SH. SANJAY DALMIA,NEW DELHI vs. DCIT, NEW DELHI

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ―G‖: NEW DELHI BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13)

Sanjay Dalmia, Vs. DCIT, 2nd Floor, Indraprakash Building, Central Circle-2, 21, Barakhamba Road, New Delhi New Delhi PAN:AADPD9438N (Appellant) (Respondent)

Assessee by : Shri Vinod Kumar Bindal, Adv Revenue by: Shri SS Rana, CIT DR Date of Hearing 28/09/2017 Date of pronouncement 05/10/2017

O R D E R PER PRASHANT MAHARISHI, A. M. 1. These are the seven appeals filed by the assessee against the order of the ld CIT(A)-III, New Delhi dated 02.05.2014 for the Assessment Year 2006-07 to 2012-13 confirming the penalty levied u/s 271(1)(b) of the Act vide separate orders. 2. The assessee has raised the identical grounds of appeal in all these seven appeals, therefore, the grounds of appeal in ITA No. 3795/Del/2014 for Assessment Year 2006-07 are reproduced as under:- ―1. That learned Commissioner of Income Tax (Appeals) has erred in confirming the penalty levied by the Assessing Officer u/s 271(1)(b) of the Income Tax Act, 1961 in an amount of Rs. 10,000/- for Assessment Year 2006-07, on the basis that the appellant has not furnished 'consent form' in respect of alleged undisclosed overseas bank account, even though the appellant denies having any such bank account and consequently cannot furnish such 'consent form' containing some bank a/c number not being owned by the appellant assessee and his order is bad in law and against the facts and circumstances of the case. 2. That since the appellant denies having any bank account with HSBC Bank, Geneva, Switzerland, it cannot be compelled to generate artificial bank account opening form and issue consent letters, in favour of any authority. Page | 1

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT 3. That the appellant having duly complied with notice u/s 142(1) of the Income Tax Act, 1961 there was no reason for levy of penalty u/s 271(l)(b) of the Income Tax Act, 1961 on incorrect assumption of facts. 4. That the learned Commissioner of Income Tax (Appeals) has erred in not adjudicating upon Ground No.5 of the appeal reading as under ―5. That levy of seven penalties under the same provisions of the Act in response to alleged non-compliance of one notice is mala fide and deserves to be cancelled." 5. That the above Grounds of Appeal are without prejudice to one another. grounds of appeal on or before the date of hearing.‖ Facts of the case 3. The brief facts of the case are that assessee is an individual filing return of income. The Ld. assessing officer received certain information relating to the bank account in HSBC bank, Geneva under Double Taxation Avoidance Agreement between India and other countries. The information contained that the certain persons in India, including the assessee held bank accounts in HSBC Private Bank Switzerland. The LD AO received information in the form of a 5-page document, which was provided to the assessee wherein the name of the assessee was mentioned with code No. 5090160287, wherein transactions from November 2005 to February 2007 were listed. The copies of the documents were provided to the assessee by the Ld. AO. Proceedings before AO 4. Search and seizure operation u/s 132 of the Income Tax Act was carried out on 20.01.2012 and subsequently, notice u/s 153A was issued on 30.04.2013, in response to which the assessee has filed his return of income on 17.05.2013. 5. During the assessment proceedings notice u/s 142(1) of the Act was issued on 18.07.2013 calling for the information with respect to the account of the assessee with HSBC Bank, Geneva, Zurich, Switzerland and assessee was asked to furnish the details with respect to: a. Account opening form in respect of foreign bank account b. Complete bank statement in original since beginning till date c. Residential status as per the Income Tax Act on the date of opening of foreign bank account and thereafter for all the assessment years 6. The assessee was further asked if he does not have a bank account he is required to furnish duly filled up signed and notarized consent letter on 22.07.2013. Assessee did not comply with this notice and neither submitted the notorised consent letter. Therefore, the ld Assessing Officer initiated penalty proceedings u/s 271(1)(b) of the Act. The assessee responded to the above notice stating that assessee has already submitted the letter dated Page | 2

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT 22.07.2013. Ld AO held that it is incomplete compliance of the notice issued. The ld Assessing Officer noted that assessee has neither furnished the complete bank statement nor the consent letter has been filed by the assessee and therefore, there is a failure to comply with the notice u/s 142(1) of the Act and therefore, levied penalty u/s 271(1)(b) of Rs. 10000/- each for all these years. Proceedings before CIT (A) 7. The assessee aggrieved with the order of the ld Assessing Officer preferred an appeal before the ld CIT(A) contesting that: a. Assessee does not have any bank account b. It does not have any connection with any of the alleged accounts and transaction detailed in the notice and that assessee denied that any of these accounts transactions or codes belonging to the assessee 8. Therefore, it was submitted that there is no question of receiving the information from that bank or signing any consent letter. With respect to the penalty assessee submitted that assessee has already complied by submitting the above letter on 23.07.2013. Therefore, there was no non-compliance. The ld CIT(A) after considering the above submission noted as under upholding the levy of penalty :- ―4. I have gone through the submissions of the appellant and have perused the AO's order and considered the facts and evidences on record. The issue of imposing the penalty is to be seen in the following background. 4.1 In April/May, 2011 India received information from a Foreign Government under the Double Taxation Avoidance Agreement (DTAA), that certain Indian passport holders have opened and had maintained bank accounts with Hongkong and Shanghai Banking Corporation (HSBC) in Switzerland, etc. The information received was covered under the confidentiality clause of the DTAA, and its contents could not be disclose by the Income Tax department without express consent of the country which had shared the information. Based on the above information received, investigations were initiated by the department in July 2011. Some persons appeared suo-motu before the tax authorities and have admitted that they have had bank account with HSBC, and also paid the due tax on the maximum amount deposited/outstanding in the account. In several cases, searches were conducted and the persons searched also admitted to have opened accounts overseas and not disclosed it for tax purposes in India. However, during the investigations, several persons have denied out rightly having opened any such bank accounts overseas, while some persons have admitted opening the account but denied having any transaction. In cases, where details of the transactions in the accounts were have denied any account or any transaction in the account, reference has been made to HSBC by way of a "consent letter" signed by the alleged account holder and duly notarized, to enable HSBC to furnish the requisite details such as account opening Page | 3

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT form, other documents, names of beneficiaries, details of transactions, etc., to the account-holder. In some such cases, account holders have already received information/documents from HSBC and are cooperating with the department in its investigations. It is also pertinent to note that the Income Tax Act, 1961 has also been amended to provide for reopening of tax assessments for a period of 16 years to cover such cases which has escaped assessment. It is only in such cases where such persons have refused to deliver the signed and notarized "consent letters" that penalty has been initiated and imposed under section 271(l)(b). 4.2 Thus, in the light of the above it is stated that these cases are not of simple tax evasion but of suspected tax evasion by transferring or keeping funds overseas in an illicit manner. The persons suspected of having opened and maintained undisclosed bank account overseas, were required to sign and execute/notarize the "consent letter" to verify the truth of the allegation against them. It is the duty of every citizen of India to cooperate with and join the investigation to ascertain the truth regarding cases with such serious allegation. The purpose of the penal provision contained in section 271(l)(b) is to ensure compliance to tax enquiry/investigation. This penalty is attracted where there is failure to comply with notices under section 142(1) or under section 143(2). In criminal law, similar provisions are contained in Sections 160 and 161 in the Code of Criminal Procedure, 1973 and the punishment for the same is prescribed in Section 174 of the Indian Penal Code, 1860. Under the civil law also, the relevant provisions are contained in Sections 31 and 32 and Order XVI (Schedule-1) of the Code of Civil Procedure, 1908. Under the Income Tax Act, 1961 the enforcement provisions are contained in Sections 131, 132, 133, 133A 142 and 143. The penal provisions contained in Chapter XXI relevant to enforcement of sections 142/143 are Sections 271 and 272A. 4.3 Thus, in the facts of present case there was a information the appellant is engaged in suspected tax evasion by transferring or keeping funds overseas in an illicit manner. The appellant is suspected of having opened and maintained undisclosed bank account overseas and was required to sign the "consent form" to verify the allegation. It is the duty of the appellant, as citizen of India, to cooperate with and join the investigation. Mere signing of the "consent form" does not cause any jeopardy to the appellant - if his denial of having opened any bank account is correct he has nothing to worry. But refusal to sign the "consent form" tantamount to refusal to join the investigation. 4.4 The purpose of the penal provision contained in section 271(l)(b) is to ensure compliance to tax investigations. The appellant, having failed to sign the "consent form", and having no reasonable cause to do so, has violated the said provision. It is immaterial whether he has opened any bank account and indulged in undisclosed transaction, that is a fact to be verified and ascertained in the investigation. But refusal of the appellant to sign the "consent document" is a deliberate refusal to join the investigation, for which liability to penal consequence arises at this very stage itself. 4.5 In view of the above factual and legal position in the matter, the penalty imposed under section 271(l)(b) is upheld. 5. In a result, the appeal is dismissed.‖ Arguments of the assessee before us

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT 9. The assessee aggrieved with the order of the ld CIT(A) has preferred appeal before us. It was submitted that: a. No addition has been made on substantive basis in the hands of the assessee but addition is only on protective basis. He submitted that addition on substantive basis has been made in the hands of Shri Anurag Dalmia. Therefore, the ld AO himself believes that income in that particular bank account does not belong to the assessee. b. He referred to para No,. 6 of the assessment order wherein he stated that document provided by the Assessing Officer refers that assessee is an attorney and therefore, that particular bank account has nothing to do with the assessee. c. He further referred to the decision of Pigam Impex Pvt. Ltd Vs. ACIT ITA No. 4787 to 4791/Del/2013 dated 6.02.2014, Pushpa Garg Vs. ACIT ITA No. 4852 to 4855/Del/2013 dated 06.02.2014, Viswanath Garodia Vs. DCIT 76 Taxmaann. Com 81, Shyam Sunder Jindal Vs. ACIT 81 Taxmann.com 123, LKG Builders Pvt. Ltd. Vs. DCIT 2017 TIOL-1242-ITAT-Del dated 29.08.2017, for deletion of penalty. d. He further raised an issue that there is no specific provision for issue of notice u/s 142(1) of the Act in search proceedings and therefore, no penalty can be levied for non compliance of notice u/s 142(1) of the Act. He submitted a detailed note on this as under:- ―In absence of a specific provision for issuance of a notice u/s 142(1) of the Act, no penalty u/s 271(b) of the Act is leviable. 1. Provisions of the Chapter XIV-B regarding the block assessment were introduced w.e.f. 01/07/1995 and this chapter ceased to apply after 31/05/2003 when section 153A was inserted in respect of searches conducted after 31/05/2003. Section 158BC of the Act provided for special procedure for block assessment in case of searches and the sub section (b) therein provides that ―(b) the Assessing Officer shall proceed to determine the undisclosed income of the block period in the manner laid down in section 158BB and the provisions of section 142. sub-sections (2) and (3) of section 143, section 144 and section 145 shall, so far as may be, apply; ‖ NO SUCH PROVISION SPECIFICALLY REQUIRING APPLICATION OF SECTIONS 143/ 142 NOTICES HAS BEEN ENACTED UNDER THE NEW SCHEME presently applicable since 01/06/2003.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT ―The scheme of block assessment has been explained by the Central Board of Direct Taxes in paragraph 39.3 of Circular No. 717, dated 14th August, 1995 (1995) 215 ITR 70. We may only notice clause (e) of the circular which provides for the procedure for making block assessment. Omitting what is not necessary for the purpose of this case, clause (e) is extracted and it reads as under: "(e)Procedure for making block assessment: (i) The Assessing Officer shall serve a notice on such person requiring him to furnish within such time, not being less than 15 days, as may be specified in the notice, a return in the prescribed form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142 setting forth his total income including undisclosed income for the block period. The officer shall proceed to determine the undisclosed income of the block period and the provisions of section 142, sub-sections (2) and (3) of section 143 and section 144 shall apply accordingly..." We may now revert back to Section 158BC(b) which is the material provision which requires our consideration. Section 158BC(b) provides for enquiry and assessment. The said provision reads "that the assessing officer shall proceed to determine the undisclosed income of the Block period in the manner laid down in Section 158 BB and the provisions of Section 142, sub-section (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be, apply." An analysis of this sub section indicates that, after the return is filed, this clause enables the assessing officer to complete the assessment by following the procedure like issue of notice under Sections 143(2)/142 and complete the assessment under Section 143(3). This Section does not provide for accepting the return as provided under Section 143(i)(a). The assessing officer has to complete the assessment under Section 143(3) only. In case of default in not filing the return or not complying with the notice under Sections 143(2)/142, the assessing officer is authorized to complete the assessment ex- parte under Section 144. Clause (b) of Section 158 BC by referring to Section 143(2) and (3) would appear to imply that the provisions of Section 143(1) are excluded. But Section 143(2) itself becomes necessary only where it becomes necessary to check the return, so that where block return conforms to the undisclosed income inferred by the authorities, there is no reason, why the authorities should issue notice under Section 143(2). However, if an assessment is to be completed under Section 143(3) read with Section 158- BC, notice under Section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under Section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under Section 143(2) cannot be dispensed with. The other important feature that requires to be noticed is that the Section 158BC(b) specifically refers to Page | 6

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT some of the provisions of the Act which requires to be followed by the assessing officer while completing the block assessments under Chapter XIV-B of the Act. This legislation is by incorporation. This Section even speaks of subsections which are to be followed by the assessing officer. Had the intention of the legislature was to exclude the provisions of Chapter XIV of the Act, the legislature would have or could have indicated that also. A reading of the provision would clearly indicate, in our opinion, if the assessing officer, if for any reason, repudiates the return filed by the assessee in response to notice under Section 158BC(a), the assessing officer must necessarily issue notice under Section 143(2) of the Act within the time prescribed in the proviso to Section 143(2)of the Act. Where the legislature intended to exclude certain provisions from the ambit of Section 158 BC(b) it has done so specifically. Thus, when Section 158BC(b) specifically refers to applicability of the proviso thereto cannot be exclude. ‖ On the other hand, the Circular No. 7/2003 Finance Act, 2003 - Explanatory Notes on Provisions relating to Direct Taxes — Dated 5-9- 2003 reads ―65. The special procedure for assessment of search cases under Chapter XIV-B be abolished 65.1 The existing provisions of the Chapter XIV-B provide for a single assessment of undisclosed income of a block period, which means the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted and also includes the period up to the date of the commencement of such search, and lay down the manner in which such income is to be computed. 65.2 The Finance Act, 2003 has provided that the provisions of this Chapter shall not apply where a search is initiated under section 132, or books of account, other documents or any assets are requisitioned under section 132A after 31st May, 2003 by inserting a new section 158BI in the Income-tax Act. 65.3 Further three new sections 153A, 153B and 153C have been inserted in the Income-tax Act to provide for assessment in case of search or making requisition. 65.4 The new section 153A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31st May, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of Page | 7

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A. 65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. ‖ 3. Thus, under the presently applicable provisions, the CBDT itself is not stating that notices u/ss 143/142 of the Act to be issued as was required under the earlier block assessment scheme u/s 158BC. This absence of specific provision was considered by the jurisdictional Delhi High Court in Ashok Chaddha reported as 337 ITR 399 (Delhi) wherein it was observed by the Court ―There is no specific provision in the Act requiring the assessment under s. 153 A to be made after issue of notice under s. 143(2) of the Act. Learned counsel for the assessee places heavy reliance on the judgment of the Hon'ble Supreme Court in Asstt. CIT v. Hotel Blue Moon (supra) wherein it was held that the where an assessment has to be completed under s. 143(3) r/w s. 158BC, notice under s. 143(2) must be issued and omission to do so cannot be a procedural irregularity and the same is not curable. It is to be noted that the above said judgment was in the context of s. 158BC. Clause (b) of s. 158BC expressly provides that "the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in s. 158BB and the provisions of s. 142, sub- ss (2) and (3) of s. 143, s. 144 and s. 145 shall, so far as may be, apply. This is not the position under s. 153A. The law laid down in Hotel Blue Moon, is thus not applicable to the facts of the present case....‖ 4. Further, the Third Member in Sumanlata Bansal vs. ACIT (ITAT Mumbai) (Third Member)(copy placed in paper book)followed the said judgment. Page | 8

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT 5. Thus, it is submitted that in absence of the specific section, penalty cannot be levied for non-compliance of notice u/s 142(1) of the Act as the same was not statutorily required to be issued. Further, the Hon‘ble jurisdictional Delhi High Court in many cases following Kurele Paper Mills Pvt. Ltd. duly confirmed by the Supreme Court has held that an assessment u/s 153A of the Act can only be made on the basis of incriminating material found at the time of search and not on the basis of any other evidence. This has been followed in various judgements as per list already placed in paper book at page 200 onwards. The direction of the revenue to file the consent waiver form as per the draft given by the revenue or to submit information as mentioned in the impugned notice dated 18/07/2013 was against the above judgments as it would be some evidence, much less incriminating, not found at the time of search. 6. The above judgments also support the view of the appellant as has been held in the cases of Ashok Chaddha and Sumanlata Bansal (supra) that the new provisions does not require issue of notice u/s 143(2) (and on the same corollary u/s 142(1) of the Act) as the assessment under this new section has to be based only on the basis an incriminating material found during the course of search and for that purpose, no notice u/s 142(1) of the Act for producing any fresh material is required. Thus, the legislature in its wisdom has very categorically omitted reference to the same while enacting the new provisions for assessments in the search cases w.e.f. 01/06/2003 though the same were specifically mentioned in the earlier special provisions to make assessments of income after search. This cannot be an oversight as the earlier provisions of search assessments were very much in consideration while replacing the same with new scheme of search assessments. Thus, on facts and law explained as above, the notice u/s 142(1) of the Act was issued beyond the authority of law.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT under, whether to be deducted - Interpretation of statutes - Taxing statutes - penalty provision - Two reasonable constructions - That favourable to assessee to be preferred. ii) C.E.D. Vs Kanakasabai & Others (1973) 89 ITR 251 (SC) Estate duty - Settlement with reservation - Gift where donor not entirely excluded - Absolute gifts of property to sons, grandsons, daughter and wife - Stipulation that sons and grandsons shall pay donor annual sum and that daughter shall maintain donor and his wife for lifetime - liability not made a charge on property - Expression of wish that wife will support donor - Whether settlement with reservation of interest - Whether gifts, donor not being entirely excluded - Taxing statute - Taxing provision capable of more than one reasonable interpretation - That beneficial to subject to be adopted - Estate Duty Act, 1953, ss. 10, 12. iii) CIT Vs J.K. Hosiery Factory (1986) 159 ITR 85 (SC) Depreciation - Unabsorbed depreciation of unregistered firm - Firm Registered next year - Unabsorbed depreciation can be carried forward - Indian Income-tax Act, 1922, ss. 10(2)(vi), Prov. Cl. (b); 24(2), Prov. (b). Interpretation of statutes - Taxing statutes - Doubt - Assessee entitled to interpretation favourable to him. iv) CIT vs. Poddar Cement (P.) Ltd. [19971 226 ITR 625 (SC) Where there are two possible interpretations of a particular section which is akin to a charging section, the interpretation which is favourable to the assessee should be preferred while construing that particular provision. Reiterating the same view, in the case of CIT vs. Shaan Finance (P.) Ltd. [1998] 231 ITR 308 (SC) it has been held that in interpreting a fiscal statute, the Court cannot proceed to make good the deficiencies if there be any. The Court must interpret the statute as it stands and in case of doubt, in a manner favourable to the taxpayer. v) CIT Vs Naga Hills Tea Co. Ltd. (1973) 89 ITR 236 (SC) Where a literal construction would defeat the obvious intention of the legislation and produce a wholly unreasonable result, the court must ―do some violence to the words‖ and so achieve that obvious intention and produce a rational construction. If the interpretation of a fiscal enactment is open to doubt, the construction most beneficial to the subject should be adopted.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT Submissions on the main ground

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT term ―accounts or documents‖ mentioned u/s 142 (1) of the Act. The AO is a creation of the statute and can exercise only and only those powers which are provided in the Act. Statutory powers u/s 142(1) of the Act are confined only and only to ‗accounts and documents‘. Needless to emphasize that a statutory authority can exercise only those powers which are conferred by the relevant statute and he cannot on his own extend these powers. The term ‗Document‘ has not been exhaustively defined under Income-tax Act but the section 2(22AA) of the Act provides inclusion of an electronic record under document. Clause (t) of the Section 2(1) in The Information Technology Act, 2000 referred to in the Section 2(22AA) defines "electronic record" means data, record or data generated, image or sound stored, received or sent in an electronic form or micro film or computer generated micro film AND THIS DEFINITION IS ALL IN PAST TENSE. The term ‗document‘ as defined u/s 3 of the Indian Evidence Act means ‗ any matter expressed or described upon any substance by means of letters, figures or mark or by more than one of those means, intended to be used or which may be used, for the purpose of recording that matter. It may kindly be noted that in the above definition the term used is ―expressed or described‖ which is also in past tense and not in future tense. Asking someone to write something or to execute power of attorney/mandate etc is positively and without any doubt, beyond the meaning of ‗document‘ as explained above. The term document does not include ‗creating a new document‘ and therefore, the section 142(1) of the Act cannot be utilized to force an assessee to execute a power of attorney/mandate etc. Executing power of attorney/mandate is also definitely not covered by ‗accounts‘.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT Income-tax Act. In my opinion, that section does not entitle the income- tax authorities to demand the production of books which are neither the books of the assessees nor under their control. In the present case the Bombay Company, which is a limited company, was alleged to be the statutory agent of the Hongkong Company, which is another limited company. The Bombay Company is not proved, on evidence, to be the statutory agent of the Hongkong Company. In law, the two companies are different entities. I do not see any justification for the Income-tax authorities calling upon the Bombay Company to produce the books of the Hongkong Company and in default to suffer the consequences provided in Sec. 23(4). The utmost which can be stated, on the allegations or statements found in the reference, is that the two companies may be called friendly. There appears, however, no justification in law, on that account, to call upon one friend to produce the books of another and in default to make the party called upon liable under Sec. 23(4). ‖

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT which is also highly doubtful. In this case, the actual authentic information is only available with the Swiss bank. Some unknown person has allegedly hacked and stole some data and passed it to French authorities. But, receiving information by the CBDT under the DTAA etc cannot make information on any CD authentic and admissible evidence despite there being a certificate u/s 65B of the Evidence Act. A self-proclaimed hacker is fully capable of tempering data, insert false data etc. It was held in Amal Kumar Chakraborty vs CIT(1994)207 ITR 376(Cal.) in para 22(copy placed in paper book)that ―Here, we are to go by the dictum "falsus in unofalsus in omnibus". Though applicable in criminal law, it is a sound principle to apply in taxation when the matter is one of finding of fact on the basis of statements of a witness and their judicial evaluation.‖ Here also the proceedings are criminal as the revenue has already filed criminal prosecution against the appellant (Anurag Dalmia) in the court of ACMM, Tis Hazari Courts, Delhi. No such evaluation been done by the AO and instead, the AO wants mandate from assessee to establish his innocence. The AO is in reality attempting to get stolen hearsay information verified by demanding mandate form from the assessee beyond his statutory powers and this cannot be made any basis for taking a penal action against the assessee because the revenue itself cannot prove the information and its source from the origin as authentic. No copy of any correspondence between the revenue and the said Bank has been given to the appellant to support the contention that the revenue authorities had been advised by the said Bank to seek a direct mandate from the appellant. The entire thrust of the AO is on the premises that a negative burden of proof can be imposed upon the assessee and that it was the legal duty of the assessee to establish the incorrectness/ untruthfulness of the impugned stolen data. This is against the established legal principles.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT ―2.5 We also find that finally the order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was wilful. ‖

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT on surmises. The appellant filed an application under the Rights to Information Act 2005 to the CIT(A) about the same without asking him to disclose the names but only for numbers of persons in each such category to ascertain the authenticity of his averment in the appellate order. However, instead of giving the reply of the information sought by the appellant, the CIT(A) refused to give any information on the plea of confidentiality. Copies of the RTI application and its reply have been filed in the PB submitted on 29/05/2017. Thereafter, the appellant inspected the relevant appellate files /folders in the office of the CIT(A) and found no material therein to support the averments of the CIT(A) which clearly shows that the same were made on surmises and just to vitiate the Hon‘ble higher judicial authorities. A letter dated 12/04/2017 was submitted to the CIT(A) thereafter on 13/04/2017 mentioning therein as to what was found in the appellate folders relating to the impugned penalty, a copy of which has been placed in the PB. The same has not been denied by the CIT(A) so far.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT authorities as under: i) Pr CIT Vs Neeraj Jindal (2017) 79 taxmann.com 96 (Delhi High Court! IDoD: 09/02/20171 The income offered to tax u/s 153A for assessment year 2004- 05 is based on entries recorded in the seized material. Unlike provisions of Explanation 5A, the provisions of Explanation 5 cannot be invoked in assessment year 2004-05 in respect of entries recorded in seized material. Thus invoking of Explanation 5 in assessment year 2004-05 is based on presumptions, surmises and conjectures. It is settled law that suspicion howsoever strong, it cannot take place of actual evidence and hence the contention of the Revenue that assessee was in possession of cash throughout the period of six assessment years has to be rejected. ii) Hiralal Chunilal Jain vs. ITO in Appeal No. 4547/Mum /2014 by ITAT Mumbai IDated 01/01/161 Bogus Sales/ Purchases: Addition solely on the basis of information received from the sales-tax department is not sustainable. Suspicion of the highest degree cannot take the place of evidence. iii) DCIT vs. Rajeev G. Kalathil in Appeal no. 6727/Mum 2012 by ITAT Mumbai 67 SOT 52 The fact that the supplier is declared as a ―Hawala dealer‖ by the VAT department is a good starting point for making further investigation and taking it to its logical end. However, suspicion of highest degree cannot take place of evidence. The AO ought to have called for details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. No such exercise was done. There is nothing in the order of the AO about the cash trail. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. Proof of movement of goods is not in doubt. In the absence of sufficient evidence, the purchases cannot be treated as bogus. iv) G. G. Diamond International v Dy. CIT (2006) 104 TTJ 809 (Mum.) (Trib.) It is not case of the Revenue that the assessee is not maintaining books of account. The purchases are recorded in the books of account. Payments are made by cheque to the immediate purchasers. They accepted and confirmed the sale. To hold Page | 17

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT otherwise, there should be some evidence in the possession of the Revenue. Suspicion, however strong, cannot take the place of evidence and that alone cannot be the criteria for deciding the matter.

v) Goyal Gases (P) Ltd. (1997) 94 Taxman 57 Delhi [DoD: 04/11/2016] vi) CIT Vs Meghjibhai Popat Bhai Virani (2013) 217 Taxman 35 (Gujarat HC) vii) Umacharan Shaw & Bros Vs CIT (1959) 37 ITR 271 (SC) viii) SAS Pharmaceuticals (2011) 335 ITR 259 Delhi ix) Mahabir Prasad Jagdish Prasad Vs CST 27 STC 337 (All) x) Pondy Metal Rolling Mills (P) Ltd Vs DCIT (2007) 14 SOT (Delhi) [DoD: 30'II 2006] xi) GTC Industries Ltd Vs ACIT (2017) 80 taxmann.com 284 (Mum) (SB)[DoD: 07/03/2017] xii) DCIT Vs Krishna Yadav (2011) 12 taxmann.com 4 (Hyd) 31/03/2011] xiii) CIT Vs Kapil Nagpal (2015) 63 taxmann.com 366 (Del) 11/09/2015]

xiv) Assessment cannot be made on presumptions / assumptions / pure guess work i) J.J. Enterprises Vs CIT 254 ITR 216 (SC) ii) CIT VsVed Prakash Chaudhary 169 Taxman 130 (Delhi High Court) iii) CIT Vs Lubtec India Ltd. (2009) 311 ITR 175 (Delhi High Court)

"14 We fully agree with the High Court that the assessee was committing a highly immoral act in illegally Page | 18

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT manufacturing and selling heroin. However, cases are to be decided by the Court on legal principles and not on one's own moral views. Law is different from morality, as the positivist Jurists, Bentham and Austin pointed out.

ii) Sanjay Tandon (Individual) 117 ITD 167: 21. In the present case, s. 184(3) clearly provides that firm should be continued to be assessed as such if it is already assessed as firm in the previous year. Against this mandate of statutory provision, the assessee cannot be assessed as AOP. In fact, this seems to be an argument against morality, i.e., if the assessee has taken stand before the CIT (A) then it is against moral principle to challenge that before the Tribunal. In this regard, we may refer to the decision of Hon'ble Supreme Court in Dr. T.A. Quereshi vs. CIT (2006) 206 CTR (SC) 489 : (2006) 287 ITR 547 (SC) wherein it is held that cases cannot be decided on one‘s moral view and law is different from morality. In other words, if there is a statutory provision then it is to be followed irrespective of moral values on the issue and the plea taken by the assessee before lower authorities. Accordingly, this ground of Revenue is rejected. iii) CIT vs Pt. Vishwanath Sharma 316 ITR 419 (Allahabad) The Apex Court held that when an assessee is being taxed under the Income-tax Act, the question has not been decided on the basis of emotions or moral approach but on legal approach. iv) CIT Vs Koodathii Kallyatan 2008-TIQL-427-HC-MUM-IT The Supreme Court in Commissioner of Income Tax vs. Gwalior Rayon Silk Mill Manufacturing Co. Ltd. 196 ITR 149 has observed as follows: "Logic alone will not be determinative of a controversy arising from a taxing statute. Equally, common sense is a stranger and an incompatible partner to the Income-tax Act. It does not concern itself with the principles of morality or ethics. It is concerned with the very limited question as to whether the amount brought to tax constitutes the income of the assessee.... ‖

v) CIT vs Calcutta Knitwears 2014-TIQL-30-SC-IT (copy placed in paper book) Page | 19

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT "the language of a taxing statute should ordinarily be read and understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative animation. A taxing statute should be strictly construed; common sense approach, equity, logic, ethics and morality have no role to play. Nothing is to be read in, nothing is to be implied; one can only look fairly at the language used and nothing more and nothing less.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT 10. In the end he submitted that no penalty can be levied u/s 271(1)(b) of the Act and therefore, ld Assessing Officer and ld CIT(A) grossly erred in levying and sustaining the above penalties. Arguments of the Revenue 11. The ld DR vehemently submitted that assessee has failed to comply with the notice issued u/s 142(1) of the act by neither supplying the information about the bank account nor the consent letter. He submitted that the letter, which is said to be compliance of the notice, is no compliance as neither of the information is furnished. He stated that if the assessee is so certain that he does not have the bank account in that bank then there should not be any fear in submitting the consent letter. He stated that claim of the assessee that he does not have bank account is full of falsity for the reason that assessee is not giving the consent . If the assessee gives the consent then the correct information would be received and if the assessee does not have the bank account there is nothing to fear. He submitted that the conduct of the assessee shows that assessee has bank account. Further merely if the protective addition is made it does not result in to compliance of the notice, it is the result of assessment and appellate proceedings and has nothing to do with the impugned penalty proceedings. He further submitted that the various case laws submitted does not have any application as the ld AO through proper channel received the information where the name of the assessee is mentioned. He therefore relied up on the orders of the lower authorities and contended that impugned penalties may be upheld. Reasons and decisions 12. We have carefully considered the rival contentions and also perused the relevant paper book furnished by the assessee. We have also perused the relevant decisions cited before us. In the present case the simple issue is that Ld. assessing officer has received certain information with respect to certain bank accounts with HSBC accounts, Geneva where the name of the assessee is mentioned. Subsequently, search was also conducted under section 132 of the income tax act. With respect to the bank account with HSBC, Geneva the assessee was issued a notice under section 142 (1) on 18/07/2013 where the assessee was required to furnish certain information with respect to that bank account and in case the assessee does not have the bank account statement then a particular consent letter was required to be signed, so that the office of the income tax officer can help the assessee in obtaining bank account from that particular bank. In response to that notice the assessee did not furnish either the bank account or furnished the consent letter but pleaded that the assessee does not

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT have any such bank account. Therefore, the penalty under section 271 (1) (b) of the income tax act was initiated and show cause notice dated 26/09/2013 was issued to the assessee in response to which assessee submitted that he has already submitted reply to the notice dated 18/07/2013 submitting the reply on 23/07/2013 and copy of which was also submitted on 23/09/2013. Therefore the claim of the assessee is that there is a complete compliance of the said notice and therefore penalty cannot be levied. The Ld. assessing officer rejected the contention of the assessee and held that as no consent letter was submitted by the assessee and merely stating that assessee does not have bank account there is no compliance by the assessee, therefore, the penalty under section 271 (1) (b) of the act of Rs. 10,000 was levied for all these years. CIT appeal confirmed the above penalty for all the years. We fully agree with the finding given by the Ld. CIT (A) in confirming the above penalty and our reasons are as under:- a. The name of the assessee appeared in a particular bank account maintained with the HSBC account and therefore the Ld. assessing officer has requested the assessee to furnish either the bank account of that particular bank or to give consent letter in a particular form so that the assessee can be helped by the revenue for obtaining the copies of the above bank account. In case if the contention of the assessee is correct, then naturally the bank account would not by the HSBC bank stating that such accounts are not held by the assessee. If the assessee has such account, in the status of the account holder or a case of beneficiaries or settlers, then naturally the HSBC bank to the revenue will supply the bank account. If the assessee signs the consent letter then the version of the assessee is proved if no such bank account is received from that particular bank or such bank refuses stating that the assessee does not own that bank account. Therefore there is no reason for the assessee to not to sign the consent form. In view of the above facts, the only inference that can be drawn is that, that assessee does not want revenue to reach at the conclusion whether the assessee is having the bank account or not. According to us the assessee is making an attempt to forestall the enquiry of the revenue. b. The revenue is not making any fishing or rowing Inquiry. It has received the information in the form of document that has been collected by the government of India as part of tax information exchange treaty. The name of the assessee is appearing in that particular document. Therefore, the revenue is asking assessee to help in ascertaining the correct facts. The revenue has further established that the

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT particular bank account has some connection with the assessee because name of the assessee is mentioned and further the name of the family members of the assessee are also appearing as attorney and account holder 1 and account holder 2. This fact gives credence to the enquiry of the revenue and the document received in information exchange from foreign country. Therefore, the revenue has got the specific information, but to ascertain the correct facts because of the confidentiality agreement between the bank and the assessee, the consent letter is required to be signed by the assessee. This is not done by the assessee despite specific notice issued by the assessing officer. c. Merely signing the consent letter would not have prejudiced the interest of the assessee because if the account would not have been having any connection with the assessee. The foreign bank would not give the details of such account. Therefore, the intentions of the assessee in not signing the consent letter prove what assessee wants to hide the information. d. Notice issued by the Ld. assessing officer under section 142 (1) of the act was very specific and precisely on the point giving the clear cut requirement of the law, and in absence of compliance of such notice, the penalty under section 271 (1) (b) is correctly levied, e. The deletion of the addition in the hands of the assessee does not help the argument of the assessee because the addition was made in the hands of the assessee on protective basis and on substantive basis in the hands of the other family members of the assessee. The addition in the hands of the other family members on substantive basis have been upheld by the appellate authorities and therefore the addition in the hands of the assessee has been deleted, which was made on the protective basis. Therefore, the result of appeal of the assessee before the appellate authority does not help the case of the assessee so far as these penalties are concerned. f. The argument of the assessee is that there is no provision of issue of notice under section 142 (1) of the act for assessing the income unearthed during the course of search and therefore the penalty originating from non-compliance of that notice does not survive because of the reason that assessment has been made under section 153A of the income tax act. The above argument of the assessee is required to be rejected at the threshold itself because of the reason that the provisions of section 153A provides that the return furnished by the assessee in response to the notice under section 153A

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT are to be treated as if their returns furnished under section 139 of the income tax act. The provisions of section 142 (1) also provides that for the purpose of making an assessment under the Act, the assessing officer may serve a notice requiring assessee on the date specified therein to furnish certain details. Therefore, we are of the opinion that the Ld. assessing officer is empowered under the provisions of this act, even in case of assessment under section 153A to issue notice under section 142 (1) of the income tax act. Hence the above plea of the assessee is rejected.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT b. The 2nd decision relied upon by the assessee is with respect to ITA No. 6425 and 6426/del/2015 for assessment year 2006 – 07 in case of Sh. Shyamsunder Jindal . We have carefully perused the facts of the above case and we are of the considered opinion that in that particular case, it was not considered by the coordinate bench that whether the non-filing of the consent letter is a compliance or not. The bench also did not consider that the consent letter in the absence of the information was not submitted, and therefore there was a non-compliance of the notice under section 142 (1) of the income tax act. Furthermore in para No. 6 of that particular order it is stated by the coordinate bench that:- ― In our opinion, when nothing was brought on record to substantiate that the alleged bank and account actually belong to the assessee, there was no possibility of furnishing the consent form, particularly when the assessee time and again denied that the alleged bank account belong to him.‖ [underline supplied by us] In the present case there is a specific name of the assessee showing that assessee has some relationship with the particular bank account held with the HSBC account. In the present case the family members of the assessee are found to having such bank accounts and the appellate authority in their hands has confirmed additions. Therefore the decision cited before us have distinct facts which are not comparable with the facts before us. It is further to be noted that when the relatives of the assessee are having the bank accounts and addition are confirmed in their hands by the 1st appellate authority and where the name of the assessee appears in the information received under the information exchange agreement between the two countries, We do not agree that there is no material brought on record by the revenue for initiating an enquiry. Therefore, the reliance placed by the assessee on the decision of the coordinate bench does not apply to the peculiar facts of the case.

c. The 3rd decision relied upon by the assessee is with respect to the decision of coordinate bench in case of Piagam Impex private limited versus ACIT in ITA No. 4787/del/2013 dated 06/02/2014. The above decision does not apply to the facts of the case as there was no issue of information received by the government of India under the information exchange. In view of this the reliance by the Ld. authorised representative on this decision is incorrect.

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT d. The 4th decision relied upon by the assessee is with respect to the decision of the coordinate bench in case of Pushpa Garg Vs. ACIT in ITA No. 4852/del/2013 dated 06/02/2014. The above decision does not apply to the facts of the case as there was no issue of information received by the government of India under the information exchange. In view of this the reliance by the Ld. authorized representative on this decision is incorrect. e. In the end the assessee has placed upon the decision of the Hon‘ble Supreme Court in case of M/s Hindustan steel Ltd versus state of Orissa 83 ITR 26 (SC). We have carefully considered the rival contentions with respect to the applicability of this decision. The Hon‘ble Supreme Court has held that an order-imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. In such circumstances penalty should not be levied. It is further held that where there is a technical or venial breach of the provisions of the act or where the breach) is bona fides that the vendor is not liable to act in the manner prescribed by the statute, the adjudicating authority will be justified in refusing to impose penalty. In that particular case the issue was pertaining to the sales tax matters where whether the amounts charged by the company as a fixed percentage for storage insurance etc it can be said to be that assessee was carrying on business of supplying material and it would not be a ‗dealer‘. Further, merely registering the assessee is a ‗dealer‘ under the genuine belief that company was not a dealer, no penalty should be levied. In the present case, the facts are quite different. In the present case the information was received by the government of India under the information exchange agreement with other countries. Issue involved is not of registering or mere technical or venial compliance default by the assessee but it is with respect to holding a foreign bank account with the bank of the foreign country, which has not been allegedly disclosed by the assessee to the Indian tax authorities. Therefore it is neither a technical nor venial default to not to sign a consent letter to arrive at the true facts of that particular bank account when the two of the relatives of the assessee are also subject to similar proceedings and addition in their hands are confirmed by the 1st appellate authority. Therefore the decision of Hon‘ble Supreme Court are rendered on different facts and do not apply in the present case as the

ITA No. 3795 to 3801/Del/2014 (Assessment Year: 2006-07 to 2012-13 Sanjay Dalmia, Vs DCIT offence of the assessee for non-compliance with the notice of the assessing officer is neither technical nor venial in nature. 14. Further on the identical facts and circumstances in the ITA No. 5157-5162/Del/2014, the penalties have been confirmed by the coordinate bench considering the peculiar facts of the case as under :- “11. The Ld. CIT(A) has properly taken note of all these relevant facts, legality of notices, nature of non- compliance and its adverse impact on investigations related to alleged undisclosed HSBC bank account. We find no infirmity in the order of Ld. CIT(A) confirming the imposition of penalty of Rs. 30,000/- each in above assessment years as defaults are more than 3 times. It has been rightly held that there is no law that for each default separate notice u/s 27(1)(b) should be issued on defaulting assessee. The orders of ld. CIT(A) being justified on proper appreciation of facts and law and based on relevant Supreme Court judgments are upheld. The appeals of assessee are dismissed.”