ON WHICH THE APPELLANT OFFERED THE INCOME, WAS REJECTED BY THE AO IN THE ASSESSMENT PROCEEDINGS, LATER ON WHEN THE ADDITIONS MADE IN THE ASSESSMENT ORDER WERE DELETED IN THE APPELLATE PROCEEDINGS THE AO MERELY FOR THE PURPOSE OF LEVY OF PENALTY, CANNOT R EVERT BACK TO THE INCOME OFFERED BY THE .APPELLANT WHICH WAS REJECTED IN THE ASSESSMENT ORDER AND THE ADDITIONAL IN~;;;OFFERED BY THE APPELLANT CANNO T ATTRACT PENAL PROVISION. FURTHER, THE APPELLANT HAS RIGHTLY CONTENDED THAT N O PROPER SATISFACTION HAS BEEN DRAWN IN THE PENALTY ORDER, WHERE EXPLANAT ION SA AS WELL AS EXPLANATION 1 OF SECTION 271(1)(C ), BOTH HAVE BEEN INVOKED AND THE APPELLANT HAS BEEN HELD TO BE GUILTY OF CONCEALMENT OF INCOME BY FURNISHING INACCURATE PARTICULARS OF INCOME, WHICH IS ALSO NOT IN ACCORDANCE WITH LAW. THE APPELLANT ALSO GET SUPPORT FROM THE DECISION OF HONOURABLE M. P. HIGH COURT WHICH HAS ALSO BEEN UPHELD BY THE HONOURABLE SUPREME COURT IN THE CASE OF CIT VIS SURESH CHAND MITTAL (2001) 251 ITR 9, HEREIN IT WAS HELD THAT WHERE THE ASSESSEE FILED REVISED RETURN SHOWING HIGHER INCOME AFTER SEARCH AND NOTICE FOR REOPENING OF ASSESSMENT AND THE DEPARTMENT SIMPLY RESTED ITS CONCLUSIONS ON THE ACTION OF SURR ENDER MADE BY THE ASSESSEE, NO PENALTY U/S 271(1)(C) COULD BE LEVIED. THROUGH IN THE PRESENT APPEAL BEFORE ME, THE AO MADE VARIOUS ADDITIONS, HO WEVER, THE SAME WERE DELETED AND THE INCOME RETURNED BY THE APPELLANT ONLY SURVIVED. THE AO EVEN WHILE VERIFYING THE PENALTY HAS NOT RECORDE D ANY SATISFACTION AND HAS LEVIED THE PENALTY MERELY ON THE BASIS OF THE A DDITIONAL INCOME WAS OFFERED BY THE APPELLANT. FOR THIS REASON ALSO THE PENALTY LEVIED U/S 271 (1)( C) IN THE PRESENT APPEAL IS HELD TO BE WRONG. IN VIEW OF THE ABOVE DISCUSSIONS THE PENALTY LEVIED IS HELD TO BE WRONG. ACCORDINGLY THE PENALTY LEVIED BY THE AO U/S 271(1) (C) IS DELETED AND THE APPEAL FILED BY THE APPELLANT IS ALLOWED. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 42 28. WE HAVE GONE THROUGH THE FINDING OF LD. CIT(A ) AND TO FURTHER EXAMINE THE FACT WE ARE REPRODUCING BELOW THE ALLEG ED NOTICE ISSUED TO THE ASSESSEE U/S 274 R.W.S. 271(1)(C) OF THE ACT . OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL), INDOR E PAN. AABCK5940D DATE: 20/03/2014 TO M/S. KETI CONSTRUCTION (INDIA) LTD, 15/3 VIDHYA DEEP, MANORAMAGANJ INDORE NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C ) OF THE INCOME TAX ACT, 1961 WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2010-11 IT APPEARS TO ME THAT YOU :- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 3.3 0 PM ON 11/04/2014 AND SHOW CAUSE WHY AN ORDER IMPOSING A P ENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271(1)(C) OF THE I NCOME TAX ACT 1961 IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNI TY OF BEARING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SIDE DATE WHICH WILL BE CO NSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271(1)(C). SD/- (RAM KUMAR YADAV) DY. COMMISSIONER OF INCOME TAX (CENTRAL) INDORE 29. THE ABOVE NOTICE CLEARLY SHOWS THAT LD. A.O HAS NOT STRIKED OFF ONE OF THE CHARGE NOT APPLICABLE TO THE ASSESSEE. I N THE NOTICE BOTH THE LIMBS ARE APPEARING. IT IS NOT CLEAR AS TO FOR WHICH CHARGE THE KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 43 PENALTY HAS BEEN LEVIED I.E. WHETHER IT IS FOR CONC EALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. WE HAVE DEALT WITH THE SAME ISSUE IN THE PRECEDING PARA IN THE CA SE OF KALYAN TOLLS PVT. LTD ITA NO.878/IND/2019 WHEREIN ALSO SIMILAR TYPE OF DEFECTIVE NOTICE WAS ISSUED AND LD. CIT(A) DELETED THE PENALTY BY RELYING ON THE DECISION OF HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF PCIT V/S KULWANT SINGH BHATIA (SUPRA). 30. SINCE THE FACTS AND FIGURES ARE SAME WE APPLY T HE SAME DECISION AS REFERRED ABOVE AND CONFIRM THE FINDINGS OF LD. CIT(A) ALLOWING THE LEGAL GROUND OF THE ASSESSEE AND HOLDI NG THE NOTICE U/S 274 R.W.S 271(1)(C) OF THE ACT AS DEFECTIVE AND THE PROCEEDINGS U/S 271(1)(C) OF THE ACT AS VOID AB-INITIO AND NOT IN ACCORDANCE WITH LAW. THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON, WE THUS CONFIRM THE FINDING OF LD. CIT(A) AND DISMISS REVEN UES APPEAL. 31. IN THE RESULT ALL THE GROUNDS RAISED BY REVENUE IN THE CASE OF M/S. KALYAN TOLL INFRASTRUCTURE LTD IN ITA NO.878/I ND/2019 AND M/S. KETI CONSTRUCTION (INDIA) LTD IN ITA NO.877/IN D/2019 STANDS DISMISSED. KETI CONSTRUCTION (INDIA) LTD & KALYAN TOLL INFRAST RUCTURE LTD. ITA NOS. 877 & 878/IND/2019 44 32. IN THE RESULT THE APPEALS FILED BY THE REVENUE IN ITA NO.878/IND/2019 AND ITA NO.877/IND/2019 ARE DISMISS ED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 23.09.202 0. SD/- SD/- ( KUL BHARAT) (MANI SH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 23 SEPTEMBER, 2020 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE