TMI Blog2017 (10) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. - ITA No. 3795 to 3801/Del/2014 - - - Dated:- 5-10-2017 - Shri H. S. Sidhu, Judicial Member And Shri Prashant Maharishi, Accountant Member Assessee by : Shri Vinod Kumar Bindal, Adv Revenue by : Shri SS Rana, CIT DR ORDER Per Prashant Maharishi, A. M. 1. These are the seven appeals filed by the assessee against the order of the ld CIT(A)-III, New Delhi dated 02.05.2014 for the Assessment Year 2006-07 to 2012-13 confirming the penalty levied u/s 271(1)(b) of the Act vide separate orders. 2. The assessee has raised the identical grounds of appeal in all these seven appeals, therefore, the grounds of appeal in ITA No. 3795/Del/2014 for Assessment Year 2006-07 are reproduced as under:- 1. That learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty levied by the Assessing Officer u/s 271(1)(b) of the Income Tax Act, 1961 in an amount of ₹ 10,000/- for Assessment Year 2006-07, on the basis that the appellant has not furnished 'consent form' in respect of alleged undisclosed overseas bank account, even though the appellant denies having any such bank account and consequently cannot furnish such 'consent fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b. Complete bank statement in original since beginning till date c. Residential status as per the Income Tax Act on the date of opening of foreign bank account and thereafter for all the assessment years 6. The assessee was further asked if he does not have a bank account he is required to furnish duly filled up signed and notarized consent letter on 22.07.2013. Assessee did not comply with this notice and neither submitted the notorised consent letter. Therefore, the ld Assessing Officer initiated penalty proceedings u/s 271(1)(b) of the Act. The assessee responded to the above notice stating that assessee has already submitted the letter dated 22.07.2013. Ld AO held that it is incomplete compliance of the notice issued. The ld Assessing Officer noted that assessee has neither furnished the complete bank statement nor the consent letter has been filed by the assessee and therefore, there is a failure to comply with the notice u/s 142(1) of the Act and therefore, levied penalty u/s 271(1)(b) of ₹ 10000/- each for all these years. Proceedings before CIT (A) 7. The assessee aggrieved with the order of the ld Assessing Officer preferred an appeal before the ld CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as account opening form, other documents, names of beneficiaries, details of transactions, etc., to the account-holder. In some such cases, account holders have already received information/documents from HSBC and are cooperating with the department in its investigations. It is also pertinent to note that the Income Tax Act, 1961 has also been amended to provide for reopening of tax assessments for a period of 16 years to cover such cases which has escaped assessment. It is only in such cases where such persons have refused to deliver the signed and notarized consent letters that penalty has been initiated and imposed under section 271(l)(b). 4.2 Thus, in the light of the above it is stated that these cases are not of simple tax evasion but of suspected tax evasion by transferring or keeping funds overseas in an illicit manner. The persons suspected of having opened and maintained undisclosed bank account overseas, were required to sign and execute/notarize the consent letter to verify the truth of the allegation against them. It is the duty of every citizen of India to cooperate with and join the investigation to ascertain the truth regarding cases with such serio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the ld CIT(A) has preferred appeal before us. It was submitted that: a. No addition has been made on substantive basis in the hands of the assessee but addition is only on protective basis. He submitted that addition on substantive basis has been made in the hands of Shri Anurag Dalmia. Therefore, the ld AO himself believes that income in that particular bank account does not belong to the assessee. b. He referred to para No,. 6 of the assessment order wherein he stated that document provided by the Assessing Officer refers that assessee is an attorney and therefore, that particular bank account has nothing to do with the assessee. c. He further referred to the decision of Pigam Impex Pvt. Ltd Vs. ACIT ITA No. 4787 to 4791/Del/2013 dated 6.02.2014, Pushpa Garg Vs. ACIT ITA No. 4852 to 4855/Del/2013 dated 06.02.2014, Viswanath Garodia Vs. DCIT 76 Taxmaann. Com 81, Shyam Sunder Jindal Vs. ACIT 81 Taxmann.com 123, LKG Builders Pvt. Ltd. Vs. DCIT 2017 TIOL-1242-ITAT-Del dated 29.08.2017, for deletion of penalty. d. He further raised an issue that there is no specific provision for issue of notice u/s 142(1) of the Act in search proceedings and therefore, no penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply. An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex-parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of such search, and lay down the manner in which such income is to be computed. 65.2 The Finance Act, 2003 has provided that the provisions of this Chapter shall not apply where a search is initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 by inserting a new section 158BI in the Income-tax Act. 65.3 Further three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition. 65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31st May, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A. 65.5 The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case.... 4. Further, the Third Member in Sumanlata Bansal vs. ACIT (ITAT Mumbai) (Third Member)(copy placed in paper book)followed the said judgment. 5. Thus, it is submitted that in absence of the specific section, penalty cannot be levied for non-compliance of notice u/s 142(1) of the Act as the same was not statutorily required to be issued. Further, the Hon ble jurisdictional Delhi High Court in many cases following Kurele Paper Mills Pvt. Ltd. duly confirmed by the Supreme Court has held that an assessment u/s 153A of the Act can only be made on the basis of incriminating material found at the time of search and not on the basis of any other evidence. This has been followed in various judgements as per list already placed in paper book at page 200 onwards. The direction of the revenue to file the consent waiver form as per the draft given by the revenue or to submit information as mentioned in the impugned notice dated 18/07/2013 was against the above judgments as it would be some evidence, much less incriminating, not found at the time of search. 6. The above judgments also support the view of the appellant as has been held in the cases of Ashok Chaddha and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hosiery Factory (1986) 159 ITR 85 (SC) Depreciation - Unabsorbed depreciation of unregistered firm - Firm Registered next year - Unabsorbed depreciation can be carried forward - Indian Income-tax Act, 1922, ss. 10(2)(vi), Prov. Cl. (b); 24(2), Prov. (b). Interpretation of statutes - Taxing statutes - Doubt - Assessee entitled to interpretation favourable to him. iv) CIT vs. Poddar Cement (P.) Ltd. [19971 226 ITR 625 (SC) Where there are two possible interpretations of a particular section which is akin to a charging section, the interpretation which is favourable to the assessee should be preferred while construing that particular provision. Reiterating the same view, in the case of CIT vs. Shaan Finance (P.) Ltd. [1998] 231 ITR 308 (SC) it has been held that in interpreting a fiscal statute, the Court cannot proceed to make good the deficiencies if there be any. The Court must interpret the statute as it stands and in case of doubt, in a manner favourable to the taxpayer. v) CIT Vs Naga Hills Tea Co. Ltd. (1973) 89 ITR 236 (SC) Where a literal construction would defeat the obvious intention of the legislation and produce a wholly unreasonable result, the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntation of the People Act has been held to be a complete and self-contained code within which must be found any rights claimed in relation to an election or an election dispute. We are concerned with an election dispute. The question is who are parties to an election dispute and who may be impleaded as parties to an election petition. We have already referred to the Scheme of the Act. We have noticed the necessity to rid ourselves of notions based on Common Law or Equity. 9. Here also the AO resorted to an extra legal method by demanding signing of some consent waiver form which is beyond the scope of the term accounts or documents mentioned u/s 142 (1) of the Act. The AO is a creation of the statute and can exercise only and only those powers which are provided in the Act. Statutory powers u/s 142(1) of the Act are confined only and only to accounts and documents . Needless to emphasize that a statutory authority can exercise only those powers which are conferred by the relevant statute and he cannot on his own extend these powers. The term Document has not been exhaustively defined under Income-tax Act but the section 2(22AA) of the Act provides inclusion of an electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited company, was alleged to be the statutory agent of the Hongkong Company, which is another limited company. The Bombay Company is not proved, on evidence, to be the statutory agent of the Hongkong Company. In law, the two companies are different entities. I do not see any justification for the Income-tax authorities calling upon the Bombay Company to produce the books of the Hongkong Company and in default to suffer the consequences provided in Sec. 23(4). The utmost which can be stated, on the allegations or statements found in the reference, is that the two companies may be called friendly. There appears, however, no justification in law, on that account, to call upon one friend to produce the books of another and in default to make the party called upon liable under Sec. 23(4). 12. The Hon ble Supreme Court in Amiya Bala Paul vs CIT (2003) 262 ITR 407 in para 11, copy placed in paper book, has held that a reference to the DVO cannot be made u/s 142(2) of the Act because that cannot be called an enquiry by the assessing officer himself but was the result of an enquiry by the DVO. Thus, asking to file a consent waiver form is not the enquiry by the AO himself under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is statutory powers and this cannot be made any basis for taking a penal action against the assessee because the revenue itself cannot prove the information and its source from the origin as authentic. No copy of any correspondence between the revenue and the said Bank has been given to the appellant to support the contention that the revenue authorities had been advised by the said Bank to seek a direct mandate from the appellant. The entire thrust of the AO is on the premises that a negative burden of proof can be imposed upon the assessee and that it was the legal duty of the assessee to establish the incorrectness/ untruthfulness of the impugned stolen data. This is against the established legal principles. 16. It is therefore submitted that the impugned penalty u/s 271(l)(b) of the Act on the appellant is unwarranted and is judicial harassment of the appellant. The law cannot be twisted so as first to demand compliance from an assessee in excess of the statutory powers and then, levy penalty for not meeting the illegal demands. 17. Further, the assessment order was finally passed under section 143(3) of the Act and not u/s 144 of the Act (that too on protective basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first reference was made to Swiss authorities in this regard. 22. The CIT(A) thereafter has stated that after commencement of investigation by Indian tax authorities in respect of those HSBC Swiss bank accounts, several persons acted differently e.g. suomoto disclosed the same and paid tax thereon, paid the tax after search, refused to acknowledge the said account etc. etc. However, no concrete information was given therein about the number of such persons in each category so mentioned. This again showed that the said averments were on surmises. The appellant filed an application under the Rights to Information Act 2005 to the CIT(A) about the same without asking him to disclose the names but only for numbers of persons in each such category to ascertain the authenticity of his averment in the appellate order. However, instead of giving the reply of the information sought by the appellant, the CIT(A) refused to give any information on the plea of confidentiality. Copies of the RTI application and its reply have been filed in the PB submitted on 29/05/2017. Thereafter, the appellant inspected the relevant appellate files /folders in the office of the CIT(A) and found no materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... voked in assessment year 2004-05 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2004-05 is based on presumptions, surmises and conjectures. It is settled law that suspicion howsoever strong, it cannot take place of actual evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of six assessment years has to be rejected. ii) Hiralal Chunilal Jain vs. ITO in Appeal No. 4547/Mum /2014 by ITAT Mumbai IDated 01/01/161 Bogus Sales/ Purchases: Addition solely on the basis of information received from the sales-tax department is not sustainable. Suspicion of the highest degree cannot take the place of evidence. iii) DCIT vs. Rajeev G. Kalathil in Appeal no. 6727/Mum 2012 by ITAT Mumbai 67 SOT 52 The fact that the supplier is declared as a Hawala dealer by the VAT department is a good starting point for making further investigation and taking it to its logical end. However, suspicion of highest degree cannot take place of evidence. The AO ought to have called for details of the bank accounts of the suppliers to find out as whether there was any immediate cash wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heroin. However, cases are to be decided by the Court on legal principles and not on one's own moral views. Law is different from morality, as the positivist Jurists, Bentham and Austin pointed out. ii) Sanjay Tandon (Individual) 117 ITD 167: 21. In the present case, s. 184(3) clearly provides that firm should be continued to be assessed as such if it is already assessed as firm in the previous year. Against this mandate of statutory provision, the assessee cannot be assessed as AOP. In fact, this seems to be an argument against morality, i.e., if the assessee has taken stand before the CIT (A) then it is against moral principle to challenge that before the Tribunal. In this regard, we may refer to the decision of Hon'ble Supreme Court in Dr. T.A. Quereshi vs. CIT (2006) 206 CTR (SC) 489 : (2006) 287 ITR 547 (SC) wherein it is held that cases cannot be decided on one s moral view and law is different from morality. In other words, if there is a statutory provision then it is to be followed irrespective of moral values on the issue and the plea taken by the assessee before lower authorities. Accordingly, this ground of Revenue is rejected. iii) CIT vs Pt. Vis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the statute or which are in excess of the powers granted. Exercise of power in a manner not allowed by law is ultra vires and not lawful as well. 30. Thus, the imposition of impugned penalty u/s 271 (1 )(b) of the Act in respect of an alleged default read with section 153 A of the Act was ultra vires, illegal and void ab initio. e. He further stated that contrary decisions in the above case with respect to Manish Periwal does not apply to the facts of the case because that decision was rendered ex parte. 