Suresh Kumar Bagrrecha, Bangalore V. ACIT, Bangalore

ITSSA 39/BANG/2009

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 9509 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 4 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-02-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-01-2010
• Assessment Year: misc
• Appeal Filed On: 06-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SREELEKHA
• Assessee Lawyers: H N KHINCHA
• Keywords: Search and seizure; Document seized; Initiation of penalty proceedings; Block assessment; Documents seized
• Section: 143(3); 246; 56; 132

Judgement Text

PAGE 1 OF 20 IT(SS)A NO.39/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B' BEFORE SHRI K P T THANGAL, VICE PRESIDENT AND SHRI A MOHAN ALANKAMONY, A.M. IT(SS)A NO.39/BANG/2009 (BLOCK ASSESSMENT 1995-96 TO 11.12.2001) SHRI SURESH KUMAR BAGRECHA, PROP: M/S SALEM STEEL SUPPLIERS, NO.169, AVENUE ROAD, BANGALORE-2. - APPELLANT VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(1), BANGALORE. - RESPONDENT APPELLANT BY : SHRI H N KHINCHA RESPONDENT BY : SMT. SREELEKHA O R D E R PER K P T THANGAL, VICE PRESIDENT : THIS APPEAL BY THE ASSESSEE IS FOR THE BLOCK PERIO D 1995-96 TO 11.12.2001. 2. THE ASSESSEE IS CHALLENGING THE ORDER OF THE CIT(A) FOR UPHOLDING THE LEVY OF PENALTY OF RS.11,71 ,267/- U/S 158BFA(2), CONFIRMING THE ORDER PASSED BY AO, WHICH WAS WITHOUT JURISDICTION, BARRED BY TIME AND THEREFORE, VOID AB- INITIO. PAGE 2 OF 20 IT(SS)A NO.39/BANG/2009 2 3. THERE WAS A SEARCH AND SEIZURE ACTION IN THE BUSINESS PREMISES OF THE ASSESSEE ON 11.12.2001. A NUMBER OF INCRIMINATING DOCUMENTS WERE SEIZED DURING THE SEAR CH REVEALING THE EXISTENCE OF UNDISCLOSED INCOME. DUR ING THE COURSE OF RECORDING THE STATEMENT U/S 132(4) ASSESS EE DECLARED UNDISCLOSED INCOME OF RS. 53,72,052/- BASE D ON THE EVIDENCES RELATING TO TOTAL STOCK, UNACCOUNTED RECE IVABLES AND UNACCOUNTED PAYABLES. ASSESSEE DECLARED AN AMOUNT O F RS.3 LAKHS ON ACCOUNT OF PROFIT EARNED DURING THE FINANC IAL YEAR UP TO THE DATE OF SEARCH. IN THE RETURN, ASSESSEE HAS DI SCLOSED ONLY RS.13 LAKHS WHEREAS THE UNDISCLOSED INCOME WAS DETE RMINED AT RS.32,52,112/-. VIDE ORDER DATED 30.12.2003, PENAL TY PROCEEDINGS WERE INITIATED. THE MATTER REACHED UP TO THE LEVEL OF TRIBUNAL AND THE PENALTY PROCEEDINGS THEREAFTER W ERE INITIATED. 4. ASSESSEE'S REPRESENTATIVE SUBMITTED THAT THE ASSESSEE NEITHER CONCEALED ANY PARTICULARS OF INCOME NOR FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THE DIFFERENCE BETWEEN ASSESSED AND RETURNED INCOME IS MAINLY DUE T O ADDITION OF STOCK. IT WAS CONTENDED THAT THE ADDITION OF ST OCK HAD NO BASIS. THE CLAIM OF THE ASSESSEE REGARDING STOCK B ELONGING TO OTHER SISTER CONCERNS WAS NOT ACCEPTED FULLY BY THE A SSESSING OFFICER. THE ASSESSEE FURTHER SUBMITTED THAT EVEN IN CASE WHERE ADDITIONS ARE AGREED IN ORDER TO PURCHASE PEA CE, AVOID HARASSMENT, LITIGATION, PENALTY IS NOT LEVIABLE. IN FACT THERE IS PAGE 3 OF 20 IT(SS)A NO.39/BANG/2009 3 NO CHARGE/SPECIFIC DEFAULT MENTIONED IN SECTION 158 BFA(2). HENCE, PENALTY U/S 158BFA(2) IS NOT LEVIABLE. THE A SSESSEE FOR THE ABOVE PROPOSITION RELIED ON THE DECISION OF THE BANGALORE BENCH IN THE CASE OF NEMICHAND IN IT(SS)A NO.21/BAN G/2001 DATED 21.12.2004. THE ASSESSEE ALSO RELIED ON THE DECISION OF HON'BLE RAJASTHAN HIGH COURT REPORTED IN 291 ITR 24 4 WHEREIN THE HON'BLE HIGH COURT HELD THAT IF THERE IS NO APP EAL AGAINST QUANTUM, THEN THE EXTENDED TIME LIMIT FOR LEVY OF PE NALTY WILL NOT APPLY. ASSESSEE FURTHER POINTED OUT THAT IN SEC TION 275(1)(A), IT IS MENTIONED THAT 'WHERE ASSESSMENT O R OTHER ORDER IS SUBJECT MATTER OF APPEAL' WHEREAS IN SECTI ON 158BFA(3), THE WORDS USED ARE 'ASSESSMENT IS SUBJEC T MATTER OF APPEAL'. THE WORD 'ORDER' IS CONSPICUOUSLY MISSI NG IN SECTION 158BFA(3). THERE BEING NO APPEAL AGAINST THE QUANT UM ASSESSMENT AS SUCH THE PENALTY PROCEEDINGS ARE TIME BARRED. THE CONTENTION OF THE ASSESSEE WAS REJECTED BY THE A SSESSING OFFICER BRIEFLY FOR THE FOLLOWING REASONS:- A) THE ASSESSEE ADMITTED THE EXISTENCE OF UNACCOUNTED STOCK, UNACCOUNTED RECEIVABLES AND UNACCOUNTED PAYABLES IN HIS STATEMENT RECORDED U/S 132(4) WHICH CAME TO THE KNOWLEDGE OF THE REVENUE ONLY ON THE BASIS OF DOCUMENTS/MATERIALS FOUND AND SEIZED DURING THE COURSE OF SEARCH AND SEIZURE ACTION. PAGE 4 OF 20 IT(SS)A NO.39/BANG/2009 4 B) THE INFORMATION WAS KEPT IN CODED LANGUAGE, WHICH CLEARLY INDICATES THE MIND OF THE ASSESSEE THAT THERE EXISTED THE MENS REA ON THE PART OF THE ASSESSEE. C) THE ADDITIONS WERE PURELY ON THE BASIS OF MATERIALS FOUND DURING THE SEARCH AND SEIZURE ACTION. THE AO ADDED BACK ONLY THOSE AMOUNTS IN RESPECT OF WHICH THE ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM. THUS, THE ADDITIONS MADE BY THE AO WERE VERY MUCH SPECIFIC AND SUFFICIENT OPPORTUNITIES WERE GIVEN TO THE ASSESSEE AT THE TIME OF ASSESSMENT. D) THE ASSESSING OFFICER DISTINGUISHED THE DECISION RELIED ON BY THE LEARNED REPRESENTATIVE FOR THE ASSESSEE ON FACTS. THE AO RELIED ON THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF P P UMMERKUTTY V CIT 1 CTR VOL.199 DATED 18.11.2005 WHEREIN IT WAS HELD THAT PENALTY U/S 158BFA(2) IN A SEARCH CASE IS CONSTITUTIONALLY VALID. THE DECISION OF THE RAJASTHAN HIGH COURT IN 291 ITR 244 IS NOT RELEVANT IN THE INSTANT CASE OF THE ASSESSEE. E) THE CONTENTION OF THE ASSESSEE THAT THERE BEING NO APPEAL AGAINST THE QUANTUM ASSESSMENT, PARTICULARLY ON THE FIGURES ON PAGE 5 OF 20 IT(SS)A NO.39/BANG/2009 5 WHICH THE PENALTY IS IMPOSED, PENALTY PROCEEDINGS ARE TIME BARRED IS NOT SUPPORTED BY ANY FORCEFUL ARGUMENT. IT CANNOT BE DENIED THAT THE ASSESSMENT WAS SUBJECT MATTER ARRIVED AT THE FIGURE OF THE UNDISCLOSED INCOME ON THE BASIS OF THE MATERIALS FOUND AND SEIZED. THE SUBSEQUENT CLA IM OF THE ASSESSEE THAT THE STOCK LYING AT ONE OF HIS SITES IN CLUDED THE STOCK OF HIS SISTER CONCERNS WERE ALSO GIVEN DUE WE IGHTAGE BY THE ASSESSING OFFICER. THE AO ADDED BACK ONLY THOSE AMOUNTS IN RESPECT OF WHICH ASSESSEE COULD NOT SUBSTANTIATE HIS CLAIM. THE ADDITION MADE BY THE ASSESSING OFFICER WAS SPECI FIC AND AFTER GIVING SUFFICIENT OPPORTUNITIES. HENCE, THE ASSESSING OFFICER LEVIED THE PENALTY. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPROACHED THE LEAR NED CIT(A). 5. WHEN THE MATTER WAS CARRIED BEFORE THE CIT(A), HE CONFIRMED THE PENALTY ORDER. AGGRIEVED, THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE ASSESSEE MAINLY CHALLENGING THE PENALTY ORD ER ON TWO GROUNDS:- (I) WITHOUT JURISDICTION (II) IT I S BARRED BY LIMITATION. PAGE 6 OF 20 IT(SS)A NO.39/BANG/2009 6 7. COMING TO JURISDICTION, IT WAS SUBMITTED THAT THE ASSESSMENT ORDER WAS PASSED BY ACIT, CENTRAL CIRCLE- 1(2), BANGALORE, AND ALONG WITH THAT ORDER, ACIT ISSUED A NOTICE REGARDING LEVY OF PENALTY. THEREAFTER, THE FILE WAS TRANSFERRED TO ITO, WARD-2(2), BANGALORE. THE OTHER ITO DID N OT ISSUE ANY FRESH NOTICE FOR PENALTY PROCEEDINGS NOR THERE IS ANY INTIMATION REGARDING THE CHANGE IN THE INCUMBENT. THIS