Vinod Kewalchand Bafna, Nandurbar V. Income-tax Officer,

ITA 935/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7195 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Assessee Lawyers: HARI KRISHAN
• Keywords: Initiation of penalty proceedings
• Section: 69C; 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 935/PUN/2014 $& ' !(' / ASSESSMENT YEAR : 2009-10 VINOD KEWALCHAND BAFNA, 20, MAHAVIR MARG, SHARDA NAGAR, NANDURBAR-425412 PAN : ADIPJ6709L ....... / APPELLANT )& /VS. INCOME TAX OFFICER, WARD 3(4), DHULE / RESPONDENT ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI ANIL CHAWARE / DATE OF HEARING : 27-12-2016 / DATE OF PRONOUNCEMENT : 18-01-2017 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 03-03 -2014 FOR THE ASSESSMENT YEAR 2009-10 CONFIRMING THE LEVY OF PENA LTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE AND PURCHASE OF PLOTS AND IS 2 ITA NO. 935/PN/2014, A.Y. 2009-10 ALSO HAVING AGRICULTURAL INCOME. THE ASSESSEE FILED HIS RETUR N OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL ON 29-03-2 010 DECLARING INCOME OF ` 2,52,920/- AND AGRICULTURAL INCOME OF ` 8,29,374/-. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSE SSING OFFICER MADE ADDITION IN THE INCOME RETURNED BY THE ASSESSEE INT ER ALIA ON ACCOUNT OF : (I) UNEXPLAINED CASH DEPOSITS ` 4,05,000/-; (II) UNDISCLOSED CLOSING CREDIT BALANCE IN ICICI BANK ` 10,777/-; (III) UNDISCLOSED INVESTMENT IN PLOTS ` 2,15,070/-; AND (IV) PURCHASE OF SCOOTER ` 41,378/-. THE ASSESSING OFFICER FURTHER INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT ON ACCOUNT OF CONCEALMENT OF INCOME IN R ESPECT OF ADDITIONS MADE DURING ASSESSMENT PROCEEDINGS. THE ASSES SING OFFICER VIDE ORDER DATED 28-06-2012 LEVIED PENALTY OF ` 2,28,572/- U/S. 271(1)(C) ON CONCEALED INCOME OF ` 6,72,460/-. AGGRIEVED BY THE PENALTY ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMIS SIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE AND UPHELD THE ORDER LEVYING PENALTY U/S. 271(1)(C) OF THE ACT. N OW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL IMPUGNING THE UPHOLDING OF PENALTY BY THE FIRST APPELLATE AUTHORITY. 3. SHRI HARI KRISHAN APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE PENALTY PROCEEDINGS ARE BAD IN LAW AS THE NOTIC E ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT SUFFERS FROM DEFECT. THEREFORE , THE PENALTY LEVIED BY THE ASSESSING OFFICER IS LIABLE TO BE SET AS IDE ON ACCOUNT OF TECHNICAL DEFECT IN THE NOTICE. THE LD. AR SUB MITTED THAT A PERUSAL OF ASSESSMENT ORDER WOULD SHOW THAT THE ASSESS ING OFFICER HAS RECORDED HIS SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U /S. 3 ITA NO. 935/PN/2014, A.Y. 2009-10 271(1)(C) ON ACCOUNT OF CONCEALMENT OF PARTICULARS OF INCOME. A PERUSAL OF THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) WOULD SHOW THA T IRRELEVANT CLAUSE IN THE NOTICE HAS NOT BEEN STRUCK OFF IN THE PROFOR MA. THUS, THE CHARGE FOR LEVY OF PENALTY IS NOT CLEARLY EVIDENT FROM THE NOTICE. AS PER NOTICE DATED 23-12-2011, PENALTY IS BEING LEVIED FOR CONCEA LMENT OF PARTICULARS OF INCOME OR FURNISHING IN ACCURATE PARTICULARS O F INCOME. THE LD. AR POINTED THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF KANHAIYALAL D. JAIN VS. THE ASSTT. COMMISSIONER OF INCOME TA X IN ITA NOS. 1201 TO 1205/PN/2014 FOR THE ASSESSMENT YEARS 20 03-04 TO 2007-08 DECIDED ON 30-11-2016 HAS DELETED THE PENALTY WHERE THE NOTICE ISSUED FOR LEVY OF PENALTY U/S. 271(1)(C) DOES NOT SPE CIFY THE CHARGE FOR LEVY OF PENALTY IN AN AMBIGUOUS MANNER. 3.1 THE LD. AR FURTHER SUBMITTED THAT EVEN ON MERITS THE PENALTY LEVIED U/S. 271(1)(C) ON THE ADDITIONS MADE DURING THE ASSES SMENT ARE LIABLE TO BE CANCELLED. THE FIRST ADDITION ON WHICH THE PENALT Y IS LEVIED IS WITH RESPECT TO DEPOSITS IN ICICI BANK AMOUNTING TO ` 4,05,000/-. THE ADDITION HAS BEEN MADE U/S. 68 OF THE ACT. THE ASSE SSEE IS HAVING INCOME FROM AGRICULTURE. THE DEPOSITS IN THE BANK ARE FROM AGRICULTURAL OPERATIONS. THE ASSESSING OFFICER MADE ADDITIONS ON THE BASIS OF ENTRIES IN THE PASSBOOK. IT IS A WELL SETTLED LAW T HAT THE PROVISIONS OF SECTION 68 CANNOT BE INVOKED TO MAKE ADDITI ONS ON THE BASIS OF ENTRIES IN THE BANK PASSBOOK, AS BANK PASSBOOK IS NOT PART OF BOOKS OF ACCOUNT. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. COMMISSIONER OF INCOME TAX VS. BHAICHAND N. GANDHI, 11 TAXMAN 59 (BOM) : 141 ITR 67 (BOM); 4 ITA NO. 935/PN/2014, A.Y. 2009-10 II. COMMISSIONER OF INCOME TAX VS. BARODA TIN WORKS, 221 ITR 661 (GUJ). 3.2 THE LD. AR CONTENDED THAT IF THE ADDITION MADE U/S. 68 IS NOT SUSTAINABLE, THERE IS NO QUESTION OF LEVY OF PENALTY ON SUCH ADDITIONS. DURING THE PENALTY PROCEEDINGS IT WAS SUBMITTED BEFORE TH E ASSESSING OFFICER THAT THE ASSESSEE HAS SUMPTUOUS AGRICULTURAL INCOM E AND THE DEPOSITS IN ICICI BANK ARE FROM AGRICULTURAL INCOME. THESE CASH DEPOSITS ARE NOT ROUTED THROUGH THE REGULAR CASH BOOK MAINTAINED BY THE ASSESSEE FOR BUSINESS PURPOSE AS THE SAID INCOME WA S AGRICULTURAL INCOME. HOWEVER, THE ASSESSING OFFICER REJECTED THE BONAFID E SUBMISSION OF THE ASSESSEE AND MADE ADDITION OF INCOME AND EVEN INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF INCOME. 3.3 IN RESPECT OF UNDISCLOSED CLOSING CASH BALANCE IN ICICI BANK ACCOUNTS ` 10,777/-, THE LD. AR SUBMITTED THAT THE AMOUNTS WERE DEPOSITED IN THE SAID BANK ACCOUNTS FROM SALE OF AGRICULTU RAL PRODUCE. SINCE, THE AMOUNTS WERE DEPOSITED IN THE BANK ACCOUNTS FROM AGRICULTURAL INCOME, THE SAME WERE NOT ROUTED THROUGH R EGULAR CASH BOOK AND REMAIN TO BE INCLUDED IN THE BALANCE SHEET. 3.4 IN RESPECT OF INVESTMENT IN PURCHASE OF SCOOTER, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS PURCHASED SCOOTER FOR ` 41,378/-. THE PAYMENT FOR SCOOTER WAS MADE THROUGH ICICI BANK ACCO UNT. THE LD. AR REFERRED TO THE BANK STATEMENT FROM ICICI BANK LTD. AT PAGE 9 OF THE PAPER BOOK. 5 ITA NO. 935/PN/2014, A.Y. 2009-10 3.5 IN RESPECT OF INVESTMENT IN PLOTS, THE LD. AR SUBMITTED THAT THE ASSESSEE HAD PURCHASED 14 PLOTS ON 17-03-2009 I.E. AT T HE FAG END OF THE FINANCIAL YEAR ENDING ON 31-03-2009 FOR A CONSIDERATIO N OF ` 2,00,000/-. THE SALE DEED OF THE PLOTS WAS REGISTERED ON 17-03-2009. HOWEVER, THE POSSESSION OF THE PLOTS WAS NOT RECEIVED DU E TO ERROR IN MEASUREMENT OF THE PLOTS. THE POSSESSION OF THE PLOTS W AS RECEIVED IN APRIL, 2009. THESE FACTS WERE CONFIRMED BY THE VENDOR OF THE PLOTS SHRI SANJAYKUMAR M. GULECHHA. SINCE, THE POSSESSION OF THE PLO TS WAS NOT RECEIVED DURING THE PERIOD RELEVANT TO THE ASSESSMENT Y EAR 2009-10 THE SAME WAS NOT RECORDED IN THE FINANCIAL YEAR 2008-09. THE ASSESSEE HAS DISCLOSED THE PAYMENT OF PLOTS IN THE BOOKS IN THE NEXT FINANCIAL YEAR. 4. AU CONTRAIRE SHRI ANIL CHAWARE REPRESENTING THE DEPARTMENT STRONGLY DEFENDED THE ORDER OF COMMISSIONER OF INCOME TA X (APPEALS) IN CONFIRMING THE LEVY OF PENALTY. THE LD. DR SUBMITTED THAT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD FAILED TO OFFER SATISFACTORY EXPLANATION REGARDING THE NATURE AND CASH D EPOSITS IN ICICI BANK. NO RELEVANT DOCUMENT WAS PRODUCED BY TH E ASSESSEE TO SHOW THAT THE DEPOSITS WERE MADE FROM SALE OF AGRICULTURA L PRODUCE. THE LD. DR FURTHER SUBMITTED THAT DURING THE ASSESSMEN T PROCEEDINGS ON VERIFICATION OF THE BALANCE SHEET IT TRANSPIRED THAT THE ASSESSEE IS HAVING TWO BANK ACCOUNTS WITH ICICI BANK WHICH WERE NO T DISCLOSED BY THE ASSESSEE. THEREFORE, THE CREDIT BALANCE AS ON 31-03 -2009 IN BOTH THE BANK ACCOUNTS I.E. ` 10,777/- WAS TREATED AS UNDISCLOSED INCOME FOR THE YEAR UNDER CONSIDERATION. IN RESPECT OF UNRECORDED PURCHASE OF LAND/PLOTS, THE LD. DR CONTENDED THAT DURING THE ASSESSME NT PROCEEDINGS THE ASSESSEE HAD PRODUCED POSSESSION LETTE R DATED 11-11-2011, WHEREAS THE SALE DEED WAS EXECUTED IN MARC H, 2011. THE 6 ITA NO. 935/PN/2014, A.Y. 2009-10 POSSESSION LETTER IS A SELF SERVING DOCUMENT AND WOULD N OT GET PREFERENCE OVER THE SALE DEED WHICH IS A REGISTERED DOCUMENT. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE CASE LAWS AND THE DOCUMENTS O N WHICH THE LD. AR OF THE ASSESSEE HAS PLACED RELIANCE WHILE MAKING HIS SUB MISSIONS. UNDISPUTEDLY, THE ADDITIONS MADE IN THE ASSESSMENT HAVE ATTAINED FINALITY. IT IS A WELL SETTLED LAW THAT ASSESSMENT PROCEEDING S AND PENALTY PROCEEDINGS ARE TWO SEPARATE AND INDEPENDENT P ROCEEDINGS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMIS SIONER OF INCOME TAX VS. DHARAMCHAND L. SHAH REPORTED AS 204 IT R 462 HAS HELD : IT IS BY NOW TRITE LAW THAT THE ASSESSMENT PROCEED INGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE AND DISTINCT PROCEEDIN GS. THE FACT THAT CERTAIN ADDITIONS WERE MADE IN THE ASSESSMENT PROCE EDINGS WOULD NOT AUTOMATICALLY JUSTIFY THE REVENUE TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THUS, ANY ADDITION MADE DURING ASSESSMENT IPSO FACTO WOULD NOT RESULT IN LEVY OF PENALTY. 6. THE LD. AR HAS MADE TWO FOLD SUBMISSIONS WHILE PRAYING FOR CANCELLING THE LEVY OF PENALTY. THE FIRST SUBMISSIONS OF THE A SSESSEE IS IN RESPECT OF NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE A CT. ACCORDING TO THE ASSESSEE, THE NOTICE ISSUED FOR LEVY OF P ENALTY DOES NOT CLEARLY SPECIFY THE CHARGE FOR LEVY OF PENALTY. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS R ECORDED SATISFACTION FOR LEVY OF PENALTY U/S. 271(1)(C) ON ACCOUNT OF CONCEALMENT 7 ITA NO. 935/PN/2014, A.Y. 2009-10 OF PARTICULARS OF INCOME. HOWEVER, WHILE ISSUING NOTICE U/S. 2 74, THE ASSESSING OFFICER HAS NOT STRUCK OFF IRRELEVANT PARTS IN T HE NOTICE PROFORMA AND THUS, THE CHARGES FOR LEVY OF PENALTY IN THE NOTICE SHOWS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE CO-ORDINATE BENCH OF THE TRIBUN AL IN THE CASE OF KANHAIYALAL D. JAIN VS. THE ASSTT. COMMISSIONER OF IN COME TAX (SUPRA) HAS DELETED THE LEVY OF PENALTY WHERE IRRELEVANT CH ARGES ARE NOT STRUCK OFF FROM PROFORMA NOTICE. THE RELEVANT EXTRACTS OF THE FINDINGS OF THE CO-ORDINATE BENCH FOR DELETING PENALTY ON ACCOUNT OF DEFECTIVE NOTICE ARE AS UNDER : 15. THE HONBLE KARNATAKA HIGH COURT HAS LAID DOWN THE PROPOSITION THAT THE ASSESSING OFFICER IS TO BE SATISFIED IN TH E COURSE OF PROCEEDINGS THAT THERE IS EITHER CONCEALMENT OF INCOME OR FURNI SHING OF INACCURATE PARTICULARS OF INCOME UNDER CLAUSE (C) TO SECTION 2 71(1) OF THE ACT. IT HAS BEEN CATEGORICALLY HELD THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THE HONBLE HIGH COURT HAS THUS, LAID DOWN THAT THE ASSESSING OFFICER WHIL E ISSUING NOTICE HAS TO COME TO CONCLUSION THAT WHETHER IT IS CASE OF CO NCEALMENT OF INCOME OR CASE OF FURNISHING OF INACCURATE PARTICULARS OF INC OME. THE RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN T. ASHOK PAI VS. CIT (2007) 292 ITR 11 (SC), WHE REIN AT PAGE 19 IT WAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATION. APPLYING THE SAID PROPOSITION, IT WAS HELD THAT WHERE THE ASSESSING O FFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE N OTICE HAS TO BE APPROPRIATELY MARKED. SIMILARLY, FOR FURNISHING INA CCURATE PARTICULARS OF INCOME, THE STANDARD PROFORMA WITHOUT STRIKING OF R ELEVANT CLAUSES, AS PER THE HONBLE HIGH COURT WOULD LEAD TO INFERENCE AS TO NON-APPLICATION OF MIND. 16. FURTHER, THE HONBLE KARNATAKA HIGH COURT IN CI T VS. SSAS EMERALD MEADOWS (SUPRA) HAS DISMISSED THE APPEAL OF REVENUE , WHERE THE TRIBUNAL HAD ALLOWED THE APPEAL OF ASSESSEE HOLDING THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 R .W.S. 271(1)(C) OF THE ACT TO BE BAD IN LAW AS IT DOES NOT SATISFY WHICH L IMB OF SECTION 271(1)(C) OF THE ACT UNDER WHICH IT HAS BEEN INITIATED THE HO NBLE HIGH COURT HAD 8 ITA NO. 935/PN/2014, A.Y. 2009-10 RELIED ON DECISION OF DIVISION BENCH OF THE COURT R ENDERED IN CIT & ANR. VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA). THE HONBLE SUPREME COURT IN CIT VS. SSAS EMERALD MEADOWS (SUP RA) HAS DISMISSED THE SPECIAL LEAVE PETITION. 17. THE PUNE BENCH OF TRIBUNAL IN M/S. SAI VENKATA CONSTRUCTION VS. ADDL. CIT (SUPRA) AND IN SANJOG TARACHAND LODHA VS. ITO (SUPRA) HAVE APPLIED THE RATIO LAID DOWN BY THE HONBLE KARNATAK A HIGH COURT (SUPRA) AND HELD THAT WHERE THERE IS NO STRIKING OFF OF EIT HER OF LIMBS, THEN NOTICE ISSUED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE AC T WAS INVALID AND SUBSEQUENT PENALTY PROCEEDINGS WERE HELD TO BE VITI ATED. THE CO-ORDINATE BENCH FURTHER HELD : 23. HOWEVER, THE QUESTION WHICH IS RAISED BEFORE US BY WAY OF ADDITIONAL GROUND OF APPEAL IS ROOT OF START OF THE PROCEEDINGS I.E. RECORDING OF SATISFACTION AND THE ISSUE OF NOTICE, WHICH HAS BEEN CHALLENGED BY THE ASSESSEE TO BE INVALID. APPLYING THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) AND CIT VS. SSAS EMERA LD MEADOWS (SUPRA) AND IN VIEW OF SLP BEING DISMISSED, WE FIND MERIT IN THE PLEA OF ASSESSEE THAT THE SATISFACTION RECORDED IN THE PRES ENT CASE TO INITIATE PENALTY PROCEEDINGS BOTH FOR CONCEALMENT OF INCOME AND FURNISHING OF PARTICULARS OF INCOME AGAINST ADDITIONAL INCOME OFF ERED BY THE ASSESSEE IS INCORRECT. FURTHER, WHERE THE ASSESSEE IS NOT AW ARE OF EXACT CHARGE AGAINST HIM, THE AMBIGUITY IN THE NOTICE ISSUED UND ER SECTION 274 R.W.S. 271(1)(C) OF THE ACT BY NOT STRIKING OF PORTION WHI CH IS NOT APPLICABLE, PREJUDICE THE RIGHT OF REASONABLE OPPORTUNITY TO TH E ASSESSEE, AS HE WAS NOT MADE AWARE OF EXACT CHARGE HE HAD TO FACE. IT I S A CLEAR-CUT CASE OF CONCEALMENT SINCE THE ASSESSEE HAD OFFERED ADDITION AL INCOME PURSUANT TO SEARCH CARRIED OUT AT ITS PREMISES. IT IS NOT TH E CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND HENCE, THE ASS ESSING OFFICER SHOULD HAVE RECORDED THE SATISFACTION ACCORDINGLY AND ISSU ED THE NOTICE ACCORDINGLY. 24. WE FIND NO MERIT ON THE PARTIAL RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. SMT. KAUSHALYA (SUPRA). THE HONBLE HIGH COURT HAS CLEARLY LAID DOWN THE PROPOSITION TH AT THE ASSESSING OFFICER HAS TO MAKE THE ASSESSEE FULLY AWARE OF EXA CT CHARGE OF THE DEPARTMENT AGAINST HIM. AS POINTED OUT, IN PRESENT CASE, IN THE 9 ITA NO. 935/PN/2014, A.Y. 2009-10 ASSESSMENT ORDER ITSELF WHILE RECORDING SATISFACTIO N FOR INITIATING PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, EXA CT CHARGE OF THE DEPARTMENT AGAINST THE ASSESSEE IS NOT CLEAR. THE A SSESSING OFFICER RECORDS THE SATISFACTION FOR INITIATING PENALTY PRO CEEDINGS ON BOTH THE COUNTS I.E. CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE BOMBAY HIGH COUR T HAD ALSO UPHELD THE QUASHING OF PENALTY PROCEEDINGS FOR ASSESSMENT YEAR 1967-68 TO BE JUSTIFIED ON ACCOUNT OF VAGUENESS AND AMBIGUITY IN THE NOTICE ISSUED. BUT THE HONBLE HIGH COURT FURTHER HELD THAT WHERE THE ASSESSEE WAS FULLY AWARE OF EXACT CHARGE OF THE DEPARTMENT AGAINST HIM , THEN TECHNICAL NON- STRIKING OF CERTAIN TERMS IN THE NOTICE WOULD NOT I NVALIDATE THE PROCEEDINGS. WHERE THERE IS DEFAULT IN THE FIRST ST AGE OF MAKING THE ASSESSEE AWARE OF EXACT CHARGE OF THE DEPARTMENT, T HEN INITIATION OF PENALTY PROCEEDINGS ARE VITIATED AND THE SAME ARE T O BE QUASHED. THE ISSUE OF NOTICE UNDER SECTION 274 OF THE ACT ON SUC H VAGUENESS AND AMBIGUITY MAKES SUCH NOTICE INVALID AND PROCEEDINGS THEREAFTER ARE TO BE QUASHED. 25. THE HONBLE SUPREME COURT IN T. ASHOK PAI VS. C IT (SUPRA) HAD HELD AS UNDER:- 23. SECTION 271(1)(C) REMAINS A PENAL STATUTE. THE RULE OF STRICT CONSTRUCTION SHALL APPLY THERETO. THE INGREDIENTS F OR IMPOSING PENALTY REMAIN THE SAME. THE PURPOSE OF THE LEGISLATURE THA T IT IS MEANT TO BE A DETERRENT TO TAX EVASION IS EVIDENCED BY THE INCREA SE IN THE QUANTUM OF PENALTY, FROM 20 PER CENT UNDER THE 1922 ACT TO 300 PER CENT IN 1985. 24. CONCEALMENT OF INCOME AND FURNISHING OF INAC CURATE PARTICULARS CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO A DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIG ENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERY OR SUGGESTION FALSI. 26. WHERE CONCEALMENT OF INCOME AND FURNISHING OF I NACCURATE PARTICULARS OF INCOME ARE TWO DIFFERENT CONNOTATION S, THEN AS PER PROVISIONS OF THE ACT, THE SATISFACTION HAS TO BE R ECORDED BY THE ASSESSING OFFICER BEFORE INITIATING PENALTY PROCEED INGS AS TO UNDER WHICH LIMB THE CASE OF ASSESSEE FALLS. IN THE PRESENT SET OF FACTS, THE SATISFACTION AS RECORDED BY THE ASSESSING OFFICER W HICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF DOES NOT ESTABLISH THE CASE OF REVENUE AGAINST THE ASSESSEE THAT IT IS LIABLE FOR LEVY OF PENALTY FOR CONCEALMENT UNDER WHICH LIMB I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE NOTICE ISSUED UNDER SECTION 274 OF 10 ITA NO. 935/PN/2014, A.Y. 2009-10 THE ACT BY THE ASSESSING OFFICER ALSO DOES NOT SHOW CAUSE THE ASSESSEE AS TO MAKE HIM AWARE OF EXACT CHARGE LEVIED AGAINST HIM. IN THE ABSENCE OF SAME, IT CAUSES PREJUDICE TO THE RIGHT OF REASON ABLE OPPORTUNITY TO BE ALLOWED TO THE ASSESSEE BEFORE LEVY OF PENALTY UNDE R SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY, PENALTY NOTICE ISSUED IN THE PRESENT CASE SUFFERS FROM INFIRMITIES I.E. LACK OF SATISFACTION AND LACK OF NOTICE BEING ISSUED IN MAKING THE ASSESSEE AWARE OF EXACT CHARGE AGAINST H IM, HENCE THE SAME IS QUASHED. THE PENALTY PROCEEDINGS COMPLETED PURSU ANT TO SUCH NOTICE ARE VITIATED AND THE SAME ARE HELD TO BE INVALID. THUS, IN VIEW OF THE FACT THAT THE NOTICE ISSUED FOR LEVY O F PENALTY U/S. 271(1)(C) DOES NOT CLEARLY SPELL OUT THE CHARGE FOR LEV Y OF PENALTY, THEREFORE, THE SAME IS DEFECTIVE, NULL AND VOID AND THE SUBS EQUENT PROCEEDINGS ARISING THERE FROM ARE VITIATED. ACCORDINGLY, T HE PENALTY IS LIABLE TO BE CANCELLED ON THIS ACCOUNT ALONE. 7. ON MERITS, WE FIND THAT PENALTY HAS BEEN LEVIED IN RESPE CT OF UNEXPLAINED DEPOSITS TO THE TUNE OF ` 4,05,000/- IN ICICI BANK ACCOUNT. THE ADDITION HAS BEEN MADE U/S. 68 OF THE ACT. THE ADDIT IONS U/S. 68 CAN BE MADE ONLY WHERE CASH CREDIT APPEARS IN BOOKS O F ACCOUNT OF THE ASSESSEE. THE BANK PASSBOOK IS NOT PART OF BOOKS OF A CCOUNT OF THE ASSESSEE. THEREFORE, THE ADDITIONS MADE U/S. 68 ON THE BASIS OF ENTRIES IN THE BANK PASSBOOKS ARE NOT SUSTAINABLE. OUR VIEW IS FU RTHER FORTIFIED BY THE DECISION RENDERED IN THE CASE OF MAYAWATI VS. DCIT REPORTED AS 113 TTJ 178 (DEL.) AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. BHAICHAND N. G ANDHI (SUPRA). THE HONBLE JURISDICTIONAL HIGH COURT HAS UPHELD THE ORDER OF TRIBUNAL, WHERE THE TRIBUNAL DELETED THE ADDITION U/S. 68 H OLDING THAT CASH CREDIT FOR THE PREVIOUS YEAR SHOWN IN THE ASSESSEE S BANK PASSBOOK ISSUED TO HIM BY THE BANK BUT NOT SHOWN IN TH E CASH BOOK 11 ITA NO. 935/PN/2014, A.Y. 2009-10 MAINTAINED BY HIM FOR THE YEAR, DOES NOT FALL WITHIN THE AMB IT OF SECTION 68 OF THE ACT. 8. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME TAX VS. BARODA TIN WORKS (SUPRA) OBSERVED : SECTIONS 68, 69, 69A, 69B AND 69C ARE ALL PART OF THE SAME SCHEME WHERE CERTAIN AMOUNTS THOUGH NOT PROVED TO BE THE I NCOME OF THE ASSESSEE OF THE PREVIOUS YEAR CONCERNED ARE FOR THE PURPOSE OF CHARGING TO TAX ARE DEEMED TO BE SO BY CREATING LEGAL FICTIO N ABSOLVING THE DEPARTMENT FROM ITS INITIAL DUTY TO PROVE THAT ANY SUCH IS THE INCOME OF THE ASSESSEE. BUT FOR THESE PROVISIONS, IT WAS FOR THE REVENUE TO PROVE THAT ANY SUM, NOT DISCLOSED BY THE ASSESSEE BUT WHI CH IS SOUGHT TO BE TAXED AS INCOME OF THE ASSESSEE, IS THE INCOME OF T HE ASSESSEE FOR THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR. THE LAW IS WELL SETTLED THAT THOUGH THE FINDING REC ORDED IN THE ASSESSMENT ORDERS ARE RELEVANT EVIDENCE TO SUPPORT THE ALLEGATION OF CONCEALMENT, BUT THESE CANNOT BE THE FOUNDATION FOR HOLDING THE ASSESSEE GUILTY OF CONCEALMENT. UNDER SECTION 68 AS UNDER SE CTION 69A NO SUCH LEGAL FICTION HAS BEEN CREATED TO TREAT SUCH ADDITI ONS AS CONCEALED INCOME OF THE ASSESSEE FOR THE PURPOSE OF PENALTY P ROCEEDINGS. THE COURT FURTHER OBSERVED THAT THE FICTION CREATED UND ER SECTIONS 68, 69, 69A, 69B AND 69C BY ITSELF CANNOT BE EXTENDED TO PENALTY PROCEEDINGS TO RAISE THE PRESUMPTION ABOUT CONCEALMENT OF SUCH INCOME. 9. IN THE PRESENT CASE, THE DEPOSITS MADE IN THE BAN K ACCOUNT WERE NOT ROUTED THROUGH CASH BOOK OF THE ASSESSEE. THE EN TRIES ARE MADE IN THE BANK PASSBOOK AND THERE ARE NO CASH CREDIT ENTRIE S IN THE CASH BOOK OF THE ASSESSEE. THEREFORE, THE ADDITION MADE U/S. 6 8 IS NOT SUSTAINABLE. ONCE, THE ADDITION IS HELD AS NOT SUSTAINABLE, T HERE IS NO QUESTION OF LEVY OF PENALTY ON SUCH ADDITION. 12 ITA NO. 935/PN/2014, A.Y. 2009-10 10. IN RESPECT OF PURCHASE OF SCOOTER THE ASSESSEE HAS POINTED THAT THE PAYMENT FOR PURCHASE OF SCOOTER HAS BEEN MADE FROM ICICI BANK ACCOUNT. THE ASSESSEE HAS SUBSTANTIATED HIS CONTENTION S BY PLACING STATEMENT OF BANK ACCOUNT AT PAGE 9 OF THE PAPER BOOK . A PERUSAL OF BANK STATEMENT CLEARLY SHOWS THAT A SUM OF ` 41,378/- HAS BEEN DEBITED FROM THE ACCOUNT OF ASSESSEE ON 13-08-2008 FOR PAYMENT TO NILESH MOTORS. THE ASSESSING OFFICER HAS MADE ADDITION IN RE SPECT OF CASH CREDITS IN THE BANK ACCOUNT. SINCE, THE PAYMENT HA S BEEN MADE FROM SAME BANK ACCOUNT FOR PURCHASE OF SCOOTER, THIS WOU LD RESULT IN DOUBLE ADDITION. THEREFORE, IN OUR CONSIDERED VIEW SUCH AN ADDITION IS NOT SUSTAINABLE AND THEREFORE DOES NOT ATTRACT PENALTY U/S. 271(1)(C) OF THE ACT. 11. THE LAST ADDITION ON WHICH THE PENALTY HAS BEEN LEVIED IS WITH RESPECT TO UNDISCLOSED INVESTMENT IN PLOTS. IT HAS BEEN CONTENDED THAT THE POSSESSION OF THE PLOTS WAS TAKEN IN NEXT FINANCIAL YEAR I.E. FINANC IAL YEAR 2009-10, WHEREAS THE SALE DEED OF THE PLOTS WAS RE GISTERED ON 17-03-2009 I.E. DURING THE FINANCIAL YEAR 2008-09. THE LD. A R HAS STATED AT THE BAR THAT THE TRANSACTIONS WITH RESPECT TO PURCHASE OF PLOTS HAVE BEEN ACCOUNTED IN THE NEXT FINANCIAL YEAR. THIS FACT HAS NOT BEEN REBUTTED BY THE LD. DR. THE DISPUTE IS ONLY WITH REGARD TO THE ASSESSMENT YEAR IN WHICH TRANSACTION HAS TO BE RECORDE D IN THE BOOKS OF ACCOUNT. UNDER SUCH CIRCUMSTANCES WE ARE OF THE VIE W THAT NO PENALTY IS TO BE LEVIED ON ADDITION, WHERE THE DISPUTE IS W ITH REGARD TO YEAR OF TAXABILITY. 12. THUS, EVEN ON MERITS THE ASSESSEE HAS BEEN ABLE TO SHOW THAT NO CASE FOR LEVY OF PENALTY IS MADE. ACCORDINGLY, WE DIRECT T HE ASSESSING 13 ITA NO. 935/PN/2014, A.Y. 2009-10 OFFICER TO CANCEL THE PENALTY. THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 18 TH DAY OF JANUARY, 2017. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 18 TH JANUARY, 2017 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, NASHIK 4. ' / THE CIT-I, NASHIK 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, 6 7 / ASSISTANT REGISTRAR, ,- , / ITAT, PUNE