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TMI Blog2017 (8) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... was admitted and the additional ground as raised reads as under:- "In the facts and circumstances of the case and in law the Ld. AO has erred in imposing penalty u/s 271(1)(c) without specifically pointing out in the show cause notice, whether the penalty was proposed on concealment of particulars of income or for furnishing inaccurate particulars of income. The action of the Ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty amounting to Rs. 21,76,000/- imposed u/s 271(1)(c). 3. Briefly stated the facts are that while framing the assessment and assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act). The Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act or concealing the particulars of his income. Subsequently, a notice u/s 274 read with Section 271 and 272 of the Act was issued on 29/9/2010 and a penalty order u/s 271(1)(c) of the Act was passed imposing penalty of Rs. 21,76,000/- had concealed income on Rs. 64,63,010/-. 4. Aggrieved by this, the assessee preferred an appeal before Ld. CIT(A), who after considering the submissions, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bal City project and had introduced cash, without specifically mentioning the amount invested, in the partnership firm constituted for the purpose of developing the Global City Project (PB : 22) * SLK however retracted from his above statement by way of an affidavit dated 01.08.2008. (PB : 10) * Shri Mohd. Sharif Khan (assessee) in his statement u/s 131 admitted having invested the said sum of Rs. 56,50,000/- in cash in the firm. (PB : 12). * Thereafter, assessee also retracted from his statement vide letter dated 17.06.2010 (AO Order-Quantum-Page 3) * One unsigned Partnership Deed was found at the business premises of the SLK wherein the assessee with Shri Ranjit Singh Yadav jointly were mentioned as one single party. (PB : 1-9) * Ledger Account of the assessee in the books of Global City Project was submitted by SLK during assessment and it was found during search conducted on him. (AO Order-Quantum-Page 3) V. Ld. AO, during the course of quantum proceedings, made additions of Rs. 56,50,000/- treating the same as undisclosed income based on the statement of Shri Mohd. Sharif Khan (Appellant) u/s 131 Ld. AO did not given opportunity of cross-examination of SLK to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crossexamination and any denial of the opportunity of cross-examination in the present case, has not resulted in violation of Principles of Natural Justice. 2.2.v Affidavit submitted by SLK is self-serving. Further, such Affidavit of SLK has been denied by him, as a result it was unreliable. 3. SUBMISSION 3.1 At the outset, it is submitted that out of the total addition of Rs. 64,63,010 on which penalty was levied by the Ld. AO, addition of Rs. 8,13,010 has been deleted by the Hon'ble ITAT, Jaipur Bench, vide order dated 23.05.2016, in ITA no. 34/JP/12. Thus penalty amounting to Rs. 2,74,000 qua such additions, deserves to be deleted. 3.2 Apropos the additions sustained by the Hon'ble ITAT, Jaipur Bench of Rs. 56,50,000 below mentioned submissions may please be considered. 3.3 Submissions made before the Ld. CIT (A), placed at PB Pages 56-62 and those made before Ld. AO, reproduced by him in his order from Pg 1 to Pg 7 may please be considered in correct perspective. 3.4 Lower authorities have erred in not appreciating a settled proposition that addition can be made in the quantum proceeding however that does not ipso facto result into penalty being imposed. Muc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion he was truthful: If Shri Sukla is neutralised as a witness what remains is the accounts, vouchers, challans, bank accounts, etc..." 3.7. Finding of the Hon'ble ITAT, in quantum proceedings are contained at Para 2.4, 2.5 and 2.6, internal pages 4,5 and 6, of the other. (PB 31: 33) 3.8 Additions have been confirmed by the Hon'ble ITAT mainly on the basis of oral evidences of the appellant as well as SLK. Needless to mention that both oral admissions were retracted subsequently. Whatever tangible evidences were found did not indicate investment by the assessee. 3.9 In quantum proceedings additions can be made even when both "may" or "may not" situations exist using the theory of human probability or preponderance of probability. However, when it comes to penalty proceedings if slightest of "may not" situation exists the penalty cannot be imposed. Penalty can be imposed only when "may not "situation is fully ruled out. In the present case enough possibility exists of appellant really not have invested Rest. 56, 50,000 in the Global City Project. 3.10 Hon'ble ITAT after referring to the Hon'ble Supreme Court decision in the case of Pullangode Rubber Produce Co. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y trying to conceal his/her income. Whereas such precision may not be required while in the quantum proceedings. 3.14.ii Since order of AO, in quantum proceedings, became final neither party can seek to reopen it in penalty proceedings. Penalty proceedings are independent to that of quantum proceedings. All the facts emerging out of the quantum proceedings have to be revisited again from the beginning in order to arrive at the conclusion whether the penalty has to be levied or not. Thus even though additions may have been confirmed in quantum proceeding the same cannot, in an automatice manner, result in penalty being imposed. 3.14.iii SLK and the appellant both were examined. Since both admitted to this transaction of Rs. 56.50 Lacs, it is a conclusive evidence gathered by the Department. Ld. CIT (A) has not considered the facts of the case in totality. Both SLK and the assessee never admitted to the transaction. Below mentioned is the summary:- The trail of events, as mentioned above, by no stretch of imagination can prove the involvement of the assessee conclusively. Under such circumstances, no certainly emerges for which assessee can be held liable for penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m proceedings on the basis of evidences having a reasonable certainty whereas unless the evidences provide virtual certainly penalty cannot be imposed. In view of the above, penalty levied by the Ld. AO and confirmed by the Ld. CIT (A) deserves to be deleted." 6. On the contrary, Ld. Departmental Representatives opposed the submissions, and supported the order of the authorities below. 7. The assessee has also taken the additional ground that reads as under:- "In the facts and circumstances of the case and in law the Ld. AO has erred in imposing penalty u/s 271(1)(c) without specifically pointing out in the show cause notice, whether the penalty was proposed on concealment of particulars of income or for furnishing inaccurate particulars of income. The action of the Ld. AO is illegal, unjustified, arbitarary and against the facts of the case. Relief may please be granted by quashing the penalty amounting to Rs. 21,76,000/- imposed u/s 271(1)(c). We deem it proper to adjudicate this additional ground before deciding the issue on merit as same relate to validity of notice u/s 271(1)(c) of the Act. It is stated by the Ld. Counsel for the assessee that this issue is covered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of T. Ashok Pai (Supra) held as under:- "..... Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported n 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The Standard proforma without striking of the relevant clauses will lead to an inference as to nonapplication of mind..." 1.7 In the case of Jyoti Ltd. [2013] taxmann.com 65 (HC-Guj) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground of furnishing inaccurate particulars of income and concealing the income." The Hon'ble Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra) has held as under:- "In the present case also notice has been issued by ticking the stereotyped format. This fact is not controverted by the revenue. Therefore, in our considered view, penalty proceeding is not validly initiated. Hence, the initiation of penalty on the basis of the notice dated 13th March, 2013 is not in accordance with the requirement of law in view of the judgment of Hon'ble Karnataka High Court referred above. The additional ground is allowed....." 1.11. Hon'ble ITAT, Jaipur Bench in the following mentioned cases has also following the ratio laid down in the case of Manjunatha Cotton & Ginning Factory (supra): 1.11.i Shankar Lal Khandelwal v. DCIT - ITA No. 878/JP/2003 1.11.ii Radha Mohan Maheshwari v. DCIT - ITA No. 773/JP/2013. 1.12. Attention is drawn towards the recent judgment of the Hon'ble Jurisdictional High Court in the case of Shevata Construction Co. Pvt. Ltd. ITA No. 534/2008(copy enclosed), wherein the Hon'ble High Court at Parra 9 of the its order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax appeal No. 534/2008 in the case of Sheveta Construction Company Pvt. Ltd. vs. ITO, Ward 3(4), Jaipur. The Hon'ble High Court had formulated the substantial question of law that reads as under: "Can penalty for alleged "Concealment of income" or "furnishing inaccurate particulars of income" be levied when legality of assessment proceedings itself is subjudice before Hon'ble High Court and the question to that effect has already been admitted in Quantum Appeal?" The Hon'ble High Court after considering the various Judgments and the Judgments of the Hon'ble Andhra Pradesh High Court in the case of Chennakesava Pharmaceutical vs. CIT 349 ITR 196 and also the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shoff Vs. Joint Commissioner of Income Tax & Anr. 291 ITR 519 (SC) held as under:- "9. Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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