M/s. Bajwa Rubber Industries, Agra v. DCIT, Agra

ITA 1/AGR/2010 | 2006-2007
Pronouncement Date: 27-08-2010 | Result: Dismissed

Appeal Details

RSA Number 120314 RSA 2010
Assessee PAN AAAFB9621Q
Bench Agra
Appeal Number ITA 1/AGR/2010
Duration Of Justice 7 month(s) 26 day(s)
Appellant M/s. Bajwa Rubber Industries, Agra
Respondent DCIT, Agra
Appeal Type Income Tax Appeal
Pronouncement Date 27-08-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 27-08-2010
Date Of Final Hearing 21-07-2010
Next Hearing Date 21-07-2010
Assessment Year 2006-2007
Appeal Filed On 01-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH AGRA BEFORE SHRI R.K. GUPTA JUDICIAL MEMBER AND SHRI P.K. BANSAL ACCOUNTANT MEMBER ITA NOS. 01/AGR/2010 & 478/AGR/2009 ASST. YEAR: 2006-07 M/S. BAJWA RUBBER INDUSTRIES VS. D.C.I.T. - 1 AGRA. 12/67 RUI KI MANDI SHAHGANJ AGRA. (PAN : AAAFB 9621 Q). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL VERMA ADVOCATE RESPONDENT BY : SHRI VINOD KUMAR JR. D.R. ORDER PER P.K. BANSAL A.M.: THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE A GAINST THE ORDERS OF THE CIT(A) DATED 30.04.2009 AND 29.10.2009 RESPECTIVELY. 2. SINCE THESE APPEALS RELATE TO THE SAME ASSESSEE THEREFORE THE SAME ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.01/AGR/2010 3. THIS APPEAL WAS FILED LATE BY 179 DAYS. THE ASS ESSEE FILED APPLICATION FOR CONDONATION OF DELAY ALONG WITH AFFIDAVIT POINTING OUT THEREIN THA T THE ASSESSEES COUNSEL SHRI J.L. VERMA WHO LOOKED OVER APPELLATE WORK HAD UNDERGONE BYE PASS S URGERY ON 23.01.2009 IN BATRA HOSPITAL 2 NEW DELHI AND THEREAFTER HIS LEFT LEG WAS FRACTURED DUE TO WHICH HE HAD UNDERGONE ORTHOPEDIC OPERATION AND SINCE THEN HE IS UNABLE TO WALK AND T O CARRY ON PROFESSIONAL ACTIVITIES. THIS CAUSED THE DELAY IN FILING OF THE APPEAL BY THE ASSESSEE. 4. THE LD. D.R. OBJECTED TO THE CONDONATION OF THE DELAY. WE ADMIT THE DELAY AS IN OUR OPINION THE ASSESSEE WAS PREVENTED BY SUFFICIENT C AUSE TO FILE THE APPEAL. 5. IN THIS APPEAL THE ASSESSEE HAS TAKEN THE FOLLOW ING GROUNDS OF APPEAL :- 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) I HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS WITHOUT PROPERLY APPRECIATING THAT THERE ARE NO INGREDIENTS WARRANTI NG REJECTION OF BOOKS OF ACCOUNTS. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) I HAS ERRED IN LAW AND ON FACTS IN APPLYING HIGHER RATE OF NET PROFIT WITHOUT PROPERLY APPRECIATING THAT EVEN IN SUCH A SITUATION THE ASSESSEE IS LEGAL LY ENTITLED TO DEDUCTION OF DEPRECIATION AND INTEREST AS CLAIMED BY HIM WHICH H AS BEEN INADVERTENTLY OMITTED TO BE CLAIMED. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND ON FACTS IN REDUCING THE RETURNED LOSS OF RS.27 51 530/- TO LOSS OF RS.11 58 637/- WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMS TANCES OF THE CASE BY APPLYING HIGHER NET RATE OF PROFIT AT 3.3% WHEREAS AVERAGE R ATE OF NET PROFIT AS APPLIED BY THE LD. AO HIMSELF IS 3%. 6. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SUBMITTED RETURN OF INCOME ON 30.10.2006 DISCLOSING A LOSS OF RS.27 51 530/-. THERE WAS SUR VEY AT THE PREMISES OF THE ASSESSEE ON 20.08.2006. IN THE COURSE OF SURVEY CERTAIN PAPER S WERE FOUND AND IMPOUNDED SHOWING UNRECORDED TRANSACTION OF SALES AS PER PAGE 11 AND REVERSE THEREOF OF ANNEXURE 1 (TOTAL PAGES 1 TO 48). THE TOTAL UNDISCLOSED PURCHASES WAS WORKED OUT AT RS.37 03 249/- AND TOTAL UNDISCLOSED 3 EXPENSES WERE WORKED OUT AT RS.2 93 799/-. ON THE BASIS OF DEDUCTION OF UNRECORDED SALES PURCHASE AND EXPENSES THE A.O. REJECTED THE BOOKS OF ACCOUNTS AND APPLIED A NET PROFIT RATE @ 3.3% AND ASSESSED THE INCOME AT RS.5 81 461/- AGAIN ST THE RETURNED LOSS OF RS.27 51 530/-. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) BEFORE THE CIT(A) IN THE RECASTED TRADING ACCOUNT THE LOSS WAS WORKED AT RS.8 64 838/-. WHE N OPPORTUNITY WAS GIVEN TO THE ASSESSEE HE STATED THAT HE HAD NO OBJECTION TO THE ASSESSED INC OME OF RS.5 81 461/- SUBSTITUTED BY A LOSS OF RS.8 64 838/- BUT ON THE DATE OF HEARING THE LD. A. R. OF THE ASSESSEE POINTED OUT TO THE CIT(A) THAT AS PER THE PAPERS IMPOUNDED DURING THE SURVEY THE TOTAL LOSS WAS WORKED OUT AT RS.11 58 637/- DUE TO NON-CONSIDERATION OF THE UNRE CORDED EXPENSE AT RS.2 93 799/-. SO FAR THE GROUND NO.1 IS CONCERNED AFTER HEARING THE RIVAL S UBMISSIONS WE NOTED THAT THERE HAD BEEN SURVEY IN THE CASE OF THE ASSESSEE AND UNRECORDED S ALES PURCHASES AND EXPENSES WERE FOUND DURING THE COURSE OF SURVEY. THIS CLEARLY PROVES T HAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE WERE NOT CORRECT. THEREFORE UNDER THESE CIRCUMSTANCES IN OUR OPINION THE CIT(A) HAS RIGHTLY UPHELD THE REJECTION OF BOOKS OF ACCOUNTS B Y THE A.O. IN OUR OPINION IT IS NOT A FIT CASE WHICH WARRANTS OUR INTERFERENCE. WE ACCORDINGLY DISMISS GROUND NO.1 TAKEN BY THE ASSESSEE. 7. SO FAR GROUND NO.2 TAKEN BY THE ASSESSEE IS CONC ERNED WE NOTED THAT THE CLAIM OF THE ASSESSEE IN RESPECT OF DEPRECIATION AND INTEREST IS NOT CORRECT. THE ASSESSEE NO DOUBT HAS SUBMITTED THE PROFIT AND LOSS ACCOUNT BEFORE THE CI T(A) SHOWING A LOSS OF RS.62 82 758/-. THIS P&L ACCOUNT WAS RECASTED AND SUBMITTED BY THE LD. A .R. OF THE ASSESSEE AFTER INCORPORATING THE UNRECORDED SALES PURCHASES AND EXPENSES AND AFTER INCORPORATING THESE ITEMS WE NOTED THE LOSS WAS WORKED OUT TO RS.11 58 637/- AND IN THE ORIGINA L P&L ACCOUNT AS WELL AS THE RECASTED P&L ACCOUNT WE NOTED THE ASSESSEE HAS CLAIMED THE FIN AL EXPENSES AT RS.16 00 890/- AND THE 4 DEPRECIATION AT RS.35 15 536/- WHICH HAS BEEN DULY ALLOWED. THUS IN OUR OPINION THE GROUND TAKEN BY THE ASSESSEE THAT THE CIT(A) HAS CONFIRMED THE HIGHER RATE OF NET PROFIT (NP) WITHOUT APPRECIATING THAT THE ASSESSEE IS ENTITLED TO DEDUC TION OF DEPRECATION AND INTEREST IS NOT CORRECT. THE DETAILS OF ORIGINAL P&L ACCOUNT AND THE RECASTE D P&L ACCOUNT ARE AVAILABLE AT PAGE 4 OF THE ORDER OF THE CIT(A). IN THESE FACTS AND CIRCUMSTAN CES OF THE CASE WE ARE OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THIS REGARD IN THE OR DER OF THE CIT(A). THUS GROUND NO.2 TAKEN BY THE ASSESSEE STANDS DISMISSED. 8. GROUND NO.3 RELATES TO THE REDUCTION OF THE RETU RNED LOSS FROM RS.27 51 530/- TO RS.11 58 637/- BY THE CIT(A). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. WE NOTED THAT THE CIT(A) HAD DETERMINED THE NET LOSS AT RS.11 58 637/- ONLY AFTER INCORPORATING THE UNRECORDED SALES PURCHASES AND EXPENSES FOUND DURING THE COUR SE OF SURVEY WHICH FACT HAS NOT BEEN DENIED BY THE LD. A.R. BEFORE US. THE ASSESSEE HIMSELF HA S SUBMITTED THE REVISED TRADING AND P&L ACCOUNT BEFORE THE CIT(A) AFTER INCORPORATING ALL T HE RECORDED AND UNRECORDED TRANSACTIONS AND THE LOSS WAS DETERMINED AT RS.11 58 637/-. IT IS N OT A CASE WHERE NET PROFIT HAS BEEN DETERMINED @ 3.3% IN THE RECASTED PROFIT AND LOSS ACCOUNT. TH E NET LOSS HAS BEEN WORKED OUT AT RS.11 58 637/- WHICH WAS DULY ACCEPTED BY THE CIT(A ). THEREFORE THERE REMAINS NO QUESTION OF APPLYING THE N.P. RATE BY THE A.O. THIS GROUND ALS O IN OUR OPINION HAS BECOME INFRUCTUOUS AND THE SAME STANDS DISMISSED AS SUCH. 10. IN THE RESULT ITA NO.01/AGR/2010 FIELD BY THE ASSESSEE STANDS DISMISSED. 5 ITA NO.478/AGR/2009 11. THIS APPEAL HAS BEEN FIELD BY THE ASSESSEE AGAI NST THE ORDER OF THE CIT(A) DATED 29.10.2009 BY WHICH THE CIT(A) IMPOSED PENALTY ON T HE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 (THE ACT HEREINAFTER) AMOUN TING TO RS.15 37 236/-. 12. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE HAS SUBMITTED THE RETURN SHOWING A LOSS OF RS.27 51 530/- ON ESTIMATE BASIS ON 30.10.2006 IN T HE ABSENCE OF RETURN OF BOOKS IMPOUNDED BY THE REVENUE ON 23.08.2006. ACCORDING TO THE ASSESS EE THERE WAS A LOSS. THE RETURN WAS TO BE FILED BY THE DUE DATE. THE BOOKS WERE RETURNED TO THE ASSESSEE ONLY ON 25.05.2007. THERE HAD BEEN SURVEY IN THE CASE OF THE ASSESSEE UNDER SECTI ON 133A OF THE ACT ON 20.08.2006. ON THE RECEIPT OF THE IMPOUNDED DOCUMENTS AND DURING THE A SSESSMENT PROCEEDINGS THE ASSESSEE HAD WORKED OUT UNRECORDED SALES UNRECORDED PURCHASES A ND UNRECORDED EXPENSES IN THE FORM OF CHART WHICH WAS FURNISHED BEFORE THE A.O. ON THE CONDITIO N THAT NO PENALTY WILL BE LEVIED AS THE ASSESSEE HIMSELF HAS SURRENDERED RS.1 CRORE DURING THE COURSE OF SURVEY ON BEHALF OF THE ASSESSEE FIRM AND SISTER CONCERN AS WELL AS INDIVIDUAL/PARTN ERS. THE A.O. EVEN THOUGH COMPLETED THE ASSESSMENT ON 29.03.2008 UNDER SECTION 143(3) ESTIM ATING THE N.P. @ 3.3% AT RS.5 81 461/- ON ESTIMATED SALES AT RS.1 76 20 000/-. NOTICE UNDER SECT IN 271(1)(C) WAS ALSO ISSUED ON THE SAME DATE. SUBSEQUENTLY THE A.O. DROPPED THE PENALTY P ROCEEDINGS UNDER SECTION 271(1)(C) VIDE ORDER DATED 04.06.2008. WHEN THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) THE CIT(A) REDUCED THE INCOME ASSESSED BY THE A.O. TO A LOSS OF RS.11 58 6 37/- ACCEPTING THE BASIS OF THE COMPUTATION PROVIDED BY THE ASSESSEE BUT INITIATED PENALTY PROC EEDINGS UNDER SECTION 271(1)(C) DATED 06.05.2009 MENTIONING THAT IT APPEARS TO HIM THAT T HE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THE APPEAL WAS DECIDED BY THE CIT(A) 6 VIDE ORDER DATED 30.04.2009. SUBSEQUENTLY AFTER C ONSIDERING THE REPLY OF THE ASSESSEE DATED 26.05.2009 THE CIT(A) IMPOSED PENALTY VIDE ORDER D ATED 29.10.2009 HOLDING THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OF RS.51 24 121 /- AND ALSO FURNISHED INACCURATE PARTICULARS THEREOF AS ENVISAGED UNDER SECTION 271(1)(C). THE PENALTY OF RS.15 37 236/- BEING 100% TAX OUGHT TO BE EVADED WAS IMPOSED. 13. THE LD. A.R. CONTENDED THAT THE ASSESSEE SUBMIT TED THE RETURN SHOWING LOSS OF RS.27 51 530/- ON ESTIMATE BASIS IN ABSENCE OF RETU RN OF BOOKS SEIZED ON 23.08.2006 INSPITE OF REPEATED REQUESTS FOR RETURN OF BOOKS AND PHOTOCOPI ES OF THE DOCUMENTS THE BOOKS WERE RETURNED ON 25.05.2007. DURING THE COURSE OF SURVEY FOR THE A.Y. 2006-07 AND 2007-08 RS.1 CRORE IN RESPECT OF DIFFERENT UNITS INCLUDING THAT OF THE AS SESSEE WAS SURRENDERED. IT IS ONLY ON 25.05.2007 THE BOOKS OF ACCOUNTS AND PAPERS IMPOUNDED DURING T HE COURSE OF SURVEY WERE RELEASED. THE ORDER UNDER SECTION 143(3) WAS PASSED BY THE A.O. A DOPTING N.P. RATE OF 3.3% ON THE ESTIMATED SALE OF RS.1 76 20 000/-. THE A.O. EVEN THOUGH INI TIATED THE PROCEEDINGS UNDER SECTION 271(1)(C) DROPPED THE PENALTY PROCEEDINGS VIDE ORD ER DATED 04.06.2008. THE CIT(A) REDUCED THE INCOME ASSESSED BY THE A.O. AT A LOSS OF RS.11 58 637/- VIDE ORDER DATED 30.04.2009. THE NOTICE UNDER SECTION 271(1)(C) DATED 06.05.2009 WAS ISSUED BY THE CIT(A) ON 06.05.2009 WHEREAS THE APPEAL WAS DECIDED ON 30.04.2009. THE NOTICE SO ISSUED MUCH AFTER THE CLOSE OF THE APPELLATE PROCEEDINGS IS ILLEGAL WITHOUT ANY JURISD ICTION. FROM THE COPY OF THE NOTICE IT WAS ALSO POINTED OUT THAT NO SPECIFIC CHARGE HAS BEEN FRAMED BY THE CIT(A) WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME. THE CIT(A) HAS WORKED OUT THE LOSS OF RS.11 58 637/- WI TH THE SAME FIGURE BUT IN DIFFERENT MANNER ON THE BASIS OF WHICH THE A.O. HAS ALREADY DROPPED THE PROCEEDINGS. THE FIGURES ON THE BASIS OF 7 WHICH INCOME IS DETERMINED EITHER BY THE CIT(A) OR BY THE A.O. BASED ON INFORMATION AND CHART SUPPLIED BY THE ASSESSEE NO OTHER ADDITION HAS BEE N MADE BY THE A.O. OR BY THE CIT(A) EXCEPT THE FIGURES SUPPLIED BY THE ASSESSEE. THE EXPLANAT ION AND THE REPLY FILED BY THE ASSESSEE WERE NOT FOUND FALSE OR UNTRUE. THE ASSESSEE HAS NEITHER FU RNISHED INACCURATE PARTICULARS NOR HAS CONCEALED THE INCOME. THE A.O. HAS ALREADY CONSIDE RED ALL THE FACTS AND DROPPED THE PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) ON TH E SAME FACTS. THE CIT(A) CANNOT RE-INITIATE THE PENALTY PROCEEDINGS ON THE SAME FACTS. REFERRI NG TO THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) IT WAS POINTED OUT THAT THE PENALTY UNDE R SECTION 271(1)(C) HAS BEEN IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME I.E. FOR THE TWIN DEFAULT. PENALTY FOR THE TWIN DEFAULT IS ILLEGAL AS PER THE ORDER OF THE I.T.A.T. DELHI BENCH IN THE CASE OF SMT. RAJ RANI MITTAL VS. ITO I N ITA NO.2275/DEL/2009 ITO VS. SMT. LALITA IN ITA NO.433/AGR/2009 OF ITAT AGRA BENCH KUM. RU CHI RATHORE VS. ITO IN ITA NO.97/AGR/2007 OF ITAT AGRA BENCH AND ACIT VS. DR. S.D. MAURYA IN ITA NO.619/AGR/2008 OF ITAT AGRA BENCH TO WHICH ACCOUNTANT MEMBER IS T HE AUTHOR. RELIANCE WAS ALSO PLACED ON THE ORDER OF THE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. VS. CIT 282 ITR 642.(GUJ.). RELIANCE WAS ALSO PLACED ON THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SURESH CHAND MITTAL 251 ITR 9 (SC) AFFIRMING THE M.P. HIGH COURTS DECISION REPORTED IN 123 TAXMAN 1052 (M.P.). RELIANCE WAS A LSO PLACED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. V.S.K. ADI CHETTY SURAVEL CHETTY 254 ITR 633 (MAD.) IN WHICH IT WAS HELD THAT THE ORDER DROPPING THE PENAL TY PROCEEDINGS HAVING BEEN ALLOWED TO BECOME FINAL IT WAS NOT OPEN TO THE OTHER OFFICERS WHO DEALT WITH THE FILES SUBSEQUENTLY TO INITIATE PENALTY PROCEEDINGS FOR THE SAME VERY A.Y. THUS I T WAS CONTENDED THAT THE PENALTY IMPOSED BY THE CIT(A) MUST BE DELETED. 8 14. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF THE CIT(A) AND CONTENDED THAT THE PENALTY WAS DROPPED BY THE A.O. BUT IT WAS LEVIED B Y THE CIT(A) WHEN HE CAME TO KNOW DURING THE COURSE OF PROCEEDINGS BEFORE HIM THAT THE ASSES SEE HAS CONCEALED PARTICULARS OF INCOME AND FILED INACCURATE PARTICULARS OF INCOME. 15. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE ORDER OF THE TAX AUTHORITI ES BELOW. WE HAVE ALSO GONE THROUGH THE CASE LAWS AS CITED BEFORE US. SECTION 271(1)(C) LA YS DOWN AS UNDER :- 271.(1) IF THE ASSESSING OFFICER OR THE COMMISSION ER (APPEALS) [OR THE COMMISSIONER] IN THE COURSE OF ANY PROCEEDINGS UNDE R THIS ACT IS SATISFIED THAT ANY PERSON - (A) .. (B) .. (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME OR (D) .. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY - EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT - (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEA LS) OR THE COMMISSIONER TO BE FALSE OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND [FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THA T ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM] THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL FOR THE PURPOSES OF CLAUSE (C ) OF THIS SUB-SECTION BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULAR S HAVE BEEN CONCEALED. 16. ON A PERUSAL OF SECTION 271(1)(C) WE NOTED THA T THE SATISFACTION BY THE A.O. OR THE COMMISSIONER (APPEALS) OR THE COMMISSIONER TO THE F ACT THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS OF SUCH INCOME MUST BE ARRIVED AT IN THE COURSE OF ANY PROCEEDINGS UNDER THE INCOME-TAX ACT. SUCH SATISFACTION IS THE CONDITION 9 PRECEDENT FOR THE LEVY OF PENALTY. THIS VIEW WAS T AKEN BY THE APEX COURT LONG BACK IN THE CASE OF CIT VS. ANGITI CHETTIAR 44 ITR 739 WHILE CONSTI TUTING THE SIMILAR PROVISIONS OF SECTION 28(1)(C) OF THE I.T. ACT AND REITERATED IN THE CASE OF D.M. MANASVI VS. CIT 86 ITR 557 (SC) WHILE CONSTITUTING THE PROVISIONS OF SECTION 271(1) (C). THE FULL BENCH OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. MOHINDER LAL 168 ITR 101 (P&H) HELD THAT IT IS THE SATISFACTION OF THE I.T.O. IN THE CASE OF ASSESSMEN T PROCEEDINGS REGARDING CONCEALMENT OF THE INCOME WHICH CONSTITUTES THE BASIS AND FOUNDATION O F THE PROCEEDINGS FOR LEVY OF PENALTY. A QUESTION HAS ARISEN SUBSEQUENTLY WHETHER SUCH A SAT ISFACTION MUST BE RECORDED IN THE ASSESSMENT ORDER. DIVERGENT VIEWS HAVE BEEN EXPRESSED BY THE HIGH COURTS. IT HAS BEEN HELD BY THE DELHI HIGH COURT P&H HIGH COURT MUMBAI HIGH COURT THAT RECORDING OF SATISFACTION BY THE A.O. IN THE ASSESSMENT ORDER IS SINE QUA NON FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 2 71(1)(C). MERE OBSERVATION PENALTY PROCEEDINGS ARE BEING INI TIATED SEPARATELY IS NOT ENOUGH. HONBLE SUPREME COURT IN THE CASE OF CIT VS. FRONTLINE SOLU TION LIMITED 325 ITR (ST.) 12 DISMISSED THE DEPARTMENTS SLP AGAINST THE JUDGEMENT DATED 23.01. 2008 OF DELHI HIGH COURT WHEREBY THE HIGH COURT DISMISSED THE DEPARTMENTS APPEAL WITH C OST HOLDING THAT EVEN THOUGH THE LAW HAD BEEN SETTLED BY THE DELHI HIGH COURT IN THE CASE OF DIWAN ENTERPRISES VS. CIT 246 ITR 571 (DELHI) AND IN THE CASE OF CIT VS. B.R. SHARMA 275 ITR 303 (DELHI) WHILE ALLAHABAD HIGH COURT IN THE CASE OF SHYAM BIRI WORKS PVT. LTD. VS. CIT 259 ITR 625 (ALL.) AND NAINU MAL HET CHAND VS. CIT 294 ITR 185 (ALL.) AS WELL AS CALCUT TA HIGH COURT IN THE CASE OF BECKER GRAY & CO. (1930) LTD. VS. ITO 112 ITR 503 (CAL.) HAS TAK EN CONTRARY VIEW THAT RECORDING OF SATISFACTION IN THE ORDER IS NOT NECESSARY. ALL HI GH COURTS HAVE TAKEN THE VIEW THAT SATISFACTION MUST BE ARRIVED AT IN THE COURSE OF PROCEEDINGS UND ER THE ACT. WE NOTED FROM THE COPY OF THE NOTICE FILED BY THE ASSESSEE BEFORE US WHICH IS AVA ILABLE AT PAGE 38 OF THE PAPER BOOK THAT THE 10 PENALTY PROCEEDINGS HAS BEEN INITIATED BY THE CIT(A ) VIDE NOTICE DATED 06.05.2009. THIS PROVES THAT THE SATISFACTION THAT THE ASSESSEE HAS CONCEAL ED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HAS NOT BEEN ARRIVED AT BY THE CIT(A) DURING THE COURSE OF PROCEEDINGS BEFORE HIM BUT ONLY ON 06.05.2009 THE C IT(A) DISPOSED OF THE APPEAL OF THE ASSESSEE ON 30.04.2009. IN OUR OPINION THE CIT(A) WAS BOUND TO INITIATE THE PENALTY PROCEEDINGS IF HE WAS SATISFIED THAT THE ASSESSEE H AS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME UP T O 30.04.2009. THE NOTICE ISSUED ON 06.05.2009 IN OUR OPINION DO NOT SATISFY THE COND ITION PRECEDENT THAT THE SATISFACTION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME DURING THE COURSE OF PROCEEDINGS BEFORE HIM. ISSUING NOTICE M UCH AFTER PASSING OF THE ORDER DATED 30.04.2009 IN OUR OPINION IS WITHOUT JURISDICTION . AS ON 06.05.2009 NO PROCEEDINGS WERE PENDING BEFORE THE CIT(A). IT IS NOT THE CASE OF T HE DEPARTMENT THAT THE NOTICE WAS ISSUED DURING THE COURSE OF APPELLATE PROCEEDINGS BUT IT WAS SERV ED ON THE ASSESSEE SUBSEQUENTLY. COPY OF NOTICE WHICH IS AVAILABLE AT PAGE 38 OF THE PAPER B OOK CLEARLY DEPICTS THAT THE NOTICE HAS BEEN ISSUED ON 06.05.2009 I.E. AFTER THE CIT(A) HAS PASS ED THE ORDER DISPOSING OF THE APPEAL OF THE ASSESSEE. NOTICE DATED 06.05.2009 PROVES THAT THE SATISFACTION FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME HAS NOT BEEN ARRIVED AT BY THE CIT(A) IN THE COURSE OF PROCEEDINGS PENDING BEFORE HIM. ON THAT BASIS I TSELF WE CANCEL THE ORDER PASSED BY THE CIT(A). WE ACCORDINGLY QUASH THE PENALTY ORDER DAT ED 29.10.2009. 17. SINCE THE ASSESSEE HAS VEHEMENTLY ARGUED ON THE OTHER PLEA ALSO WE ARE BOUND TO DISPOSE OF OTHER PLEAS TAKEN BY THE ASSESSEE. WE NOTED FRO M THE NOTICE DATED 06.05.2009 THAT THE PENALTY HAS BEEN INITIATED BY THE CIT(A) FOR THE TWIN DEFAU LTS WITHOUT MENTIONING IN THE NOTICE FOR WHICH 11 PARTICULAR DEFECT THE PENALTY HAS BEEN INITIATED. AS PER PROVISIONS OF SECTION 271(1)(C) PENALTY PROCEEDINGS CAN BE INITIATED ON TWO CHARGES I.E.(1) FOR CONCEALMENT OF PARTICULARS OF INCOME AND (2) FOR FURNISHING OF INACCURATE PARTICULARS OF INC OME. IF THE PENALTY PROCEEDINGS ARE INITIATED ON THE CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME THEN PENALTY CANNOT BE LEVIED ON THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME A ND VISE VERSA. THIS WAS SO HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. LAKHDIR L ALJI 85 ITR 77 (GUJ.). IN VIEW OF PROVISIONS OF SECTION 271(1)(C) WE ARE OF THE VIEW THAT THERE MUST BE CLEAR FINDING ABOUT THE CHARGE OF THE PENALTY. IT IS INCUMBENT ON THE A.O. OR THE OFFICE R IMPOSING THE PENALTY TO SATE WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICU LARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF SUCH A FI NDING AN ORDER PASSED BY THE CONCERNED AUTHORITY IMPOSING PENALTY UNDER SECTION 271(1)(C) WILL BE VOID. THIS VIEW HAS BEEN TAKEN IN THE FOLLOWING CASE BY THE HIGH COURTS :- 1) CIT VS. MANU ENGINEERING WORKS 122 ITR 306 (GUJ ) 2) NEW SORATHIA ENGINEERING CO. VS. CIT 282 ITR 64 2 (GUJ) 3) PADMA RAM BHARALI VS. CIT 110 ITR 54 (GAUHATI) 18. IN THIS CASE WE NOTED THAT THE CIT(A) HAS NOT B ROUGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT. HE HAS NOT POINTED OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THIS I S APPARENTLY CLEAR FROM THE FINDING OF THE CIT(A) IN THE PENALTY ORDER WHICH IS REPRODUCED HER EUNDER :- THUS CLEARLY THE APPELLANT HAS CONCEALED PARTICUL ARS OF INCOME OF RS.51 24 121/- [RS.62 82 758/- (-) RS.11 58 637/-] AND ALSO FURNISHED INACCURATE 12 PARTICULARS THEREOF AS ENVISAGED IN SECTION 271(1)( C) OF THE ACT READ WITH EXPLANATION 4(A) THEREOF AND IS THEREFORE LIABLE FOR PENALTY AS PROVIDED THEREIN. 19. THE PENALTY PROCEEDINGS AND THE ASSESSMENT PROC EEDINGS BOTH ARE DIFFERENT. EXPLANATION 1 TO SECTION 271(1)(C) STATES THAT THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE SHALL BE DEEMED TO BE THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. THIS DEEMING PROVISION IS NOT ABSOLUTE ONE BUT IS REBUT TABLE ONE. IT ONLY SHIFTS THE ONUS ON THE ASSESSEE. EXPLANATION 1 REFERS TO THE TWO SITUATIONS IN WHICH PRESUMPTION OF THE CONCEALMENT OF THE PARTICULARS OF INCOME IS DEEMED. THE FIRST SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE AO OR THE COMMISSIONER TO BE FALSE. THE SECOND SITUATION IS WHERE THE ASSESSEE IN RESPECT OF ANY F ACTS MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME OFFERS AN EXPLANATION WHICH THE ASSESSEE I S NOT ABLE TO SUBSTANTIATE AND ALSO FAILS TO PROVE THAT SUCH EXPLANATION WAS BONAFIDE ONE AND TH AT ALL THE FACTS RELATING TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. THE PRESU MPTION AVAILABLE UNDER EXPLANATION TO SECTION 271(1) CANNOT BE DRAWN UNLESS THE CASE OF THE ASSESSEE FALLS UNDER EITHER OF THE CLAUSES (A) OR (B). IN THIS CASE WE NOTED THAT THE AO HAS NOT BROUGHT OUT ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSESSEE U/S 27 1(1)(C) OF THE INCOME-TAX ACT. HE HAS NOT BROUGHT OUT WHETHER THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED THE INACCURATE PARTICULARS OF THE INCOME. THIS IS APPARENTLY CLEA R FROM PAGE 4 OF THE PENALTY ORDER WHERE THE CIT(A) HELD THAT THE ASSESSEE HAS CONCEALED PARTICU LARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME. WE HAVE GONE THROUGH THE DE CISION OF THE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. LTD. 282 ITR 642 IN WHICH IT WAS HELD AS UNDER:- 13 IT IS INCUMBENT UPON THE ASSESSING OFFICER TO STAT E WHETHER THE PENALTY WAS BEING LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF INCOME HAD BEEN FURNISHED BY THE ASSESSEE. --------------------------------------------------- ------------------------ --------------------------------------------------- ------------------------ HELD THAT THE PENALTY ORDER AND THE ORDER OF THE C OMMISSIONER (APPEALS) SHOWED THAT NO CLEAR CUT FINDING HAD BEEN REACHED. THE TRIBUNAL HA D FAILED TO APPRECIATE THIS LEGAL. ISSUE. THE RATIO IN CIT V. MANU ENGINEERING WORKS 122 ITR 306(GUJ) WAS APPLICABLE AND THE ORDER OF PENALTY COULD NOT BE UPHELD BY THE TRIBUNAL. THE ORDER WAS INVALID. 20. ON THIS BASIS ALSO THE PENALTY ORDER PASSED UND ER SECTION 271(1)(C) CANNOT BE SUSTAINED AND ACCORDINGLY PENALTY IMPOSED STANDS DELETED. 21. SIMILAR VIEW HAS BEEN TAKEN BY US IN THE FOLLOW ING JUDGEMENTS :- ITO VS. SMT. LALITA IN ITA NO.433/AGR/2009 FOR A.Y. 1998-99 KM. RUCHI RATHORE VS. ITO IN ITA NO.97/AGR/2007 FOR A.Y. 1998-99 SMT. RAJ RANI MITTAL VS. ITO IN ITA NO.2275/DEL/200 9 OF ITAT DELHI BENCH A ACIT VS. DR. S.D. MAURYA IN ITA NO.619/AGR/2008 FO R A.Y. 2003-04 22. COMING TO THE PLEA OF THE LD. A.R. WHETHER THE CIT(A) CAN IMPOSE THE PENALTY UNDER SECTION 271(1)(C) ON THE SAME FACTS AND INFORMATION ON THE BASIS OF WHICH THE PENALTY INITIATED UNDER SECTION 271(1)(C) BY THE A.O. WAS DROPPED BY THE A.O. IN THIS REGARD WE NOTED THAT THE A.O. HAS ASSESSED THE INCOME OF THE ASSESSEE BY REJ ECTING THE BOOKS OF ACCOUNTS AND BY ESTIMATING THE SALES AT RS.1 76 20 000/- BY APPLYIN G A N.P. @ 3.3% AT RS.5 81 461/-. THE SALES HAS BEEN ESTIMATED AT RS.1 76 20 000/- BECAUSE THE A.O. NOTED AS PER ANNEXURE-A TO THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY THAT TH ERE WAS UNDISCLOSED SALES TO THE EXTENT OF RS.91 21 000/-. THE ASSESSEE WENT IN APPEAL AGAINS T THE ORDER OF THE A.O. AND POINTED OUT FROM ANNEXURE-1 3 & 4 OF THE DOCUMENTS IMPOUNDED DURING THE CURSE OF SURVEY THAT THERE WERE UNRECORDED EXPENSES AS WELL AS PURCHASES ALSO TO TH E EXTENT OF RS.2 93 799/- AND RS.37 03 249/- 14 RESPECTIVELY AND ACCORDINGLY HE WORKED OUT ON THE BASIS OF THE PAPERS IMPOUNDED DURING THE COURSE OF SURVEY NET LOSS AT RS.11 58 637/-. THE CIT(A) ON APPRECIATION OF THE IMPOUNDED DOCUMENTS ACCEPTED THE WORKING GIVEN BY THE ASSESS EE AND REDUCED THE LOSS TO RS.11 58 637/- AND ACCORDINGLY DIRECTED THE A.O. TO ADOPT THE LOSS AT RS.11 58 637/- AGAINST THE ASSESSED INCOME OF RS.5 81 461/-. THIS IS FACT ON RECORD THAT THE ASSESSEE HAS SUBMITTED THE ORIGINAL RETURN ON 30.10.2006 ON ESTIMATE BASIS AS THE BOOKS SEIZED WE RE NOT RETURNED TO THE ASSESSEE. SURVEY HAS TAKEN PLACE ON 23.08.2006 AND THE BOOKS WERE RETURN ED TO THE ASSESSEE ON 25.05.2007 WHILE THE ASSESSMENT ORDER WAS PASSED ON 29.03.2008. THE A.O . HAS MERELY INCORPORATED THE UNRECORDED SALES AT RS.91 21 169/- WHILE ESTIMATING THE SALES OF THE ASSESSEE AT RS.1 76 20 000/- AND APPLIED A N.P. @ 3.3%. WHEN HE INITIATED THE PENALTY PROCE EDINGS UNDER SECTION 271(1)(C) THE ASSESSEE SUBMITTED THE REPLY TO THE A.O. AND HE CONSEQUENTLY DROPPED THE PENALTY PROCEEDINGS. COPY OF THE ORDER IS AVAILABLE AT PAGE 31 OF THE PAPER BOOK . AT THE TIME OF DROPPING OF PENALTY PROCEEDINGS THE FACTS ABOUT THE UNRECORDED SALES PURCHASES AND THE EXPENSES WERE BEFORE THE A.O. WE NOTED THAT THE CIT(A) HAS ALSO INITIATED T HE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) DUE TO THE CLAIM OF EXCESS LOSS BY THE AS SESSEE DEDUCTED DUE TO THE SURVEY TAKEN PLACE UNDER SECTION 133A ON 23.08.2006 DURING THE COURSE OF WHICH SEVERAL DOCUMENTS POINTING OUT THE UNDISCLOSED SALES AT RS.91 21 000/- UNDISCLOSE D PURCHASES AND EXPENSES AT RS.37 03 249/- AND RS.2 93 799/- RESPECTIVELY WERE FOUND. THESE U NRECORDED SALES PURCHASES AND EXPENSES WERE DULY INCORPORATED BY THE ASSESSEE AND THE ASSE SSEE FILED THE REVISED TRADING AND P&L ACCOUNT ON THE UNDERSTANDING THAT NO PENALTY WILL B E INITIATED AGAINST THE ASSESSEE. THESE VERY PAPERS WERE ALSO BEFORE THE A.O. WHEN HE ESTIMATED THE PROFIT AT RS.5 81 461/-. THE CIT(A) ON THE BASIS OF THE SAME VERY INFORMATION INITIATED TH E PENALTY PROCEEDINGS AGAINST THE ASSESSEE AND ACCORDINGLY IMPOSED THE PENALTY ON THE ASSESSEE FOR CONCEALMENT OF PARTICULARS OF INCOME AND FOR 15 FURNISHING INACCURATE PARTICULARS OF INCOME DUE TO THE OVERSTATEMENT OF THE LOSS. WE NOTED FROM THE APPELLATE ORDER THAT THE CIT(A) ON THE SAME VE RY FACTS HAS GIVEN THE RELIEF TO THE ASSESSEE IN QUANTUM PROCEEDINGS BUT ON THE BASIS OF THE SAME VE RY FACTS HE IMPOSED THE PENALTY ON THE ASSESSEE. NO DOUBT SECTION 271(1)(C) EMPOWERS THE CIT(A) ALSO TO IMPOSE THE PENALTY ON THE ASSESSEE IF HE IS SATISFIED DURING THE COURSE OF AN Y PROCEEDINGS THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE P ARTICULAR OF HIS INCOME. BUT THIS POWER IN OUR OPINION CANNOT BE EXERCISED BY THE CIT(A) ON THE B ASIS OF THE SAME VERY INFORMATION THE A.O. HAS ALREADY EXAMINED WHETHER THE ASSESSEE HAS CONCE ALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND HE CAME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT COMMITTED ANY DEFAULT AND DID NOT IMPOSE ANY PENALT Y ON THE ASSESSEE. HAD THERE BEEN SOME OTHER INFORMATION WHICH WOULD HAVE COME IN THE KNOW LEDGE OF THE CIT(A) AND BY WHICH HE WOULD HAVE SATISFIED THAT THE ASSESSEE HAS CONCEALE D THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME HE COULD HAVE INI TIATED PENALTY PROCEEDINGS BUT NOT ON THE BASIS OF THE INFORMATION ON THE BASIS OF WHICH THE A.O. H AS ARRIVED AT THE CONCLUSION THAT THE PENALTY IS NOT TO BE IMPOSED ON THE ASSESSEE. WE HAVE ALSO GO NE THROUGH THE DECISION OF MADRAS HIGH COURT IN THE CASE OF CIT VS. V.S.K. ADI CHETTY SURA VEL CHETTY 254 ITR 633 (MAD). IN OUR OPINION THIS JUDGEMENT IS NOT APPLICABLE TO THE FA CTS OF THE CASE OF THE ASSESSEE. IN THIS CASE WE NOTED THAT THE INSPECTING ASSISTANT COMMISSIONER DR OPPED THE PENALTY PROCEEDINGS BUT SUBSEQUENTLY THE OTHER OFFICER WHO DEALT WITH THE F ILE INITIATED THE PENALTY PROCEEDINGS FOR THE VERY SAME YEAR ON 18.02.1978. IT IS NOT THE CASE W HERE THE A.O. DROPPED THE PENALTY PROCEEDINGS BUT THE PENALTY PROCEEDINGS WERE INITIATED BY THE C IT(A). IN VIEW OF OUR AFORESAID DISCUSSIONS WE DELETE THE PENALTY IMPOSED BY THE CIT(A). 16 ITA NOS. 01/AGR/2010 & 478/AGR/2009 23. IN THE RESULT ITA NO.01/AGR/2010 STANDS DISMIS SED AND ITA NO.478/AGR/2009 STANDS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 27.08.201 0). SD/- SD/- (R.K. GUPTA) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: AGRA DATE: 27 TH AUGUST 2010. PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT BY ORDER 3. CIT CONCERNED 4. CIT (APPEALS) CONCERNED 5. DR ITAT AGRA BENCH AGRA 6. GUARD FILE ASSIST ANT REGISTRAR INCOME-TAX APPELLATE TRIBUNAL AGRA TRUE COPY