ITO HAD SENT TWO LETTERS ONLY. GETTING CLUE FROM SE CTION 129, ASSESSEE SUBMITTED THAT THE SECOND OFFICER WHO SUCC EEDED, DID NOT CONTINUE THE PROCEEDINGS FROM THAT STAGE WHERE THE PREDECESSOR LEFT IT EXCEPT SENDING SOME COMMUNICATI ONS. HENCE, RELYING ON THE DECISION OF THE BOMBAY HIGH COU RT IN THE CASE OF CIT V SHANKAR B DHANWATEY 212 ITR 150 AND AHMEDABAD TRIBUNAL IN THE CASE OF CHANDRAKANTH G PA TEL IN ITA NO.1611 TO 1613 DATED 19.2.1996, THE PENALTY IS LIAB LE TO BE CANCELLED. IN SHORT, ACCORDING TO THE ASSESSEE, TH ERE WERE THREE OFFICERS TO HANDLE THE MATTER AND OFFICER, WH O SUCCEEDED IMMEDIATELY THE ASSESSING OFFICER WHO STARTED THE PR OCEEDINGS KEPT SILENT EXCEPT ISSUING SOME LETTERS AND THEREFO RE THERE IS NO LINK BETWEEN THE 1ST AND 3RD OFFICER, WHO COMPLE TED THE ORDER. CONSEQUENTLY, THE ORDER PASSED BY THE THIRD O FFICER IS NULL AND VOID FOR WANT OF JURISDICTION. ALSO BECA USE THE SECOND OFFICER IN FACT CAN NEVER EXERCISE ANY JURISDICTION BECAUSE THAT OFFICER WAS BELOW THE RANK OF ONE, PRESCRIBED BY THE ACT TO DEAL WITH JURISDICTION UNDER CHAPTER XIVB. THIS PL EA OF THE ASSESSEE WAS REJECTED BY THE CIT(A) HOLDING THAT IN THE CASES PAGE 7 OF 20 IT(SS)A NO.39/BANG/2009 7 RELIED BY THE ASSESSEE MENTIONED ABOVE, NO INTIMATIO NS WERE GIVEN AS TO THE CONTINUANCE OF THE PROCEEDINGS BY TH E SUCCEEDING OFFICER WHEREAS IN THIS CASE, BOTH THE S UCCEEDING OFFICERS HAVE INFORMED THE ASSESSEE AS TO THEIR INT ENTION TO COMPLETE THE PROCEEDINGS GIVING A DATE OF HEARING A ND THEREFORE, CIT(A) HELD THAT THERE IS SUFFICIENT COM PLIANCE TO THE PROVISIONS OF SECTION 129 OF THE I T ACT. FURT HERMORE, HE HELD THAT THE ASSESSEE HAD GIVEN A DETAILED REPLY TO SUCH REHEARING LETTERS IN WHICH NO OBJECTION TO ASSUMPTI ON OF JURISDICTION BY THE ASSESSING OFFICER WAS RAISED AT ALL. HENCE THIS PLEA I.E. CHANGE OF OFFICER WITHOUT JURISDICTI ON WAS REJECTED. 8. COMING TO THE SECOND POINT, I.E. TIME BARRED, T HIS WAS ALSO REJECTED BY THE LEARNED CIT(A). IT WAS CON TENDED BEFORE THE LEARNED CIT(A) THAT U/S 158 BG OF THE I T ACT, A BLOCK ASSESSMENT CAN BE PASSED BY AN OFFICER, WHO IS NOT BELOW THE RANK OF AN ACIT OR DCIT. U/S 158BFA(3), THE OR DER LEVYING PENALTY CAN BE MADE ONLY BY AN OFFICER NOT BELO W THE RANK OF ACIT OR DCIT. IT WAS FURTHER SUBMITTED THA T U/S 129 OF THE I T ACT, THE SUCCEEDING AUTHORITY CONTINUES T HE PROCEEDINGS FROM THE STAGE WHERE IT WAS LEFT BY THE PREDECESSOR. IN THIS CASE, THE OFFICER LEVYING PEN ALTY TOOK OVER THE PROCEEDINGS FROM THE OFFICER WHO WAS BELOW THE RANK OF AN ACIT. THE OFFICER LEVYING PENALTY, HAVING TAKEN OVER THE PROCEEDINGS FROM AN OFFICER WHO HAD NO JURISDICTION VITIATES THE PAGE 8 OF 20 IT(SS)A NO.39/BANG/2009 8 ENTIRE PROCEEDINGS AND THE IMPUGNED ORDER IS LIABLE TO BE QUASHED ON THAT GROUND ALONE. CIT(A) HELD THIS IS ONLY A PROCEDURAL SECTION AND DOES NOT BAR CHANGE IN JURIS DICTION MORE THAN ONCE. THE INTIMATION OF SUCH CHANGE IS NOT MA NDATORY AND FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISIO N OF THE HON'BLE SUPREME COURT IN THE CASE OF KASHIRAM AGRAW AL V UNION OF INDIA 56 ITR 14. 9. SECOND OBJECTION OF THE ASSESSEE ON THE SAME POINT WAS THAT THE LIMITATION FOR LEVY OF PENALTY U/S 158BFA(3) STARTS FROM THE DATE OF THE 'COMPLETION OF THE BLOC K ASSESSMENT' AND NOT FROM THE DATE OF RECEIPT OF THE ORDER IN THE OFFICE OF THE CCIT/CIT BECAUSE THE APPEAL FILED WAS NOT AGAINST THE 'ASSESSMENT' BUT WAS DIRECTED AGAINST L EVY OF 'INTEREST AND SURCHARGE'. IT WAS FURTHER ARGUED TH AT THE WORDS 'OTHER ORDERS' FOUND IN SECTION 275 IS MISSIN G IN SECTION 158BFA(3) OF THE I T ACT THAT STRENGTHEN THE ABOVE PROPOSITION CANVASSED. THE WORD 'ASSESSMENT' MEANS ONLY DETERMINATION OF TOTAL INCOME OR LOSS AND DOES NOT ENTAIL CALCULATION OF TAX AND INTEREST. PROVISIONS OF SEC TION 143(3)/144 WAS ALSO QUOTED AND POINTED OUT THE WORD 'AND' JOINS TWO SEPARATE ACTIVITIES I.E. ASSESSMENT AND D ETERMINATION OF 'SUMS PAYABLE'. ASSESSMENT ENDS WITH THE DETERMI NATION OF TOTAL INCOME AND THE DETERMINATION OF SUMS PAYABLE I S ENTIRELY SEPARATE AND INDEPENDENT EXERCISE. IN THE INSTANT CASE, IT WAS CONTENDED, THE PENALTY ORDER WAS PASSED ONLY AFTER TH E PAGE 9 OF 20 IT(SS)A NO.39/BANG/2009 9 FINALISATION OF SUMS PAYABLE BY THE ITAT AND AS SUCH, IT IS BARRED BY LIMITATION. THE ARGUMENT OF THE ASSESSEE WAS REJECTED BY THE LEARNED FIRST APPELLATE AUTHORITY BR IEFLY FOR THE FOLLOWING REASONS:- LEARNED CIT(A) AGREED WITH THE PROPOSITION THAT THERE IS A SUBTLE DISTINCTION BETWEEN THE ACTIVITIE S TERMED AS 'ASSESSMENT' AND THE EXERCISE OF DETERMINATION OF ' SUMS PAYABLE' AS TAX, INTEREST, CESS, ETC. HOWEVER, HE H ELD, THAT DOES NOT MEAN THAT TWO SEPARATE COMPUTATIONS ARE TO BE TREATED INDEPENDENTLY. HE HELD THAT BOTH ARE SUPPLE MENTARY, COMPLEMENTARY AND DEPENDANT ON EACH OTHER. ONE CANN OT EXIST WITHOUT THE OTHER. TREATING THEM AS SEPARATE IS NO T POSSIBLE IN THE TAX ADMINISTRATION. DETERMINATION OF INCOME WI THOUT CALCULATION OF TAX IS MEANINGLESS. SIMILARLY, IF NO INCOME IS DETERMINED, COMPUTATION OF TAX, ETC. IS ALSO BASELE SS. BOTH ACTIVITIES ARE INSEPARABLE AND ASSESSMENT IS COMPLE TE ONLY WHEN THE TAX IS COMPUTED BY THE ASSESSING OFFICER UNDER H IS SIGNATURE. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CW T V DHANSUKHAL J GUJJAR 237 ITR 534, HON'BLE SUPREME CO URT'S DECISION IN THE CASE OF KALYANKUMAR RAY V CIT 191 ITR 634 AND SMT. KILASHA DEVI BURMAN V CIT 219 ITR 214.. HE HE LD THE DEFINITION OF THE ASSESSMENT AS DEFINED IN SEC.2(7) OF THE I T ACT IS AN INCLUSIVE DEFINITION AND NOT AN EXHAUSTIV E ONE WHICH INCLUDES NOT ONLY DETERMINATION OF TOTAL INCOME OR L OSS BUT ALSO PAGE 10 OF 20 IT(SS)A NO.39/BANG/2009 10 COMPUTATION OF TAX, INTEREST, CESS, ETC. FOR THE ABOVE REASONS, HE DISMISSED THE ASSESSEE'S PLEA WITH REGARD TO BAR RED BY LIMITATION. 10. ANOTHER GROUND URGED BY THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE PENALTY IS BAD IN LAW BECAUSE SE CTION 158BFA(2) DOES NOT CREATE A CHARGE FOR PENALTY. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE TRIBU NAL IN THE CASE OF SHRI NEMICHAND (SUPRA). THESE CONTENTION OF TH E ASSESSEE WERE REJECTED BY THE LEARNED CIT(A) VIDE PARA 17, 18 AND 19 OF HIS ORDER, OBSERVING AS UNDER:- 17. I FIND THE CHARGE IS DIRECT, SPECIFIC AND PINPOINTED IN THIS CASE. A DIRECT SEARCH U/S 132(1) OF I T ACT WAS CONDUCTED IN THE PREMISES OF THE APPELLANT CREATING AN AUTOMATIC CHARGE FOR INITIATION OF PENALTY PROCEEDINGS U/S 158BFA(2) OF I T ACT. DURING THE COURSE OF STATEMENT RECORDED U/S 132(4) OF I T ACT ON 11.12.2001, THE UNDISCLOSED INCOME TOO WAS ADMITTED TO THE TUNE OF RS.53,72,052/- VOLUNTARILY ESPECIALLY ON THE BASIS OF SEIZED MATERIAL NO.A/PB/1. THUS, THE CHARGE IS FRAMED AND ALSO THE APPELLANT WAS ASKED WHETHER HE PLEADS GUILTY OR NOT TO WHICH HE ADMITTED TO HAVE COMMITTED THE DEFAULT ON THE DATE OF SEARCH ITSELF. A FURTHER OPPORTUNITY WAS ALSO PROVIDED TO THE APPELLANT IN THE SHAPE OF NOTICE U/S 158BC TO FILE THE RETURN OF UNDISCLOSED INCOME I.E. TO COME OUT CLEAN SO THAT PENALTY COULD HAVE PAGE 11 OF 20 IT(SS)A NO.39/BANG/2009 11 BEEN DROPPED USING THE DISCRETIONARY POWER. BUT THAT WAS NOT TO BE. A RETURN DECLARING INCOME OF RS.13,00,000/- WAS FILED. THE AO EXAMINED THE SEIZED DOCUMENTS AND FOUND OUT A HIGHER FIGURE OF RS.32,52,112/- AS UNDISCLOSED INCOME AGAINST WHICH NO APPEAL WAS FILED. THE PLEA THAT NO APPEAL WAS MADE TO BUY PEACE AND AVOID PROTRACTED LITIGATION IS ONLY AN EYEWASH. HAD THE APPELLANT COME OUT CLEANLY AND CLEARLY, THE CHARGE COULD HAVE BEEN DROPPED BUT THAT WAS NOT TO BE IN VIEW OF THE PROVEN MALAFIDE INTENTION OF THE APPELLANT. 18. IN THE CITED CASE, THERE WAS NO SEARCH U/S 132 OF I T ACT. NO STATEMENT U/S 132(4) WAS RECORDED AND HENCE THERE WAS NO ADMISSION AS TO UNDISCLOSED INCOME. PROCEEDINGS WERE INITIATED ONLY U/S 158BD OF THE I T ACT. EVEN IF SATISFACTION WAS ARRIVED THAT SRI NEMICHAND WAS HAVING UNDISCLOSED INCOME, AFTER SCRUTINY AND INVESTIGATION, ADDITIONS OF UNDISCLOSED INCOME WERE MADE NOT ON THE BASIS OF SEIZED DOCUMENT ALLEGEDLY BELONGING TO HIM BUT PURELY ON ESTIMATE BASIS VIZ. RS.30,000/- ON ACCOUNT OF MARRIAGE EXPENSES AND RS.48,635/- ON ACCOUNT OF DIFFERENCE IN TOTALING IN ACCOUNTS. THUS, ITAT FOUND THAT THE PENALTY IS NOT LEVIABLE RIGHTLY UNDER SUCH CIRCUMSTANCES HOLDING THAT THE POINT OF INITIATION ITSELF HAD NO BASIS. BUT IN THE CASE ON HAND, I HAVE ELABORATED SUPRA THAT THE INITIATION AS WELL LEVY WAS STRONG LEGALLY AND FACTUALLY. 19. IN TOTO, I CONCLUDE UNDER THE CIRCUMSTANCES OF THE FACTS OF THE CASE OF PAGE 12 OF 20 IT(SS)A NO.39/BANG/2009 12 NEMICHAND, THE LEARNED ITAT WAS JUSTIFIED IN HOLDING THAT THERE IS NO CHARGE TO INITIATE AND LEVY THE PENALTY U/S 158BFA(2) OF I T ACT. I HAVE DISTINGUISHED THE FACTS OF THE CASE ON HAND AND HOLD THAT THERE EXISTED NOT ONLY CHARGE TO INITIATE BUT ALSO ABSOLUTE MATERIAL TO IMPOSE PENALTY U/S 158BFA(2) OF I T ACT. HENCE, THE GROUND OF APPEAL IS DISMISSED.' AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A), THE ASSE SSEE IS IN APPEAL BEFORE THE TRIBUNAL. 11. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED FIRSTLY THAT THE ASSESSING OFFICER HAS NO JURISDICTION AND SECONDLY, THE ORDER IS BARRED BY LIMITATION AND F OR THE ABOVE PROPOSITION, HE REITERATED THE SAME ARGUMENT ADVANCED BEFORE THE LEARNED FIRST APPELLATE AUTHORITY AND THE THIRDLY HE SUBMITTED THAT EVEN ASSUMING THE ABOVE TWO POINTS, EVEN IF DECIDED AGAINST THE ASSESSEE, U/S 158BFA(2) THERE C ANNOT BE ANY PENALTY BECAUSE THE SECTION DOES NOT CREATE ANY CH ARGE. BRIEFLY WITH REGARD TO JURISDICTION, HE SUBMITTED TH AT INTERVENING OFFICER HAVING NO JURISDICTION; THERE I S NO LIVEWIRE BETWEEN THE FIRST AND THE 3RD OFFICER WHO PASSED TH E PENALTY ORDER. SINCE THE SECOND OFFICER HAS NO JURISDICTIO N, SINCE HE IS BELOW THE RANK OF THE OFFICER WHO CAN PASS ORDER UN DER CHAPTER XIVB, THE THIRD OFFICER CANNOT TAKE CHARGE FROM THE SECOND OFFICER. WITH REGARD TO NEXT POINT, IT WAS SUBMITT ED THAT IN THIS CASE, THE ASSESSMENT ORDER WAS PASSED ON 30.12 .2003; PAGE 13 OF 20 IT(SS)A NO.39/BANG/2009 13 HENCE, THE PENALTY ORDER SHOULD HAVE BEEN COMPLETED BY 30.6.2004 WHEREAS IT WAS ACTUALLY PASSED ON 27.6.200 7. HE SUBMITTED THAT THE QUANTUM POINT WAS NEVER AGITATED IN APPEAL; ONLY THE INTEREST AND SURCHARGE WERE CHALLENGED. QU ANTUM WAS ACCEPTED. SECTION 158BFA(3)(C) STIPULATES NO ORDER IMPOSING A PENALTY UNDER SUB SECTION (2) SHALL BE MADE IN A CAS E WHERE THE ASSESSMENT IS THE SUBJECT MATTER OF AN APPEAL TO TH E COMMISSIONER (APPEALS) U/S 246 OR 246A OR AN APPEAL TO THE APPELLATE TRIBUNAL U/S 253. IN THIS CASE, ASSESSEE 'S REPRESENTATIVE SUBMITTED, ONLY INTEREST AND SURCHARG ES WERE CHALLENGED AND NOT THE 'ASSESSMENT' AS SUCH AND THE PENALTY ORDER WAS PASSED AFTER THE RECEIPT OF THE ORDER OF THE TRIBUNAL; HENCE, IT IS TIME BARRED. THE LEARNED RE PRESENTATIVE FOR THE ASSESSEE TOOK US THROUGH 143(3) AND SUBMITT ED THAT SECTION 143(3) SUBSTITUTED BY FINANCE ACT, 2002 SPEA KS OF 'ASSESSMENT'. HENCE, HE SUBMITTED, IN FACT THE ASS ESSMENT AND THE INTEREST AND SURCHARGE ETC. CANNOT BE TREATED E QUALLY AND IF ONLY INTEREST AND SURCHARGE CHALLENGED, THEN PENALTY PERIOD CANNOT GET EXCLUDED FOR THE SIMPLE REASON 'ASSESSME NT IS NOT UNDER CHALLENGE'. SO ONLY QUANTUM IS UNDER CHALLENG E, THE TIME EXTENSION IS AVAILABLE. IN SUPPORT OF THE ABOVE CO NTENTION, HE RELIED IPON THE DECISION OF THE HON'BLE RAJASTHAN H IGH COURT REPORTED IN 291 ITR 244. 12. ON MERIT, RELYING UPON THE DECISION OF THE HON 'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT, PA TIALA V PAGE 14 OF 20 IT(SS)A NO.39/BANG/2009 14 METAL PRODUCTS OF INDIA 150 ITR 714, IT WAS SUBMITT ED THAT PENALTY WILL NOT SURVIVE. WHILE FRAMING THE ASSESS MENT ORDER, ASSESSEE DECLARED RS.53,72,052/- AS UNDISCLOSED INC OME FOR THE BLOCK PERIOD. IN ADDITION TO THE ABOVE, ASSESSEE A LSO AGREED TO DECLARE AN INCOME OF RS.3 LAKHS REPRESENTING PROFIT EARNED DURING THE FINANCIAL YEAR, PUT TOGETHER WHICH COMES TO RS. 56,72,02/-. AS AGAINST THIS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE DECLARED ONLY RS.13 LAKHS. THE ASS ESSEE EXPLAINED BEFORE THE ASSESSING OFFICER PRODUCING PU RCHASE VOUCHERS OF SISTER CONCERNS FOR HAVING PURCHASED ST EEL SHEETS, S.S.COLD ROLLED SHEETS, S.S.STRIPS, PATTA, COIL AND SHEET ETC. THE POSITION. HE FILED THE DETAILS OF CLOSING STOC K IN WHICH THE SISTER CONCERN DECLARED RS.40.20 LAKHS. AFTER EXA MINING HIS CLAIM, THE ASSESSING OFFICER ACCEPTED IT PARTIALLY. IN OTHER WORDS, THE ASSESSEE'S REPRESENTATIVE SUBMITTED THAT THE ASSESSEE GAVE A COGENT EXPLANATION, WHICH WAS PARTI ALLY ACCEPTED BY THE ASSESSING OFFICER. THE MERE NON-ACC EPTANCE OF EXPLANATION DOES NOT LEAD TO AUTOMATIC IMPOSITIO N OF PENALTY. FOR THE ABOVE PROPOSITION, HE RELIED ON THE DECISIO N OF THE HON'BLE PUNJAB AND HARYANA HIGH COURT REPORTED IN 15 0 ITR 714 (SUPRA). 13. REPLYING TO THE ABOVE, THE LEARNED DR SUPPORTED THE ORDERS OF THE REVENUE AUTHORITIES AND SUBMITTED THAT ASSESSMENT INCLUDES INTEREST AND SURCHARGE ALSO. F OR THE ABOVE PROPOSITION, HE RELIED ON THE DECISION OF THE HON'B LE SUPREME PAGE 15 OF 20 IT(SS)A NO.39/BANG/2009 15 COURT IN THE CASE OF KALYANKUMAR RAY V CIT 191 ITR 63 4. IN THIS CASE, THE HON'BLE HIGH COURT HELD THAT THE ASS ESSMENT ORDER MEANS AND INCLUDES NOT ONLY ASSESSMENT OF THE TOTAL INCOME BUT ALSO DETERMINATION OF THE TAX PAYABLE. H E ALSO RELIED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CWT V DHANSUKHLAL J GAJJAR 237 ITR 534. IN THIS CASE, THE HON'BLE HIGH COURT HELD THAT THE WORDS 'SUMS PA YABLE' ARE OF WIDER AMPLITUDE THAN THE WORDS 'TAX PAYABLE'. TH EREFORE, THERE IS A GREATER REASON FOR THE ASSESSING OFFICER TO WORK OUT THE SUM PAYABLE PURSUANT TO THE ASSESSMENT OF THE WE ALTH MADE BY HIM. EVEN OTHERWISE, THE LEARNED DR SUBMITTED TH AT THESE ARE PROCEDURAL SECTIONS AND THE PENALTY ORDER WILL N OT NULLIFY AND FOR THE ABOVE PROPOSITION, HE RELIED ON THE DEC ISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF ASPINWALL & CO. LTD. V CIT 220 ITR 617. THE LEARNED DR FURTHER SUBMITTED THAT THE HON'BLE KERALA HIGH COURT AGAIN UPHELD THE PENALTY L EVIED U/S 158BFA(2) AS REPORTED IN 279 ITR 213. IN THIS CAS E, THE HON'BLE HIGH COURT HELD THAT SECTION 158BFA(2) IS I NTENDED TO PROVIDE AN EFFECTIVE DETERRENT AGAINST EVASION OF T AX AND TO PUT A STOP TO THAT PRACTICE. 14. IN REPLY, THE LEARNED AR REITERATED THE SUBMISSIONS MADE. HE FURTHER BROUGHT OUR ATTENTION TO CALCUTTA HIGH COURT DECISION REPORTED IN 139 ITR 79 3. IN THE CASE OF MOHENDRA J THACKAR AND CO. V CIT, WEST BENG AL, THE HON'BLE HIGH COURT HELD THAT THE WORD 'ASSESSMENT' MEANS NOT PAGE 16 OF 20 IT(SS)A NO.39/BANG/2009 16 MERELY THE COMPUTATION OF INCOME OF THE ASSESSEE BUT ALSO DETERMINATION OF TAX PAYABLE BY HIM. FOR THE PROPOSI TION THAT THE WORD 'ASSESSMENT' IS USED IN DIFFERENT CONTEXT IN DIFFERENT SECTIONS, HE ALSO RELIED ON THE DECISION REPORTED I N 6 ITR 414. 15. AFTER HEARING THE RIVAL SUBMISSION, WE ARE OF THE VIEW THAT THE APPEAL BY THE ASSESSEE ON THE TECHNICA L POINTS OF JURISDICTION IS TO BE DISMISSED. WE FIND CONSIDERA BLE FORCE AND REASONING WITH THE REVENUE AUTHORITIES. 16. THE FIRST OBJECTION OF THE ASSESSEE IS THAT, I N THE PROCESS OF MAKING THE ASSESSMENT, FILE WAS TRANSFER RED FROM THE FIRST OFFICER, WHO INITIATED THE PROCEEDINGS TO SECOND OFFICER ITI, WARD-2(2), BANGALORE. HE DID NOT ISSU E ANY FRESH PENALTY PROCEEDINGS NOR THERE WAS ANY INTIMATION REGA RDING THE CHANGE. U/S 158BG, THE BLOCK ASSESSMENT COULD BE P ASSED BY AN OFFICER, WHO IS NOT BELOW THE RANK OF ACIT AND U/S 158BFA(3), THE LEVY OF PENALTY CAN BE MADE ONLY BY AN OFFICER, AGA IN NOT BELOW THE RANK OF ACIT OR DCIT. IN THE INSTANT CAS E, THE SECOND OFFICER TO WHOM THE FILE WAS TRANSFERRED WAS BELOW THE RANK AND THEREFORE, THE ENTIRE PROCEEDINGS ARE NULL AND VOID. FURTHER, U/S 129 THE SUCCEEDING AUTHORITY CONTINUES THE PROCEEDINGS FROM THE STAGE WHERE IT WAS LEFT BY THE PREDECESSOR. SINCE THE SECOND OFFICER HAD NOT TAKE N UP ANYTHING, THERE WAS NO CONTINUITY AND THEREFORE THE T HIRD OFFICER DOES NOT GET JURISDICTION AS FROM WHOM HE T AKES HIMSELF PAGE 17 OF 20 IT(SS)A NO.39/BANG/2009 17 WAS WITHOUT JURISDICTION. WE ARE UNABLE TO AGREE W ITH THE PROPOSITION. EVEN ACCORDING TO THE ASSESSEE, SECON D OFFICER HAS NOT TAKEN ANY STEPS EXCEPT ISSUING TWO NOTICES/LETTE RS. IT IS ACTUALLY THE FIRST AND THIRD OFFICER, WHO COMPLETED THE PROCEEDINGS. IT IS NOT DISPUTED THAT BOTH OF THEM HAD RESTRICTIONS. IF AN OFFICER WHO IS INCAPABLE OF DI SCHARGING HIS FUNCTION BECAUSE THE LAW DOES NOT PERMIT TO DISCHAR GE THE DUTY AND IF SUCH OFFICER PASSES AN ORDER, THE ORDER IS N ULL AND VOID. IN THE INSTANT CASE, INTERMEDIARY OFFICER WAS HAVING NO JURISDICTION. IF HE HAD TAKEN ANY STEP AND PASS THE ORDER, THIS PROCEEDING WOULD HAVE BEEN IN NULLITY. AN ORDER WIT HOUT SANCTION OF LAW NEVER EXISTS. ONLY THE THIRD OFFICE R COULD ASSUME JURISDICTION. AS SUCH, THIS PLEA OF THE ASSE SSEE IS WITHOUT ANY MERIT AND IS DISMISSED. 17. COMING TO THE SECOND POINT, ACCORDING TO THE ASSESSEE, THE PENALTY ORDER IS TIME BARRED. AGAIN, WE ARE UNABLE TO SUBSCRIBE THIS VIEW. THE SUBMISSION OF T HE LEARNED AR IS THAT IN THE INSTANT CASE, PROVISO TO SECTION 275(1)(A) APPLIES AND THEREFORE, PENALTY WOULD HAVE BEEN LEVIE D, BEFORE THE EXPIRY OF THE FINANCIAL YEAR IN WHICH THE PROCEED INGS, IN THE COURSE OF WHICH ACTION FOR THE IMPOSITION OF PENALT Y HAS BEEN INITIATED, ARE COMPLETED, OR WITHIN ONE YEAR FROM TH E END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE CIT(A) IS R ECEIVED BY THE CCIT, WHICHEVER IS LATER, IS UNACCEPTABLE. IN THIS CASE, NOT ONLY THE CIT(A) PASSED THE ORDER BUT THERE WAS FURTH ER APPEAL. PAGE 18 OF 20 IT(SS)A NO.39/BANG/2009 18 PROVISO DOES NOT DEAL WITH FURTHER APPEAL BEFORE TH E TRIBUNAL. ONLY SECTION 275(1)(A) DEALS TALKS OF TIME IN CASE W HERE THE APPEAL IS PREFERRED BEFORE THE TRIBUNAL. IF AN APP EAL IS PREFERRED BEFORE THE TRIBUNAL, THEN ACCORDING TO SE CTION 271(1)(A), THE ORDER IS TO BE COMPLETED AFTER THE E XPIRY OF FINANCIAL YEAR IN WHICH THE PROCEEDINGS, IN THE COUR SE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED, ARE COMPLETED OR 6 MONTHS FROM THE END OF THE MONTH OR SIX MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) OR AS THE CASE MAY BE, THE AP PELLATE TRIBUNAL IS RECEIVED BY THE CCIT OR COMMISSIONER , WHICHEVER PERIOD EXPIRES LATER. THEREFORE, THE STAND OF THE ASSESSEE THAT PROVISO APPLIES AND NOT SECTION (1)(A) IS UNAC CEPTABLE. 18. THE THIRD OBJECTION OF THE ASSESSEE IS THAT TH E PENALTY IS BAD IN LAW BECAUSE SECTION 158BFA(2) DOES NOT CREATE A CHARGE FOR PENALTY. THIS OBJECTION IS ALSO UNACCE PTABLE. FOR THE ABOVE PROPOSITION, HE RELIED UPON THE DECISION OF THE TRIBUNAL IN IT(SS)A NO.21/BANG/2001 IN THE CASE OF NEMICHAND V ACIT. THIS PROPOSITION OF THE LEARNED AR IS ALSO WITHOUT ANY MERIT. THE DECISION RELIED BY THE LEARNED AR REPORT ED IN 291 ITR 244 IN THE CASE OF CIT V HISARIA BROTHERS (RAJ. ) ARE QUITE DISTINGUISHABLE ON THE FACTS. IN THAT CASE, THE HO N'BLE HIGH COURT WAS DEALING WITH FUNCTIONS OF SECTION 269SS A ND ON FACTS, THE HON'BLE HIGH COURT HELD THAT PENALTY CANNOT BE I MPOSED U/S 271D. THIS DECISION HAS NO APPLICABILITY IN THE INS TANT CASE OF PAGE 19 OF 20 IT(SS)A NO.39/BANG/2009 19 THE ASSESSEE. COMING TO NEMICHAND, WE ARE OF THE V IEW THAT THE ABOVE DECISION ALSO CANNOT BE APPLIED FOR THE S IMPLE REASON THAT THE DECISION OF THE HON'BLE KERALA HIGH COURT IN THE CASE OF P P UMMERKUTTY V CIT 279 ITR 213 WAS NOT BEFORE T HE BENCH. THE LEARNED AR TRIED TO MAKE THE DISTINCTIO N SAYING THAT THE ISSUE BEFORE THE HIGH COURT WAS THE CONSTI TUTIONAL VALIDITY U/S 158BFA(2). FOR THIS PLEA, THIS ISSUE I S ALSO REJECTED. 19. HOWEVER, WE FIND, ON MERIT, THE APPEAL BY THE ASSESSEE IS TO BE ALLOWED. ASSESSEE HAD GIVEN PLAU SIBLE EXPLANATION BY PRODUCING EVIDENCES IN THE FORM OF VO UCHERS OF SISTER CONCERN FOR HAVING PURCHASED STEEL SHEETS, S S COLD ROLLED SHEETS, S S STRIPS, PATTA, COIL AND SHEET ET C. ALSO ASSESSEE FILED DETAILS OF CLOSING STOCK IN WHICH TH E SISTER CONCERN DECLARED RS.40.20 LAKHS. AFTER EXAMINING T HE POINT, THE ASSESSING OFFICER ACCEPTED PARTIALLY. IT MEANS, THE ASSESSEE'S EXPLANATION WAS BONAFIDE. MERE REJECTIO N OF THE EXPLANATION, WHICH WAS ACCEPTED BY THE ASSESSING OFF ICER PARTIALLY DOES NOT IPSO-FACTO LEADS TO THE CONCLUSIO N THAT ASSESSEE'S EXPLANATION WAS NEITHER BONAFIDE NOR A P LAUSIBLE EXPLANATION. ON THE ABOVE FACTS, WE ALLOW THE APPE AL OF THE ASSESSEE ON MERITS. ON JURISDICTIONAL POINT, ALL THE THREE POINTS CANVASSED BY THE LEARNED AR IS WITHOUT MERIT. PAGE 20 OF 20 IT(SS)A NO.39/BANG/2009 20 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 10TH FEBRUARY, 2010. SD/- SD/- (A MOHAN ALANKAMONY) (K P T THANGAL) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DTD.10/2/2010 COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CIT( A) CONCERNED.4. THE CIT CONCERNED. 5. THE DR 6. GUAR D FILE. 7. GF, ITAT, NEW DELHI. MSP/8.2. BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.