MEHTA TRANSPAORT SERVICES (I) LTD, MUMBAI v. ACIT CIR (6)3, MUMBAI

I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI. [ CORAM: D.MANMOHAN V.P. AND PRAMOD KUMAR AM ] I.T.A NO.5294/ MUM/2008 ASSESSMENT YEAR: 2003--2004 MEHTA TRANSPORT SERVICES (I) LTD. .. APPELLANT 106/107 PRESTIGE CHAMBERS KALYAN ST. DANA BUNDER MUMBAI-09 PA NO.AAACM 7260 R VS ACIT CIRCLE 6(3) . RESPONDEN T MUMBAI. APPEARANCES: VIJAY MEHTA FOR THE APPELLANT NARESH KUMAR BALODIA FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE HAS CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 7 TH MAY 2008 IN THE MATTER OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME TAX ACT 1961 FOR TH E ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUND: THE LD CIT (A) HAS ERRED IN LAW AND ON FACTS IN SU STAINING THE ORDER OF THE AO LEVYING PENALTY OF ` .3 15 00 000 U/S.271(1)(C) OF THE ACT. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSEE FILED THE RETURN OF INCOME ON 1.12.2003 DECLARING TOTAL LOSS OF ` .4 59 50 804. HOWEVER WHEN ASSESSEE WAS CALLED UPON TO APPEAR BEFORE THE ASSES SING OFFICER AND SUBSTANTIATE I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 2 THE CLAIM MADE IN THE SAID INCOME TAX RETURN IN TH E COURSE OF SCRUTINY ASSESSMENT THE ASSESSEE DID NOT COMPLY WITH THE REQUISITIONS M ADE AND NOTICES ISSUED BY THE AO FROM TIME TO TIME. IT WAS IN THIS BACKGROUND AN D HAVING NOTED THAT NEITHER THE ASSESSEE NOR ITS REPRESENTATIVE ATTENDED AND SUBMITT ED ANY DETAILS NOR PRODUCED ANY BOOKS OF ACCOUNT. THE ASSESSING OFFICER FINALIZED THE ASSESSMENT EX PARTE AND DISALLOWED 55% OF THE TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE. PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE ALSO INITI ATED IN CONNECTION WITH THE QUANTUM ADDITIONS SO MADE. HOWEVER NONE APPEARED BEFORE THE ASSESSING OFFICER IN THE COURSE OF PENALTY PROCEEDINGS EITHER. ACCOR DINGLY THE AO PROCEEDED TO IMPOSE PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO ` .3 15 00 000 BY OBSERVING AS FOLLOWS: 4. DURING THE COURSE OF PENALTY PROCEEDINGS ALSO N O DETAILS HAVE BEEN FURNISHED NO REPLY HAS ALSO BEEN GIVEN BY THE ASSE SSEE EXCEPT THAT HE IS ON APPEAL. HE HAS NOT EVEN MADE ANY EFFORTS TO MAKE SU BMISSION ON MERITS DESPITE REPEATED OPPORTUNITY GIVEN. THE ASSESSEE HA S NOT MADE ANY SUBMISSIONS BEFORE THE UNDERSIGNED REGARDING THE AD DITIONS MADE IN THE ASSESSMENT ORDER IN RESPECT OF WHICH PENALTY WAS IN ITIATED. 5. COMING THEREFORE TO THE BASIS OF IMPOSITION OF T HE PENALTY SECTION 271(1)(C) OF THE ACT IS ATTRACTED WHERE IN THE CASE OF ANY PROCEEDING UNDER THE ACT THE ASSESSING OFFICER IS SATISFIED THAT AN Y PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCUR ATE PARTICULARS OF SUCH INCOME. THE EXPRESSIONS HAS CONCEALED AND HAS FUR NISHED INACCURATE PARTICULARS HAVE NOT BEEN DEFINED IN THE SECTION OR ANYWHERE IN THE ACT. HOWEVER NOTWITHSTANDING TILE DIFFERENCE IN THE TWO CIRCUMSTANCES THEY LEAD TO THE SAME EFFECT VIZ. KEEPING OFF A PORTION OF T HE INCOME. THE FORMER IS DIRECT WHILE THE LATTER MAY BE INDIRECT IN ITS EXEC UTION. 6. THE POSITION REGARDING IMPOSITION OF PENALTY UNDER SECTION 271(1)C) OF THE ACT READ WITH EXPLANATION 1 THERETO AS APPLICAB LE W.E.F. 1.4.1976 IS THAT PENALTY IS TO BE IMPOSED IF THE AO IS SATISFI ED THAT THE PERSON HAS CONCEALED THE PARTICULARS OF INCOME OR HAS FURNISH ED INACCURATE PARTICULARS THEREOF. THOUGH THE ASSESSMENT PROCEEDI NGS AND THE PENALTY PROCEEDINGS ARE TWO SEPARATE AND INDEPENDENT PROCEE DINGS END THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS CAN NOT BE SAID TO BE DECISIVE AND CONCLUDED FACTOR IN THE PENALTY PRO CEEDINGS IT IS NOT NECESSARY FOR THE DEPARTMENT TO MAKE ANY FURTHER EN QUIRY WHERE THERE IS ANY SUPPRESSION OF INCOME TO SEE AS TO WHETHER SUCH SUPPRESSION WAS DUE TO ANY DISHONEST INTENTION ON THE PART OF THE A SSESSEE. IN A CASE WHERE THERE HAS BEEN AN OMISSION THE DEPARTMENT SHOULD N OT IGNORE THE MATERIAL COLLECTED AT THE ASSESSMENT STAGE. FOR WI TH THE DELETION OF THE I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 3 WORD DELIBERATE FROM SECTION 271(1)(1) OF THE ACT AND THE INTRODUCTION OF EXPLANATION 1 THERETO WHICH CAN BE INVOKED AT A NY STAGE THE PENALTY PROCEEDINGS ARE NO LONGER QUASI-CRIMINAL PROCEEDING S AND HENCE THE PRESENCE OF MENS-REA IS NOT REQUIRED TO BE ESTABLIS HED AS THE RATIO LAID DOWN IN THE EARLIER DECISION OF THE SUPREME COURT I N THE CASE OF CIT V. ANWAR ALI 76 ITR 696(SC) NO LONGER HOLDS THE FIELD . THIS HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF B.A.BAL ASUBRAMANIAM & BROS CO. V CIT 236 ITR 977(SC). THEREFORE THE P RINCIPLE ENUNCIATED IN ANWAR ALIS CASE THAT THE MERE REJECTION OF THE EXP LANATION OF THE ASSESSEE IS NOT SUFFICIENT FOR LEVY OF PENALTY NO LONGER HOL DS GOOD AND IT IS NO LONGER NECESSARY THAT THE DEPARTMENT MUST GO FURTHE R AND ESTABLISH THAT THERE WAS A CONSCIOUS CONCEALMENT OF PARTICULARS OF INCOME OR A DELIBERATE FAILURE TO FURNISH ACCURATE PARTICULARS. THIS HAS BEEN HELD IN THE CASE OF CIT (ADDL) V JEEVAN LAL SHAH 205 ITR 2 44 (SC). 7. IT HAS BEEN HELD IN M/S. CEMENT DISTRIBUTIONS PV T LTD V CIT 60ITR 586 THAT RECORDING OF TRANSACTION IN ORDER TO DISPLAY INCOME AT A MUCH LESS FIGURE ATTRACTS PENAL PROVISIONS U/S.271(1)(C) OF THE I.T. ACT. 8. UNDER THE ACT PENALTY U/S.271(1)(C) IS LEVIABLE FOR CONCEALING THE INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF SUCH I NCOME. IN THE INSTANT CASE THE ASSESSEE HAS CONCEALED ITS TAXABLE INCOME. BY CONCEALING TAXABLE INCOME/FURNISHING INACCURATE PARTICULARS OF INCOME THE ASSESSEE HAS TRIED TO DEFRAUD THE REVENUE. 9. IT HAS BEEN HELD THAT FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TWO FORMS; EITHER (AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY OR AN ITEM OF EXPENDITURE MAY BE FALSELY(OR IN AN EXAGGERATED AMOUNT) CLAIMED. BOTH TYPES ATTEMPT TO REDUCE THE TAXABLE INCOME. BOTH T YPES AMOUNT TO CONCEALMENT OF THE PARTICULARS OF ONES INCOME AS W ELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. PENALTY MAY BE I MPOSED FOR EITHER OR BOTH SUCH ATTEMPTS [CIT VS. INDIA SEA FOODS(1976) 105 IT R 708(KER); NAGIN CHAND SHIV SAHAI V CIT(1938) 6 ITR 534 (LAH); CIT V S GATES FOAM & RUBBER CO. (1973) 91 ITR 467 KER). 10. AS THE ASSESSEE HAS FURNISHED INACCURATE PARTIC ULARS OF INCOME I HOLD THE ASSESSEE A DEFAULTER U/S.271(1)(C) AND IMPOSE PENAL TY U/S.271(1)(C) OF I.T.ACT. FURTHER AFTER THE AMENDMENT OF CLAUSE (A) TO EXPLANATION 4 OF SECTION 271(1)(C) W.E.F. 1.4.2002 THE EXPRESSION THE AMOU NT OF TAX SOUGHT TO BE EVADED HAS BEEN REDEFINED. 11. IN VIEW OF THE ABOVE IN TERMS OF EXPLANATION ( 4) TO SECTION 271(1)(C) THE PENALTY IS CALCULATED AS UNDER:- AMOUNT OF INCOME SOUGHT TO BE EVADED ` .8 44 82 115 MAXIMUM PENALTY @ 300% OF TAX SOUGHT TO BE EVADED ` .9 31 41 531 I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 4 MINIMUM PENALTY @ 100% OF TAX SOUGHT TO BE EVADED ` .3 10 47 177 12. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE I IMPOSE THE PENALTY U/S.271(1)(C) BEING RZ.3 15 00 000 (RUPEES THREE CR ORES FIFTEEN LAKHS ONLY 3. AGGRIEVED BY THE STAND SO TAKEN BY THE ASSESSING OFFICER THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). THE CIT ( A) UPHELD THE PENALTY IN PRINCIPLE BUT DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE TH E SAME ON THE BASIS OF ADDITIONS SUSTAINED IN APPELLATE PROCEEDINGS. WHILE DOING SO THE CIT (A) OBSERVED AS FOLLOWS: 4. I HAVE CONSIDERED THE FACTS OF THE CASE AS WE LL AS SUBMISSION OF THE APPELLANT. IT HAS BEEN NOTED ABOVE IN THIS CASE T HAT ASSESSMENT WAS FRAMED U/S.144 DISALLOWING 55% OF EXPENDITURE CLAIMED AND THEREAF TER PENALTY HAS BEEN LEVIED IN THE QUANTUM APPEAL IT HAS BEEN HELD THAT THE A.O. WAS JUSTIFIED IN FRAMING ASSESSMENT U/S. 144 OF THE ACT ON THE FACTS OF THE APPELLANTS CASE. IT HAS FURTHER BEEN HELD THAT AFTER INVOKING PROVISIONS OF SECTION 44 THE A.O. IS BOUND TO MAKE ASSESSMENT AS PER HIS BEST JUDGMENT. IT WAS FURTHER HELD HAT BLANKET