M/S VISION COMMODITIES & DERIVATIVES PVT. LTD.,LUDHIANA vs. ITO, LUDHIANA

आदेश/Order

PER N.K. SAINI, VICE PRESIDENT This is an appeal by the Assesse against the order dt. 21/03/2021 of the Pr. CIT, Chandigarh-1.

2. That the learned Commissioner of Income Tax (Appeals) erred in composing penalty order of learned Assessing Officer in imposing penalty of Rs. 888,792/- u/s 271(1)(c) of Income Tax Act.

3. That the learned Commissioner of Income Tax (Appeals) erred in not admitting evidence under Rule 46A of Income Tax Rules in appeal proceedings before her.

4. That the appellant craves to amend, add, delete or supplement bring additional evidence on grounds of appeal before the appeal is finally heard and dispose off.

The only grievance of the assessee relates to the sustenance of penalty of Rs. 888,792/- levied by the AO under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).

“3. We have heard the Id. DR. and perused the relevant material on record. There is no appearance from the side of the assessee. An application seeking adjournment on an irrelevant ground was filed, which has been rejected. We are, ergo, going ahead with the disposal of the instant appeals ex parte qua the assessee.

4. It is an admitted position that the Tribunal has upheld the quantum addition made by the Assessing Officer which has further not been interfered by the Hon'ble High Court. However, the mere fact that an addition has been confirmed in quantum proceedings cannot per se lead to automatic imposition of penalty under Section 271(1)(c) of the Act. It is so for the reason that the assessment proceedings are distinct from the penalty proceedings. Even if an addition has been confirmed in quantum proceedings, which constitutes the bedrock of penalty, the assessee is entitled to argue in the penalty proceedings that the addition was not called for or at least the penalty should not be imposed qua the amount of addition confirmed in the quantum proceedings. The findings recorded by the authorities during the quantum proceedings have only a perusasvie value and are not conclusive so as to assume a character of binding nature in the penalty proceedings. The Hon’ble Allahabad High Court in Jaidayal Pyarelal Vs. CIT(1973) Tax LR 880 (Ald) has held that “the assessee is entitled to show cause in penalty proceedings and to establish by the material and relevant facts which may came to affect his liability or the quantum of penalty. He cannot be held to be debarred from taking appropriate plea simply on the ground that such plea was not taken in the regular assessment proceedings.” Instantly, we are dealing with a situation in which the penalty was imposed by the Assessing Officer despite the assessee’s request for keeping the penalty proceedings in abeyance. When the assessee tried to file before the Ld. CIT(A) some additional evidence, giving names and addresses of the beneficiaries of the accommodation entries who gave cash and received cheques, in an attempt to establish her claim that version given in the statement at the time of survey was correct, the same was repelled on the ground that she did not avail opportunity at the stage of proceedings before the Assessing Officer and now it was too late in the day. The Ld. DR has also vehemently supported the rejection of additional evidence by the Ld. CIT(A). In our considered opinion, there is a vital difference in two situations, viz, one where the assessee does not willingly furnish any evidence despite the Assessing Officer’s request and penalty order is passed and two, where the assessee has no intention of defiance abeyance is being considered positively but the penalty order is passed rejecting such a request. Whereas, the assessee may be debarred from furnishing additional evidence in the former situation, but in all fairness, the second situation warrants admission of additional evidence. There is an underlying object of any proceedings under the Act, which is to make a fair and reasonable decision on the pecuniary liability of the assessee. No attempt should be made by the authorities in taking undue advantage of the assessee’s vulnerable position, either because of ignorance or of not being on a right track. Currently, we are confronted with a situation in which the assessee stated during the course of survey that the cash deposited in her bank accounts was on account of accommodation entries given to certain parties against such receipt of cash and in that view of the matter only commission on such accommodation entries should be brought to tax. When the assessee tried to furnish a list of such beneficiaries with their complete addresses to the Ld. CIT(A) during the course of first appellate proceedings, the entry point of justice was closed and the assessee was not allowed to support her claim made during the course of survey proceedings. It is further relevant to note that the assessee categorically stated before the Ld. CIT(A) that the report of the Assistant Director of Income Tax (Investigation), Ludhiana, was used against the assessee without confronting it to her, which fact has not been refuted in the impugned order. On a holistic approach, what emerges is that whereas por una parte there was assessee’s claim before the Ld. CIT(A) that the cash deposits in the bank were meant for giving accommodation entries to certain beneficiaries and, por otra parte, there was a claim made during the course of assessment proceedings that the cash was deposited by his customers in the course of business. Both these versions were initially unsubstantiated, namely, neither the list of beneficiaries of the accommodation entries nor the list of persons who alleged gave the cash in the course of business dealings, were provided. The first version, if accepted, by the AO would have led to the lower amount of addition towards commission on such accommodation entries, which the assessee admitted during the course of survey, at 0.50% of the transaction amount. The second version, if accepted, would have led to the higher amount of addition of the amount of deposits. The AO opted for the second version because that was leading to a higher addition. Out of the two earlier unsubstantiated versions, the assessee tried to substantiate the first version during the course of appellate proceedings by providing names and addresses of the persons to whom accommodation entries were given, which was foiled and the additional material sought to be filed by the assessee in support of the same was not permitted to be taken on record. In our considered opinion, the impugned order based on the second version, without even giving an opportunity to the assessee to substantiate her first version, violates the fundamental principles of natural justice.

5. Reliance of the Ld. DR on the judgment of the Hon’ble jurisdictional High Court in Shiv Narain Khanna Vs. CIT(1977) 107 ITR 0542 is misconceived. In that case it was found that certain transactions were bogus. The transactions were with a certain firm of which the assessee’s wife and daughters-in-law were the partners. The nature of the transactions was that goods said to have been purchased from the other firm were immediately resold to the same firm for half the price. All the authorities found that the transactions were false. Assessmetn and penalty were levied on that basis. The assessee in that case argued that there was no material justifying the levy of penalty, whatever might be said about the assessment. The contention of the assessee that ‘some additional material should always be available for the levy of penalty in addition to the material on which the assessment was based’, was turned down by the Hon’ble High Court. It found that there was no basis for this assumptions. When we try to apply the ratio decidendi of this judgment to the facts of the instant case, what turns out that her is a case in which the assessee is producing positive material in support of her case and there is no question of any presumption as was the only base in the case of Shiv Narain Khanna(supra). The least that was expected of the authorities was to give an opportunity of hearing to the assessee to place on record whatever she wanted. It was then up to them to accept or reject the explanation giving cogent reasons. Shutting the doors of justice at the very outset in not permitting the assessee to put forward her case is against all the canons of justice and fairness, which cannot be permitted. Under these circumstances, we set aside the impugned order and remit the matter to the file of Assessing Officer for deciding the question of penalty afresh as per law after allowing a reasonable opportunity of being heard. Needless to say, the assessee will be at liberty to file any fresh evidence in support of her claim during the fresh penalty proceedings before the AO.

6. The Ld. DR candidly admitted that the facts and circumstances of the other eight appeals in this batch are mutatis mutandis similar. Following the view taken hereinabove, we set aside all the impugned orders and remit the matter to the file of the respective A.Os for deciding the question of penalty afresh as per law after allowing a reasonable opportunity of hearing to the assesses.

So respectfully following the aforesaid referred to order dt. 10/11/2016 the issue in the present case is also set aside to the file of the AO for fresh adjudication as directed vide order dt 10/11/2016 in & 752/Chd/2016 and others in case of Smt. Shobha Kumar Sharma Vs. ITO, Ward- VI(3) and others(supra).

(Order pronounced in the open Court on 08/04/2022 )