THE DCIT-CENTRAL-2, INDORE vs. M/S. KALYAN TOLL INFRASTRUCTURE LTD., INDORE

PER MANISH BORAD

The above captioned appeals filed at the instance of the

Revenue pertaining to Assessment Years 2010-11 & 2008-09 in

the case of M/s. Kalyan Toll Infrastructure Pvt. Ltd & M/s. Keti

Construction (India) Ltd respectively are directed against the orders

of Ld. Commissioner of Income Tax (Appeals)-3 (in short ‘Ld.CIT(A)’],

Bhopal evenly dated 25.06.2019 which are arising out of the order

u/s 271(1)(c) of the Income Tax Act 1961(In short the ‘Act’) dated

25.06.2019 framed by DCIT, OSD(Central)-1, Indore.

M/s Kalyan Toll Infrastructure Pvt. Ltd, ITA No.878/Ind/2019 Assessment Year 2010-11 1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in deleting the penalty of Rs.1,60,00,000/- levied by Assessing Officer for concealment of income and for furnishing of inaccurate particulars of income in respect of undisclosed income deleted during search and excess claim of depreciation. M/s Keti Constructions(India), Ltd, ITA No.877/Ind/2019 Assessment Year 2008-09

1.On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in deleting the penalty of Rs.50,00,000/- levied by Assessing Officer

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 for concealment of income and for furnishing of inaccurate particulars of income in respect of undisclosed income deleted during search and disallowance of claim u/s 36(V) of the Income Tax Act, 1961. 3. As both the assesee(s) in these two appeals relates to the same

group, they were heard together and are being disposed off by this

common order for the sake of convenience and brevity.

Kalyan Toll Infrastructure Pvt. Ltd for Assessment Year 2010-11.

Sole grievance of the revenue is against the finding of Ld. CIT(A)

deleting the penalty levied u/s 271(1)(c) of the Act at Rs.

1,60,00,000/-.

narrated by Ld. Counsel for the assessee are that the appellant is a

company of Kalyan (Garg) group of Indore engaged in the business

of civil construction contracts and Build-Operate-Transfer (BOT

contracts). Search and seizure operations were carried out u/s 132

on the business as well as residential premises of Kalyan group

covering various concerns and individual of the groups on

05.05.2011 wherein substantial disclosure of additional income

was made by the group. Fresh assessment proceedings were

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 initiated and notice u/s 153A were issued in response to which

fresh returns were filed by the appellant declaring additional

incomes, which were declared by it u/s 132(4). In response to the

notice issued u/s 153A, the appellant filed the return of income of

Rs.8,60,48,030/- including additional income offered u/s 132(4) of

Rs.5,08,55,709/-. The AO completed the assessment proceedings

u/s 143(3) r.w.s. 153A on 26.03.2014 at a total income of

Rs.41,97,07,950/- by making various additions and disallowances.

The additions made by the Ld. A.O were partly deleted by Ld. CIT(A)

and remaining were deleted by the Tribunal except for the addition

of Rs.2,28,103/- sustained on account of additional claim of

depreciation.

of the Act. Assessee’s submissions were noted in the penalty

proceedings along with the contentions made by the assessee for

not levying the penalty but the same were not accepted. Ld. A.O

levied penalty of Rs.1,60,00,000/-.

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 7. Against the order of the Ld. A.O assessee went in appeal

before an appeal before Ld. CIT(A) and challenged the levy of

penalty on merits as well as legal ground. It was submitted by the

assessee that the penalty notice issued u/s 274 r.w.s. 271(1)(c) of

the Act was not valid in the eyes of law since the charge against the

assessee was not specified. Reliance was placed on various

judgments including the judgment of Hon’ble Jurisdictional High

Court in the case of Pr. CIT V/s Kulwant Singh Bhatia IT No. 9 to 14

of 2018 order dated 9.5.2018. Ld. CIT(A) accordingly applied the

judgments referred and relied by Ld. Counsel for the assessee and

allowed legal ground and held the notice issued u/s 274 r.w.s.

271(1)(c) of the Act as a defective notice not sustainable in law. On

merits also Ld. CIT(A) allowed assessee’s ground observing that

when the basic premises on which the appellants offered income

was rejected by Ld. A.O and later on when the additions made in

the assessment orde3r were deleted in the appellate proceedings,

the Ld. A.O merely for the purpose of levy of penalty took the basis

of additional income offered by the appellant. Ld. CIT(A) also

observed that since the Ld. A.O had been unable to make any

proper satisfaction in the penalty order, the penalty so levied was 5

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 not in accordance with law.

sole issue of deletion of penalty made u/s 274 r.w.s. 271(1)(c) of the

Act at Rs.1,60,00,000/-

supporting order of Ld. A.O. contending that had the search not

taken place the assessee would not have offered the additional

income, therefore penalty u/s 271(1)(c) of the Act was rightly levied.

submissions placed on record running from page 1 to 28, referred

to the paper book dated 20.8.2020 running from page 1 to 186 and

also referring to various judgments referred and relied in support of

the finding of Ld. CIT(A).

11 Ld. Counsel for the asssessee also submitted that the penalty

proceedings were void ab-initio since in the assessment order no

charge was specified before initiating penalty proceedings. The

penalty notice issued u/s 274 r.w.s. 271(1)(c) of the Act have also

been issued in cyclostyled proforma mentioning both the limbs of

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 concealment of income and furnishing inaccurate particulars of

income without striking off the inapplicable clause. In support of

settled proposition that both the limbs carried different

connotations, reliance was placed on the judgment of Hon’ble

Supreme Court in the case of T Ashok Pai V/s CIT (2007) 292 ITR

Jurisdictional High Court in the case of Kulwant Singh Bhatia

(supra) . Reference was also made to various decisions of Bench of

Indore taking similar view.

decisions of the Indore Tribunal in the case of Smt. Shruti Garg V/s

DCIT ITA No. 988/Ind/2016 dated 28.06.2017 and Keti Sanga,

Infrastructure (I) Ltd & others ITA No.1343 & 601/Ind/2016 dated

27.06.2018. Both these cases are of the assessee’s belonging to the

same Kalyan Group wherein also additional income was offered in

the same search and subsequently the penalty levied was deleted

by the Tribunal.

referred to the written submissions and the relevant part of the 7

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 written submission is reproduced below:-

Imposition of penalty of Rs.l,60,OO,OOO/- is wrong and uncalled for:

11.Pursuant to search operations, notices u/s 153A was issued to the respondent in response to which return was filed on 12.10.2013 offering a total income of Rs. 8,60,48,030/- including additional income of Rs, 5,08,55,709/ _ offered u / s 132(4). The breakup of the additional income is as under:

(i) Rs.28,90,450 / _ was offered on the basis of notings made on various loose paper seized at the time of search which could not be identified in books of accounts.

(ii) Rs. 3,58,72,460/- was offered on account of peak credit offered on the basis of cash flow statement prepared to explain the source of share application money introduced in books of accounts

(iii) Rs.l,03,87,500/_ was offered on account of as commission on the share application money.

(iv) Rs. 17,05,300/ - was offered on account of proportionate depreciation forgone by spreading over the total inflated project cost over the period/ life of the projects.

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 12.Penalty proceedings were also initiated in respect of a claim of depreciation of Rs.2,28,103/ _ which was made in the return filed u / s 153A and which was inadvertently short claimed in the return filed u/s 139(1). The AO did not allowed the said claim made in the return filed u / s 153A and initiated penalty proceedings.

The contentions of the respondent in respect of the penalty levied u/ s 271(1)(C) are as under:-

17.1 No penalty was initiated in the assessment order in respect of additional income offered of Rs. 3,58,72,460/ - on account of peak credit. Since no penalty proceedings were initiated in respect of this income, the respondent did not made any submissions on the same in its written submission filed during the present penalty proceedings. The AO has also not discussed the said item in the present penalty order, but surprisingly still levied penalty under explanation 5A of 271(1)(c) which is totally unjustified and bad in law. Also otherwise the penalty is not leviable on the same due to following reasons:

17.2 The additional income offered of Rs. 3,58,72,460/ - was on account of peak credit to explain the source of share application money introduced in books of accounts.

17.3 In respect of above additional income offered u/s 132(4) and also in the return filed u/s 153A r.w.s. 139, the respondent wish to submit as under:-

Basic facts of the case resulting into offering of additional income:

17.3.1 The respondent has raised certain share capital in 9

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 various years, along with other group companies which was not found to be proper, which fact was also accepted by the respondent group during the search proceedings. However, the respondent group explained the source of share capital introduced in the books of accounts, out of amounts generated from inflation of project costs in some of the group companies through a date wise cash flow statement which was prepared scientifically and systematically on the basis of loose paper found for all the years covered u/s 153A. The major source of share capital was generated through inflation of project cost of various toll projects in the group. Amounts received from the inflation of project cost were utilized for generating share capital. This fact was properly explained and duly substantiated during the search proceedings itself and a detailed working in the form of cash now statement was filed to explain the source of share capital. In the cash flow statement some negative peak credit arose, which was offered as income in the respective year.

17.3.2 The resultant peak credit in the cash flow statement was offered as income in the respective years and the depreciation claimed in respect of the inflated project cost was withdrawn in the respective group companies. These amounts were offered as additional income u/s 132(4) before the investigation wing, which were also offered in the return filed vi] s 153A and due taxes along with interest was also paid. In this respect the respondent places reliance on its detailed explanation and workings on the basis of which these amounts were offered u/s 132(4) and also on the written submissions filed before the Investigation Wing and also during the course of assessment proceedings, which have also been abstracted in the assessment order. 10

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 The assessment proceedings:

17.3.3 It is submitted that the Learned AO in the assessment order rejected the peak theory and consequentially also rejected the cash flow statement as discussed in Para 12.8.1 of the assessment order and proceeded to add the entire share capital raised by the company by treating it as unexplained cash credit u/s 68. However, the addition on account of share capital received was made after reducing there from, the income already offered by the respondent on account of peak credit as discussed in Para 12.9 of the assessment order. Penalty proceedings in respect of the addition so made by the AO were initiated in Para 12.10 of the assessment order. Copy of the assessment order is enclosed at page no. 29 to 59 of the paper book. Thus the crux of the matter is that the income offered by the respondent on account of peak credit arising out of the cash flow statement prepared to explain the source of share capital was rejected and addition of entire share capital was made by the AO.

First Appellate proceedings~

17.3.4 The Ld. CIT(A) has discussed this issue in Para 6 to Para 6.13 of the order. The Ld. CIT(A) accepted the cash flow statement in Para 6.7 and 6.10 of the order and also accepted the fact that the source of generating the share capital was inflation of project cost in Para 6.10 and 6.11 of the order. However, the Lde CIT(A) allowed credit of cash utilization to the extent, the cash generated from inflation of project cost was utilized within a period of 15· days for augmenting the share capital and thus accepted the source of share capital to this extent. Thus part of the addition made by the AO on account of share capital received was deleted and balance addition was 11

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 confirmed. The Ld. CIT(A) however, did not accepted the theory of peak credit as discussed in Para 6.9 of her order. Copy is enclosed at page no. 60 to 81 of the paper book.

Second Appellate proceedings:

17.3.5 The respondent and the department both filed second appeals before the Honourable ITAT. The Honourable ITAT has discussed this issue in Para 4 to 15 of its order and deleted the addition, which was confirmed by the CIT(A), thus allowed the appeal of the respondent and dismissed the appeal of the department on this issue. The Honourable !TAT while dismissing the departmental appeal also rendered a categorical finding on internal page 36 of the order that the source of share capital was the inflation of project cost and therefore no seperarate addition was warranted on account of share capital. The Honourable ITAT while deciding the appeal filed by the respondent, accepted the peak theory and rejected the contentions of the AO on internal page 38 holding that the observations formed by the AO is totally out of context and the AO rejected the peak theory just for the sake of rejection without any cogent reasons and ignoring the clear facts of the case. It was also held on internal page 40 of the order that the CIT(A) was not justified in not accepting the peak working which ought to have been accepted on the facts of the case. The Honourable ITAT also rejected the theory propounded by the Learned CIT(AI of utilization of cash within 15 days of its generation and held on internal page 41 that once the cash was available with the respondent from inflation of project cost, telescoping of the same should have been allowed unless some other utilization of the same is on record. The Honourable

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 ITAT finally concluded on internal page 42 of the order that "we hold that AO was not justified in rejecting the peak theory of the respondent and Learned CIT(A) was not justified in restricting the same to the extent of utilization of within 15 days. Therefore, the addition to the extent confirmed by the Learned CIT(A) is directed to be deleted. Accordingly, assessee's grounds of appeal in this issue are allowed."

17.3.6 It was also explained during the search and also during the assessment proceedings that the entire exercise of generating share capital was undertaken solely with the purpose of generating more business and to augment higher finances for the purpose of business, which were invested in the ongoing projects for generating more business and was not done with the motive of evading tax. It was also explained that the inflation of project cost in group companies eventually did not resulted in lowering the taxable income since all these projects qualified for deduction u/ s 80lA and the enhanced depreciation on the inflated project cost would have only reduce the deduction u/s 8OlA without affecting the taxable income. It was categorically stated even before the Investigation Wing and also during the assessment proceedings that the entire assertion of the respondent was with the sole object of coming clean and to avoid penalties and protected litigation with the department. All these contentions of the respondent group have been discussed at length in the order of the Honourable ITAT and have been accepted.

Thus, the cash flow statement and the peak income on the basis of which the respondent surrendered additional

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 income and which was rejected by the AO in the assessment proceedings finally stand accepted in the appellate proceedings. Thus in a nutshell the cash flow statement and the peak income offered, arising out of the cash flow statement to explain the source of share capital, was rejected in the assessment proceedings and additions of the entire share capital were made by the AO. The Hon'ble CIT(A) accepted the cash flow statement but rejected the peak theory and allowed partial relief on an altogether different theory of utilization of available amount within 15 days of its generation. On this issue, the Hon'ble ITAT dismissed the appeal filed by the Department and in the appeals filed by the respondent, accepted the peak theory and also deleted the balance additions of share capital, made in the respective years, which was sustained by the CIT(A).

17.3.7 Without prejudice to the basic contention of the respondent that in view of above facts and circumstances, the additional income offered is not liable for penal consequences, it is submitted that penalty in respect of the additional income offered on account of peak credit is even otherwise not warranted for the following reasons:

The income offered by the respondent was rejected in the assessment.

(i) The additional income of Rs.3,58,72,460/- on account of peak credit of the cash flow statement offered by the respondent in the return filed u/s 153A was not accepted and was categorically rejected in the assessment proceedings. Since the income offered by the respondent and the theory propounded to explain the share capital, itself was rejected, the question of 14

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 initiating penalty proceedings on the same does not arise and was rightly not so initiated. At the first instance penalty proceedings were not initiated on this issue and hence the levy of the penalty on the same is uncalled for. Even otherwise, once the income offered by the respondent and the methodology adopted by the respondent of working such income, was rejected by the AO and additions were made on an altogether different premise, the question of levying penalty in respect of income offered by the respondent does not arse.

The addition made by the AO stand deleted.

(ii) After rejecting the cash flow statement and the peak income offered by the respondent, the addition was made on account of share application money and penalty proceedings were initiated in respect of the said addition. The said addition stand deleted in its entirety in the subsequent appellate proceedings, therefore penalty is even otherwise not attracted in respect of this issue and has rightly been levied by the AO.

(iii] Further, the addition of share capital was made on an altogether different premise rejecting the cash flow statement and the income offered by the Respondent. The income offered by the respondent and its working was accepted only in the appellate proceedings, wherein the theory propounded by the AO was rejected at the first appellate stage itself and the addition made on account of share capital was deleted. Thus the very premises on which the additions were made by the AO did not survived, the question of levying penalty does not arise.

Therefore, in the humble opinion of the Respondent, no penalty u/s 271 (l)(c) is attracted in this case in respect of the income 15

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 offered by the respondent on the basis of cash flow statement and peak income theory.

The Learned CIT(A) has rightly held that the basic premises. on which the respondent offered the income was rejected by the Learned AO in the assessment proceedings and the Learned AO merely for the purpose of levying penalty cannot revert back to the income offered by the respondent which was rejected in the assessment order. Therefore, the ground raised by the department may please be dismissed on this ground.

17.4 Additional income was also offered in respect of proportionate depreciation forgone of Rs. 17,05,300/ - in respect of the inflated project cost. It is submitted that, as explained above the project cost of' various toll projects was inflated and the amount so generated was utilized for sourcing the share capital. Therefore, the respondent reduced its claim of depreciation in the returns filed u / s 153A in respect of the project cost so inflated. The issue is discussed in Para 14 to 14.5 of the assessment order, wherein the depreciation forgone by the respondent in various years was accepted without any variation and without any adverse comment. It is submitted that penalty has been levied merely on the basis of the offer of additional income made and honoured by the respondent. There is no satisfaction drawn by the AO much less any requisite satisfaction, as to why and how the income offered by the respondent was liable for further penalty.

The Learned CIT(A) has rightly held that the basic premises on which the respondent offered the income was rejected by the Learned AO in the assessment proceedings and the Learned AO merely for the purpose of levying penalty cannot revert back to the income offered by the respondent which was rejected in the 16

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 assessment order. Therefore, the ground raised by the department may please be dismissed on this ground.

17.5 Similarly additional income was also offered of Rs. 1,03,87,500/- in respect of the commission for arranging the share capital. In this respect it is submitted that the said income was suomoto offered by the respondent without there being any incriminating material found during the search to this effect. It is submitted that the respondent on its own calculated such commission @ 2.5% of the share capital introduced and offered the same for taxation before the investigation Wing. It is reiterated that no noting was found indicating any actual payment of any such nature relating to this item and the same was offered only on the pretext that such expenditure is generally required to be incurred in similar circumstances. It is submitted that the respondent otherwise had sufficient cash available in the cash flow statement prepared by it (as discussed above) and the respondent could have very well claimed telescoping of this estimated expenditure out of the same. However, the said income was still separately offered solely to honour the offer made at the time of search and to avoid confrontation and long drawn litigation.

The relevant discussion in this regard is in para 13 of the assessment order, from where it is evident that the income offered by the respondent has been accepted solely on the basis of offering it by the respondent without bringing anything on record and without reference to any noting or any other incriminating material seized during the search. Therefore. the offer of said income does not attract the deemed penal provisions of explanation 5A to section 271.

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 17.6Additional income of Rs. 28,90,450/- was offered on account of certain notings found on loose papers, which the respondent could not readily reconcile with its books of accounts. This income was offered suo-moto by the respondent during the search without having been pointed out by the search team. Later on when the cash flow statement was prepared, the respondent had ample opportunity to cover the effect of these notings/LPS in the cash flow statement and to claim telescoping of the same however, the same was not done to merely to honour the offer of additional income made during the search proceedings and the said income was offered in the returns filed u/s 153A without any modification. In fact the action of offering this income separately and not claiming the telescoping of the same, the respondent has already suffered double taxation to this extent. The income so offered stand accepted without any modification or any adverse comment during the assessment. proceedings as evident from the assessment order. Therefore, the respondent ought not. to have been saddled with additional penal consequences in respect of this income.

For the proposition that the notice u/s 274 r.w.s. 271(1)(c) was vague as the same was issued without drawing requisite satisfaction and without mentioning the specific charge against the appellant:- (i) Hon’ble Karnataka High Court in the case of CIT V/s SSA’S Emerald Meadows (2015) 99 CCH 0334 (ii) Hon’ble Supreme Court in the case of CIT V/s SSA’s Emerald Meadows (2016) 73 taxmann.com 248 (iii) Hon’ble High of Madhya Pradesh in the case of CIT V/s 18

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 Kulwant Singh Bhatia (2018) 304 CTR 0103. (iv) Hon’ble Indore ITAT in the case of Shri Bansidhar Somani V/s DCIT ITA No.169 to 624/Ind/2017 dated 17.12.2018. (v) Hon’ble Indore ITAT in the case of Smt. Shruti Garg V/s DCIT ITA No.988/Ind/2016 dated 28.06.2017 (vi) Hon’ble Indore ITAT in the case of Keti Sangam Infrastructure (I) Ltd & Others V/s DCIT ITA No.516/Ind/2017 dated 27.06.2018. (vii) Hon’ble Bombay Tribunal in the case of Indrani Sunil Pillai V/s ACIT (2018) 52 CCH 0056. (viii) Hon’ble Delhi Tribunal in the case of ABRAuto Pvt. Ltd V/s ACIT (2017) 51 CCH 0477.

placed before us and carefully gone through the written submission

and decisions referred and relied by the Ld. Counsel for the

assessee. Revenue’s sole grievance is against the deletion of

penalty levied u/s 271(1)(c) of the Act at Rs. 1,60,00,000/- in the

case of assessee namely M/s Kalyan Toll Infrastructure Limited ITA

No.948/Ind/2019.

M/s. Kalyan Toll Infrastructure Limited from 5.5.2011 to 7.5.2011

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 along with other persons of Kalyan Group. In the return of income

filed subsequent to issue of notice u/s 153A of the Act assessee

offered additional income. Ld. A.O did not accepted the income

offered by the assessee and went ahead making various other

additions and completed the assessment. All the additions so made

by the Ld. A.O except for the additional claim of depreciation of

Rs.2,28,103/- stood deleted partly at the stage of first appellate

authority and remaining by the Tribunal. Subsequently Ld. A.O

initiated the penalty proceedings u/s 271(1)(c) while completing the

assessment without satisfying himself as to whether the

proceedings are to be initiated for concealment of income or for

furnishing inaccurate particulars of income. Ld. A.O carried out the

penalty proceedings after considering the submissions of the

assessee and levied the penalty u/s 271(1)(c) of the Act on the

additional income offered by the assessee in the return of income.

This fact is not disputed at the end of revenue that firstly in the

return, the additional income offered by assessee was not accepted

by Ld. A.O, secondly all the additions made by the Ld.A.O except

one were deleted partly by Ld. CIT(A) and by Tribunal, Indore Bench

and thirdly no specific charge was levelled in the assessment order. 20

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 It is also pertinent to note that at the first appellate stage assessee

along with raising grounds on merits has also challenged the

legality of the notice issued u/s 274 r.w.s. 271(1)(c) of the Act

contending it to be bad in law. We observe that Ld. CIT(A) has dealt

both the legal issue as well as the merits of the case regarding levy

of penalty u/s 271(1)(C) deciding in favour of the assessee observing

as follows :-

4.1 Ground No. 1 & 2 - Through these ground of appeal, the appellant has challenged the levy of penalty of Rs. 1,60,00,000/- u/s 271(1)(c) of the Income Tax Act and also the initiation of the penalty proceedings u/s 271(1)(c) and also the penalty show cause notice issued u/s 274. It is seen that the appellant filed its return of income u/s 139(1) on 23.09.2008 declaring an income of Rs. 3,54,20,430/-. In response to notice issued u/s 153A, the appellant filed the return on 12.10,2013 declaring an income of Rs. 8,60,48,030/-. The AO completed, the assessment on 26.03.2014 on an income of Rs, 41,97,07,950/- by making various additions and disallowances. However, all the additions and disallowances so made have been deleted either in the first appeal or in the second appeal except for a nominal addition of Rs. 2,28,103/- which was made by the appellant in the return filed u/s 153A. In the assessment order, the AO initiated penalty u/s 271(1)(c). The AO also issued a notice u/s 274 r.w.s. 271(1)(c) dated 26.03.2014 stating that the appellant has concealed the particulars of income or furnished inaccurate particulars of income. After considering the reply of the appellant, the AO passed the impugned penalty order u/s 271 (1)( c) on 31.03.2018 levying a penalty of Rs. 1,60,00,000/- for this year. 21

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 12.The penalty has been levied in respect of additional income of Rs. 5,06,02,159/-(5,08,55,710 -2,28,103 additional claim of depreciation in 153A) offered by the assessee and also in respect of the disallowances made by the AO of Rs. 2,28,103/--. There is no discussion in the penalty order passed by the AO regarding the nature of additional income offered by the appellant on which the AO has levied the penalty. However, the appellant has explained that it has offered additional income of Rs. 3,58,72,460/- account of peak credit worked out on the basis of the cash flow statement prepared by it to explain the source of share capital generated by the appellant and Rs. 17,05,300/- on account of depreciation forgone and Rs.1,03,87,500/- on account of expenses incurred for share capital and Rs.28,90,450/- on account of loose papers. The income so offered by the assessee U/S 132(4) was also offered in the return filed in response to notice issued u/s 153A and due taxes were also paid before filing the return of income.

The appellant has challenged the initiation of the penalty proceedings on the contention that no satisfaction was drawn in the assessment order while initiating the penalty proceedings as no charge was mentioned in the assessment order and the notice issued under section 274 was also a defective notice as no specific charge was mentioned against the appellant. The appellant has challenged the levy of penalty u/s 271 (1)( c) on the ground that there was no satisfaction in the penalty order as well, as both the charges were reiterated in the penalty order. It is also contended that the penalty order is vague as on one hand Explanation 5A to section 271(1)(c) has been referred in Para 3.3 of the penalty order and on other hand Explanation 1 to section 271(1)(c) has also been invoked in Para 3.4 stating that when there is difference between the assessed income and the returned income, there is presumption of concealment or furnishing of inaccurate particulars. It is contended that since both the explanations operate under all together different situations, invoking both 22

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 the explanation at the same time, shows that penalty has been levied under confused state of mind. The appellant has also contended that no penalty was initiated in the assessment order in respect of the income offered on the basis of peak credit, still penalty has been levied on the same without making any discussion in the penalty order. The appellant further contended that the cash flow statement prepared by it, which was also filed before the Investigation Wing, and the income offered on the basis of peak credit working was rejected by the AO in the assessment order and separate and independent additions were made by the AO. However, the cash, flow statement and the peak credit working of the. appellant was accepted in the appellate proceedings and all additions made by the AO were deleted in the appellate proceedings. Therefore, it is contended that when the income of peak credit offered by the appellant was itself rejected by the AO in the assessment order, no penalty u/s 271(1)(c) ought to have been levied on the same. Finally the, appellant contended that since all the additions made have been deleted and the income returned by the appellant finally stand accepted, no penalty ought to have been levied.

After taking consideration the assessment order and also the penalty order and all the contentions of the appellant carefully it is seen that while initiating the penalty proceedings in the assessment order the AO has simply stated that penalty proceedings are initiated u/s 271(l)(c) and no charge of either concealment of income or furnishing of inaccurate particulars of income was mentioned in the assessment order. Therefore, no requisite satisfaction was drawn in the assessment order. From a perusal of the notice dated 20.03.2014 issued uls 274 which is at page 115 of the paper book, it is seen that both the charges i.e. concealment of particulars /of income or furnishing inaccurate particulars of income are mentioned therein. Similarly a perusal of the penalty order shows that again both the charges are mentioned in the heading in para 3 and also in 23

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 concluding para 5 & 6 of the penalty order.

As per the provisions of section 271(1)(c) of the Act, there are two different charges i.e. the concealment of particulars of income or furnishing of inaccurate particulars of income. Penalty can be imposed for a specific charge. In view of the decision of Honourable Supreme Court in the case of T. Ashok Pai Vis CIT (2007) 292 ITR 11 (SC) it is now a settled proposition that concealment of income and furnishing inaccurate particulars of income carry different connotation. It is equally settled proposition that where the charge for levying penalty is not specific, the notice u/s 271 (1)( c) is bad in law as it does not mentioned the specific limb of section 271 (1)( c) of the Act under which it has been initiated. When the notice does not specify the charge for levy of penalty, it has been held that the penalty cannot be levied. The Hon'ble Supreme court in Dilip N. Shroff V/s JCIT (2007) 291 ITR 519 (SC),.has observed that while issuing the notice under section 274 r.w.s. 271, in the standard format, the Assessing. Officer should delete the inappropriate words or paragraph, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. The Honourable Court further observed that the AO has not struck down the relevant word/sentence in the cyclostyled proforma of the penalty show cause notice, therefore, the AO was not sure that on what ground he is levying the penalty.

The penalty proceedings in this case were initiated without mentioning any charge' in the assessment order. The penalty notice was. also issued in mechanical manner without specifying the specific charge as to whether the appellant is found guilty of concealing the particular of income or have furnished inaccurate particulars of income. Thus the very initiation of the penalty proceeding in this case is not in accordance with law and has led to vitiation of entire penalty proceedings. very recently the Hon'ble

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 jurisdictional High Court in the case of Principal Commissioner of Income Tax v/s Kulwant Singh Bhatia dated 09.05.2018 (ITA 9 to 14 of2018) has held that the penalty u/s 271(1)(c) of the Act of 1961 is not sustainable in law as the notice was not specific, observing as follows:-

"on due consideration of the arguments of the Learned counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that Learned Tribunal has rightly relying on the decision of CIT Vis Manjunatha Cotton Ginning Factory and CIT Vis SSA'S Emerald Meadows rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA. No(s) 9/2018, 10/2018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed. "

It is observed that facts of the present case under appeal before me are identical to that of the case of Kulwant Singh Bhatia (Supra) in so far as additional income was offered by the assessee in the returns filed after the search and penalties u/s 271(1)(c) were levied on the basis of show cause notice issued without, striking off either of the two charges, which facts are identical in the present appeal. In the case of Kulwant Singh Bhatia also, it, was the observation of the AO that-the assessee has offered additional income only due to search and the additional income was not declared in the return filed u/s 139 and therefore, penalty proceedings u/s 271(1)(c) were initiated, which fact is also identical with the present appeal. Further in the case of Kulwant Singh Bhatia penalties were levied by invoking Explanation SA to section 271(1)(c) and in the - instant case also the same explanation has been invoked. In the case before the Honourable High Court, the penalties were deleted by the

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 Tribunal holding that the same as not sustainable in law, as no specific charge was levied in penalty show cause notice, later the order of the Honourable IT AT was affirmed by the Honourable Jurisdictional High court. Therefore, the proposition laid down by the Honourable Jurisdictional High Court of Madhya Pradesh is applicable in the present appeal also and it is held that the penalty proceedings initiated in this case are not as per law and the penalty so levied is wrong.

The appellant has stated that in its other group cases also, wherein penalties were levied u/s 271 (1)( c) in the assessment proceedings carried out as a result of the same search, wherein also penalty proceedings were initiated in an identical manner, in which the same were initiated in the present appeal, have been deleted by the Honourable IT AT Indore Bench in the cases of M/s Keti Sangam Infrastructure (I) Ltd. and other group company appeals and also in the case of Shruti Garg and other individual cases of the group, copies of such orders have also been filed at page no. 61 to 115 and at page no. 38 to 60 respectively of the case law paper book. A perusal of the order passed in the case of Keti Sangam Infrastructure (I) Ltd. in IT no. 516/Ind/20 17 and other cases by the Honourable Jurisdictional IT AT on 27.06.2018 it is seen that the penalties levied u/s 271(1)(c) of the Act has been deleted. After discussing the issue at length and after analyzing the various deeisions.jhe Honourable ITAT in Para 13 on internal page 32 of the order held that;

"From the perusal of the above judgment and examining the facts of the instant nine appeals, we find that in all these cases the Assessing Officer has not struck down the relevant word from the sentence in the cyclostyled proforma of penalty show cause notice which means that the Assessing Officer was not sure as to on what ground he has initiated the penalty proceedings and in such a case the alleged notice is not sustainable in law and is

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 liable to be quashed. Be, therefore, respectfully following the judgments and decisions referred to above, allow this common legal ground of the assessee's in these nine appeals and delete the penalties levied u/s 271 (l)(c) of the Act in all these cases. "

Therefore, following the decision of the Honourable ITA T Indore Bench rendered on 27.06.2018 in the appellant group cases itself, it is held that the penalty levied by the AO in the impugned order is invalid.

It is also seen that the income offered by the appellant on account of peak credit worked out on the basis of cash flow statement prepared by the appellant was rejected by the AO as evident from para 13.7 of the assessment order. Further the said cash flow statement and also the income offered by the appellant was accepted in the appellate proceedings and all the additions made by the AO were deleted. Therefore, when the basic premises on which the appellant offered the income, was rejected by the AO in the assessment proceedings, later on when the additions made in the assessment order were deleted in the appellate proceedings the AO merely for the purpose of levy of penalty, cannot revert back to the income offered by the .appellant which was rejected in the assessment order and the additional in~;;;offered by the appellant cannot attract penal provision. Further, the appellant has rightly contended that no proper satisfaction has been drawn in the penalty order, where explanation SA as well as explanation 1 of section 271(1)(c ), both have been invoked and the appellant has been held to be guilty of concealment of income by furnishing inaccurate particulars of income, which is also not in accordance with law.

The appellant also get support from the decision of Honourable M. P. High Court which has also been upheld by the Honourable Supreme Court in the case of CIT Vis Suresh Chand Mittal (2001) 251 ITR 9, herein it was held that where the assessee filed revised return showing higher income 27

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 after search and notice for reopening of assessment and the department simply rested its conclusions on the action of surrender made by the assessee, no penalty u/s 271(1)(c) could be levied. Through in the present appeal before me, the AO made various additions, however, the same were deleted and the income returned by the appellant only survived. The AO even while verifying the penalty has not recorded any satisfaction and has levied the penalty merely on the basis of the additional income was offered by the appellant. For this reason also the penalty levied u/s 271 (1)( c) in the present appeal is held to be wrong.

In view of the above discussions the penalty levied is held to be wrong. Accordingly the penalty levied by the AO u/s 271(1)(c) is deleted and the appeal filed by the appellant is allowed.

first deal with the legal issue as to whether the notice issued for

levy of penalty u/s 274 r.w.s. 271(1)(c) of the Act was defective in

nature so as to render the penalty proceedings u/s 274 r.w.s.

271(1)(c) of the Act as void ab-initio. To adjudicate the issue we will

first go through the penalty notice issued to the assessee which is

reproduced below:-

OFFICE OF THE Deputy Commissioner of Income Tax (Central), Indore PAN. AACCCK1840M Date: 26/03/2014 To M/s. Kalyan Toll Infrastructure Pvt. Ltd, 15/3 Vidhya Deep, Manoramaganj Indore

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT, 1961 Whereas in the course of proceedings before me for the assessment year 2010-11 it appears to me that you :- have concealed the particulars of your Income or furnished inaccurate particulars of such Income. You are hereby requested to appear before me at 3.30 pm on 24/04/2014 and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271(1)(c). Sd/- (Ram Kumar Yadav) Dy. Commissioner of Income Tax (Central) Indore 19. From going through the above notice it is well evident that in

the notice the specific charge/limb u/s 271(1)(c) of the Act was not

mentioned. The Ld. A.O has not striked off one of the charge which

is not relevant to the assessee. It is not clear as to whether the

penalty has been levied for concealment of income or furnishing of

inaccurate particulars of income. Though various judgments and

decisions have been referred by Ld. CIT(A) in its order and also by

the Ld. Counsel for the assessee, however the judgment of Hon’ble

High Court in the case of Pr. CIT V/s Kulwant Singh Bhatia (supra)

is squarely applicable on this issue wherein the revenue’s appeal

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 has been dismissed by the Hon’ble High Court observing as

follows:-

“on due consideration of the arguments of the Learned Counsel of the respondent, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that the Learned Tribunal has rightly relying on the decision of CIT V/s Manjunath Cotton Ginning Factory (supra) and CIT V/s SSA’S Emeralds Meadows (supra) rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities”. 20. Similar view has also been taken by the Tribunal’s decision

applying the judgments and more particularly in other cases of

same Kalyan Group namely Smt. Shruti Garg V/s DCIT (Supra) and

KT Sangam Infrastructure (I) Ltd V/s and others (supra). In light of

the above judgments squarely applying on the case of the assessee

and also the consistent view taken by this Tribunal in such cases

where defective notice has been issued without specifying the

charge against the assessee which thus fails to provide reasonable

opportunity to assessee to defend its case at the stage of issue of

notice u/s 274 of the Act. We thus find no reason to interfere in the

finding of Ld. CIT(A) deciding the legal ground in favour of the

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 assessee thereby holding the penalty proceedings u/s 271(1)(c) of

the Act as void ab-initio and thus the penalty of Rs.1,60,00,000/-

levied u/s 271(1)(c) of the Act has been rightly deleted by Ld.

CIT(A).

and held the penalty proceedings u/s 274 r.w.s. 271(1)(c) as void

ab-initio still for academic purpose we want to adjudicate issue on

merits. We observe that subsequent to search when the assessee

filed the return in compliance to notice u/s 153A of the Act it

offered the additional income of Rs.5,08,55,709/-. The brake up of

this additional income is as follows;

Rs.28,90,450/_ was offered on the basis of (i) notings made on various loose paper seized at the time of search which could not be identified in books of accounts.

(ii) Rs. 3,58,72,460/- was offered on account of peak credit offered on the basis of cash flow statement prepared to explain the source of share application money introduced in books of accounts.

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 (iii) Rs.l,03,87,500/_ was offered on account of as commission on the share application money.

(iv) Rs. 17,05,300/- was offered on account of proportionate depreciation forgone by spreading over the total inflated project cost over the period/ life of the projects.

income offered by the assessee under the head “peak credit” and

other heads and made various additions for unexplained share

capital, disallowance u/s 14A and excess claim of depreciation

thereby assessing the income at Rs.41,97,07,950/- as against the

income shown in the return filed u/s 153A of the Act at

Rs.3,54,20,430/-. Against the addition made by the Ld. A.O

assessee filed appeals and up to the stage of Tribunal all the

additions made by the Ld. A.O were deleted except for the payment

for depreciation at Rs.2,28,103/-. This means that the additions on

which the penalty proceedings were initiated in the penalty

proceedings stood deleted and thus no penalty was leviable on the

additions so made by the Ld. A.O. The very basis of the initiation of

penalty proceedings do not materialize since the additions were 32

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 deleted when the penalty proceedings were carried out and penalty

was levied by Ld. A.O on the additional income offered by the

assessee in the return of income.

penalty on the additional income offered by the assessee since the

basic premises on which the assessee offered the additional income

was rejected by Ld.A.O and addition made in the assessment order

were deleted in the appellate proceedings, which thus leaves no

room for the Ld. A.O to levy the penalty u/s 271(1)(c) of the Act on

the additional income offered by the assessee which Ld. A.O himself

has not accepted while completing the assessment. Therefore on

merits also the Ld. CIT(A) has rightly deleted the levy of penalty u/s

271(1)(c) of the Act. We therefore in the given facts and

circumstances of the case and our discussions made herein above

confirm the finding of Ld. CIT(A) deleting the penalty of

Rs.1,60,00,000/- levied u/s 271(1)(c) of the Act by the Ld. A.O.

Ground raised by the Revenue are dismissed. Revenue’s appeal

No.878/Ind/2019 stands dismissed.

case of Keti Construction (India) Ltd wherein also similar issue of 33

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 penalty u/s 271(1)(c) of the Act at Rs.50,00,000/- has been taken

up by the Revenue challenging the finding of Ld. CIT(A) deleting the

levy of penalty.

issue is squarely covered in the case of Keti Sangam Infrastructure

(I) Ltd ITA No.1343 & 601/Ind/2016 as well as other decisions of

the Tribunal in the case of Smt. Shruti Garg V/s DCIT ITA

No.988/Ind/2016. He also submitted that the notice issued u/s

274 r.w.s. 271(1)(c) of the Act is defective as charge is not specified

against the assessee.

supporting order of Ld. A.O.

placed before us. Revenue is aggrieved with the deletion of penalty

u/s 271(1)(c) of the Act levied at Rs.50,00,000/- by the Ld. A.O on

the additional income offered by the assessee in the return filed in

response to notice u/s 153A of the Act. We find that Ld. CIT(A) has

held that the penalty proceedings is bad in law and void ab-initio as

the notice issued u/s 274 r.w.s. 271(1)(c) of the Act is defective. On

arriving on this finding Ld. CIT(A) observed as follows:- 34

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 4.1 Ground No. 1 & 2 - Through these ground of appeal, the appellant has challenged the levy of penalty of Rs. 50,00,0001- u/s 271(1)(c) of the Income Tax Act and also the initiation of the penalty proceedings u/s 271(1)(c) and also the penalty show cause notice issued u/s 274. It is seen that the appellant filed its return of income u/s 139(1) on 30.09.2008 declaring an income of Rs. 3,94,53,9101-. In response to notice issued u/s 153A, the appellant filed the return on 28.05.2012 declaring an income of Rs. 5,50,52,505/-. The AO completed, the assessment on 20.03.2014 on an income of Rs, by making various additions and 14,56,31,7601- disallowances. However, all the additions and disallowances so made have been deleted either in the first appeal or in the second appeal except for a nominal addition of Rs. 67,484/- made u/s 36(1)(va). In the assessment order, the AO initiated penalty u/s 271(1)(c). The AO also issued a notice u/s 274 r.w.s. 271(1)(c) dated 20.03.2014 stating that the appellant has concealed the particulars of income or furnished inaccurate particulars of income. After considering the reply of the appellant, the AO passed the impugned penalty order u/s 271 (1)( c) on 31.03.2018 levying a penalty of Rs. 50,00,000/- for this year.

The penalty has been levied in respect of additional income of Rs. 1,56,66,079/- offered by the assessee and also in respect of the disallowances made by the AO u/s 36(1)(va) of Rs. 67,484/-. There is no discussion in the penalty order passed by the AO regarding the nature of additional income offered by the appellant on which the AO has levied the penalty. However, the appellant has explained that it has offered additional income of Rs. 46,12,992/- on account of peak credit worked out on the basis of the cash flow statement prepared by it to explain the source of share capital generated by the appellant and Rs. 95,53,087/- on account of loose papers and an amount of Rs. 15,00,000/-- was offered to cover other discrepancies that may be found and also to 'cover technical disallowances. The income so offered by the assessee U/S 132(4) was 35

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 also offered in the return filed in response to notice issued u/s 153A and due taxes were also paid before filing the return of income.

The appellant has challenged the initiation of the penalty proceedings on the contention that no satisfaction was drawn in the assessment order while initiating the penalty proceedings as no charge was mentioned in the assessment order and the notice issued under section 274 was also a defective notice as no specific charge was mentioned against the appellant. The appellant has challenged the levy of penalty u/s 271 (1)( c) on the ground that there was no satisfaction in the penalty order as well, as both the charges were reiterated in the penalty order. It is also contended that the penalty order is vague as on one hand Explanation 5A to section 271(1)(c) has been referred in Para 3.3 of the penalty order and on other hand Explanation 1 to section 271(1)(c) has also been invoked in Para 3.4 stating that when there is difference between the assessed income and the returned income, there is presumption of concealment or furnishing of inaccurate particulars. It is contended that since both the explanations operate under all together different situations, invoking both the explanation at the same time, shows that penalty has been levied under confused state of mind. The appellant has also contended that no penalty was initiated in the assessment order in respect of the income offered on the basis of peak credit, still penalty has been levied on the same without making any discussion in the penalty order. The appellant further contended that the cash flow statement prepared by it, which was also filed before the Investigation Wing, and the income offered on the basis of peak credit working was rejected by the AO in the assessment order and separate and independent additions were made by the AO. However, the cash, flow statement and the peak credit working of the. appellant was accepted in the appellate proceedings and all additions made by the AO were deleted in the appellate proceedings. Therefore, it is contended that when the income of peak credit offered by the appellant 36

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 was itself rejected by the AO in the assessment order, no penalty u/s 271(1)(c) ought to have been levied on the same. Finally the, appellant contended that since all the additions made have been deleted and the income returned by the appellant finally stand accepted, no penalty ought to have been levied.

After taking consideration the assessment order and also the penalty order and all the contentions of the appellant carefully it is seen that while initiating the penalty proceedings in the assessment order the AO has simply stated that penalty proceedings are initiated u/s 271(l)(c) and no charge of either concealment of income or furnishing of inaccurate particulars of income was mentioned in the assessment order. Therefore, no requisite satisfaction was drawn in the assessment order. From a perusal of the notice dated 20.03.2014 issued uls 274 which is at page 115 of the paper book, it is seen that both the charges i.e. concealment of particulars /of income or furnishing inaccurate particulars of income are mentioned therein. Similarly a perusal of the penalty order shows that again both the charges are mentioned in the heading in para 3 and also in concluding para 5 & 6 of the penalty order.

As per the provisions of section 271(1)(c) of the Act, there are two different charges i.e. the concealment of particulars of income or furnishing of inaccurate particulars of income. Penalty can be imposed for a specific charge. In view of the decision of Honourable Supreme Court in the case of T. Ashok Pai Vis CIT (2007) 292 ITR 11 (SC) it is now a settled proposition that concealment of income and furnishing inaccurate particulars of income carry different connotation. It is equally settled proposition that where the charge for levying penalty is not specific, the notice u/s 271 (1)( c) is bad in law as it does not mentioned the specific limb of section 271 (1)( c) of the Act under which it has been initiated. When the notice does not specify the charge for levy of penalty, it has been held that the penalty cannot be

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 levied. The Hon'ble Supreme court in Dilip N. Shroff V/s JCIT (2007) 291 ITR 519 (SC),.has observed that while issuing the notice under section 274 r.w.s. 271, in the standard format, the Assessing. Officer should delete the inappropriate words or paragraph, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. The Honourable Court further observed that the AO has not struck down the relevant word/sentence in the cyclostyled proforma of the penalty show cause notice, therefore, the AO was not sure that on what ground he is levying the penalty.

The penalty proceedings in this case were initiated without mentioning any charge' in the assessment order. The penalty notice was. also issued in mechanical manner without specifying the specific charge as to whether the appellant is found guilty of concealing the particular of income or have furnished inaccurate particulars of income. Thus the very initiation of the penalty proceeding in this case is not in accordance with law and has led to vitiation of entire penalty proceedings. very recently the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax v/s Kulwant Singh Bhatia dated 09.05.2018 (ITA 9 to 14 of2018) has held that the penalty u/s 271(1)(c) of the Act of 1961 is not sustainable in law as the notice was not specific, observing as follows:-

"on due consideration of the arguments of the Learned counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that Learned Tribunal has rightly relying on the decision of CIT Vis Manjunatha Cotton Ginning Factory and CIT Vis SSA'S Emerald Meadows rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 arising in these appeals. ITA. No(s) 912018, 1012018, 1112018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed. "

It is observed that facts of the present case under appeal before me are identical to that of the case of Kulwant Singh Bhatia (Supra) in so far as additional income was offered by the assessee in the returns filed after the search and penalties u/s 271(1)(c) were levied on the basis of show cause notice issued without, striking off either of the two charges, which facts are identical in the present appeal. In the case of Kulwant Singh Bhatia also, it, was the observation of the AO that-the assessee has offered additional income only due to search and the additional income was not declared in the return filed u/s 139 and therefore, penalty proceedings u/s 271(1)(c) were initiated, which fact is also identical with the present appeal. Further in the case of Kulwant Singh Bhatia penalties were levied by invoking Explanation SA to section 271(1)(c) and in the - instant case also the same explanation has been invoked. In the case before the Honourable High Court, the penalties were deleted by the Tribunal holding that the same as not sustainable in law, as no specific charge was levied in penalty show cause notice, later the order of the Honourable IT AT was affirmed by the Honourable Jurisdictional High court. Therefore, the proposition laid down by the Honourable Jurisdictional High Court of Madhya Pradesh is applicable in the present appeal also and it is held that the penalty proceedings initiated in this case are not as per law and the penalty so levied is wrong.

The appellant has stated that in its other group cases also, wherein penalties were levied u/s 271 (1)( c) in the assessment proceedings carried out as a result of the same search, wherein also penalty proceedings were initiated in an identical manner, in which the same were initiated in the present appeal, have been deleted by the Honourable IT AT Indore Bench

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 in the cases of Mls Keti Sangam Infrastructure (I) Ltd. and other group company appeals and also in the case of Shruti Garg and other individual cases of the group, copies of such orders have also been filed at page no. 61 to 115 and at page no. 38 to 60 respectively of the case law paper book. A perusal of the order passed in the case of Keti Sangam Infrastructure (I) Ltd. in IT no. 516/Ind/20 17 and other cases by the Honourable Jurisdictional IT AT on 27.06.2018 it is seen that the penalties levied u/s 271(1)(c) of the Act has been deleted. After discussing the issue at ilength and after analyzing the various deeisions.jhe Honourable ITAT in Para 13 on internal page 32 of the order held that;

"From the perusal of the above judgment and examining the facts of the instant nine appeals, we find that in all these cases the Assessing Officer has not struck down the relevant word from the sentence in the cyclostyled proforma of penalty show cause notice . which means that the Assessing Officer was not sure as to on what ground he has initiated the penalty proceedings and in such a case the alleged notice is not sustainable in law and is liable to be quashed. Be, therefore, respectfully following the judgments and decisions referred to above, allow this common legal ground of the assessee's in these nine appeals and delete the penalties levied u/s 271 (l)(c) of the Act in all these cases. "

Therefore, following the decision of the Honourable ITA T Indore Bench rendered on 27.06.2018 in the appellant group cases itself, it is held that the penalty levied by the AO in the impugned order is invalid. It is also seen that the income offered by the appellant on account of peak credit worked out on the basis of cash flow statement prepared by the appellant was rejected by the AO as evident from para 13.7 of the assessment order. Further the said cash flow statement and also the income offered by the appellant was accepted in the appellate proceedings and all the

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 additions made by the AO were deleted. Therefore, when the basic premises on which the appellant offered the income, was rejected by the AO in the assessment proceedings, later on when the additions made in the assessment order were deleted in the appellate proceedings the AO merely for the purpose of levy of penalty, cannot revert back to the income offered by the .appellant which was rejected in the assessment order and the additional in~;;;offered by the appellant cannot attract penal provision. Further, the appellant has rightly contended that no proper satisfaction has been drawn in the penalty order, where explanation SA as well as explanation 1 of section 271(1)(c ), both have been invoked and the appellant has been held to be guilty of concealment of income by furnishing inaccurate particulars of income, which is also not in accordance with law.

The appellant also get support from the decision of Honourable M. P. High Court which has also been upheld by the Honourable Supreme Court in the case of CIT Vis Suresh Chand Mittal (2001) 251 ITR 9, herein it was held that where the assessee filed revised return showing higher income after search and notice for reopening of assessment and the department simply rested its conclusions on the action of surrender made by the assessee, no penalty u/s 271(1)(c) could be levied. Through in the present appeal before me, the AO made various additions, however, the same were deleted and the income returned by the appellant only survived. The AO even while verifying the penalty has not recorded any satisfaction and has levied the penalty merely on the basis of the additional income was offered by the appellant. For this reason also the penalty levied u/s 271 (1)( c) in the present appeal is held to be wrong.

In view of the above discussions the penalty levied is held to be wrong. Accordingly the penalty levied by the AO u/s 271(1)(c) is deleted and the appeal filed by the appellant is allowed.

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 28. We have gone through the finding of Ld. CIT(A) and to further

examine the fact we are reproducing below the alleged notice issued

to the assessee u/s 274 r.w.s. 271(1)(c) of the Act.

OFFICE OF THE Deputy Commissioner of Income Tax (Central), Indore

PAN. AABCK5940D Date: 20/03/2014 To M/s. Keti Construction (India) Ltd, 15/3 Vidhya Deep, Manoramaganj Indore NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT, 1961

Whereas in the course of proceedings before me for the assessment year 2010-11 it appears to me that you :-

have concealed the particulars of your Income or furnished inaccurate particulars of such Income.

You are hereby requested to appear before me at 3.30 pm on 11/04/2014 and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of bearing heard in person or through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271(1)(c).

Sd/- (Ram Kumar Yadav) Dy. Commissioner of Income Tax (Central) Indore

one of the charge not applicable to the assessee. In the notice both

the limbs are appearing. It is not clear as to for which charge the

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 penalty has been levied i.e. whether it is for concealment of income

or for furnishing inaccurate particulars of income. We have dealt

with the same issue in the preceding para in the case of Kalyan

Tolls Pvt. Ltd ITA No.878/Ind/2019 wherein also similar type of

defective notice was issued and Ld. CIT(A) deleted the penalty by

relying on the decision of Hon’ble Jurisdictional High Court in the

case of PCIT V/s Kulwant Singh Bhatia (Supra).

decision as referred above and confirm the findings of Ld. CIT(A)

allowing the legal ground of the assessee and holding the notice u/s

274 r.w.s 271(1)(c) of the Act as defective and the proceedings u/s

271(1)(c) of the Act as void ab-initio and not in accordance with law.

The Ld. CIT(A) was justified in deleting the addition, we thus

confirm the finding of Ld. CIT(A) and dismiss revenue’s appeal.

M/s. Kalyan Toll Infrastructure Ltd in ITA No.878/Ind/2019 and

M/s. Keti Construction (India) Ltd in ITA No.877/Ind/2019 stands

dismissed.

Keti Construction (India) Ltd & Kalyan Toll Infrastructure Ltd. ITA Nos. 877 & 878/Ind/2019 32. In the result the appeals filed by the Revenue in ITA

No.878/Ind/2019 and ITA No.877/Ind/2019 are dismissed.

The order pronounced in the open Court on 23.09.2020.

Sd/- Sd/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 23 September, 2020

/Dev

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore