Income Tax Appellate Tribunal - Delhi
Chintels India Ltd., New Delhi vs Acit, New Delhi on 31 March, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES 'D' BENCH DELHI
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 3791/Del/2016
Asstt. Year: 2008-09
ITA No. 3792/Del/2016
Asstt. Year: 2009-10
ITA No. 3793/Del/2016
Asstt. Year: 2010-11
Chintels India Ltd., vs ACIT,
A-11, Kailash Colony, Central Circle-8,
New Delhi. New Delhi.
(PAN: AAACC0897N)
(Appellant) (Respondent)
Appellant by: Shri Kapil Goel, Adv.
Shri Mukul Gupta, Adv.
Respondent by: Shri Umesh Chandra Dubey, Sr. DR
Date of hearing: 05.01.2017
Date of order:
ORDER
PER SUDHANSHU SRIVASTAVA, J.M.
These three appeals have been preferred by the assessee against the order confirming the penalty u/s 271(1) (c) of the Income Tax 1 Act, 1961. ITA No. 3791 pertains to AY 2008-09, ITA No. 3792 pertains to AY 2009-10 & ITA No. 3193 pertains to AY 2010-11. These three appeals emanate from the analogous orders dated 30.03.2016 passed by the Ld. CIT (A)-25, New Delhi. For sake of convenience, these three appeals are disposed by this common order.
2. Brief facts of the case are that the assessee is a company engaged in business of horticulture, agriculture and real estate. On 26.03.2010 a search u/s 132 of the Income Tax Act, 1961 ("The Act") was carried out at the business and residential premises of the assessee who belongs to Ashok Solomen and Chintels Group of cases. On post search enquiry, it was found that one Shri Tarun Goyal was subjected to search u/s 132 of the Act on 1st September 2008 wherein it was found that he had created more than 90 companies which were engaged in the business of bogus bills and providing accommodation entries such as share capital, share application money, loans and advances and who charged commission accordingly. During the enquiry it was noted that Shri Tarun Goyal had more than 120 bank accounts and that he had deposited more than Rs.250 crores as cash in those bank accounts. 2 It was also found that the Directors of those companies were bogus and the addresses of those companies were also bogus. Statement of Shri Tarun Goyal was recorded u/s 132(4) of the Act, wherein he accepted that he was engaged in providing accommodation entries and bogus bills to various persons. During the course of investigation it was found that one company M/s Macro Infotech Ltd. was also formed by Shri Tarun Goyal, which was engaged in issuing bogus bills and which did not have any expertise in software business. During the enquiry after the search and seizure operation it was found that the assessee had purchased software of Rs. 42,424,550/- from M/s. Macro Infotech Ltd. It was alleged by the AO that the assessee had taken the bogus bills to inflate their expenditure. Further vide letter dated 19.08.2011 the assessee was further asked about the Macro Infotech Ltd and its transaction with the assessee from Assessment Years 2003-04 to 2009-10 and the assessee was also asked to prove the genuineness of the transaction made with M/s. Macro Infotech Ltd. In response to this the assessee submitted on 28.11.2011 that M/s. Macro Infotech Ltd was engaged in the business of supply of various kinds of the computer software, graphics and other elite products and that during FY 2007-08, the 3 assessee had purchased software of Rs. 42,424,550/- from the company and payment for which was made through account payee cheques. It was further submitted that these software were installed in the assesseee company and were recorded in the books of account. The assessee submitted that the software was sophisticated and was most effectively used as marketing and sales tool. It was further submitted that the software was later handed over to M/s Sobha Developers Limited for joint use of developing and marketing upon the assessee entering into a Joint Development Agreement dated 25th September, 2008 with M/s Sobha Developers Ltd. for 32 acres of group housing project. It was further submitted before the AO that later on this project was cancelled vide agreement dated 08.10.2011 and assessee was informed by M/s Sobha Developers Ltd. that the software had been damaged and destroyed and, therefore, the same cannot be returned. It was also submitted before the AO that the bills had been debited in the books of account and depreciation had been claimed.
2.1 As the AO was not satisfied with the explanation of the assessee, the depreciation on the software amounting to 4 Rs.84,84,910/- being 20% depreciation on the cost of software of Rs.42,424,550/- was disallowed.
2.2 The assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals), who confirmed the disallowance on the ground that the assessee had failed to establish the ownership and the use of the alleged software. 2.3 In appeal before the ITAT, the appeal of the assessee was dismissed vide order dated 10.03.2016, in ITA no. 4808/2012 to 4810/2012. The relevant findings are contained in paragraphs 32, 33, 34 and 35 of the said order in which the ITAT has observed that the assessee has not been able to prove that the software purchased was used in the business of the assessee.
2.4 In the mean while, the AO started penalty proceedings u/s 271(1)(c) of the Act and when the assessee's appeals in the quantum proceedings got dismissed by the Ld. CIT (Appeals), the AO proceeded to levy the penalty amounting to Rs. 28,84,021/-, Rs. 45,80,882/- and Rs. 27,68,661/- for assessment years from 2008- 09, 2009-10 and 2010-11 respectively .
2.5 Challenging the penalty orders, the assessee filed appeals before the Ld. CIT (A). The assessee also raised additional ground 5 vide letter dated 16/03/2016 stating that the underlying assessments u/s 153A were bad for want of incriminating material which in turn made the penalty orders invalid in law. Further, the assessee also submitted before the Ld. CIT (A) that the AO had imposed the penalty in violation of the principles of natural justice. It was also argued before the Ld. CIT (A) that no independent enquiry from any external source was made in the quantum proceedings to establish that the assessee had received the cash back as alleged. The assessee reiterated in the penalty appeals before the Ld. CIT (A) that no cash had been received back by assessee from Micro Infotech Ltd. Request was again made by the assessee to summon Shri Tarun Goyal during the course of hearing of the penalty appeals before the Ld. CIT (A). The assessee also contended before the Ld. CIT (A) that penalty orders were invalid because the AO had failed to mention as to whether the penalty was levied for concealment of income or for furnishing inaccurate particulars of income.
2.6 However, the Ld CIT (A) confirmed the penalties by firstly rejecting the additional legal ground being not bona fide and 6 confirming the penalties on merits by observing that assessee had made bogus software purchases.
2.7 Now, the assessee has approached the ITAT and has challenged the imposition of penalty in all the three years by raising the following grounds of appeal:
2.8 Grounds of Appeal in ITA 3791/Del/2016 (A.Y. 2008-09)
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) (CITA) upholding the levy of penalty by the AO u/s 271(1)(c) of the Act is bad, both in the eyes of law as well as on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty of Rs. 28,84,021/- on account of disallowance of depreciation software made by the AO.
3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty despite the fact that the AO has not recorded satisfaction as whether the penalty be initiated for concealment of income or for furnishing of inaccurate particulars.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the penalty despite the fact that the disallowance made by AO itself is not sustainable in view of the fact that in the absence of any incriminating material found during the course of search no such addition can be made in assessment under section 153A of the Act.
5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and law in upholding the levy of penalty despite the fact that the disallowance made by the AO and sustained by the learned CIT(A) itself is not sustainable on merits also.7
6. (i) On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the levy of penalty despite the fact that the assessee has duly discharged the onus cast upon it to prove the purchase of software.
(ii) That the learned CIT(A), both on facts and in law, in upholding the levy of penalty, ignoring the fact that the penalty proceedings are independent proceedings, and as such, mere disallowance or addition could not lead to the levy of penalty.
7. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the levy of penalty, despite the fact that the disallowance of depreciation claimed by the assessee cannot per se be treated as concealment of income or furnishing of inaccurate particulars of income. 2.9 Grounds of Appeal in ITA 3792/Del/2016 (A.Y. 2009-10)
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) (CITA) upholding the levy of penalty by the AO u/s 271(1)(c) of the Act is bad, both in the eyes of law as well as on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty of Rs. 45,80,882/- on account of disallowance of depreciation software made by the AO.
3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty despite the fact that the AO has not recorded satisfaction as whether the penalty be initiated for concealment of income or for furnishing of inaccurate particulars.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the penalty despite the fact that the disallowance made by AO itself is not sustainable in view of the fact that in the absence of any incriminating material 8 found during the course of search no such addition can be made in assessment under section 153A of the Act.
5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and law in upholding the levy of penalty despite the fact that the disallowance made by the AO and sustained by the learned CIT(A) itself is not sustainable on merits also.
6. (i) On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the levy of penalty despite the fact that the assessee has duly discharged the onus cast upon it to prove the purchase of software.
(ii) That the learned CIT(A), both on facts and in law, in upholding the levy of penalty, ignoring the fact that the penalty proceedings are independent proceedings, and as such, mere disallowance or addition could not lead to the levy of penalty.
7. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the levy of penalty, despite the fact that the disallowance of depreciation claimed by the assessee cannot per se be treated as concealment of income or furnishing of inaccurate particulars of income. 2.10 Grounds of Appeal in ITA 3793/Del/2016 (A.Y. 2010-11)
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) (CITA) upholding the levy of penalty by the AO u/s 271(1)(c) of the Act is bad, both in the eyes of law as well as on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty of Rs. 27,68,661/- on account of disallowance of depreciation software made by the AO.
3. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in upholding the levy of penalty despite the fact that the AO has not recorded satisfaction as whether 9 the penalty be initiated for concealment of income or for furnishing of inaccurate particulars.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and law in upholding the levy of penalty despite the fact that the disallowance made by the AO and sustained by the learned CIT(A) itself is not sustainable on merits also.
5. (i) On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the levy of penalty despite the fact that the assessee has duly discharged the onus cast upon it to prove the purchase of software.
(ii) That the learned CIT(A), both on facts and in law, in upholding the levy of penalty, ignoring the fact that the penalty proceedings are independent proceedings, and as such, mere disallowance or addition could not lead to the levy of penalty.
6. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in confirming the levy of penalty, despite the fact that the disallowance of depreciation claimed by the assessee cannot per se be treated as concealment of income or furnishing of inaccurate particulars of income
3. The Ld. AR submitted that the impugned penalty orders are bad in law because notices issued u/s 274 in all the three years are vague and mechanical as the irrelevant columns have not been struck off. It was submitted that nowhere has it been clearly spelt out as to under which limb the extant penalty was sought to be levied i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Reliance was placed on The Hon'ble Karnataka High Court's decision in the case of 10 Manjunath Cotton Ginning Factory 359 ITR 565. It was submitted that this decision of the Hon'ble Karnatake High Court was not challenged before the Hon'ble Apex Court as recorded in the decision of the Hon'ble Karnataka High Court in the case of Magnur Builders in ITA 616/2015 Dated 28/07/2016 in Para 5. Reliance was also placed on the decision of the Hon'ble Karnataka High Court in the case of SSA's Emerald Meadows 73 Taxmann.com 241 wherein the SLP was dismissed by the Hon'ble Apex Court and reported in 73 Taxmann.com 248). Further reliance was placed on the order of the Lucknow Bench of the ITAT in the case of Lal Chand Agarwal in ITA 314/LKW/2014 Dated 30/10/2015. Copies of all these decisions are placed on records.
3.1 Further, the Ld. AR drew our attention to the assessment orders and the penalty orders for the years involved and submitted that the same discrepancy existed in as much as the exact limb under which penalty is initiated and levied remained unspecified. Continuing his arguments, the Ld. AR submitted that the only basis for addition and imposition of penalty was a) post search enquiries,
b) search and seizure of Shri Tarun Goyal and c) Un-confronted 11 Statement of Shri Tarun Goyal. It was vehemently submitted that no incriminating material was ever found from the premises of assessee. Further it was highlighted that there was a thorough lack of cross examination of Shri Tarun Goyal. Addressing his arguments on ITAT Quantum order findings, the Ld. AR submitted that this can be a case of fact not proved but not fact disproved. Highlighting this, the Ld. AR submitted that no penalty can be imposed for facts not proved which are not disproved. Reliance was placed on Hon'ble Gujarat High Court's decision in the case of National Textiles reported in 249 ITR 125. Further, the Ld. AR placed his reliance on the very recent Hon'ble Apex Court's decision in the case of Gopal Sons HUF (order dated 4/1/2017) to highlight that deeming fiction needs strict interpretation and any doubt must go to the benefit of taxpayer.
3.2 Further, the Ld. AR drew our attention to the page 4 of the Early Hearing Petition of the assessee, dated 15/11/2016, filed before the Hon'ble VP ITAT Delhi Zone to argue that lack of cross examination of Shri Tarun Goyal made the entire penalty 12 proceedings nullity, in spite of the fact that quantum was confirmed. Reliance was placed on the following judicial precedents:
a) Pune Bench ITAT in Chandrabhan Mugale order dated 30.10.2015
b) Shri Nirmal Commercial Ltd vs CIT 308 ITR 406 (Bom)
c) Calcutta high court CIT Vs Ratal Lal Surekha 61 Taxmann 133
d) Apex Court's decision in the case of Andaman Timber Industries vs CCE 281 CTR 472.
4. The Ld. DR strongly countered the submissions of the Ld. AR. The Ld. DR submitted that not mentioning the exact limb under which the penalty is levied is a mere technical defect and cannot invalidate the penalty proceedings/orders. Further, the Ld. DR placed heavy reliance on findings returned by the ITAT in the quantum order, highlighting that once software purchase stands rejected, and is denied, the assessee cannot escape from penalty. The Ld. DR argued that no case is made out by the assessee to escape from clutches of penalty provisions. Ld. DR prayed for total confirmation of penalty relying on orders of lower authorities. 13
5. We have heard the rival submissions and perused the material on record. The Hon'ble Supreme Court, in the case of Hindustan Steel Ltd. v. State of Orissa 83 ITR 26, had laid down the position of law by holding that the Assessing Officer is not bound to levy penalty automatically simply because the quantum addition has been sustained. Also, in case of CIT v. Khoday Eswara (83 ITR 369) (SC), incidentally reported in same ITR Volume, it is held that penalty cannot be levied solely on basis of reasons given in original order of assessment. The Hon'ble Supreme Court has also reiterated the law in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519 by holding in Para 62 that finding in assessment proceedings cannot automatically be adopted in penalty proceedings and that the authorities have to consider the matter afresh from different angle. The statute requires a satisfaction on the part of the Assessing Officer. He is required to arrive at a satisfaction so as to show that there is primary evidence to establish that the assessee had concealed the amount or furnished inaccurate particulars and this onus is to be discharged by the Department. While considering whether the assessee has been able to discharge his burden, the Assessing Officer should not begin with the presumption that he is 14 guilty. Since the burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in the assessment proceedings that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceedings constitutes good evidence in the penalty proceedings. In the penalty proceedings the authorities must consider the matter afresh as the question has to be considered from a different angle. It is important to keep in mind the fundamental legal proposition that Assessment proceedings are not conclusive. Assessment proceedings and penalty proceedings are separate and distinct. Findings in the assessment proceedings don't operate as res judicata in the penalty proceedings. For this proposition reliance is placed on the decision in CIT vs. Dharamchand L. Shah (1993) 204 ITR 462 (Bom). In Vijay Power Generators Ltd vs. ITO (2008)6 DTR 64 (Del) it was held that "It is well settled that though they constitute good evidence do not constitute conclusive evidence in penalty proceedings." During penalty proceedings, there has to be reappraisal of the very same material on the basis of which the addition was made and if further material is adduced by the assessee in the course of the penalty proceedings, it is all the more necessary that such further material 15 should also be examined in an attempt to ascertain whether the assessee concealed his income or furnished inaccurate particulars. Thus, under penalty proceedings assessee can discharge his burden by relying on the same material on the basis of which assessment is made by contending that all necessary disclosures were made and that on the basis of material disclosed there cannot be a case of concealment of income or furnishing inaccurate particulars of income. Further if there is any material or additional evidence which was not produced during assessment proceedings, same can be produced in penalty proceedings as both assessment and penalty proceedings are distinct and separate. In CIT vs. M/s Sidhartha Enterprises (2009) 184 Taxman 460 (P & H)(HC) it was held that the judgment in Dharmendra Textile cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. Even so, the concept of penalty has not undergone change by virtue of the said judgment. Penalty is imposed only when there is some element of deliberate default.
5.1 At this juncture it may also be apposite to refer to the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322, wherein 16 the Hon'ble Apex Court, while interpreting the provisions of section 271(1)(c) of the Act, has held that a glance at the said provision would suggest that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. In the facts of that case, the court found that it was not a case of concealment of the particulars of the income, nor was it the case of the revenue either. However, the counsel for the revenue suggested that by making an incorrect claim for the expenditure on interest, the assessee had furnished inaccurate particulars of income. The court observed that it had to only see as to whether in that case, as a matter of fact, the assessee had given inaccurate particulars. The court noted that as per Law Lexicon, the meaning of the word "particular" is a detail or details (in the plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particular" used in section 271(1) (c) would embrace the meaning of the details of the claim made. The court further observed that in Webster's Dictionary, the word "inaccurate" has been defined as: "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or 17 transcript." The court observed that reading the words "inaccurate" and "particulars" in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or erroneous. The court noted that it was an admitted position that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect and accordingly, held that, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The court repelled the contention raised by the counsel for the revenue that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". The court held that in order to expose the assessee to the penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. The court further observed that there can be no dispute that everything would depend upon the return filed because that is the only 18 document, where the assessee can furnish the particulars of his income.
5.2 Reverting to the facts of the present case, the AO, in the assessment orders, in the notices issued u/s 274 and in the penalty orders, has not stated the exact limb (concealment of particulars of income or furnishing of inaccurate particulars of income) under which the penalty is initiated and levied. We have very carefully considered this aspect. We have no hesitation in accepting assessee's contention that nowhere has the exact limb of penalty been specified. The Hon'ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory & Ors. (Supra) dealt with the identical issue threadbare and came to the following conclusion:-
"63. In the light of what is stated above, what emerges is as under:
a) Penalty under Section 271(1)(c) is a civil liability.
b) Mens rea is not an essential element for imposing penalty for breach of civil 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 271.19
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) & (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 of penalty even if the tax liability is admitted is not automatic.
k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would 20 have escaped from tax net and as opined by the assessing officer in the assessment order.
l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed.
m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed.
n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity.
o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority.
p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income
q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law.
r) The assessee should know the grounds which he has to meet specifically. Otherwise, principle of natural justice is offended. On 21 the basis of such proceedings, no penalty could be imposed to the assessee.
s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law.
t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate 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."
5.3 Respectfully following the law laid down by Hon'ble High Court, we are of the considered view that when the assessee has not been specifically made aware of the charges leveled against him as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty u/s 271(1)(c) of the Act is not sustainable. We are also supported in our conclusion by the Hon'ble Karnataka High Court's decision in the case of SSA Emerald Meadows (supra) against which the 22 Department's SLP was dismissed by the Hon'ble Apex Court. In reaching this conclusion we also find support from the decision of the Hon'ble Apex Court in the case of Ashok Pai reported in 292 ITR 11 (relied upon in Manjunath Cotton Ginning Factory (Supra) wherein it has been observed that concealment of income and furnishing of inaccurate particulars of income carry different meanings/connotations.
5.4 We would also like to underline the settled position of law that penalty proceedings are independent of assessment proceedings and that a mere confirmation of addition cannot be the sole ground to levy penalty. In the penalty orders, the AO has himself observed that the entire proceedings of assessments were based on a) post search enquiries b) statement of Shri Tarun Goyal, which have been the key factors to impose the penalty u/s 271(1)(c). In the present appeals, it is undisputed that no incriminating material was unearthed during assesssee's search u/s 132 of the Act, that no independent enquiry and examination took place during assessment proceedings qua Shri Tarun Goyal and Micro Infotech Ltd, that only post search enquiries were made the basis of the entire assessment and penalty proceedings/orders, that no cross 23 examination of Shri Tarun Goyal took place, that no effort was made to find out the status of the supplier independently, that the assessee's contention that software purchase was genuine was discounted on the basis of preponderance of probabilities and inferences, that no material was brought on record to establish that cash found its way back to the coffers of the assessee. It is apparent that no independent inquiry was made from the concerned party by issuing notices u/s 133(6)/131 and the entire foundation is laid on post search enquiries, search and seizure operation of Shri Tarun Goyal and statement of Shri Tarun Goyal. On an overall consideration of all these facts, we are inclined to agree with the Ld. AR's argument that the present case may lie in the realm of "facts not proved" but cannot fall in the realm of "facts disproved". We have gone through the orders of the co-ordinate Bench of the ITAT in the quantum proceedings confirming the additions. However, since the scales are different in penalty and quantum proceedings and penalty cannot be automatic to the confirmation of addition in the quantum proceedings, we are disinclined to agree with the contention of the department that the confirmation of the quantum by the ITAT would automatically result in confirmation of the penalty. We are of the 24 considered opinion that mere probability can, at most, be the basis of addition but same cannot be good enough in penalty proceedings. Further, the findings in the quantum order of the ITAT on merits do not reflect any incriminating material unearthed from the search of the assessee. This fact assumes significance because assessments were framed u/s 153A r.w.s. 143(3) of the Act. Therefore, we accept the arguments of the Ld. AR and direct the AO to delete the penalties in all the three years.
Order pronounced in the open court on 31.03.2017.
Sd/- Sd/-
(N.K. SAINI) (SUDHANSHU SRIVASTAVA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
DT. 31st March, 2017
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
By Order
Asstt. Registrar
25