Income Tax Appellate Tribunal - Chennai
Tube Investments Of India Ltd., Chennai vs Assessee
IN THE INCOME-TAX APPELLATE TRIBUNAL
CHENNAI 'D' BENCH, CHENNAI.
Before Shri.U.B.S. Bedi, J.M. & Shri. Abraham P. George, A.M.
I.T.A. No. 1757/Mds/2010
Assessment Year: 1998-99
M/s. Tube Investments of India Ltd., The Assistant Commissioner of
"Dare House", Vs. Income Tax, Large Tax Payer Unit,
#234, NSC Bose Road, Chennai 600 101.
Chennai 600 001.
[PAN: AAACT1240H]
(Appellant) (Respondent)
I.T.A. No. 1920/Mds/2010
Assessment Year: 1998-99
The Deputy Commissioner of M/s. Tube Investments of India Ltd.,
Income Tax, Large Tax Payer Unit, "Dare House",
Chennai 600 101. Vs. #234, NSC Bose Road,
Chennai 600 001.
(Appellant) (Respondent)
Assessee by : Shri Ajay Vohra
Revenue by : Shri Anirudh Rai, CIT- DR
ORDER
PER U.B.S. Bedi, J.M.
These cross appeals - one by the assessee and other by the Department are directed against the order passed by the ld. CIT(A), LTU, Chennai dated 19.08.2010 relevant to the assessment year 1998-99 and challenge of the assessee is against sustenance of part penalty under section 271(1)(c) by restricting it with regard to additions of `.1.66 crores and `.1.2 crores, whereas in the appeal of the Department, the Revenue has challenged deletion of penalty with 2 I.T.A. Nos Nos.1757 & 1920/Mds/10 respect to 2nd addition of `.1.20 crores, out of total penalty of `.2,13,15,000/- imposed under section 271(1)(c) by the Assessing Officer.
2. The assessee has raised in all three grounds, first in relation to time limitation in imposing penalty and non-recording of proper satisfaction, second in relation to sustenance of penalty against addition of `.1.66 crores and `.1.20 crores at 125% against 150% imposed by the Assessing Officer and third issue is without prejudice to above grounds, for restricting penalty at 100%.
3. As regards, first issue in relation to the appeal of the assessee, facts indicate that the assessee company had filed its return of income for the assessment year 1998-99 on 30.11.1998 declaring total income of `.1,46,86,704/- and profit under section 115J at `.4,04,28,085/-. Original assessment under section 143(3) was completed on 27.03.2001. Subsequently, reassessment under section 143(3) r.w.s. 147 was completed on 27.03.2006 by making the following additions:
1) Capital gains on sale of Wind Turbines/surrender of rights in the contract - `.58,85,41,252/-.
2) Income on account of set off of credit - `.33,87,06,625/-.
3) Disallowance of electricity charges claimed on wind mills -
`.59,56,238/-.
4) Unaccounted lease syndication charges - `.1,66,00,000/-.
5) Lease rent received from M/s. Wescare (India) Ltd., `.1.2 crores.
6) Unaccounted lease syndication amount of DLWL Company `.1.2 crores.
3.1 On the appeal filed by the assessee, the following additions were confirmed by the ld. CIT(A) vide order ITA No.139/2006-07/TR/16/A-VIII dated 30.03.2007:
3 I.T.A. Nos Nos.1757 & 1920/Mds/10
1) Unaccounted lease syndication charges - `.1,66,00,000/-.
2) Unaccounted lease rent received from M/s. Wescare (India) Ltd., `.1.20,00,000/-.
3) Unaccounted lease syndication amount of DLWL Company `.1,20,00,000/-.
3.2 Aggrieved, the assessee as well as the Department had filed their respective appeals before the ITAT, Chennai against the above order of the ld. CIT(A). The ITAT vide order in ITA No. 1454/Mds/2007 dated 09.01.2009 dismissed the case of the assessee. Thereafter, the Assessing Officer has levied the penalty of `.2,13,15,000/- @ 150% of tax sought to be evaded under section 271(1)(c) on the issues confirmed both by the ld. CIT(A) and the ITAT, for concealment of income due to the fact that the concerned additions were made in the reassessment order based on the survey under section 133A conducted by the Department in assessee's business premises.
4. Aggrieved by this order of the Assessing Officer, the assessee besides challenging the penalty order on merits, as well as on time limitation, it also challenged for non-recording of satisfaction. The ld. AR argued that there is no proper satisfaction recorded during assessment and moreover, the impugned penalty order is barred by limitation under section 275, as the penalty order was passed after the expiry of one year from the end of the financial year in which the order of the ld. CIT(A) was received by the Assessing Officer. In support of the same, the assessee has relied on the proviso to section 275(1)(a), which contains provisions of limitation to pass order imposing penalty under section 271(1)(c) and reference was made to assessment order as no specific satisfaction about each 4 I.T.A. Nos Nos.1757 & 1920/Mds/10 item of concealment is there, since, in the case of the assessee, the order of the ld. CIT(A) dated 30.03.2007 was received by the Assessing Officer on 12.04.2007. So, according to the ld. AR, the period of limitation to pass the penalty order expires on 31.03.2009, whereas the impugned order has been passed thereafter on 17.06.2009. Hence, the order is barred by limitation. The assessee also relied on the decision of Amritsar Bench of Tribunal in the case of Tarlochan Singh & Sons (HUF) vs. ITO [114 TTJ 82]. About non-recording of satisfaction, reference was made to the assessment order.
5. The ld. CIT(A), while considering but not accepting the plea of the assessee on the very first issue raised in the appeal had dismiss both the points raised in the issue as per para 4.2 to 5.1 as under:
4.2 I have gone through the facts of the case and the submission of the appellant. The contention of the appellant on the proviso to the section 275(l)(a) cannot be accepted in view of the decision of the jurisdictional High Court in the case of M/s. Rayala Corporation Limited Vs. Union of India & Other vide [288 ITR 452], wherein it was held that in the event an appeal is filed before the ITAT, the limitation of period for levy of penalty will be as provided for in Section 275(l)(a) ie., 6 months from the end of the month in which the appellate order of the Tribunal is received by the Chief Commissioner. It further held that the proviso to section 275(1)(a) does not nullify the availability to the AO of the period of six months from the end of the month when the order of the ITAT is received by the Assessing Officer. The relevant paragraph of the decision of the Honorable High Court is reproduced as under:
"Section 275(1)(a) of the Income-tax Act, 1961, reads as follows: "275. [(1)] No order imposing a penalty under this Chapter shall be passed.
(a) in a case where the relevant assessment or other order is the subject-
matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, 5 I.T.A. Nos Nos.1757 & 1920/Mds/10 or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Chief Commissioner or Commissioner, whichever period expires later :
A reading of the abovesaid provision makes it clear that the interpretation, placed by learned counsel for the petitioner on the said provision is acceptable. There is no dispute in this case that the petitioner has filed an appeal before the Tribunal and the same is pending. In such a case, the limitation period for the levy of penalty will be as provided for under section 275(1)(a), i.e., six months from the end of the month in which the order of the Appellate Tribunal is received by the Chief Commissioner. There cannot be any doubt on this aspect. Accordingly, this court is of the view that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the Income-tax Appellate Tribunal, Chennai, is received by the third respondent herein.
The above decision of the Honorable jurisdictional High Court is squarely applicable to the fact of the present appeal. The department has also accepted the above decision of the High Court. Therefore, the issue has been settled and has reached finality. The order of the ITAT was passed on 9.1.2009 and the AO has passed the penalty order on 17.6.2009. It is thus clear that the order was passed within 6 months from the order of the ITAT.
Hence, the contention of the Id.AR is rejected and this ground is dismissed. 4.3 Be that as it may, the appellant itself submitted a letter vide 13.4.2009 and asked for further extension of time to submit the relevant details with reference to the very same pending penalty proceedings. Further, the appellant has not contested jurisdiction as per the proviso to section 275(1)(a) and accepted the validity of the proceedings during the course of penalty proceedings before the AO. Under such circumstances, the provisions of section 292 BB also negates the contention of the appellant. In the result, this ground is dismissed.
5. The appellant has taken another plea that the AO has not recorded any satisfaction for initiating penalty in the assessment order. The appellant has relied on the decisions of the Delhi High Court in the case of Madhushree Gupta v. UOI, 225 CTR l.
5.1 I have considered the facts Of the case and the submission of the Id. AR. As per Sub-section (1) of section 271 the Assessing Officer is required to be satisfied before such a penalty is levied. There has been considerable variance in the judicial opinion on the issue as to whether the AO is required 6 I.T.A. Nos Nos.1757 & 1920/Mds/10 to record his satisfaction before issue of penalty notice under this sub- section. Some judicial authorities have held that such a satisfaction need not be recorded. Reference may be made to Nainu Mal Het Chand v. CIT [2007] 295 ITR 185 (All); CIT v. S.V. Angidi Chettiar [1962] 44 ITR 739 (SC); Becker Gray & Company (1930) Ltd v.ITO [1978]112 ITR 503(Cal); Shyam Biri Works Pvt. Ltd. v. CIT [2002] 259 ITR 625 (All). However, Hon'ble Delhi High Court in the case of CIT v. Ram Commercial Enterprises Ltd. (246 ITR 568) has held that such a satisfaction must be recorded by the AO and similar view has been taken in various other decisions i.e. CIT v. Rajan & Co. [2995] 146 Taxman 271(del); CIT v. Vikas Promotors Pvt. Ltd.[2005]145 Taxman 3OO(del): Diwan Enterprises v. CIT(2000) 246 ITR 571(Del); CIT v. Super Metal Re-rollers (P) Ltd [2004) 135 Taxman 407(Del); Narita Investments P.Ltd.[2007] 17 SOT 428(Mum). Given the conflicting judgments on the issue and the legislative intent, sub-section (lB) has been inserted in this section with retrospective effect from 1st April 1989, so as to unambiguously provide that 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 such order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (l), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the assessing officer for initiation of penalty proceedings under the said clause (c). In view of the clear provisions of the Act, which does not require any external aid for its interpretation, I am of the considered opinion that the AO has validly initiated the penalty proceedings. This ground is accordingly rejected."
6. Still aggrieved, the assessee has come up in appeal and while reiterating the submissions as made before the ld. CIT(A) on both the points, it was further pleaded that firstly in view of the provisions as contained in proviso to section 275(1)(a), penalty could only be imposed before expiry of the financial year in which proceedings, in the course of which action for imposition of the penalty has been initiated are completed, or within one year from the end of the financial year in which the order of the ld. CIT(A) is received by the CCIT or CIT, whichever is later, and in this case as per appeal form, the CIT(A)'s order has been received on 12.04.2007, therefore, penalty could be imposed upto 31.03.2009, whereas the 7 I.T.A. Nos Nos.1757 & 1920/Mds/10 same has been imposed on 17.06.2009. Therefore, it is barred by time limitation. Reliance in this regard has been placed by the ld. Counsel for the assessee on Amritsar Bench of Tribunal in the case of Tarlochan Singh & Sons (HUF) vs. ITO [114 TTJ 82], Delhi Bench decision in the case of Cosmo Films Ltd. vs. ACIT in ITA No. 2192/Del/2010 vide order dated 22.07.2011; Mohair Investment and Trading Company (P) Ltd. in ITA No. 4677/Del/2009 vide order dated 30.04.2010 and Lucknow Bench decision in the case of ITO vs. Bloosom Floriculture in ITA No.647/Luck/2008 [134 TTJ 51]. It was further submitted that the ld. CIT(A) is not justified in rejecting the plea of the assessee while following the Hon'ble Madras High Court's decision in the case of M/s. Rayala Corporation Limited Vs. Union of India & Other vide [288 ITR 452], in which writ was filed by the assessee to get a declaration for getting larger period of limitation and order by the Hon'ble Madras High Court was passed on the basis of concession recorded by the ld. Standing Counsel for the Department and so far as precedents are concerned, the ld. Counsel for the assessee submitted that in the case of DCIT vs. K.s. Suresh 319 ITR 1, the Hon'ble Madras High Court has specifically held that order passed on concession, cannot be a precedent laying down law. Therefore, reading various observations of the Hon'ble Madras High Court's decision in the said case, it was pleaded for holding that penalty proceedings in this case are time barred and hence penalty is liable to be quashed, which may be quashed.
7. The ld. DR, while relying upon the basis and reasonings as given by the ld. CIT(A) has pleaded that since the Hon'ble Madras High Court's decision is there in favour of the Department in the case of M/s. Rayala Corporation Limited Vs. Union 8 I.T.A. Nos Nos.1757 & 1920/Mds/10 of India & Other (supra) and in this case there was a further appeal the ITAT and order of penalty has been passed within six months from the end of the month in which the Tribunal order has been received, therefore, penalty order passed is well within the prescribed time and the ld. CIT(A) has rightly concluded to reject the plea of the assessee. The ld. DR has further relied upon the decision of ITAT Delhi Bench in the case of ITO v. Pandit Vijay Kant Sharma 2009-TIOL-554-ITAT-DEL to support the above plea and submitted that so far as plea of the ld. Counsel for the assessee that the order of the Hon'ble Madras High Court has been passed under concession, the same cannot be accepted in as much as Hon'ble Madras High Court has dealt with the legal issue with respect to the provisions and so far as interpretation of the statute is concerned, concession if not given will not affect the judgment to be very being a precedent of Hon'ble Jurisdictional High Court, which is necessarily be followed. Therefore, the plea of the assessee in this regard is liable to be dismissed and order of the ld. CIT(A) requires further confirmation, which may be confirmed.
8. We have heard both the sides, considered the material on record on the point relating to limitation provided for passing penalty order and find that the Hon'ble Madras High Court has dealt with this issue in the case of M/s. Rayala Corporation Limited Vs. Union of India & Other (supra) and also find that in order to decide the writ petition, which has been filed for a declaration, declaring that in the petitioner's case where an appeal is pending before the ITAT Chennai, the proviso to section 275(1)(a) of the Act, does not mollify the availability to the third party of the period of limitation of six months from the end of the month when the order of 9 I.T.A. Nos Nos.1757 & 1920/Mds/10 the ITAT, Chennai is received by the Department and after reproducing the relevant provisions of section 275(1)(a), the Hon'ble Madras High Court has held as under:
"A reading of the abovesaid provision makes it clear that the interpretation, placed by learned counsel for the petitioner on the said provision is acceptable. There is no dispute in this case that the petitioner has filed an appeal before the Tribunal and the same is pending. In such a case, the limitation period for the levy of penalty will be as provided for under section 275(1)(a), i.e., six months from the end of the month in which the order of the Appellate Tribunal is received by the Chief Commissioner. There cannot be any doubt on this aspect. Accordingly, this court is of the view that the proviso to section 275(1)(a) of the Act, does not nullify the availability to the third respondent of the period of limitation of six months from the end of the month when the order of the Income-tax Appellate Tribunal, Chennai, is received by the third respondent herein."
8.1 Since the issue is squarely covered in favour of the Revenue by the decision of Hon'ble Jurisdictional High Court, the order of the ld. CIT(A), which has followed the such decision, can be held to be valid and justified to uphold the point that the penalty order in this case has been passed within the prescribed time. So far as Tribunal's decisions as relied upon by the ld. Counsel for the assessee are concerned, in view of the Jurisdictional High Court's order, the same loses their importance, since the Hon'ble Jurisdictional High Court has interpreted the relevant proviso to section 275(1)(a) to decide that it will not apply where the appeal has been filed against the order of the ld. CIT(A), therefore, following the said precedent, we uphold the order of the ld. CIT(A) and dismiss the point raised.
9. The assessee's counsel has further raised a point that satisfaction is not appropriately recorded and from the wording contained in the assessment order while initiating penalty proceedings, satisfaction cannot be de-siphoned from such 10 I.T.A. Nos Nos.1757 & 1920/Mds/10 language. Therefore, it was pleaded that the ld. CIT(A)'s order in this regard is not proper and the plea of the assessee in this regard should be accepted and the assessee's counsel has also relied upon Hon'ble Supreme Court's decision in the case of CIT v. Sun Engineering Works P. Ltd. 198 ITR 297 for the preposition that context in which the Court has given the decision is most relevant and to be considered and in this case writ for calling declaration was filed and penalty imposed on the basis of invalid satisfaction recorded by the Assessing Officer during the assessment proceedings should be quashed. It was also submitted that majority addition of amounts `.58.85 crores and `.33.38 crores have already be deleted in quantum appeal and the satisfaction recorded is not specific to each item, which were considered, so it cannot be said that proper satisfaction is recorded. Therefore, penalty could not be imposed. The ld. CIT(A)'s reliance on section 292BB is also misplaced.
9.1 The ld. DR, while relying upon the order of the ld. CIT(A) on this point has pleaded that since satisfaction about concealment of income is properly recorded, therefore, the assessee cannot take the plea to plead that there is no satisfaction recorded and the ld. CIT(A) has appropriately dealt with the issue to reject the plea of the assessee, whose action is legally and factually correct, which may be upheld.
