TMI Blog2017 (8) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings has been done without application of mind. - Decided in favour of assessee. - ITA No. 441/JP/2014 - - - Dated:- 27-7-2017 - SHRI KUL BHARAT, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri Rajeev Sogani(CA) For The Revenue : Shri R.A. Verma (Addl.CIT) ORDER PER SHRI KUL BHARAT, JM. This Appeal filed by the Assessee is directed against the order of ld. CIT (A), Central, Jaipur dated 15.04.2014 pertaining to Assessment Year 2008-09. The Assessee has raised the following grounds of appeal :- 1. In the facts and circumstances of the case and in law the Ld. CIT(A) has erred in confirming the action of the Ld. AO in imposing penalty u/s 271(1)(c) of Income Tax Act, 1961 amounting to ₹ 21,76,000/-. The Action of the Ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty of ₹ 21,76,000/- imposed u/s 271(1)(c). 2. The assessee craves his right to add, amend or alter any of the grounds on or before the hearing. 2. On the last date of hearing, the Additional Ground filed by the assessee was admitted and the additional ground as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty was also confirmed in the first appellate proceedings by the Ld. CIT (A). Synopsis of the outcome in the quantum and penalty proceedings is as under:- S. No. Particulars Quantum Proceedings Penalty Proceedings Addition by AO Confirmed by CIT (A) Confirmed by ITAT Penalty Levied by AO Penalty Confirmed by CIT (A) 1. Addition as undisclosed income 56,50,000/- 56,50,000 56,50,000 19,02,000 19,02,000 2. Purchase of property out of gift received considered as undisclosed investment u/s 69 8,13,010/- 8,13,010/- 2,74,000 2,74,000 3. Agricultural income treated from other sources 1,16,400/- 65,79,410/- 56,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummarized position of the contentions raised before him are as under:- 1.1.i No corroborative documentary evidences were available with the department to confirm that the investment was actually done by the assessee in the partnership firm. Sole reliance was placed on oral evidences. 1.1.ii Partnership deed seized from the premises of SLK was unsigned which was nothing but a dumb document. 1.1.iii A worst the documents can be considered as one which the parties intended to enter. 1.1.iv Presumption of section 132 (4) is against the person in possession of the document. It cannot, in any way, be extended to third party. 1.1.v Entries in books of third party cannot be treated as evidence. 1.1.vi Oral admissions, with not contrary evidence on record, subsequently retracted have no evidentiary value. 1.1.vii No opportunity of cross-examination of SLK was provided to the assessee. 1.1.viii Contents of the affidavit cannot be ignored. 1.2 Ld. AO brushed aside the contentions raised without any cogent basis and levied penalty on the assessee. 2. COMMISSIONER OF INCOME TAX (APPEALS) 2.1. Elaborate submissions were also made before the Ld. CIT (A) which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. Evidentiary value of such statements cannot be relied upon as held by the Hon'ble ITAT Delhi Bench in the case of Amarjit Singh Bakshi (HUF) [2003] 86 ITD 13 (Delhi) (TM). So far as the penalty is concerned, no person should be penalized based on such. 3.6 Any witness who indulges in double tax is a shifty witness. His testimony is not reliable. He is not a trustworthy witness as it is difficult for the court to come to any conclusion on which occasion the witness told the truth on which occasion he did not. Such statement, whether given by way of an oral statement in an affidavit or in his examination , has little evidentiary value. This was held by the Hon'ble Calcutta High Court in the case of Eastern Commercial Enterprises [1994] 210 ITR 103 (Cal). In this case, initially, the witness stated that all the sales were genuine but subsequently he changed his stand before the Assessing Officer claiming that the sales were genuine and he received payments by account payee cheque. His statement was not believed as he was found to be shifty witness. Hon'ble Calcutta High Court observed as under:- ....... We have considered the contesting contentions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty u/s 271 (1) (c). It is for this reason that law for making addition in quantum proceedings is different from the law for imposing penalty. In recognition of this fundamental difference, both proceedings have been kept separate and independent. 3.12 Following questions, although not answered in the quantum proceedings needs to be dealt with in the penalty proceedings:- 3.12.i Why no deed was executed and signed when the same was ready for signing by parties? 3.12.ii Why the money was returned on the same day? 3.12.iii Why will anyone invest such a huge sum of ₹ 56,50,000 in cash without signing any deed when the same was ready for signing? 3.12.iv Why the firm will allow withdrawal of money without executing a retirement deed especially when the project was related to real estate having large stakes? 3.13 Hon'ble Bombay High Court in the case of Upendra V. Mithani ITA (L) No. 1860 of 2009, decided on 05.08.2009, observed in the matter of levy of penalty u/s 271 (1) (c) of the Act. that if the assessee gives an explanation which is unproved but not disproved i.e it is not accepted but circumstances do not lead to the reasonable and positive inference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly when the same was given in his presence and without his DeDenied Accepted Letter dated 17.06.2010 (AO- Quantum Order- Page 3) When summoned u/s 131 Statement made during search u/s 132 (4) 16.11.2017 (PB : 17-26) Affidavit dated 1.08.2008 (PB : 10) Denied Statement made u/s 131 (PB : 11-16) SLK Assessee Denied Accepted presence. In such circumstances cross-examination was all the more important so that SLK could have been confronted by the assessee for his two different versions. 3.14.v Affidavit submitted by SLK is self serving. Further such Affidavit of SLK has been denied by him, as a result it was unreliable. Affidavit, by no stretch of imagination, can be considered to be self serving. As per section 277, any person making a false statement under the Act can be punished with a penalty and also rigorous imprisonment. It is pertinent to not that if Ld. AO was of the view that wrong information has been furnished by SLK in the affidavit, the Ld. AO had all the powers to implicate him u/s 277. However, Ld. AO did choose to do so, as he himself was not fully convinced w.r.t. the facts emerging out of the different evidence. 3.15 The partnership deed found fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply his mind and come to a conclusion that whether the penalty is being levied for concealment of particulars of income or furnishing inaccurate particulars of income. 1.2 In the penalty proceedings, there is heavy onus on the ld. AO, initiating penalty, of proving the assessee guilty of concealment of income as penalty proceedings result into undue hardship for the assessee. Thus it is inevitable that the authority levying penalty should be fully satisfied, after proper application of mind, that it is fit case for levy of penalty. 1.3 Attention is drawn towards the notice issued under section 274 read with section 271(1)(c) (copy enclosed). 1.4 Any notice issued under section 274, read with Section 271(1)(c) of the Income Tax Act, 1961, should specify under which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income OR furnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271(1)(c). 1.5 It is pertinent to note that in the said notice Ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty being imposed on concealment of income or on furnishing inaccurate particulars of income, the Tribunal was justified in setting aside the impugned penalty order. Hon'ble Gujrat High Court followed the rati laid down in the case of New Sorathia Engg. Co. [2006] 282 ITR 642 (Guj-HC). 1.8 The above ratio laid down in the case of Manjunatha Cotton Ginning Factory (Supra) has been followed by various High Courts in the below mentioned cases: 1.8.i Shri Samson Perinchery, ITA 1154,953,1097,1226 of 2014 (Order date - 5.01.2017) (Bombay High Court) 1.8.ii SSA'S Emerald Meadows [2016] 73 taxmann.com 241 (Karnataka High Court) 1.8.iii Mitsu Industries Ltd. ITA No. 216 of 2004, Gujarat High Court 1.9 SLP filed by the department against the said order was dismissed by the Hon'ble Supreme Court in the case of SSA'S Emerald Meadows [2016] 73 taxmann.com 248 (SC). Hon'ble Apex Court in the above mentioned case held that we do not find any merit in this petition. The special leave petition is, accordingly, dismissed (Emphasis Supplied). Thus the matter has stamp of approval of the Hon'ble Aped Court. 1.10 Further attention is drawn towards the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order..... ( Emphasis Supplied) In view of the above, penalty levied by the Ld. AO deserves to be deleted as the same has been levied by him in a mechanical manner and without application of mind. 8. Ld. D/R opposed the submission; he submitted that the penalty has been validly initiated, and any technical or procedural defect should not be the basis for cancelling the penalty. 9. We have heard the rival contentions, perused the material available on record. We find that the AO has merely ticked the pre-typed notice u/s 274 read with Section 271 and 272 of the Income-tax Act. The relevant contents are reproduced as under:- U/s 271(1)(b) Failed to comply with a notice under section 142(1) or section 143(2) or failed to comply with a direction under section 142(2A). U/s 271(1)(c) Concealed particulars of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the penalty order. 10. In that view of the matter, the issue is answered in favour of the assessee and against the department. The facts are identical as were in the case before the Jurisdictional High Court. Therefore, respectfully following the jurisdictional High Court, we are of the considered view that the penalty imposed in pursuance of notice dated 29/09/2010 is bad in law, same is hereby deleted. The Ld. Departmental Representatives had relied upon the judgment of the Hon ble jurisdictional High Court in the case of Grass Field Farms Resorts (P.) Ltd. Vs. Deputy Commissioner of Incometax. The facts of that case are distinguishable as in that case the issue of validity of notice was not under consideration. As in that case issue of satisfaction by the AO was considered by the Hon ble High Court. However, in the case of Sheveta Construction Company Pvt. Ltd., vs. ITO (Supra). The Hon ble High Court ruled that the AO has to give a notice as to whether he proposes to levy a penalty for concealment of income or furnishing inaccurate particulars of income . He cannot have both the conditions and if it so he has to say so in the notice and record the finding in ..... 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