THE DCIT-CENTRAL-2, Indore V. M/s. KALYAN TOLL INFRASTRUCTURE LTD., Indore

ITA 928/Ind/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4741 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 31-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PUNIT KUNAR
• Assessee Lawyers: SHALINI MEHTA CAS
• Keywords: Capital asset; Business income; Depreciation; Loose papers; Opportunity of being heard; Principle of natural justice; Peak credit; Retrospective amendment; Question of law; Reasonable cause; Set aside
• Section: 271(1)(c); 143(3); 153A; 80IA; 292BB; 274; 143(2); 139(1); 43; 48; 13; 22; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE KUL BHARAT, JUDICIAL MEMBER AND HONBLE MANISH BORAD, ACCOUNTANT MEMBER ITA NO.928/IND/2019 ASSESSMENT YEAR 2011-12 DCIT, CENTRAL-2, INDORE : REVENUE V/S M/S KALYAN TOLL INFRASTRUCTURE LTD, 15/3, VIDHYADEEP, MANORAMAGANJ, INDORE PAN : AACCK1840M : RESPONDENT ITA NO.929/IND/2019 ASSESSMENT YEAR 2016-17 DCIT, CENTRAL-2, INDORE : REVENUE V/S M/S. KALYAN KETI TOLL PVT. LTD, 15/3, VIDHYADEEP, MANORAMAGANJ, INDORE PAN : AADCK8996M : RESPONDENT REVENUE BY SHRI PUNIT KUNAR , SR.DR ASSESSEE BY SHRI AJAY TULSIYAN & MS. SHALINI MEHTA, CAS DATE OF HEARING 2 7 .08.2020 DATE OF PRONOUNCEMENT 28 . 0 9 . 2020 KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 2 O R D E R PER MANISH BORAD THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCES OF THE REVENUE PERTAINING TO THE ASSESSEE(S) NAMELY M/S KA LYAN TOLL INFRASTRUCTURE FOR ASSESSMENT YEAR 2011-12 AND M/S KALYAN KETI TOLL PVT. LTD FOR ASSESSMENT YEAR 2016-17 ARE DIREC TED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- 3 (IN SHORT LD.CIT(A)], BHOPAL EVENLY DATED 09.08.2019 WHICH ARE ARISING OUT OF THE ORDER U/S 271AAA OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT) DATED 31.03.2018 FRAMED BY DCIT, CENTRAL-2, INDORE. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL; KALYAN TOLL INFRASTRUCTURE LTD ITA NO.928/IND/2019 ASSESSMENT YEAR 2011-12 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS.70,78,640/- LEVIED BY TH E ASSESSING OFFICER U/S 271AAA OF THE INCOME TAX ACT, 1961 IN RESPECT OF UN DISCLOSED INCOME SURRENDERED BY THE ASSESSEE U/S 132(4) OF THE INCOM E TAX ACT, 1961 WITHOUT APPRECIATING THAT SUCH INCOME WAS DISCLOSED ONLY BECAUSE OF SEARCH ACTION AND THAT THE ASSESSEE DID NOT SPECIFY AND SUBSTANTIATE THE MANNER OF DERIVING SUCH INCOME DURING THE SEARCH AN D DISCLOSED IN THE RETURN OF INCOME FILED U/S 153A OF THE INCOME TAX A CT, 1961. KALYAN KETI TOLL PVT. LTD ITA NO.928/IND/2019 ASSESSMENT YEAR 2016-17 KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 3 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE PENALTY OF RS.1,33,78,415/- LEVIED BY THE ASSESSING OFFICER U/S 271AAB(1)(A) IN RESPECT OF SURRENDER MADE BY TH E ASSESSEE U/S 132(4) OF THE INCOME TAX ACT, 1961 AND DISCLOSED IN THE RE TURN OF INCOME FILED AFTER SEARCH & SEIZURE ACTION WHICH ITSELF IS THE S UFFICIENT CAUSE FOR LEVYING OF PENALTY IN ACCORDANCE WITH PROVISIONS OF THE ACT .. 3. AS BOTH THE APPEALS RELATES TO DIFFERENT ASSESSE E(S) BEING PART OF SAME BUSINESS GROUP WHICH WERE SUBJECTED TO SEAR CH U/S 132 OF THE ACT, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENC E AND BREVITY. 4. WE WILL FIRST TAKE UP ITA NO.928/IND/2019 IN TH E CASE OF KALYAN TOLL INFRASTRUCTURE LTD FOR ADJUDICATION. 5 BRIEF FACTS OF THE CASE AS CULLED OUT FROM THE RE CORDS ARE THAT THE COMPANY KALYAN TOLL INFRASTRUCTURE LIMITED IS A COMPANY OF KALYAN (GARG) GROUP OF INDORE, HEREINAFTER REFERRED TO AS THE RESPONDENT. THE COMPANY WAS INCORPORATED ON 13.07. 2002 AND IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION CONTR ACT, BUILD- OPERATE-TRANSFER (BOT) PROJECTS AND INFRASTRUCTURE DEVELOPMENT. SEARCH OPERATIONS WERE CONDUCTED ON THE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF THE KETI/KALYAN GROUP OF IN DORE FROM 05.05.2011 TO 07.05.2011. THE ORIGINAL RETURN OF IN COME FOR THE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 4 YEAR UNDER CONSIDERATION WAS FILED U/S 139(1) ELECT RONICALLY ON 30.09.2011 I.E. AFTER THE SEARCH, OFFERING A TOTAL INCOME OF RS.11,84,65,740/- AFTER CLAIMING DEDUCTION U/S 80IA . AN ADDITIONAL INCOME OF RS. 6,85,96,426/- WAS ALSO OFFERED IN THI S RETURN. NOTICES U/S 153A WERE ISSUED TO THE COMPANY IN RESPONSE TO WHICH THE RESPONDENT COMPANY FILED ITS RETURN OF INCOME ON 12 .10.2013 OFFERING A TOTAL INCOME OF RS.11,95,60,710/- INCLUD ING ADDITIONAL INCOME OF RS.6,85,96,426/- OFFERED U/S 132(4) AND A LREADY OFFERED IN THE RETURN FILED U/S 139(1). IN ADDITION TO THIS THE COMPANY WITHDREW THE CLAIM OF DEPRECIATION TO THE EXTENT OF RS.10,94,969/- WHICH WAS INADVERTENTLY CLAIMED AT A HIGHER FIGURE IN THE RETURN FILED U/S 139(1). STATUTORY NOTICES WERE ISSUED AND THE CASE WAS SELECTED UNDER SCRUTINY. THE ASSESSMENT PROCEEDINGS COMPLETED U/S 153A R.W.S. 143(3) VIDE ORDER DATED 26.03.2014 ASSESSING THE TOTAL INCOME AT RS.13,99,31,620/-. AGGRIEVED FROM T HE ASSESSMENT ORDER THE RESPONDENT FILED APPEAL WITH LD.CIT(A)-II , INDORE. THE ORDER DATED 25.07.2016 WAS PASSED BY LD. CIT(A) ALL OWING CONSIDERABLE RELIEF TO THE RESPONDENT. THE INCOME F INALLY ASSESSED BY THE LEARNED CIT(A) WORKED OUT AT RS.11,95,60,71 0/- AS AGAINST THE INCOME RETURNED U/S 153A OF RS.11,95,60,710/- A ND ALL THE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 5 ADDITIONS MADE IN THE ASSESSMENT ORDER WERE DELETED IN THE APPELLATE PROCEEDINGS. AGGRIEVED FROM THE FIRST APP EAL ORDER THE REVENUE FILED APPEAL WITH HONBLE ITAT, INDORE WHIC H WAS DISMISSED VIDE ORDER DATED 30.11.2017 BY THE HON'BLE INCOME T AX APPELLATE TRIBUNAL, INDORE (IN SHORT ITAT, INDORE). FORMAL AN D INITIAL PENALTY SHOW CAUSE NOTICE DATED 26.03.2014 WAS ISSUED U/S 2 74 R.W.S. 271AAA ALONGWITH THE ASSESSMENT ORDER STATING THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHE D INACCURATE PARTICULARS OF INCOME. THE RESPONDENT FILED A FORMA L REPLY STATING THAT THE PENALTY PROCEEDINGS BE KEPT IN ABEYANCE AS IT HAS FILED AN APPEAL BEFORE THE LD. CIT(A) AGAINST THE ASSESSMENT ORDER. IT SEEMS THAT TAKING COGNIZANCE OF THIS REPLY, THE PENALTY P ROCEEDINGS WERE KEPT IN ABEYANCE AND NO PENALTY ORDER WAS PASSED, T ILL THE MATTER WAS PENDING WITH THE APPELLATE AUTHORITIES. HOWEVER , NO FURTHER NOTICE WAS ISSUED AND STRAIGHTAWAY THE PENALTY ORDE R WAS PASSED ON 31.03.2018 LEVYING PENALTY U/S 271AAA OF RS. 70, 78,640/- @ 10% ON INCOME OF RS.7,07,86,364/- STATING THAT RS. RS.6,96,91,395/- WAS OFFERED DURING THE SEARCH ACTI ON U/S 132(4) AND RS.10,94,969/- WAS OFFERED IN THE RETURN OF INC OME FILED U/S 153A. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 6 6. BEING AGGRIEVED BY THE PENALTY IMPOSED BY LD. AO , THE RESPONDENT PREFERRED AN APPEAL BEFORE LD. CIT(A) AN D THE LD. CIT(A) VIDE ORDER DATED 09.08.2019 IN APPEAL NO. CIT(A)-3 /BPL/IT- 11302/2018-19 ALLOWED THE RESPONDENTS APPEAL. 7. NOW THE REVENUE IS IN APPEAL BEFORE US CHALLENGI NG THE RELIEF GRANTED BY THE LEARNED CIT(A) BY RAISING FOLLOWING GROUND OF APPEAL: (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) ERRED IN DELETING THE PENALTY OF RS.70,78 ,640/- LEVIED BY THE ASSESSING OFFICER U/S 271AAA IN RESPECT OF U NDISCLOSED INCOME SURRENDERED BY THE ASSESSEE U/S 132(4) OF TH E INCOME ACT, 1961, WITHOUT APPRECIATING THAT SUCH INCOME WA S DISCLOSED ONLY BECAUSE OF SEARCH ACTION AND THAT TH E ASSESSEE DID NOT SPECIFY AND SUBSTANTIATE THE MANNER OF DERI VING SUCH INCOME DURING THE SEARCH AND DISCLOSED IN THE RETUR N OF INCOME FILED U/S 153A OF THE INCOME TAX ACT, 1961. 8. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUE D SUPPORTING ORDER OF LD. A.O. 9. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED R EFERRING TO THE WRITTEN SUBMISSION, PAPER BOOK DATED 21.8.2020 RUNNING FROM PAGE NO. 1 TO 162 AND VARIOUS JUDGMENTS PLACED IN P APER BOOK KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 7 RUNNING PAGE 1 TO 175. LD. COUNSEL FOR THE ASSESSE E MADE THREE FOLD ARGUMENTS FIRSTLY CONTENDING THAT THE LD. A.O ERRED IN LEVYING THE PENALTY U/S 271AAA(1) OF THE ACT AS THIS PROVIS ION WAS NOT APPLICABLE TO THE ASSESSEE SINCE METHOD AND MANNER OF ADDITIONAL INCOME OFFERED WAS DULY EXPLAINED TO THE INVESTIGAT ION WING AND ALSO DURING THE ASSESSMENT PROCEEDINGS COMPLETE DET AILS WERE FILED. FOR THIS REASON NO PENALTY WAS LEVIABLE TO THE ASSE SSEE. RELIANCE WAS PLACED ON ONE OF THE DECISION IN THE CASE OF AN OTHER ASSESSEE OF THE SAME GROUP BELONGING TO THE ASSESSEE IN THE CAS E OF K.T. SANGAM (I) LTD AND OTHERS ITA NO.601 TO 603 ORDER D ATED 26.7.2018 OF I.T.A.T. INDORE BENCH. SECOND FOLD OF CONTENTI ON WAS THAT THE SHOW CAUSE NOTICE ISSUED U/S 274 R.W.S. 271AAA OF T HE ACT BEING DEFECTIVE IN NATURE WHICH HAS RENDERED THE CONSEQUE NT PENALTY PROCEEDINGS BAD IN LAW SINCE NO SPECIFIC CHARGE WAS LEVELED AGAINST THE ASSESSEE. THIS ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE DECISION OF CO-ORDINATE BENCH CHAND IGARH IN THE CASE OF GILLCO DEVELOPERS & BUILDERS (P) LTD V/S DC IT (2017) 157 DTR 0177. THIRD FOLD OF CONTENTION IS THAT NO PROPE R OPPORTUNITY OF BEING HEARD WAS PROVIDED TO THE ASSESSEE THEREBY DE NYING THE OPPORTUNITY OF NATURAL JUSTICE. HE SUBMITTED THAT THE FORMAL KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 8 PENALTY NOTICE WAS ISSUED ON 26.3.2014 ALONG WITH A SSESSMENT ORDER, THE FIRST APPEAL WAS DECIDED BY ORDER DATED 27.7.2016 AND SECOND APPEAL PREFERRED BY THE DEPARTMENT WAS DECID ED BY THE HON'BLE I.T.A.T., INDORE ON 30.11.2017. THEREAFTER FINAL PENALTY ORDER WAS PASSED AND ISSUED TO THE RESPONDENT, DEPR IVING IT OF ANY OPPORTUNITY OF BEING HEARD. LD. COUNSEL FOR THE AS SESSEE RELIED THE FINDING OF LD. CIT(A) AND ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS AND JUDGMENTS:- ON THE PROPOSITION THAT PENALTY PROCEEDINGS U/S 27 1AAA ARE INVALID BECAUSE OF DEFECTIVE AND INVALID SHOW CAUS E NOTICE (I) HON'BLE CHANDIGARH TRIBUNAL IN THE CASE OF GILLCO DEVELOPERS & BUILDERS (P) LTD V. DCIT IN ITA NO.168/CHD/ 2017. (II) HON'BLE I.T.A.T. CHENNAI IN THE CASE OF DCIT V/S SH RI R. ELANGOVAN ITA NO.1199/CHNY/2017 ORDER DATED 05.04.2018. (III) HON'BLE I.T.A.T. JAIPUR IN THE CASE OF RAVI MATHUR VS DCIT ITA NO.969/JP/2017. (IV) HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF KULWANT SINGH BHATIA (2018) CCH 0303. ON THE PROPOSITION THAT THE ASSESSEE IS ENTITLED TO IMMUNITY AS PROVIDED UNDER SECTION 271AAA(2) WHEN THE ADDITIONA L INCOME WAS OFFERED AND ALSO ASSESSED AS BUSINESS INCOME AN D ALSO WHEN THE AUTHORIZED OFFICER WHILE RECORDING THE STA TEMENT U/S KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 9 132(4) DID NOT PUT ANY SPECIFIC QUESTION WITH REGAR D TO THE MANNER IN WHICH INCOME WAS DERIVED. (I) HON'BLE GUJRAT HIGH COURT IN THE CASE OF PRINCIPAL CIT V/S SHAHLON SILK MILLS PVT. LTD ORDER DATED 05.02.0 218. (II) HON'BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL C IT V/S M/S EMIRATES TECHNOLOGIES PVT. LTD ORDER DATED 18.07.2017. (III) HON'BLE I.T.A.T. AHMEDABAD IN THE CASE OF SULOCHANA DEVI A AGRAWAL V/S DEPARTMENT OF INCOME TAX ORDER DATED 17.7.2012. (IV) HON'BLE I.T.A.T. DELHI IN THE CASE OF SMT. RAJ RANI GUPTA V/S DCIT. (V) HON'BLE I.T.A.T. INDORE BENCH IN THE CASE OF SHRI TIKAMCHAND GARG & ORS ITA NO.1027 TO 1033/IND/2016 ORDER DATED 28.06.2017 (VI) HON'BLE I.T.A.T. NAGPUR BENCH IN THE CASE OF CONCRE TE DEVELOPERS V/S ACIT (2013) 34 TAXMANN.COM 62. (VII) HON'BLE I.T.A.T. INDORE BENCH IN THE CASE OF KETI S ANGAM INFRASTRUCTURE (I) LTD & ORS V/S DCIT ITA NO.516/IND/2017, 1341, 1342, 602 & 603/IND/2016 ORDER DATED 27.06.2018. (VIII) HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MAHENDRA C SHAH (2008) 299 ITR 305.. (IX) HON'BLE ALLAHABADHIGH COURT IN THE CASDE OF CIT V/S RADHA KISHAN GOEL (2005) 278 ITR 454. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 10 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND GONE THROUGH THE JUDGMENTS REF ERRED AND RELIED BY THE LD. COUNSEL FOR THE ASSESSEE. REVENUE S SOLE GRIEVANCE IN THE CASE OF ASSESSEE M/S KALYAN TOLL INFRASTRUCT URE LTD ITA NO.928/IND/2019 IS AGAINST THE DELETION OF PENALTY OF RS.70,78,640/- LEVIED BY THE LD. A.O U/S 271AAA OF THE ACT @10% ON THE ALLEGED ADDITIONAL INCOME INCOME OFFERED IN THE RETURN OF INCOME FILED U/S 153A OF THE ACT. LD. A.O LEVIED T HIS PENALTY ALLEGING THAT THE ASSESSEE COMPANY HAS NOT DISCLOSE D THE MANNER OF DERIVING INCOME SURRENDERED DURING THE COURSE OF SE ARCH. AGAINST THE LEVY OF PENALTY THE ASSESSEE PREFERRED APPEAL B EFORE LD. CIT(A) ON MERITS CONTENDING THAT ASSESSEE HAS DULY DISCLOS ED THE MANNER OF EARNING THE INCOME THUS NO PENALTY IS LEVIABLE A ND SECONDLY THE PENALTY PROCEEDINGS WERE BAD IN LAW SINCE THE NOTIC E ISSUED U/S 274 OF THE ACT WAS DEFECTIVE. LD.CIT(A) AFTER CONSI DERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO IN VIEW OF THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF KULWANT SINGH BHATIA (SUPRA) AS WELL AS THE DECISION OF I.T.A.T., INDORE IN OT HER GROUP CONCERN M/S KETI SANGAM INFRASTRUCTURE (I) LTD (SUPRA) ADJUDICATING KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 11 THE SAME ISSUE OF LEVY OF PENALTY U/S 271AAA OF THE ACT, ALLOWED THE GROUNDS RAISED BY THE ASSESSEE OBSERVING AS FOLLOWS :- 4.1 GROUND NO. 1 TO 3 - THROUGH THESE GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY OF RS. 70,78,64 0/- - U/S 271AAA OF THE INCOME TAX ACT AND ALSO THE INITIATION OF THE PENA LTY PROCEEDINGS U/S 271AAA AND ALSO THE PENALTY SHOW CAUSE NOTICE ISSU ED U/S 274. IT IS SEEN THAT THE APPELLANT FILED ITS RETURN OF INCOME U/S 139(1) ON 20.09.2011 DECLARING AN INCOME OF RS. 11,84,65,740/ -. INCLUDING ADDITIONAL INCOME OF RS.6,85,96,426/- WHICH WAS OFFERED U/S 132(4). IN RESPONSE TO NOTICE ISSUED U/S 153A, THE APPELLANT FILED THE RETURN ON 12.10. 2013 DECLARING AN INCOME OF RS. 11,95,60,710 /-. INCLUDING ADDITIONAL INCOME OF RS.6,85,96,426/- WHICH WAS OFFERED U/S 132(4). IN ADDITION TO THIS THE APPELLANT OFFERED AN AMOUNT OF RS.10,94,969/- ON ACCOUNT OF WITHDRAWAL OF EXCESSI VE DEPRECIATION WHICH WAS ERRONEOUSLY CLAIMED IN THE RETURN FILED UNDER SECT ION 139(1). THE AO COMPLETED, THE ASSESSMENT ON 26.03.2014 ON AN INCOME OF RS, 1 3,99,31,620/-- BY MAKING CERTAIN ADDITIONS AND DISALLOWANCES. HOWEV ER, ALL THE ADDITIONS AND DISALLOWANCES SO MADE HAVE BEEN DELETED IN THE FIRST APPEAL AND IN THE SECOND APPEAL RESULTING INTO RESTORATION OF THE INCOME RETURNED BY THE APPELLANT. IN THE ASSESSMENT ORDER, THE AO IN ITIATED PENALTY U/S 271AAA. THE AO ALSO ISSUED A NOTICE U/S 274 R.W.S . 271AAA DATED 26.03.2014 STATING THAT THE APPELLANT HAS CONCEALE D THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCO ME. THE AO PASSED THE IMPUGNED PENALTY ORDER U/S 271AAA ON 31.03.2018 LE VYING A PENALTY OF RS.70,78,640/- FOR THIS YEAR. THE PENALTY HAS BEEN LEVIED IN RESPECT OF ADDITIONA L INCOME OF RS. 6,85,96,4261- OFFERED BY THE ASSESSEE U/S 13 2( 4) AND ALSO IN RESPECT OF RS. 10,94,969/- WHICH WAS OFFERED IN THE RETURN FILED U/S 153A ON ACCOUNT KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 12 OF EXCESSIVE DEPRECIATION CLAIMED IN THE RETURN FIL ED U/S 139(1) BUT WITHDRAWN IN THE RETURN FILED U/S 153A. THERE IS NO DISCUSSION IN THE PENALTY ORDER PASSED BY THE AO REGARDING THE NATURE AND DETAILS OF ADDITIONAL INCOME OFFERED BY THE APPELLANT ON WHICH THE AO HAS LEVIED THE PENALTY. HOWEVER, THE APPELLANT HAS EXPLAINED THAT IT HAS OFFERED ADDITIONAL INCOME OF RS. 6,85,96,426/- ON THE BASIS OF THE CASH FLOW STATEMENT PREPARED BY IT TO EXPLAIN THE SOURCE OF S HARE CAPITAL GENERATED BY THE APPELLANT AND ALSO ON ACCOUNT OF CERTAIN NOT INGS ON LOOSE PAPERS. THE INCOME SO OFFERED BY THE ASSESSEE U/S 13 2( 4) WAS ALSO OFFERED IN THE RETURN FILED U/S 139(1) AND ALSO IN RESPONSE TO NOT ICE ISSUED U/S 153A. IN ADDITION TO THIS THE APPELLANT OFFERED AN AMOUNT OF RS. 10,94,969/- ON ACCOUNT OF WITHDRAWAL OF DEPRECIATION, WHICH WAS EX CESSIVELY CLAIMED IN THE RETURN FILED U/S 139(1), AND DUE TAXES WERE ALS O PAID BEFORE FILING THE RETURN OF INCOME. THE APPELLANT HAS CHALLENGED THE INITIATION OF THE PENALTY PROCEEDINGS ON THE CONTENTION THAT NO SATISFACTION WAS DRAWN IN THE ASSESSMENT ORDER WHILE INITIATING THE PENALTY PROC EEDINGS AS THE AO HAS SIMPLY STATED THAT PENALTY PROCEEDINGS ARE INITIATED U/S 271AAA WITHOUT SPECIFYING ANY CHARGE OR REASON FOR THE SAM E. THE NOTICE ISSUED UNDER SECTION 274 WAS ALSO A DEFECTIVE NOTICE AS T HE SAME WAS ISSUED IN MECHANICAL MANNER WITHOUT STRIKING OF THE IRRELEVAN T PORTION AND ALSO MENTIONING THE CHARGES APPLICABLE FOR LEVY OF PENA LTY U/S 271(1)(C) AND NOT FOR PENALTY U/S 271AAA. THE APPELLANT HAS CHALL ENGED THE LEVY OF PENALTY U/S 271AAA ON THE GROUND THAT THERE WAS NO SATISFACTION IN THE PENALTY ORDER AS WELL. IT IS ALSO CONTENDED THAT TH E PENALTY ORDER IS VAGUE AS THE AO HAS STATED IN PARA 2 OF THE PENALTY ORDE R THAT THE PENALTY PROCEEDINGS WERE INITIATED UNDER SECTION 271AAA IN ACCORDANCE WITH EXPLANATION SA OF THE SECTION 271 OF THE ACT AND S HOW CAUSE NOTICE WAS ISSUED ON 26.03.2014. IT IS CONTENDED THAT THE EXPL ANATIONS 5A OPERATE UNDER ALL TOGETHER DIFFERENT SITUATIONS AND NOT AT ALL APPLICABLE FOR THE YEAR KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 13 UNDER CONSIDERATION WHICH IS EVIDENT FROM THE FACT THAT PENALTY HAS BEEN LEVIED U/S 271AAA AND NOT U/S 271(1)(C). THIS SHOWS THAT PENALTY HAS BEEN LEVIED UNDER CONFUSED STATE OF MIND. THE APPEL LANT ALSO CONTENDED THAT THERE IS NO SATISFACTION IN THE PENALTY ORDER AS THE AO HAS NOT MENTIONED THE DETAILS AND NATURE OF INCOME OFFERED BY THE APPELLANT. THE APPELLANT FURTHER CONTENDED THAT THE CASH FLOW STAT EMENT PREPARED BY IT, WHICH WAS ALSO FILED BEFORE THE INVESTIGATION WING, AND THE INCOME OFFERED IN VARIOUS YEARS ON THE BASIS OF PEAK CREDIT WORKIN G WAS REJECTED BY THE AO IN THE ASSESSMENT ORDER AND SEPARATE AND INDEPEN DENT ADDITIONS WERE MADE BY THE AO IN ALL THE YEARS. HOWEVER, THE CASH FLOW STATEMENT AND THE PEAK CREDIT WORKING OF THE APPELLANT WAS ACCEPT ED IN THE APPELLATE PROCEEDINGS AND ALL ADDITIONS MADE BY THE AO IN ALL THE YEARS WERE DELETED IN THE APPELLATE PROCEEDINGS BY THE CIT(A) AND ALSO BY THE ITAT. THEREFORE, IT IS CONTENDED THAT WHEN THE METHODOLOG Y OF EARNING AND OFFERING INCOME BY THE APPELLANT WAS ITSELF REJECTE D BY THE AO IN THE ASSESSMENT ORDER, NO PENALTY OUGHT TO HAVE BEEN LEV IED ON THE SAME. THE APPELLANT HAS ALSO CONTENDED THAT THE PENALTY H AS BEEN LEVIED WITHOUT AFFORDING PROPER OPPORTUNITY OF BEING HEARD, AS AFT ER ISSUING A FORMAL NOTICE DATED 26.03.2014, WHICH WAS ISSUED ALONG WIT H THE ASSESSMENT ORDER, THE PENALTY PROCEEDINGS WERE KEPT IN ABEYANC E, SINCE THE APPELLANT HAS FILED AN APPEAL AGAINST THE SAID ASSESSMENT ORD ER. HOWEVER, AFTER CONCLUSION OF THE APPELLATE PROCEEDINGS FINALLY BY THE IT AT IN NOVEMBER 2017, NO FRESH NOTICE WAS ISSUED TO THE APPELLANT R EGARDING THE PENALTY PROCEEDINGS U/S 271AAA FOR THIS YEAR AND STRAIGHT A WAY THE ORDER LEVYING PENALTY U/S 271AAA WAS PASSED ON 31.03.2018. THE APPELLANT HAS ALSO CONTENDED THAT NO PENALTY U/ S 271 AAA OUGHT TO HAVE BEEN LEVIED AS THE APPELLANT WAS COVERED BY TH E IMMUNITY PROVIDED TO IT U/S 271AAA (2), AS THE APPELLANT HAS OFFERED THE INCOME IN THE STATEMENT RECORDED U/S 132(4) ADMITTING THE ADDITIONAL INCOME AND ALSO KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 14 PAID THE TAXES ALONG WITH INTEREST IN RESPECT OF TH E SAID INCOME. IT IS ALSO THE CASE OF THE APPELLANT THAT IT HAD EXPLAINED THE METHOD AND MANNER OF EARNING OF INCOME AND HAD ALSO OFFERED THE SAID INC OME AS BUSINESS INCOME IN THE RETURN FILED U/S 139(1), WHICH STAND ACCEPTED AS SUCH BY THE AO. FURTHER IT IS ALSO CONTENDED BY THE APPELLANT T HAT NO QUERIES WERE RAISED BY THE INVESTIGATION WING OR EVEN BY THE AO AT THE TIME OF MAKING THE ASSESSMENT AS WELL AS AT THE TIME OF LEVYING TH E PENALTY ABOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME HAS BEEN DER IVED. IT IS ALSO SUBMITTED BY THE APPELLANT THAT IT HAS FILED DETAIL ED EXPLANATION BEFORE THE INVESTIGATION WING AS WELL AS DURING THE ASSESSMENT PROCEEDINGS WHICH ARE ALSO ABSTRACTED IN THE ASSESSMENT ORDER, WHICH CONCLUSIVELY ESTABLISHES THE MODUS OPERANDI AND METHODOLOGY OF E ARNING INCOME BY THE APPELLANT. THESE FACTS COUPLED WITH THE FACT THAT T HE APPELLANT HAD NO OTHER SOURCE OF INCOME AND THE INCOME WAS OFFERED I N THE COMPUTATION AS BUSINESS INCOME, SUBSTANTIALLY EXPLAINED THE EARNMG OF ADDITIONAL UNDISCLOSED INCOME. AFTER TAKING INTO CONSIDERATION THE ASSESSMENT ORDE R AND ALSO THE PENALTY ORDER AND ALL THE CONTENTIONS OF THE APPELLANT CARE FULLY IT IS SEEN THAT WHILE INITIATING THE PENALTY PROCEEDINGS IN THE ASSESSMEN T ORDER THE AO HAS SIMPLY STATED THAT PENALTY PROCEEDINGS ARE INITIATE D U/S 271AAA AND NO REASON HAS BEEN GIVEN AS TO HOW THE SAID PENAL PROV ISION IS ATTRACTED IN THE CASE OF THE APPELLANT. THEREFORE, NO REQUISITE SATISFACTION WAS DRAWN IN THE ASSESSMENT ORDER. FROM A PERUSAL OF THE NOTICE DATED 26.03.2014 ISSUED U/S 274, IT IS SEEN THAT BOTH THE CHARGES I. E. CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME, WHICH ARE RELEVANT FOR PENALTY U/S 271(1)(C) ARE MENTIONE D THEREIN AND THE. CHARGES RELEVANT FOR LEVY OF PENALTY U/S 271AAA ARE NOT MENTIONED. SIMILARLY A PERUSAL OF THE PENALTY ORDER SHOWS THAT THE NATURE AND DETAILS OF UNDISCLOSED INCOME HAS NOT BEEN DISCUSSED IN THE SAID ORDER AND PENALTY HAS BEEN LEVIED MERELY STATING THAT THE ASS ESSEE HAS NOT DISCLOSED KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 15 THE MANNER OF DERIVING INCOME. IN THE PENALTY ORDER IN PARA 2 IT IS ALSO STATED THAT PENALTY PROCEEDINGS ARE INITIATED IN AC CORDANCE WITH EXPLANATION SA TO SECTION 271. THE PENALTY PROCEEDINGS IN THIS CASE WERE INITIATED WITHOUT MENTIONING ANY CHARGE IN THE ASSESSMENT ORDER. THE PENALTY NOT ICE WAS ALSO ISSUED IN MECHANICAL MANNER SPECIFYING THE WRONG CHARGES AS T O WHETHER THE APPELLANT IS FOUND GUILTY OF CONCEALING THE PARTICU LAR OF INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF INCOME, WHICH A RE NOT APPLICABLE FOR LEVY OF PENALTY U/S 271AAA. THUS THE VERY INITIATIO N OF THE PENALTY PROCEEDING IN THIS CASE IS NOT IN ACCORDANCE WITH L AW AND HAS LED TO VARIATION OF ENTIRE PENALTY PROCEEDINGS AS HAS BEEN HELD BY VARIOUS HIGHER JUDICIAL AUTHORITIES. VERY RECENTLY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V/S KULWANT SI NGH BHATIA DATED 09.05.2018 (ITA 9 TO 14 OF2018) HAS HELD THAT THE P ENALTY U/S 271(1)(C) OF THE ACT OF 1961 IS NOT SUSTAINABLE IN LAW AS THE NO TICE WAS NOT SPECIFIC, OBSERVING AS FOLLOWS:- 'ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LEARN ED COUNSEL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THAT TH E GROUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SATISFY THE REQUIREM ENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT LE ARNED TRIBUNAL HAS RIGHTLY RELYING ON THE DECISION OF CIT VIS MANJ UNATHA COTTON GINNING FACTORY AND CIT VIS SSA'S EMERALD MEADOWS R IGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE TH E ORDER OF PENALTY IMPOSED BY THE AUTHORITIES. NO SUBSTANTIAL QUESTION OF LAW IS ARISING IN THESE APPEALS. ITA. NO(S) 9/2018, 10/201 8, 11/2018, 12/2018, 13/2018 AND 14/2018, FILED BY THE APPELLAN T HAVE NO MERIT AND ARE HEREBY DISMISSED. ' KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 16 IT IS OBSERVED THAT FACTS OF THE PRESENT CASE UNDER APPEAL BEFORE ME ARE IDENTICAL TO THAT OF THE CASE OF KULWANT SINGH BHAT IA (SUPRA) IN SO FAR AS ADDITIONAL INCOME WAS OFFERED BY THE ASSESSEE IN TH E RETURNS FILED AFTER THE SEARCH AND PENALTIES U/S 271(1)(C) WERE LEVIED ON THE BASIS OF SHOW CAUSE NOTICE ISSUED WITHOUT, STRIKING OFF EITHER OF THE TWO CHARGES. SIMILARLY IN THE PRESENT CASE PENALTY SHOW CAUSE IS SUED UNDER SECTION 274 R.W.S 271AAA MENTIONED WRONG AND INAPPLICABLE CHARG ES. IN THE CASE BEFORE THE CASE BEFORE THE HONOURABLE HIGH COURT, T HE PENALTIES WERE DELETED BY THE TRIBUNAL HOLDING THAT THE SAME AS NO T SUSTAINABLE IN LAW, AS DEFECTIVE PENALTY NOTICE WAS ISSUED UNDER SECTIO N 274 AND NO SPECIFIC CHARGE WAS LEVIED IN PENALTY SHOW CAUSE NOTICE, LAT ER THE ORDER OF THE HONOURABLE ITAT WAS AFFIRMED BY THE HONOURABLE JURI SDICTIONAL HIGH COURT. IN THE PRESENT CASE BEFORE ME ALSO THE PENAL TY SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 WAS DEFECTIVE AND NO SPECI FIC CHARGE UNDER SECTION 271AAA WAS MENTIONED. THEREFORE, THE PROPOS ITION LAID DOWN BY THE HONOURABLE JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IS APPLICABLE IN THE PRESENT APPEAL ALSO AND IT IS HELD THAT THE PENALTY PROCEEDINGS INITIATED IN THIS CASE ARE NOT AS PER LAW AND THE P ENALTY SO LEVIED IS WRONG. THE APPELLANT HAS STATED THAT IN ITS OTHER GROUP CA SES ALSO, WHEREIN PENALTIES WERE LEVIED U/S 271AAA IN THE ASSESSMENT PROCEEDINGS CARRIED OUT AS A RESULT OF THE SAME SEARCH AND ON SIMILAR C HARGE OF NOT EXPLAINING THE MANNER OF EARNING UNDISCLOSED INCOME, HAVE BEEN DELETED BY THE HONOURABLE ITAT INDORE BENCH IN THE CASES OF M/S KE TI SANGAM INFRASTRUCTURE (I) LTD. AND OTHER GROUP COMPANY APP EALS AND ALSO IN THE CASE OF SHRI TIKAMCHAND GARG AND OTHER INDIVIDUAL C ASES OF THE GROUP, COPIES OF SUCH ORDERS HAVE ALSO BEEN FILED. A PERU SAL OF THE ORDER PASSED IN THE CASE OF SHRI TIKAMCHAND GARG IN IT NO.1027 & 1028/IND/2016 AND OTHER CASE BY HONOURABLE JURISDICTIONAL ITAT ON 28. 06.2017 FOR AYS 2011- 12 AND AY 2012-13 IT IS SEEN THAT THE PENALTIES LEV IDED U/S 271AAA OF THE ACT HAVE BEEN DELETED. AFTER DISCUSSING THE ISSUE A T LENGTH AND AFTER KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 17 ANALYZING THE VARIOUS DEEISIONS.JHE HONOURABLE ITAT HAS DEALT THE ISSUE IN PARA 7 TO 7.6 ON INTERNAL PAGE 20 TO 27 OF THE O RDER. FINALLY IN PARA 7.6 OF THE ORDER THE HONOURABLE ITAT FOLLOWING THE DECI SION OF VARIOUS HIGH COURTS AND COORDINATE BENCHES OF VARIOUS TRIBUNALS HELD THAT IN ABSENCE OF ANY QUERY RAISED BY THE AUTHORISED OFFICER DURIN G THE COURSE OF SEARCH ABOUT THE MANNER IN WHICH THE UNDISCLOSED INCOME WA S EARNED, THE AO WAS NOT JUSTIFIED IN IMPOSING PENALTY U/S 27AAAA OF THE ACT SPECIFICALLY WHEN THE SURRENDERED UNDISCLOSED INCOME HAS BEEN A CCEPTED AND DUE TAXES HAS BEEN PAID BY THE ASSESSEE. THE HONOURABLE ITAT DELETED THE PENALTIES LEVIED U/S 271AAA. SINCE THE PRESENT PENALTY IS ALSO EMANATING FROM TH E SAME SEARCH AND THE FACTS ARE IDENTICAL AND THE PENALTY ALSO IS LEVIED IN IDENTICAL MANNER, THEREFORE, FOLLOWING THE DECISION OF THE HONOURABLE ITAT INDORE BENCH RENDERED ON 28.06.2017 IN THE APPELLANT GROUP CASES ITSELF FOR THIS VARY ASSESSMENT YEAR, IT IS HELD THAT THE PENALTY LEVIED BY THE A.O U/S 271AAA IS WRONG AND IS THEREFORE DELETED. IN VIEW OF THE ABOVE DISCUSSIONS THE PENALTY LEVIED IS HELD TO BE WRONG. ACCORDINGLY THE PENALTY LEVIED BY THE AO U/S 271AAA IS DELETED AND THE APPEAL FILED BY THE APPELLANT IS ALLOWED. 11. WE HAVE CONSIDERED THE FINDING OF LD. CIT(A) AN D ALSO THE RELEVANT JUDGMENTS REFERRED AND RELIED BY HIM AS WE LL AS LD. COUNSEL FOR THE ASSESSEE. AS REGARDS THE MERITS OF THE CASE IS THAT WHETHER THE LD. A.O IS JUSTIFIED IN INVOKING PROVIS IONS OF SECTION 271AAA(1) OF THE ACT ALLEGING THAT ASSESSEE HAS NOT DISCLOSED THE MANNER OF DERIVING THE INCOME OFFERED DURING THE CO URSE OF SEARCH. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 18 WE FIND THAT THE ADDITIONAL INCOME SURRENDERED BY T HE ASSESSEE HAVE BEEN ACCEPTED BY THE DEPARTMENT ON THE BASIS O F THE EXPLANATION GIVEN BY THE RESPONDENT AND ON THE BAS IS OF OFFERING THE SAME AS BUSINESS INCOME WHICH IS EVEN CLEARLY D ISCERNABLE FROM THE ASSESSMENT ORDER. IT IS ALSO NOT IN DISPUTE T HAT THE ASSESSEE COMPANY HAS NO OTHER SOURCE OF GENERATING INCOME OT HER THAN THE BUSINESS CARRIED OUT BY IT AS PER THE OBJECTS FOR W HICH IT IS REGISTERED. THIS FACT WAS NOT IN DISPUTE AND METHO D AND MANNER OF ADDITIONAL INCOME OFFERED WAS DULY EXPLAINED TO THE INVESTIGATION WING AND ALSO DURING THE COURSE OF ASSESSMENT PROCE EDINGS WHICH IS WELL EVIDENT FROM THE ASSESSMENT ORDER ITSELF. WE FIND THAT UNDER THE SIMILAR FACTS, WE BOTH THE UNDERSIGNED O F THIS ORDER HAVE ADJUDICATED THE SIMILAR ISSUE IN ASSESSEES ANOTHER GROUP CONCERN M/S. KETI SANGAM INFRASTRUCTURE (I) LTD AND KETI-T CONSTRUCTION (INDIA) LTD (SUPRA) WHEREIN WE AFTER REFERRING TO OUR DECISION IN THE CASE OF SMT. SHRUTI GARG ITA NO.988/IND/2016 (SUPRA) DELETED THE PENALTY LEVIED U/S 271AAA OF THE ACT OBSERVING AS F OLLOWS:- THE ASSESSEES ARE ELIGIBLE FOR GETTING IMMUNITY FRO M PAYING PENALTY U/S 271AAA OF THE ACT AS THE UNDISCLOSED INCOME HAS BEE N ADMITTED DURING THE COURSE OF SEARCH AND THE MANNER OF EARNING INCO ME IS FROM BUSINESS SOURCES, DUE TAXES WITH INTEREST HAVE BEEN PAID, SU RRENDERED INCOME HAS BEEN OFFERED AS BUSINESS INCOME IN RETURNS OF INCOM E FILED AND THEY HAVE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 19 BEEN ACCEPTED AND ASSESSED AS BUSINESS INCOME ONLY AND IN THIS MANNER THE ASSESSEE HAS SUCCESSFULLY FULFILLED ALL THE THR EE CONDITIONS U/S 271AAA OF THE ACT. EVEN OTHERWISE, IF THE REVENUE HAS NOT ASKED SPECIFIC QUESTION RELATING TO THE MANNER OF DERIVING UNDISCLOSED INCO ME, THE ASSESSEE WHILE FULFILLING THE FIRST CONDITION OF ADMITTING THE UND ISCLOSED INCOME HAS ALREADY SPECIFIED THE MANNER OF EARNING THE INCOME I.E. FROM BUSINESS SOURCES AND THE STATEMENT U/S 132(4) OF THE ACT WAS NOT FOR INDIVIDUAL BUSINESS CONCERN, BUT WAS FOR THE GROUP CONCERNS/CO MPANIES/BUSINESS ASSOCIATES/ INDIVIDUALS AND AT THE POINT OF TIME OF GIVING THE STATEMENT DURING THE COURSE OF SEARCH, SPECIFIC DETAILS ABOUT EACH BUSINESS CONCERN AND THE SOURCE OF EARNING SUCH UNDISCLOSED INCOME A RE NOT PRACTICALLY POSSIBLE FOR THE PERSON GIVING THE STATEMENT ON BEH ALF OF THE GROUP CONCERNS/INDIVIDUALS. ABOVE ALL, THE BUSINESS INCOM E SURRENDERED HAS BEEN OFFERED AND ASSESSED AS BUSINESS INCOME ONLY. WE ARE, THEREFORE, OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) ERRED IN CONFIRMING THE FINDINGS OF THE ASSESSING OFFICER LE VYING PENALTY U/S 271AAA OF THE ACT. WE ACCORDINGLY SET ASIDE THE FIN DINGS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DELETE THE PENALTY OF RS.25,14,100/- IN THE CASE OF M/S KETI SANGAM INFRA STRUCTURE (I) LIMITED, RS.43,94,610/- IN THE CASE OF KETI-T CONSTRUCTION ( INDIA) LIMITED AND RS. 25,07,250/- IN THE CASE OF KETI SANGAM INFRASTRUCTU RE (I) LIMITED LEVIED U/S 271AAA OF THE ACT. 12. SINCE THE ISSUE IS SQUARELY COVERED BY OUR OWN DECISION, THUS WE CONFIRM THE FINDING OF LD. CIT(A) DELETING THE P ENALTY U/S 271AAA OF THE ACT LEVIED BY THE LD. A.O INVOKING PR OVISION OF SECTION 271AAA OF THE ACT. WE FURTHER OBSERVE THAT ON EXAMINING THE INSTANT CASE IN THE LIGHT OF LEGAL ISSUE DECIDE D BY LD. CIT(A), WE FIND THAT THE IMPUGNED NOTICE ISSUED/S 274 R.W.S. 2 71AAA OF THE ACT IS DEFECTIVE IN NATURE THE SAME IS DISCERNIBLE FROM THE NOTICE REPRODUCED BELOW:- KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 20 NOTICE UNDER SECTION 274 READ WITH SECTION 271AAA O F THE INCOME TAX ACT, 1961 OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL)-I, IND ORE PAN. AACCK1840M DATE: 26/03/2014 TO M/S KALYAN TOLL INFRASTRUCTURE PVT. LTD, 15/3, VIDHYA DEEP, MANORAMAGANJ INDORE WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2015-16 IT APPEARS TO ME THAT YOU :- *HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WITH YOU WERE REQUIRED TO FURNISH BY A NOTICE GIVEN UNDER SECTION 22(1)/22(2)/34 OF THE INDIA INCOME TAX ACT, 1922 OR WHICH YOU WERE REQUIRED TO FURNISH UNDER SECTION 139(1) OR BY A NO TICE GIVEN UNDER SECTION 139(2)/148 OF THE INCOME TAX ACT 1961 , NO DATED .. OR HAVE WITHOUT REASONABLE CAUSE FAILED T O FURNISH IT WITHIN THE ALLOWED AND THE MATTER REQUIRED BY THE SIDE SECTIO N 139(1) OR BY SUCH NOTICE. *HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WIT H A NOTICE UNDER SECTION 22(4)/32(2) OF THE INDIA INCOME TAX ACT, 19 22 OR UNDER SECTION 142(1)/143(2) OF THE INCOME TAX ACT 1961. NO. DATED . HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME ON 24. 04.2014 AT 3.30 PM AND SHOW CAUSE WHY AN ORDER IMPOSING A PENA LTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271AAA OF THE INCOME TAX ACT 1961 IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF B EARING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW C AUSE IN WRITING ON OR BEFORE THE SIDE DATE WHICH WILL BE CONSIDERED BE FORE ANY SUCH ORDER IS MADE UNDER SECTION 271AAA. SD/- (RAM KUMAR YADAVA) DY. COMMISSIONER OF INCOME TAX (CENTRAL) INDORE 13. THE ABOVE NOTICE CLEARLY SPELLS OUT THAT THE PR OVISIONS UNDER WHICH THE NOTICE WAS ISSUED FOR LEVY OF PENALTY U/S 271AAA BUT THE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 21 CHARGES MENTIONED THEREIN REFERS TO THOSE PROVIDED IN SECTION 271(1)(C) OF THE ACT. LD. A.O FAILED TO MENTION TH E CHARGES PROVIDED U/S 271AAA OF THE ACT. WE FIND THAT THIS ISSUE IS ALSO SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HON'BLE COORDINATE CHANDIGARH BENCH IN THE CASE OF GILLCO DEVELOPERS & BUILDERS (P) LTD (SUPRA ) WHEREIN THE TRIBUNAL AFTER OBSERVING THAT THE NOTICE ISSUED IS DEFECTIVE HELD IN FAVOUR OF THE AS SESSEE AND QUASHED THE PENALTY PROCEEDINGS OBSERVING AS FOLLOW S:- 19. NOW COMING TO THE LEGAL ISSUES RAISED BY THE AS SESSEE, THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT EVEN THE NOTICE SERVED UPON THE ASSESSEE U/S 274 OF THE ACT IS ALSO INVALID. WE HAV E GONE THROUGH THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE. THE LD. C OUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE LETTER / NOTICE ISSUED U/S 274 READ WITH SECTION 271AAA OF THE ACT DATED 13.1.2014 , WHICH FOR THE SAKE OF REFERENCE IS EXTRACTED AS UNDER:- NOTICE U/S 274 READ WITH SECITON 271AAA OF THE INC OME TAX ACT, 1961 OFFICE OF THE DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -1II, AAYAKAR BHAWAN, SECTOR 17-E, CHANDIGARH DATED 13.01.2014 TO M/S GILCO DEVELOPERS AND BUILDERS PVT LTD., SCF 23024, GILCO VALLEY MORINDA ROPAR ROAD, ROPAR, PUNJAB 140001 WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2012-13, IT APPEARS TO ME THAT YOU HAVE NOT RECORDE D THE TRUE PARTICULARS OF YOUR INCOME IN THE BOOKS OF ACCOUNTS OR NOT DISC LOSED ACCURATE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 22 PARTICULARS OF INCOME. THEREFORE, YOU ARE REQUIRED TO SHOW CAUSE AS TO WHY PENALTY PROCEEDINGS U/S 274 READ WITH SECTION 271AA A(1) OF THE INCOME TAX ACT MAY NOT BE LEVIED AGAINST YOU. IN THIS REGA RD, YOU ARE HEREBY REQUESTED TO APPEAR BEFORE THE UNDERSIGNED AT 11.00 A.M. ON 20.02.2014 AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY ON Y OU SHOULD NOT BE MADE U/S 271AAA(1) OF THE INCOME-TAX ACT, 1961). IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD I N PERSON OR THOUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRI TING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE U/S 271AAA(1). (SEAL) SD/- (LAGANPREET SANDHU). DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, CHANDIGARH 20. A PERUSAL OF THE ABOVE NOTICE SHOWS THAT THOUGH THE ASSESSING OFFICER HAS INTENDED TO INITIATE PENALTY PROCEEDINGS U/S 27 1AAA(1) OF THE ACT, HOWEVER, THE WORDING WRITTEN IN THE BODY OF THE LET TER DOES NOT CONFORM TO THE CHARGES OF THE PROVISIONS OF SECTION 271AAA OF THE ACT, RATHER, THE ASSESSEE HAS BEEN SHOW CAUSED ON THE CHARGE OF FURN ISHING OF INACCURATE PARTICULARS OF INCOME, WHICH FALLS UNDER THE SCOPE AND PURVIEW OF SECTION 271(1)(C) OF THE ACT. THE ASSESSEE, THEREFORE, IS N OT SHOW CAUSED FOR LEVY OF PENALTY UNDER THE PROVISIONS OF SECTION 271AAA, RAT HER FOR DOING AN ACT INVITING PENALTY U/S 271(1)(C) OF THE ACT, WHICH OT HERWISE IS NEITHER ARISING OUT OF THE FACTS OF THE CASE NOR ESTABLISHED AGAINS T THE ASSESSEE. THUS, THE PENALTY PROCEEDINGS CONDUCTED AGAINST THE ASSESSEE U/S 271AAA OF THE ACT WERE INVALID AT ITS VERY INCEPTION BECAUSE OF T HE DEFECTIVE AND INVALID SHOW CAUSE NOTICE, RENDERING THE ENTIRE PENALTY PRO CEEDINGS VOID ABNITIO. THE PENALTY LEVIED AGAINST THE ASSESSEE IS THUS NOT SUSTAINABLE ON THIS SCORE ALSO. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 23 14. AS THE ABOVE DECISION OF HON'BLE CHANDIGARH TRI BUNAL IS SQUARELY APPLICABLE ON THE ASSESSEE WE THEREFORE RE SPECTFULLY FOLLOWING THE SAME DECIDE THIS LEGAL ISSUE ALSO IN FAVOUR OF THE ASSESSEE HOLDING THAT THE PENALTY PROCEEDINGS CARRI ED OUT IN THE CASE OF THE ASSESS WERE VOID AB-INITIO SINCE THE NOTICE ISSUED ITSELF IS DEFECTIVE AND NOT IN ACCORDANCE WITH LAW. THUS IN VIEW OF ABOVE DECISION AND IN THE GIVEN FACTS AND CIRCUMSTANCES O F THE CASE AND VARIOUS JUDGMENTS REFERRED ABOVE, WE FIND NO REASON TO INTERFERE IN THE FINDING OF LD. CIT(A) DELETING THE PENALTY OF R S.70,78,640/- LEVIED U/S 271AAA OF THE ACT. ACCORDINGLY THE GROU ND RAISED IN ITA NO.928/IND/2019 BY THE REVENUE STANDS DISMISSED. 15. NOW WE TAKE UP ITA NO.929/IND/2019 IN THE CASE OF M/S KALYAN KETI TOLL PVT. LTD RELATING TO ASSESSMENT YE AR 2016-17. IN THIS CASE THE REVENUE HAS RAISED SOLE ISSUE AGAINS T THE FINDING OF LD. CIT(A) DELETING THE PENALTY OF RS.1,33,78,415/- LEVIED BY LD. A.O U/S 271AAB(1)(A) OF THE ACT. BRIEF FACTS AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS ALSO A PART OF KAL YAN GROUP WHICH WAS SUBJECT TO SEARCH U/S 132 OF THE ACT ON 4.9.201 5. THE DUE DATE OF FILING OF INCOME TAX RETURN FOR ASSESSMENT YEAR 2016-17 DID NOT EXPIRED BEFORE THE DATE OF SEARCH. RETURN OF INCOM E WAS FILED U/S KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 24 139 OF THE ACT ON 17.10.16 DECLARING TOTAL INCOME O F RS.20,990/- AFTER INCLUDING INCOME OFFERED TO TAX U/S 41(1) OF THE ACT TOWARDS CESSATION OF LIABILITY AT RS.13,37,84,149/- AND AL SO AFTER CALCULATING BROUGHT FORWARD LOSS OF RS.16,93,79,576/-. SUBSEQU ENTLY NOTICE U/S 143(2) WAS ISSUED ON 20.3.2017. THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 31.10.2017 ACCEPTING THE R ETURNED INCOME. IN OTHER WORDS INCOME OF RS.20,990/- SHOWN BY THE ASSESSEE IN THE INCOME TAX RETURN FILED U/S 139 OF THE ACT WAS ASSESSED AS INCOME OF THE ASSESSEE U/S 143(3) OF TH E ACT. HOWEVER THE PENALTY PROCEEDINGS U/S 271AAB OF THE ACT WAS P ROPOSED ON THE INCOME OF RS.13,37,84,149/- OFFERED BY THE ASSESSEE U/S 41(1) OF THE ACT ON ACCOUNT OF WRITING OFF OUTSTANDING CREDI T BALANCE IN THE NAME OF A CREDITOR NAMELY M/S. HORIZON INFRASTRUCTU RE LTD. LD. A.O THEREAFTER ISSUED SHOW CAUSE NOTICE DATED 31.10.201 7 U/S 274 R.W.S. 271AAB OF THE ACT AND AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE LEVIED A PENALTY OF RS.1,33,78,415/- C ALCULATED @10% OF THE ALLEGED UNDISCLOSED INCOME U/S 271AAB(1)(A) OF THE ACT. 16. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) RAISING BOTH THE LEGAL AND ON MERITS OF THE CASE AND SUCCEE DED AS LD. CIT(A) ALLOWED BOTH THE GROUNDS AND DELETED THE PEN ALTY LEVIED U/S KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 25 271AAB OF THE ACT. AGGRIEVED REVENUE IS NOW IN APP EAL BEFORE THE TRIBUNAL. 17. LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGU ED SUPPORTING ORDER OF LD. A.O. 18. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE CO- ORDINATE BENCH OF INDORE IN THE CASE OF DR. RAJESH JAIN VS. DCIT ITA NO.905/IND/2018 ORDER DATED 19.02.2020 FOR ASSESSMENT YEAR 2014-15 AND SHRI VIVEK CHUGH V/S ACIT ITA NO.6/36/IND/2017 ORDER DATED 28.03.2019. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE FACTS OF THE INSTANT CASE ARE SA ME TO THE EXTENT OF ISSUE OF SIMILAR TYPE OF DEFECTIVE NOTICE WITHOU T SPECIFYING THE SPECIFIC CHARGE AGAINST THE ASSESSEE AS MANDATED IN SECTION 274 R.W.S. 271AAB OF THE ACT. 19. LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT ON MERITS ALSO THE ASSESSEE HAS A STRONG CASE AS PENALTY LEVI ED U/S 271AAB OF THE ACT IS LEVIABLE ON UNDISCLOSED INCOME WHEREAS I N THE CASE OF ASSESSEE THERE WAS NOT SUCH UNDISCLOSED INCOME. TH E INCOME OFFERED U/S 41(1) OF THE ACT WAS IN THE REGULAR RET URN OF INCOME FILED U/S 139(1) OF THE ACT AND THE OUTSTANDING LIABILITY PAYABLE TO THE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 26 CREDITOR WAS DULY APPEARING IN THE REGULAR BOOKS OF ACCOUNTS AND THE DISPUTE WITH THIS PARTY WAS WELL EVIDENCED WITH NECESSARY DOCUMENTS. EVEN THE LD. A.O HAS ALSO DISCUSSED THE ISSUE IN THE ASSESSMENT ORDER. THEREFORE BY NO CANON SUO-MOTO I NCOME OFFERED U/S 41(1) CAN BE TREATED AS UNDISCLOSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB(1)(A) OF THE ACT. LD. C OUNSEL FOR THE ASSESSEE FURTHER REFERRED AND RELIED ON THE DECISIO NS IN SUPPORT ON LEGAL AND MERITS OF THE CASE:- FOR THE PROPOSITION THAT SHOW CAUSE NO TICE ISSUED U/S 274 IS WITHOUT DRAWING REQUISITE SATISFACTION FOR LEVY OF PENALTY U/S 271AAB AND WAS AKIN TO THE NOTICE ISSUED U/S 271(1) (C). DEFECTIVE NOTICE ISSUED U/S 274 R.W.S. 271AAB IS FA TAL AND PENALTY LEVYING U/S 271AAB IS VACATED. (I) HON'BLE I.T.A.T., CHENNAI IN THE CASE OF DCIT CORPO RATE CIRCLE-1, COIMBATORE V/S SHRI R. ELANGOVAN (1199/CHNY/2017) DATED 05.04.2018 (II) HON'BLE I.T.A.T., JAIPUR IN THE CASE OF RAVI MATH UR VS. DCIT IN ITA NO/969/JP/2017. (III) HON'BLE I.T.A.T., CHANDIGARH IN THE CASE OF GILLCO DEVELOPERS & BUILDERS (P) LTD V/S DCIT IN ITA NO.168/CHD/2017. (IV) HON'BLE MADHYA PRADESH HIGH COURT IN THE CASE OF KULWANT SINGH BHATIA (2018) 102 CCH 0303 KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 27 (V) HON'BLE I.T.A.T., INDORE IN THE CASE OF DR. RAJESH JAIN V/S DCIT CENTRAL-1, INDORE IN ITA NO.905/IND/2018. (VI) HON'BLE I.T.A.T., INDORE IN THE CASE OF SHRI ASHOK BHATIA V/S DCIT CENTRAL-1, INDORE IN ITA NO.869/IND/2018. (VII) HON'BLE I.T.A.T., INDORE IN THE CASE OF SHRI VIVEK CHUGH V/S DCIT CENTRAL-2, INDORE IN ITA NO.636/IND/2017. SECTION 271AAB IS NOT APPLICABLE AS THERE WAS NO UNDISCLOSED INCOME (I) HON'BLE I.T.A.T., KOLKATTA IN THE CASE OF DCIT CEN TRAL CIRCLE 2(2) V/S SHRI LIADHAR AGARWAL IN ITA NO.1605/KOL/2017 DATED 30.11.2018. (II) HON'BLE I.T.A.T., RANCHI IN THE CASE OF DCIT CENTR AL CIRCLE-2 V/S HARSH AGARWAL IN ITA NO.194/RAN/2017 DATED 30.11.2018. (III) HON'BLE I.T.A.T., KOLKATTA IN THE CASE OF ACIT CEN TRAL CIRCLE 2(3) V/S SRI KANWAR SAIN GUPTA IN ITA NO.538/KOL/2017 DATED 05.10.18. (IV) HON'BLE I.T.A.T., COIMBATORE IN THE CASE OF ACIT C ENTRAL CIRCLE-2) V/S S MARTIN IN ITA NO.2382/CHNY/2016 DATED 05.10.2018. (V) HON'BLE I.T.A.T., VISAKHAPATNAM IN THE CASE OF ACIT CENTRAL CIRCLE-2 V/S MARVEL ASSOCIATES (2018) 92 TAXMANN.COM 109 DATED 16.03.2018. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 28 20. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND CAREFULLY GONE THROUGH THE DEC ISIONS REFERRED AND RELIED BY US. REVENUES SOLE GRIEVANCE IS AGAI NST THE DELETION OF PENALTY BY LD. CIT(A) LEVIED BY LD. A.O U/S 271AAB OF THE ACT AT RS.1,33,78,415/-. WE FIND THAT THE ASSESSEE WAS SU BJECT TO SEARCH U/S 132 OF THE ACT ON 4.9.15 AND ON THE DATE OF SEA RCH STATUTORY TIME LEFT TO FILE REGULAR RETURN OF INCOME FOR ASSE SSMENT YEAR 2016- 16 U/S 139(1) OF THE ACT DID NOT EXPIRED. IT IS FU RTHER NOT DISPUTED THAT BEFORE THE ISSUANCE OF NOTICE U/S 143(2) OF TH E ACT, ASSESSEE HAD E-FILED THE RETURN OF INCOME U/S 139(1) OF THE ACT ON 17.10.16 DECLARING INCOME OF RS.20,990/-. FURTHER THE INCOM E SHOWN BY THE ASSESSEE IN THE RETURN HAS BEEN ACCEPTED BY THE LD. A.O IN THE ASSESSMENT ORDER FRAMED U/S 143(3) OF THE ACT. THE ONLY DISPUTE IS WITH REGARD TO THE PENALTY LEVIED U/S 271AAB OF THE ACT @10% ON THE INCOME OFFERED U/S 41(1) OF THE ACT AT RS.13,37 ,84,149/- ON ACCOUNT OF CESSATION OF LIABILITY. 21. WE FIND THAT LD. CIT(A) AFTER DEALING EXTENSIVE LY WITH THE FACTS OF THE CASE AND DRAWING SUPPORT FROM RELEVANT JUDGM ENTS AND DECISIONS HAS ALLOWED BOTH THE LEGAL GROUND AS WELL AS GROUND RAISED ON MERITS IN FAVOUR OF THE ASSESSEE OBSERVIN G AS FOLLOWS:- KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 29 4.1 GROUND NO. 1 & 2 - THROUGH THESE GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY OF RS. 1,33,78,4 15/- U/S 27LAAB OF THE INCOME TAX ACT AND ALSO THE INITIATION OF THE PENAL TY PROCEEDINGS U/S 271AAB AND ALSO THE PENALTY SHOW CAUSE NOTICE ISSUE D U/S 274. IT IS SEEN THAT THE APPELLANT FILED ITS RETURN OF INCOME U/S 1 39(1) ON 17 .1 0.2016 DECLARING AN INCOME OF RS. 20,990/- INCLUDING AN AM OUNT OF RS.13,37,84,149/- IT WAS OFFERED AS CESSATION OF LI ABILITY U/S 41(1). THE AO COMPLETED THE ASSESSMENT ON 31.10.2017 ON AN INC OME OF RS, 20,990/- ACCEPTING THE RETURNED INCOME AND ALSO ALL OWING TOTAL LOSSES TO BE CARRY FORWARD OF RS.L6,93,79,576/-. IN THE ASSES SMENT ORDER, THE AO INITIATED PENALTY U/S 271AAB. THE AO ALSO ISSUED A NOTICE U/S 274 R.W.S. 271 AAB DATED 31.1 0 .20 1 7 STATING THAT THE APPEL LANT HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF INCOME. AFTER CONSIDERING THE REPLY OF THE APPELLANT, THE AO PASS ED THE IMPUGNED PENALTY ORDER U/S 271AAB ON 27.04.2018 LEVYING A PE NALTY OF RS. 1,33,78,415/- FOR THIS YEAR. THE PENALTY HAS BEEN LEVIED IN RESPECT OF ADDITIONA L INCOME OF RS, 13,37,84,149/-_ OFFERED BY THE ASSESSEE AS CESSATIO N OF LIABILITY U/ S 41 (1). THIS LIABILITY WAS OUTSTANDING IN THE BOOKS OF ACCOUNTS OF THE APPELLANT IN RESPECT OF CONSTRUCTION OF ITS ROAD PROJECT AND WAS PAYABLE TO A CONTRACTOR NAMELY HORIZON INFRASTRUCTURE LTD. THE S AID AMOUNT WAS NO MORE PAYABLE SINCE THE SAID CONTRACTOR HAD NOT COMP LETED TBE WORK PROPERLY AND TIMELY AND THERE WAS A DISPUTE OF THE APPELLANT WITH HIM. THE RELEVANT FACTS ARE DISCUSSED IN THE ASSESSMENT ORDER AS WELL AS IN THE PENALTY ORDER. DURING THE SEARCH, THE APPELLANT STA TED THAT THE SAID AMOUNT WAS NO MORE PAYABLE AND OFFERED THE SAME U/S 41(1) AS CESSATION OF LIABILITY. THE INCOME SO OFFERED BY THE ASSESSEE U/S 132(4) WAS ALSO OFFERED IN THE RETURN FILED U/S 139(1) AND DUE TAXE S WERE ALSO PAID BEFORE FILING THE RETURN OF INCOME. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 30 THE APPELLANT HAS CHALLENGED THE INITIATION OF THE PENALTY PROCEEDINGS ON THE CONTENTION THAT NO SATISFACTION WAS DRAWN IN TH E ASSESSMENT ORDER WHILE INITIATING THE PENALTY PROCEEDINGS AS NO CHAR GE WAS MENTIONED IN THE ASSESSMENT ORDER AND THE NOTICE ISSUED UNDER SECTIO N 274 WAS ALSO A DEFECTIVE NOTICE AS NO SPECIFIC CHARGE U/S 271AAB W AS MENTIONED AGAINST THE APPELLANT, ON THE CONTRARY CHARGES RELEVANT FOR PENALTY U/S 271(1)(C) I.E. CONCEALMENT OF PARTICULARS OF INCOME AND FURNI SHING OF INACCURATE PARTICULARS OF INCOME WERE MENTIONED. THE APPELLANT HAS ALSO CHALLENGED THAT THE INCOME OFFERED BY IT WAS NOT UNDISCLOSED I NCOME. REFERRING TO THE ASSESSMENT ORDER, THE PENALTY SHOW CAUSE NOTICE AND THE PENALTY ORDER, IT IS CONTENDED THAT NO CASE OF ANY UNDISCLOSED INCOME HAS BEEN MADE OUT BY THE AO. THE APPELLANT HAS CHALLENGED THE LEVY OF PENALTY U/S 271AAB ON THE GROUND THAT THERE WAS NO SATISFACTION IN THE PENALTY ORDER AS WELL, AS THE APPELLANT HAS NOT EARNED ANY UNDISCLOSED INC OME AS EVIDENT FROM THE PENALTY ORDER. IT IS ALSO CONTENDED THAT THE PE NALTY ORDER IS VAGUE AS IT IS SIMPLY STATED THAT THE ASSESSEE HAS OFFERED THE AMOUNT TO TAX U/S 41(1) OF THE ACT AS CESSATION OF LIABILITY, THEREFORE, PE NALTY IS LEVIABLE U/S 271AAB(1)(A). IT IS ALSO CONTENDED THAT THE AMOUNT PAYABLE WAS DULY REFLECTING IN THE BOOKS OF ACCOUNTS OF THE APPELLAN T AND THAT THE SAID LIABILITY WAS OTHERWISE FOUND IN ORDER AND IT IS NO T A CASE OF UNEARTHING ANY INCOME ON THE BASIS OF ANY SEIZED INCRIMINATING MATERIAL. SINCE THERE IS NO UNDISCLOSED INCOME PENALTY U/S 271AAB IS NOT ATTRACTED IN THIS CASE. IT IS ALSO CONTENDED THAT THE SAID LIABILITY WAS IN RESPECT OF THE ROAD PROJECT OF THE APPELLANT AND THE RELATED EXPENDITURE WAS CA PITALIZED IN THE BOOKS OF ACCOUNTS TO THE COST OF THE PROJECT AND NO DEDUC TION WAS CLAIMED THROUGH THE PROFIT AND LOSS ACCOUNT, THEREFORE, THE PROVISIONS OF SECTION 41 (1) ARE EVEN OTHERWISE NOT ATTRACTED. THE INCOME WA S OFFERED U/S 41(1) UNDER A WRONG NOTION, WHICH WAS ALSO ASSESSED BY TH E AO. IT WAS FURTHER CONTENDED THAT SINCE THE SAID AMOUNT WAS NOT IN THE NATURE OF INCOME, EVEN IF THE APPELLANT HAS OFFERED THE SAME AS INCOM E, WOULD NOT ATTRACT THE PENALTY U/S 271AAB AND THEREFORE, NO PENALTY OUGHT TO HAVE BEEN LEVIED. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 31 AFTER TAKING INTO CONSIDERATION THE ASSESSMENT ORDE R AND ALSO THE PENALTY ORDER AND ALL THE CONTENTIONS OF THE APPELLANT CARE FULLY IT IS SEEN THAT WHILE INITIATING THE PENALTY PROCEEDINGS IN THE ASSESSMEN T ORDER THE AO HAS SIMPLY STATED THAT PENALTY PROCEEDINGS ARE INITIATE D U/S 271AAB AND HAS NOT GIVEN ANY REASONS FOR THE SAME. IT IS ALSO SEEN THAT THE AO HAS ALSO ACCEPTED THE FACT THAT A DISPUTE WAS GOING ON BETWE EN THE APPELLANT AND THE SAID CONTRACTOR, AS HE DID NOT COMPLETED THE WO RK PROPERLY AND TIMELY. SINCE THE APPELLANT WAS UNDER THE CONTRACTUAL OBLIG ATION OF THE STATE GOVERNMENT OF MAHARASHTRA TO COMPLETE THE WORK WITH IN THE STIPULATED TIME, THE WORK WAS GOT COMPLETED WITH ALTERNATIVE A RRANGEMENTS. IT IS ALSO SEEN THAT THE AO HAS CONDUCTED DUE VERIFICATION OF THE SAID CONTRACTOR, AS MENTIONED IN PARA 5.3 OF THE ASSESSMENT ORDER AND A LSO IN PARA 2.4 OF THE PENALTY ORDER AND IT WAS FOUND THAT THE SAID CONTRA CTOR M/S HORIZON INFRASTRUCTURE LTD. WAS EVIDENCING SUBSTANTIAL FALL IN THE ACTIVITIES IN THE YEAR 2013. THE TURNOVER OF THE SAID CONTRACTOR REDU CED FROM 468 CORERS IN MARCH 2013 TO RS. 377.58 CRORES IN MARCH 2014 AND T O RS. 70.82 CORERS IN MARCH 2015. FURTHER IT IS NOTED BY THE AO THAT THE CONTRACTOR PARTY WAS INCURRING HUGE LOSSES ON THE WORKING CAPITAL AND HA D STARTED REPORTING HEAVY LOSSES FROM THE YEAR ENDED 2014 WHICH STOOD A T RS. 171.54 CORERS, WHICH GOT FURTHER INCREASED IN THE LATER PERIOD. TH US IN VIEW OF THE DISCUSSION MADE IN THE ASSESSMENT ORDER AND IN THE PENALTY ORDER, IT IS SEEN THAT THE LIABILITY WAS DULY RECORDED IN THE BO OKS OF THE APPELLANT AND WAS ON ACCOUNT OF COST OF THE PROJECT WHICH WAS CAP ITALIZED IN THE BOOKS. THE APPELLANT HAS RIGHTLY TAKEN THE SUPPORT OF THE DECISION OF HONOURABLE SUPREME COURT IN CIT VIS MAHINDRA & MAHINDRA LTD. (2018) 404 ITR 1 FOR THE CONTENTION THAT IF THE LIABILITY IS IN RESPECT OF CAPITAL ASSET, THE DEDUCTION CLAIMED BY THE ASSESSEE IS ONLY ON ACCOUN T OF DEPRECIATION OF SUCH ASSETS AND THE PURCHASE AMOUNT OR THE EXPENDIT URE IS NOT DEBITED TO THE TRADING ACCOUNT OR TO THE PROFIT AND LOSS ACCOU NT, THEREFORE, THE CESSATION OF LIABILITY IN SUCH CASE IS NOT AN INCOM E U/S 41 (1). KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 32 IT IS ALSO SEEN THAT NO CASE OF ANY UNDISCLOSED INC OME HAS BEEN MADE OUT EITHER IN THE ASSESSMENT OR IN THE PENALTY ORDER. I T IS RIGHTLY POINTED OUT BY THE APPELLANT THAT THERE IS NOT EVEN A WHISPER OF ' UNDISCLOSED INCOME' IN THE ASSESSMENT ORDER AND ALSO IN THE PENALTY ORDER. THERE IS NO REFERENCE OF ANY INCRIMINATING MATERIAL OR ANY OTHER DOCUMENT S OR RECORD FOUND DURING THE SEARCH REGARDING THE SAID CONTRACTOR OR REGARDING THE LIABILITY APPEARING IN THE BOOKS OF THE APPELLANT. THERE IS N OTHING TO SUGGEST ON RECORD THAT THE SAID LIABILITY WAS INGENUINE OR BOG US. THE APPELLANT HAS DEMONSTRATED THAT THE SAID AMOUNT WAS NOT PAID ON A CCOUNT OF DISPUTE WITH THE SAID PARTY, WHO DID NOT COMPLETED THE CONS TRUCTION WORK TIMELY AND PROPERLY. ALL THESE FACTS THOUGH MENTIONED IN T HE ASSESSMENT ORDER AND ALSO IN THE PENALTY ORDER ARE NOT DISPUTED OR R EBUTTED BY THE AO IN THE ASSESSMENT ORDER OR EVEN IN THE PENALTY ORDER. ON T HESE FACTS OF THE CASE, IT IS HELD THAT THE SAID INCOME OFFERED BY THE APPE LLANT U/S 41(1) IN RESPECT OF A LIABILITY DULY RECORDED IN ITS BOOKS OF ACCOUN TS, CANNOT BE CATEGORIZED AS 'UNDISCLOSED INCOME' ATTRACTING PENALTY U/S 271A AB. IT IS ALSO SEEN THAT THOUGH THE SAID LIABILITY WAS ON ACCOUNT OF COST OF THE PROJECT, WHICH WAS CAPITALIZED IN THE BOOKS OF ACCO UNTS AND NO DEDUCTION IN RESPECT OF THE SAME WAS CLAIMED BY THE APPELLANT IN EARLIER YEARS, STILL THE SAME WAS OFFERED AS INCOME U/S 41 (L). MERELY O FFERING OF THE INCOME BY THE APPELLANT WITHOUT ANY CORROBORATIVE EVIDENCE TO HOLD THE SAID INCOME AS UNDISCLOSED INCOME CANNOT BE SUBJECT TO P ENALTY. IT IS HELD BY THE HONOURABLE SUPREME COURT IN THE CASE OF SURDARS HAN SILK AND SAREES V/SCIT (2008) 7 6 CCH 0545 DATED 11.04.2018 THAT ONLY THE STATEMENT O F THE ASSESSEE WITHOUT CORROBORATING EVIDENCE CANNOT BE THE ONLY BASIS FOR LEVYING PENALTY. THE APPELLANT HAS ALSO PLACED RELI ANCE ON THE DECISION OF VARIOUS OTHER COURTS THAT WHEN NO UNDISCLOSED INCOME IS FOUND DURING THE EACH AND NO INCRIMINATING MATERIAL IS FO UND, THERE IS NO CASE FOR IMPOSING PENALTY U/S 271AAB. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 33 THE PENALTY PROCEEDINGS IN THIS CASE WERE INITIATED WITHOUT MENTIONING ANY CHARGE IN THE ASSESSMENT ORDER. THE PENALTY NOT ICE WAS ALSO ISSUED IN MECHANICAL MANNER MENTIONING THE CHARGES SPECIFIED FOR LEVY OF PENALTY U/S 271(1)(C) AND NO CHARGE SPECIFIED U/S 271AAB WAS ME NTIONED IN THE NOTICE. THE APPELLANT WAS NOT FOUND OF HAVING EARNE D ANY UNDISCLOSED INCOME. THUS THE VERY INITIATION OF THE PENALTY PRO CEEDING IN THIS CASE IS NOT IN ACCORDANCE WITH LAW AND HAS LED TO VITIATION OF ENTIRE PENALTY PROCEEDINGS. VERY RECENTLY THE HON'BLE JURISDICTION AL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V/S KULWANT SINGH BHATIA DATED 09.05.2018 (ITA 9 TO 14 OF 2018) HAS HELD THAT THE PENALTY U/S 271(1)(C) OF THE ACT OF 1961 IS NOT SUSTAINABLE IN LAW AS THE NO TICE WAS NOT SPECIFIC, OBSERVING AS FOLLOWS:- 'ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LEARN ED COUNSEL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THAT THE GROUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SATISFY THE REQUIREMENT OF L AW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT LEARNED TRIBUNAL HAS RIGHTLY RELYING ON THE DECISION OF CIT VIS MANJUNATHA COTTON GINNING F ACTORY AND CIT VIS SSA'S EMERALD MEADOWS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET ASIDE THE ORDER OF PENALTY IMPOSED BY THE AUTHO RITIES. NO SUBSTANTIAL QUESTION OF LAW IS ARISING IN THESE APPEALS. ITA. N O(S) 912018, 10/2018, 11/2018, 12/2018, 13/2018 AND 14/2018, FILED BY THE APPELLANT HAVE NO MERIT AND ARE HEREBY DISMISSED. IT IS OBSERVED THAT FACTS OF THE PRESENT CASE UNDER APPEAL BEFORE ME ARE IDENTICAL TO THAT OF THE CASE OF KULWANT SINGH BHAT IA (SUPRA) IN SO FAR AS ADDITIONAL _ INCOME WAS OFFERED BY THE ASSESSEE IN THE RETURNS F ILED AFTER THE SEARCH AND PENALTIES U/S 271(1)(C) WERE LEVIE D ON THE BASIS OF SHOW CAUSE NOTICE ISSUED WITHOUT STRIKING OFF EITHER OF THE TWO CHARGES. SIMILARLY IN THE PRESENT CASE PENALTY SHOW CAUSE ISSUED UNDER SECTION 274 R.W.S . 271AAB MENTIONED WRONG AND INAPPLICABLE CHARGES. IN THE CASE BEFORE THE HONOURABLE HIGH COURT, THE PENALTIES WERE DELETED B Y THE TRIBUNAL HOLDING KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 34 THAT THE SAME AS NOT SUSTAINABLE IN LAW, AS DEFECTI VE PENALTY NOTICE WAS ISSUED UNDER SECTION 274 AND NO SPECIFIC CHARGE WAS MENTIONED IN THE PENALTY SHOW CAUSE NOTICE. LATER THE ORDER OF THE H ONOURABLE IT AT WAS AFFIRMED BY THE HONOURABLE JURISDICTIONAL HIGH COUR T. IN THE PRESENT CASE BEFORE ME ALSO THE PENALTY SHOW CAUSE ISSUED UNDER SECTION 274 WAS DEFECTIVE AS NO SPECIFIC CHARGE UNDER SECTION 271AA B WAS MENTIONED, RATHER THE CHARGES OF SECTION 271(1)(C) ARE MENTION ED. THEREFORE, THE PROPOSITION LAID DOWN BY THE HONOURABLE JURISDICTIO NAL HIGH COURT OF MADHYA PRADESH IS APPLICABLE IN THE PRESENT APPEAL ALSO AND IT IS HELD THAT THE PENALTY PROCEEDINGS INITIATED IN THIS CASE ARE NOT AS PER LAW AND THE PENALTY SO LEVIED IS WRONG. IN VIEW OF THE ABOVE DISCUSSIONS AND ALSO CONSIDERI NG THE FACT THAT THE AMOUNT OFFERED BY THE ASSESSEE ON ACCOUNT OF CESSAT ION OF LIABILITY IS NEITHER AN INCOME U/S 41(1) NOR IT IS AN UNDISCLOSE D INCOME. THE PENALTY LEVIED U/S 271AAB IS HELD TO BE WRONG. ACCORDINGLY THE PENALTY LEVIED BY THE AO U/S 271AAB IS DELETED AND THE APPEAL FILED BY THE APPELLANT IS ALLOWED . 22. AS REGARDS THE LEGAL GROUND ALLOWED IN FAVOUR O F THE ASSESSEE IS CONCERNED, WE FIND THAT LD. A.O SERVED FOLLOWING NOTICE TO THE ASSESSEE U/S 274 R.W.S. 271AAB OF THE ACT AS UNDER :- OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL)2I, IND ORE PAN. AADCK8996M DATE: 31/10/2017 TO M/S KALYAN KETI TOLL PVT. LTD, 15/3, VIDHYA DEEP, MANORAMAGANJ INDORE SIR/MADAM KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 35 NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB O F THE INCOME TAX ACT, 1961 WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2016-17 IT APPEARS TO ME THAT YOU :- *HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WITH YOU WERE REQUIRED TO FURNISH BY A NOTICE GIVEN UNDER SECTION 22(1)/22(2)/34 OF THE INDIA INCOME TAX ACT, 1922 OR WHICH YOU WERE REQUIRED TO FURNISH UNDER SECTION 139(1) OR BY A NO TICE GIVEN UNDER SECTION 139(2)/148 OF THE INCOME TAX ACT 1961 , NO DATED .. OR HAVE WITHOUT REASONABLE CAUSE FAILED T O FURNISH IT WITHIN THE ALLOWED AND THE MATTER REQUIRED BY THE SIDE SECTIO N 139(1) OR BY SUCH NOTICE. *HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WIT H A NOTICE UNDER SECTION 22(4)/32(2) OF THE INDIA INCOME TAX ACT, 19 22 OR UNDER SECTION 142(1)/143(2) OF THE INCOME TAX ACT 1961. NO. DATED . HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME ON 29. 11.2017 AT 11.30 AM AND SHOW CAUSE WHY AN ORDER IMPOSING A PEN ALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271AAB OF THE INCO ME TAX ACT 1961 IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNI TY OF BEARING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SIDE DATE WHICH WILL BE CO NSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271AAB. SD/- (VINITA DUBEY) DY. COMMISSIONE R OF INCOME TAX,CENTRAL CIRCLE-2 INDORE 23. WE FIND THAT THE ABOVE SHOW CAUSE NOTICE IS CRY PTIC IN NATURE AND NOT IN ACCORDANCE WITH LAW SINCE THE NOTICE ISS UED FOR LEVYING THE PENALTY U/S 271AAB OF THE ACT REFERS TO THE CHA RGES PROVIDED IN SECTION 271(1(C) OF THE ACT. WHEN THE PENALTY HAS BEEN INITIATED U/S 271AAB OF THE ACT THEN THE CHARGES SHOULD BE TH OSE MENTIONED KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 36 IN SECTION 271AAB OF THE ACT ABOUT THE LEVY OF PENA LTY UNDER VARIOUS SUB-CLAUSES OF SECTION 271AAB OF THE ACT AN D THE ONE APPLICABLE TO THE ASSESSEE. BUT IN THE INSTANT CAS E LD. A.O HAS ISSUED NOTICE REFERRING TO THE PENALTY TO BE LEVIED U/S 271AAB OF THE ACT BUT MENTIONING VARIOUS CHARGES PROVIDED IN SECT ION 271(1)(C) OF THE ACT. WE HAVE CONSISTENTLY HELD SUCH NOTICES AS CRYPTIC AND NOT IN ACCORDANCE TO LAW AND THEREFORE HELD THE PENALTY PROCEEDINGS AS VOID AB-INTIO DESERVING TO BE QUASHED. IN ONE OF THE CASE DECIDED BY US NAMELY DR. RAJESH JAIN (SUPRA) WE AFTER ADJUDICATING SIMILAR ISSUE AND IDENTICAL FACTS, ALLOWED LEGAL GROUND IN FAVOUR OF THE ASSESSEE SINCE THE NOTICE ISSUED U/S 274 R.W.S. 271 AAB OF THE ACT WAS DEFECTIVE AND NOT IN ACCORDANCE WITH LAW. THE RELEVANT EXTRACT OF OUR DECISION IN THE CASE OF DR. RAJESH JAIN V/S DCIT ITA NO.905/IND/2018 ORDER DATED 19.02.2018 IS REPRODUCE D BELOW:- 16. WE HAVE GONE THROUGH THE DECISION OF THE TRIBUN AL IN THE CASE OF DR. RAJESH JAIN (SUPRA) AND AFTER EXAMINING THE FACT FI ND THAT THE FACTS ARE VERBATIM SIMILAR WHEREIN DEFECTIVE NOTICE WAS ISSUE D U/S 274 R.W.S. 271AAB OF THE ACT, WITHOUT SPECIFYING THE CHARGES FOR WHICH PENALTY PROCEEDINGS WERE INITIATED. IN OTHER WORDS IN THE NOTICE ISSUED U/S 274 R.W.S. 271AAB OF THE ACT ASSESSEE HAS NOT BEEN GIVE N AN OPPORTUNITY TO OFFER EXPLANATION AGAINST THE TYPE OF PENALTY TO BE LEVIED I.E. WHETHER THE PENALTY IS TO BE UNDER CLAUSE (A), (B) OR (C) OF SE CTION 271AAB. THE TRIBUNAL KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 37 HAS QUASHED THE PENALTY PROCEEDINGS FOR THE DEFECTI VE NOTICE ISSUED U/S 274 R.W.S. 271AAB OF THE ACT OBSERVING AS FOLLOWS:- 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RE CORDS PLACED BEFORE US. THE LEGAL ISSUE BEFORE US IS THAT WHETHE R THE NOTICE ISSUED U/S 274 R.W.S. 271AAB OF THE ACT SUFFERS FROM FATAL ERR OR AND TECHNICAL DEFECT THEREBY NOT PROVIDING AN OPPORTUNITY TO THE ASSESSE E TO PLEAD HER CASE. SINCE THE LEGAL GROUND GOES TO BE ROOT CAUSE OF THE ISSUE LEVYING PENALTY U/S 271AAB OF THE ACT, WE IN VIEW OF THE RATIO HELD BY THE HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED (SUPRA) ADMIT THE ADDITIONAL LEGAL GROUND FOR ADJUDICATION. FOR LEVYING PENALTY U/S 271AAB OF THE ACT THE LD. A.O NEEDS TO PRIMARIL Y ISSUE NOTICE U/S 274 OF THE ACT SO FOR INITIATING PROCEEDINGS U/S 271AAB OF THE ACT THE LD. A.O HAS TO FIRST PASS THROUGH THE HURDLE OF SECTION 274 OF THE ACT. FOR BETTER UNDERSTANDING WE REPRODUCE THE PROVISIONS OF SECTIO N 271AAB AND 274 OF THE ACT WHICH READS AS FOLLOWS:- SECTION 271AAB. '271AAB. PENALTY WHERE SEARCH HAS BEEN INITIATED.( 1) THE ASSESSING OFFICER MAY, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS B EEN INITIATED UNDER SECTION 132 ON OR AFTER THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYA BLE BY HIM, (A) A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSESSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UN DER SUB-SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPEC IFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; (II) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCL OSED INCOME WAS DERIVED; AND (III) ON OR BEFORE THE SPECIFIED DATE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 38 (A) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; AND (B) FURNISHES THE RETURN OF INCOME FOR THE SPECIFI ED PREVIOUS YEAR DECLARING SUCH UNDISCLOSED INCOME THEREIN; (B) A SUM COMPUTED AT THE RATE OF TWENTY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF SUCH ASSE SSEE (I) IN THE COURSE OF THE SEARCH, IN A STATEMENT UN DER SUB-SECTION (4) OF SECTION 132, DOES NOT ADMIT THE UNDISCLOSED INCOME; AND (II) ON OR BEFORE THE SPECIFIED DATE (A) DECLARES SUCH INCOME IN THE RETURN OF INCOME F URNISHED FOR THE SPECIFIED PREVIOUS YEAR; AND (B) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME; (C) A SUM WHICH SHALL NOT BE LESS THAN THIRTY PER CENT BUT WHICH SHALL NOT EXCEED NINETY PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR, IF IT IS NOT COVERED BY THE PROVISIONS OF CLA USES (A) AND (B). (2) NO PENALTY UNDER THE PROVISIONS OF CLAUSE (C) O F SUB-SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON THE ASSESSEE IN RESPECT O F THE UNDISCLOSED INCOME REFERRED TO IN SUB-SECTION (1). (3) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, A S FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECT ION. EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) 'SPECIFIED DATE' MEANS THE DUE DATE OF FURNISH ING OF RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 139 OR THE DATE ON WHICH THE PERIOD SPECIFIED IN THE NOTICE ISSUED UNDER SECTION 153A F OR FURNISHING OF RETURN OF INCOME EXPIRES, AS THE CASE MAY BE; (B) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS Y EAR (I) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FURNISHING THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTI ON 139 FOR SUCH YEAR HAS KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 39 NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSES SEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE T HE DATE OF SEARCH; OR (II) IN WHICH SEARCH WAS CONDUCTED; (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER V ALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMM ISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECOR DED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED.'. SECTION 274 (1) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHA LL BE MADE UNLESS THE ASSESSEE HAS BEEN HEARD, OR HAS BEEN GIVEN A RE ASONABLE OPPORTUNITY OF BEING HEARD. (2) NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHA LL BE MADE- (A) BY THE INCOME- TAX OFFICER, WHERE THE PENALTY EXCE EDS TEN THOUSAND RUPEES; (B) BY THE ASSISTANT COMMISSIONER, WHERE THE PENALTY E XCEEDS TWENTY THOUSAND RUPEES, EXCEPT WITH THE PRIOR APPROVAL OF THE DEPUTY COMMISSIONER.] KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 40 (3) AN INCOME- TAX AUTHORITY ON MAKING AN ORDER UNDER THIS CHAPTER IMPOSING A PENALTY, UNLESS HE IS HIMSELF THE ASSESS ING OFFICER, SHALL FORTHWITH SEND A COPY OF SUCH ORDER TO THE ASSESSIN G OFFICER'] 9. FROM PERUSAL OF THE ABOVE PROVISION WE OBSERVE THA T SUB SECTION 3 OF SECTION 271AAB OF THE ACT TALKS ABOUT ISSUING THE N OTICE U/S 274 OF THE ACT. SO FOR INITIATING THE PENALTY PROCEEDINGS U/S 271AAB OF THE ACT THE FIRST STEP TO BE TAKEN BY LD. A.O IS TO ISSUE A VA LID NOTICE U/S 274 OF THE ACT. SUB-SECTION (1) TO SECTION 274 OF THE ACT PROV IDES A PROCEDURE THAT NO ORDER IMPOSING A PENALTY UNDER THIS CHAPTER SHALL B E MADE UNLESS THE ASSESSEE HAS BEEN HEARD, OR HAS BEEN GIVEN A REASON ABLE OPPORTUNITY OF BEING HEARD. TO COMPLY WITH THIS REQUIREMENT THE N OTICE U/S 274 SHOULD BE CLEAR ENOUGH TO CONVEY THE ASSESSEE ABOUT THE CH ARGE WHICH IS TO BE LEVELED AGAINST HIM/HER/IT FOR LEVYING THE PENALTY FOR THE CONTRAVENTION OF THE RELATED PROVISIONS OF THE ACT WHICH IN THE INST ANT CASE RELATES TO NOT SURRENDERING OF UNDISCLOSED AMOUNT DURING THE COURS E OF SEARCH WHICH IS SUBSEQUENTLY ADMITTED DURING THE COURSE OF ASSESSME NT AND NOT CHALLENGED BEFORE THE LD. CIT(A). SO IT WAS INCUMBE NT FOR LD. A.O THAT IN THE NOTICE ISSUED U/S 274 OF THE ACT HE SHOULD HAVE MENTIONED THAT PENALTY U/S 271AAB OF THE ACT MAY BE LEVIED @10/20/ 30% SINCE THE ASSESSEE FALLS IN CLAUSES (A)/(B)/(C) OF SECTION 27 1AAB OF THE ACT. HE SHOULD HAVE FURTHER MENTIONED THAT AS THE ASSESSEES CASE FALLS UNDER CLAUSE-C OF SECTION 271AAB OF THE ACT, WHY SHE SHOU LD NOT BE VISITED BY PENALTY @30% OF THE UNDISCLOSED INCOME. AGAINST TH IS CHARGE THE ASSESSEE SHOULD HAVE BEEN GIVEN A REASONABLE OPPORT UNITY OF BEING HEARD. 10. NOW LET US REVERT BACK TO THE FACT OF THE INSTANT CASE OF THE ASSESSEE AND LOOK INTO AS TO WHAT IS MENTIONED IN THE ALLEGE D NOTICES ISSUED U/S 274 R.W.S. 271AAB OF THE ACT. NOTICE IS REPRODUCED BELOW; NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB O F THE INCOME TAX ACT, 1961 PAN. ABTPJ0870H KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 41 OFFICE OF THE ASSTT. COMMISSIKONER OF INCOME TAX (CENTRAL)-I, IND ORE DATE: 22.03.2016 TO DR. RAJESH JAIN, E-63 SAKET, INDORE-452001 WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2014-15 IT APPEARS TO ME THAT YOU :- *HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WITH YOU WERE REQUIRED TO FURNISH BY A NOTICE GIVEN UNDE R SECTION 22(1)/22(2)/34 OF THE INDIA INCOME TAX ACT, 1922 OR WHICH YOU WERE REQUIRED TO FURNISH UNDER SECTION 193(1) OR BY A NO TICE GIVEN UNDER SECTION 193(2)/148 OF THE INCOME TAX ACT 1961, NO. . DATED .. OR HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH IT WITHIN THE AL LOWED AND THE MANNER REQUIRED BY THE SIDE SECTION 139(1) OR BY SUCH NOTI CE. *HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WIT H A NOTICE UNDER SECTION 22(4)/23(2) OF THE INDIA INCOME TAX ACT, 19 22 OR UNDER SECTION 142(1)/143(2) OF THE INCOME TAX ACT 1961, NO. DATED HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME ON 21. 04.2016 AT 04.00 PM AND SHOW CAUSE WHY AN ORDER IMPOSING A PEN ALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271AAB OF THE INCOME TAX ACT 1961 IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF B EARING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUS E IN WRITING ON OR BEFORE THE SIDE DATE WHICH WILL BE CONSIDERED BEFOR E ANY SUCH ORDER IS MADE UNDER SECTION 271AAB. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 42 SD/- (AMIT KUMAR SONI) ASSTT. COMMIS SIONER OF INCOME TAX (CENTRAL)-1 INDORE 11. FROM GOING THROUGH THE ABOVE NOTICE ISSUED TO THE ASSESSEE, WE FIND THAT THERE IS NO MENTION ABOUT VARIOUS CONDITIONS P ROVIDED U/S 271 AAB OF THE ACT. IN THE NOTICE DATED 22.03.2016 THE LD. A.O HAS VERY CASUALLY USED THE PROFORMA USED FOR ISSUING NOTICE BEFORE LEVYING PENALTY U/S 271(1)(C) OF THE ACT FOR THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IT DOES NOT TALK ANYTHING A BOUT VARIOUS CLAUSES OF SECTION 271AAB OF THE ACT FOR LEVYING PENALTY @10%/ 20%/30%. CERTAINLY SUCH NOTICE HAS A FATAL ERROR AND TECHNICALLY IS NO T A CORRECT NOTICE IN THE EYES OF LAW BECAUSE IT INTENDS TO PENALIZE AN ASSES SEE WITHOUT SPELLING ABOUT THE SPECIFIC CHARGE AGAINST THE ASSESSEE. 12. HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF P CIT V/S KULWANT SINGH BHATIA (SUPRA) DEALT THE ISSUE OF DEFECTIVE N OTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT AND HON'BLE COURT AFTER RELYING JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT V/S MANJUN ATHA COTTON GINNING FACTORY AND CIT V/S SSAS EMERALD MEADOWS (SUPRA) H ELD THAT SUCH SHOW CAUSE NOTICES WOULD NOT SATISFY THE REQUIREMENT OF LAW AS NOTICE WAS NOT SPECIFIC. MERELY ISSUING NOTICE IN GENERAL PROFORM A WILL NEGATE THE VERY PURPOSE OF NATURAL JUSTICE. HON'BLE APEX COURT IN THE CASE OF DILIP N SHRAF 161 TAXMANN 218 HELD THAT THE QUASI CRIMINAL PROCE EDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPLY WITH THE PRINCIPLES OF N ATURAL JUSTICE. 13. IN THE CASE OF DCIT V/S R. ELANGOVAN LTD (SUPRA) , CO-ORDINATE BENCH, CHENNAI WHILE DEALING WITH THE LEGAL GROUND CHALLENGING THE VALIDITY OF NOTICE ISSUED U/S 274 R.W.S. 271AAB OF THE ACT HAD OBSERVED THAT ; KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 43 IT IS CLEAR FROM THE SUB SECTION (3) OF SECTION 27 1 AAB THAT SECTIONS 274 AND SECTION 275 OF THE ACT SHALL, SO FAR AS MAY BE, APPLY. SUB SECTION (1) OF SECTION 274 OF THE ACT MANDATES THAT ORDER IMPOS ING PENALTY HAS TO BE IMPOSED ONLY AFTER HEARING THE ASSESSEE OR GIVING A ASSESSEE OPPORTUNITY OF HEARING. OPPORTUNITY THAT IS TO BE GIVEN TO THE ASSESSEE SHOULD BE A MEANINGFUL ONE AND NOT A FARCE. NOTICE ISSUED TO TH E ASSESSEE REPRODUCED (SUPRA), DOES NOT SHOW WHETHER PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR HAVING UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT. NOTICE IN OUR OPINION WAS VAGUE. HON'BLE K ARNATAKA HIGH COURT IN THE CASE OF SSA'S EMERALD MEADOWS (SUPRA) RELYING I N ITS OWN JUDGMENT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY ( SUPRA) HAD HELD AS UNDER:- '2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWING SU BSTANTIAL QUESTIONS OF LAW. (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITL Y MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF I NACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY OR DER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND RE ASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NO TICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALID DESPITE THE AMENDMENT OF SECTION 271 (1 B) WITH RETROSPECTIVE EFFECT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 44 WAS JUSTIFIED IN DECIDING THE APPEALS AGAINST THE R EVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOUT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSING OFFICER HAS SPE CIFIED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTIO N 274 READ WITH SECTION 271 (1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT ' THE ACT,) TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271 (1 )(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELI ED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDG MENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBS TANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COU RT. THE APPEAL IS ACCORDINGLY DISMISSED'. IN THE EARLIER CASE OF MANJUNATHA COTTON AND GINNIN G FACTORY (SUPRA) THEIR LORDSHIP HAD OBSERVED AS UNDER:- 'NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C) , I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW; THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 45 OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENA LTY COULD BE IMPOSED ON THE ASSESSEE) TAKING UP OF PENALTY PROCE EDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIM B IS BAD IN LAW; PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMEN T PROCEEDINGS : THOUGH PROCEEDINGS FOR IMPOSITION OF PENALTY EMANAT E FROM PROCEEDINGS OF ASSESSMENT, THEY ARE INDEPENDENT AND A SEPARATE ASPECT OF THE PROCEEDINGS; THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PR OCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE PROCEEDINGS ON THE MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSM ENT CANNOT BE DECLARED INVALID IN THE PENALTY PROCEEDINGS'. VIEW TAKEN BY THE HON'BLE KARNATAKA HIGH COURT IN T HE ABOVE JUDGMENT WAS INDIRECTLY AFFIRMED BY THE HON'BLE APEX COURT, WHEN IT DISMISSED AN SLP FILED BY THE REVENUE AGAINST THE JUDGMENT IN TH E CASE OF SSA'S EMERALD MEADOWS (SUPRA), SPECIFICALLY OBSERVING THA T THERE WAS NO MERITS IN THE PETITION FILED BY THE REVENUE. CONSIDERING T HE ABOVE CITED JUDGMENTS, WE HOLD THAT THE NOTICE ISSUED UJS.274 R .W.S. 271AAB OF THE ACT, REPRODUCED BY US AT PARA 5 ABOVE WAS NOT VALID . EX-CONSEQUENTI, THE PENALTY ORDER IS SET ASIDE. 14. THE VIEW TAKEN BY THE CO-ORDINATE BENCH OF CHENNAI IN THE CASE OF DCIT V/S R. ELANGOVAN 1199/CHNY/2017 ORDER DATED 05 .04.2018 HAS BEEN SUBSEQUENTLY FOLLOWED BY THE CO-ORDINATE BENCH OF JAIPUR IN THE CASE OF RAVI MATHUR VS. DCIT, ITA NO.969/JP/2017 HO LDING THAT SUCH SHOW CAUSE NOTICE ISSUED U/S 274 R.W.S. 271AAB OF T HE ACT ARE NOT SUSTAINABLE IN LAW. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 46 15. AS REGARDS TO JUDGMENT OF HON'BLE ALLAHABAD HIGH C OURT IN THE CASE OF PR. CIT VS SANDEEP CHANDAK (SUPRA) WHICH HAS BEE N RELIED BY THE DEPARTMENTAL REPRESENTATIVE IS CONCERNED, WE FIND T HAT IN THE DECISION RENDERED BY THE CO-ORDINATE BENCH OF JAIPUR IN THE CASE OF RAVI MATHUR VS DCIT (SUPRA) WHEREIN ALSO SIMILAR ISSUE OF DEFECTIV E NOTICE U/S 274 R.W.S. 271AAB WAS ADJUDICATED, THE JUDGMENT OF HON'BLE ALL AHABAD HIGH COURT IN THE CASE OF PR. CIT VS SANDEEP CHANDAK (SUPRA) H AS BEEN DISCUSSED AND DISTINGUISHED OBSERVING AS FOLLOWS:- IT IS FURTHER SUBMITTED THAT IN PARA 5 OF THIS JUDG MENT (RAVI MATHUR), THE CASE QUOTED BY LD CIT(A) PR. CIT VS SANDEEP CHANDAK (ALL.) WAS DISTINGUISHED AS UNDER: 5. BEFORE WE PROCEED FURTHER, THE DECISIONS RELIED UPON BY THE LD D/R ARE TO BE CONSIDERED. IN THE CASE OF PRINCIPAL CIT VS S ANDEEP CHANDAK & OTHERS [TS-6389-HC-2017(ALLAHABAD)-O] (SUPRA) THE I SSUE BEFORE THE HONBLE HIGH COURT WAS THE DEFECT IN THE NOTICE ISS UED UNDER SECTION 271AAB ON ACCOUNT MENTIONING WRONG PROVISION OF THE ACT BEING 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT AFTER CONSIDERIN G THE FACT THAT THE SHOW CAUSE NOTICE ISSUED BY THE AO THOUGH MENTIONS SECTI ON 271(1) IN THE CAPTION OF THE SAID NOTICE, HOWEVER, THE BODY OF TH E SHOW CAUSE NOTICE CLEARLY MENTIONS SECTION 271AAB, WHICH WAS FULLY CO MPREHENDED BY THE ASSESSEE AS REVEALS IN THE REPLY FILED BY THE ASSES SEE AGAINST THE SAID SHOW CAUSE NOTICE. HENCE THE HONBLE HIGH COURT HAS HELD AS UNDER: - THE LD A.RS HAVE ALSO CHALLENGED THAT THE CAPTION OF THE NOTICE MENTIONED ONLY SECTION 271 AND NOT 271AAB. IN THIS RESPECT, T HE COPY OF NOTICE HAS BEEN PRODUCED BY THE LD. A.R. BEFORE ME. IT IS SEEN THAT THE LD A.R IS CORRECT IN OBSERVING THAT THE SECTION OF PENALTY HAS NOT BE EN CORRECTLY MENTIONED BY THE AO IN THE CAPTION. HOWEVER, THE AO WILL GET THE BENEFIT OF SECTION 292BB OF THE INCOME TAX ACT, 1961 BECAUSE FIRSTLY, THE ASSESSEE HAS RAISED NO OBJECTION BEFORE THE AO IN THIS REGARD. S ECONDLY, LAST LINE OF THE NOTICE CLEARLY MENTIONS SECTION 271AAB. THIRDLY, TH E ASSESSEE HAS GIVEN KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 47 REPLY TO SAID NOTICE WHICH SHOWS THAT THE ASSESSEE FULLY COMPREHENDED THE IMPLICATION OF THE NOTICE THAT IT IS FOR SECTION 27 1AAB. THE ASSESSEE HAS ALSO CHALLENGED THAT THE PRINCIPLE S OF NATURAL JUSTICE HAS NOT FOLLOWED BY THE AO. THE DETAILED SUBMISSIONS OF A.R. IN THIS REGARD HAS ALREADY BEEN REPRODUCED ABOVE. THE A.R. DID NOT PRODUCE ANY EVIDENCE TO SHOW THAT HE WAS NOT GIVEN PROPER OPPOR TUNITY OF HEARING. IT IS CLEAR FROM THE PENALTY ORDER THAT THE AO HAS GIVEN NOTICE AND WHICH WAS ALSO REPLIED BY THE ASSESSEE. THEREFORE, IN MY OPIN ION, PRINCIPLE OF NATURAL JUSTICE HAS NOT BEEN VIOLATED. THUS IN VIEW OF ABOV E DISCUSSION PENALTY IMPOSED BY AO U/S. 271AAB OF THE ACT IS CONFIRMED. THUS IT WAS FOUND BY THE HONBLE HIGH COURT THAT TH E MISTAKE IN MENTIONING THE SECTION IN THE SHOW CAUSE NOTICE IS COVERED UNDER SECTION 292BB AND THE AO WILL GET THE BENEFIT OF THE SAME. THE SAID DECISION WILL NOT HELP THE CASE OF THE REVENUE SO FAR AS THE ISSU E INVOLVES THE MERITS OF LEVY OF PENALTY UNDER SECTION 271AAB. AS REGARDS TH E DECISION OF KOLKATA BENCHES OF THE TRIBUNAL IN THE CASE OF DCIT VS AMIT AGRAWAL (TS-7675- ITAT-2017(KOLKATA)-O) (SUPRA), WE FIND THAT THE SAI D DECISION WAS SUBSEQUENTLY RECALLED BY THE TRIBUNAL AND A FRESH O RDER DATED 14 TH MARCH, 2018 WAS PASSED BY THE TRIBUNAL IN FAVOUR OF THE AS SESSEE. THEREFORE, THE DECISION RELIED UPON BY THE LD D/R IS NO MORE IN EX ISTENCE. 16. WE, THEREFORE RESPECTFULLY FOLLOWING THE JUDGMENT/ DECISION REFERRED ABOVE AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF T HE CASE WHEREIN THE MATTER WRITTEN IN THE BODY OF THE NOTICE ISSUED U/S 274 OF THE ACT DOES NOT REFER TO THE CHARGES OF PROVISION OF SECTION 271AAB OF THE ACT MAKES THE ALLEGED NOTICE DEFECTIVE AND INVALID AND THUS DESER VES TO BE QUASHED. SINCE THE PENALTY PROCEEDINGS ITSELF HAS BEEN QUASH ED THE IMPUGNED PENALTY OF RS. 2,04,900/- STANDS DELETED. WE ACCOR DINGLY ALLOW THE LEGAL GROUND RAISED BY THE ASSESSEE CHALLENGING THE VALID ITY OF NOTICE ISSUED U/S 274 R.W.S. 271AAB OF THE ACT AND QUASH THE PENALTY PROCEEDING AS VOID AB INTIO. IN THE RESULT APPEALS OF THE ASSESSEE(S) FOR ASSESSMENT YEARS 2014- KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 48 15 IS ALLOWED ON LEGAL GROUND. 17. SINCE THE PENALTY U/S 271AAB HAS ALREADY BEEN DEA LT ON LEGAL GROUND AND DELETED ON THE PRELIMINARY LEGAL POINTS , OTHER GROUNDS AND ARGUMENTS OF THE ASSESSEE DEALING WITH THE MERITS O F THE LEVY OF PENALTY ARE NOT BEEN DEALT WITH, AS THE SAME ARE RENDERED A CADEMIC IN NATURE. THUS GROUNDS RAISED ON MERITS ARE DISMISSED AS INFR UCTUOUS. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED O N LEGAL GROUND. 24. THE ABOVE FINDING IN THE CASE OF DR. RAJESH JAIN (SUPRA) WAS ALSO APPLIED BY US IN THE CASE OF SMT. RAJRANI MITTAL & OTHERS IN RECENT DECISION VIDE ITA NOS. 852 TO 858 & 879/IND/ 2019 ORDER DATED 07.09.2020. 25. WE THEREFORE RESPECTFULLY FOLLOWING OUR ABOVE R EFERRED DECISION, FIND NO REASON TO INTERFERE IN THE FINDING OF LD. C IT(A) DELETING THE PENALTY OF RS. 1,33,78,415/- LEVIED U/S 271AAB OF T HE ACT ALLOWING LEGAL GROUND RAISED BY THE ASSESSEE. 26. THOUGH WE HAVE ALREADY CONFIRMED THE FINDING OF LD. CIT(A) QUASHING THE PENALTY PROCEEDINGS VOID AB-INITIO SINCE THE DEFECTIVE NOTICE WAS SERVED TO THE ASSESSEE BUT STILL WE WILL LIKE TO ADJUDICATE THE ISSUE ON MERITS FOR ACADEMIC PURPOSE. WE OBSER VE THAT THE PENALTY U/S 271AAB(1)(A) OF THE ACT IS LEVIABLE @10 % ON THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR I F THE ASSESSEE KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 49 ADMITS UNDISCLOSED INCOME U/S 132(4) OF THE ACT AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED, SUBST ANTIATE THE MANNER OF DERIVING SUCH INCOME AND PAYS THE DUE TAX ES TOGETHER WITH INTEREST ON OR BEFORE THE SPECIFIED DATE. SO T HE FIRST CONDITION TO LEVY THE PENALTY U/S 271AAB(1)(A) OF THE ACT IS THA T THERE SHOULD BE AN UNDISCLOSED INCOME AND THE SAME IS DEFINED IN CL AUSE (C) OF THE EXPLANATION TO SECTION 271AAB OF THE ACT WHICH READ S AS FOLLOWS; (C) 'UNDISCLOSED INCOME' MEANS (I) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER V ALUABLE ARTICLE OR THING OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENT S OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS (A) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEAR CH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR (B) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMM ISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR (II) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPR ESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECOR DED IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FOUND TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCT ED.'. 27. FROM PERUSAL OF THE ABOVE DEFINITION OF UNDISCL OSED INCOME FOR THE PURPOSE OF LEVY OF PENALTY U/S 271AAB OF THE AC T, IN OUR UNDERSTANDING ONE OF THE COMPONENT FOR NOT TREATING THE INCOME AS KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 50 UNDISCLOSED INCOME WILL BE IF SUCH INCOME STANDS DU LY RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUN TS OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR. NOW EXAMINING TO FACTS OF THE INSTA NT CASE WE FIND THAT THERE IS A CREDITOR IN THE BOOKS OF THE ASSESS EE M/S. HORIZON INFRASTRUCTURE LTD WHICH WAS WORKING IN THE CAPACIT Y AS A CONTRACTOR FOR THE EARTH WORK IN RESPECT OF FOUR LA NE OF NANDED- NARSI ROAD PROJECT AND TWO LANE IMPROVEMENT OF NARS I-DEGLOOR TO STATE BORDER ROAD (MSH-6) SITUATED IN THE STATE OF MAHARASHTRA. AS ACCEPTED BY THE LD. A.O THERE WAS A DISPUTE WITH TH E CONTRACTOR DUE TO QUALITY OF WORK AND TIMING OF WORK COMPLETION SI NCE THE ASSESSEE WAS UNDER THE CONTRACTUAL OBLIGATION OF THE STATE G OVERNMENT OF MAHARASHTRA TO COMPLETE THE WORK IN LIMITED TIME. T HUS ASSESSEE WAS FORCED TO MAKE ALTERNATE ARRANGEMENT TO COMPLET E THE CONTRACT. IT IS ALSO NOTICED THAT AS PER FINANCIAL RECORD AV AILABLE ON PUBLIC PORTALS THERE IS A SUBSTANTIAL FALL IN THE ACTIVITI ES OF THE CONTRACTOR M/S. HORIZON INFRASTRUCTURE LTD SO MUCH SO THAT ITS TURNOVER REDUCED FROM RS.468 CRORES DURING FINANCIAL YEAR 20 12-13 TO RS. 70.82 CRORES DURING FINANCIAL YEAR 2014-15. THE CO NTRACTOR M/S. HORIZON INFRASTRUCTURE WAS INCURRING HUGE LOSSES AN D REPORTED NET KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 51 LOSS OF RS. 171.54 CRORES FOR THE YEAR ENDED ON 31 ST MARCH 2015. THERE WAS AN OUTSTANDING AMOUNT PAYABLE TO M/S HORI ZON INFRASTRUCTURE LTD AT RS.13,37,84,149/- IN THE BOOK S OF THE ASSESSEE AS ON 31.3.2015. SINCE THE ASSESSEE HAD M ADE ALTERNATE ARRANGEMENT TO COMPLETE THE CONTRACT AND M/S HORIZO N INFRASTRUCTURE LTD HAD COMMITTED VARIOUS DEFAULTS A S AGREED IN THE CONTRACT THE ASSESSEE COMPANY WAS NO MORE LIABLE TO PAY THE OUTSTANDING AMOUNT OF RS.13,37,84,149/-. THUS THE A LLEGED OUTSTANDING AMOUNT WAS OFFERED TO TAX U/S 41(1) OF THE ACT IN THE INCOME TAX RETURN FILED U/S 139(1) OF THE ACT. IN THESE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSID ERED VIEW THAT THE ALLEGED OUTSTANDING AMOUNT OFFERED TO TAX U/S 4 1(1) OF THE ACT ON ACCOUNT OF CESSATION OF LIABILITY IS NOT AN UN DISCLOSED INCOME SINCE THE RELEVANT INFORMATION ABOUT ALLEGED UNDISC LOSED INCOME WAS DULY RECORDED IN THE BOOKS BEFORE THE DATE OF S EARCH AND SUFFICIENT DOCUMENTARY EVIDENCES ARE AVAILABLE TO P ROVE THIS FACT. THE ALLEGED AMOUNT WAS BROUGHT FORWARD FROM PRECEDI NG YEAR AND THUS FORMING PART OF AUDITED BOOKS OF ACCOUNTS. TH US THE AMOUNT OFFERED TO TAX U/S 41(1) OF THE ACT IS NOT A UNDISC LOSED INCOME SINCE IT WAS SHOWN IN THE RETURN OF INCOME FILED U/S 139( 1) OF THE ACT. KALYAN TOLL INFRASTRUCTURE LTD & KALYAN KETI TOLL P VT.LTD ITA NOS. 928 & 929/IND/2019 52 THEREFORE IN OUR VIEW THE ACTION OF THE LD. A.O LEV YING PENALTY U/S 271AAB(1)(A) @10% ON THE ALLEGED UNDISCLOSED INCOME WAS NOT JUSTIFIED AND UNCALLED FOR. THEREFORE LD. CIT(A) HA S RIGHTLY ALLOWED THE GROUND RAISED BY THE ASSESSEE ON MERITS OF THE CASE HOLDING THAT PENALTY WAS NOT LEVIABLE U/S 271AAB OF THE ACT AT R S. 1,33,78,415/-. THUS THE SOLE GROUND RAISED BY THE REVENUE FOR ASSESSMENT YEAR 2016-17 IN CASE OF KALYAN KETI TOLL PVT. LTD IS DISMISSED. 28. IN THE RESULT BOTH THE REVENUES APPEAL NO.928/I ND/2019 IN THE CASE OF M/S KALYAN TOLL INFRASTRUCTURE LTD FOR ASSESSMENT YEAR 2011-12 AND APPEAL NO.929/IND/2019 IN THE CASE OF M /S KALYAN KETI TOLL PVT. LTD FOR ASSESSMENT YEAR 2016-17 STA NDS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.09 .2020. SD/- SD/- ( KUL BHARAT) (MANI SH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 28 SEPTEMBER, 2020 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE