VINOD (RATAN) SUHALKA,UDAIPUR vs. ACIT, CENTRAL CIRCLE-1, UDAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR

BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER

ITA No. 241 & 242/Jodh/2019 (ASSESSMENT YEAR- 2007-08 & 2008-09 ) Shri Vinod (Ratan) Suhalka Vs The ACIT Udaipur C.C.-1 Udaipur (Appellant) (Respondent) PAN NO. AJYPS 0059C

Assessee By Shri Amit Kothari Revenue By Shri Venkatesh V (JCIT-DR) Date of hearing 03/11/2022 Date of 05/01/2023 Pronouncement

O R D E R PER: SANDEEP GOSAIN, JM

Both these appeals have been filed by the assessee against two different orders of the ld. CIT(A), dated 12-04-2019 for the assessment year 2007-08 & 2008-09 respectively in the matter of Section 271(1)(c) of the Income Tax Act, 1961. The assessee has raised the following grounds of appeal in the respective appeals.

2 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR ITA NO. 241/JODH/2019 - A.Y. 2007-08

ITA NO. 241/JODH/2019 - A.Y. 2008-09

2.1 First of all, we take up the appeal of the assessee for the assessment year 2007-08 for adjudication.

3.1 Apropos Ground No. 1 & 2 of the assessee, the facts as emerges from the order of the ld. CIT(A) are as under:-

‘’6.4 I am supported in my view as above by the decision of the Hon. Calcutta High Court in the case of Prasanna Dugar 371 ITR 19. The assessee's SLP against the decision of the Hon. High Court has been dismissed by the Hon. Supreme Court vide order dated 01.05.2015, 373 ITR 681 The facts in the case before the Hon High Court were that a search under section 132 was conducted at the premises of the assessee on February 3, 2009. In the course of the search, the assessee made voluntary disclosure under section 132(4) disclosing a sum of Rs. 70,00,000/- for the AY 2008-09. On the basis of the disclosure, the assessee filed a return on March 31, 2010, offering a sum

3 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR of Rs 70,00,000/- for taxation earned during the assessment year 2008-09 The Hon. High Court took note of the fact that for the AY 2008-09, the assessee had earlier filed his return in which the aforesaid sum of Rs 70,00,000/- was not disclosed and held that the assessee's case was covered by clause (a) of Explanation 5A to Section 271(1)(c) and upheld levy of penalty u/s 271(1)(c) The decision of the Hon. Calcutta High Court applies squarely in the case of the assessee where the assessee had furnished his ROI for A.Y 2007- 08 on 28.03.2008, Le before the date of search (15.09.2010) but the income of Rs. 35,80,000/- had not been declared therein. In view of the Hon. Calcutta High Court decision, as above, notwithstanding the fact that the income of Rs.35.80,000/- is included in the income of Rs.37,36,900/-, declared by the assessee in the ROI u/s 153A filed on 15.03.2013, the assessee is still deemed to have concealed particulars of the income of Rs.35,80,000/- as per the deeming provisions of Explanation 5A to Section 271(1)(c) 6.5 So far as the High Court decisions cited by the assessee are concerned, they either do not pertain to search cases or were rendered before the insertion of Explanation 5A to Section 271(1)(c), as discussed below 1.Varkay Chacko Vis CIT 203 ITR 885 (SC) 2.K.R. CHinni Krishna Chetty (2000) 246 ITR 121 n the instant case penalty is being upheld in light of the deeming provisions of Explanation 5A to Section 271(1)(c), applicable specifically in cases where a search has been conducted. However, in the above two cases, relied upon by the assessee, there was no search therefore the decisions have no application at all to the instant case. 3.CIT Vis Suresh Chandra Mittal (2001) 251 ITR 9 (SC) 4 CIT VIs Suresh Chand Bansal (2010) 329 ITR 330 (Cal) In the instant case search has been conducted after 01.06.2007 therefore the provisions of Explanation 5A to Section 271(1)(c) are applicable. Penalty is being upheld in light of the deeming provisions of Explanation 5A to Section 271(1)(c). However in the above. mentioned two cases, relied upon by the assessee, search was conducted before 01.06.2007, and Explanation 5A to Section 271(1)(c), has no application. Therefore the decisions have no application at all to the instant case. 5. M/s S.A.S. Pharmaceuticals, Delhi high Court, 335 ITR 259(Del) n the instant case penalty is being upheld in light of the deeming provisions of Explanation 5A to Section 271(1)(c), applicable specifically in

4 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR cases where a search has been conducted. However, in the case relied upon by the assessee there was no search, only a survey operation, therefore the decision has no application at all to the instant case. 6.6 The assessee has relied on the decision of Hon. ITAT, Jodhpur, in the case of Shri Suresh Picholiya, in support of the proposition that once an income is declared in the RO filed u/s 153A, no penalty for concealment is leviable in respect of such income. The Tribunal decision relied upon by the assessee is not applicable since the Hon. High Court of Calcutta in its order in the case of Prasanna Dugar 371 ITR 19, has taken a contrary view and subsequently assessee's SLP against the High Court decision has also been dismissed (as discussed earlier in this order), and, so far as the High Court cases cited by the assessee are concerned, as discussed in detail in the preceding paras, they have been rendered in positions of fact or law different from the instant case. 6.7 In view of the above discussion the penalty of Rs. 12,05,028/ levied u/s 271(1)(c). for deemed concealment of income of Rs.35,80,000/-, as per Explanation 5A to Section 271(1)(c), is hereby confirmed In the result the appeal is dismissed.’’ 3.2 During the course of hearing the Bench noted through the present appeal that the assessee has challenged the levy of penalty of Rs.12,05,028/- u/s 271(1)(c) of the Act.

3.3 At the outset, the ld. AR appearing on behalf of the assessee has drawn our attention to the grounds wherein specific grounds has been raised by the ld. AR with regard to challenging the imposition of penalty on the basis of vague notice. In this respect, our attention was drawn by the ld. AR towards impugned notice issued u/s 274 read with Section 271(1) of the Act dated 28-03-2013 and the same is reproduced as under:-

5 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR

‘’Notice Under Section read with Section 271 of the Income Tax Act Dy. Commissioner of Income – Tax, Central Circle-1, Udaipur Date: 28-03-2013 To Shri Ratan (Vinod) Suhalka 25-A, Indraprastha Complex Sector-14, H.M. Udaipur Whereas in the course of proceedings u/s 143(3)/153A of the I.T. Act before for the assessment year 2007-08, it appears to me that you – Section 271(1) read with Section 274 271(1)(a) Have without reasonable cause failed to furnish the return of income which you were required to furnish u/s 139(1) or by a notice given under section 139(2)/ 148 of the Income Tax, 1961 or have without reasonable cause failed to furnish it within the time allowed and in the manner requiuired by said section 139(1) by such notice. 271(1)(b) Have without reasonable cause failed to comply with a notice u/s 142(1)/ 143(2) of the Income Tax Act, 1961.  271(1)(c) Have concealed the particulars of your income and/ or furnished inaccurate particulars of such income. You are hereby requested to appear before me at 11.00 AM on 26-04- 2013 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income Tax Act, 1961. If you do not avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1)(c) Sd/- (Anand Swaroop) Dy. Commissioner of Income Tax Central Circle-1, Udaipur

6 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR

It was further submitted that said notice issued by the Department is vague and defective and thus no proceedings for levy of penalty could have been initiated on the basis of said defective notice and in this regard he relied on series of decisions of the Coordinate Benches of ITAT as well as Hon’ble High Court.

3.4 On the other hand, the ld. DR appearing on behalf of the Department relied upon the order of the lower authorities and submitted that the notice issued by the Department is not vague and it was in accordance with provisions of law.

3.5 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee is engaged in the business of commission/ dalali and consultancy for property business under the name & style of ‘’Vaishno Properties’’. Search and seizure proceedings were carried out at the residential and business premises of the assessee group namely Suhalka Group on 15-09-2010. On receiving the intimation about the search from Addl. DIT (Inv.), Udaipur, Notice u/s 153A was issued by the ACIT, Central Circle-1,

7 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR Udaipur. Thereafter the assessee filed his return of income declaring total incoe of Rs.7,36,901/- on 17-08-2012 which was revised at Rs.37,36,900/- on 15-03- 2013. According to the AO (ACIT, CC-1), the revised return income u/s 153A comprises undisclosed income of Rs.35,80,000/- declared on account of undisclosed investment in property which was not disclosed in original return filed on 28-03-2008 as well as return u/s 153A dated 17-08-2012. Thus the scrutiny assessment u/s 143(3) was completed on 28-08-2014 at Rs.37,36,900/-. The AO noted that during the course of search in his statement u/s 132(4), Shri Ratan (Vinod) Suhalka made a disclosure of Rs.5,80,000/- on account of on money payment for purchase of plot of his office on the basis of seized page no. 1 to 13 of Annexue AS-1. To this effect, the assessee filed the written submission before the AO who did not find convincing as mentioned at para 10.1 to 11 and observed that the AO had brought on record proper and sufficient material for making additions. The burden lies upon the assessee to establish its contention but the assessee could not furnish supporting evidences and the burden had not been discharged by the assessee. He noted that concealment of income of Rs.35.80 lacs was declared by the assessee in return u/s 153A of the Act on account of undisclosed investment in property which was not disclosed in original return filed on 28-03-2008 as well as return u/s 153A dated 17-08- 2012. Taking into consideration all these facts, the ACIT, Central Circle-1 imposed the penalty of Rs.12,05,028/- u/s 271(1)(c ) of the Act which was

8 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR confirmed by the ld. CIT(A). It is noticed that during the penalty proceedings the notice u/s 274 read with Section 271 of the Act was issued which is mentioned above. On perusal of the same, it is noted that neither the applicable clause has been ticked off nor the applicable link i.e. have concealed the particulars of your income and/ or furnished inaccurate particulars of such income have been specified/ mentioned. In other words, prima facie, there was failure on the part of the AO to frame a specific charge against the assessee for which the assessee was being penalized. It is apparent from the order of the assessment that penalty was initiated against the assessee in the quantum assessment on both the charges i.e. concealment of income as well furnishing the inaccurate particulars of income which shows that the AO was not clear as to specific limb which was applicable to given factual matrix. This is further fortified by the fact that exact charge has not been framed even while issuing notice u/s 274 r.w.s. 271 of Act which has been issued in plain printed form without ticking / marking the applicable clause as well as without striking-off the irrelevant limb. This conclusion draws all the more strength upon perusal of penalty order wherein penalty has finally been levied on both the limb which is evident from para-18 of the penalty order, which has already been extracted by us in preceding para 2.13. The aforesaid three events, put together, reveal that the penalty was initiated as well as levied for both the charges. It is apparent that if Ld. AO, in the course of assessment proceedings, was satisfied that the

9 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR assessee has concealed the particulars of income or furnished inaccurate particulars of such income, then he may levy penalty on the assessee. However, in our considered opinion, concealment of particulars of income or furnishing of inaccurate particulars of income, are two different charges. These two expressions i.e. furnishing of inaccurate particulars and concealment of income, in terms of ratio of binding judicial precedents, carry different connotation / meaning and non-framing of specific charge against the assessee would vitiate the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect 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. 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: -

10 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR 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 other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. 4. The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v. Manjunatha Cotton & Ginning Factory[2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 to delete the penalty:— "The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). 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 as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai[2007] 292 ITR 11 (SC) 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 P. Ltd., reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." 5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between Tweedledum and Tweedledee. In the above view, the deletion of the penalty, is unjustified. 6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT[2007]

11 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - 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 not give rise to any substantial question of law. Thus, not entertained. 9. Accordingly, all these Appeals are dismissed. No order as to costs.

It is evident that Hon’ble Court, in the above decisions, has confirmed the ratio laid down by Hon’ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory (359 ITR 565). This decision of Hon’ble Karnataka High Court was subsequently followed by the same court in the case of CIT V/s SSA’s Emerald Meadows (2016 73 Taxmann.com 241) which was agitated by the revenue before Hon’ble Supreme Court. However, Special Leave Petition, against the same, was dismissed by the Hon’ble Court on 05/08/2016 reported

12 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR at 73 Taxmann.com 248. This decision of Hon’ble Karnataka High Court rendered in Manjunatha Cotton & Ginning Factory has subsequently been followed extensively in catena of judicial pronouncements rendered by various Hon’ble High Courts as well as different benches of Tribunal. Following the same decision, Hon’ble Karnataka High Court, in its later decision titled as Muninaga Reddy V/s ACIT (88 Taxmann.Com 545 21/09/2016) observed 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.

13 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR (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 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 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.

14 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR (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, principles of natural justice is offended. On 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.”

15 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR ground which he has to meet specifically otherwise the principles of natural justice would be violated and consequently, no penalty could be imposed on the assessee if there is no specific ground mentioned in the notice. No specific ground is mentioned in the subject notice and resultantly the principles of natural justice could be said as violated. 10. In our view, if the observations made by this Court in the above referred decision and more particularly clauses (p), (q) and (r) are considered, it was a case wherein the decision of this Court would apply and it cannot be said that the decision of this Court in the case of Manjunatha Cotton & Ginning Factory (supra) would not apply. 11. In view of the aforesaid discussion, if the decision of this Court in case of Manjunatha Cotton & Ginning Factory (supra) is considered, the resultant effect would be that the notice in question issued under Section 271(1)(c) for levy of penalty and consequently the penalty imposed, both would be unsustainable and cannot stand in the eye of law.

It has been held by Hon’ble Court that the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to whether the penalty was for concealment of income or furnishing of incorrect particulars of the income. Further, issuing printed form would not satisfy the requirement of law since the assessee should know the ground which he has to meet specifically otherwise the principles of natural justice would be violated and consequently, no penalty could be imposed on the assessee if there is no specific ground mentioned in the notice. We find that similar is the case here since appropriate limb has not been specified in the subject notice and therefore, the principles of natural justice could be said to be have been violated. More or less, similar proposition has been laid in other binding judicial precedents as tabulated by us. In other words, failure to frame specific charge against the

16 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR assessee during penalty proceedings would be fatal to penalty proceedings itself and the same could not be sustained in the eyes of law. The revenue is unable to demonstrate that specific charge was ever framed and 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. In view of the above aforesaid discussion, we hold that impugned penalty was unsustainable in the eyes of law and therefore, we direct for deletion of the same. Since the penalty has been deleted on legal grounds, the other arguments of the assessee including arguments on merits assailing impugned penalty are not being dealt with as the same have been rendered in academic in nature. In view of the above deliberations, we do not concur with the findings of the ld. CIT(A) and the appeal of the assessee is allowed.

4.1 It is pertinent to mention that the appeal of the assessee for the assessment year 2008-09 also pertains to penalty u/s 271(1)(c) of the Act amounting to Rs.23,45,310/-. It is not imperative to repeat the same facts, therefore, the decision taken by us in the appeal of the assessee for the assessment year 2007-08 shall apply mutatis mutandis in the appeal of the assessee for the assessment year 2008-09. Hence, the appeal of the assessee for the 2008-09 is also allowed.

17 ITA NO. 241/JODH/2019 VINOD (RATAN) SUHALKA VS ACIT, CC-1, UDAIPUR 5.0 In the result, the appeals of the assessee are allowed Order pronounced in the open Court on 5/01/2023as per Rules 34(4) of ITAT Rules, 1963. . Sd/- Sd/- (B. R. BASKARAN) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated : 5 /01/2023 *Mishra Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) Asstt. Registrar 5. The DR 6. Guard File Jodhpur Bench