Sanjay Gupta, Delhi V. ACIT, New Delhi

ITSSA 31/DEL/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8738 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-12-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-12-2010
• Assessment Year: misc
• Appeal Filed On: 15-06-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Loose papers; Bonafide belief; Question of law; Initiation of penalty proceedings; Documents seized
• Section: 27; 15

Judgement Text

IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.(SS)A. NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 SH. SANJAY GUPTA, 493, MAIN BAZAR, SUBZI MANDI, DELHI (PAN: AFEPG3171P) VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-20(1), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. ANIL SHARMA, ADVOCATE DEPARTMENT BY : SHRI R.P. SINGH, D.R. PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 26.3.2 010 PERTAINING TO BLOCK PERIOD 1.4.1996 TO 21.3.2003. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN CONFIRMING THE PENALTY OF ` 15,46 ,068/- U/S. 158BFA(2) OF THE IT ACT. 3. BRIEF FACTS OF THE CASE ARE THAT APPELLANT IS A N INDIVIDUAL AND DERIVES COMMISSION INCOME FROM PURCHASE AND SALE OF PROPERTY AND INCOME FROM TRADING OF TRANSISTOR PARTS. THE MAIN ACT IVITY OF THE APPELLANT WAS TO WORK AS AN INFORMER FOR THE DIRECT ORATE OF REVENUE IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 2 INTELLIGENCE (DRI). A SEARCH HAD BEEN CONDUCTED B Y THE CENTRAL BUREAU OF INVESTIGATION (CBI) UPON THE APPELLANT O N 15.6.2001 AT HIS RESIDENCE SITUATE AT 493, MAIN BAZAR, SUBZI MANDI, DE LHI, AT 10 NORTH AVENUE ROAD, PUNJABI ROAD, NEW DELHI AND AT SHOP NO . 26 LAJPAT RAI MARKET, BHAGIRATH PLACE, CHANDNI CHOWK, DELHI. AS A R ESULT OF THE SEARCH OPERATION, CASH AGGREGATING TO ` 1,14,54,077 /- WAS FOUND AND SEIZED FROM DIFFERENT PREMISES. APART FROM CASH, C ERTAIN NOTE BOOKS LOOSE PAPERS WERE ALSO SEIZED. ON RECEIVING INFOR MATION FROM CBI, DIT (INV.). ISSUED A WARRANT OF AUTHORIZATION U/S 132(1 ) OF THE INCOME TAX ACT, 1961 ON 18.9.2001 REQUIRING THE CBI TO HANDOVE R BOOKS OF ACCOUNTS AND OTHER DOCUMENTS SEIZED AS A RESULT OF SEARCH. THE APPELLANT FILED A PETITION BEFORE SPECIAL JUDGE, N EW DELHI, WHO DIRECTED THE CBNI TO TRANSFER THE AMOUNT OF SEIZED CASH AND OTHER BOOKS OF ACCOUNTS AND DOCUMENTS TO IT DEPARTMENT. BAS ED ON THIS DIRECTION OF THE HONBLE SPECICIAL JUDGE, DELHI, THE DEPARTMENT EXECUTED THE WARRANT OF AUTHORIZATION U/S 132A OF T HE IT ACT VIDE PANCHNAMA DATED 21.3.2003, AND THE SEIZED CASH WAS TAKEN OVER WITH OTHER BOOKS OF ACCOUNTS AND DOCUMENTS. 3.1 A NOTICE U/S 158BC OF THE IT ACT, 1961 WAS ISSU ED ON 28.5.2003 AND SENT THROUGH REGISTERED POST ON 30.5.2003 ASKI NG THE APPELLANT TO DELIVER THE RETURN FOR BLOCK PERIOD IN PRESCRIBED FORM NO. 2B WITHIN 30 DAYS FROM THE SERVICE OF THE NOTICE. IN RESPONSE TO STATUTORY NOTICE, THE APPELLANT FILED THE RETURN ON 7.11.2003. THE UNDISCLOSED INCOME OF ` 90,00,000/- WAS DECLARED IN THE RETURN FILED O N 7.1.2003. THE RETURN WAS FILED LATE BY 5 MOTHS AND 7 DAYS. THE AP PELLANT STATED THAT THEY HAD FURNISHED THE RETURN IN FORM 2B STATING B LOCK PERIOD FROM 1.4.1992 TO 19.10.2002 OF SPL. JUDGE, DELHI-9. IN T HIS REGARD, APPELLANT WAS INFORMED THAT THE BLOCK PERIOD (I.E. 1.4.1996 T O 21.3.2003) IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 3 MENTIONED IN THE NOTICE ISSUED U/S 158BC BY THE DEPA RTMENT IS CORRECT. ACCORDING TO SECTION 158B(A), THE WARRANT OF AUTHOR IZATION WAS SERVED UPON CBI(ACB) ON 21.3.2003 U/S 132A BY THE ITO(CIB) , JHANDEWALAN EXTN., NEW DELHI, WAS THE ACTUAL DATE OF SERVICE OF AUTHORIZATION U/S 132A WHICH CAN BE CALLED AS THE DATE OF THE SEARCH. ACCORDINGLY, THE APPELLANT WAS ASKED TO SUBMIT THE RETURN OF UNDISCLO SED INCOME IN FORM NO. 2B FOR THE BLOCK PERIOD 1.4.1996 TO 21.3.20 03. 3.2 THE APPELLANT STATED THAT DURING THE SEARCH BY CBI, CASH AMOUNTING TO ` 1,12,50,000/- WAS TAKEN TO BE BELONG ING TO MR. SANJAY GUPTA AND ONLY THIS AMOUNT WAS REQUISITIONED. BUT T HE APPELLANT HAD NOT EXPLAINED TO WHOM THE BALANCE AMOUNT OF ` 2,04, 007/- BELONGED. IN VIEW OF THIS FACT, THE APPELLANTS SUBMISSION T HAT CASH AMOUNTING TO ` 1,12,50,000/- WAS TAKEN TO BE BELONGING TO SH. DAY A SINGH WAS NOT ACCEPTED. FURTHER THE AMOUNT TO THE EXTENT OF ` 1, 14,54,077/- WHICH WAS CREDITED IN THE P.D. ACCOUNT OF THE HONBLE C.I.T ., DELHI VII, NEW DELHI HAD NEVER BEEN CLAIMED BY ANY OTHER PERSON OTH ER THAN THE APPELLANT SHRI SANJAY GUPTA. IN VIEW OF THIS, THE EN TIRE AMOUNT OF ` 1,14,54,077/- WAS TAKEN AS BELONGING TO SH. SANJAY G UPTA. 3.3 THE APPELLANTS EXPLANATION WITH REGARD TO HIS CLAIM THAT THE SEIZED AMOUNT OF ` 1,12,50,000/- INCLUDED ` 22,50,00 0/- WAS NOT ACCEPTABLE. THE MERE SUBMISSION THAT ` 8 LACS WAS REC EIVED FROM DRI DID NOT ESTABLISH THAT THE CASH FOUND INCLUDED THE SAME AMOUNT WHICH WAS AS PER THE CERTIFICATES DATED 6.6.2002 ISSUED B Y THE ADDL. DIRECTOR GENERAL. FURTHER, THIS CERTIFICATE COULD ALSO NOT BE RELIED UPON SINCE EXCEPT THUMB IMPRESSION THERE WAS NO MENTION OF RECIPI ENTS NAME ETC. REGARDING THE BALANCE AMOUNT ALSO THE APPELLANTS S UBMISSION THAT SOME CERTIFICATES PERTAINING TO THE SAME HAD GONE I N SEIZED MATERIAL IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 4 WAS ALSO NOT ACCEPTABLE FOR THE REASON THAT NO SEIZ ED MATERIAL IN THIS REGARD WAS EVER HANDED OVER /RECEIVED BY THE I.T. DE PARTMENT. SECONDLY, THE CASH FOUND COULD NOT BE RELATED/ ESTA BLISHED TO BE A PART OF REWARD FROM DRI. 3.4 THE APPELLANT ALSO FILED AN AFFIDAVIT DATED 22 .3.2005 WITH HIS LETTER DATED 23.3.2005. IN THE SAID AFFIDAVIT, THE APPELLANT STATED THAT ` 22.50 LACS INCLUDED IN THE SEIZED CASH PERTAINS TO THE CASH REWARD FROM DRI. IT WAS ADMITTED IN THE AFFIDAVIT BY THE APPELLA NT THAT HE WAS NOT HAVING ANY CERTIFICATE IN THIS REGARD. THE AFFID AVIT SUBMITTED BY THE APPELLANT COULD NOT ESTABLISH THE SUBMISSION OF THE APPELLANT SINCE IT DOES NOT ESTABLISH THE CORRELATION BETWEEN THE DAT E OF SEARCH ON WHICH CASH WAS FOUND AND THE DATE ON WHICH THE REWA RD WAS RECEIVED FROM THE DRI. THE QUESTION OF MAKING ANY ENQUIRY FRO M THE DRI WOULD HAVE ONLY ARISEN IF THE APPELLANT COULD HAVE ESTABL ISHED THAT THE REWARD AMOUNT IS INCLUDED IN THE SEIZED CASH. HENCE, THE APPELLANTS SUBMISSION WITH REGARD TO ` 22.50 LACS WAS NOT ACCE PTED. IN VIEW OF ALL THESE FACTS MENTIONED ABOVE, THE ENTIRE AMOUNT OF ` 1,14,54,077/- SEIZED U/S 133A(1) OF THE INCOME TAX ACT, 1961 AS PE R PANCHNAMA DATED 21.3.2003 WAS TAKEN AS UNDISCLOSED INCOME OF THE APPELLANT DURING THE BLOCK PERIOD 1.4.1996 TO 21.3.2003. 4. NOTICE U/S 158BFA(2) FOR INITIATION OF PENALTY PROCEEDINGS WAS ALSO ISSUED. IN THE MEANWHILE ITAT VIDE ITS ORDER DATED 30.4.2009 IN ITA NO. 2174/DE/2006 DISMISSED THE APPEAL FILED BY THE ASSESSEE AND CONFIRMED UNDISCLOSED INCOME OF ` 1,14,54,077/- SEIZ ED DURING THE SEARCH BY THE CBI AS UNDISCLOSED INCOME OF THE BLOC K PERIOD. ASSESEE RESPONDED THAT ON PERUSAL OF THE ITAT FINDING WOULD SHOW THAT THESE IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 5 ADDITIONS HAVE BEEN CONFIRMED ON THE GROUND THAT THE ASSESSEE COULD NOT RECONCILE BEFORE THE ASSESSING OFFICER, THE DAT ES OF THE REWARD RECEIVED FROM DRI WITH THE DATE ON WHICH THE CASH WAS ACTUALLY FOUND. IT WAS SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS ` 22.50 LACS FROM PARTY OF THE TOTAL CASH SEIZED BY THE CBI. THE CA SH REWARD AMOUNTING TO ` 22.50 LACS WAS PART OF THE REWARD RECEIVED F ROM DRI ON CERTAIN DATES. AS PER THE PROVISO TO SECTION 158BFA(2), IN THE CASES WHERE UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFIC ER IS EXCESS OF THE INCOME SHOWN IN THE RETURN AND IN SUCH CASES T HE PENALTY SHALL BE IMPOSED ON THAT PORTION OF UNDISCLOSED INCOME DETERM INED WHICH IS IN EXCESS OF THE AMOUNT OF DISCLOSED INCOME SHOWN IN T HE RETURN. IN THE PRESENT CASE THE ASSESSEE SHOWN INCOME OF ` 90,00,00 0/- IN THE RETURN FILED IN COMPLIANCE OF THE CLAUSE (A) OF SECTION 158 BC AS AGAINST FINALLY ASSESSED INCOME OF ` 1,14,54,077/- AS ARRIVED AT AFT ER GIVING EFFECT OF THE ITAT ORDER. HENCE, PENALTY WAS FOUND TO BE LEV IABLE U/S 158BFA(2) ON THE PORTION OF UNDISCLOSED INCOME AMOUNTING TO ` 24,54,077/-. ASSESSEE SUBMITTED BEFORE THE LD. COMMISSIONER OF IN COME TAX (APPEALS) THAT THE AMOUNT OF ` 22.50 LACS WAS CASH REWARD RECEIVED FROM DRI WAS NOT CHARGEABLE TO TAX AND IN ANY CASE HE DID NOT REPRESENT THE INCOME WITHIN THE MEANING OF SECTION 1 58B(B/158BB) OF THE ACT. LD. COMMISSIONER OF INCOME TAX (APPEALS) DI D NOT ACCEPT THIS IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 6 CONTENTION. HE HELD THAT THE SECTION 158BFA(2) CLEAR LY MENTION THAT THE PENALTY IS LEVIABLE IN RESPECT OF UNDISCLOSED INCOME DETERMINED BY THE ASSESSING OFFICER. LD. COMMISSIONER OF INCOM E TAX (APPEALS) FURTHER NOTED THAT IN THE CASE OF DHARMENDRA TEXTILE THE HONBLE SUPREME COURT HAS HELD THAT THE PENALTY IS NO LONGE R QUASI CRIMINAL IN NATURE ALBEIT STRICTER CIVIL LIABILITY. 4.1 LD. COMMISSIONER OF INCOME TAX (APPEALS) CONCLUD ED AS UNDER:- A PERUSAL OF SECTION 158BFA(2) SHOW THAT THE ASSESS ING OFFICER OR THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IS VES TED WITH THE POWER TO DIRECT THE APPELLANT TO PAY THE PENALTY A S SPECIFIED IN RESPECT OF THE UNDISCLOSED INCOME DETERMINED BY THE ASSESSIN G OFFICER UNDER CLAUSE (C) OF SECTION 158BC. IT IS UNDISPUTED FAC T THAT THE ASSESSING OFFICER AND THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) AND THEREAFTER HONBLE ITAT HAS CONFIRMED THE ADDITION MADE ON AN AMOUNT OF ` 24,54,077/- ON ACCOUNT OF DIFFERENCE BET WEEN THE UNDISCLOSED INCOME DECLARED TO THE TUNE OF ` 90,00,0 00/- BY THE APPELLANT AND UNDISCLOSED INCOME DETERMINED AT ` 1,14 ,54,077/- BY THE ASSESSING OFFICER. THE CONFIRMATION OF QUANTUM B Y ITAT MAY NOT BE SOLE GROUND FOR LEVY OF PENALTY NEVERTHELESS A REL EVANT FACTOR IN JUDGING THE PROSPECT FOR LEVYING PENALTY. THE QUA NTUM BEING CONFIRMED BY ITAT AND NOTHING SUBSTANTIAL HAS BEEN B ROUGHT ON THE IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 7 RECORD BY THE APPELLANT IN CONTRARY TO THE FINDINGS , THE PENALTY U/S 158BFA(2) IS THUS CONFIRMED. THE APPELLANTS CONTEN TION THAT HE WAS UNAWARE OF THE PROVISIONS OF THE INCOME TAX ACT IS NOT SUSTAINABLE, IGNORENTIA LEGIS NON EXCUSAT. IN VIEW OF DISCUSSION , PENALTY OF ` 15,46,068/- IS CONFIRMED AND THE GROUNDS OF APPELLA NT REJECTED. 5. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 6. FOLLOWING HAS BEEN SUBMITTED ON BEHALF OF THE ASSE SSEE:- THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DRAWING ADVERSE INFERENCE FROM THE FACT THA T THE ADDITION MADE TO THE UNDISCLOSED INCOME STOOD CONFI RMED BY THE HONBLE TRIBUNAL, FAILING TO APPRECIATE THAT THE DIFFERENCE IN THE UNDISCLOSED INCOME DECLARED AND UNDISCLOSED INCOME ASSESSED WAS ON ACCOUNT OF INCLU SION OF AN AMOUNT OF ` 22.50 LAKH BEING THE AMOUNT OF CASH RE WARD RECEIVED BY THE APPELLANT FROM DRI AND BECAUSE THE APPELLANT WAS UNDER A BONAFIDE BELIEF THAT THE SAME DID NOT REPRESENT INCOME MUCH LESS THE UNDISCLOSED INCOME. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THE AMOUNT OF CASH REWARD WAS OUTSIDE THE SCOPE OF THE PROVISIONS OF CHAPTER XI VB OF THE IT ACT AND IN ANY CASE, COULD NOT BE CONSIDERED FOR THE PURPOSES OF LEVY OF PENALTY U/S 158BFA(2) OF THE IT ACT ON THE FACTS OF THE INSTANT CASE. IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 8 THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED IN FAILING TO APPRECIATE THAT IN T HE LIGHT OF THE CERTIFICATE / CONFIRMATION DATED 17.3.2006 ISSU ED BY THE DRI CONFIRMING PAYMENT OF CASH REWARD OF ` 27.50 LAKH TO THE ASSESSEE, THERE WAS NO JUSTIFICATION FOR LEVY O F PENALTY U/S 158BFA(2) IN RESPECT OF THE AMOUNT OF ` 22.50 LAKHS. 6.1 LD. COUNSEL OF THE ASSESSEE BEFORE US REITERATE D THE SUBMISSIONS THAT THE PENALTY WAS LEVIED ON THE AMOUNT OF ` 22.50 LACS, THE SAME PERTAIN TO CASH REWARD RECEIVED FROM THE DRI. HE CLAI MED THAT THE ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT THE CASH REWARD RECEIVED FROM DRI IS EXEMPT FROM TAX. IN THIS REGARD, HE REFERR ED THE PROVISIONS OF SECTION 10(17A) REGARDING EXEMPTION OF ANY PAYMEN T WHETHER IN CASH OR IN KIND: (I) PURSUANCE OF ANY AWARD INSTI TUTED IN PUBLIC INTEREST BY THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT OR INSTITUTED BY ANY OTHER BODY AND APPROVED BY THE CENTRAL GOVERNME NT IN THIS BEHALF OR (II) AS REWARD BY THE CENTRAL GOVERNMENT OR ANY STATE GOVERNMENT FOR SUCH PURPOSES AS MAY BE APPROVED BY THE CENTRAL GOVERNMENT IN THIS BEHALF IN THE PUBLIC INTEREST. 6.2 ON THESE BASIS, LD. COUNSEL CLAIMED THAT THE AS SESSEE WAS UNDER THE BONAFIDE BELIEF THAT THIS REWARD AMOUNT IS NOT T AXABLE. HENCE THE SAME HAS NOT BEEN INCLUDED IN THE UNDISCLOSED INCOM E RETURNED PURSUANT TO THE SEARCH. LD. COUNSEL FURTHER SUBM ITTED THAT IN THE APPEAL AGAINST TRIBUNAL ORDER THE HONBLE DELHI HIGH COURT HAS ACCEPTED FOR ADJUDICATION THE FOLLOWING QUESTIONS W HETHER THE INCOME TAX APPEALS, TRIBUNAL IS CORRECT IN LAW IN ASSESSIN G THE AMOUNT OF ` 22.50 LACS RECEIVED BY THE ASSESSEE AS CASH REWARD FROM DRI AS ALLEGED UNDISCLOSED INCOME OF THE BLOCK PERIOD INCLU DING ALL RECORDS IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 9 AND MORE PARTICULARLY DRI LETTER NO. DRI/F/50D/27/20 06 C.I. DATED 17.3.2006 INDEPENDENTLY OBTAINED BY THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) AND SEPARATELY FILED BEFORE THE TRIBU NAL IN THE COURSE OF HEARING. LD. COUNSEL OF THE ASSESSEE FURTHER PLAC ED RELIANCE UPON THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF C.I.T. VS. SATYENDRA KUMAR DOSI & ANR. 315 ITR 172 AND HONBLE A PEX COURT DECISION IN THE CASE OF HINDUSTAN STEEL VS. STATE O F ORISSA. 83 ITR 26. 6.3 LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAN D RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE FIND THAT THE ISSUE FOR ADJUDICATION BEFORE US IS W HETHER DIFFERENCE BETWEEN INCOME DISCLOSED OF ` 90 LACS AND THAT ASS ESSED BY ASSESSING OFFICER AMOUNTING TO ` 1,14,54,077/- GIVING RISE T O DIFFERENCE OF ` 24,54,077/- EXIGIBLE TO PENALTY U/S 158BFA(2). SEC TION 158BFA(2) PROVIDES THAT LEVY OF PENALTY BETWEEN