TMI Blog2020 (9) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty proceedings, could also not be sustained. Moreover, the condition of framing of specific charge, in any case, was required to be fulfilled before invoking Explanation 5A against the assessee - we hold that impugned penalty was unsustainable in the eyes of law and therefore, we direct for deletion of the same. -Decided in favour of assessee. Penalty proceedings u/s 271AAA - notice u/s 274 read with Section 271AAA was issued to the assessee without specifying the exact charge - HELD THAT:- It is quite evident that beside failure to frame specific charges against the assessee, the penalty was initiated u/s 271AAA in the quantum assessment order whereas the same has finally been levied u/s 271AAB which would show non- application of mind on the part of Ld. AO to factual matrix of the case. It is noted that the penal provisions of Sections 271AAA were not, at all, applicable to the facts of the case since the search was conducted on the assessee after 01/07/2012. Therefore, from any angle, the penalty would not be sustainable in the eyes of law. - Decided in favour of assessee. - I.T.A. No.5580/Mum/2016, I.T.A. No.7645, 7646, 7647, 7648, 7649, 7650/Mum/2016 - - - Dated:- 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /IT/DC-CC- 4(3)/151/2015-16 dated 01/09/2016 2014-15 143(3) dated 19/05/2015 271AAB Vide penalty order dated 23/11/2015 Appeal No. CIT(A)-52/IT/DC-CC- 4(3)/153/2015-16 dated 02/09/2016 First, we take up appeal for AY 2007-08 since the penalty has been confirmed by first appellate authority, for the first time, in this year. ITA No. 5580/Mum/2016, AY 2007-08 2.1 Aggrieved by confirmation of penalty u/s 271(1)(c) for ₹ 94,16,115/- by Ld. Commissioner of Income-Tax (Appeals)-52, Mumbai, [in short referred to as CIT(A) ], Appeal No. CIT(A)-52/IT/DC- CC-4(3)/113/2015-16 order dated 16/06/2016, the assessee is in appeal before us with following ground of appeal: - 1. The learned CIT(A)-52 has erred in confirming the penalty levied by the learned Assessing Officer without appreciating the fact of the case in the right perspective. 2.2 The assessee, vide petition dated 29/07/2019, has filed additional ground of appeal and pleaded for the admission of the same by submitting that the same are legal grounds and do not require appreciation of new facts. The said ground reads as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was reopened vide issuance of notice u/s 148 on 11/02/2014. In response, the assessee filed return of income on 07/03/2014 declaring income of ₹ 117.53 Crores. In other words, in the return of income, the assessee declared additional income of ₹ 2.79 Crores (₹ 117.53 Crores ₹ 114.74 Crores) as disclosed during search operations on account of alleged bogus purchases bogus payments amounting to ₹ 2.68 Crores ₹ 0.11 Crores respectively. It is evident from perusal of quantum assessment order that the said returned income has been accepted by the revenue without making any further additions. 2.6 The bogus purchases were stated to be made by the assessee from various concerns controlled, operated and managed by one Shri Jagdish Mundra, an alleged entry provider. The statement of Shri Jagdish Mundra and his accountant was recorded u/s 132(4) wherein it was confirmed by them that various concerns run by Shri Jagdish Mundra were mere paper concerns involved in giving accommodation entries to various parties without supplying any material. 2.7 During the course of search proceedings, statements of key persons of assessee s group was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the paper-book. Upon perusal of the same, it is noted that neither the applicable clause has been ticked-off nor the applicable limb i.e. have concealed the particulars of income or furnishes inaccurate particulars of such income have been specified / mentioned. In other words, prima-facie, there was failure on the part of learned AO to frame a specific charge against the assessee for which the assessee was being penalized. 2.11 During penalty proceedings, the assessee inter-alia, pleaded that the total turnover of the assessee was ₹ 328.96 Crores and the amount of disputed purchases / expenditure ₹ 2.79 Crores barely constituted 0.80% of the turnover and it was practically impossible for Managing Director to abruptly certify the authenticity of the expenditure at the time of search proceedings by producing supporting documents like bills, delivery challans, lorry receipts, entries inward /outward register and to attend to a list comprising-off of almost 50 to 75 such dealers. Nevertheless, the said admission was made to buy peace with the Income Tax Department. The attention was drawn to the fact that tax was voluntarily paid by the assessee on 31/01/2014 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Finally, the assessee has been saddled with impugned penalty of ₹ 94.16 Lacs, being 100% of tax sought to be evaded vide penalty order dated 28/09/2015. 3.1 Aggrieved, the assessee preferred further appeal before first appellate authority and again drew attention to the fact that the purchased goods were actually used in the ordinary course of production of films and telefilms and the purchases were duly supported by purchase registers, the payment to suppliers was through banking channels, the suppliers were having VAT No. / PAN and similar other registrations and the purchased goods were duly entered in the Goods inward register. The attention was also drawn to the fact that surrender was not backed by any incriminating material or document which would conclude that the purchases were non-genuine and no opportunity of cross-examining the suppliers was ever provided to the assessee in violation of principle of natural justice. Reliance was placed on the decision of Indore Tribunal rendered in Radheshyam Sarda V/s ACIT for the submissions that once the revised ROI has been regularized by the revenue, the assessee s explanation that he had declared the additional income t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in CIT V/s Manjunatha Cotton Ginning Factory 359 ITR 565. In the light of these submissions, it has been submitted that the AO has to apply his mind as to specific charge which was being invoked against the assessee and non-application of mind would make the penalty proceedings void-ab- initio and hence, would be liable to be quashed. The said submissions have further been fortified by submitting that the learned first appellate authority invoked Explanation 5A for the first time, during appellate proceedings which would show complete non-application of mind on the part of lower authorities while levying penalty against the assessee. Reliance has been placed on following judicial precedents in support of legal submissions: - No. Case Law Judicial Authority Citation 1. CIT V/s SSA s Emerald Meadows Hon ble Supreme Court 73 Taxmann.com 248 SLP dismissed on 05/08/2016 2. Shri Samson Perinchery Hon ble Bombay High Court ITA No. 1154 of 2014 Ors. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was recorded at the back of the assessee and the same was never confronted to the assessee and no opportunity of cross- examination was ever provided to the assessee, which was in gross violation of principle of natural justice. However, the fact remains that revenue was not in possession of any incriminating material which would corroborate those third-party statements. The assessee made a voluntary disclosure to avoid further litigation and the disclosure, in toto, has been accepted by the revenue. In the said background, Ld. AR asserted that the penalty was unjustified, under the given circumstances. 4.3 Lastly, Ld. AR submitted that the returned income filed by the assessee has been accepted by the revenue and due taxes were paid even before issuance of notice u/s 148 and therefore, the penalty was not justified from this angle also since there was no concealment of income or furnishing of inaccurate particulars in the return of income furnished by the assessee. 4.4 The Ld. Departmental Representative, on other hand, submitted that surrender / disclosure was made only pursuant to search proceedings and therefore, the penalty was clearly leviable in terms of Explanation 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect whereas, concealment of particulars of income would mean that the assessee has concealed the income and has not reflected certain income in its return of income. 5.4 For the said proposition, we straightway rely upon the decision rendered by Hon ble Bombay High Court rendered in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein Hon ble Court has held as under: - 3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-Assessee. This by holding that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. 7. Therefore, the issue herein stands concluded in favour of the Respondent- Assessee by the decision of the Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra). 8. In view of the above, the question as framed do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. (e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. (f) Ever if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) 1(B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. (g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). (h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. (i) The imposition of penalty is not automatic. (j) Imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate aspect of the proceedings. (u) The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. 8. We are not required to consider the other contingencies for examination of legality and validity of the penalty under Section 271(1)(c) of the Act, but clauses (p), (q) (r) of the above referred observations are required to be considered. 9. As per the above referred decision of this Court, the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to whether it is for the concealment of income or furnishing incorrect particulars of the income said penalty proceedings is being initiated. Second aspect is that, as held by this Court, sending of printed form wherein the grounds menti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confronted to the assessee during penalty proceedings. Therefore, respectfully following the binding judicial precedents favoring the assessee, on the issue, we find substantial force in legal grounds raised by Ld. AR, in this regard. 5.7 For the aforesaid reasons, the provisions of Explanation-5A to Section 271(1)(c), as invoked by learned first appellate authority for the first time, which were never invoked by Ld. AO and which was never confronted to the assessee during penalty proceedings, could also not be sustained. Moreover, the condition of framing of specific charge, in any case, was required to be fulfilled before invoking Explanation 5A against the assessee. 5.8 Proceeding further, we find that one of the sister concerns of the assessee group, which was also covered under same search proceedings was saddled with penalty on similar circumstances. The co-ordinate bench of the Tribunal, while adjudicating the assessee s appeal titled as Balaji Motion Pictures Ltd. V/s DCIT, ITA No. 7643/Mum/2016 order dated 03/01/2018, deleted the penalty in view of the fact that the incriminating statement made by Shri Jagdish C. Mundra, was never confronted to the assessee and no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal for AY 2014-15 7.1 This AY pertains to financial year in which the search was conducted in the case of the assessee i.e. on 30/04/2013. Accordingly, the assessment was framed u/s 143(3) on 19/05/2015 accepting the returned income of ₹ 8.78 Crores filed by the assessee on 15/11/2014. Nevertheless, penalty proceedings were initiated u/s 271AAA while framing the assessment. The notice u/s 274 read with Section 271AAA was issued to the assessee on 19/05/2015 in similar manner, without specifying the exact charge. However, penalty has finally been levied for ₹ 11,240/- u/s 271AAB vide penalty order dated 23/11/2015. The same, upon confirmation by learned first appellate authority, is under challenge before us. 7.2 Going by the enumeration of facts, it is quite evident that beside failure to frame specific charges against the assessee, the penalty was initiated u/s 271AAA in the quantum assessment order whereas the same has finally been levied u/s 271AAB which would show non- application of mind on the part of Ld. AO to factual matrix of the case. It is noted that the penal provisions of Sections 271AAA were not, at all, applicable to the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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