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2016 (4) TMI 992 - ITAT JAIPUR

2016 (4) TMI 992 - ITAT JAIPUR - TMI - Levy of penalty u/s 271(1)(c) - Held that:- Assessing Officer has not recorded satisfaction specifically for concealed particulars of income or furnished inaccurate particulars of income and on both. The various courts have held that this satisfaction can be for both the purposes i.e. for concealed particulars of income and furnishing of inaccurate particulars of income jointly as both the satisfaction are overlapping, which is also not found place in the c .....

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e assessee guilty of another limb is bad in law, therefore, we delete the penalty confirmed by the ld CIT(A). See CIT Vs M/s Manjunath Cotton & Ginning Factory & Ors [2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee - ITA No. 773/JP/2013 - Dated:- 18-3-2016 - SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM For The Assessee : Shri P.C. Parwal (CA) For The Revenue : Mrs. Neena Jeph (JCIT) ORDER PER T.R. MEENA, A.M. This is an appeal filed by the assessee against the order da .....

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nfirming the levy of penalty even when notice issued u/s 271(1)(c) does not state whether the charge against the assessee is for concealment of income or for furnishing inaccurate particulars of income and the penalty order also does not specify as to on what offence penalty is levied i.e. for concealment of income or for furnishing inaccurate particulars of income. 1.2 The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the levy of penalty of ₹ 14,25,1 .....

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income of ₹ 1,56,290/-. In response to notice U/s 153A, the assessee has filed return of income declaring same income i.e. ₹ 1,56,290/-. During the course of search, the assessee disclosed additional income U/s 132(4) of the Act of ₹ 5.00 crores for different years i.e. for A.Y. 2006-07 ₹ 1.00 crore, for A.Y. 2007-08 ₹ 3.00 crores, and for A.Y. 2008-09 at ₹ 1.00 crore in total ₹ 5.00 crores. The ld Assessing Officer scrutinized the seized material and c .....

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Y. 2002-03, 2003-04 and 2004-05 read with sections 274 and 275 of I.T. Act for concealment of income/furnishing of inaccurate particular of income. Therefore, penalty proceedings are initiated separately. (b) I am also satisfied that it is a fit case for imposing of penalty proceeding U/s 271AAA for A.Y. 2007-08 and 2008-09 read with sections 274 and 275 of I.T. Act on assessed undisclosed income as the search has been initiated U/s 132 of I.T. Act after 01/6/2007. Therefore, penalty proceedings .....

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of the Act, gave notice dated 30/10/2009 as under:- U/s 271(1)(c):- Concealed particulars of income or furnished inaccurate particulars of income . 2.1 Before imposing penalty, the ld Assessing Officer gave reasonable opportunity of being heard on 30/10/2009. Again opportunity was allowed vide show cause noticed dated 09/2/2012. The assessee replied vide letter dated 09/3/2012. Brief facts of the case has been reproduced by the Assessing Officer on page 1,2,3,4,5 of the penalty order. The ld Ass .....

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sment year 2008-09 the surrendered income reduced to ₹ 85,17,000/- against surrender of ₹ 1 Crore. Therefore, the claim of the assessee that out of total income of ₹ 5 Crores income of ₹ 4.49 Crores was appropriated towards unaccounted income of assessment year 2006-07 to 2008-09 and surplus income of ₹ 51 lakhs was more than the addition made for the assessment year 2002-03 to 2005-06. (d) The assessee not disclosed any income in the statement u/s 132(4) of the IT .....

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other years involved in the search assessment proceedings. The assessee has coated para-5(c) of the assessment order in his written submission. The claim of the assessee is not acceptable. Though no mention is available in para-5(c) of the assessment order but in the concluding para (Page-17) of the assessment order regarding initiation of penalty proceedings following finding has been recorded- Penalty notice u/s 271(1)(c) of the IT Act, 1961 r.w.s. 274/275 is issued separately for concealment/ .....

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e department has filed appeals against the orders of the ITAT allowing relief to the assessee in the orders for these three assessment years. (g) The assessee has relied on judgment of the Rajasthan High Court in case of CIT vs. Kanhaiyalal 299 ITR 19 and Madras High Court in case of CIT vs. S.D.V. Chandru 266 ITR 175. These judgments relates to offer of income in the statement u/s 132(4) of the IT Act, 1961 and immunity available under explanation 5 to section 271(1)(c) of the IT Act, 1961. The .....

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TR 200 (AT)(Luck) CIT V/s Mehta Engineers Ltd. (2008) 300 ITR 308 (P&H) Section - 271 (1)(c) CIT Vs. Ajaib Singh & Co. (2001) 253 ITR 630 (Puj. & Har.) The ratio of above judgments is not applicable to the case of the assessee. The case of Hindustan Steel Ltd. 83 ITR 26 and Dharmendra Textile Processors 306 ITR 277 (SC) has been over ruled by the Supreme Court in the case of Dilip N Shroff Vs CIT 291 ITR 519 (SC) and in favour of the revenue. (i) The ratio of other judgments are rela .....

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dient for attracting penalty (v) no discretion with the authority imposing penalty. Hence, revenue is not required to prove the element of mens rea on the part of assessee. This decision was understood to mean that levy of penalty is automatic. The above decision has been explained by the SC in subsequent decision in the case of UOI-v- Rajasthan Sps & Wvg Mills 224 CTR 1 SC wherein it is explained that levy of penalty is not automatic. If the conditions specified in the section are satisfied .....

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ex court recently in the case of Reliance Petro products 322 ITR 158 SC by observing that the said decision is an authority only for the proposition that element of mens rea stands excluded from the scope of the provisions of section 271(l)(c) and it is only to this extent the decision in case of Dilip N shroff stands overruled. It is further held that conditions of that section must exist before levy of penalty. It is for revenue to establish that such conditions exist. It is only the element o .....

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ncome(156290+30,143 =1,86,433) ₹ 30529/- 3. Tax sought to be evaded (1-2) ₹ 1425187/- 4. 100% of Tax sought to be evaded ₹ 1425187/- 5. 300% of Tax sought to be evaded ₹ 4275561/- 6. Penalty imposed equivalent to 100% of Tax sought to be evaded ₹ 1425187/- Issue necessary forms. This order has been passed after prior approval of the Jt. Commissioner of income-Tax, Central Range, Jaipur received vide her office letter No. Joint CIT(C)/ Penalty/JPR/2011-12/2380 dated .....

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cord and do not concur with the submissions of the AR on the following grounds: i) On examination of the facts it is seen that search in the case of appellant was conducted from 21 to 25th June, 2007. The return of income U/s 139 for this A.Y. was filed on 8.9.2005 declaring total income of ₹ 1,56,290/-. Subsequently return u/s 153A was filed declaring total income of ₹ 1,56,290/-. The assessment order was passed on 30.10.2009 determining the income of the appellant at ₹ 44,23, .....

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r of- i) Any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or ii) Any income based on any entry in any books of accounts or other documents or transactions and he claims that such entry in the books of accounts or other documents or transactions represents his income (wholly or in part) for any p .....

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penalty under clause (a) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. iii) This Explanation is a non-obstante clause and it is a deeming provision for purpose of imposition of penalty once the specific conditions are fulfilled. The facts of the case of the appellant are examined with reference to the conditions laid down as per Explanantion-5A of sec. 271 (l)(c) as follows: a) The search was car .....

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ed that the appellant was indulging in business outside his regular books of accounts income from which was not declared in his return. This was admitted to by him. A finding of fact regarding the matter was given by Hon. ITAT in quantum appeal of appellant vide order ITA No. 1302, 1303, 1304/JP/2010 for A.Y. 2002- 03, 2005-06 and 2008-09 dated 14.7.2011, on page 9 para 2.10 as follows: The assessee is doing business as, per regular books of accounts and is also doing business outside the books .....

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s of accounts, was not interfered with by the Hon. ITAT in its order. Thus the facts of the case are clearly covered under the provisions of Explanation-5 A to sec. 271 (1)(c) and the appellant is deemed to have concealed the particular of his income, since documents were found during the course of search showing undeclared income by way of investment in unaccounted debtors. iv) The AR of the appellant has raised the objection that the AO had specifically mentioned the assessment years namely A. .....

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at nowhere has it been mentioned in either of the orders relied on by him where exactly the satisfaction for initiating proceedings u/s 271(l)(c) is required to be noted. The AO has mentioned on page 15, para C of his order that he was satisfied that the case of the assessee is fit for imposing penalty us/ 271 (1 )(c) for A.Y. 2002- 03 to 2004-05 and while concluding the assessment order for A.Y. 2005-06 he has categorically noted as follows: Penalty notice u/s 271(1)(c) r.w.s 274/275 is issued .....

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enalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law required, so far as the penalty proceedings are concerned, is that they should be imitated in the course of the proceedings for assessment. It is sufficient, if there is some record somewhere, even apart from the assessment order itself, that the AO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. .....

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order and no specific recording of satisfaction required. In cases where sales were found to have been made outside books and not disclosed in the original return documents relating to undisclosed sales having been found during search, penalty u/s 271(1)(c) was upheld. a. DCIT vs. K. Natarajan (ITAT, Bang) 2 ITR (Trib) 273 b. ACIT vs. Kirit Dahyabhai Patel (ITAT, Ahd.-TM) 121 ITD 159 These findings are applicable to the facts of the case of the appellant because not only has he not declared the .....

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is satisfaction by noting that the penalty notice be issued for concealment/ furnishing of inaccurate particulars of income. However while passing the penalty order the AO has given a categorical finding that the penalty was being imposed on concealed income. The Karnataka High Court in the case of CIT vs. M/s Manjunatha Cotton & Jinning Factory & Ors. has admitted that there could be some cases which would attract both the offences. The specific observations are reproduced below: Clause .....

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on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Thus it is seen that the Hon. Karnataka High Court itself has accepted that there may be cases where there may be overlapping of the two offences and in such cases the initiation of penalty proceedings must be for both the offences. Thus in the case of the appellant the AO while initiating penalty proceedings u/ .....

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ion that penalty should be imposed u/s 271(1 )(c) for only concealment of his income. Thus the principle of natural justice was not offended given the facts of the case of the appellant. vi) The next contention of the AR of the appellant is that on the basis of the approval memos found during the course of search the assessee surrendered an amount of ₹ 5 Cr. in his statement u/s 132(4) in A.Y. 2006-07 to 2008-09. He accepted the taxability of debtors in earlier years on the basis of the da .....

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hose of the appellant. The penalty in the case of CIT vs. Kanhaiya Lai (supra) was applicable as per Explanation-5 of sec. 271(l)(c). The Hon. High Court has observed that from the language of sub clause (2) of Explanation-5 of sec. 271(l)(c), it is clear that it does not contemplate the requirement of the assessee paying tax in respect of such income, in any particular A.Y. only. It was clarified that the immunity as per such clause (2) of Explanation- 5 would not be lost, simply because of the .....

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e course of appellate proceedings the AR of the appellant has filed submissions that the AO had passed an order u/s 154 dated 28.1.2011 determining the tax on the total assessed income of ₹ 44,11,435/- at ₹ 14,39,632/- as against ₹ 14,55,716/- mentioned in penalty order. Relief was sought to this extent while determining quantum of penalty. The AO is directed to verify the submissions of the AR and determine the correct tax on the concealed income and thereafter calculate the p .....

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ly recorded his satisfaction for the assessment years for which he intended to initiate the penalty proceedings. This satisfaction he has recorded for AY 2002-03, 03-04, 04- 05, 07-08 & 08-09 only. For AY 2005-06 & 2006-07, no satisfaction is recorded for initiation of penalty proceedings. Therefore only because at the end of the assessment order, the AO has stated to have issued penalty notice u/s 271(1)(c) of the Act, the same cannot be taken as the satisfaction of the AO of having ini .....

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s. UOI in 317 ITR 107, wherein it has been held that the satisfaction should be arrived at during the course of any proceedings. It is a settled law that lex specialis derogat legi generali i.e. more specific provisions prevail over general. In the present case the Assessing Officer has specifically mentioned the assessment years for which he intends to initiate the penalty proceedings. Therefore, only mentioning at the end of the assessment order that penalty proceedings are initiated without r .....

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the notice U/s 274 and had not specified for issue of notice either concealment of income or furnishing inaccurate particulars of income. The Hon ble Karnataka High Court in case of CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors.(2013) 359 ITR 565 (Karn) has held that in penalty notice issued by the Assessing Officer, it should be specific in the notice itself that penalty either issued for concealment of income or furnishing inaccurate particulars of income. Sending printed form .....

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ry different connotations. The Hon ble Gujarat High Court in the case of Manu Engineering 122 ITR 306 and the Hon ble Delhi High Court in the case of Virgo Marketing 171 Taxman 156 have 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, in issuing the notice U/s 274, the Assessing Officer should be specific either on concealment of particulars of income or furnishing inaccurate particulars of incom .....

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ernatively, it is also submitted by the ld AR that the approval memo on the basis of which addition is made represents the outstanding debtors as on the date of search. The assessee in his statement u/s 132(4) has categorically stated that in his trade the goods are generally purchased and sold in cash but where the payment is not received in cash, it is recorded on such approval memo. Thus, these approval memo indicate outstanding amount on the particular date mentioned therein. The year in whi .....

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years on the basis of date mentioned on such approval memo though such debtors have arisen as a result of trading transaction of earlier years. Except these approval memos, there is no material on record to hold that it is out of the income of that particular year. Hence, only because the addition of debtors is confirmed in a particular assessment year it cannot be held to be undisclosed income of that year so as to attract levy of penalty u/s 271(1)(c) ignoring that the assessee has paid tax a .....

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o set standard for initiation of penalty proceedings U/s 271(1)(c) of the Act. A reference of initiation of penalty is sufficient satisfaction of the Assessing Officer. He further argued that as per Section (1B) of Section 271(1)(c), the deeming provision has been inserted in the Act as per this section only initiation of penalty proceedings is required to be used for Assessing Officer s satisfaction. Therefore, he prayed to confirm the order of the ld CIT(A). 6. We have heard the rival contenti .....

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rate particulars of income In notice U/s 274 read with Section 271-272 of the Act dated 30/10/2009 issued as under:- U/s 271(1)(c):- Concealed particulars of income or furnished inaccurate particulars of income . It is apparent from the initiation as well as issue of notice that Assessing Officer has not specifically specified that penalty proceedings either issued for concealed particulars of income or furnished inaccurate particulars of income. The amended provisions of Section (1B) was challe .....

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concealment of particulars of income or furnishing inaccurate particulars of income. U/s 271(1)(c) to initiate penalty proceedings, the pre-requisites should obtain (i) the Assessing Officer should be satisfied that: (a) the assessee has either concealed particulars of his income; or (b) furnished inaccurate particulars of income; or (c) infracted both (a) & (b). (ii) This satisfaction should be arrived at during the course of any proceedings. These could be assessment, reassessment or recti .....

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