TMI Blog2016 (9) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional High Courts, and must be considered as having been rendered in the facts of the case, i.e., where the assessee is not in the know of the charge against, or the default for which penalty is proposed to be levied on him. The assessee s argument fails. There being no separate initiation qua each addition - As we discern from the assessment order and the material on record, the assessee furnished no explanation during the assessment proceedings; failing to produce the creditors, as called for vide order sheet entry dated 14/10/2008. In penalty proceedings also the assessee s explanation (vide letter dated 18/6/2009) was only with reference to the addition u/s.68, i.e., qua which the penalty stands levied. Why? That is to say, there was no ambiguity or doubt that the penalty was initiated and proposed to be levied only qua this addition, i.e., qua which only it stands levied despite the assessee not furnishing any explanation qua the disallowance , to which there is no reference or even a whisper in the penalty order. Legally also, section 271(1B) stands inserted in the statute book by Finance Act 2008, with retrospective effect from 1/4/1989; the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the credits, admitting the impugned sum as its income. The decisions in the case of Mak Data (P.) Ltd. [ 2013 (11) TMI 14 - SUPREME COURT] and K. P. Madhusudhanan vs. CIT [ 2001 (8) TMI 8 - SUPREME COURT] among others, which clarify the settled position in the matter, are clearly applicable in the present case. - Decided against assessee. - I.T.A. No. 206/Mum/2011 - - - Dated:- 19-9-2016 - SHRI SANJAY ARORA, A M AND SHRI PAWAN SINGH, JM For The Appellant : Shri Prakash Jhunjhunwala and Shri Sanjay Jain For The Respondent : Shri Vishwas Jadhav ORDER Per Sanjay Arora, A. M.: This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-8, Mumbai ( CIT(A) for short) dated 11.11.2010, confirming the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2006-07 vide order dated 25.6.2009. 2. Vide the instant appeal, the assessee challenges the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 ( the Act hereinafter), at one hundred percent of the tax sought to be evaded for assessment year (AY) 2006-07, since upheld by the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in their name it would suffice for the purpose of the income tax that the amounts received from these individual are taxed in the hand of the company, since section 68 of the IT Act operates on the receipt of credit in the books and subsequent change are inconsequential. This is followed by findings pursuant to the statements recorded of Rita Tanna and Vijal Tanna , the persons stated to have purchased the shares from the original allotees. Considering the said depositions, as well as the facts of the case, he further held as: (at pg. 4 of the assessment order) Thus both the initial allotment and subsequent purchase is a sham transaction. All people examined have feigned ignorance of the transaction. All of them without any exception are unaware of the details of sources of funds in their bank accounts. They have not disclosed the sources of the funds even at subsequent stage. Ignorance of such high value transactions by all of them is not co-incidence. All these persons have been utilized by the assessee company to accommodate its undisclosed income . Reliance was further placed by him on the decisions in the case of Sohan Lal vs. CIT [2002] 256 ITR 659 (P H); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record material establishing the transactions as sham. Not only the shareholders did not have any knowledge of the transactions, or of the investee-company, much less capacity to invest therein, denying the same, the persons purchasing the shares there-from also had no clue of the purchase of shares by them, much less the source of funds for investment, admitting to as did the original subscribers, having signed blank cheques . The decision in the case of CIT vs. Lovely Exports P. Ltd. [2008] 319 ITR (St.) 5 (SC) (dismissing the Revenue s SLP against the judgment of the Delhi High Court reported at 299 ITR 268) is not applicable in-as-much as subsequent to the assessee filing the details of the shareholders, the AO had carried out investigation, bringing on record evidence to the effect that the transactions were bogus. The onus had thus shifted to the assessee, who had not brought on record any material rebutting the findings by the AO that the shareholders were bogus and mere name lenders. The assessee had, in fact, come forward owning the impugned investment. The proposed penalty was accordingly levied vide order dated 25.6.2009. In further appeal, where at the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pg. 756) Under s. 274 of the I. T. Act, 1961, all that is required is that the assessee should be given an opportunity of show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings. A similar issue came up before the Hon'ble jurisdictional High Court in the case of Smt. Kaushalya Others (supra). Relying on the decision in the case of Mithila Motors (supra), it was held as under: (pg. 665(e-g)) Sec. 274 of the Income-tax Act, 1961 contains a principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in the facts of the case, i.e., where the assessee is not in the know of the charge against, or the default for which penalty is proposed to be levied on him. The assessee s argument fails. 5.2 The second proposition canvassed by the ld. Counsel again finds fault with initiation of the penalty proceedings, this time on the basis of there being no separate initiation qua each addition. Reliance for the purposes is placed on CIT v . Virgo Marketing (P.) Ltd . [2008] 171 Taxman 156 (Del) and Chennakesava Pharmaceutical vs. CIT [2012] 349 ITR 196 (AP), besides others by the tribunal. In this regard, we find the assessee s claim as untenable, both factually and legally. On facts, the satisfaction of the AO as to the assessee having concealed the particulars of income which the law deems on the assessee failing to furnish any explanation; or furnishes one which is found as false; or a satisfactory explanation, substantiating the same with reference to the disclosed facts, manifest in the assessment order itself, which (order) stands reproduced in part (in this order), and also bears the gist of the statements which are in fact revealing, recorded of all the traceab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stands levied despite the assessee not furnishing any explanation qua the disallowance , to which there is no reference or even a whisper in the penalty order. Legally also, section 271(1B) stands inserted in the statute book by Finance Act 2008, with retrospective effect from 1/4/1989; the same reads as under, making it abundantly clear that that a mere initiation is deemed as to constitute a satisfaction of the Assessing Officer for initiating penalty proceedings u/s. 271(1)(c): Failure to furnish returns, comply with notices, concealment of income, etc. 271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person (a) .. (b) . (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) he may direct that such person shall pay by way of penalty .. (1A) (1B) Where any amount is added or disallowed in computing the total income or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order, signifies a clear direction, leaving no option or discretion for the competent authority (AO) whether to take action or not, so that the same is only in the nature of a direction, as explained by the Hon ble Apex Court in Rajinder Nath vs. CIT [1979] 120 ITR 14 (SC). It in fact clarifies of the simultaneous issue of the notice u/s. 274 show causing the assessee in the matter. The assessee s second argument thus is also of no moment. 5.3 The third proposition advanced is that a voluntary surrender would not attract penalty. The law in the matter is clear, and the assessee cannot take recourse to this plea upon detection of the income . The consistent and uniform judicial opinion in the matter; case law on which is legion, is that blameworthiness attaches to the assessee with reference to the original return, which cannot be avoided for filing a fresh return or making a surrender after the concealment is detected by the A.O. (refer: CIT vs. A. Rm. A.L.A. Arunachalam Chettiar [AIR 1932 Mad. 433]; Vadilal Ichhachand vs. CIT [1957] 32 ITR 569 (Bom); Woman Padmanabh Dande vs. CIT [1952] 22 ITR 339 (Nag); Biland Ram Hargan Dass vs. CIT [1988] 171 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly poised, being essentially matters of fact. We have in the present case, on the other hand, clarified of a complete failure on the part of the assessee in discharging the onus or the burden of proof on it; the evidences on record being unrebutted, so that the same in fact disprove the assessee s claims, leading to the inference of the credits being the assessee s money. The assessee s disclosure is to be seen in this context. The argument advanced thus is invalid, both on facts and in law, as well as not sustainable in law in the facts and circumstances of the case. The decision in Lovely Exports P. Ltd. (supra), not pressed before us, stands discussed in CIT vs. Nova Promoters Finlease P. Ltd. [2012] 342 ITR 169 (Del), explaining the scope of the explanation of the former decision. The clear findings by the Revenue being undisputed and unrebutted, there is no question of the application of the decision in Lovely Exports P. Ltd. (supra) in the instant case. The filing of the confirmations by the creditors, in this view of the matter, is of little consequence. If the share application and transfer forms, nay, blank cheques could be signed by the share applicants, why could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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