DISALLOWANCE OF 55% OF EXPENDITURE WAS NOT WARRANTED AND THE INCOME HAS BEEN DETERMINED LOOKING INTO THE PAST HISTORY OF THE CASE AND THE A .O. HAS BEEN DIRECTED RE-COMPUTE THE INCOME ACCORDINGLY IT WAS NOTICED AT THE TIME OF APPELLATE PROCEEDINGS IN QUANTUM APPEAL THAT THE APPELLANT HAD CLAIMED FINAN CE EXPENDITURE TO THE RUNE OF RS 4.82 80 015- AS AGAINST ` .2 30 27 801 IN PREVIOUS YEAR THE DETAILS REGARDIN G THE CLAIM OF FINANCE EXPENDITURE FOR THE LAST THREE YEA RS ARE AS FOLLOWS 1999 % 2000 % 2001 % 2002 % 2003 % FINANCE CHARGES 22738211 7.69 27350203 6.48 33186305 5.86 23027801 15.09 48280015 47.63 IN OTHER WORDS FINANCIAL CHARGES WHICH WERE HOVER ING AROUND 5 TO 7% IN EARLIER YEARS JUMPED TO 15.09% AND THEN FURTHER JUM PED TO 47.63% IN THE CURRENT YEAR. COMING TO THE FACTS OF THE PRESENT CASE THE APPELLA NT HAS ARGUED THAT PENALTY IS NOT LEVIABLE BECAUSE THERE IS NO CONCEALMENT OF INCOME AND ADDITION IS BASED ON MERE DISALLOWANCE U/S. 44 OF THE ACT. IN OTHER WORDS TH E CONTENTION OF THE APPELLANT IS THAT WHEN ASSESSMENT IS FRAMED U/S 144 OF THE ACT PENALTY IS NOT LEVIABLE BECAUSE U/S. 144 THE INCOME IS ONLY ON ESTIMATE BASIS. THE APPELLANT HAS RELIED UPON VARIOUS EASE LAWS IN THIS REGARD. AFTER GOING THROU GH THE FACTS OF THE CASE AS WELL AS VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT I AM OF THE CONSIDERED OPINION THAT THERE IS NO PRESUMPTION IN LAW THAT IF ASSESSMENT IS FRAMED U/S. 144 PENALTY U/S. 271 ( I)(C) IS NOT LEVIABLE. WHETHER P ENALTY IS LEVIABLE OR NOT IN A CASE OF 144 ASSESSMENT WOULD DEPEND ON THE PECULIAR FACTS O F EACH CASE. PENALTY IS LEVIED WHEN THERE IS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 5 PARTICULARS OF INCOME. EXPLANATION I SAYS THAT WHEN IN RESPECT OF AMOUNT ADDED OR DISALLOWED SAID DISALLOWANCE OR ADDITION FOR THE P URPOSE OF CLAUSE OF SUB-SECTION 271(1) WOULD DEEM TO BE CONCEALED INCOME IF NO EXPL ANATION IS OFFERED OR EXPLANATION OFFERED IS NOT FOUND TO BE BONAFIDE AND FURTHER IF HE FAILS TO PROVE THAT ALL FACTS RELATING TO THE DISALLOWANCE OR ADDITION WAS DISCLOSED. IT IS IN THE LIGHT OF PROVISION OF SECTION 271(1 )C) IT IS TO BE EXAMINE D WHETHER THE ASSESSMENT FRAMED U/S. 144 IN THE CASE OF APPELLANT MERIT LEVY OF PEN ALTY US. 271(L) OF THE IT. ACT. THE FIRST ISSUE IS IN RESPECT OF FRAMING OF ASSESSM ENT U/S. 144 OF THE ACT. THERE IS NO DISPUTE THAT THE APPELLANT HAD NOT RESPONDED TO THE VARIOUS NOTICES ISSUED BY A.0 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THIS F ACT HAS BEEN BROUGHT CLEARLY BOTH IN THE ASSESSMENT ORDER AS WELL AS IN THE APPE LLATE ORDER. IN FACT PENALTY U/S. 271B WAS ALSO INITIATED AND LEVIED AND ALSO CONFIRM ED PRECISELY BECAUSE THE APPELLANT HAD FAILED TO RESPOND TO THE VARIOUS NOTI CES. IT WAS THEREFORE HELD THAT FRAMING OF ASSESSMENT U/S. 144 WAS THE ONLY OPTION AVAILABLE TO A.O IN THIS CASE. THIS FINDING GIVEN AT THE TIME OF QUANTUM PROCEEDIN G HAS NOT REBUTTED AT THE TIME OF PENALTY PROCEEDINGS. THE APPELLANT HAS STATED THAT IT HAD NOT APPEARED OR PRODUCED BOOKS OF ACCOUNT OR RELEVANT DOCUMENTS BE FORE AO BECAUSE FACTORY PREMISES WERE SEALED BY THE BANKERS. THIS STATEMENT OF THE APPELLANT WAS FOUND BUT CONVINCING FOR VARIOUS REASONS. FIRSTLY THE APPEL LANT OF NEVER APPEARED BEFORE AO AT ALL. EVEN IF IT HAD PROBLEM IN PROCURING BOOKS OF ACCOUNTS FROM THE POSSESSION OF BANKERS THE APPELLANT COULD HAVE APPEARED BEFORE A O AND STATED THE SAME AND PROVIDED COMPLETE DETAILS AS TO UNDER WHAT CONDITIO NS THE BANKERS HAD SEALED THE PREMISES AS TO WHERE THE BOOKS WERE LYING AND WHET HER IT HAD MADE ANY EFFORT TO GET BOOKS OR COPIES OF BOOKS OF ACCOUNTS. THE APPEL LANT DID NOT APPEAR BEFORE AO AND THEREFORE IT IS APPARENT THAT SEAL OF THE BANK ERS USED AS RUSE FOR NON COMPLIANCE. SECONDLY EVEN WHEN PREMISES ARE SEALED BY BANKERS THE NEGOTIATIONS ARE HELD FOR RECOVERY OF DUES. SUCH RECOVERY OF DUE S COULD BE ON THE BASIS OF BOOKS OF ACCOUNTS ONLY. THIS IS AGAINST ANY REASONABLE PRESUMPTION THAT BANKERS WOULD SEAL BOOKS OF ACCOUNTS AND DOCUMENTS AND NOT GIVE A COPY OF THE SAME TO THE APPELLANT AND STILL ASK FOR REPAYMENT OF LOAN AND INTEREST. IT IS ONLY REASONABLE TO ACCEPT THAT WHENEVER BANKERS WOULD ASK FOR DUES IT WOULD BE WITH REFERENCE TO BOOKS OF ACCOUNTS OR DOCUMENTS OR ATLEAST A COPY OF THE SAME. THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE WHATSOEVER AT ANY FORUM OR AN Y PROCEEDINGS TO SHOW THAT FIRSTLY BOOKS OF ACCOUNTS WERE IN THE POSSESSION OF BANKERS AND SECONDLY THE SAME WERE REFUSED TO BE GIVEN TO THE APPELLANT. IN OTHER WORDS THE APPELLANT HAD DELIBERATELY NOT PRODUCED BOOKS OF ACCOUNTS BEFORE A.O. TAKING THE SHELTER BEHIND BANKERS SEAL ON THE FACTORY PREMISES. THE INTENTION OF THE APPELLANT CANNOT BE CONSIDERED BONAFIDE. TO PUT IT DIFFERENTLY THE AP PELLANT DID NOT REPAY ITS DUES TO THE BANKERS AND THEN WHEN BANKS STARTED RECOVERY PROCEE DINGS THE APPELLANT CONSIDERED THIS AS GOOD EXCUSE FOR NOT COMPLYING WI TH THE PROVISIONS OF INCOME TAX ACT. AN ARGUMENT HAS BEEN TAKEN THAT ONE OF THE DIR ECTORS HAD SOME MEDICAL PROBLEMS IN THE YEAR 2003. BUT THE ASSESSMENT ORDER WAS PASSED IN FEBRUARY 2006 AND PENALTY ORDER IN AUGUST 2006. IN BETWEEN THE DI RECTORS HAVE STARTED OTHER BUSINESS ALSO. THUS ON THE FACTS OF APPELLANTS CAS E IT IS APPARENT THAT IT HAD DELIBERATELY