10. In the end he submitted that no penalty can be levied u/s 271(1)(b) of the Act and therefore, ld Assessing Officer and ld CIT(A) grossly erred in levying and sustaining the above penalties. Arguments of the Revenue 11. The ld DR vehemently submitted that assessee has failed to comply with the notice issued u/s 142(1) of the act by neither supplying the information about the bank account nor the consent letter. He submitted that the letter, which is said to be compliance of the notice, is no compliance as neither of the information is furnished. He stated that if the assessee is so certain that he does not have the bank account in that bank then there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 23/07/2013 and copy of which was also submitted on 23/09/2013. Therefore the claim of the assessee is that there is a complete compliance of the said notice and therefore penalty cannot be levied. The Ld. assessing officer rejected the contention of the assessee and held that as no consent letter was submitted by the assessee and merely stating that assessee does not have bank account there is no compliance by the assessee, therefore, the penalty under section 271 (1) (b) of the act of ₹ 10,000 was levied for all these years. CIT appeal confirmed the above penalty for all the years. We fully agree with the finding given by the Ld. CIT (A) in confirming the above penalty and our reasons are as under:- a. The name of the assessee appeared in a particular bank account maintained with the HSBC account and therefore the Ld. assessing officer has requested the assessee to furnish either the bank account of that particular bank or to give consent letter in a particular form so that the assessee can be helped by the revenue for obtaining the copies of the above bank account. In case if the contention of the assessee is correct, then naturally the bank account would not by the HS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d precisely on the point giving the clear cut requirement of the law, and in absence of compliance of such notice, the penalty under section 271 (1) (b) is correctly levied, e. The deletion of the addition in the hands of the assessee does not help the argument of the assessee because the addition was made in the hands of the assessee on protective basis and on substantive basis in the hands of the other family members of the assessee. The addition in the hands of the other family members on substantive basis have been upheld by the appellate authorities and therefore the addition in the hands of the assessee has been deleted, which was made on the protective basis. Therefore, the result of appeal of the assessee before the appellate authority does not help the case of the assessee so far as these penalties are concerned. f. The argument of the assessee is that there is no provision of issue of notice under section 142 (1) of the act for assessing the income unearthed during the course of search and therefore the penalty originating from non-compliance of that notice does not survive because of the reason that assessment has been made under section 153A of the income tax act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts the penalties were deleted. In the present case, the facts are very clear that the assessee was asked to comply with certain notices which assessee defiantly did not comply by furnishing such information or if the assessee does not have such information by not signing the consent letter. In view of this the reliance placed on the above decision is incorrect. b. The 2nd decision relied upon by the assessee is with respect to ITA No. 6425 and 6426/del/2015 for assessment year 2006 07 in case of Sh. Shyamsunder Jindal . We have carefully perused the facts of the above case and we are of the considered opinion that in that particular case, it was not considered by the coordinate bench that whether the non-filing of the consent letter is a compliance or not. The bench also did not consider that the consent letter in the absence of the information was not submitted, and therefore there was a non-compliance of the notice under section 142 (1) of the income tax act. Furthermore in para No. 6 of that particular order it is stated by the coordinate bench that:- In our opinion, when nothing was brought on record to substantiate that the alleged bank and account actually belong t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der-imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. In such circumstances penalty should not be levied. It is further held that where there is a technical or venial breach of the provisions of the act or where the breach) is bona fides that the vendor is not liable to act in the manner prescribed by the statute, the adjudicating authority will be justified in refusing to impose penalty. In that particular case the issue was pertaining to the sales tax matters where whether the amounts charged by the company as a fixed percentage for storage insurance etc it can be said to be that assessee was carrying on business of supplying material and it would not be a dealer . Further, merely registering the assessee is a dealer under the genuine belief that company was not a dealer, no penalty should be levied. In the present case, the facts are quite different. In the present case the information was received by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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