TMI Blog2011 (8) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... anu Engineering Works (1978 - TMI - 37011 - GUJARAT High Court), Either Concealment or In accurate particulars. No such clear-cut finding was reached by the AO and, on that ground alone the order of penalty passed by the AO is liable to be struck down. - IT APPEAL NO. 493 (LUCK.) OF 2010 - - - Dated:- 25-8-2011 - H.L. KARWA, N.K. SAINI, JJ. P.K. Bajaj for the Appellant. Rakesh Garg for the Respondent. ORDER H.L. Karwa, Vice-President This appeal filed by the Revenue is directed against the order of the learned CIT(A)-II, Kanpur dt. 12th May, 2010 deleting the penalty of Rs. 3,98,209 imposed by the AO on the concealed income of Rs. 10,75,062 under s. 271(l)(c) of the IT Act, 1961 ("the Act") for asst. yr. 2005-06. 2. Briefly stated, the facts of the case are that in this case survey under s. 133A of the Act was conducted on 15th Dec., 2005 by Asstt. Director of IT (Inv-1), Kanpur and certain books of account and loose papers were impounded. During the course of proceedings under s. 143(3) of the Act for the asst. yr. 2006-07, certain credit balances were found appearing in the impounded books of account. The assessee was required to verify the opening ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee filed written submission on 7th Sept., 2009 wherein the assessee has stated as under : "With reference to above, we have to inform your Honour that at the time of issuance of notice under s. 148 dt. 15th Sept., 2008, Department had no knowledge about any concealment or inaccurate particulars and issued the notice arbitrarily and without any reason. You can verify this fact from the records. We had filed return of income of Rs. 11,44,020 and suo motu and voluntarily surrendered Rs. 10,75,062 in the return to buy peace of mind and to avoid litigation. Hon'ble Supreme Court in CIT v. Suresh Chandra Mittal [2001] 119 Taxman 433 has held that Department had not discharged its burden of proving concealment and had simply rested its conclusion on assessee's act of voluntary surrender, which obviously was in good faith and to buy peace, hence penalty could not be levied. Hon'ble, Supreme Court in Sir Shadi Lal Sugar General Mills Ltd. v. CIT [1987] 33 Taxman 460A/168 ITR 705 has held 'that assessee admitted that these were the incomes of the assessee but that was not an admission that there was deliberate concealment. From agreeing to additions, it does not follow that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not accepted by the AO. The AO has also stated that the assessee did not file appeal before the appellate authorities accepting the additions as made in the assessment order because he was well aware of the fact that he has no reasonable cause against the additions made by the AO and in appeal he would lose the case. The AO concluded that the assessee has consciously concealed particulars of income to the extent of Rs. 11,61,944 and furnished inaccurate particulars of his income, therefore, the assessee is liable for penalty as provided in s. 271(l)(c) of the Act. Consequently, the AO imposed a penalty of Rs. 4.30 lakhs under s. 271(l)(c) of the Act. 3. On appeal, the learned CIT(A) confirmed the penalty in respect of addition of Rs. 86,882 and cancelled the penalty of Rs. 3,98,209 in respect of the amount of Rs. 10,75,062 observing as under: "Considering the fact of the case, legal provisions and various decisions in this connection, I hold that the AO was not justified to levy the penalty under s. 271(l)(c) on the self-surrendered amount of Rs. 10,75,062. On perusal of the case records for both the years, i.e. asst. yrs. 2005-06 and 2006-07, it is nowhere seen that the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccurate particulars/concealed particulars of income in respect of a sum of Rs. 10,75,062. Since the assessee has failed to explain cash credits/deposits and the assessee has no reasonable cause regarding cash credits/deposits, therefore, he is liable for penalty under s. 271(l)(c) of the Act. Therefore, the learned CIT(A) was not justified in cancelling the penalty without assigning any cogent reason. He, therefore, submitted that the order of the learned CIT(A) may be reversed and restore that of the AO. Reliance was also placed on the following decisions. 5.1 CIT v. Rakesh Suri [2011] 9 taxmann.com 5 (All.) wherein it has been held that the assessee had deliberately concealed the income and disclosure being not voluntary and bona fide, the Tribunal was not justified in cancelling the penalty. 5.2 P.C. Joseph Bros. v. CIT [2000] 108 Taxman 253/240 ITR 818 (Ker.), wherein it has been held that return in response to a' notice under s. 148 was not to be treated at par with or compared to a revised return. That being the position, the filing of return including the agreed, concealed income did not constitute a mitigating circumstance and penalty had been rightly levied. 5.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he premise of suspicion only. On analysis of the reasons recorded, it would be found that the record/file of asst. yr. 2005-06 have not been examined or looked into. On mere suspicion that the opening balance for asst. yr. 2006-07 of the creditors could not be properly explained by the assessee, a presumption has been drawn that the income for asst. yr. 2005-06 has escaped assessment. According to the learned counsel for the assessee there is no allegation that the opening balances of the creditors for asst. yr. 2006-07 do not tally with the closing balances of the creditors for asst. yr. 2005-06. Further, there is no mention that which particular credit balance is not explainable satisfactorily. There is no mention of any amount or name of the party in the reason recorded. What to say, there is no whisper in the entire reasons recorded as to whether return for asst. yr. 2005-06 have ever seen by the AO before or at the time of recording the reasons. Shri Rakesh Garg, learned counsel for the assessee further submitted that the reasons recorded are vague and are based on conjectures and surmises. He further pointed out that the reasons suffer and are devoid of honest belief. Shri Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Tribunal Delhi Bench in the case of Tidewater Marine International Inc. (supra) also relied on the decision of Hon'ble Rajasthan High Court in the case of Deep Chand Kothari v. CIT [1987] 35 Taxman 223/[1988] 171 ITR 381 wherein it has been held that an order passed by an authority without jurisdiction is a nullity and its invalidity can be challenged whenever and wherever it is sought to be enforced or relied upon. According to the learned counsel for the assessee in the instant case penalty proceedings under s. 271(l)(c) of the Act has emanated from the assessment proceedings and therefore validity of assessment if not already challenged can be challenged in the penalty proceedings under s. 271(l)(c) of the Act. He, therefore, submitted that since reassessment order itself was not valid and therefore on the basis of invalid assessment, no penalty under s. 271(l)(c) of the Act can be levied. According to him, on this score alone penalty under s. 271(l)(c) of the Act cannot be validly levied. 6.2 Shri Rakesh Garg, learned counsel for the assessee also invited our attention to para 13 of the penalty order which reads as under : "13. In view of the above facts, I hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the parties. At the very outset, we may observe that none of the case law referred to in paras 5.1 to 5.4 (supra), relied upon by the learned Departmental Representative are applicable to the facts of the assessee's case. In fact these cases are related to disclosure being not voluntary and bona fide. In such cases, penalty levied under s. 271(l)(c) of the Act were held to be justified. In the instant case, the plea taken by the learned counsel for the assessee are two-fold. Firstly, his contention is that in penalty proceedings under s. 271(l)(c) of the Act, it is open to the assessee to raise question of validity of assessment. Secondly, the learned counsel for the assessee submitted that in a penalty order it was incumbent upon the AO to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No argument was advanced by the learned counsel for the assessee as to whether disclosure was voluntary and bona fide and the surrender was made before any detection of concealment by the Revenue. 8.1 Now the question before us is that as to whether the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Rajasthan High Court held that an order passed by an authority without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon. 8.4 There is a direct-decision on the point rendered by the Tribunal Delhi Bench in the case of Tidewater Marine International Inc. (supra). The Tribunal relying on the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383, held that in view of the decision of the Hon'ble Supreme Court, we are of the view that it is open to the assessee to set up/raise the question of validity of assessment in the appeal against the levy of penalty. Since the question of validity of assessment made in the matter is raised, which is a pure question of law and not involving any investigation into the facts as the same are on record, we admit the additional ground raised by the assessee for decisions. 8.5 It is relevant to state that since there is a direct decision of the Hon'ble jurisdictional High Court in the case of Jai Dayal Pyare Lal (supra) on the issue in hand and therefore we are bound to follow the same and therefore in prefer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment. We find substance in the submission of the learned counsel for the assessee that there is no allegation that the opening balances of the creditors for asst. yr. 2006-07 do not tally with the closing balances of the creditors for asst. yr. 2005-06. Furthermore, there is no mention that which particular credit balance is not explainable satisfactorily. The AO has failed to mention any particular amount or name of the party in the reason recorded. What to say, there is no whisper in the entire reasons recorded as to whether return for asst. yr. 2005-06 have ever been seen by the AO before or at the time of recording the reasons. We may also add here that there is no attempt on the part of the AO to demonstrate that the closing balance of the asst. yr. 2005-06 is not correct. It may be that the fresh credits for asst. yr. 2006-07 may have been themselves shown as opening balances instead of fresh deposits. The so-called reasons recorded by the AO speak of non-application of mind. It seems that the reasons have been recorded without looking into the file or facts of the case. Looking to the facts, we are of the opinion that the reassessment proceedings have been initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IAC was liable to be struck down." 8.11 In the instant case also penalty order shows that the AO has not reached on any clear-cut finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. It is settled law that if any person has concealed particulars of his income or has furnished inaccurate particulars of such income are different things. One thing is certain that these two circumstances are not identical in details although they may lead to the same effect, namely, keeping off certain portion of income. Furthermore, first is direct and latter may be indirect in its execution. 8.12 In the case of Padma Ram Bharali (supra), the Tribunal held as under : "In view of our findings above it is evident that the assessee has concealed income to the extent of Rs. 28,742 by furnishing inaccurate particulars of income and so the penalty has to be imposed to the extent of Rs. 28,742. Under the circumstances we restrict the penalty to Rs. 28,742 only." 8.13 On a reference, the Hon'ble Gauhati High Court held as under : "Thus, it is found that the initiation of the penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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