THE UNDISCLOS ED INCOME RETURNED FOR A BLOCK PERIOD PURSUANT TO SEARCH AND THE UNDIS CLOSED INCOME FINALLY ASSESSED BY THE ASSESSING OFFICER. IN THE PRESENT CASE REGARDING THE DIFFERENCE THE ASSESSEE IS CLAIMING T HAT ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT A SUM OF ` 22.50 LACS WAS EXEMPTED U/S 10(17A) BEING REWARD RECEIVED FROM DRI. ASSESSEE H AS ALSO SUBMITTED DETAIL OF REWARD RECEIVED FROM DRI AS UND ER:- S.NO. DATE AMOUNT DISBURSED IN ` AUTHORITY FROM WHOM RECEIVED 1 22.1.1999 10,00,000/- SH. A.K. PANDEY, DGP, DRI, NEW DELHI 2 6.12.1999 1,50,000/- SH. JOGINDER SINGH, ADG, DRI, NEW DELHI 3 6.4.2000 3,00,000/- -DO- IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 10 4 6.4.2000 8,00,000/- -DO- 5 10.9.2000 4,50,000/- -DO- TOTAL 27,00,000/- 7.1 IT IS UNDISPUTED THAT ASSESSEE HAS RECEIVED RE WARD FROM DRI. ASSESSEES CLAIM OF ` 22.50 LACS IN CASH FOUND RELAT ED TO THAT CASH REWARD WAS NOT ACCEPTED ON THE GROUND THAT ASSESSEE COULD NOT PROVE THAT THE CASH REWARD RECEIVED WAS RELATED TO THE CA SH AMOUNT FOUND PURSUANT TO SEARCH. IN OUR CONSIDERED OPINION, IT CAN BE SAID THAT ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT ` 22.50 L ACS BEING CASH REWARD RECEIVED FROM DRI IS EXEMPTED FROM TAX. IT WA S INCUMBENT UPON THE ASSESSEE TO PROVE THAT THE CASH FOUND DURI NG SEARCH INCLUDED THAT CASH REWARD RECEIVED WHICH LED TO THE CONF IRMATION OF THE ADDITION. BUT IN OUR CONSIDERED OPINION, THIS IS NOT SUFFICIENT TO LEVY PENALTY U/S 158BFA. WE FIND THAT HONBLE RAJASTHA N HIGH COURT IN THE CASE OF C.I.T. VS. SATYENDERA KUMAR DOSI & ANR. 315 ITR 172 HAS HELD THAT LEVY OF PENALTY U/S 158BFA(2) IS DISCRETIONARY AND NOT MANDATORY. WE FURTHER FIND THAT HONBLE BOMBAY HIGH COURT IN TH E CASE OF C.I.T. VS. DODSAL LTD. 218 CTR 430 HAS ALSO HELD THAT LEVY OF P ENALTY U/S 158BFA(2) IS DIRECTORY AND NOT MANDATORY. 7.2 THUS, FROM THE ABOVE PRECEDENTS, IT IS EVIDENT T HAT LEVY OF PENALTY U/S 158BFA(2) IS NOT AUTOMATICALLY AND MANDA TORY. ON THE FACTS AND CIRCUMSTANCES OF THE CASE IT CAN BE SAID T HAT ASSESSEE WAS UNDER A BONAFIDE BELIEF THAT ` 22.50 LACS WAS EXEMPT ED FROM TAX BEING REWARD RECEIVED FROM DRI. IN THE 3 RD MEMBER DECISION IN OF THE ITAT, AHEMEDABAD IN THE CASE OF RUPAM MERCANTILES LTD. VS. DCIT 91 ITD 237, IT WAS HELD THAT ASSESSEE HAVING PAID UPFRONT INTEREST FOR SIX YEARS IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 11 ON THE DATE OF ISSUE OF REDEEMABLE DEBENTURES IN TE RMS OF AGREEMENT AND HIGH COURT ADMITTED THE APPEAL OF THE ASSESSEE A GAINST THE DISALLOWANCE FINDING A SUBSTANTIAL QUESTION OF LAW INVOLVED IN THE MATTER THE CLAIM BY THE ASSESSEE FOR DEDUCTION OF EN TIRE AMOUNT IN THE YEAR OF PAYMENT WAS NOT MALAFIDE AND PENALTY U/S 27 1(1)(C) WAS NOT ATTRACTED. 7.3 IN SUPPORT OF OUR ABOVE ADJUDICATION, WE PLACE RELIA NCE UPON THE DECISION OF THE LATEST HONBLE APEX COURT DECISION IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS LTD. WHEREIN IT HAS BEEN IN TER-ALIA HELD THAT THE LAW LAID DOWN IN THE DILIP SHEROFF CASE 291 ITR 519 (SC) AS TO THE MEANING OF WORD CONCEALMENT AND INACCURATE CONTINUES TO BE A GOOD LAW BECAUSE WHAT WAS OVERRULED IN THE DHARMENDER TEXTILE CASE WA S ONLY THAT PART IN DILIP SHEROFF CASE WHERE IT WAS HELD THAT MENSREA WAS A ESSENTIAL REQUIREMENT OF PENALTY U/S 271(1)(C). THE HONBLE A PEX COURT ALSO OBSERVED THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED T HEN IN CASE OF EVERY RETURN WHERE THE CLAIM IS NOT ACCEPTED BY THE AO FOR ANY RE ASON, THE ASSESSEE WILL INVITE THE PENALTY U/S 271(1)(C). THIS IS CLEARLY NO T THE INTENDMENT OF LEGISLATURE. 7.4. IN THIS REGARD, WE ALSO PLACE RELIANCE FROM T HE APEX COURT DECISION RENDERED BY A LARGER BENCH COMPRISING OF THREE OF T HEIR LORDSHIPS IN THE CASE OF HINDUSTAN STEEL VS. STATE OF ORISSA IN 83 ITR 2 6 WHEREIN IT WAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEEDINGS, AND PENA LTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED EITHER ACTED DELIB ERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST , OR ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION. PENALTY WILL NO T ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFUL TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION IS A MATTER OF DISCR ETION OF THE AUTHORITY TO BE EXERCISED JUDICIALLY AND ON A CONSIDERATION OF AL L THE RELEVANT IT(SS)A.NO. 31/DEL/2010 BLOCK PERIOD 1.4.1996 TO 21.3.2003 12 CIRCUMSTANCES. EVEN IF A MINIMUM PENALTY IS PRESCRIBED , THE AUTHORITY COMPETENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PENALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT, OR WHERE THE BREACH FLOWS FROM A BONAFIDE BELIE F THAT THE OFFENDER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE . 8. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AN D PRECEDENTS, WE FIND THAT PENALTY U/S 158BFA(2) IS NOT LEVIABLE ON THE SUM OF ` 22.50 LACS ON WHICH ASSESSEE WAS UNDER THE BELIEF T HAT THE AMOUNT WAS NOT EXIGIBLE TO TAX. SECONDLY, THE HONBLE DELHI HIGH COURT HAS ALSO ADMITTED THAT THE SUBSTANTIAL QUESTION OF LAW R EGARDING THE AMOUNT RECEIVED. THUS THE ASSESSEES EXPLANATION CA NNOT BE SAID TO BE MALAFIDE AND IN THE BACKGROUND OF THE AFORESAID D ISCUSSION AND PRECEDENTS, WE HOLD THAT PENALTY CANNOT BE LEVIED O N THE SUM OF ` 22.50 LACS. REGARDING THE BALANCE OF ` 204077/- NO SUBMISSION HAVE BEEN MADE AND THE SAME IS LIABLE FOR PENALTY U/S 15 8BFA(2). 9. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/12/2010. SD/- SD/- [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [RAJPAL YADAV] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 23/12/2010 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES