M/s. Modern Malleables Ltd., Kolkata V. ACIT, Central Circle - XXVII, Kolkata, Kolkata

ITA 908/KOL/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1560 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 10-04-2017
• Assessment Year: 1996-1997
• Appeal Filed On: 17-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P KHAITAN; A K GUPTA A R MD USMAN
• Keywords: Unexplained expenditure; Search and seizure; Opportunity of being heard; Principle of natural justice; Question of law; Initiation of penalty proceedings; Block assessment; Revised return; Bonafide mistake
• Section: 69C; 143(3); 37(1); 69; 54; 132

Judgement Text

I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 1 OF 35 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 908/KOL/ 2011 ASSESSMENT YEAR: 1996-1997 M/S. MODERN MALLEABLES LIMITED,.................... ........................APPELLANT 53, MIRZA GHALIB STREET, KOLKATA-700 016 [PAN:AABCM 5669 D ] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ....................RESPONDENT CIRCLE-8, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 & I .T.A. NO. 1888/KOL/ 2016 ASSESSMENT YEAR: 1996-1997 DEPUTY COMMISSIONER OF INCOME TAX,................. ....................APPELLANT CIRCLE-15(2), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 -VS.- M/S. MODERN MALLEABLES LIMITED,.................... ........................RESPONDENT 53, MIRZA GHALIB STREET, KOLKATA-700 016 [PAN:AABCM 5669 D ] APPEARANCES BY: SHRI J.P. KHAITAN, A.R. & SHRI A.K. GUPTA, A.R. , F OR THE ASSESSEE MD. USMAN, CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : JULY 26, 2017 DATE OF PRONOUNCING THE ORDER : AUGUST 30, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M. .: OUT OF THESE TWO APPEALS, ONE APPEAL BEING ITA NO. 1888/KOL/2016 IS THE APPEAL OF THE REVENUE, WHICH IS DIRECTED AGA INST THE ORDER OF THE LD. I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 2 OF 35 COMMISSIONER OF INCOME TAX (APPEALS)-12, KOLKATA DA TED 24.06.2016 PASSED IN THE QUANTUM PROCEEDINGS, WHILE THE OTHER APPEAL BEING ITA NO. 908/KOL/2011 IS THE APPEAL OF THE ASSESSEE, WHICH I S DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL-II, KOLKATA DATED 31.03.2011 PASSED IN THE PENALTY PROCEEDINGS. SINCE THE ISSUES INVOLVED IN BOTH THESE APPEALS ARE INTER-LINKED, TH E SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONS OLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE FOR A .Y. 1996-97 BEING ITA NO. 1888/KOL/2016 . THE ISSUE INVOLVED IN GROUND NO. 1 OF THIS APPEAL RELATES TO THE DELETION BY THE LD. CIT(APPEA LS) OF THE DISALLOWANCE OF RS.8,22,42,335/- MADE BY THE ASSESSING OFFICER O N ACCOUNT OF ASSESSEES CLAIM FOR THE PURCHASES OF IMPORTED RAW MATERIALS FROM GERALD METAL, SWITZERLAND AND EUROMIN S.A. GENEVA. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TRANSMISSION LINE HARDWARE AND ACCESSORIES. THE RETURN OF INCOME FOR THE YEAR UNDE R CONSIDERATION WAS ORIGINALLY FILED BY IT ON 29.11.1996 DECLARING A TO TAL INCOME OF RS.56,35,160/-. A SEARCH AND SEIZURE ACTION UNDER S ECTION 132 WAS CONDUCTED IN THE CASE OF THE ASSESSEE ON 03.09.1997 AS WELL AS ON SUBSEQUENT DATES. THEREAFTER A REVISED RETURN WAS F ILED BY THE ASSESSEE ON 06.11.1997 DECLARING A LOSS OF RS.5,83,30,250/- AFTER CLAIMING, INTER ALIA, A DEDUCTION ON ACCOUNT OF PURCHASES AMOUNTING TO R S.8,22,42,335/-. THE STAND OF THE ASSESSEE WAS THAT THERE WAS A MIST AKE IN NOT DEBITING THE PURCHASE OF IMPORTED RAW MATERIALS AMOUNTING TO RS. 8,22,42,335/- ALTHOUGH SALE OF SAID MATERIALS WAS BOOKED IN THE S ALES ACCOUNT AND THIS MISTAKE WAS RECTIFIED IN THE REVISED RETURN FILED O N 06.11.1997. IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3 ) VIDE AN ORDER DATED 31.03.1999, THIS STAND OF THE ASSESSEE WAS NO T ACCEPTED BY THE ASSESSING OFFICER AND THE TOTAL INCOME OF THE ASSES SEE WAS DETERMINED BY I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 3 OF 35 HIM AT RS.5,54,31,939/-. THE SAID ASSESSMENT WAS TH E SUBJECT MATTER OF APPEALS AND WHEN THE MATTER TRAVELLED TO THE HONBL E CALCUTTA HIGH COURT, IT WAS SENT BACK BY THEIR LORDSHIPS OF THE HONBLE CALCUTTA HIGH COURT TO THE ASSESSING OFFICER TO ARRIVE AT A DEFINITE FINDI NG AS REGARDS THE CLAIM OF THE ASSESSEE FOR PURCHASE OF IMPORTED RAW MATERIALS OF RS.8,22,42,335/-. THE ASSESSING OFFICER WAS ALSO DIRECTED BY THE HON BLE CALCUTTA HIGH COURT TO FIND OUT THE REAL NATURE OF THE TRANSACTIO NS AFTER AFFORDING SUFFICIENT AND PROPER OPPORTUNITY TO THE ASSESSEE O F BEING HEARD. DURING THE COURSE OF THE SET ASIDE PROCEEDINGS BEFORE THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THE RELEVANT DETAILS IN SUPPORT OF ITS CLAIM OF PURCHASE OF RAW MATERIALS IN QUESTION ALONG WITH TH E DOCUMENTARY EVIDENCE IN THE FORM OF BILL OF LADING, INVOICE, DE BIT NOTE, ETC. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER THAT THE SAID PURCHASES OF IMPORTED RAW MATERIALS HAVE BEEN WRONG LY DEBITED TO THE ACCOUNT OF M/S. JJH INDUSTRIES LIMITED, ONE OF ITS SISTER CONCERN TO WHOM THE SAID IMPORTED MATERIAL WAS ULTIMATELY SOLD INST EAD OF PURCHASE ACCOUNT. IT WAS CONTENDED THAT THE SAID PURCHASES O F IMPORTED RAW MATERIALS THUS WERE NOT DEBITED TO THE PURCHASE ACC OUNT, ALTHOUGH THE CORRESPONDING SALES THEREOF WAS DULY CREDITED TO SA LES ACCOUNT. THE RELEVANT DETAILS OF THE PURCHASES OF IMPORTED MATER IALS FROM TWO PARTIES WERE ALSO FURNISHED BY THE ASSESSEE, WHICH AS GIVEN BY THE ASSESSING OFFICER IN TABULAR FORM IN THE ASSESSMENT ORDER WER E AS UNDER:- FROM EUROMIN : SL. NO. PARTICULARS DATE AMOUNT 1. BILL OF LADING(MV RAMDAS, (VESSEL) 25.08.1994 $15,76,688 2. INVOICE(985 MT) 25.08.1994 $15,76,688 3. PAYMENT 06.04.1995 05.07.1995 RS.4,70,07,261/ - RS.52,28,082/- 4. DEBIT NOTE ADVICE 05.07.1995 RS.5,22,35,343/ - (RS.4,96,94,684/- MATERIAL VALUE REST INTEREST) I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 4 OF 35 FROM GERALD METALS :- SL. NO. PARTICULARS DATE AMOUNT 1. BILL OF LADING 19.07.1995 $8,98,858.08 2. INVOICE(P - 50440W) 19.07.1995 $15,76,688 3. HIGH SEA SALE TO JJH 3 0.09.1995 4. PAYMENT 29.01.1996 22.03.1996 RS.3,15,88,829/ - RS.25,00,000/- DEBIT NOTE ADVICE (ALLAHABAD BANK) 03.04.1996 RS.3,40,44,753/ - IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE FOR TH E AFORESAID PURCHASES FROM THE RELEVANT DOCUMENTARY EVIDENCE, AN INSPECTO R WAS DEPUTED BY THE ASSESSING OFFICER. FROM THE RELEVANT DETAILS FU RNISHED BY THE ASSESSEE, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE BI LL OF LADING AS WELL AS INVOICES IN RESPECT OF PURCHASES FROM EUROMIN S.A. GENEVA WERE DATED 25.08.1994 SHOWING THAT THE RELEVANT MATERIALS WERE LOADED ON SHIP ON 25.08.1995 ITSELF. AS FURTHER NOTICED BY THE ASSESS ING OFFICER, PAYMENTS AGAINST THE SAID PURCHASES, HOWEVER, WERE MADE ONLY ON 06.04.1995 AND 05.07.1995, I.E. AFTER THE GAP OF APPROXIMATELY EIG HT MONTHS. IN THIS REGARD, IT WAS EXPLAINED BY THE ASSESSEE THAT THE P AYMENTS WERE MADE ONLY AFTER RECEIPT OF MATERIALS. ACCORDING TO THE A SSESSING OFFICER, THE MATERIALS THUS WERE SHIFTED TO INDIA AFTER EIGHT MO NTH FROM ITS LOADING WHICH WAS VERY UNUSUAL. AS THE ASSESSEE COULD NOT O FFER ANY SATISFACTORY EXPLANATION IN RESPECT OF THIS INORDINATE DELAY, TH E ASSESSING OFFICER HELD THAT THE CLAIM OF THE ASSESSEE OF HAVING PURCHASED THE MATERIALS FROM EUROMIN S.A. GENEVA WAS NOT PROVED. 4. AS REGARDS THE PURCHASES CLAIMED TO BE MADE BY T HE ASSESSEE FROM GERALD METAL, SWITZERLAND, THE ASSESSING OFFICER NO TICED THAT THE BILL OF LADING AS WELL AS INVOICE WERE OF THE SAME DATE, I. E. 19.07.1995. IN THIS REGARD, THE CLAIM OF THE ASSESSEE WAS THAT THE SAID MATERIAL WAS SOLD TO M/S. JJH LIMITED, ONE OF ITS SISTER CONCERNS IN TRA NSIT AS HIGH-SEA-SALE ON I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 5 OF 35 30.09.1995. THE ASSESSING OFFICER FOUND THAT THE PA YMENTS AGAINST THE PURCHASES MADE FROM GERALD METAL, SWITZERLAND, HOWE VER, WERE MADE BY THE ASSESSEE ONLY ON 19.01.1996 AND 22.03.1996, I.E . AFTER A GAP OF MORE THAN SIX MONTHS. THIS DELAY WAS AGAIN EXPLAINED BY THE ASSESSEE BY STATING THAT THE PAYMENTS WERE MADE TO GERALD METAL , SWITZERLAND ONLY UPON RECEIPT OF MATERIAL. ACCORDING TO THE ASSESSIN G OFFICER, THE ASSESSEE, HOWEVER, COULD NOT PRODUCE ANY EVIDENCE TO PROVE TH AT THE MATERIAL WAS ACTUALLY RECEIVED IN INDIA BY THE ASSESSEE OR BY M/ S. JJH LIMITED. HE, THEREFORE, HELD THAT THERE WAS A FAILURE OF THE ASS ESSEE TO PROVE THAT ACTUAL PURCHASE HAD TAKEN PLACE FROM GERALD METAL, SWITZERLAND DURING THE YEAR UNDER CONSIDERATION. HE ALSO NOTED THAT TH E ASSESSEE COULD NOT PRODUCE ANY RECONCILIATION OF MATERIAL FLOW, I.E. O PENING STOCK, PURCHASE, CONSUMPTION/SALE AND CLOSING STOCK TO SUPPORT AND S UBSTANTIATE ITS CLAIM FOR PURCHASE OF IMPORTED MATERIALS IN QUESTION. ACC ORDINGLY, THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF PUR CHASE OF IMPORTED MATERIALS WAS DISALLOWED BY THE ASSESSING OFFICER I N THE FRESH ASSESSMENT COMPLETED VIDE AN ORDER DATED 30.03.2013 AS PER THE DIRECTION OF THE HONBLE CALCUTTA HIGH COURT. 5. AGAINST THE ORDER OF THE ASSESSING OFFICER DATED 30.03.2013, THE ASSESSEE AGAIN WENT IN APPEAL BEFORE THE LD. CIT(AP PEALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT( APPEALS), THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER IN SU PPORT OF ITS CLAIM OF PURCHASE OF IMPORTED MATERIALS IN QUESTION WERE REI TERATED BY THE ASSESSEE. IT WAS ALSO SUBMITTED BY THE ASSESSEE THA T THE ASSESSING OFFICER HAD NOT APPRECIATED THE RELEVANT DETAILS AND DOCUME NTS FURNISHED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM OF PURCHASE OF RAW MATERIALS IN QUESTION AND THE SAID PURCHASES WERE HELD TO BE NOT GENUINE BY HIM MERELY ON THE BASIS THAT THERE WAS A DELAYED PAYMENT. THE LIST OF DOCUMENTS SUBMITTED BEFORE THE ASSESSING OFFICER IN SUPPORT OF ITS CLAI M FOR THE SAID PURCHASES WAS ALSO FILED BY THE ASSESSEE BEFORE THE LD. CIT(A PPEALS), WHICH AS I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 6 OF 35 EXTRACTED BY THE LD. CIT(APPEALS) ON PAGE 5 & 6 OF HIS IMPUGNED ORDER, IS GIVEN HEREUNDER:- FOR MATERIALS RECEIVED FROM EUROMIN SA SL. NO. PARTICULARS PG. NO. IN PB 1. COPY OF BILL OF LADING IN RELATION 1 - 2 2. COPY OF INVOICE FROM EUROMIN SA 3 3. COPY OF THE BILLS OF THE WAREHOUSING AGENT 4 - 50 4. COPY OF THE LEDGER OF EUROMIN SA 51 5. COPY THE BANK VOUCHER IN RELATION TO PAYMENT TO EUROMIN SA 52 6. COPY OF THE PAYMENT ADVICE FROM ALLAHABAD BANK 53 7. COPY OF THE JOURNAL VOUCHER PASSED IN RELATION TO EUROMIN SA 54 8. COPY OF THE BANK STATEMENT SHOWING PAYMENT 55 - 56 9. COPY OF THE DEBIT NOTE RAISED BY MODERN MALLEABLES ON JJH INDUSTRIES LTD. FOR RS.1,49,12,200 57 10. COPY OF THE DEBIT NOTE RAISED BY MODERN MALLEABLES ON JJH INDUSTRIES LTD. FOR RS.1,32,10,000 58 11. COPY OF THE DEBIT NOTE RAISED BY MODERN MALLEABLES ON JJH INDUSTRIES LTD. FOR RS.1,21,43,100 59 12. COPY OF CREDIT NOTE RECEIVED FROM JJH INDUSTRIES LIMITED FOR RS.89,31,552/- 60 13. COPY OF THE DEBIT NOTE RAISED BY MODERN MALLEABLES ON JJH INDUSTRIES LTD. FOR RS.40,77,100 61 14. COPY OF LEDGER OF JJH INDUSTRIES LTD. 62 - 63 15. COPY OF THE ANNUAL REPORT FOR THE FINANCIAL YEAR 1996-97 64 - 83 FOR MATERIALS RECEIVED FROM GERALD METALS SA SL. NO. PARTICULARS PG. NO. IN PB 1. COPY OF THE INVOICE 84 2. COPY OF THE BILL OF LADING 85 3. COPY OF THE HIGH SEA SALE AGREEMENT WITH JJH INDUSTRIES LTD. 86 - 87 I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 7 OF 35 4. COPY OF THE INVOICE RAISED ON JJH INDUSTRIES LTD. 88 5. COPY THE LEDGER OF GERALD METALS SA 89 6. COPY OF THE JOURNAL VOUCHER PASSED IN RELATION TO GERALD METALS. 90 - 91 7. COPY OF BANK VOUCHER 92 8. COPY OF THE PAYMENT ADVICE FROM ALLAHABAD BANK 93 9. COPY OF THE INVOICE OF THE WAREHOUSING AGENT 94 - 96 IT WAS BROUGHT TO THE NOTICE OF THE LD. CIT(APPEALS ) BY THE ASSESSEE THAT THE ASSESSING OFFICER HAD DEPUTED AN INSPECTOR TO V ERIFY THE ABOVE DOCUMENTS BUT THE COPY OF THE INSPECTORS REPORT ON SUCH VERIFICATION WAS NEVER PROVIDED TO THE ASSESSEE. IT WAS ALSO BROUGHT TO THE NOTICE OF THE LD. CIT(APPEALS) BY THE ASSESSEE THAT THERE WAS A MISTA KE IN NOT DEBITING THE PURCHASE OF IMPORTED MATERIAL IN QUESTION TO THE PR OFIT & LOSS ACCOUNT AND INSTEAD THE SAME WERE DEBITED TO THE ACCOUNT OF M/S. JJH INDUSTRIES LIMITED RESULTING IN INFLATION OF SUNDRY DEBTORS AC COUNT WHILE THE COST OF MATERIALS REMAINED DEFLATED. IT WAS SUBMITTED BY T HE ASSESSEE THAT THIS MISTAKE WAS SPECIFICALLY POINTED OUT TO THE ASSESSI NG OFFICER, BUT HE FAILED TO APPRECIATE THE SAME. IT WAS SUBMITTED BY THE ASSESSEE THAT THE IMPORTED MATERIALS IN QUESTION PURCHASED BY IT WAS SOLD TO M/S. JJH INDUSTRIES LIMITED AND EVEN THOUGH THERE WAS A SEAR CH CONDUCTED IN THE CASE OF THE SAID CONCERN ON 03.09.1997, NO ADDITION OR DISALLOWANCE WAS MADE IN THE CASE OF M/S. JJH INDUSTRIES LIMITED EIT HER IN THE ORIGINAL ASSESSMENT OR EVEN IN THE BLOCK ASSESSMENT ON ACCOU NT OF THE PURCHASE OF THE SAID MATERIAL MADE FROM THE ASSESSEE. IT WAS CO NTENDED THAT THE GENUINENESS OF THE SAID PURCHASES THUS WAS ACCEPTED BY THE DEPARTMENT IN THE CASE OF M/S. JJH INDUSTRIES LIMITED. IT WAS CONTENDED THAT THE GENUINENESS OF THE PURCHASES IN QUESTION WAS DOUBTE D BY THE ASSESSING OFFICER MERELY ON THE BASIS OF DELAYED PAYMENTS IGN ORING THAT THE DELAYED PAYMENTS COULD BE FOR VARIOUS REASONS. IT WAS SUBMI TTED THAT THE IMPORTED MATERIAL WAS RECEIVED BY THE ASSESSEE ON T HE BASIS OF LETTER OF CREDIT ISSUED BY THE ALLAHABAD BANK AND EVEN THE PA YMENTS ADVICE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 8 OF 35 RECEIVED FROM ALLAHABAD BANK CLEARLY MENTIONED THE CORRESPONDING BILL OF LADING NUMBERS. IT WAS ALSO POINTED OUT FROM THE BI LL OF FORWARDING AGENT THAT THE FORWARDING AGENT HIMSELF HAD RECEIVED THE GOODS ONLY AFTER THREE MONTH. THE ATTENTION OF THE LD. CIT(APPEALS) WAS ALSO DRAWN BY THE ASSESSEE TO THE DETAILS PROVIDED TO THE ASSESSING O FFICER TO SHOW THE TRANSFER OF MATERIAL TO WAREHOUSING AGENT AS THE GO ODS WERE PLEDGED TO ALLAHABAD BANK. IT WAS CONTENDED BY THE ASSESSEE BE FORE THE LD. CIT(APPEALS) THAT THE DOCUMENTARY EVIDENCE FILED BY IT BEFORE THE ASSESSING OFFICER WAS SUFFICIENT TO SUPPORT AND SUB STANTIATE ITS CLAIM OF HAVING MADE THE PURCHASES OF RAW MATERIAL FROM THE CONCERNED TWO PARTIES AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE SAID PURCHASES WAS BASED ONLY ON SURMISES AND C ONJECTURES. 6. THE SUBMISSIONS MADE BY THE ASSESSEE FOUND MERIT WITH THE LD. CIT(APPEALS) AND HE PROCEEDED TO DELETE THE DISALLO WANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSEES CLAIM FO R PURCHASE OF RAW MATERIALS FOR THE FOLLOWING REASONS GIVEN IN HIS IM PUGNED ORDER:- THE SUBMISSIONS OF THE APPELLANT HAVE BEEN CAREFU LLY CONSIDERED AND I HAVE ALSO PERUSED THE ASSESSMENT O RDER. IN LIGHT OF THE ABOVE PARAGRAPHS, IT CAN BE SEEN THAT THE A.O HAS DISALLOWED THE PURCHASES HOLDING THEM TO BE NOT AN ACTUAL ONLY ON THE FACT THAT THE PAYMENTS MADE WAS DELAYED. THE ASSESSING OFFICER HAS NOT CONTROVERTED THE FACT THAT THE ACTUAL PAYMENT WAS MADE AND DELIVERY OF THE GOODS W ERE TAKEN AND THE AO ALSO ACCEPTED THAT THE MATERIAL WE RE SHIPPED TO INDIA. THE ASSESSING OFFICER HAS ALSO NOT CONTROVERTED TH E FACT THAT THE SUBSEQUENT SALE MADE TO GROUP-COMPANY WHICH WAS ALSO ASSESSED UNDER THE SEARCH AND SEIZURE PROVISIONS OF THE INCOME TAX ACT, 1961. THE APPELLANT HAD PROVIDED AL L THE DOCUMENTS IN RELATION TO PAYMENT MADE TO THE FOREIG N VENDORS AND ALSO PROVIDED COPIES OF THE CLEARING AG ENTS AND WAREHOUSING AGENT. THUS BY MERELY STATING THAT THE PAYMENT WAS DELAYED AND SUSPECTING SUCH PURCHASE IS WITHOUT ANY BASIS AND IS LIABLE TO BE SET ASIDE. AS PER THE ASS ESSMENT ORDER, THE INSPECTOR WAS DEPUTED TO VERIFY THESE DO CUMENTS FROM RESPECTIVE ISSUING AUTHORITIES AND HIS REPORT WAS PLACED ON RECORD. AS THERE IS NO FURTHER MENTION OF THE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 9 OF 35 INSPECTOR'S REPORT IN THE ASSESSMENT ORDER, IT CAN BE SAFELY INFERRED THAT THE REPORT DID NOT FIND ANY DISCREPAN CY IN THE DOCUMENTS RELIED UPON BY THE ASSESSEE. THE APPELLAN T'S CASE IS FURTHER STRENGTHENED ON THE FACT THAT THE APPELL ANT HAD IMMEDIATELY REVISED THE RETURN, AND THE SAID REVISE D RETURN WAS NOT AT ALL CONSIDERED BY THE ASSESSING OFFICER . 7. THE LD. D.R. SUBMITTED THAT THE CLAIM IN RESPECT OF PURCHASE OF IMPORTED MATERIALS IN QUESTION WAS MADE BY THE ASSE SSEE IN THE REVISED RETURN FILED FOR THE YEAR UNDER CONSIDERATION AND T HE SAME WAS REJECTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORIGINAL LY COMPLETED. HE SUBMITTED THAT THE SAID ASSESSMENT WAS THE SUBJECT MATTER OF APPEAL AND WHEN THE MATTER REACHED TO THE HONBLE CALCUTTA HIG H COURT, IT WAS REMANDED BY THE HONBLE CALCUTTA HIGH COURT TO THE ASSESSING OFFICER FOR DECIDING THE REAL NATURE OF TRANSACTIONS AFTER GIVI NG AN OPPORTUNITY TO THE ASSESSEE TO PROVE THEIR CASE. THE ASSESSING OFFICER WAS ALSO DIRECTED BY THE HONBLE CALCUTTA HIGH COURT TO ARRIVE AT A DEFI NITE FINDING AS TO THE OUTCOME OF THE TRANSACTIONS ON THE BASIS OF THE MAT ERIAL ON RECORD. HE SUBMITTED THAT THE ISSUE ACCORDINGLY WAS RE-EXAMINE D BY THE ASSESSING OFFICER AND THE CLAIM OF THE ASSESSEE FOR THE PURCH ASE OF IMPORTED MATERIALS WAS AGAIN REJECTED BY HIM FOR THE REASONS GIVEN IN PARAGRAPH NO. 2.3 TO 2.6 OF THE ASSESSMENT ORDER. HE INVITED OUR ATTENTION TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER TO POINT O UT THAT THERE WAS AN INORDINATE DELAY ON THE PART OF THE ASSESSEE TO MAK E PAYMENTS AGAINST THE PURCHASE OF RAW MATERIALS IN QUESTION AND THE SAID DELAY COULD NOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE. HE ALSO P OINTED OUT THAT THE ASSESSEE EVEN COULD NOT PRODUCE ANY EVIDENCE TO PRO VE THAT THE RELEVANT IMPORTED RAW MATERIAL WAS ACTUALLY RECEIVED BY THEM . HE SUBMITTED THAT THE ASSESSEE EVEN FAILED TO ESTABLISH THE FLOW OF I MPORTED RAW MATERIAL CLAIMED TO BE PURCHASED BY THEM. HE CONTENDED THAT THE LD. CIT(APPEALS), HOWEVER, FAILED TO APPRECIATE THESE ADVERSE FINDING S RECORDED BY THE ASSESSING OFFICER WHILE ALLOWING THE CLAIM OF THE A SSESSEE FOR THE PURCHASE OF IMPORTED MATERIALS IN QUESTION. HE CONT ENDED THAT THE FURTHER MOVEMENT OR UTILIZATION OF THE IMPORTED MAT ERIAL IN QUESTION I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 10 OF 35 CLAIMED TO BE PURCHASED BY THE ASSESSEE WAS ALSO NO T VERIFIED OR EXAMINED BY THE LD. CIT(APPEALS). ACCORDING TO HIM, THE LD. CIT(APPEALS) WAS ALSO NOT JUSTIFIED IN TAKING WITHOUT ANY BASIS THE REPORT OF THE INSPECTOR TO BE IN FAVOUR OF THE ASSESSEE. 8. THE LD. D.R. INVITED OUR ATTENTION TO THE MODIFI ED/RECTIFIED BALANCE- SHEET OF THE ASSESSEE-COMPANY AS ON 31.03.1996 PLAC ED AT PAGE NO. 128 OF THE PAPER BOOK TO POINT OUT THAT THERE WAS A CHANGE IN THE FIGURE OF SUNDRY DEBTORS TO THE EXTENT OF THE AMOUNT OF PURCH ASE OF IMPORTED MATERIAL IN QUESTION. IN THIS REGARD, HIS CONTENTIO N WAS THAT IT IS NOT CLEAR HOW THE UNACCOUNTED PURCHASE AS CLAIMED BY THE ASSE SSEE WILL HAVE EFFECT ON SUNDRY DEBTORS. HE CONTENDED THAT EVEN THE CHANG ES MADE BY THE ASSESSEE IN THE QUANTITATIVE DETAILS OF RAW MATERIA LS AS GIVEN ON PAGE NO. 137 WERE NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. HE CONTENDED THAT THE CLAIM OF THE ASSESSEE OF HAVING PURCHASED THE I MPORTED MATERIAL IN QUESTION THUS WAS NOT CONCLUSIVELY PROVED ON EVIDEN CE AND THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN DISALLOWING THE SAME . 9. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, TOOK US THROUGH THE RELEVANT PORTION OF THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT REMANDING THE MATTER TO THE ASSESSING OFFICER TO PO INT OUT THAT THE SPECIFIC FINDINGS RECORDED BY THEIR LORDSHIPS ON TH E CLAIM OF THE ASSESSEE FOR THE PURCHASE OF IMPORTED MATERIALS IN QUESTION WERE IN FAVOUR OF THE ASSESSEE. HE CONTENDED THAT THE MATTER WAS SENT BAC K ON REMAND TO THE ASSESSING OFFICER BY THE HONBLE HIGH COURT FOR THE SPECIFIC PURPOSE OF DECIDING THE REAL NATURE OF TRANSACTIONS AND ARRIVE AT A DEFINITE FINDING AS TO THE OUTCOME OF THE TRANSACTIONS ON THE BASIS OF MATERIAL ON RECORD. HE SUBMITTED THAT WHEN THE LIST OF DOCUMENTARY EVIDENC E WAS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER, AN INSPE CTOR WAS DEPUTED BY THE ASSESSING OFFICER TO VERIFY THE SAME. HE INVITE D OUR ATTENTION TO THE COPY OF THE INSPECTORS REPORT PLACED ON RECORD AND SUBMITTED THAT ALL THE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 11 OF 35 FINDINGS RECORDED BY THE INSPECTOR AFTER VERIFICATI ON WERE IN SUPPORT OF THE ASSESSEES CLAIM FOR THE PURCHASE OF IMPORTED M ATERIALS IN QUESTION. 10. THE LD. COUNSEL FOR THE ASSESSEE THEN TOOK US T HROUGH THE COPIES OF THE RELEVANT DOCUMENTS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IN SUPPORT OF ITS CLAIM FOR THE PURCHASE OF IMPORTE D MATERIAL IN QUESTION AS PLACED IN PAPER BOOK. HE INVITED OUR ATTENTION T O THE COPY OF BILL OF LADING DATED 25.08.1994 PLACED AT PAGE NO. 1 OF THE PAPER BOOK TO SHOW THAT 702 PIECES OF PRIMARY ALUMINIUM WIRE RODS WERE DESPATCHED BY EUROMIN S.A. GENEVA TO THE ASSESSEE THROUGH SHIPPIN G CORPORATION OF INDIA. HE ALSO INVITED OUR ATTENTION TO THE COPY OF INVOICE DATED 25.08.1994 RAISED BY EUROMIN S.A. GENEVA ON THE ASS ESSEE FOR THE SUPPLY OF THE SAID MATERIAL WEIGHING 985.08 METRIC TON FOR A TOTAL CONSIDERATION OF US DOLLAR 15,76,608. HE ALSO POINTED OUT FROM TH E SAID INVOICE THAT THE SAID PURCHASE WAS MADE AGAINST IRRECOVERABLE LETTER OF CREDIT ISSUED BY ALLAHABAD BANK. HE THEN DREW OUR ATTENTION TO THE C OPY OF BILL OF CLEARING AGENT M/S. S.B. INTERNATIONAL DATED 21.04.1995 TO S HOW THAT THE MATERIAL DESPATCHED BY EUROMIN S.A. GENEVA WAS RECEIVED IN I NDIA ONLY IN APRIL, 1995. HE THEN INVITED OUR ATTENTION TO THE DEBIT NO TE ADVICE ISSUED BY ALLAHABAD BANK IN JULY, 1995 TO SHOW THAT THE PAYME NT OF RS.4,96,09,468/- WAS MADE ON BEHALF OF THE ASSESSEE BY ALLAHABAD BANK TO EUROMIN S.A. GENEVA. HE ALSO POINTED OUT FROM THE S AID ADVICE THAT INTEREST OF RS.20,92,925/- WAS CHARGED BY THE ALLAH ABAD BANK TO THE ASSESSEE CALCULATED @ 18.5% FOR THE DELAY IN PAYMEN T MADE TO EUROMIN S.A. GENEVA. HE THEN REFERRED TO THE COPY OF LEDGER ACCOUNT OF EUROMIN S.A. GENEVA IN THE BOOKS OF THE ASSESSEE PLACED AT PAGE NO. 51 OF THE PAPER BOOK TO SHOW THAT THE AMOUNT PAID BY ALLAHABA D BANK TO THE SAID PARTY WAS DULY DEBITED IN THEIR LEDGER ACCOUNT ON 0 1.08.1995 BUT INSTEAD OF ADJUSTING THE SAME AGAINST THE PURCHASE ACCOUNT, THE ENTRY WAS SQUARED OFF BY DEBITING M/S. JJH INDUSTRIES LIMITED A/C. INSTEAD OF PURCHASE ACCOUNT. HE ALSO INVITED OUR ATTENTION TO THE COPIES OF VARIOUS DELIVERY CHALLANS ISSUED BY S.B. INTERNATIONAL PLAC ED AT PAGE NO. 5 TO 15 OF I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 12 OF 35 THE PAPER BOOK TO SHOW THAT THE ENTIRE MATERIAL REC EIVED FROM EUROMIN S.A. GENEVA WAS TRANSFERRED TO THE GODOWN OF JAMES ALEXANDER & CO. LIMITED FOR STORING IN THEIR GODOWN AND ALSO INVITE D OUR ATTENTION TO A LETTER DATED 23.04.1995 ISSUED BY M/S. JAMES ALEXAN DER & CO. LIMITED ACKNOWLEDGING THE RECEIPT OF THE SAID MATERIAL IN T HEIR WAREHOUSES WHICH WAS PLEDGED TO ALLAHABAD BANK. HE ALSO INVITED OUR ATTENTION TO A COPY OF LETTER DATED 25.04.1995 ISSUED BY ALLAHABAD BANK TO JAMES ALEXANDER & CO. LIMITED ADVISING THEM NOT TO RELEASE THE SAID M ATERIAL WITHOUT THE CONSENT OF THE BANK. HE SUBMITTED THAT THE CONSENT WAS FINALLY GIVEN BY ALLAHABAD BANK ON 18.07.1995 (COPY OF LETTER AT PAG E NO. 181 OF THE PAPER BOOK) TO RELEASE THE GOODS TO M/S. JAMES ALEXANDER & CO. LIMITED AND ACCORDINGLY THE MATERIAL WAS TRANSFERRED/SOLD TO M/ S. JJH INDUSTRIES LIMITED FOR WHICH DEBIT NOTES AMOUNTING TO RS.4,02, 65,300/- (COPIES AT PAGE NO. 57-59 OF THE PAPER BOOK) WERE RAISED ON 3 0.03.1996. HE CONTENDED THAT THERE WAS SUFFICIENT DOCUMENTARY EVI DENCE THUS FURNISHED BY THE ASSESSEE TO SUPPORT AND SUBSTANTIATE NOT ONL Y ITS CLAIM OF PURCHASE OF IMPORTED MATERIAL IN QUESTION BUT THE SALE THERE OF TO M/S. JJH INDUSTRIES LIMITED. HE ALSO TOOK US THROUGH THE SIM ILAR DOCUMENTARY EVIDENCE PLACED IN HIS PAPER BOOK AT PAGES 84 TO 96 IN ORDER TO SUPPORT AND SUBSTANTIATE THE CLAIM OF THE ASSESSEE FOR PURC HASE OF IMPORTED MATERIAL FROM M/S. GERALD METAL, SWITZERLAND AND TH E SALE OF THE SAID MATERIAL TO M/S. JJH INDUSTRIES LIMITED IN TRANSIT ON HIGH-SEA. HE CONTENDED THAT THE AMOUNTS OF BOTH THESE PURCHASES AS PAID THROUGH BANK WERE DULY DEBITED BY THE ASSESSEE IN THE LEDGER ACC OUNT OF THE CONCERNED PARTIES BUT WHILE CREDITING THEIR ACCOUNTS, THE COR RESPONDING AMOUNTS WERE DEBITED WRONGLY TO THE ACCOUNT OF M/S. JJH IND USTRIES LIMITED INSTEAD OF PURCHASE ACCOUNT. HE CONTENDED THAT IS H OW THE SUNDRY DEBTORS FIGURE IN THE BALANCE-SHEET WAS INFLATED BY THE AMO UNT OF PURCHASE OF IMPORTED MATERIAL IN QUESTION AND AFTER RECTIFICATI ON, THE SAID FIGURE WAS REDUCED TO THAT EXTENT. HE ALSO TOOK US THOUGH THE LEDGER ACCOUNT OF M/S. JJH INDUSTRIES LIMITED AS PER THE BOOKS OF THE ASSE SSEE TO SUPPORT AND SUBSTANTIATE THIS CONTENTION. HE SUBMITTED THAT THE SE WRONG ENTRIES, I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 13 OF 35 HOWEVER, WERE DULY RECTIFIED BY THE ASSESSEE-COMPAN Y IN ITS BOOKS OF ACCOUNT FOR THE IMMEDIATELY SUCCEEDING YEAR AND POI NTED OUT SUCH RECTIFICATION ENTRIES MADE FROM THE COPIES OF THE R ELEVANT LEDGER ACCOUNT PLACED ON RECORD. HE ALSO POINTED OUT FROM THE COPY OF ASSESSMENT ORDER MADE IN THE CASE OF M/S. JJH INDUSTRIES LIMITED UND ER SECTION 158BC OF THE ACT THAT THE CORRESPONDING SALE MADE BY THE ASS ESSEE OF THE IMPORTED RAW MATERIAL IN QUESTION WAS ACCEPTED BY THE DEPART MENT IN THE CASE OF THE SAID PARTY AND THERE WAS NO DISALLOWANCE MADE O N ACCOUNT OF ANY BOGUS OR UNPROVED PURCHASES. HE CONTENDED THAT THE CLAIM OF THE ASSESSEE FOR PURCHASE OF IMPORTED RAW MATERIAL IN QUESTION T HUS WAS DULY SUPPORTED AND SUBSTANTIATED BY THE RELEVANT DOCUMEN TARY EVIDENCE PLACED ON RECORD BY THE ASSESSEE AND THE LD. CIT(AP PEALS) WAS FULLY JUSTIFIED IN ACCEPTING THE SAID CLAIM ON APPRECIATI ON OF THE SAID EVIDENCE. 11. IN THE REJOINDER, THE LD. D.R. SUBMITTED THAT T HE INSPECTORS REPORT DOES NOT CONTAIN ANY SPECIFIC FINDING AND IT SHOWS THAT THE ENQUIRY MADE BY HIM AFTER A LONG GAP DID NOT YIELD ANY SPECIFIC RESULTS. HE ALSO SUBMITTED THAT M/S. JJH INDUSTRIES LIMITED IS A SIS TER CONCERN OF THE ASSESSEE AND THE DOCUMENTARY EVIDENCE OF THE SAID P ARTY, THEREFORE, CANNOT BE RELIED UPON BEING SELF-SERVING EVIDENCE. HE CONTENDED THAT THERE IS NO CONCLUSIVE EVIDENCE TO SHOW THE ACTUAL MOVEMENT OF GOODS AND IN THE ABSENCE OF THE SAME, CLAIM OF THE ASSESS EE FOR PURCHASE OF IMPORTED MATERIAL IN QUESTION REMAINS UNPROVED. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A LSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE CLAIM FOR DEDUCTION ON ACCOUNT OF PURCHASE OF IMPORTED MATERI AL IN QUESTION WAS MADE BY THE ASSESSEE IN THE REVISED RETURN FILED FO R THE YEAR UNDER CONSIDERATION ON 06.11.1997. IN THE ASSESSMENT ORIG INALLY COMPLETED UNDER SECTION 143(3) VIDE AN ORDER DATED 30.03.1999 , THE SAID CLAIM WAS DISALLOWED BY THE ASSESSING OFFICER. THE SAID ASSES SMENT WAS THE SUBJECT MATTER OF APPEAL AND WHEN THE MATTER TRAVELLED TO T HE HONBLE CALCUTTA I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 14 OF 35 HIGH COURT, THE FOLLOWING OBSERVATIONS WERE RECORDE D BY THE HONBLE CALCUTTA HIGH COURT AFTER HEARING THE ARGUMENTS OF BOTH THE SIDES BEFORE SENDING THE MATTER BACK TO THE ASSESSING OFFICER ON REMAND:- AFTER HEARING THE LEARNED COUNSEL FOR THE .PARTIES AND AFTER GOING THROUGH THE MATERIALS ON RECORDS, WE FIND THA T THERE IS NO DISPUTE THAT THE ASSESSEE IMPORTED FROM TWO SWISS C OMPANIES ALUMINIUM INGOTS WORTH RS.8,22,42,335/ - AND THOSE WERE SOLD TO AN INDIAN COMPANY, VIZ. JJH INDUSTRIES LTD. THOS E FACTS ARE PROVED BY THE DOCUMENTARY EVIDENCE AND THE ASSESSIN G OFFICER HAS ALSO NOT DISPUTED THE FACT. IT APPEARS THAT UPO N PAYMENTS TO THE SWISS SUPPLIERS, THEIR RESPECTIVE ACCOUNTS WERE DEBITED AND AFTER SALE TO JJH, THE ACCOUNT OF JJH WAS DEBITED W ITH CORRESPONDING CREDIT TO THE REVENUE ACCOUNT. WE FIN D, SUBSTANCE IN THE CONTENTION OF MR. KHAITAN, THE LEARNED COUNS EL FOR THE ASSESSEE, THAT THE ACCOUNTS OF THE SWISS SUPPLIERS TO WHICH DEBITS HAD BEEN MADE UPON PAYMENT FOR THE IMPORTED GOODS SHOULD HAVE BEEN CLOSED BY TRANSFERRING THE PURCHAS E ACCOUNT BUT INSTEAD OF THAT, THE ACCOUNTS OF THE SWISS SUPP LIERS WERE CLOSED BY TRANSFER TO THE ACCOUNT OF J. J. H. UNDER HEAD 'ADVANCE' AND CONSEQUENTLY, FOR THE SALE OF THE IMP ORTED MATERIALS TO J. J. H., THE INCOME STOOD ACCOUNTED F OR BUT THERE WAS NO DEBIT TO THE PURCHASE ACCOUNT BY WAY OF EXPE NDITURE AND INSTEAD OF THAT, THE ACCOUNT OF J. J. H. STOOD DEBI TED TWICE, ONCE AT THE TIME OF SALE AND AGAIN UPON THE CLOSER OF SW ISS SUPPLIERS' ACCOUNTS. THUS, NO EXPENDITURE FOR THE PURCHASE OF THE IMPORTED MATERIALS WAS CHARGED IN THE ACCOUNTS ALTHOUGH THE INCOME UPON THE SALE THEREOF WAS REFLECTED IN THE ACCOUNTS . IT APPEARS THAT ON DISCOVERY OF SUCH MISTAKE, THE ASSESSEE PAS SED A RECTIFICATION ENTRY IN ITS ACCOUNTS FOR THE SUBSEQU ENT PREVIOUS YEAR ENDED SEPTEMBER 30, 1997 AND IN THE SUBSEQUENT YEAR, THE ASSESSEE DID NOT CLAIM ANY DEDUCTION IN RESPECT OF THE SAID SUM OF RS. 8,22,42,335/-. ALL THE AUTHORITIES; BELOW REFUSED TO GO INTO THE QUESTION OF RECTIFICATION OF THE SAID MISTAKE ON THE SOLE GROUN D THAT IT WAS NOT A BONAFIDE MISTAKE BUT A DELIBERATE AND FICTITI OUS ENTRY AND THUS, SHOULD NOT BE RECTIFIED. IN OUR OPINION, EVEN IF WE ASSUME FOR THE SAKE OF ARGUMENT THAT IT WAS A CASE OF DELI BERATE' AND FICTITIOUS ENTRY, IT IS THE DUTY OF THE INCOME TAX AUTHORITY TO FIND OUT THE TEAL NATURE OF THE TRANSACTION BEHIND THE S AID ENTRY AND TO PASS APPROPRIATE ORDER OF ASSESSMENT IN ACCORDAN CE WITH LAW. MERELY BECAUSE AN ASSESSEE HAS MADE A WRONG OR EVEN FICTITIOUS ENTRY IN THE ACCOUNTS, SUCH FACT CANNOT BE A GROUND FOR ACCEPTING SUCH WRONG OR FICTITIOUS ENTRY. IN THE CA SE BEFORE US, THE ASSESSEE ITSELF HAS COME UP WITH REVISED RETURN AND THUS, IT IS THE DUTY OF THE ASSESSING AUTHORITY TO PASS NECE SSARY ORDER ON I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 15 OF 35 THE BASIS OF THE MATERIALS ON RECORD. IT IS WELL-KN OWN THAT THE DOCTRINE OF ESTOPPEL IS NOT APPLICABLE AGAINST THE STATUTE. IF A PARTICULAR INCOME IS NOT TAXABLE UNDER THE INCOME-T AX ACT, IT CANNOT BE TAXED ON THE BASIS OF ESTOPPEL OR ANY OTH ER EQUITABLE DOCTRINE. EQUITY IS OUT OF PLACE IN TAX LAW; A PART ICULAR INCOME IS EITHER LIABLE TO TAX UNDER THE TAXING STATUTE OR IT IS NOT. IF IT IS NOT, THE INCOME TAX OFFICER HAS NO POWER TO IMPOSE TAX ON THE SAID INCOME (COMMISSIONER OF INCOME TAX, MADRAS VS. V. MR. P. FIRM MUAR '' AIR 1965 SC 1216. 13. AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE AFORESAID OBSERVATIONS RECORDED BY THEIR LORDSHIPS OF HONBLE CALCUTTA HIGH COURT WERE SUBSTANTIALLY IN FAVOUR OF THE ASSE SSEE, INASMUCH AS, A FINDING WAS GIVEN AFTER HEARING THE PARTIES AND AFT ER GOING THROUGH THE MATERIALS ON RECORD THAT THERE WAS NO DISPUTE THAT THE ASSESSEE HAD IMPORTED FROM TWO SWISS COMPANIES ALUMINIUM INGOTS WORTH RS.8,22,42,335/- AND THOSE THERE SOLD TO AN INDIAN COMPANY NAMELY M/S. JJH INDUSTRIES LIMITED. IT WAS ALSO SPECIFICALLY ME NTIONED BY THE HONBLE CALCUTTA HIGH COURT THAT THESE FACTS WERE PROVED BY THE DOCUMENTARY EVIDENCE. IT WAS ALSO CLEARLY MENTIONED THAT DUE TO THE WRONG ACCOUNTING ENTRIES MADE BY THE ASSESSEE-COMPANY IN ITS BOOKS O F ACCOUNT, THE SALE OF IMPORTED MATERIALS TO M/S. JJH INDUSTRIES LIMITED S TOOD ACCOUNTED FOR AS INCOME BUT THERE WAS NO DEBIT TO THE PURCHASE ACCOU NT BY WAY OF EXPENDITURE. AS NOTED BY THE HONBLE CALCUTTA HIGH COURT, NO EXPENDITURE FOR THE PURCHASE OF IMPORTED MATERIALS THUS WAS CHA RGED IN THE ACCOUNTS OF THE ASSESSEE-COMPANY, ALTHOUGH THE INCOME UPON T HE SALE THEREOF WAS REFLECTED IN THE ACCOUNTS. HONBLE CALCUTTA HIGH CO URT ALSO TOOK NOTE OF THE FACT THAT ON DISCOVERY OF THE SAID MISTAKE, REC TIFICATION ENTRY WAS PASSED BY THE ASSESSEE-COMPANY IN ITS BOOKS OF ACCO UNT FOR THE IMMEDIATELY SUCCEEDING YEAR BUT THE DEDUCTION ON AC COUNT OF PURCHASE OF RAW MATERIAL IN QUESTION WAS CLAIMED BY THE ASSESSE E-COMPANY IN THE YEAR UNDER CONSIDERATION AND NOT IN THE SUBSEQUENT YEAR. AFTER RECORDING THESE FINDINGS/OBSERVATIONS CATEGORICALLY IN FAVOUR OF THE ASSESSEE, HONBLE CALCUTTA HIGH COURT CONSIDERED THE CASE OF THE REVENUE OF I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 16 OF 35 QUESTIONING THE RECTIFICATION ENTRY PASSED BY THE A SSESSING OFFICER ON THE SOLE GROUND THAT IT WAS NOT A BONAFIDE MISTAKE BUT A DELIBERATE AND FICTITIOUS ENTRY. IN THIS REGARD, IT WAS HELD BY TH E HONBLE CALCUTTA HIGH COURT THAT EVEN IF IT WAS TO BE ASSUMED FOR THE SAK E OF ARGUMENTS THAT IT WAS A CASE OF DELIBERATE AND FICTITIOUS ENTRY, IT W AS THE DUTY OF THE INCOME-TAX AUTHORITY TO FIND OUT THE REAL NATURE OF TRANSACTION BEHIND THE SAID ENTRY AND FOR THIS PURPOSE, THE MATTER WAS SENT BACK ON REMAND TO THE ASSESSING OFFICER FOR DECIDING THE REAL NATU RE OF TRANSACTION AFTER ARRIVING AT A DEFINITE FINDING AS TO THE OUTCOME OF THE TRANSACTION ON THE BASIS OF THE MATERIALS ON RECORD. WHEN THIS MATTER WAS TAKEN UP BY THE ASSESSING OFFICER FOR EXAMINATION AS PER THE DIRECT ION OF THE HONBLE CALCUTTA HIGH COURT, THE DOCUMENTARY EVIDENCE IN SU PPORT OF ITS CLAIM FOR PURCHASE OF IMPORTED RAW MATERIAL IN QUESTION WAS F ILED BY THE ASSESSEE, THE LIST OF WHICH, AS GIVEN BY THE ASSESSING OFFICE R ON PAGES NO. 5 & 6 OF THE ASSESSMENT ORDER, IS ALREADY REPRODUCED BY US I N THE FOREGOING PORTION OF THIS ORDER. IN ORDER TO VERIFY THE SAID DOCUMENTARY EVIDENCE, AN INSPECTOR WAS DEPUTED BY THE ASSESSING OFFICER A ND IT IS WORTHWHILE TO REFER TO THE INSPECTORS REPORT SUBMITTED TO THE AS SESSING OFFICER ON 28.03.2013 ON VERIFICATION OF THE DOCUMENTARY EVIDE NCE FILED BY THE ASSESSEE, WHICH IS EXTRACTED BELOW:- LNSPECTION REPORT AS DIRECTED, BY D.C.I.T. CIRCLE-8, KOLKATA I PERSO NALLY VISITED THE FOLLOWING ADDRESS IN CONNECTION WITH SCRUTINY PROCE EDING OF M/S. MODERN MALLEABLES LTD [PAN: AABCM5669D] FOR THE AY 1996-97. I MET WITH MR. SURESH MANUAL RAPHAEL, SR. MANAGER (FOREX) [XEROX COPY OF VISITING CARD ENCLOSED] ALLAHABAD BANK, INT ERNATIONAL BRANCH, 119 PARK STREET, KOLKATA-16, WHO IS THE OVE RALL IN CHARGE OF IMPORT-EXPORT TRANSACTION OF INTERNATIONAL BRANC H OF ALLAHABAD BANK, KOLKATA AND ASKED ABOUT THE TWO PUR CHASES FROM GERALD METALS, SWITZERLAND & EUROMIN SA GENEVA. IN REPLY, MR. SURESH MANUAL RAPHAEL SAID THAT SINCE THE MATTER IS VERY OLD BEING MORE THAN FIFTEEN YEARS THE DOCUMENTS ARE NOT READILY AVAILABLE WITH THEM. HOWEVER, HE WENT THROUGH THE D OCUMENTS OF BANK PRODUCED BY THE ASSESSEE &-''VERBALLY CONFIRME D THAT THESE TRANSACTION HAVE BEEN ROUTED THROUGH THIS BRANCH OF THE BANK. I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 17 OF 35 FOR VERIFICATION OF DOCUMENTS HE SUGGESTED TO COME LATER. I VISITED THE BANK AGAIN ON 26.03.2013. THE SR. MANAGER (FORE X) OF ALLAHABAD BANK, INTERNATIONAL BRANCH, PARK STREET, KOLKATA HAS VERIFIED THE FOLLOWING DOCUMENTS (CERTIFIED TRUE CO PY OF THE FOLLOWING DOCUMENTS IS ENCLOSED HEREWITH) A) EUROMIN S.A, GENEVA :- ALIAHABAD BANK ADVICE DA TED 05.07.1995 DEBITING RS.4,70,07,261/- ON 06.04.1995 AND RS.52,2 8,082/- ON 05.07.1995, BANK STATEMENT FOR DEBITING RS.4,70,07, 261/- ON 06.04.1995 AND RS.52,28,0821- ON 05.07.1995 INVOICE DATED 25.08.1994 ALONG WITH BILL OF LADING, PACKING LIST & CERTIFICATE OF ANALYSIS. B) GERALD METALS SWITZERLAND:- ALLAHABAD BANK DEBI T ADVICE DATED 03,04.1996 DEBITING RS.3,15,88,8291- ON 29.0L.1996 AND RS.25,00,000/- ON 22.03.1996, BANK STATEMENT, INVOI CE, BILL OF LADING & PACKING LIST. I INSPECTED THE OFFICE OF J.C.BANERJEE & SONS, CLE ARING AGENT, 15/1 STRAND ROAD, CUSTOMS HOUSE, KOLKATA-1 WHERE MR. SUS ANTA CHAKRABORTY, THE PARTNER OF THE FIRM WAS AVAILABLE AND CONFIRMED THAT THE BILL NO.-911 & 912 DATED 02.11.1995 (ANNEX URE 6 & 6A OF ASSESSEES SUBMISSION WAS PREPARED AND SIGNED BY HI M ONLY AT THE TIME OF IMPORTS. (CERTIFIED TRUE COPY OF THE SAID B ILLS ENCLOSED.) I ALSO INSPECTED THE CLEARING AGENT M/S. S.B. INTE RNATIONAL WHOSE OFFICE HAS SHIFTED FROM NEW CUSTOMS HOUSE, 15/1 STR AND ROAD, KOLKATA - 700001 TO 3A, GARSTIN PLACE, 6TH FLOOR, K OLKATA-1 WHERE I MET MR. BISWAS WHO WAS AWARE OF THE TRANSACTION. HE SAID SINCE THE MATTER WAS MORE THAN FIFTEEN YEARS OLD NO DOCUM ENT WERE READILY AVAILABLE WITH THEM BUT HE VERBALLY VERIFIE D THE DOCUMENTS PRODUCED BY THE COMPANY. I VISITED THE WAREHOUSE NAMED M/S. JAMES ALEXANDER & CO WHERE THE IMPORTED MATERIALS WERE KEPT. THE SAID WAREHOUS E HAS BEEN CLOSED AND THE LAND HAS BEEN SOLD TO MERLIN GROUP A ND A NEW MULTI-STORIED APARTMENT NAMED MERLIN RIVERSIDE APAR TMENT 15, KABITIRTHA SARANI, KIDHERPORE, KOLKATA - 23 HAS BEE N BUILT UP THERE. I MET MR. LAKHAN GHOSH, CLUB MANAGER THE SAI D APARTMENT & MR. M.A. KARIM RESIDING AT 3F, WAVE, MERLIN RIVER SIDE APTS. AND CAME TO KNOW THAT THE WAREHOUSE HAS BEEN CLOSED IN 2004. IT WAS FOUND FROM THERE HEAD OFFICE AT MC LEOD HOUSE, 3A N .S.ROAD, KOLKATA WHERE I MET MR. KHEMKA (ACCOUNTANT) AND WHO VERBALLY CONFIRMED THAT MATERIAL AS PER SIGNATURE ON CHALLAN OF S. B. INTERNATIONAL WERE RECEIPTED BY MR. DUBEY WHO WAS W ORKING IN THEIR WAREHOUSE DURING THAT TIME. I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 18 OF 35 I VISITED THE OFFICE OF THE ASSESSEE AT 53B, MIRZA GALIB STREET, KOLKATA -16 AND WENT THROUGH THE LEDGERS OF THE PAR TIES, I FOUND FROM THE LEDGER AS PROVIDED BY THE ASSESSEE THAT IN 1995-96 THE ENTRIES WERE PASSED WITHOUT DEBITING THE PURCHASE A /C. SUBSEQUENTLY, RECTIFICATION ENTRIES WERE PASSED IN SUBSEQUENT ACCOUNTING YEAR. (CERTIFIED COPY OF LEDGER OF GERAL D METALS FOR THE PERIOD 1995-96, VOUCHER NOS.J03884, BP1300, BP1301, J0385 LEDGER OF EUROMIN FOR THE PERIOD 1995-96, VOUCHER N OS.-BP0330, J03659, LEDGER OF JJH INDS. LTD. FOR THE PERIOD 199 5-96 & 1996-97 ALLAHABAD BANK ADVICE NOTE AND STATEMENT ARE ENCLOS ED HEREWITH):- I ALSO VISITED THE OFFICE OF JJH INDUSTRIES LTD. ( NOW M/S. ERI- TECH LTD.) 9, TRANSPORT DEPOT ROAD, KOLKATA - 88 TO VERI FY THE BOOKS OF ACCOUNT. I MET MR. M. DASGUPTA (MGR.) WHO EXPLAINED THAT THE SAID BOOKS OF ACCOUNTS HAS BEEN SEIZED BY THE INCOME TAX DEPARTMENT DURING THE COURSE OF SEARCH AND SEIZURE HELD ON 03. 09.1997 AND ARE NOT AVAILABLE WITH THEM. CERTIFIED TRUE COPY OF RETENTION OF SEIZED BOOKS OF ACCOUNTS AND DOCUMENTS ISSUED BY TH E OFFICE OF AC.I.T., CENTRAL CIRCLE-XXVII, 18 RABINDRA SARANI, KOLKATA DATED 08.03.2007 IS ENCLOSED HEREWITH. SUBMITTED ON 28.03.2013. SD/- ( CHIRADIP SARKAR.) (INSPECTOR). 14. A PERUSAL OF THE REPORT SUBMITTED BY THE INSPEC TOR TO THE ASSESSING OFFICER CLEARLY SHOWS THAT THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR PURCHASE OF IMPORTED MA TERIAL IN QUESTION WAS CROSS VERIFIED BY THE INSPECTOR WITH THE CONCERNED PARTIES, SUCH AS ALLAHABAD BANK, CLEARING AGENT J.C. BANERJEE & SONS AND S.B. INTERNATIONAL, M/S. JAMES ALEXANDER & CO. LIMITED, WHOSE WAREHOUSE WAS USED BY THE ASSESSEE TO KEEP THE IMPORTED MATERIALS . AS REPORTED BY THE INSPECTOR, ALL THESE PARTIES HAD CONFIRMED THE RELE VANT TRANSACTIONS AND THERE WAS NOTHING ADVERSE REPORTED BY THE INSPECTOR ON SUCH VERIFICATION DISPUTING OR EVEN DOUBTING THE GENUINENESS OF THE T RANSACTIONS OF THE ASSESSEE-COMPANY INVOLVING THE PURCHASE OF IMPORTED MATERIALS IN QUESTION. AS REPORTED BY THE INSPECTOR, HE ALSO VIS ITED THE OFFICE OF THE ASSESSEE AND VERIFIED THE RELEVANT ENTRIES INCLUDIN G THE RECTIFICATION I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 19 OF 35 ENTRIES PASSED BY THE ASSESSING OFFICER IN THE SUBS EQUENT ACCOUNTING YEAR. HE ALSO VISITED THE OFFICE OF M/S. JJH INDUST RIES LIMITED TO VERIFY THE CLAIM OF THE ASSESSEE OF HAVING SOLD THE IMPORTED M ATERIAL IN QUESTION PURCHASED BY IT FROM THE BOOKS OF ACCOUNT OF THE SA ID PARTY. BUT THE SAME COULD NOT BE DONE AS THE BOOKS OF ACCOUNT OF THE SA ID PARTY WERE IN THE CUSTODY OF THE INCOME TAX DEPARTMENT AT THE RELEVAN T TIME. ALTHOUGH IN THE ASSESSMENT ORDER PASSED BY HIM, THE ASSESSING O FFICER HAS MADE A PASSING REFERENCE TO THE REPORT SUBMITTED BY THE IN SPECTOR, BUT HE HAS NOT DISCUSSED THE SAME. HE APPEARS TO HAVE COMPLETELY O VERLOOKED THE POSITIVE FINDINGS GIVEN BY THE INSPECTOR ON VERIFIC ATION OF THE DOCUMENTARY EVIDENCE FURNISHED BY THE ASSESSEE TO S UPPORT AND SUBSTANTIATE ITS CLAIM FOR PURCHASE OF IMPORTED MAT ERIALS IN QUESTION. 15. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE HAS TAKEN US THROUGH THE COPIES OF THE RELEVANT DOCUMEN TARY EVIDENCE FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER AS PLACED IN THE PAPER BOOK TO SHOW THAT THE CLAIM OF THE ASSESSEE F OR PURCHASE OF IMPORTED MATERIALS IN QUESTION IS DULY SUPPORTED AN D SUBSTANTIATED BY THE RELEVANT DOCUMENTARY EVIDENCE. AS POINTED OUT B Y HIM FROM THE COPY OF BILL OF LADING PLACED AT PAGE NO. 1, 702 PIECES OF PRIMARY ALUMINIUM WIRE RODS WERE DESPATCHED BY THE EUROMIN S.A. GENEV A TO THE ASSESSEE ON 25.08.1994 THROUGH THE SHIPPING CORPORATION OF INDI A AND AN INVOICE (COPY PLACED AT PAGE NO. 3 OF THE PAPER BOOK) WAS A LSO RAISED BY THE SAID PARTY ON THE ASSESSEE FOR SUPPLY OF THE SAID MATERI AL ON THE SAID DATE FOR US DOLLARS 15,76,608. AS SPECIFICALLY MENTIONED IN THE SAID INVOICE, THE MATERIAL WAS SUPPLIED TO THE ASSESSEE AGAINST THE I RRECOVERABLE LETTER OF CREDIT ISSUED BY ALLAHABAD BANK. AS PER THE BILL OF CLEARING AGENT M/S. S.B. INTERNATIONAL (COPY PLACED AT PAGE NO. 4 OF TH E PAPER BOOK), THE SAID MATERIAL WAS LANDED IN INDIA ON 21.04.1995 AND ON C LEARING THE SAME AFTER COMPLETING CUSTOMS FORMALITIES, THE SAME WAS DELIVERED BY S.B. INTERNATIONAL TO THE WAREHOUSE OF JAMES ALEXANDER & CO. IN THE MONTH OF APRIL, 1995 ITSELF AS PER THE VARIOUS DELIVERY CHAL LANS, THE COPIES OF WHICH I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 20 OF 35 ARE PLACED AT PAGES NO. 5 TO 50 OF THE PAPER BOOK. VIDE LETTER DATED 23.04.1995 (COPY AT PAGE NO. 175 OF THE PAPER BOOK) , JAMES ALEXANDER & CO. LIMITED HAD ACKNOWLEDGED THE RECEIPT OF THE SAI D MATERIAL INFORMING IT TO ALLAHABAD BANK THAT THE SAME BELONGING TO THE ASSESSEE-COMPANY AND PLEDGED WITH THE ALLAHABAD BANK WAS LYING IN TH EIR WAREHOUSES. VIDE A LETTER DATED 18.07.1995, ALLAHABAD BANK FINALLY G AVE IT CONSENT TO M/S. JAMES ALEXANDER & CO. TO RELEASE THE MATERIALS STOR ED IN THEIR GODOWN IN FAVOUR OF THE ASSESSEE AND THE SAME THEREAFTER WAS SUPPLIED BY THE ASSESSEE TO M/S. JJH INDUSTRIES LIMITED FOR WHICH D EBIT NOTES WERE RAISED BELATEDLY IN THE MONTH OF MARCH, 1996 (COPIES AT PA GE NO. 57-59 OF THE PAPER BOOK). MEANWHILE AS PER THE ADVICE ISSUED BY ALLAHABAD BANK ON 05.07.1995 (COPY AT PAGE NO. 53 OF THE PAPER BOOK), A PAYMENT OF RS.4,96,94,684/- WAS RELEASED IN FAVOUR OF THE EURO MIN S.A. GENEVA ON BEHALF OF THE ASSESSEE AND THE ENTRY FOR THE SAME W AS MADE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT BY DEBITING THE AC COUNT OF EUROMIN S.A. GENEVA ON 01.08.1995 ( COPY OF LEDGER ACCOUNT AT PA GE NO.51 OF THE PAPER BOOK). A PERUSAL OF THE LEDGER ACCOUNT OF EUROMIN S .A. GENEVA SHOWS THAT THE SAID ACCOUNT WAS SQUARED OFF BY THE ASSESSEE ON 30.03.1996 BY MAKING A CORRESPONDING ENTRY WHEREBY THE ACCOUNT OF M/S. JJH INDUSTRIES LIMITED WAS DEBITED INSTEAD OF PURCHASE ACCOUNT. TH E PURCHASE ACCOUNT THUS REMAINED TO BE DEBITED ON ACCOUNT OF PURCHASE OF IMPORTED MATERIALS BY THE ASSESSEE FROM EUROMIN S.A. GENEVA AND THE AM OUNT TO THAT EXTENT WAS DEBITED TO THE ACCOUNT OF M/S. JJH INDUSTRIES L IMITED THEREBY INFLATING THE FIGURE OF SUNDRY DEBTORS. AN IDENTICA L MISTAKE HAPPENED EVEN IN CASE OF PURCHASE OF IMPORTED MATERIAL BY TH E ASSESSEE FROM M/S. GERALD METAL, SWITZERLAND AS IS DEMONSTRATED BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE SIMILAR DOCUMENTARY EVIDENCE PLAC ED AT PAGES NO. 84 TO 96 OF THE PAPER BOOK. 16. IT IS THUS CLEAR THAT SUFFICIENT DOCUMENTARY EV IDENCE WAS PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER TO SUP PORT AND SUBSTANTIATE ITS CLAIM FOR PURCHASE OF IMPORTED MATERIALS IN QUE STION, WHICH WAS MADE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 21 OF 35 IN THE REVISED RETURN OF INCOME. IT APPEARS THAT TH E ASSESSING OFFICER, HOWEVER, BRUSHED ASIDE THE SAID EVIDENCE WHILE DISA LLOWING THE CLAIM OF THE ASSESSEE FOR THE SAID PURCHASES BY TREATING THE SAME AS UNPROVED/UNEXPLAINED. HE ALSO APPEARS TO HAVE OVERL OOKED THE SPECIFIC OBSERVATIONS RECORDED BY THE HONBLE CALCUTTA HIGH COURT IN THE JUDGMENT DATED 29.04.2011 WHILE SENDING THE MATTER BACK TO H IM ON REMAND. AS ALREADY NOTED BY US, A SPECIFIC FINDING WAS RECORDE D BY THEIR LORDSHIPS OF HONBLE CALCUTTA HIGH COURT AFTER HEARING BOTH THE PARTIES AND AFTER GOING THROUGH THE MATERIALS ON RECORD THAT THERE WAS NO D ISPUTE THAT THE ASSESSEE HAD IMPORTED FROM TWO SWISS COMPANIES ALUM INIUM INGOTS WORTH RS.8,22,42,335/- AND THOSE WERE SOLD TO AN IN DIAN COMPANY NAMELY M/S. JJH INDUSTRIES LIMITED. THE FACT THAT THERE WA S A MISTAKE COMMITTED BY THE ASSESSEE IN RECORDING THE SAID TRANSACTIONS WAS ALSO TAKEN NOTE OF BY THE HONBLE CALCUTTA HIGH COURT AND IT WAS OBSER VED IN THIS REGARD THAT AS A RESULT OF THE SAID MISTAKE, NO EXPENDITURE FOR THE PURCHASE OF IMPORTED MATERIAL WAS CHARGED IN THE ACCOUNTS OF TH E ASSESSEE-COMPANY, ALTHOUGH THE INCOME UPON THE SALE THEREOF WAS REFLE CTED IN THE ACCOUNTS. THE ENTRY PASSED BY THE ASSESSEE-COMPANY IN ITS BOO KS OF ACCOUNTS FOR THE SUBSEQUENT YEARS TO RECTIFY THE SAID MISTAKE WA S ALSO CONSIDERED BY THE HONBLE CALCUTTA HIGH COURT BUT KEEPING IN VIEW THAT THE SAID ENTRY WAS TREATED BY THE AUTHORITIES BELOW AS FICTITIOUS ENTRY, THE MATTER WAS FINALLY SENT BACK BY THE HONBLE CALCUTTA HIGH COUR T ON REMAND TO THE ASSESSING OFFICER TO FIND OUT THE REAL NATURE OF TR ANSACTION BEHIND THE SAID ENTRY. THE ASSESSING OFFICER WAS DIRECTED IN T HIS REGARD BY THE HONBLE CALCUTTA HIGH COURT TO COME TO A DEFINITE C ONCLUSION AND ARRIVE AT A DEFINITE FINDING AS TO THE OUTCOME OF THE TRANSAC TIONS ON THE BASIS OF THE MATERIALS PLACED ON RECORD. AS PER THE DIRECTION OF THE HONBLE CALCUTTA HIGH COURT, AN INSPECTOR WAS DEPUTED BY THE ASSESSI NG OFFICER TO VERIFY THE RELEVANT DOCUMENTARY EVIDENCE FILED BY THE ASSE SSEE IN SUPPORT OF ITS CASE ON THE ISSUE UNDER CONSIDERATION. THE INSPECTO R ACCORDINGLY NOT ONLY VERIFIED THE RELEVANT ENTRIES PASSED IN THE BOOKS O F ACCOUNT OF THE ASSESSEE-COMPANY BUT ALSO MADE ENQUIRIES DIRECTLY W ITH THE CONCERNED I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 22 OF 35 BANK AS WELL AS CLEARING AGENTS. AS ALREADY NOTED B Y US FROM THE REPORT SUBMITTED BY THE INSPECTOR TO THE ASSESSING OFFICER , ALL THESE PARTIES WITH WHOM ENQUIRY WAS MADE BY THE ASSESSING OFFICER CONF IRMED THE RELEVANT TRANSACTIONS. BUT THIS REPORT SUBMITTED BY THE INSP ECTOR, WHICH WAS COMPLETELY IN FAVOUR OF THE ASSESSEE, AGAIN WAS NOT TAKEN INTO CONSIDERATION BY THE ASSESSING OFFICER WHILE DECIDI NG THE ISSUE, ALTHOUGH A PASSING MENTION WAS MADE BY HIM TO THE SAID REPOR T IN THE ASSESSMENT ORDER. 17. THE POSITION THAT EMERGES FROM THE PERUSAL OF T HE RELEVANT RECORD AVAILABLE BEFORE US IS THAT THE ASSESSING OFFICER W HILE DISALLOWING THE CLAIM OF THE ASSESSEE FOR PURCHASE OF THE IMPORTED MATERIALS IN QUESTION NOT ONLY IGNORED/OVERLOOKED THE OVERWHELMING EVIDEN CE PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM BUT ALSO THE SPECI FIC OBSERVATIONS/FINDINGS RECORDED BY THE HONBLE CALCU TTA HIGH COURT IN ITS JUDGMENT AS WELL AS THAT OF THE INSPECTOR AS RECORD ED IN THE REPORT SUBMITTED TO HIM. 18. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH E ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE PURCHA SE OF IMPORTED MATERIALS IN QUESTION FOR TWO REASONS. FIRSTLY, THE RE WAS AN INORDINATE DELAY OF ABOUT 7-8 MONTHS IN THE PAYMENTS MADE BY T HE ASSESSEE AGAINST THE CORRESPONDING PURCHASES, WHICH ACCORDING TO THE ASSESSING OFFICER, COULD NOT BE SATISFACTORILY EXPLAINED BY THE ASSESS EE. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE IN THIS REGARD, TH ERE WAS A DELAY IN THE ARRIVAL OF THE IMPORTED MATERIAL IN INDIA AND THE S AME WAS CLEARLY EVIDENT FROM THE COPIES OF THE RELEVANT BILLS OF LADING AS WELL AS BILLS OF CLEARING AGENTS. MOREOVER, THE IMPORTED MATERIAL WAS SUPPLIE D AGAINST IRRECOVERABLE LETTER OF CREDIT AND THE CONCERNED BA NK, I.E. ALLAHABAD BANK TOOK SOME FURTHER TIME TO CLEAR THE PAYMENTS W HICH AGAIN CAUSED THE DELAY RESULTING INTO PAYMENT OF INTEREST BY THE ASSESSEE-COMPANY AS RECOVERED BY THE SAID BANK. THE RELEVANT DOCUMENTAR Y EVIDENCE PRODUCED I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 23 OF 35 BY THE ASSESSEE THUS WAS SELF-EXPLANATORY AS REGARD S THE DELAY IN PAYMENT, WHICH THE ASSESSING OFFICER, IN OUR OPINIO N, FAILED TO APPRECIATE. 19. THE SECOND REASON GIVEN BY THE ASSESSING OFFICE R TO DISPUTE THE CLAIM OF THE ASSESSEE FOR THE PURCHASE OF IMPORTED MATERIALS IN QUESTION WAS THAT THE ASSESSEE COULD NOT ESTABLISH THE MATER IAL FLOW. AS WE HAVE ALREADY SEEN FROM THE RELEVANT DOCUMENTARY EVIDENCE PLACED BY THE ASSESSEE ON RECORD THAT THE IMPORTED MATERIAL ON IT S ARRIVAL WAS CLEARED AND COLLECTED BY THE CONCERNED CLEARING AGENTS ON B EHALF OF THE ASSESSEE AND THE SAME WAS FORWARDED TO THE WAREHOUSES UNDER THEIR DELIVERY CHARGES FOR STORAGE PURPOSE. THE SAID MATERIAL PLED GED WITH THE BANK WAS SUBSEQUENTLY RELEASED FROM THE WAREHOUSES ON THE AD VICE OF THE BANK AND THE SAME WAS DELIVERED DIRECTLY TO M/S. JJH INDUSTR IES LIMITED TO WHOM THE SAME WAS SOLD BY THE ASSESSEE AS IS EVIDENT FRO M THE CORRESPONDING DEBIT AND CREDIT NOTES ISSUED BY THE CONCERNED PART IES. SUFFICIENT DOCUMENTARY EVIDENCE THUS WAS PLACED ON RECORD BY T HE ASSESSEE TO ESTABLISH THE COMPLETE TRAIL OF THE MATERIAL IMPORT ED BY IT AND SALE THEREOF AFTER GETTING IT CLEARED THROUGH THE CLEARI NG AGENT AND STORING IT FOR SOME TIME IN THE WAREHOUSES BELONGING TO THIRD PARTY. 20. KEEPING IN VIEW THE ABOVE DISCUSSION, WE FIND T HAT THE REASONS GIVEN BY THE ASSESSING OFFICER FOR DISALLOWING THE CLAIM OF THE ASSESSEE FOR PURCHASE OF IMPORTED MATERIAL IN QUESTION WERE NOT TENABLE AND HIS ACTION IN DOUBTING OR DISPUTING THE SAID CLAIM OF T HE ASSESSEE OVERLOOKING THE COGENT DOCUMENTARY EVIDENCE PLACED BY THE ASSES SEE ON RECORD AS WELL AS THE OBSERVATIONS/FINDINGS RECORDED BY THE H ONBLE CALCUTTA HIGH COURT IN ITS ORDER AS WELL AS BY THE INSPECTOR IN H IS REPORT WAS TOTALLY ARBITRARY AND UNSUSTAINABLE. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE AND UPHOLDIN G THE SAME, WE DISMISS GROUND NO. 1 OF THE REVENUES APPEAL. I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 24 OF 35 21. IN GROUND NO. 2, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE DISALLOWANCE OF RS.1,0 0,38,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED EXP ENDITURE. 22. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E CONSUMPTION AND SALE OF ALUMINIUM INGOTS WAS EXAMINED BY THE ASSESS ING OFFICER FROM THE BOOKS OF ACCOUNT AND OTHER RECORD OF THE ASSESSEE-C OMPANY. ON SUCH EXAMINATION, HE FOUND THAT THE ALUMINIUM INGOTS ONL Y TO THE EXTENT OF 178.989 METRIC TON WAS AVAILABLE WITH THE ASSESSEE- COMPANY GOING BY THE QUANTITY OF OPENING STOCK, PURCHASES AND CLOSIN G STOCK WHILE THE TOTAL SALE/CONSUMPTION OF ALUMINIUM INGOTS WAS 301.446 ME TRIC TON. SINCE THE ASSESSEE COULD NOT EXPLAIN THIS DIFFERENCE SATISFAC TORILY, THE ASSESSING OFFICER TREATED THE EXCESS CONSUMPTION OF 122.457 M ETRIC TON AS UNEXPLAINED PURCHASES OF THE ASSESSEE AND THE VALUE THEREOF AMOUNTING TO RS.1,00,38,000/- WAS ADDED BY HIM TO THE TOTAL INCO ME OF THE ASSESSEE UNDER SECTION 69C. 23. ON APPEAL, THE LD. CIT(APPEALS) DELETED THE SAI D ADDITION BY RELYING ON THE DECISION OF ITAT IN THE CASE OF NISHANT HOUS ING DEVELOPMENT (P) LTD. VS.- ACIT [52 ITD 103], WHEREIN IT WAS HELD T HAT IF ANY ADDITION IS MADE ON THE GROUND OF UNEXPLAINED EXPENDITURE INCUR RED, THEN SIMILAR AMOUNT WILL HAVE TO BE SIMULTANEOUSLY ALLOWED AS DE DUCTION ON ACCOUNT OF SUCH EXPENDITURE NEUTRALISING THE ADDITION. 24. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, INTER ALIA, BY THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF KRISH NA TEXTILES VS.- CIT [310 ITR 227], WHEREIN IT WAS HELD THAT EVEN IF ANY ADDITION IS REQUIRED TO BE MADE ON ACCOUNT OF UNEXPLAINED PURCHASES UNDER S ECTION 69C, THE ENTIRE EXPENDITURE TOWARDS SUCH PURCHASE HAS TO BE ALLOWED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT, WHICH WOU LD NEUTRALISE THE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 25 OF 35 ADDITION. HONBLE GUJARAT HIGH COURT ALSO TOOK NOTE OF THE AMENDMENT MADE IN SECTION 69C BY ADDING THE PROVISO PROVIDING THAT IF AN ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE IS MADE UNDER SECTION 69C, THEN THE DEDUCTION UNDER SECTION 37(1) CANNOT BE ALLOWED FOR SUCH EXPENDITURE. IT WAS HELD BY THE HONBLE GUJARAT HIG H COURT IN THIS CONTEXT THAT THE SAID AMENDMENT COMING INTO FORCE W.E.F. 1 ST APRIL, 1999 WAS RELEVANT TO THE ASSESSMENT YEAR 1999-2000 ONWARDS H AVING NOT BEEN MADE RETROSPECTIVE IN OPERATION AND THE FACT THAT S UCH AMENDMENT WAS SPECIFICALLY MADE IN SECTION 69 WAS SUFFICIENT TO S HOW THAT SUCH DEDUCTION WAS ALLOWABLE UNDER SECTION 37(1) IN RESPECT OF ANY EXPENDITURE TREATED AS UNEXPLAINED UNDER SECTION 69C UPTO ASSESSMENT YE AR 1998-99. THE LD. D.R. HAS NOT BROUGHT TO OUR NOTICE ANY OTHER DECISI ON OF THE HONBLE HIGH COURT TAKING A DIFFERENT VIEW WHICH IS IN FAVOUR OF THE ASSESSEE. WE, THEREFORE, RESPECTFULLY FOLLOW THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF KRISHNA TEXTILES (SUPRA) AND U PHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED PURCHASES OF ALUM INIUM INGOTS. GROUND NO. 2 OF THE REVENUES APPEAL IS ACCORDINGLY DISMIS SED. 25. NOW WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE BEING ITA NO. 908/KOL/2011 , WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(APPEALS), CENTRAL-II, KOLKATA DATED 31.03.2011, WHEREBY HE CONFIRMED THE PENALTY OF RS.4,31,93,780/- IMPOSED B Y THE ASSESSING OFFICER UNDER SECTION 271(1)(C). 26. AS A RESULT OF CONFIRMATION BY THE TRIBUNAL OF THE TWO ADDITIONS OF RS.8,22,42,335/- AND RS.2,57,42,014/- MADE IN THE Q UANTUM PROCEEDINGS ON ACCOUNT OF DISALLOWANCE OF PURCHASE OF IMPORTED MATERIAL AND DISALLOWANCE OF ASSESSEES CLAIM FOR SHORT-TERM CAP ITAL GAIN RESPECTIVELY, PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE IN ITIATED BY THE ASSESSING OFFICER AND SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED BY HIM DUR ING THE COURSE OF THE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 26 OF 35 SAID PROCEEDINGS WAS NOT FOUND ACCEPTABLE BY HIM, T HE ASSESSING OFFICER PROCEEDED TO IMPOSE PENALTY OF RS.4,31,93,780/- UND ER SECTION 271(1)(C) BEING 100% OF THE TAX IN RESPECT OF THE SAID TWO AD DITIONS VIDE AN ORDER DATED 07.05.2004. 27. THE PENALTY IMPOSED BY THE ASSESSING OFFICER UN DER SECTION 271(1)(C) WAS CHALLENGED BY THE ASSESSEE IN AN APPE AL FILED BEFORE THE LD. CIT(APPEALS) AND VIDE HIS APPELLATE ORDER DATED 19. 10.2006 PASSED ORIGINALLY, THE LD. CIT(APPEALS) DISMISSED THE SAID APPEAL AND CONFIRMED THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C). AGAINST THE SAID ORDER OF THE LD. CIT(APPEALS) DATE D 19.10.2006, A FURTHER APPEAL WAS FILED BY THE ASSESSEE BEFORE THE TRIBUNA L AND THE TRIBUNAL VIDE ITS ORDER DATED 09.03.2007 PASSED IN ITA NO. 3 5/KOL/2007 REMITTED THE MATTER BACK TO THE LD. CIT(APPEALS) FOR DECIDIN G THE SAME AFRESH AFTER RECORDING ITS OBSERVATIONS IN PARAGRAPH NO. 6 AS UN DER:- SINCE THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE ORDER ON THE GROUND OF ISSUANCE OF SHOW CAUSE NOTICE, OPP ORTUNITY, LIMITATION AND SERVICE OF ORDER AND SUCH IMPORTANT ISSUES WERE DECIDED BY THE LD. CIT(A) AGAINST THE ASSESSEE WITHOUT PROVIDING RELEVANT MATERIAL OR OPPORTUNITY IN THIS REGARD TO THE ASSESSEE AND EVEN AT THIS STAGE NO SUCH MATERIA L WAS PLACED ON RECORD, THEREFORE, WE ARE OF THE VIEW THA T THERE WAS A VIOLATION OF RULE OF NATURAL JUSTICE AT THE E ND OF THE LD. CIT(A) AND THEREFORE, IN THE INTEREST OF JUSTICE WE CONSIDER IT FAIR AND REASONABLE TO SEND BACK THE MATTER TO THE FILE OF THE LD. CIT(A) AND ACCORDINGLY WE SET ASIDE THE ORDER P ASSED BY THE LD. CIT(A) AND RESTORE BACK THE MATTER TO THE F ILE OF THE LD. CIT(A) WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF OBSERVATION HEREINABOVE AND ACCORDING TO LAW AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE AND ACCORDINGLY, ALL THE GROUNDS TAKEN BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 28. AS PER THE DIRECTION OF THE TRIBUNAL, THE MATTE R RELATING TO THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) WAS A GAIN CONSIDERED BY THE LD. CIT(APPEALS) AFRESH AFTER GIVING AN OPPORTU NITY OF BEING HEARD TO THE ASSESSEE AND SINCE HE DID NOT FIND MERIT IN THA T ELABORATE SUBMISSION I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 27 OF 35 MADE BY THE ASSESSEE ON VARIOUS ISSUES CHALLENGING THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271(1)(C), H E CONFIRMED THE SAID PENALTY AND DISMISSED THE APPEAL OF THE ASSESSEE. A GGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 29. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS RAISED VARIOUS CONTENTIONS IN SUPPORT OF THE ASSESS EES CASE FOR DELETION OF THE PENALTY IMPOSED UNDER SECTION 271(1)(C). THE FIRST CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE MATTER RELATING TO BOTH THE ADDITIONS IN RESPECT OF WHICH THE IMPUGNED PENALTY IS IMPOSED UNDER SECTION 271(1)(C) WAS THE SUBJECT MATTER OF A N APPEAL BEFORE THE HONBLE CALCUTTA HIGH COURT AND THE SAME HAVING BEE N ADMITTED BY THE HONBLE CALCUTTA HIGH COURT INVOLVING THE SUBSTANTI AL QUESTIONS OF LAW, BOTH THESE ISSUES WERE ARGUABLE OR DEBATABLE IN RES PECT OF WHICH BONAFIDE CLAIM WAS MADE BY THE ASSESSEE AND IT WAS THUS NOT A FIT CASE TO IMPOSE PENALTY UNDER SECTION 271(1)(C). IN SUPPORT OF THIS CONTENTION, HE HAS RELIED ON THE TWO DECISIONS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT-VS.- OFF SHORE INDIA LIMITED [209 ITR 473] A ND CIT VS.- VIMAL KR. DAMANI [261 ITR 87]. IN THE CASE OF CIT VS- OFF SH ORE INDIA LIMITED, THE MATTER RELATING TO THE ASSESSEES CLAIM FOR SET OFF OF LOSS UNDER THE HEAD SHARE DEALING AGAINST OTHER INCOME WAS THE SUBJEC T MATTER OF REFERENCE TO THE HONBLE CALCUTTA HIGH COURT UNDER SECTION 25 6(2) OF THE ACT AND THE SAME WAS ADMITTED BY THE HONBLE CALCUTTA HIGH COURT AS INVOLVING A QUESTION OF LAW. KEEPING IN VIEW THIS POSITION, THE HONBLE CALCUTTA HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL CANCELLIN G THE PENALTY IMPOSED UNDER SECTION 271(1)(C) ON THE GROUND THAT THE BONA FIDE OF THE ASSESSEE COULD NOT BE DOUBTED. IN THE CASE OF CIT VS.- VIMA L KR. DAMANI (SUPRA), HONBLE CALCUTTA HIGH COURT HAD AN OCCASION TO CONS IDER A SIMILAR ISSUE AND AFTER TAKING NOTE OF ITS EARLIER DECISION RENDE RED IN THE CASE OF CIT VS.- OFF SHORE INDIA LIMITED (SUPRA), IT WAS HELD B Y THE HONBLE CALCUTTA I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 28 OF 35 HIGH COURT THAT ONCE IT IS FOUND IN THE QUANTUM PRO CEEDINGS THAT THERE WAS AN ARGUABLE CLAIM FOR DEDUCTION, WHICH WAS NOT FREE FROM DOUBT, THEN THE BONAFIDE OF THE ASSESSEE CANNOT BE RULED OUT. 30. IN THE PRESENT CASE, THE MATTERS RELATING TO BO TH THE ADDITIONS IN RESPECT OF WHICH THE IMPUGNED PENALTY IS IMPOSED UN DER SECTION 271(1)(C) WERE ADMITTED BY THE HONBLE CALCUTTA HIG H COURT AS INVOLVING THE SUBSTANTIAL QUESTION OF LAW IN THE QUANTUM PROC EEDINGS SHOWING THAT THE SAME INVOLVED ARGUABLE ISSUES ON WHICH BONAFIDE CLAIM WAS MADE BY THE ASSESSEE. THIS BEING SO, WE HOLD BY RELYING ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF OFF SHOR E INDIA LIMITED (SUPRA) AND VIMAL KR. DAMANI (SUPRA) THAT THE PENAL PROVISI ONS OF SECTION 271(1)(C) CANNOT BE APPLIED IN RESPECT OF THE ADDIT IONS MADE TO THE TOTAL INCOME OF THE ASSESSEE WHICH INVOLVED ARGUABLE ISSU ES, ON WHICH BONAFIDE CLAIM WAS MADE BY THE ASSESSEE. 31. THE SECOND CONTENTION RAISED BY THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE PENALTY UNDER SECTION 271(1)(C) WAS INITIA TED AND IMPOSED BY THE ASSESSING OFFICER IN RESPECT OF THE RELEVANT TWO AD DITIONS MADE IN THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3 ) VIDE AN ORDER DATED 31.03.1999. AS REGARDS THE ADDITION OF RS.8.2 2 CRORES MADE ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR PUR CHASE OF IMPORTED MATERIALS, HE HAS SUBMITTED THAT THE HONBLE CALCUT TA HIGH COURT SET ASIDE THE ORDER OF THE ASSESSING OFFICER VIDE ITS JUDGMEN T DATED 29.04.2011 AND SENT THE MATTER BACK TO THE ASSESSING OFFICER ON RE MAND FOR DECIDING THE SAME AFRESH AS PER THE SPECIFIC DIRECTION GIVEN BY THEIR LORDSHIPS. AS RIGHTLY CONTENDED BY HIM, THE VERY BASIS OR FOUNDAT ION OF THE PENALTY IMPOSED UNDER SECTION 271(1)(C) IN RESPECT OF THE S AID ADDITION THUS NO MORE SURVIVES AND THE PENALTY TO THAT EXTENT IS LIA BLE TO BE CANCELLED HAVING NO LEGS TO STAND. IN ANY CASE, THE SAID ADDI TION MADE BY THE ASSESSING OFFICER WHILE GIVING EFFECT TO THE ORDER OF THE HONBLE CALCUTTA HIGH COURT WAS SUBSEQUENTLY DELETED BY THE LD. CIT( APPEALS) AND WHILE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 29 OF 35 DISPOSING OF THE APPEAL OF THE REVENUE ON THIS ISSU E, WE HAVE UPHELD THE ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THE SAID ISSUE. CONSEQUENTLY THE PENALTY IMPOSED UNDER SECTI ON 271(1)(C) IN RESPECT OF THE SAID ADDITION EVEN OTHERWISE IS LIAB LE TO BE CANCELLED. 32. AS REGARDS THE OTHER ADDITION OF RS.2.57 CRORES MADE ON ACCOUNT OF SHORT-TERM CAPITAL GAIN, THE LD. COUNSEL FOR THE AS SESSEE HAS INVITED OUR ATTENTION TO PAGE NO. 5 OF THE ASSESSMENT ORDER DAT ED 31.03.1999 TO POINT OUT THAT THE BUILDING PURCHASED BY THE ASSESSEE ON 19.09.1994 WAS SOLD IN MARCH, 1996 AFTER MAKING FURTHER CONSTRUCTION, WHIC H WAS COMPLETED ON 08.12.1995. HE HAS SUBMITTED THAT THE SAID BUILDING ON COMPLETION OF FURTHER CONSTRUCTION WAS ENTERED BY THE ASSESSEE IN THE BLOCK OF ASSETS AND SINCE THE SAID BLOCK WAS REDUCED BY THE SALE CO NSIDERATION OF THE BUILDING, THERE WAS NO QUESTION OF OFFERING ANY CAP ITAL GAIN ON SALE OF THE SAID BUILDING. HE HAS CONTENDED THAT THE ASSESSING OFFICER, HOWEVER, TREATED THE PROFIT ARISING FROM THE SALE OF THE SAI D BUILDING A SHORT-TERM CAPITAL GAIN ON THE GROUND THAT THE BUILDING WAS NO T PUT TO USE AND ALTHOUGH THE HONBLE CALCUTTA HIGH COURT HAS UPHELD THE DECISION OF THE ASSESSING OFFICER ON THIS ISSUE, THE CLAIM MADE BY THE ASSESSEE IS DULY SUPPORTED, INTER ALIA, BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS.- OSWAL AGRO MILLS LIMITED [341 ITR 467], WHEREIN IT IS HELD THAT ONCE ANY INDIVIDUAL ASSET ENTERS THE BLOC K OF ASSETS, IT LOOSES ITS IDENTITY AND THE USER CONDITION IS REQUIRED TO BE S ATISFIED QUA THE ENTIRE BLOCK OF ASSETS AND NOT QUA THE INDIVIDUAL ASSETS. KEEPING IN VIEW THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF OSWAL AGRO MILLS LIMITED (SUPRA), WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE CLAIM MADE BY THE ASSESSEE ON THI S ISSUE BY REDUCING THE BLOCK OF ASSETS BY THE SALE CONSIDERATION OF BU ILDING INSTEAD OF OFFERING THE PROFIT ON SUCH SALE AS CAPITAL GAIN WA S A BONAFIDE CLAIM BASED ON A POSSIBLE VIEW AND ALTHOUGH THE SAID CLAIM IS N OT FOUND TO BE ACCEPTABLE IN THE QUANTUM PROCEEDINGS, THE ASSESSEE CANNOT BE SAID TO HAVE CONCEALED THE PARTICULARS OF HIS INCOME OR FUR NISHED INACCURATE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 30 OF 35 PARTICULARS OF SUCH INCOME SO AS TO ATTRACT THE PEN AL PROVISIONS OF SECTION 271(1)(C). 33. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO RAISE D ONE MORE PRELIMINARY ISSUE TO CHALLENGE THE IMPOSITION OF IM PUGNED PENALTY UNDER SECTION 271(1)(C) ON THE GROUND THAT IN THE ABSENCE OF ANY SPECIFIC MENTION IN THE SHOW-CAUSE NOTICE ISSUED UNDER SECTI ON 274 OF THE ACT FOR THE YEAR UNDER CONSIDERATION BY THE ASSESSING OFFIC ER AS TO WHETHER THE ASSEESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME , THE INITIATION OF PENALTY PROCEEDINGS ITSELF WAS BAD IN LAW AND THE P ENALTY ORDER PASSED IN PURSUANCE THEREOF IS LIABLE TO BE QUASHED BEING INV ALID. HE HAS INVITED OUR ATTENTION TO THE SHOW-CAUSE NOTICE ISSUED BY TH E ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION UNDER SECTION 274 IN T HE PRINTED FORM TO POINT OUT THAT THE IRRELEVANT PORTION, VIZ. FURNIS HED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME WAS NOT STRUCK OFF BY THE ASSESSING OFFICER. IT IS OBSERVED THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SUVAPRASANNA BHATTACHARYA VS.- ACIT (IN ITA NO. 1303/KOL/2010) CITED BY THE LD. CO UNSEL FOR THE ASSESSEE HAD AN OCCASION TO CONSIDER A SIMILAR ISSU E IN THE IDENTICAL FACT SITUATION AND THE ORDER PASSED BY THE ASSESSING OFF ICER IMPOSING PENALTY UNDER SECTION 271(1)(C) WAS HELD TO BE INVALID BY T HE TRIBUNAL RELYING ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS.- MANJUNATHA COTTON & GINNING FACTORY R EPORTED IN 359 ITR 565 AFTER DISCUSSING THE PROPOSITION LAID DOWN THER EIN IN GREAT DETAIL IN PARAGRAPH NO. 8 TO 8.2 OF ITS ORDER DATED 06.11.201 5, WHICH READ AS UNDER:- 8. THE NEXT ARGUMENT THAT THE SHOW CAUSE NOTICE U /S.274 OF THE ACT WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR C ONCEALING PARTICULARS OF SUCH INCOME. ON THIS ASPECT WE FIND THAT IN THE SHOW CAUSE NOTIC E U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELT OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME. I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 31 OF 35 8.1 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING P ROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FO RM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIRE MENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO B E HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. 8.2 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLL OWING PRINCIPLES TO BE FOLLOWED IN THE MATTER OF IMPOSING PENALTY U/S.271(1)(C) OF THE ACT . NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CO NTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF T HE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT I S PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED I N SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSI NG PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGH T TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT E XIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A P RINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SA TISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED , NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPE CIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. 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(1 )(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 I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 32 OF 35 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 PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, T HE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUS T BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HAND S OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FU RTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO 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 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 FU RNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURAT E PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF P ENALTY 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 I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PRO FORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE A S TO NON-APPLICATION OF MIND. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS FO LLOWS:- 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISI ONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOU LD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271 (L)(C) IS A SINE QUA NON FOR THE I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 33 OF 35 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 THE 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 ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSE LF 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 CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH 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 EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. 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 PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS ' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSES SEE 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. I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 34 OF 35 THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANC ELLED. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF P ENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE THEREFORE CANCEL THE ORDERS IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSEE. 34. IN OUR OPINION, THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF SUVAPRASANNA BHATT ACHARYA VS.- ACIT RENDERED VIDE ITS ORDER DATED 06.11.2015 IN ITA NO. 1303/KOL/2010 BY RELYING ON THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT & ANOTHER VS.- MANJUNATHA COTTON & GINNING FAC TORY REPORTED IN 359 ITR 565 IS SQUARELY APPLICABLE IN THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE SHOW-CAUSE NOT ICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 FOR THE YEAR UN DER CONSIDERATION NOT BEING IN ACCORDANCE WITH LAW, THE PENALTY ORDER PAS SED BY THE ASSESSING OFFICER IN PURSUANCE THEREOF IS LIABLE TO BE CANCEL LED BEING INVALID. 35. FOR THE VARIOUS REASONS GIVEN ABOVE, WE HOLD TH AT THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) AND CONFIRMED BY THE LD. CIT(APPEALS) IS NOT SUSTAINABLE AND CANCELLING THE SAME, WE ALLOW THIS APPEAL OF THE ASSESSEE. 36. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED, WHILE THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 30, 20 17. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 30 TH DAY OF AUGUST, 2017 I.T.A. NO. 908/KOL./2011 ASSESSMENT YEAR: 1996-1997 & I.T.A. NO. 1888/KOL/2016 ASSESSMENT YEAR:1996-1997 PAGE 35 OF 35 COPIES TO : (1) M/S. MODERN MALLEABLES LIMITED, 53, MIRZA GHALIB STREET, KOLKATA-700 016 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-15(2), KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, KOLKATA-700 107 (4) COMMISSIONER OF INCOME TAX (APPEALS), CENTRAL -II, KOLKATA; (5) CIT(APPEALS)-12, KOLKATA, (6) COMMISSIONER OF INCOME TAX ,KOLKAT A (7) THE DEPARTMENTAL REPRESENTATIVE (8) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.