WITHHELD INFORMATION FROM A.O. SO AS TO PREVENT HIM FROM MAKING ANY I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 6 FRUITFUL AND WORTHWHILE ENQUIRY INTO ITS AFFAIRS A ND THEREFORE FRAMING OF ASSESSMENT U/S. 44 WAS BECAUSE THE APPELLANT HAD DELIBERATELY NOT CO-OPERATED OF ASSESSMENT. IN VIEW OF THIS FACT THE APPELLANT IS NOT ENTITLE D TO CLAIM SINCE ASSESSMENT HAS BEEN FRAMED U/S. 144 PENALTY CANNOT BE LEVIED. IN THIS CASE AFTER CONSIDERING THE FACTS OF THE CA SE PROFIT OF RS. 20 27 232/- WAS ESTIMATED IN THE APPELLATE PROCEEDINGS AS AGAINST T HE DECLARED LOSS OF RS. 4.59CRORES. AS NOTED ABOVE FINANCIAL CHARGES HAVE BEEN JUMPED TO GRAVITY DEFYING LEVEL THIS YEAR. NO EXPLANATION & EVIDENCE AT ALL HAS BEEN FUR NISHED FOR THIS UNUSUALLY HIGH EXPENDITURE. CONSIDERING THE FACT THAT ASSESSMENT H AS BEEN MADE BECAUSE THE APPELLANT HAD DELIBERATELY NOT PRODUCED BOOKS OF AC COUNTS AND OTHER DETAILS AND ALSO BECAUSE OF THE FACT THAT THE ACCOUNTS FILED WE RE NOT RELIABLE AND NEITHER SUPPORTED BY ANY EVIDENCE ADDITION MADE AMOUNTING T O RS. 4 79 78 036/- (LOSS RETUNED + INCOME DETERMINED) IS CONSIDERED AS INCOM E IN RESPECT OF WHICH INACCURATE PARTICULARS WERE FILED. THE EXPLANATION GIVEN BY THE APPELLANT FOR NOT FURNISHING DOCUMENTS ETC AS ALREADY NOTED ABOVE IS NOT BONAFIDE. ACCORDINGLY IT IS HELD THAT HE A O. IS JUSTIFIED IN LEVYING PENALTY U /S. 271(L) OF THE ACT IN THIS CASE. HOWEVER QUANTUM OF PENALTY SHOULD BE RECOMPUTED ON THE BASIS OF ADDITION SUSTAINED BY THE APPELLATE ORDER DATED 2&3.1008. T HIS GROUND IS THEREFORE REJECTED. 5. IN THE RESULT APPEAL IS DISMISSED. 4. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED THE FACTUAL MATRIX OF THE CASE AS ALSO T HE APPLICABLE LEGAL POSITION. 6. WE HAVE NOTED THAT THERE WAS NO COMPLIANCE TO TH E NOTICES ISSUED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS OR EVEN PENALTY PROCEEDINGS. LEARNED COUNSEL HOWEVER HAS MADE EL ABORATE SUBMISSIONS AT THIS STAGE POINTING OUT THE REASONS FOR WHICH ACCORDING TO HIM PENALTY OUGHT TO BE DELETED. LEARNED COUNSEL SUBMITTED THAT THE DISALL OWANCE OF EXPENSES OF 55% IS WHOLLY ARBITRARY AND DEVOID OF ANY RATIONAL BASIS. IT HAS ALSO BEEN POINTED OUT THAT IN THE SUBSEQUENT PROCEEDINGS UNDER SECTION 143(3) R.W 153A THE SAME EXPENSES HAVE BEEN ACCEPTED. HE HAS TAKEN US THROUGH THE PA PER BOOK AND MADE AN EFFORT TO DEMONSTRATE THAT THE VERY ADDITIONS BASED ON WHICH THE IMPUGNED PENALTY IS LEVIED I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 7 ARE NOT SUSTAINABLE IN LAW. LEARNED DEPARTMENTAL AUTHORITIES ON THE OTHER HAND HAS POINTED OUT THAT NONE OF THE SUBMISSIONS WERE B EFORE THE AO AND THAT THE ASSESSEE HAS NOT CO-OPERATED IN PROCEEDINGS BEFORE THE AO. LEARNED D.R. HOWEVER SUBMITS THAT HE HAS NO OBJECTION TO THE MATTER BEIN G REMITTED TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF WHATEVER SUB MISSIONS THE ASSESSEE WISHES TO FURNISH. LEARNED COUNSEL VEHEMENTLY OPPOSED THE SU GGESTION AND SUBMITTED THAT THE MATTER SHOULD BE DECIDED BY US ON MERITS AS CON SIDERABLE TIME HAS PASSED AND THE ASSESSEE WILL BE PUT TO UNDUE HARDSHIP IN CASE THE MATTER IS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION. 7. HAVING GIVEN OUR CAREFUL CONSIDERATION TO THE RI VAL CONTENTIONS AND HAVING PERUSED THE MATERIAL ON RECORD WE ARE NOT INCLINE D TO ADDRESS OURSELVES TO THE MERITS OF LEARNED COUNSELS ARGUMENTS ADVANCED BEFO RE US AT THIS STAGE. THE ASSESSEE DID NOT AVAIL OF ANY OPPORTUNITY OF HEARIN G BEFORE THE ASSESSING OFFICER AND THE FACTS BEING PLACED BEFORE US HAVE NOT COME UP FOR CONSIDERATION BEFORE THE ASSESSING OFFICER AT ANY STAGE. HOWEVER CONSIDERI NG THE FACT THAT THE ASSESSING OFFICER DID NOT HAVE BENEFIT OF SUBMISSIONS BY THE ASSESSEE AT THE STAGE OF FRAMING THE IMPUGNED PENALTY ORDER AND CONSIDERING THE FAC T THAT THE ASSESSEE HAS BONAFIDE REASONS FOR NOT APPEARING BEFORE THE AO INASMUCH AS THE ASSESSEES PREMISES WERE SEALED BY THE BANKERS WE DEEM IT FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE AO FOR ADJUDICATION DENOVO IN THE LIGHT OF SUCH SUB MISSIONS AS THE ASSESSEE WISHES TO FURNISH. THE ASSESSING OFFICER IS DIRECTED TO R E-ADJUDICATE THE PENALTY AFRESH IN ACCORDANCE WITH THE LAW BY WAY OF A SPEAKING ORDER AND AFTER GIVING A FAIR AND REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE MAY ADD THAT ONE OF THE ARGUMENTS BEFORE US WAS THAT IN THE COURSE OF ASSES SMENT U/S.153A FOR THE SAME ASSESSMENT YEAR ALL THE EXPENSES ARE ALLOWED AS A DEDUCTION. IF THAT BE THE CASE AND CONSIDERING THAT ORIGINAL ASSESSMENT U/S.143(3) ST ANDS ABATED AS A RESULT OF 153A PROCEEDINGS THERE WILL BE NO CAUSE OF ACTION FOR PENALTY PROCEEDINGS U/S.271(1)(C). WHEN THE QUANTUM ADDITION DOES NOT SURVIVE THERE C ANNOT BE ANY QUESTION OF PENALTY I.T.A NO.5294/M/08 MEHTA TRANSPORT SERVICES INDIA LTD 8 IN RESPECT OF THOSE ADDITIONS. THE ASSESSING OFFIC ER SHALL CONSIDER ALL THESE FACTORS AND IF NECESSARY ADJUDICATE ON THE PENALTY MATTER AFRESH. 8. IN THE RESULT THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 25 TH FEBRUARY 2011 SD/- (D.MANMOHAN ) (VICE PRESIDENT) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 25 TH FEBRUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) XXIX MUMB AI 4. COMMISSIONER OF INCOME TAX-6 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI