AI Drafter 
TaxTMI 
TaxTMI 
2017 (8) TMI 560
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....of hearing, the Additional Ground filed by the assessee was admitted and the additional ground as raised reads as under:- "In the facts and circumstances of the case and in law the Ld. AO has erred in imposing penalty u/s 271(1)(c) without specifically pointing out in the show cause notice, whether the penalty was proposed on concealment of particulars of income or for furnishing inaccurate particulars of income. The action of the Ld. AO is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the penalty amounting to Rs. 21,76,000/- imposed u/s 271(1)(c). 3. Briefly stated the facts are that while framing the assessment and assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act). The Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act or concealing the particulars of his income. Subsequently, a notice u/s 274 read with Section 271 and 272 of the Act was issued on 29/9/2010 and a penalty order u/s 271(1)(c) of the Act was passed imposing penalty of Rs. 21,76,000/- had concealed income on Rs. 64,63,010/-. 4. Aggrieved by this, the assessee preferred an a....
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....rch operations against SLK were as under:- * Statements of SLK were recorded u/s 132 (4) who stated therein that Shri Mohd. Sharif Khan (Appellant) was a partner in the Global City project and had introduced cash, without specifically mentioning the amount invested, in the partnership firm constituted for the purpose of developing the Global City Project (PB : 22) * SLK however retracted from his above statement by way of an affidavit dated 01.08.2008. (PB : 10) * Shri Mohd. Sharif Khan (assessee) in his statement u/s 131 admitted having invested the said sum of Rs. 56,50,000/- in cash in the firm. (PB : 12). * Thereafter, assessee also retracted from his statement vide letter dated 17.06.2010 (AO Order-Quantum-Page 3) * One unsigned Partnership Deed was found at the business premises of the SLK wherein the assessee with Shri Ranjit Singh Yadav jointly were mentioned as one single party. (PB : 1-9) * Ledger Account of the assessee in the books of Global City Project was submitted by SLK during assessment and it was found during search conducted on him. (AO Order-Quantum-Page 3) V. Ld. AO, during the course of quantum pr....
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.... of AO, in quantum proceedings, became final neither party can seek to reopen it in penalty proceedings. 2.2.iii SLK and the appellant both were examined. Since both admitted to this transaction of Rs. 56.50 Lacs, it is a conclusive evidence gathered by the Department. 2.2iv Above mentioned evidence cannot be vitiated for want of crossexamination and any denial of the opportunity of cross-examination in the present case, has not resulted in violation of Principles of Natural Justice. 2.2.v Affidavit submitted by SLK is self-serving. Further, such Affidavit of SLK has been denied by him, as a result it was unreliable. 3. SUBMISSION 3.1 At the outset, it is submitted that out of the total addition of Rs. 64,63,010 on which penalty was levied by the Ld. AO, addition of Rs. 8,13,010 has been deleted by the Hon'ble ITAT, Jaipur Bench, vide order dated 23.05.2016, in ITA no. 34/JP/12. Thus penalty amounting to Rs. 2,74,000 qua such additions, deserves to be deleted. 3.2 Apropos the additions sustained by the Hon'ble ITAT, Jaipur Bench of Rs. 56,50,000 below mentioned submissions may please be considered. 3.3 Submissions mad....
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....ly made to the assess. This statement can at the worst show that Shri Sukla is not a trustworthy witness and little value can be attached to what he stated either in his affidavits or in his examination by the Assessing Officer. His conduct neutralises his value as a witness. A man indulging in double-speaking cannot be said by any means a truthful man at any stage and not court can decide on which occasion he was truthful: If Shri Sukla is neutralised as a witness what remains is the accounts, vouchers, challans, bank accounts, etc..." 3.7. Finding of the Hon'ble ITAT, in quantum proceedings are contained at Para 2.4, 2.5 and 2.6, internal pages 4,5 and 6, of the other. (PB 31: 33) 3.8 Additions have been confirmed by the Hon'ble ITAT mainly on the basis of oral evidences of the appellant as well as SLK. Needless to mention that both oral admissions were retracted subsequently. Whatever tangible evidences were found did not indicate investment by the assessee. 3.9 In quantum proceedings additions can be made even when both "may" or "may not" situations exist using the theory of human probability or preponderance of probability. However, when it comes to penalty pr....
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....e contention raised by Ld. CIT (A) in his order are as under:- 3.14.i No new facts were brought to the notice of Ld. AO during the course of penalty proceedings as compared to quantum proceedings. It is submitted in penalty proceedings facts emerging out of the quantum proceedings are considered. However for levy of penalty any fact against the assessee has to be conclusive and should hold the assessee guilty of consciously trying to conceal his/her income. Whereas such precision may not be required while in the quantum proceedings. 3.14.ii Since order of AO, in quantum proceedings, became final neither party can seek to reopen it in penalty proceedings. Penalty proceedings are independent to that of quantum proceedings. All the facts emerging out of the quantum proceedings have to be revisited again from the beginning in order to arrive at the conclusion whether the penalty has to be levied or not. Thus even though additions may have been confirmed in quantum proceeding the same cannot, in an automatice manner, result in penalty being imposed. 3.14.iii SLK and the appellant both were examined. Since both admitted to this transaction of ....
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....rty, it could not be, with procession, held that the money belonged to the assessee only. (PB :2) 3.16 Further, the ledger account of the assessee maintained by SLK in his books, on which heavy reliance was placed by the Ld. AO in quantum proceedings, was subsequently submitted by SLK to the department and was not found during the course of search. Thus the fact that it was an afterthought of SLK cannot be ruled out. 3.17 Borrowing the accounting terminology additions can be made in the quantum proceedings on the basis of evidences having a reasonable certainty whereas unless the evidences provide virtual certainly penalty cannot be imposed. In view of the above, penalty levied by the Ld. AO and confirmed by the Ld. CIT (A) deserves to be deleted." 6. On the contrary, Ld. Departmental Representatives opposed the submissions, and supported the order of the authorities below. 7. The assessee has also taken the additional ground that reads as under:- "In the facts and circumstances of the case and in law the Ld. AO has erred in imposing penalty u/s 271(1)(c) without specifically pointing out in the show cause notice, whether the penalty was pr....
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....ew that the assessee has concealed the income by furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income. The above act of the Ld. AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind. 1.6 Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Hon'ble Supreme Court in the case of T. Ashok Pai (Supra) held as under:- "..... Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported n 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported....
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....in the case of Manjunatha Cotton & Ginning Factory (Supra). It was held as under (Case Law Page 29): "....We have heard rival contentions and perused the material available on record. The assessee has not filed any paper book. However, alongwith the written submission, assessee has filed a copy of letter dated 16th February, 2015. In the notice dated 13.03.2013, the AO has ticked on stereotyped format the reason which reads "concealed particulars of income of furnished inaccurate particulars of income". However, while levying penalty, the AO has levied the penalty on the ground of furnishing inaccurate particulars of income and concealing the income." The Hon'ble Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra) has held as under:- "In the present case also notice has been issued by ticking the stereotyped format. This fact is not controverted by the revenue. Therefore, in our considered view, penalty proceeding is not validly initiated. Hence, the initiation of penalty on the basis of the notice dated 13th March, 2013 is not in accordance with the requirement of law in view of the judgment of Hon'ble Karnataka High Court ....
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....ticulars of income. This cannot be construed as the concealing particulars of income and furnishing inaccurate particulars of income. 10. Ld. D/R could not controvert the contents of the notice. However, he submitted that any technical defect should not ground for quashing the penalty order. However, the Ld. Authorize Representative submitted that the issue is squarely covered in favour of the assessee, under the identical facts, the Hon'ble Rajasthan High Court had upheld the deletion of penalty on this basis. 11. Ld. Counsel for the assessee placed reliance on the Judgment of the Hon'ble High Court in the case of DB Income Tax appeal No. 534/2008 in the case of Sheveta Construction Company Pvt. Ltd. vs. ITO, Ward 3(4), Jaipur. The Hon'ble High Court had formulated the substantial question of law that reads as under: "Can penalty for alleged "Concealment of income" or "furnishing inaccurate particulars of income" be levied when legality of assessment proceedings itself is subjudice before Hon'ble High Court and the question to that effect has already been admitted in Quantum Appeal?" The Hon'ble High Court after considering the various Judgments and the Judgme....