TaxTMI 
TaxTMI 
2011 (8) TMI 748
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..... yr. 2005-06 and its genuineness may be examined in asst. yr. 2005-06, therefore, action under s. 148 of the Act was taken for the asst. yr. 2005-06. The AO completed assessment under s. 147/143(3) of the Act on 20th May, 2009 at the total income of Rs. 12,30,900 making certain additions as against original returned income of Rs. 68,960. The AO initiated penalty proceedings under s. 271(l)(c) of the Act. Duping the course of assessment proceedings, it was revealed from the revised return that the assessee had surrendered various cash credits and deposits totalling to Rs. 10,75,062. In order to verify the authenticity of other various creditors given in the list of sundry creditors, the books of account were examined and enquiry letters were issued for confirmation of these credit balances. On the basis of examination of books of account and direct enquiries made from trade creditors, further certain credit balances were not found correct. In the cases of Prakash Dye-chem and Princessa Overseas, enquiry letters were sent and the same were returned back unserved and in the cases of Ajai Engineering Works, Garg Trading Co., and Modern Tin Decorators, enquiry letters were sent but no ....
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....ssessee realizes the true position, it does not dispute certain disallowances but that does not absolve the Revenue from proving the mens rea of a quasi-criminal offence...' (p. 713). Clause (c) of sub-s. (1) of s. 271 categorically states that the penalty would be leviable if the assessee conceals the particulars of his income or furnishes inaccurate particulars thereof. In the "present case, assessee himself disclosed the income in response to return under s. 148 of the IT Act to buy peace of mind and to avoid litigation. Further, in Gem Granites (Karnataka) v. Dy. CIT [2009] 31 SOT 21 (Chennai) (URO), has held that though Supreme Court held that penalty provision is civil liability and wilful concealment is not an essential ingredient, however, onus to prove that there was a concealment of income with a view to avoid tax, is on Department. Therefore, for attracting penalty provision, a strict proof is required and onus to prove the same is on Department. Since Department had failed to establish the same and discharge its onus, ultimately, penalty imposed by the Department was not warranted and justified and deleted the penalty," 2.1 The AO did not accept the reply of the asse....
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....deed concealed income or had furnished inaccurate particulars. It is a fact, evident from the records that it was the assessee who had offered the impugned creditors for taxation purposes in the revised return filed. The decision of the Hon'ble Supreme Court in the case of Suresh Chandra Mittal (supra) is clearly applicable to the facts of the case. However, as regards, the addition of Rs. 86,882 made by the AO, I find that the AO had made extensive enquiries in each and every such case, and the appellant was unable to provide any bona fide explanation with respect to those transactions. Thus, penalty in respect of addition of Rs. 86,882 is hereby confirmed." 4. Now the Revenue is in appeal before the Tribunal against the order of the learned CIT(A) in cancelling the penalty of Rs. 3,98,209. 5. Before us, Shri P.K. Bajaj, learned' Departmental Representative vehemently argued that the order of the learned CIT(A) in cancelling the impugned penalty is not sustainable in law. According to him, in this case, original return of income showing income of Rs. 68,960 was filed on 11th Dec., 2005 and further the assessee was having opportunity to surrender/disclose any income in its revise....
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....e explanation of the assessee had not been accepted by any of the authorities and concealment of income, as a matter of fact, was found by all the three authorities. Therefore, the return filed so as to include the concealed income could not be characterized as a revised return within the meaning of s. 139(5) of the Act. The Tribunal had found that the penalty proceedings had been commenced during the course of the assessment proceedings. The Expln. 2 to s. 271(l)(c) applied. The Tribunal was justified in confirming the order of penalty. No question of law arose from its orders. 5.4 Ravi & Co. v. Asstt. CIT [2004] 271 ITR 286/[2005] 143 Taxman 287 ((Mad.), wherein it has been held that the Tribunal found that the revised returns had not been filed voluntarily in a bona fide manner, but with a view to escape from the consequences of not filing a proper return. In the reply to the notice under s. 271(l)(c) of the Act, the assessee did not offer any credible explanation indicating the reasons for which the amount had not been disclosed in the original return. The Tribunal was right in upholding the penalty levied under s. 271(l)(c) of the Act. 6. On the other hand, Shri Rakesh Garg,....
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....f the case. Shri Rakesh Garg, learned counsel for the assessee vehemently argued that the so-called reasons recorded by the AO for reopening the assessment speak of non-application of mind. The AO has not demonstrated as to how the opening balances are not explainable, whether with reference to name or amount. There is no attempt on the part of the AO to demonstrate that the closing balance of the asst. yr. 2005-06 is not correct. It may be that the fresh credits for asst. yr. 2006-07 may have been themselves shown as opening balances instead of fresh deposits. Shri Rakesh Garg, learned counsel for the assessee also pointed out that the AO in the reasons has mentioned that it was during the course of assessment proceedings for asst. yr. 2006-07 that it came to suspect the genuineness of the opening credit balances. As per s. 142(1) proviso (b) the AO could have called for production of any accounts relating to a period up to three years prior to the year under assessment. The AO did not call for the accounts and as such failed to apply his mind to the facts of the case. Shri Rakesh Garg, learned counsel for the assessee submitted that in view of the above, initiation of proceedings....
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....come, therefore, assessee is liable for penalty as provided in s. 271(l)(c) of the IT Act, 1961." 6.3 Shri Rakesh Garg, learned counsel for the assessee also invited our attention to para 2 of the assessment order which reads as under : "2. In response to notice under s. 148 of the IT Act, 1961 the assessee has filed revised return of income of Rs. 11,44,020 surrendering therein a sum of Rs. 10,75,062 on account of creditors/depositors. The assessee has surrendered Rs. 10,75,062 due to survey operation and has filed revised return after the service of notice under s. 148 of the Act. Since the assessee has furnished inaccurate particulars of income and deliberately concealed the facts in the original return of income, the penalty proceedings under s. 271(l)(c) of the Act are initiated." 6.4 Shri Rakesh Garg, learned counsel for the assessee submitted that in a criminal case or a quasi-criminal case, it was incumbent upon the AO to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear-cut finding was reached by the AO and, on that ground alone, ....
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....ecision of Hon'ble Jammu & Kashmir High Court in the case of Hotel Highland Park (supra) wherein the Hon'ble Court has held (headnote) as under : "Penalty proceedings and assessment proceedings are two separate proceedings. An appeal is provided in s. 246 of the Act both against the order of assessment and the order of penalty. Any person objecting to any penalty imposed by the AO under s. 271 may appeal to the AAC under cl. (o) of s. 246(1) (as it stood at the material time). There is a separate provision in cl. (e) of s. 246(1) for appeal against an order of assessment under ss. 143(3) and 147. "Appeal against an order of reassessment or recomputation under s. 147 or 150 is provided in cl. (e) of s. 246(1). If an order of assessment or reassessment is not challenged, it becomes final and cannot be challenged in an appeal against an order of penalty. The challenge in such appeal is confined to the imposition of penalty. The scope and ambit of the appeal is restricted, to the order of penalty. The validity of an assessment order which has attained finality, cannot be challenged in such an appeal. The appellate authority cannot entertain any challenge to the validity of the assessm....
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....e decision of the Hon'ble jurisdictional High Court in the case of Jai Dayal Pyare Lal (supra). Furthermore, the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra) can also be relied upon. In the said case, the Hon'ble Supreme Court has observed that: "undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee". In the instant case, the validity of reopening of assessment challenged by the assessee is a pure question of law and not involving investigation into the facts as the same are on record and therefore the same should be considered while deciding the penalty appeal. 8.6 We have already discussed hereinabove that the decision of Hon'ble Rajasthan High Court in the case of Deep Chand Kothari (supra) is also in favour of the assessee and therefore we are of the view that the val....
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....r on the basis of mere suspicion or making fishing or roving enquiries, initiation of proceedings under s. 147 of the Act in the present case was illegal and bad in law. In that view of the matter, the very basis of imposition of penalty since ceased to exist by virtue of invalid assessment order, the penalty imposed under s. 271(l)(c) of the Act is not leviable. 8.8 As regards the second limb of argument of the learned counsel for the assessee, we find that the AO initiated penalty proceedings under s. 271(l)(c) of the Act and levied penalty by recording as under : "13. In view of the above facts, I hold that assessee has consciously concealed particulars of income to the extent of Rs. 11,61,944 and furnished inaccurate particulars of its income, therefore, assessee is liable for penalty as provided in s. 271(l)(c) of the IT Act, 1961." 8.9 Shri Rakesh Garg, learned counsel for the assessee relied on the decision in the case of Manu Engg. Works (supra) and submitted that penalty could not be sustained in the absence of clear-cut finding by the AO while levying penalty, i.e. while passing the order of penalty, it was incumbent upon the AO to state whether penalty was being levie....
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....s of income or to have furnished inaccurate particulars of such income. It is thus found, that-the basis of the initiation of penalty proceeding is not identical with the ground on which the penalty has been imposed and this must have deprived the assessee of reasonable opportunity of showing cause against the penalty proceeding which is after all a quasi-criminal proceeding. It also has to be remembered that cl. (c) of subs. (1) of s. 271 deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences, but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up a penalty proceeding for one offence and finding guilty for another offence or finding guilty for either the one or the other offence, as has been done by the Tribunal in the instant case, cannot be sustained in law. This view is supported by the decision of the Gujarat High Court in CIT v. Lakhdhir Lai Ji [1972] 85 ITR 77 (Guj.). In the result we find that, on the facts and in t....