Sri. V.S. Balasubramanyam, Bangalore V. ITO, Bangalore

ITA 887/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63801 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Assessee Lawyers: VENKATESAN
• Section: 133A

Judgement Text

PAGE 1 OF 11 ITA NO.887/ BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI N BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI GEORGE GEORGE K, J.M ITA NO.887/BANG/2011 (ASSESSMENT YEAR 2005-06) SRI V S BALASUBRAMANYAM, #7/3, BULL TEMPLE ROAD, SHANKARPURAM, BANGALORE-4. PA NO.AATPB 8232 E VS THE INCOME TAX OFFICER, WARD-3(1), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 14.11.2012 DATE OF PRONOUNCEMENT : 23.11.2012 APPELLANT BY : SHRI VENKATESAN, C.A. RESPONDENT BY : SMT. SUSAN THOMAS JOSE, JCIT ORD ER PER GEORGE GEORGE K : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LEARNED CIT (A)-II, BANGALORE DATED 11.8.201 1. THE RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THE ASSESSEE HAS, IN HIS GROUNDS OF APPEAL, RAI SED SIX GROUNDS ILLUSTRATIVELY. GROUND NOS.1, 5 & 6 ARE GENERAL IN NATURE WITH NO SPECIFIC ISSUES AND, THEREFORE, THEY ARE TREATED AS INCONSEQU ENTIAL. THE REMAINING GROUNDS RELATE TO A SOLITARY ISSUE, NAMELY, THAT THE AUTHORITIES BELOW HAVE FAILED TO APPRECIATE THAT THERE WAS NEITHER ANY CON CEALED INCOME NOR PAGE 2 OF 11 ITA NO.887/ BANG/2011 2 FURNISHING OF INACCURATE PARTICULARS OF INCOME, WA RRANTING IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT. 3. THE ISSUE, IN BRIEF, IS AS UNDER: THE ASSESSEE, AN INDIVIDUAL, OWNED AROUND 4 ACRES AND 20 GUNTAS OF LAND AT HOSEKERAHALLI, BANGALORE SOUTH AND HIS W IFE SMT. KALAVATHI ALSO OWNED ABOUT 5 ACRES AND 9 GUNTAS OF LAND AT ITTAMAD UGU WHICH WERE, ACCORDING TO THE ASSESSEE, ACQUIRED BY THEM SOME TIM E IN 1980. THE ASSESSEE CLAIMS THAT THEY HAVE CONSTITUTED A PARTNER SHIP FIRM STYLED, M/S. HIGHLAND ENTERPRISES BY CONTRIBUTING THE SAID PROPER TIES AS THEIR CAPITALS ALONG WITH M/S. L.K. TRUST ON 23.12.1988 FOR THE DE VELOPMENT OF THE SUBJECT PROPERTIES BY AVAILING THE EXPERTISE AVAILABLE WITH THE SAID TRUST. IT WAS IN RESPECT OF THE TRANSACTION ENTERED INTO BY THE ASSES SEE WITH THE SAID LAND, THE AO HAD ASSESSED LONG TERM CAPITAL GAIN [LTCG] I N THE HANDS OF THE ASSESSEE FOR THE REASONS RECORDED IN THE ASSESSMENT ORDER. SIMULTANEOUSLY, THE AO HAD INITIATED PENAL PROCEEDINGS U/S 271(1)(C ) OF THE ACT, ALLEGING THAT THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME . 3.1. DURING THE COURSE OF PENAL PROCEEDINGS, THE A SSESSEE WAS REQUIRED BY THE AO TO EXPLAIN AS TO WHY PENALTY SHOUL D NOT BE IMPOSED FOR HAVING CONCEALED THE PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME ETC., AFTER TAKING INTO ACCOUNT THE DETAILED SUBMISSION MADE BY THE ASSESSEE AS RECORDED IN HER P ENALTY ORDER UNDER CONSIDERATION, THE AO HAD REJECTED THE CONTENTIONS OF THE ASSESSEE AND, PAGE 3 OF 11 ITA NO.887/ BANG/2011 3 ACCORDINGLY, IMPOSED THE PENALTY. THE REASONS RECORD ED BY THE AO FOR REJECTING THE ASSESSEES SUBMISSION ARE EXTRACTED A S UNDER: 11 . THE TRANSACTION OF THE ASSESSEE CAME TO LIGHT ONLY BECAUSE OF THE SURVEY U/S 133A IN THE CASE OF BHUMIK A BUILDERS AND DEVELOPERS CONDUCTED 24.8.2005 BY ITO, WARD 3(1), BANGALORE. THE ASSESSEE TO TRANSFERRED THE PROPERTY 22/5/2004 DID NOT DISCLOSE THE SAME IN THE RETURN OF INCOME FOR THE ASST. YEAR 2005-06 AND CHOS E TO DECLARE ONLY RENTAL INCOME AND INTEREST INCOME. HAD NOT SURVEY( WAS) CONDUCTED IN BHUMIKA BUILDERS AND DEVELOPERS, THE TRANSACTION WOULD NOT HAVE COME TO LIGHT AND THE ASSESSEE WOULD HAVE CONCEALED THIS INCOME F ROM DISCLOSING THE SAME TO THE DEPARTMENT. THUS, THE ASSESSEE FAILED TO DISCLOSE THE TRANSACTION TO THE DEPARTMENT AND, HENCE, CONCEALED THE INCOME AND FIL ED THE INACCURATE PARTICULARS. 12. APART FROM THIS, THE ASSESSEE IS LEGALLY BO UND TO DECLARE THE RECEIPT OF MONEY TRANSACTIONS FROM THE PROPERTY AND SHOULD HAVE OFFERED THE EXPLANATION FOR THE SAME. BASED ON THIS IT IS FOR THE DEPARTMENT TO DE CIDE WHETHER THE TRANSACTION IS TAXABLE OR EXEMPT. THE I.T. ACT DO NOT GIVE THE RIGHT TO THE ASSESSEE TO DECIDE WHETHER THE INCOME IS EXEMPT OR TAXABLE ON HIS OWN AND AVOID PAYMENT OF TAXES UNDER THE GUISE THAT THE INCO ME RECEIVED IS EXEMPT. 13. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE, IT IS EVIDENT FROM RECODS AND ALSO FROM THE ABOVE T HAT THE ASSESSEE HAS DELIBERATELY AND CONSCIOUSLY CONCEAL ED THE FACTS AND FURTHER FOUND THAT THE FACTS FURNISHE D WERE FOUND TO BE INACCURATE AND, HENCE, THE ASSESSE E HAS PAGE 4 OF 11 ITA NO.887/ BANG/2011 4 RENDERED HIMSELF FOR THE PENALTY LEVIABLE UNDER 271(1)(C). 3.2. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE BEF ORE THE CIT (A) FOR RELIEF. AFTER GIVING DUE WEIGHT-AGE TO THE CO NTENTIONS OF THE ASSESSEE AS RECORDED IN HER APPELLATE ORDER, THE CIT (A) HAD REJECTED THE ASSESSEES SUBMISSION AND JUSTIFIED THE STAND OF THE AO IN LEV YING A MINIMUM PENALTY U/S 271(1)(C) OF THE ACT. THE REASONS RECORDED BY T HE FIRST APPELLATE AUTHORITY IN BRUSHING ASIDE THE ASSESSEES CLAIM ARE EXTRACTED AS UNDER: 3.2. IN THE WRITTEN AS WELL AS ORAL SUBMISSIONS MADE BY THE APPELLANT DURING THE COURSE OF THE APPELLATE PROCEEDINGS, THE MAIN ARGUMENT TAKEN BY THE APPELLAN T IS THAT, SINCE THE HONBLE HIGH COURT IN CIVIL MISCELL ANEOUS PETITION NO.34/2007 DATED 13.11.2007, HAS HELD THAT THE EXISTENCE OF PARTNERSHIP VIZ., M/S HIGHLAND ENTERPR ISES IS NOT DISPUTED, THERE IS NO CAUSE FOR LEVY OF PENAL TY AS THE FINDINGS OF THE AO AND THE HIGH COURT ARE CONTR ARY. 3.3. THIS ARGUMENT OF THE APPELLANT CANNOT BE ACCE PTED BECAUSE THE HONBLE HIGH COURT OF KARNATAKA IN THE MISC. PETITION REFERRED TO HAS NOT GIVEN ANY FINDING REGA RDING THE PARTNERSHIP FIRM. THE MP BEFORE THE HONBLE HI GH COURT IS ONLY FOR SETTING UP AN ARBITRATOR FOR SETTL ING THE DISPUTE BETWEEN THE TWO PARTIES WHO, IN THAT PETITI ON, HAVE NOT DISPUTED THE PARTNERSHIP BEFORE THE HONBL E HIGH COURT. THE HONBLE HIGH COURT HAS HAD NO OCCAS ION TO EXAMINE THE ISSUE REGARDING THE GENUINENESS OF T HE PARTNERSHIP FIRM. AS SUCH, THIS ARGUMENT OF THE AP PELLANT DOES NOT HELP HIS CASE 3.4. HAVING EXAMINED THE DEED OF PARTNERSHIP OF HIGHLAND ENTERPRISES REFERRED TO BY THE APPELLANT, I T IS SEEN THAT THE SHARE OF CONTRIBUTION VIS--VIS SHARE OF PROFIT OF THE PARTNERS IS AS UNDER: PAGE 5 OF 11 ITA NO.887/ BANG/2011 5 NAME OF THE PARTNER SHARE OF CONTRIBUTION PROFIT SHARING RATIO SRI V.S. BALASUBRA- MANYAM SMT. KALAVATHY 50% 50% 100% 3% M/S. L.K. TRUST 0% 97% . 3.5. THIS IS TOTALLY AGAINST THE PRE-REQUISITES OF A PARTNERSHIP FIRM AS ENVISAGED IN THE INDIAN PARTNERSHIP ACT AND , THEREFORE, VOID AB INITIO. 3.6. MOREOVER, IN THE PETITION NO.PCR 135/2006-07 FILED BY THE APPELLANT AGAINST SHRI K.L. SRIHARI REPRESENTIN G THE THIRD PARTNER VIZ., M/S. L.K. TRUST AND OTHERS, THE RELEV ANT COMPLAINT IN PARAS 32 AND 33 READS AS UNDER: 32. IT IS CLEAR FROM 33. THE COMPLAINANT ... .AND HIS WIFE SEPARATELY.. 3.7. THIS CLEARLY SHOWS THAT THE PARTNERSHIP DEED WA S A SHAM ARRANGEMENT. THE AO IN THE ASSESSMENT ORDER AND TH E PENALTY ORDER HAS CLEARLY BROUGHT OUT HOW THE APPELLA NT ALONG WITH HIS WIFE HAS WORKED OUT AND ATTEMPTED TO DECEI VE AND DEFY THE PROVISIONS CONTAINED IN THE INCOME-TAX ACT BY NOT OFFERING TO TAX THE AMOUNT RECEIVED ON TRANSFER OF HIS PROPERTY WHICH IS CLEARLY TAXABLE AS CAPITAL GAIN TO THE EXTENT OF RS.2,85,00,000/- AS UPHELD BY MY PREDECESSOR IN HI S ORDER REFERRED TO ABOVE. IT IS A CASE INVOLVING WILLFULL Y FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT. 3.8. AS SUCH, IT IS A FIT CASE FOR LEVY OF PENALTY U/ S 271(1)(C) OF THE ACT. THE PENALTY OF RS.63,41,544/- LEVIED BY THE AO BEING MINIMUM PENALTY LEVIABLE IS JUSTIFIED AND IT I S, THEREFORE, UPHELD. PAGE 6 OF 11 ITA NO.887/ BANG/2011 6 4. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE PR ESENT APPEAL. DURING THE COURSE OF HEARING, THE LEARNED A R REITE RATED MORE OR LESS WHAT HAS BEEN REPRESENTED BEFORE THE FIRST APPELLATE AUT HORITY. IN FURTHERANCE, THE SUBMISSION MADE BY THE LEARNED A R IS SUMMED UP AS UNDER: - THAT BOTH THE AUTHORITIES HAVE ERRED IN HOLDING T HAT THE PARTNERSHIP FIRM, M/S. HIGHLAND ENTERPRISES WAS NOT GENUINE; AND THAT THEY OUGHT TO HAVE APPRECIATED THAT THE ASS ESSEE HAD PRODUCED EVIDENCE TO SHOW THAT M/S. HIGHLAND ENTERP RISES WAS PROPERLY VESTED WITH THE TITLE TO THE PROPERTIES CON TRIBUTED BY THE ASSESSEE IN TERMS OF THE PARTNERSHIP DEED DATED 23.12.1988; - THAT THE AO HAD FAILED TO APPRECIATE THAT THE ASS ESSEE HAD NEITHER CONCEALED ANY INCOME NOR FURNISHED INACCURAT E PARTICULARS OF INCOME WARRANTING LEVY OF PENALTY; - THAT THE AO HAD ERRED IN HOLDING THAT THE FORMATI ON OF THE SAID FIRM ON 23.12.1988 AND CONTRIBUTION OF THE PRO PERTY BY THE ASSESSEE TOWARDS HIS CAPITAL IN THE YEAR 1988 AND LA TER HIS RETIREMENT FROM THE SAID FIRM DURING THE PREVIOUS YE AR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL WERE MERELY A DEV ISE OR A CLOAK TO CONCEAL THE SALE OF THE PROPERTY TO M/S L.K TRUST AND OTHERS AND THIS FINDING WAS PURELY ON SUSPICION AND SURMISE AND CONTRARY TO THE EVIDENCE AND FINDING OF THE HONBLE HIGH COURT AND, ACCORDINGLY WAS VITIATED IN AS MUCH AS THE ASSE SSEE HAD REALLY CONSTITUTED THE FIRM AND EVEN LATER INSTITUTE D PROCEEDINGS BOTH CIVIL AND CRIMINAL AGAINST THE PAR TNERS FOR BEING ENTICED TO FORM SUCH FIRM BY MAKING PROMISES W HICH THEY FAILED TO PERFORM THUS GIVING A RAW DEAL AND IN ALL THESE PROCEEDINGS. EVEN THE HONBLE HIGH COURT HAD UPHEL D THE FORMATION OF THE FIRM AND RETIREMENT FROM THE SAID FIRM. ACCORDINGLY, IT WAS ARGUED, IT CANNOT BE HELD THAT T HE FORMATION OF THE FIRM WAS A MERELY A DEVISE TO CONCEAL THE SAL E TO AVOID CAPITAL GAINS AND, ACCORDINGLY, SUCH FINDING WAS VIT IATED; PAGE 7 OF 11 ITA NO.887/ BANG/2011 7 - THAT IT IS WELL-SETTLED THAT THE ASSESSMENT PROCE EDINGS WERE DIFFERENT AND INDEPENDENT PROCEEDINGS; THAT THE PEN ALTY PROCEEDINGS WERE PENAL IN NATURE AND, THEREFORE, TH E AUTHORITY WAS BOUND, IN LAW, TO HOLD THAT THE ASSESSEE WAS FI RST GUILTY OF CONCEALMENT OF INCOME BEFORE IMPOSING THE PENALTY; - THAT THERE WERE TWO FINDINGS, NAMELY, (I) ONE OF T HE AO ON THE BASIS OF THE GRIEVANCES OF THE ASSESSEE VOICED IN T HE CIVIL AND CRIMINAL PROCEEDINGS CONFIRMED BY THE CIT(A); AND (I I) ANOTHER BY THE HONBLE HIGH COURT ON THE BASIS OF THE ASSESS EES GRIEVANCE IN THE LITIGATION AND, THUS, THERE WERE T WO VIEWS EACH ONE AS FORMIDABLE AS THE OTHER. IF THERE WERE TWO VIEWS, PENALTY CANNOT BE LEVIED AS RULED BY THE HONBLE SUPR EME COURT. RELIES ON CASE LAWS : CEMENT MARKETING CO. OF INDIA LTD V. ASST. COMMISSI ONER OF SALES-TAX, INDORE & OTHERS - 124 ITR 15 (SC); CIT, WEST BENGAL V. VEGETABLE PRODUCT LTD 88 ITR 192 (SC); CIT V. ISHTIAQ HUSSAIN (1998) 232 ITR 673 (ALL); 4.1. ON THE OTHER HAND, THE LEARNED D R SUPPOR TED THE REASONS RECORDED BY THE AO IN IMPOSING THE PENALTY WHICH HAS BEEN DULY SUSTAINED BY THE LEARNED CIT (A). IT WAS, THEREFORE, PLEADED TH AT THERE WAS NO ANY INFIRMITY IN THE FINDINGS OF THE CIT (A) WHICH WARRA NTS THE INTERVENTION OF THIS BENCH. 5. WE HAVE CAREFULLY CONSIDERED THE RIV AL SUBMISSIONS, PERUSED THE RELEVANT CASE RECORDS AND ALSO THE VARIOUS CASE LAW S ON WHICH THE LEARNED AR HAD PLACED STRONG RELIANCE. 5.1. IT WAS AN ADMITTED FACT THAT TH E EARLIER BENCH OF THIS TRIBUNAL TOOK A STAND THAT THE ALLEGED TRANSFER OF THE SUBJE CT PROPERTIES HAD BEEN PAGE 8 OF 11 ITA NO.887/ BANG/2011 8 EFFECTED BY AN AGREEMENT DATED 22.5.2004, AS A RESUL T OF WHICH, THE ASSESSEE AND HIS WIFE HAVE, IN FACT, RECEIVED THEIR RESPECTIVE SHARES DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR UNDER CON SIDERATION. IT MAY NOT BE INAPPROPRIATE TO MENTION HERE THAT THE QUANTUM A SSESSMENT COULD HAVE BEEN PRIMARILY DECIDED AGAINST THE ASSESSEE BY THE EA RLIER BENCH ON THE PREMISE THAT THE ASSESSEE WOULD HAVE BEEN IN ANY WAY LIABLE FOR CAPITAL GAINS TAX U/S. 45(3) OF THE ACT. ACCORDING TO THE ASSES SEE, THE SUBJECT PROPERTY WAS INTRODUCED AS HIS CAPITAL CONTRIBUTION IN THE B OOKS OF ACCOUNT OF THE ALLEGED FIRM FOR A SUM OF RS.2 CRORES WAY BACK ON 23 .12.1988. IF THAT WERE TO BE TRUE, THE ASSESSEE WOULD HAVE BEEN LIABLE FOR CAPITAL GAIN TAX BY VIRTUE OF S. 45(3) OF THE ACT WHICH CAME INTO EXISTENCE W. E.F. 1.4.1988. 5.2. HOWEVER, DURING THE PENALTY PROCEEDINGS, O N BEING QUERIED BY THE AO, THE ASSESSEE HAD SUBMITTED, AMONG OTHERS, T HAT AN AGREEMENT DATED 23.9.2005 ENTERED INTO BY THE FIRM, M/S. HIGHL AND ENTERPRISES WITH M/S. PRESTIGE ESTATES PROJECTS PVT. LTD WHICH, ACCO RDING TO THE ASSESSEE, CLEARLY ESTABLISHED THAT THE FORMATION OF THE FIRM O F HIGHLAND ENTERPRISES WAS IN POSSESSION OF THE PROPERTY. FURTHER, M/S. HI GHLAND ENTERPRISES HAD ALSO SURRENDERED SOME PORTION OF THE SUBJECT LAND A S EARLY AS ON 28.7.2000 TO THE BANGALORE DEVELOPMENT AUTHORITY WHICH PROVED THAT THE VERY EXISTENCE OF THE FIRM IN 2000 ITSELF. THIS SUBMISS ION OF THE ASSESSEE HAS NOT BEEN LOOKED INTO DURING THE COURSE OF PENALTY PR OCEEDINGS BUT, MERELY GONE BY THE FINDINGS WHICH HAVE BEEN RENDERED IN THE ASSESSMENT PROCEEDINGS. AS COULD BE SEEN FROM THE REASONS REC ORDED BY THE AO IN THE PENALTY PROCEEDINGS, THE AO HAD VIRTUALLY REPRODUCED THE EVENTS WHICH HAVE BEEN DESCRIBED IN THE ASSESSMENT PROCEEDINGS. IT S ETTLED POSITION OF LAW PAGE 9 OF 11 ITA NO.887/ BANG/2011 9 THAT THE ASSESSMENT PROCEEDING SHALL NOT OPERATE AS RES JUDICATA AND IT IS ALWAYS OPEN TO HAVE A RELOOK AT THE ASSESSMENT RECOR DS AND COME TO A DIFFERENT CONCLUSION IN THE PENALTY PROCEEDINGS. THERE IS NOTHING ON RECORD TO CONCLUSIVELY PROVE OR TO ESTABLISH THAT THE ASSES SEE HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THE ASSESSING OFFICER MERELY HAD STATED THAT 11 THE TRANSACTION OF THE ASSESSEE CAME TO LIGHT ONLY BECAUSE OF THE SURVEY U/S 133A IN THE CASE OF BHUMIK A BUILDERS AND DEVELOPERS CONDUCTED 24.8.2005 BY ITO, WARD 3(1), BANGALORE. THE ASSESSEE WHO TRANSFERRED THE PROPERTY 22.5.2004 DID NOT DISCLOSE THE SAME IN THE RETURN OF INCOME FOR THE ASST. YEAR 2005-06 AND CHOS E TO DECLARE ONLY RENTAL INCOME AND INTEREST INCOME. HAD NOT SURVEY WAS CONDUCTED IN BHUMIKA BUILDERS AND DEVELOPERS, THE TRANSACTION WOULD NOT HAVE COME (TO ) LIGHT AND THE ASSESSEE WOULD HAVE CONCEALED THIS IN COME FROM DISCLOSING THE SAME TO THE DEPARTMENT. THUS, THE ASSESSEE FAILED TO DISCLOSE THE TRANSACTION TO THE DEPARTMENT AND, HENCE, CONCEALED THE INCOME AND FIL ED THE INACCURATE PARTICULARS. 12.. 13. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE IT IS EVIDENT FROM RECORDS AND ALSO FROM THE ABOVE THA T THE ASSESSEE HAS DELIBERATELY AND CONSCIOUSLY CONCEAL ED THE FACTS AND FURTHER FOUND THAT THE FACTS FURNISHE D WERE FOUND TO BE INACCURATE AND HENCE THE ASSESSEE HAS RENDERED HIMSELF FOR THE PENALTY LEVIABLE UNDER (SEC TION) 271(1)(C). PAGE 10 OF 11 ITA NO.887 /BANG/2011 10 5.3. IN ESSENCE, THERE IS NOTHING ON RECORD TO EST ABLISH WITH DOCUMENTARY PROOF THAT THE ASSESSEE HAD, IN FACT, CO NCEALED THE PARTICULARS OF HIS INCOME AND/OR FURNISHED INACCURATE PARTICULA RS OF SUCH INCOME. IN STEAD, THE ASSESSING OFFICER HAS MERELY REPEATED WHA T HAS BEEN RECORDED IN THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE. 5.4. ON HER PART, THE LEARNED CI T (A) HAD HEAVILY RELIED ON THE FINDINGS OF HER PREDECESSOR IN THE QUANTUM APPEAL O F THE ASSESSEE AND ON THE BASIS OF WHICH, SHE CAME TO A CONCLUSION THAT I T WAS A FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. HOWEVER, AS MENT IONED EARLIER THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS CANNOT OPERA TE AS RES JUDICATA SINCE THE CONSIDERATION THAT ARISE IN PENAL PROCEEDINGS ARE INVARIABLY DIFFE RENT FROM THOSE IN THE ASSESSMENT PROCEEDINGS. 5.5. OUR ABOVE VIEW IS IN CONSONANCE WITH THE RULING OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V. ISHTIAQ HUSSAIN REPORTED IN (1998) 232 ITR 673 (ALL): (1998) 150 CTR (ALL) 444. FOR READY REFERENCE, THE RELEVANT PORTION OF THE RULING OF THE HONBLE C OURT IS EXTRACTED AS UNDER: THE DEGREE OF PROOF NECESSARY UNDER THE EXPLANATION TO S. 271(1)(C) IS THAT IN A CIVIL SUIT, VIZ., PREPOND ERANCE OF PROBABILITY. THE EXPLANATION MERELY RAISES A REBUTTA BLE PRESUMPTION WHICH COULD BE DISCHARGED IN A GIVEN CA SE BY POINTING OUT THE FACTORS AND THE MATERIALS IN FAVOU R OF THE ASSESSEE. IT IS SETTLED THAT THE FINDINGS GIVE N IN ASSESSMENT PROCEEDINGS WOULD BE RELEVANT AND ADMISS IBLE MATERIALS IN PENALTY PROCEEDINGS, BUT, THOSE FINDIN GS CANNOT OPERATE AS RES JUDICATA BECAUSE THE CONSIDER ATION THAT ARISE IN PENALTY PROCEEDINGS ARE DIFFERENT FROM THOSE IN THE ASSESSMENT PROCEEDINGS. PAGE 11 OF 11 ITA NO.887 /BANG/2011 11 5.6. IN THE INSTANT CASE, IT CANNOT B E CONCLUSIVELY PROVED FOR PENALTY PROCEEDINGS THAT THE FIRM M/S. HIGHLAND ENTERPRISES WAS NEVER IN EXISTENCE AND ITS ALLEGED FORMATION WAS ONLY A PLOY TO AVOID P AYMENT OF CAPITAL GAINS TAX. 5.6.1. IN THE ABOVE CIRCUMSTANCES, WE TAKE A DIVE RGENT VIEW FROM THAT OF THE AUTHORITIES BELOW. HENCE, THE PENALTY L EVIED BY THE AO AND SUBSEQUENTLY SUSTAINED BY THE CIT (A) WILL NOT STAND THE TESTIMONY OF LAW AND, THEREFORE, THE SAME IS DELETED. 6. IN THE RESULT , THE ASSESSEES APPEAL IS ALLOWED. THE ORDER PRONOUNCED ON THE 23 RD DAY OF NOVEMBER, 2012 AT BANGALORE. SD/- SD/- (N BARATHVAJA SANKAR) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BAN GALORE.