9.2 We have heard both the sides, considered the material on record as well as precedent relied upon by both the sides and find that while passing the assessment order dated 28.03.2006, the Assessing Officer has recorded at the end of the assessment order, in last paragraph, penalty proceedings under section 11 I.T.A. Nos Nos.1757 & 1920/Mds/10 271(1)(c) initiated for concealing the particulars of income and otherwise also relevant provision has also been amended by inserting sub-section 1B to section 271 vide Finance Act of 2008 with retrospective effect from 01.04.1989 as under:
"(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 initiation of penalty proceedings under clause (c) of subsection (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c)."
9.3 Since satisfaction in the assessment order is very much there for initiating the penalty proceedings, therefore, we are of the considered view that the ld. CIT(A) is fully justified in rejecting the plea as raised by the assessee, whose action is confirmed and the ground raised by the assessee in this regard is dismissed.
10. As regards case on merits is concerned, the assessee in its appeal has challenged penalty against two out of three items on which the penalty was imposed. As the ld. CIT(A) has given relief with respect to third item and the Department has came up in appeal in relation to that item of which the ld. CIT(A) directed to delete the penalty. So, these all three items are considered together. 10.1 The first addition was in respect of unaccounted lease syndication of `.1.66 crores. The addition was made on the basis of impounded documents during the course of survey conducted under section 133A of the Income Tax Act at the premises of the assessee on 07.02.2005. But the document showed that the assessee had received `.3.97 crores, whereas it had accounted for `.2.31 crores only.
10.2 The second addition was also based on impounded document found during 12 I.T.A. Nos Nos.1757 & 1920/Mds/10 the survey and it pertains to lease rental of `.1.20 crores, which was received by the assessee from Wescare (India) Ltd. towards lease rent of 80 acres of land at Vadakankulam, which were not accounted in the books of account. The other addition was for an amount of `.1.00 crore received from DLWL towards amount due to the assessee by one M/s. Arun Pipes Ltd. As regards the amount of `.1.66 crores, both the ld. CIT(A) and ITAT sustained the addition by holding that the assessee has not been able to satisfactorily explain as to why it had accounted only `.2.13 crores as against `.3.97 crores appearing as lease syndication charges in the impounded document. Regarding the amount of `.1.2 crores towards lease rental of land, the ld. CIT(A) has stated that the content of the impounded letter clearly indicated that the said amount was to be received by the assessee. As the amount was receivable by the assessee on account of revenue transactions, he justified the additions made by the Assessing Officer, which was based on documentary evidence. The ITAT has also confirmed the addition by observing from the aforesaid letter that the assessee had received `.1.2 crores as a special case, which was not offered for taxation. Regarding the third amount of `.1.2 crores, the ITAT found that no confirmation from M/s. Arun Pipes Ltd. was submitted to show that the aforesaid amount was paid to the assessee by DLWL on its behalf. It also stated that the amounts were not produced to demonstrate that what DLWL paid to the assessee was no behalf of M/s. Arun Pipes Ltd. Hence the addition was confirmed.
10.3 Against imposition of penalty by the Assessing Officer, the assessee took up the matter in appeal and in its written submissions, it was stated that the additions 13 I.T.A. Nos Nos.1757 & 1920/Mds/10 were made in the assessment order solely on the basis of the aforesaid impounded document i.e. handwritten note of the Managing Director of the assessee which has not been corroborated by any other evidence substantiating that total amount of `.3.97 crores was actually received by the assessee towards the lease syndication charges. The addition was made and subsequently sustained on the basis of adverse inference drawn on the presumption that the assessee might have received the said amount in view of the document found at the time of survey. The availability of hand written note does not automatically prove that the amount stated therein was actually received by the assessee nor can it be stated that the explanation has not been offered by the assessee or that the explanation offered by the assessee was not bonafide. Similar argument has been put forward by the assessee in respect of the second addition of `.1.2 crores towards lease rentals on land at Vadakankulam. As regards the third addition of `.1.2 crores received from DLWL, claimed to be on behalf of M/s. Arun Pipes Ltd., the assessee has stated that the said amount was adjusted in the account of Arun Pipes Ltd. The confirmation given by the DLWL makes it clear that `.1.2 crores was paid by the DLWL for and on behalf of M/s. Arun Pipes Ltd., so it proves that the contention of the assessee is correct. The addition has been made by the Assessing Officer on the assumption that it was lease syndication charges. The addition has been subsequently confirmed in the absence of confirmation from Arun Pipes Ltd. and the failure of the assessee to explain the relationship between Arun Pipes Ltd. and DLWL. The assessee stated that merely because the explanation is not accepted, it does not lead to levy of penalty. The explanation of the assessee can at best be 14 I.T.A. Nos Nos.1757 & 1920/Mds/10 said to be untrue but has not been disproved or held to be false by the Assessing Officer. Only in the latter case, where the Assessing Officer is able to disprove the explanation of the assessee that the penalty can be imposed. The assessee has relied upon following decisions:
1. CIT v. S.V. Angidi Chettiar 44 ITR 739 (SC)
2. D.M. Manasvi v. CIT[1972] 86 ITR 557(SC)
3. Dilip N. Shroff vs. Jt. CIT: 291 ITR 519 (SC)
4. Diwan Enterprises v. CIT: 246 ITR 571 (Del.)
5. CIT v. Ram Commercial Enterprises Ltd.: 246 ITR 568 (Del)
6. CIT v. Super Metal Re- rollers (P) Ltd.: 265 ITR 82 (Del.)
7. CIT V. Rajan & Co.: 197 CTR 199 (Del.)
8. CIT V. Auto Lamps Ltd: 278 ITR 32/ 196 CTR 459 (Del.)
9. CIT V. B.R. Sharma: 275 ITR 303 (Del)
10. CIT V. Vikas Promoters (P) Limited: 194 CTR 384 (Del.)
11. CIT V. Mayar India Limited: 142 Taxman 230 (Del.)
12. CIT V. Munish Iron Store: 263 ITR 484 (P&H)
13. CIT vs. Rampur Engineering Co. Ltd.: 309 ITR 143 (Del.) (FB) 10.4 The ld. CIT(A), before concluding to delete the penalty with respect to third item and confirming penalty in relation to first two items has made observation in para 6.2 and decided the issue as per para from 6.3 to 6.3.6, whereas to delete the penalty with respect to item No.3, as per para 6.4 and 6.4.1 of his order and further reduced the quantum of penalty with respect to items on which penalty order was confirmed to 125% against 150%, imposed by the Assessing Officer.
10.5 In further appeal before the Tribunal, challenging a portion of the penalty, which has been confirmed by the ld. CIT(A), the ld. Counsel for the assessee, while supporting the order of the deletion of penalty with respect to item No.3 in relation to addition of `.1.2 crores, has pleaded for deletion of penalty with respect to `.1.66 crores and `.1.20 crores with respect to item No. 1 and 2. Since the penalty proceedings are independent and separate from assessment proceedings and penalty under section 271(1)(c) of the Act can be imposed only if conditions
15 I.T.A. Nos Nos.1757 & 1920/Mds/10 warranted under that section are satisfied in respect of which addition or disallowance made in the assessment proceedings. Merely because certain additions are made in the assessment order, which have been sustained in appeal, does not mean that penalty automatically becomes leviable in relation thereto. According to the ld. AR, in the case of the assessee, the conditions warranted for imposition of penalty under section 271(1)(c) viz., (i) failure to offer an explanation,
(ii) explanation was found to be false, (iii) explanation was not bonafide in respect of each impugned additions aggregating to `.4.06 crores, were not satisfied and penalty imposed, therefore calls for deletion in toto. It was further stated that the aforesaid additions were made on presumption by drawing adverse inference from certain documents found during survey and there was no positive evidence brought on record by the Assessing Officer to demonstrate the aforesaid incomes were, in fact, received by the assessee. The additions have been made by rejecting the explanations provided by the assessee. However, the explanations of the assessee have not been shown to be malafide or unsubstantiated and hence penalty under section 271(1)(c) of the Act has been wrongly levied by the Assessing Officer and to the extent confirmed by the ld. CIT(A). Relying upon various decisions as cited before the ld. CIT(A) and reiterated here, it was pleaded that penalty is not exigible in this case, which was wrongly imposed by the Assessing Officer and confirmed by the ld. CIT(A). The assessee's counsel further submitted that the ld. CIT(A) has followed the Hon'ble Supreme Court's decision in the case of Union of India vs. Dharmendra Textiles Processors & Others (306 ITR
277), but much water has flown after the said decision and in the case of UOI vs. 16 I.T.A. Nos Nos.1757 & 1920/Mds/10 Rajasthan Spinning and Weaving Mills Ltd. (224 CTR 1), the Hon'ble Supreme Court has discussed the decision in the case of Dharmendra Textiles Processors & Others (supra) and has clarified the said decision and made certain important observation, which are very relevant and the conditions stipulated in the respective penalty proceedings needs to be satisfied before penalty can be imposed and further reliance was placed in the case of CIT v. Reliance Petroproducts Ltd. (322 ITR 158)(SC), it was thus, strongly pleaded for deletion of penalty with respect to two out of three items.
11. The ld. DR, while relying upn the order of the ld. CIT(A) has pleaded for confirmation of the penalty with respect to first two items and further sub mitted that vital documents were found and case was reopened in which, specific addition with regard to first two items were made, which addition came be confirmed by the ld. CIT(A) and then by the Tribunal, therefore, the order of the ld. CIT(A), which based on documental evidence found to impose penalty should be upheld.
12. As regards Department appeal with respect to third item of which the Assessing Officer imposed the penalty and the ld. CIT(A) deleted the same, the ld. DR submitted that the assessee has miserably failed to either produce any document to support, its plea or substantiate the explanation given to the Assessing Officer and as per explanation 1 to section 271(1)(c), if the assessee furnishes the explanation and he fails to substantiate the same, penalty could validly be imposed, which has rightly been imposed by the Assessing Officer and the ld. CIT(A) is not justified in deleting the same. It was, thus pleaded for setting aside the order of the ld. CIT(A) with respect to deletion of penalty in relation to 17 I.T.A. Nos Nos.1757 & 1920/Mds/10 item 3 and restoring that of the Assessing Officer.
13. The ld. Counsel for the assessee, on the appeal of the Department has submitted that firstly, the Assessing Officer has committed a mistake of adding `.1.2 crores twice when it is only one item and against that item, the assessee has explained that the assessee had to recover the amount of `1.20 crores from M/s. Arun Pipes Ltd., so it adjusted the said amount from DLWL on behalf of the Arun Pipes Ltd. in the account of Arun Pipes Ltd. and confirmation of DLWL that `.1.20 crores was paid by DLWL was for and on behalf of Arun Pipes Ltd. with the contention of the assessee that the payment was adjustment made between the assessee and other two persons and moreover, M/s. Arun Pipes Ltd. had become a defunct company so the addition of `.1.2 crores made twice was not sustainable at all and for some reasons, the assessee has not challenged the order of the ITAT against quantum appeal decided by the ITAT, it does not mean that the assessee has admitted having concealed the amount of `.1.2 crores and the assessee can always raise such issue in penalty proceedings for deletion of the penalty, which has been demonstrated showing that the amount received to the extent of `.1.20 crores is only on one amount and penalty with respect to `.1.20 crores could not be imposable and the ld. CIT(A) has rightly deleted the same, whose order should be upheld.
14. We have considered the rival submissions, gone through the material on record as placed in the paper books in the light of precedents relied upon by rival sides.We have also carefully gone through relevant portion of the ld. CIT(A)'s order in relation to penalty as considered and elaborately discussed by him and find that 18 I.T.A. Nos Nos.1757 & 1920/Mds/10 all the items relatable to penalty have been dealt with by him in detailed manner, giving elaborate reasons and basis, which have duly been considered by us carefully and it is found that he has taken a correct view of the matter by deleting the penalty in relation to 3rd item, while upholding the penalty in relation to item 1 and 2 to which, we fully agree . However, the reasoning and basis as given by the ld. CIT(A) are not being repeated as we are in full agreement with the view expressed/taken by the ld. CIT(A) and have no other ground to record in support thereof other than recorded by the ld. CIT(A) and this point gets support from the decision of Hon'ble Supreme Court in the case of CIT v. K.Y. Pilliah and Sons [63 ITR 411]. Therefore, while concurring with the finding and conclusion as drawn by the ld. CIT(A) in this regard and taking same basis as adopted by the ld. CIT(A), we uphold his action on merits of the penalty and confirm his action and dismiss both the appeals of the Revenue as well as assessee being devoid of any merits.
15. In the result, both the appeals of the Revenue and assessee are dismissed.
Order pronounced on 09.09.2011 Sd/- Sd/- (ABRAHAM P. GEORGE) (U.B.S. BEDI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, the 09.09.2011 Vm/- To: The assessee//A.O./CIT(A)/CIT/D.R.