DCIT 3(3)(1), MUMBAI vs. RELIANCE GENERAL INSURANCE COMPANY LTD, MUMBAI

आदेश / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: The present set of appeals filed by the revenue for A.Ys 2007-08 to 2011-12 are directed against the respective orders passed by the CIT(A)-8, Mumbai, dated 30.09.2016, which in itself arises from the orders passed by the A.O under Sec. 271(1)(c) of the Income Tax Act, 1961 (for short „Act‟), dated 27.08.2015. That as common issues are involved in the aforementioned appeals, therefore, the same are

P a g e | 2 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. being taken up together and are being disposed of by way of a consolidate order. We shall first advert to the appeal of the revenue for A.Y 2007-08. The revenue assailing the order of the CIT(A) who had vacated the penalty imposed by the A.O under Sec.271(1)(c) of the Act, had raised before us the following grounds of appeal:-

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of Rs. 31,37,972/- levied u/s. 271(1)(c) of the I.T. Act, 1961 without appreciating the facts that had made the disallowance only after the receipt of notice u/s. 148 and had the notice not been issued, the assessee would not have disclosed/revised its return of income. 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 2. Briefly stated, the facts of the case are that the assessee company which is engaged in the business of providing general insurance had e-filed its return of income for A.Y 2007-08, declaring loss of Rs.2,88,23,400/- (after claiming set off of short term capital gain of Rs.4,02,16,787/-). The case of the assessee was taken up for scrutiny assessment under Sec.143(2) and its total income was determined under the normal provisions at Rs.2,53,22,500/- and the „book profit‟ under Sec. 115JB at Rs. 26,68,976/-. Subsequently, the A.O while giving effect to the order of the CIT(A) revised the total assessed loss of the assessee at Rs.6,60,10,398/- vide his order dated 22.11.2010. 3. That after the culmination of the assessment proceedings in the case of the assessee the A.O was in receipt of information from the DIT(Inv.), Kolkata, as had emerged in context of the assessee during the course of the Search and seizure action conducted on one Shri Praveen Agarwal, an infamous entry operator of Kolkata. The information revealed that Shri Praveen Agarwal had in his statement

P a g e | 3 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. recorded during the course of the Search and seizure proceedings admitted that he had provided entries of bogus expenses like commission, contractual expenses, professional charges etc through his group company, viz. Tuticorin Trexim Pvt. Ltd. (PAN AAACT9539J) (now known as Makesworth Project and Developers Pvt. Ltd.) by issuing bogus bills for Rs. 17,63,705/- to the assessee company. The A.O after deliberating on the aforesaid information and the documents received/information contained in the documents forwarded by the investigation wing, held a conviction that the income of the assessee for the year under consideration had escaped assessment within the meaning of Sec. 147 of the Act. The A.O on the basis of his aforesaid observations initiated proceedings under Sec. 147 and issued a notice under Sec. 148, dated 21.03.2014. The assessee in compliance to the notice issued under Sec. 148 filed its return of income on 22.04.2014, wherein the amount of Rs.93,22,558/- paid to M/s Tuticorin Trexim Pvt. Ltd. (supra) and earlier claimed as an expenditure in the „Profit & loss account‟ was voluntarily disallowed and the returned loss was revised at Rs.1,95,00,840/-. The assessee thereafter obtained the copy of the „reasons to believe‟ on the basis of which its case was reopened, and vide its letter dated 22.07.2014 objected to the validity of the reopening before the A.O. The assessee in its objections assailing the very basis on which its case was reopened, submitted that the expenses incurred through Tuticorin Trexim Pvt. Ltd were genuine expenses and had wrongly been alleged to be bogus. However, the A.O not persuaded to accept the objections raised by the assessee, thus, disposed off the same and proceeded with the reassessment proceedings. The assessee on being called upon by the A.O to explain as to why the transactions entered with Tuticorin Trexim Pvt. Ltd. may not be held as bogus transactions and the amount booked as an expenditure in respect of such transactions be not disallowed,

P a g e | 4 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. submitted that no adverse inferences in respect of the veracity of the transactions were liable to be drawn in its hands on the basis of the unsubstantiated report of the investigation wing of the department. However, the A.O not impressed with the contention of the assessee, observed that as Mr. Praveen Agarwal had categorically admitted in his statement recorded under oath that M/s Tuticorin Trexim Pvt. Ltd, a group company, had during the period 15.05.2006 to 31.03.2012 provided accommodation entries to the assessee on account of commission/contractual charges/professional charges, therefore, it could safely be concluded that the aforesaid company had not provided/rendered any services to the assessee company, but rather, had only provided accommodation entries on the basis of which the assessee had suppressed its income. The A.O in the backdrop of his aforesaid conviction concluded that as the transactions of the assessee with Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.), a group company of Mr. Praveen Agarwal, were proved to be non-genuine, therefore, the assessee could safely be held to have deflated its income by booking bogus expenses to the said extent. The A.O further taking cognizance of the fact that the assessee had voluntarily disallowed the payments made to Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.) in its return of income filed on 22.04.2014 in compliance to notice issued under Sec. 148, observed that the said fact in itself sufficiently proved that the assessee was well conversant of the said non-genuine expenditure debited in its books of account for the year under consideration. The A.O in the backdrop of the fact that the assessee had already disallowed and offered the entire amount paid to Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd) as its income in the „return of income‟ filed under Sec. 148 of the Act, therefore, accepted the same and did not make

P a g e | 5 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. any further disallowance in its hands. The A.O while culminating the reassessment initiated penalty proceedings under Sec. 271(1)(c) in respect of „furnishing of inaccurate particulars of income‟ by the assessee in respect of the aforesaid amount of Rs.93,22,558/- which was earlier claimed by the assessee as an expenditure in its „books of account‟. 4. That as the assessee had voluntarily disallowed the amount of Rs.93,22,558/- and revised the returned loss to Rs.1,95,00,840/-, therefore, no appeal against the order passed by the A.O was filed before the CIT(A). 5. The A.O after the culmination of the rassessment proceedings issued a „Show Cause‟ notice (for short „SCN‟) under Sec. 274 r.w. Sec. 271(1)(c) of the Act, dated 02.02.2015 calling upon the assessee to explain as to why penalty may not be imposed on it under Sec. 271(1)(c). The assessee in its reply dated 06.04.2015, submitted before the A.O as under: “(i) The amount has been added back in the computation and return to avoid protracted litigation on the matter more particularly in view of continuous losses on year on year basis. (ii) The assessed business loss for the year is Rs.5.67 crores and there was no need to debit bogus expenses for any tax savings, thus, there is no intention of tax avoidance in booking the so called bogus bills. (iii) Assessee has not paid any commission to Tuticorin and the payments made were on account of Policy Management, which included the work in relation to policies issued, more particularly courier, printing, data entry etc., and not paid any commission for procuring customers. (iv) The statement of Mr. Pravin Aggarwal that the money received were refunded to the beneficiary companies is an unverified statement and assessee denies having received the money back from Tuticorin and there is no evidence produced in support of so called return of money. (v) Besides the statement of Mr. Pravin Aggarwal no other evidence is provided to the assessee and said statement is not relevant as Mr.Aggarwal is not a director of Tuticorin. Statement of a third

P a g e | 6 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. party cannot be taken as evidence as regards the transaction between a company of which he is not a director. (vi) No information has been provided as to whether statement has been retracted by Mr. Pravin Aggarwal. However, the A.O not persuaded to be in agreement with the aforesaid contentions of the assessee, therefore, declined to accept the same. The A.O observed that Shri Praveen Agarwal had in his statement categorically admitted that he had floated number of companies to carry out the activity of issuing accommodation bills to various parties, for which he was in receipt of commission etc. The A.O further observed that not only the assessee had failed to substantiate the veracity of its claim, but rather, the admission by the issuer of the bogus bills, viz. Shri Praveen Agarwal that he had only provided bogus/accommodation entries also could not be dislodged by the assessee by placing on record any evidence which could go to suggest that the amount was paid in lieu of any services rendered by the aforesaid company, viz. Tuticorin Trexim Pvt. Ltd. The A.O after culling out the facts, which as per him conclusively proved to the hilt that number of bogus companies were floated by Mr. Praveen Agarwal to facilitate issuing of bogus/accommodation bills to various parties, in lieu whereof he was in receipt of commission, observed that the assessee in the garb of accommodation entries had suppressed its actual profits. The A.O was also not impressed by the claim of the assessee that the payments made to Tuticorin Trexim Pvt. Ltd. were for services rendered in context of courier, printing, data entry etc, for the reason that neither any documentary evidence evidencing the aforesaid claim, nor any details in respect of the services claimed to have been utilized by assessee were furnished before the A.O. The A.O was also not persuaded to accept the claim of the assessee that as it had in order to avoid litigation disallowed the payments made to

P a g e | 7 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. Tuticorin Trexim Pvt. Ltd., therefore, no penalty under Sec.271(1)(c) was called for in its case. The A.O rejecting the contentions advanced by the assessee before him, observed that as the assessee had came forth with the disallowance of the payments made to Tuticorin Trexim Pvt. Ltd. only after receiving the Notice issued under Sec. 148., therefore, it could safely be concluded that the same was not voluntarily done on its part. The A.O holding a strong conviction that the assessee would not have disallowed the aforesaid expenses if its case would not have been reopened under Sec. 147, therefore, after deliberating on the scope and gamut Section 271(1)(c) concluded that the assessee had not only furnished a claim which was incorrect in law, but rather, the facts clearly revealed a conscious knowledge on the part of the assessee as regards raising of a false claim. The A.O being of the view that the assessee had furnished inaccurate particulars of its income and concealed particulars of income as envisaged in Sec. 271(1)(c) in respect of the aforesaid amount of Rs.93,22,558/-, therefore, imposed a penalty of Rs.31,37,972/-. 6. Aggrieved, the assessee assailed the order of the A.O imposing penalty under Sec.271(1)(c) before the CIT(A). During the course of the appellate proceedings it was submitted by the assessee that the voluntary disallowance of the amount of Rs. 93,22,558/- paid to M/s Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.) was made with the intent to avoid protracted litigation on the matter, in the backdrop of the substantial losses which were suffered by the assessee on year on year basis. The assessee submitted before the CIT(A) that as the penalty proceedings are separate and distinct from the assessment proceedings, therefore, the parameters considered for the disallowance of an expenditure were substantially different from those relevant for levy of penalty. The

P a g e | 8 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. assessee in the backdrop of the aforesaid facts submitted that as it had voluntarily disallowed the amount of Rs.93,22,558/- paid to M/s Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.), therefore, it could safely be gathered that it had neither furnished inaccurate particulars nor concealed its income. Thus, it was submitted by the assessee that as it had neither hidden any income/facts, therefore, it could not be held to have “concealed” any income. The assessee further in order to drive home its contention that no penalty under Sec. 271(1)(c) of the Act was called for in its hands, raised multiple contentions in support thereof before the CIT(A), viz. (i) that the aforesaid amount of Rs.93,22,558/- was voluntarily disallowed by the assessee with a view to avoid protracted litigation on the matter; (ii) that the fact that the assessee during the year under consideration had assessed business loss of Rs.5.67 crores in itself proved that there was no reason for it to have debited bogus expenses with an intent for evading taxes; (iii) that the payments made by the assessee to Tuticorin Trexim Pvt. Ltd.(now known as Makesworth Projects & Developer Pvt. Ltd.) were made by the assessee in relation to the services pertaining to courier, printing, data entry etc. provided by the aforesaid company and not by way of commission as was alleged by the revenue by taking support of the statement of Mr. Praveen Agarwal; (iv) that the assessee on the basis of sample invoices issued by Tuticorin Trexim Pvt. Ltd. had proved that the payments made to the said company were in context of the aforementioned services and not towards commission; (v) that in the absence of any evidence supporting the allegation of Mr. Praveen Agarwal that the money received was refunded to the beneficiary companies, no adverse inferences were liable to be drawn in the hands of the assessee which had clearly denied of having received any refund of such money from Tuticorin Trexim Pvt. Ltd; (vi) that as Mr. Praveen

P a g e | 9 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. Agarwal was not the director of Tuticorin Trexim Pvt. Ltd, therefore, his statement in context of the transactions between the assessee and Tuticorin Trexim Pvt. Ltd. carried no evidentiary value; (vii) that except for the unsubstantiated statement of Mr. Praveen Agarwal, no other evidence to dislodge the claim of the assessee and support the adverse inferences drawn in its hands was brought on record by the revenue; and (viii) that no information was provided to the assessee as to whether the statement recorded by Mr. Praveen Agarwal did hold the ground or was retracted. The assessee in order to fortify its claim that no penalty under Sec. 271(1)(c) was liable to be imposed in its hands, relied on the following judicial pronouncements: (i) Swati Pearls and Jewellers Vs. DCIT (Trib) ITA No. 1401/Hyd/2014 (ii) Ashok Raj Nath Vs. ACIT [2013] 33 taxmann.com 588 (Delhi- Trib.) (iii) CIT Vs. Suresh Chandra Mittal [2001] 119 TAXMANN 433 (SC) (iv) Vipul Life Scinences Ltd. Vs. DCIT ITA No. 5948/Mum/2014 & 5949/Mum/2014 (v) Vasavi Shelters Vs. ITO [2013] 32 taxmann.com 26 (Bangalore- Trib) (vi) Saket Agarwal Vs. ITO [2013] 36 Taxmann.com 293 (Delhi-Trib) (vii) Marathon Nextgen Reality & Textiles Ltd. Vs. DCIT (2013) 36 Taxmann.com 3 (Mumbai-Trib) (viii) CIT Vs. Punjab Tyres (1986) 162 ITR 517 (HC MP) 7. The CIT(A) after deliberating on the facts of the case, observed that the sole basis for characterising the transactions between the assessee and Tuticorin Trexim Pvt. Ltd. as bogus transactions by the A.O was the stand alone statement of Shri Praveen Agarwal which was shared by the DIT (Inv.), Kolkata with him. The CIT(A) further observed that it remained as a matter of fact that no evidence was placed on record by the revenue which would irrefutably prove that the amount paid by the assessee company to M/s Tuticorin Trexim Pvt. Ltd. had thereafter found its way back to the pocket of the

P a g e | 10 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. assessee by way of a refund from the said company. The CIT(A) observed that while for the information received by the A.O from the DIT(Inv.),Kolkata was in context of an alleged bogus commission of Rs.17,63,705/- which was claimed by the assessee company to have been paid to Tuticorin Trexim Pvt. Ltd, but however, the assessee company in its return of income filed under Sec. 148 had disallowed the total payments of Rs.93,22,558/- made to the said company, which was accepted by the A.O, as such. The CIT(A) further took note of the fact that the A.O while framing the assessment under Sec. 143(3) r.w.s 147 neither made any new addition/disallowance, nor had arrived at any concealment or furnishing of inaccurate particulars in context of Sec. 271(1)(c) of the Act. Rather, the action of the A.O as per the view of the CIT(A) appeared to have emanated from the fact that certain concealment/inaccurate particulars were embedded in the original return of income filed by the assessee, which had remained under assessed in the original assessment order passed by him under Sec. 143(3). The CIT(A) observed that despite the fact that the assessee had disallowed the entire expenditure booked in context of Tuticorin Trexim Pvt. Ltd in its return of income filed in response to notice under Sec.148, but however, the A.O appeared to be of the view that the implied act of concealment/inaccurate particulars in the original return of income would suffice for imposition of penalty under Sec. 271(1)(c) in the hands of the assessee. The CIT(A) noted that his indulgence was sought for adjudication of the issue that where an assessee in its return of income filed in response to a notice under Sec. 148 enhances its income or reduces the loss, could it be construed that the assessee had admitted to have concealed its income or furnished inaccurate particulars of income. The CIT(A) was of the view that the issue involved in the case had been looked into and adjudicated upon by a coordinate bench of the Tribunal, viz. ITAT,

P a g e | 11 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. Mumbai in the case of Vipul Life Science Ltd. Vs. DCIT (ITA No. 5948/Mum/2014 and 5949/Mum/2014).The CIT(A) observed that the Tribunal deliberating on the fundamental question for which their indulgence was sought, i.e as to whether any additional income/reduced loss declared in a return of income filed by an assessee in response to a notice under Sec. 148 would tantamount to admission of concealment/inaccurate particulars of income, had observed as under:-

“26. It is a fact that in live assessments, no addition whatsoever was made by the AO. It is also a fact that while examining the books in the course of assessment proceedings, the AO did not lay his hands on any item of income, which the assessee had not declared in the return or fill the assessment Vipul Life Sciences Ltd.” The Tribunal further observed as under: “30. We are supported by the decision of the coordinate Bench at Bangalore in the case of Muninapa Reddy Vs. ACIT, reported in 2013- 17taxman.com440, where it was held, “There can be no concealment or non-disclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax and, therefore, no penalty under section 271(1)(c) could be levied. The words 'in the course of any proceedings under this Act” in section 271(1) are prefaced by the satisfaction of the Assessing Officer or the Commissioner (Appeals). When a survey is conducted by a survey team, the question of satisfaction of Assessing Officer or the Commissioner (Appeals) or the Commissioner does not arise. One has to keep in mind that it/s the Assessing Officer who initiates penalty Vipul Life Sciences Ltd. proceedings and directs the payment of penalty. He cannot record any satisfaction during the course of survey. Decision to initiate penalty proceedings is taken while making assessment order. It is thus obvious that the expression 'in the course of any proceedings under this Act' cannot have the reference to survey proceedings. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in the return filed by him. The assessee can furnish the particulars of income in his return and everything would depend upon the return filed by the assessee. This view gets supported by Explanations 4, 5 and 5A of section 271(1)(c). Obviously no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Section 271(1)(c) has to be construed strictly. Unless it is found that there is actually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax.

P a g e | 12 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd.

It necessarily, follows that concealment of particulars of income or furnishing of inaccurate particular of income by the assessee has to be in return filed by it. The assessee can furnish the particulars of income in his return and everything would depend upon the return filed by the assessee. This view gets supported by Explanations 4 as well as 5 and 5A of section 271. Obviously, no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey, may be, it would not have disclosed the income but for the said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. Section 271(1)(c) has to be construed strictly. Unless it is found that there is I actually a concealment or non- disclosure of particulars of income in return filed by assessee, penalty cannot be imposed. There is no such concealment or nondisclosure as the assessee had made a complete disclosure in the return and offered the surrendered P. amount for the purposes of tax. 34. In the case of Dilip Kedia Vs. ACIT, reported in 2013-40 taxman.com 102, the coordinate Bench at Hyderabad held, considering all the aspects viz., the assessee had declared the amount he will be offering in the course of statement recorded under section 132(4), the Assessing Officer has not brought on record any other materials or evidence for coming to the conclusion that the assessee had concealed any income except for the statement recorded under section 132(4), even the CBDT has cautioned the Assessing Officers to make additions based purely on the sworn statements recorded under section 132(4), the Explanation 5A as it stood on the date of filing of return/revised return by the assessee, levy of penalty on the additional income included in the return based only on the sworn statement of the assessee cannot be sustained. Accordingly the penalty levied upon the assessees deserved to be deleted.”

P a g e | 13 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. could be treated as a situation in which any income was concealed by the assessee.” The CIT(A) taking cognizance of the observations arrived at by the Tribunal in the aforementioned case held a conviction that the facts involved in the case before him were pari materia to those which were involved in the case of Vipul Life Science Ltd. (supra). The CIT(A) further relied on an another decision of a coordinate bench of the Tribunal in the case of Shri Kiran Shah Vs. ACIT (ITA No. 5919 to 5925/Mum/2011). The CIT(A) observed that in the said case, the additional income of Rs.13,93,000/- which had emerged from the incriminating documents found and seized during the course of search proceedings conducted on the assessee was offered by him as his additional income in the „return of income‟ filed under Sec. 148 of the Act. The A.O though accepted the „return of income‟ filed under Sec. 148, but however, imposed penalty under Sec. 271(1)(c) on the assessee. The Tribunal while cancelling the levy of penalty, observed that in the backdrop of the additional income which was offered by the assessee in its return of income filed under Sec. 148 of the Act, as neither any amount was added nor disallowed by the A.O, therefore, there remained no occasion for imposing penalty under Sec. 271(1)(c) on the assessee. The CIT(A) taking support of the aforesaid judicial pronouncements was of the view that now when in the present case the assessee had made a complete disclosure in its return of income filed in compliance to notice issued under Sec.148, which was accepted by the A.O without making any further additions/disallowances, therefore, the question of concealment /furnishing of inaccurate particulars would no longer arise. The CIT(A) held a conviction that once an assessee had availed the opportunity to file a fresh return of income in response to a notice issued under Sec. 148 and had made a complete disclosure, then irrespective of the fact

P a g e | 14 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. that the case of the assessee was reopened on the basis of “tangible material”, there would remain no occasion for imposing penalty under Sec. 271(1)(c) for concealment/furnishing inaccurate particulars of income in the hands of the assessee. The CIT(A) while concluding as hereinabove relied on the following judicial pronouncements:- 1) Prem Arora Vs. DCIT-24 Taxmann.com 260 (Delhi Tribunal) 2) Purti Sakhar Karkhana Vs. DCIT 35 Taxmann.com 594 (Nag. Tri) 3) Vrajlal T. Gala Vs. ACIT 33 Taxmann.com 620 (Mum. Tribunal). 4) M/s Unimark Remedies Ltd. Vs. ACIT dated 26.09.2012 in ITA No. 3817/Mum/2009 5) Smt. Pramila D. Ashtekar Vs. ITO-39 Taxmann.com 103 (Pune) 6) Yogesh Parekh Vs. ACIT ITA No. 6750, 6051/Mum/2008 The CIT(A) on the basis of his aforesaid observations deleted the penalty of Rs.31,37,972/- imposed by the A.O under Sec.271(1)(c) of the Act. 8. Aggrieved, the revenue had assailed the order passed by the CIT(A) before us. The ld. Departmental Representative (for short „D.R‟) taking us through the order of the A.O passed under Sec. 271(1)(c) of the Act, submitted that as the assessee had consciously booked bogus expenses in respect of ingenuine transactions with Tuticorin Trexim Pvt. Ltd, therefore, the A.O had rightly imposed penalty under Sec. 271(1)(c) in the hands of the assessee. It was submitted by the ld. D.R that as the assessee had added back the amount of Rs.93,22,558/- only pursuant to the notice issued by the A.O under Sec. 148 of the Act, the same thus could not be characterised as a voluntary act on its part, but rather, was clearly an afterthought to wriggle out of the ramifications ensuing from raising such bogus claim of expenses. The ld. D.R averred that if the A.O would not have had reopened the case of the assessee under Sec. 148, the assessee would have never

P a g e | 15 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. disclosed/revised its return for the year under consideration. The ld. D.R in the backdrop of the aforesaid facts submitted that as the assessee had failed to substantiate the genuineness and veracity of its claim of expenses of Rs. 93,22,558/- and rebut the admission of the issuer of bogus bills that he had only provided bogus/accommodation entries and not rendered any services, therefore, it could safely be concluded that the assessee had suppressed its profits in the garb of bogus expenses booked on the basis of accommodation entries. The ld. D.R submitted that as the assessee had consciously inflated the expenses with a clear intent to reduce its taxable income/enhance the loss, therefore, the A.O had rightly imposed penalty under Sec. 271(1)(c). The ld. D.R taking support of his aforesaid contentions submitted that as the conduct of the assessee was clearly malafide, therefore, the same was squarely covered by Part B of the Explanation 1 to Sec. 271(1)(c) of the Act. The ld. D.R submitted that as the CIT(A) loosing sight of the aforesaid material facts had erred in vacating the well reasoned penalty imposed by the A.O under Sec. 271(1)(c), therefore, his order may be set aside and that of the A.O be restored. 9. The ld. Authorized Representative (for short „A.R‟) for the assessee at the very outset of the hearing of the appeal objected to the validity of the penalty imposed by the A.O under Sec. 271(1)(c). It was submitted by the ld. A.R that as the A.O had failed to mention in the „Show cause‟ notice (for short „SCN‟) the default for which the impugned penalty proceedings were being initiated in the hands of the assessee, therefore, the very assumption of jurisdiction and imposition of penalty under Sec. 271(1)(c) in the hands of the assessee was bad in the eyes of law. The ld. A.R in order to fortify his aforesaid contention, took us through the copy of the notice issued under Sec.274 r.w.s. 271(1)(c) of the Act, dated 02.02.2015 (Page 1) of his „Paper book‟ (for

P a g e | 16 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. short „APB‟), wherein the A.O had failed to strike off the irrelevant default in the notice, and thus had failed to put the assessee to notice as regards the default for which it was being called upon to show cause as to why penalty under Sec. 271(1)(c) may not be imposed on it. The ld. A.R submitted that the aforesaid default on the part of the A.O was allowed by him to perpetuate as such, and even in the „SCN‟ dated 13.08.2015, (Page 2 of „APB‟) the A.O had once again failed to point out the default for which the assessee was called upon to explain as to why penalty under Sec. 271(1)(c) may not be imposed in its hands. It was thus the contention of the ld. A.R that as the assessee was kept in dark as regards the default for which penalty proceedings under Sec. 271(1)(c) was initiated in its hands, therefore, it remained divested of any opportunity to defend its case and substantiate before the A.O as to why no penalty under Sec. 271(1)(c) was called for in its hands. The ld. A.R submitted that as the aforesaid default did go to the very root of valid assumption of jurisdiction by the A.O for imposing penalty under Sec.271(1)(c), therefore, the penalty imposed under Sec. 271(1)(c) could not be sustained and was liable to be vacated on the said count itself. The ld. A.R in order to drive home his aforesaid contention relied on the following judicial pronouncements:

Sr. No. Particulars Citation/Case Number 1. CIT Vs. SSA‟s Emerald Meadows [2016] 73 taxmann.com 248 (SC) 2. Dilip N. Shroff Vs. JCIT [2007] 291 ITR 519 (SC) 3. CIT Vs. Shri Samson Perinchery ITA Nos.953, 1097, 1154 and 1226 of 2014 (order dated 05.01.2017 (Bom. HC) 4. PCIT Vs. Smt. Baisetty Revathi ITA No. 684 of 2016 (order dated 13.07.2017) (AP- HC) 5. Jehangir HC Vs. Asst CIT ITA No. 261/Mum/2011 (order dated 17.05.2017) (Mum.- Trib.) 6. Meherjee Cassinath Holdings ITA No.2555/Mum/2012 Private Limited Vs. ACIT (order dated 28.04.2017) (Mum. Trib) 7. Sarang Property Developers Pvt. ITA No. 4013/Mum/2015 Ltd. Vs. Addl. CIT (order dated 28.07.2017) (Mum.

P a g e | 17 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. –Trib) 8. Kanakia Hospitality Pvt. Ltd. Vs. ITA No. 2326 & ACIT 2328/Mum/2015 (order dated 09.08.2017)(Mum.- Trib) 9. Orbit Enterprises Vs. ITO ITA Nos. 1559 & 1597/Mum/2014 (order dated 01.09.2017) (Mum.- Trib) 10. The ld. A.R further submitted that even otherwise no penalty in the backdrop of the merits of the case was liable to be imposed in the hands of the assessee. It was averred by the ld. A.R that as the assessee in order to purchase peace of mind and to avoid unnecessary litigation had in its „return of income‟ filed in compliance to the notice issued under Sec.148 voluntarily disallowed the payments of Rs. 93,22,558/- made to Tutucorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.), which was accepted by the A.O and no part of the same was found to be incorrect or erroneous or false, therefore, no penalty under Sec. 271(1)(c) could have been validly imposed in its hands. It was further submitted by the ld. A.R that though it remained as a matter of fact that the assessee company had made payments to Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.) in respect of the courier, printing, data entry services etc, which fact was duly corroborated on the basis of the sample invoices that were produced during the course of the assessment proceedings before the A.O, but however, with the intent to avoid protracted litigation on the matter in the backdrop of the continuous losses suffered on year to year basis, the assessee had voluntarily disallowed the aforesaid amount in its „return of income‟ filed in compliance to notice issued under Sec.148 of the Act. The ld. A.R submitted that the fact that the assessee was suffering huge losses for the last many years, and even during the year consideration had an assessed business loss of Rs.5.67 crores, itself proved that there was no need on the part of the assessee to have booked bogus

P a g e | 18 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. expenses with the purpose of facilitating any tax evasion. The ld. A.R further submitted that as the statement of Mr. Praveen Agarwal on which heavy reliance was placed by the revenue for drawing of adverse inferences in the hands of the assessee was an unverified statement of a person who was not even a director of the aforesaid company, viz. Tutocorin Trexim Pvt. Ltd.(now known as Makeswork Projects & Developer Pvt. Ltd.), therefore, the same had no evidentiary value and could not have been accepted on the very face of it for dislodging the genuineness and veracity of the claim of the assessee. It was further submitted by the ld. A.R that even till date the department had failed to place on record any clinching material which could irrefutably prove to the hilt that the transactions between the assessee and M/s Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd.) were bogus transactions. The ld. A.R averred that the adverse inferences drawn by the revenue in the hands of the assessee were merely haunted by assumptions, presumptions, surmises and conjectures and not backed by any clinching evidence which would conclusively dislodge the claim of the assessee. The ld. A.R submitted that in the backdrop of the aforesaid facts the CIT(A) had rightly vacated the penalty imposed by the A.O under Sec. 271(1)(c) in the hands of the assessee. The ld. D.R in his rejoinder vehemently objected to the challenge thrown by the ld. A.R to the validity of the penalty imposed under Sec. 271(1)(c) on the ground that the A.O had failed to strike off the irrelevant default in the „Show cause‟ notice issued to the assessee. It was submitted by the ld. D.R that as the assessee had neither filed an appeal or a cross-objection before the Tribunal, therefore, it was not be permissible on its part to raise the aforesaid plea for the very first time during the course of hearing of the appeal before the Tribunal. It was thus submitted by

P a g e | 19 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. the ld. D.R that the contention advanced by the ld. A.R as regards the validity of the penalty proceedings may not be taken cognizance of. 11. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the revenue has sought our indulgence in the present appeal for adjudicating the validity of the order passed by the CIT(A) deleting the penalty imposed by the A.O under Sec. 271(1)(c) of the Act. We shall first advert to the preliminary objection raised by the ld. A.R as regards the validity of the penalty proceedings initiated by the A.O under Sec. 271(1)(c), without putting the assessee to notice as regards the default for which it was called upon to show cause as to why penalty under the aforesaid statutory provision may not be imposed on it. We have deliberated on the objection raised by the ld. D.R that as the assessee had neither filed an appeal or cross-objections before the Tribunal, therefore, it would not be permissible on its part to assail the validity of the penalty proceedings for the very first time during the course of hearing of the appeal before the Tribunal, on the ground that the A.O had failed to strike off the irrelevant default in the „Show cause‟ notice issued to the assessee. We are unable to persuade ourselves to be in agreement with the objection advanced by the ld. D.R. We are of the considered view that as the objection as regards the validity of the penalty proceedings raised by the assessee before us involves purely a question of law based on the facts available on record, therefore, the same after giving both the parties to the appeal an opportunity of being heard can be adjudicated upon. We find that our aforesaid view of proceeding with and adjudicating upon the validity of the penalty proceedings as assailed before us by the respondent assessee in the backdrop of the facts already available on record is fortified by the

P a g e | 20 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. judgment of the Hon‟ble High Court of Bombay in the case of Commissioner of Income-tax Vs. Hazarimal Nagji & Co. (1962) 46 ITR 1168 (Bom), wherein the High court deliberating on the scope and gamut of similarly worded Rule 27, as was then available on the statute, had observed as under: “On the facts as stated by the Tribunal, the contention raised in the present case was one purely, in law, on the facts as they existed all along before the ITO as well as the AAC, though the legal argument available on those facts was not urged before either of the authorities. In our opinion, none of the decisions to which Mr. Joshi has invited our attention, goes contrary to the view which we are inclined to take in the matter. In our opinion, therefore, it was within the jurisdiction of the appellate powers of the Tribunal to permit the assessee-respondent to raise the question, which it sought to raise, for the first time before the Tribunal, and Tribunal, therefore, could not be said to have erred in permitting the assessee-respondent to do so. Our answer, therefore, to the question No. 1, as reframed by us, is in the negative.” We thus in the backdrop of our aforesaid observations proceed with and adjudicate upon the challenge thrown by the assessee to the validity of the penalty proceedings on the basis of the facts available on record. 12. We have given a thoughtful consideration to the facts of the case and find that it remains as a matter of a conceded fact that in the notice issued by the A.O u/ss. 274 r.w.s. 271, dated 02.02.2015, (Page 1) of the „APB‟, the A.O by failing to strike off the irrelevant default mentioned in the „SCN‟ had failed to put the assessee to notice as regards the default for which it was called upon to explain as to why the penalty under Sec. 271(1)(c) may not be imposed on it. We have further perused the second „SCN‟ issued by the A.O on 13.08.2015 (Page 2 of „APB‟) wherein the A.O by way of a letter making a specific mention that it appeared that the assessee had concealed the particulars of income or furnished inaccurate particulars of such income had called upon the assessee to show

P a g e | 21 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. cause as to why penalty under Sec. 271(1)(c) read with Explanation 1 may not be imposed on it for concealing particulars of income/furnishing inaccurate particulars of such income. We find that the aforesaid default on the part of the A.O was allowed by him to perpetuate as such and even in the „SCN‟ dated 13.08.2015, (Page 2 of „APB‟) the default for which the assessee was called upon to explain as to why penalty under Sec. 271(1)(c) may not be imposed in its hands was not specified by the A.O. We would now test the validity of the aforesaid notice and the jurisdiction emerging therefrom in the backdrop of the aforesaid facts as they so remain. We are not oblivious of the fact that the A.O. is vested with the powers to levy penalty under Sec. 271(1)(c) of the Act, if in the course of the proceedings he is satisfied that the assessee had either „concealed his income‟ or „furnished inaccurate particulars of his income‟. We are of the considered view that both of the defaults contemplated in Sec. 271(1)(c) operate in their exclusive independent fields and are neither interchangeable nor overlapping in nature. We are of a strong conviction that as penalty proceedings are in the nature of quasi criminal proceedings, therefore, the assessee as a matter of a statutory right is supposed to know the exact charge he had to face. The non striking off the irrelevant charge in the „Show cause‟ notice not only reflects the non application of mind by the A.O, but rather, the same seriously defeats the very purpose of giving reasonable opportunity of hearing to the assessee as contemplated under Sec. 274. We find that the fine distinction between the said two defaults contemplated in Sec. 271(1)(c), viz. „concealment of income‟ and „furnishing of inaccurate particulars of income‟ had been appreciated at length by the Hon‟ble Supreme Court in its judgments passed in the case of Dilip & Shroff Vs. Jt. CIT (2007) 210 CTR (SC) 228 and T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC), wherein the Hon‟ble Apex Court had

P a g e | 22 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. concluded that the two expressions, namely „concealment of particulars of income‟ and „furnishing of inaccurate of particulars of income‟ have different connotation. The Hon‟ble Apex Court being of the view that the non-striking off the irrelevant limb in the notice clearly reveals a non-application of mind by the A.O, had held as under:- “83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he has furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing reliance on the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice [See Malabar Industrial Co. Ltd. Vs. CIT (2000) 2 SCC 718]. We are of the considered view that such non-striking off the irrelevant charge in the notice cannot be characterised as merely a technical default, as the same clearly divesting the assessee of the statutory right of an opportunity of being heard and defend his case, would thus have a material bearing on the validity of the jurisdiction assumed by the A.O for imposing penalty in the hands of the assessee. 13. We have given a thoughtful consideration to the issue before us, and are of the considered view that a similar proposition had came up before the Hon‟ble High Court of Karnataka in the case of CIT Vs. SSA‟s Emerald Meadows (73 taxmann.com 241)(Kar), wherein the Hon‟ble High Court following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the

P a g e | 23 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. penalty proceedings had been initiated, i.e whether for „concealment of particulars of income‟ or „furnishing of inaccurate particulars‟, the same had to be held as bad in law. The „Special Leave Petition‟ ( for short „SLP‟) filed by the revenue against the aforesaid order of the Hon‟ble Karnataka High Court had been dismissed by the Hon‟ble Supreme Court in CIT Vs. SSA‟s Emerald Meadows (2016) 73 taxmann.com 248 (SC). We further find that a similar view had been taken by the Hon‟ble High Court of Bombay in the case of CIT Vs. Samson Perinchery (ITA No. 1154 of 2014; Dt. 05.01.2017)(Bom). 14. We find that as averred by the ld. A.R., the issue involved in the present case is squarely covered by the order of a coordinate bench of the Tribunal, i.e ITAT “B” Bench, Mumbai in the case of Meherjee Cassinath Holdings Private Limited Vs. ACIT, Circle -4(2), Mumbai [ITA No. 2555/Mum/2012; dated. 28.04.2017, wherein the Tribunal after deliberating at length on the issue under consideration in the backdrop of various judicial pronouncements had concluded that the non striking off the irrelevant charge in the notice clearly reflects the non application of mind by the A.O and would resultantly render the order passed under Sec. 271(1)(c) in the backdrop of the said serious infirmity as invalid and void ab initio. The Tribunal in its aforesaid order in the case of Meherjee Cassinath Holdimgs Pvt. Ltd.(supra) had observed as under:- “ 8. We h av e c aref ull y c on s id ere d th e r iv al sub mis s io n s. S ec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c)

P a g e | 24 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist, It is also a well accepted proposition that 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon’ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case T. Ashok Pal, 292 ITR 11 (SC). Therefore, if the two expressions namely 'concealment of the particulars of income and furnishing of inaccurate particulars of income' have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee which is based on the manner in which the notice u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 has been issued to the assessee company. A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The af oresaid inf irmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the some postulates that inappropriate words and paragraphs were to be deleted, but the some had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additio nal Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v.

P a g e | 25 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. CIT [2000] 2 SCC 718]" Factually speaking, the aforesaid plea of assessee is borne 9. out of record and having regard to the parity of reasoning laid down by the Hon’ble Supreme Court in the case of 0/lip N. Shroff (supra), the notice in the instant case does suffer from the vice of non-application of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon’ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon’ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. In fact, at the time of hearing, the Id. CIT-DR has not 10. disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s27)4(c) of the Act for furnishing of inaccurate particulars of income in our considered opinion, the attempt of the Id. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the Id. CIT -DR based on the observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by the Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, 953, 1097& 1126 of 2014 dated 5.1.2017 (supra) and the decision of the Tribunal holding levy of penalty in such circumstance being bad, has been approved.

P a g e | 26 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. (supra). Our coordinate Bench, after considering the judgment of the Honble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharnendra Textile Processors, 306 ITR 277 (SC) deduced as under:- “12 A combined reading of the decision rendered by Hon’ble Bombay High Court in the case of Smt. Kaushalya and Others (supra) and the decision rendered by Hon’ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AG at the time of issuing notice. In the case of Lakhdir Laiji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon 'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania lyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AG did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AG, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon’ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya (supra) and observed as under:- “The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified." In the instant case also, we are of the view that the AG has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AG has failed to apply his mind at the time of issuing penalty notice to the assessee."

P a g e | 27 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. 12. The aforesaid discussion clearly brings out as to the reasons why the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) is to prevail. Following the decision of our coordinate Bench in the case of Dr. Santa Milind Davare (supra), we hereby reject the aforesaid argument of the Id. CIT-DR.

P a g e | 28 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. be deleted. We hold so. Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with”. We are of the considered view that as the issue involved in the present case is squarely covered by the aforesaid order of the coordinate bench of the Tribunal in the case of Meherjee Cassinath Pvt. Ltd.(supra), and still further is no more res integra in light of the aforesaid judicial pronouncements, therefore, respectfully follow the same. We thus in the backdrop of illegal assumption of jurisdiction on the part of the A.O as regards penalty imposed on the assessee under Sec. 271(1)(c), without putting it to notice as regards the default for which it was called upon to explain as to why no such penalty was liable to be imposed in its hands, therefore, on the said count itself quash the penalty of Rs.31,37,972/-imposed in the hands of the assessee. 15. We shall now advert to the validity of the penalty imposed by the A.O on merits, which was deleted by the CIT(A). We have deliberated at length on the facts involved in the case before us and find that the A.O acting on the information shared by the DIT (Inv.), Kolkata that the revelations in the course of the Search & seizure proceedings conducted in the case of Mr. Praveen Agarwal, Kolkata, an infamous entry operator, revealed that bogus bills of Rs. 17,63,705/- were issued to the assessee company, had on the said count reopened its case under Sec. 147 of the Act. We find that the assessee in compliance to the notice issued by the A.O under Sec. 148, dated 21.03.2014 had filed its „return of income‟ on 22.04.2014, wherein the entire amount of Rs.93,22,558/- which was paid to Tuticorin Trexim Pvt. Ltd (now known as Makesworth Project Developer Pvt. Ltd.) during the year and claimed as an expense in the „Profit & loss a/c‟ was disallowed and the loss was revised at Rs.1,95,00,840/-. The A.O accepted the aforesaid „return of income‟ filed by the assessee in

P a g e | 29 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. compliance to the notice issued under Sec. 148 (subject to certain modifications which were made while framing the original assessment) and framed the reassessment vide his order passed under Sec. 143(3) r.w.s 147, dated 02.02.2015. We find that the A.O observing that as the person who had issued the bills, viz. Shri Praveen Agarwal had in his statement recorded during the course of Search & seizure proceedings conducted on him by the investigation wing of the Income Tax department, Kolkata, admitted that he had provided accommodation entries to various parties as well as to the assessee company, therefore, concluded that the transactions of the assessee with Tuticorin Trexim Pvt. Ltd. could safely be held to be bogus transactions which were backed by accommodation entries. We find that the A.O in the backdrop of the aforesaid facts held a conviction that as the assessee had inflated its expenses with the intent to suppress its profit, therefore, penalty under Sec. 271(1)(c) was clearly attracted in respect of the expenses of Rs.93,22,558/-, despite the fact that the same were disallowed by assessee in its return of income filed in compliance to notice issued under Sec. 148. The A.O was of the view that the assessee had came forth with the disallowance of the expenses of Rs.93,22,558/- in respect of its transactions with Tuticorin Trexim Pvt. Ltd, only for the reason that the falsity of the said expenses had surfaced and had came to the notice of the department. We are unable to persuade ourselves to be in agreement with the aforesaid observations of the A.O in the backdrop of the facts involved in the case of the assessee. We find that though the information which was shared by the Investigation wing, Kolkata was stated to be in respect of accommodation entries in respect of bogus commission expenses of Rs.17,63,705/-, but however, the assessee had in its return of income filed under Sec. 148 added back the entire transactions of Rs.93,22,558/- pertaining to the courier, printing,

P a g e | 30 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. data entry services etc. rendered by the aforesaid company, viz. Tuticorin Trexim Pvt. Ltd to the assessee. We are of the considered view that undoubtedly the very basis for reopening the case of the assessee was the information shared by the Investigation wing, Kolkata with the A.O that the assessee was a beneficiary of the accommodation entries received from Mr. Praveen Agarwal, but however, cannot remain oblivious of the fact that though the said information on the very face of it would justifiably form a basis for reopening the case, however, the said stand alone information could not be characterised as a concrete evidence to dislodge the genuineness and veracity of the transactions, as claimed by the assessee. We find that the assessee had throughout been canvassing that the disallowance of expenses of Rs.93,22,558/- was made by it only with the purpose of avoiding protracted litigation on the matter, specifically in the backdrop of the fact that it had been suffering substantial losses on year to year basis and had clearly rebutted the unsubstantiated allegation of the revenue as regards the falsity of its claim. We further find substantial force in the contention of the assessee that the fact that it had during the year under consideration an assessed business loss of Rs.5.67 crores, in itself rules out any reason on its part to have booked bogus expenses as alleged by the revenue. We have perused the facts available on record and find that though the revenue acting on the statement of Mr. Praveen Agarwal had inferred that the assessee was merely a beneficiary of the accommodation entries provided by Tuticorin Trexim Pvt. Ltd and had not carried out any genuine transactions with it, but however, it had failed to substantiate its allegation by placing on record any irrefutable and clinching evidence on the basis of which the veracity of the claim of the assessee could be safely dislodged. We further find that the multiple contentions raised by the assessee in rebuttal of the

P a g e | 31 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. allegation raised by the revenue as regards the genuineness of its claim, viz. (i) that as Mr. Praveen Agarwal was not a director of the aforesaid company, i.e. Tuticorin Trexim Pvt. Ltd, therefore, his unsubstantiated statement on the basis of which adverse inferences had been drawn by the revenue in the hands of the assessee had no evidentiary value; (ii) that as the claim of Mr. Praveen Agarwal that Mr. Pramod Sharma was a dummy director in Tuticorin Trexim Pvt. Ltd. was not backed by any documentary evidence, therefore, no cognizance of the same could be taken; (iii) that no evidence was placed on record by the revenue which could prove that as alleged by Mr. Praveen Agarwal, the amount paid by the assessee company to Tuticorin Trexim Pvt. Ltd. was refunded to the assessee; (iv) that in clear contradiction of the claim of Mr. Praveen Agarwal that in the garb of accommodation entries payments were shown to have been made to Tuticorin Trexim Pvt. Ltd. by way of commission by the entry seekers, the payments made in the case of the assessee were not in respect of any such commission, but rather, in respect of courier, printing, data entry services etc. rendered by the aforesaid company; (v) that the amount of Rs.93,22,558/- which was paid by the assessee to Tuticorin Trexim Pvt. Ltd. was voluntarily disallowed by the assessee with the intent to avoid protracted litigation on the matter, specifically keeping in view the substantial losses which it had suffered on year to year basis, and not on being confronted with any material by the revenue which disproved the genuineness of the expenses; and (vi) that in the very backdrop of the fact that not only the assessee had a substantial business loss of Rs.5.67 crores during the year under consideration, but rather, had huge accumulated losses of the last many years, therefore, there was no reason or need on its part to have debited bogus expense as alleged by the revenue, had however not been addressed and dislodged by the revenue on the

P a g e | 32 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. basis of any concrete material, which could prove to the hilt that the explanation tendered by the assessee was not tenable. We thus are of the firm conviction that though the information received by the revenue from the Investigation wing, Kolkata would have justifiably formed a basis for reopening the case of the assessee, but however, as the revenue had failed to discharge its burden of proving that the assessee had furnished inaccurate particulars of its income or had concealed its income, and rather as a matter of fact had rested its conclusion on the unsubstantiated statement of a third party, viz. Sh. Parveen Agarwal and the fact that the assessee had voluntarily disallowed the expenses in its „return of income‟ filed in compliance to notice under Sec.148, which we find as claimed by the assessee was done with the intent to avoid protracted litigation on the matter, therefore, no penalty on the said count could have been levied in its hands. We may herein observe that the judgment of the Hon‟ble Supreme Court in the case of MAK Data P. Ltd. Vs. CIT (2013) 358 ITR 593 (SC) relied upon by the A.O while imposing penalty under Sec. 271(1)(c) in the hands of the assessee is distinguishable on facts. We find that in the case before the Hon‟ble Apex Court certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of income-tax returns and blank share transfer deeds duly signed were impounded during the course of the survey operation conducted on 16.12.2003 in the case of its „sister concern‟. The assessee only during the course of the assessment proceedings in its case, on being confronted with the aforesaid documents pertaining to the share applications found in the course of survey proceedings, particularly, blank transfer deeds duly signed, had as per its reply filed on 22.11.2006 came up with a disclosure of Rs. 40.74 lakhs with a view to avoid litigation, buy peace and to make an amicable settlement of

P a g e | 33 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. the dispute. That it was in the backdrop of the aforesaid facts that the Hon‟ble Supreme Court deliberating on the facts involved in the said case observed, viz. (i). the Explanation to section 271(1) raises a presumption of concealment, when a difference is noted by the Assessing Officer between reported and assessed income; (ii). that as the surrender of income was made by the assessee in view of the detection made by the A.O in the search conducted on the sister concern, therefore, the same could not be held as voluntary; (iii). that the assessee had came forth with a disclosure only after being confronted and called upon to put forth its explanation in respect of documents, viz. share application forms, bank statements, memorandum of association of companies, affidavits, copies of income-tax returns, assessment orders and blank share transfer deeds duly signed, as were impounded in the course of survey proceedings conducted under Sec. 133A on 16.12.2003 in the case of its „sister concern‟; and (iv).that as the survey was conducted more than 10 months before the assessee filed its return of income‟, therefore, had it been the intention of the assessee to make a full and true disclosure of its income, it would have filed the return of income declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. We have deliberated on the facts of the case and are of the considered view that unlike the facts involved in the aforesaid case, in the case of the assessee before us the assessee had voluntarily in the return of income filed in compliance to notice received under Sec. 148 disallowed the payments made to M/s Tuticorin Trexim P. Ltd. We have deliberated on the facts and are of the considered view that though it remains as a matter of fact that the case of the assessee was reopened on the basis of the information received by the A.O from the DIT(Inv.), Kolkata that the Search & seizure proceedings conducted on

P a g e | 34 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. Sh. Praveen Agarwal stated to have revealed that the assessee had taken accommodation entries in respect of commission expenses, but however, as observed by us hereinabove, it remains as a matter of fact that till date no concrete material had been placed on record by the A.O which could go to prove to the hilt that the assessee on the basis of the accommodation entries had booked bogus expenses. Rather, we find that the disallowance of expenses by the assessee was clearly explained by it to have been made with the purpose of avoiding protracted litigation, keeping in view the substantial losses which it had suffered during the year under consideration, as well as the preceding years. Be that as it may, we are of the considered view that unlike the facts as were involved in the case before the Hon‟ble Apex Court, as in the case of the assessee before us the revenue till date had not only failed to place on record any material which would irrefutably evidence that the assessee had booked bogus expenses, but rather, as a matter of fact, except for placing reliance on the unsubstantiated statement of Mr. Praveen Agarwal, which as observed by us hereinabove is itself not free from doubts, or taking cognizance of the fact that the assessee in its return of income filed in compliance to notice under Sec. 148 had disallowed the expenses, had clearly failed to dislodge the genuineness and veracity of the expenses, as claimed by the assessee . We further find that as the assessee in the case before us had disallowed the payments of Rs.93,22,558/- made to M/s Tuticorin Trexim Pvt Ltd. in its return of income filed in compliance to notice issued under Sec. 148, which was accepted as such, therefore, unlike the facts involved in the case before the Hon‟ble Apex Court, in the case before us there remained no difference between the reported and the assessed income, thus, on the said count also the facts of the present case are found to be distinguishable as against those involved in the case of MAK Data (supra). We thus are

P a g e | 35 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. of the considered view that as observed by us hereinabove, the facts involved in the case before us are distinguishable as against those in the case of MAK Data (supra), which however had been lost sight of by the A.O while placing reliance on the same. We rather find that our aforesaid view stands fortified by the judgment of the Hon‟ble Supreme Court in the case of CIT Vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC), wherein the Hon‟ble Apex Court upholding the order of the Hon‟ble High Court of Madhya Pradesh had concluded that where an assessee after being subjected to Search and seizure action under Sec. 132 had offered additional income in its „return of income‟ filed in compliance to the notice issued under Sec. 148, in order to buy peace of mind and avoid litigation, penalty under Sec. 271(1)(c) merely on account of such voluntary surrender made by the assessee in good faith could not have been imposed. We further are of the view that though it remains as a matter of fact that the disallowance of the expenses made by the assessee in its return of income filed in compliance to notice issued under Sec. 148 was subsequent to the information received by the department from Investigation wing, Kolkata that the assessee was a beneficiary of the accommodation entries provided by Mr. Praveen Agarwal, but as observed by us hereinabove, the said allegation had not fructified into a concrete evidence which could prove to the hilt that the assessee had deflated its income by booking bogus expenses. We though at this stage may observe that there could be every probability that the disallowance of the expenses by the assessee in its „return of income‟ filed in compliance to notice under Sec. 148 could have been prompted by the fact that the information as had emerged in the course of the Search and seizure proceedings conducted on Mr. Praveen Agarwal was forwarded by the Investigation wing, Kolkata to the A.O, but however, are afraid that for imposing penalty under Sec. 271(1)(c), which as per

P a g e | 36 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. the settled position of law is nothing short of quasi criminal proceedings, a very heavy onus is cast upon the revenue to conclusively prove that the assessee had concealed its income or furnished inaccurate particulars. We may herein observe that as the genuineness and veracity of the expenses claimed by the assessee in respect of the payments of Rs.93,22,558/-made to Tuticorin Trexim Pvt. Ltd. had not been disproved by the revenue, therefore, simply on the basis of the unsubstantiated statement of Mr. Praveen Agarwal, which as observed by us hereinabove had not seen the light of the day and fructified into a concrete evidence on the basis of which the claim of the assessee as regards the veracity of the aforesaid expenses could safely be dislodged, no penalty under Sec. 271(1)(c) could have been validly imposed in the hands of the assessee. We find that our aforesaid observations are fortified by the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Upendra V. Mithani (ITA (L) No. 1860 of 2009), dated 05.08.2009, wherein the Hon‟ble High Court being of the view that unless the claim of the assessee is disproved, no penalty under Sec. 271(1)(c) could be imposed, had held as under: “The issue involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I.T. Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee’s case is false. The view taken by the Tribunal is a reasonable and possible view. The appeal is without any substance. The same is dismissed in limine with no order as to costs.” We thus being of the considered view that as the contention of the assessee that its claim of expenses of Rs. 93,22,558/- was in respect

P a g e | 37 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. of genuine transactions with M/s Tuticorin Trexim Pvt. Ltd and had been disallowed only with the intent to avoid protracted litigation on the said issue, had not been disproved by the revenue on the basis of any concrete material made available on record, therefore, no penalty under Sec. 271(1)(c) on the said count also could not have been imposed in the hands of the assessee. Before parting, we may also observe that we are persuaded with the view taken by the CIT(A) that as the assessee had already disallowed the expenses of Rs. 93,22,558/- in the return of income filed in compliance to notice issued under Sec. 148 of the Act, which was accepted by the A.O, as such, therefore, in the absence of any addition or disallowance made in respect of the same by the A.O while framing the reassessment, no penalty under Sec. 271(1)(c) could have validly been made in the hands of the assessee. 16. We thus in the backdrop of our aforesaid observations are of the considered view that the A.O had erred both in law and facts of the case in imposing penalty under Sec. 271(1)(c) in the hands of the assessee. We thus in terms of our aforesaid observations and finding no infirmity in the order of the CIT(A), uphold the quashing of the penalty of Rs. 31,37,972/- imposed by the A.O under Sec. 271(1)(c) in the hands of the assessee. The Grounds of appeal No. 1 & 2 are dismissed in terms of our aforesaid observations. The Ground of appeal No. 3 being general is dismissed as not pressed. The appeal filed by the revenue is dismissed. ITA No. 7248/Mum/2016 AY: 2008-09 17. We shall now advert to the appeal of the revenue for A.Y 2008- 09. The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal:

P a g e | 38 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd.

“1. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) was right in deleting the penalty of Rs. 65,80,394/- levied u/s. 271(1)(c) of the I.T. Act, 1961 without appreciating the facts that had made the disallowance only after the receipt of notice u/s. 148 and had the notice not been issued, the assessee would not have disclosed/ revised its return of income. 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

P a g e | 39 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. aforesaid amount of Rs.1,94,56,957/- which was earlier claimed by the assessee as an expenditure in its „books of account‟.

P a g e | 40 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. of the revenue for A.Y 2007-08, viz. ITA No. 7249/Mum/2016 shall apply mutatis mutandis to the present appeal of the revenue for A.Y. 2008-09 in ITA No. 7248/Mum/2016. The Grounds of appeal Nos. 1 to 3 are dismissed in terms of our observations recorded while disposing off the Grounds of appeal No. 1 to 3 in the appeal of the revenue for A.Y 2007-08.

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of Rs. 34,63,963/- levied u/s. 271(1)(c) of the I.T. Act, 1961 without appreciating the facts that had made the disallowance only after the receipt of notice u/s. 148 and had the notice not been issued, the assessee would not have disclosed/ revised its return of income. 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

P a g e | 41 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. the DIT(Inv.),Kolkata that the assessee had taken accommodation entries from M/s Tuticorin Trexim Pvt. Ltd. for Rs. 1,01,91,127/-, the case of the assessee was reopened by the A.O under Sec. 147 of the Act. The assessee in the return of income filed in compliance to notice issued under Sec. 148, voluntarily disallowed the payment of Rs. 1,01,91,127/- made to Tuticorin Trexim Pvt. Ltd. and revised the loss to Rs. 77,98,64,104/-. The A.O in the backdrop of the fact that the assessee had already disallowed the entire amount paid to Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd) in the „return of income‟ filed under Sec. 148 of the Act, therefore, accepted the same and did not make any further disallowance in its hands. The A.O while culminating the reassessment proceedings initiated penalty proceedings under Sec. 271(1)(c) of the Act for „furnishing of inaccurate particulars of income‟ by the assessee in respect of the aforesaid amount of Rs. 1,01,91,127/- which was earlier claimed by the assessee as an expenditure in its „books of account‟.

P a g e | 42 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. 271(1)(c) in respect of the aforesaid amount of Rs. 1,01,91,127/-, therefore, imposed a penalty of Rs.34,63,963/-.

P a g e | 43 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd.

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of Rs.17,16,048/- levied u/s. 271(1)(c) of the I.T. Act, 1961 without appreciating the facts that had made the disallowance only after the receipt of notice u/s. 148 and had the notice not been issued, the assessee would not have disclosed/ revised its return of income. 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 32. Briefly stated, the facts of the case are that the assessee had filed its return of income for A.Y. 2010-11 on 29.09.2010, declaring loss of Rs. 109,29,46,273/-. Thereafter the assessee filed a revised return of income on 22.09.2011, declaring current year loss of Rs. 112,02,24,986/-. The assessment in the case of the assessee was framed under Sec. 143(3), vide order dated 28.03.2013 and the total loss under the normal provisions was determined at Rs. 112,03,24,986/- and the „book loss‟ under Sec. 115JB at Rs. 80,62,45,754/-. That on the basis of information received from the DIT(Inv.), Kolkata that the assessee had taken accommodation entries from M/s Tuticorin Trexim Pvt. Ltd. for Rs. 55,53,555/-, the case of the assessee was reopened by the A.O under Sec. 147 of the Act. The assessee in the return of income filed in compliance to notice issued under Sec. 148, voluntarily disallowed the payment of Rs. 55,53,555/- made to Tuticorin Trexim Pvt. Ltd. and revised the loss to Rs. 111,47,71,430/- under the normal provisions and „book loss‟ under Sec. 115JB at Rs. 80,62,45,754/-. The A.O in the backdrop of the fact that the assessee had already disallowed the entire amount paid to Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd) in the „return of income‟ filed under Sec. 148 of the Act, therefore, accepted the same and did not make any further disallowance in its hands. The A.O while culminating the

P a g e | 44 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. reassessment proceedings initiated penalty under Sec. 271(1)(c) of the Act for „furnishing of inaccurate particulars of income‟ by the assessee in respect of the aforesaid amount of Rs.55,53,555/- that was earlier claimed by the assessee as an expenditure in its „books of account‟.

P a g e | 45 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. against those which were involved in its appeal for A.Y 2007-08, viz. ITA No. 7249/Mum/2016 that had been adjudicated by us hereinabove, therefore, our order passed while disposing off the appeal of the revenue for A.Y 2007-08, viz. ITA No. 7249/Mum/2016 shall apply mutatis mutandis to the present appeal of the revenue for A.Y. 2010-11 in ITA No. 7246/Mum/2016. The Grounds of appeal Nos. 1 to 3 are dismissed in terms of our observations recorded while disposing off the Grounds of appeal No. 1 to 3 in the appeal of the revenue for A.Y 2007-08.

“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the penalty of Rs. 20,34,034/- levied u/s. 271(1)(c) of the I.T. Act, 1961 without appreciating the facts that had made the disallowance only after the receipt of notice u/s. 148 and had the notice not been issued, the assessee would not have disclosed/ revised its return of income. 2. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 3. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.” 38. Briefly stated, the facts of the case are that the assessee had filed its return of income for A.Y. 2011-12 on 23.09.2011, declaring loss of Rs. 295,84,96,047/-. Thereafter the assessee filed a revised return of income on 22.09.2012, declaring current year loss of Rs. 297,97,65,379/-. The assessee again revised the return of income on 23.03.2013 at a loss of Rs. 289,82,41,809/- under the normal

P a g e | 46 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. provisions and „book loss‟ under Sec. 115JB at Rs. 296,59,10,016/-. The assessment in the case of the assessee was framed under Sec. 143(3), vide order dated 28.03.2013 and the total loss under the normal provisions was determined at Rs. 289,82,41,809/- and the „book loss‟ under Sec. 115JB at Rs. 296,59,10,016/-. That on the basis of information received from the DIT(Inv.), Kolkata, that the assessee had taken accommodation entries from M/s Tuticorin Trexim Pvt. Ltd. for Rs. 60,13,406/-, the case of the assessee was reopened by the A.O under Sec. 147 of the Act. The assessee in the return of income filed in compliance to notice issued under Sec. 148, voluntarily disallowed the payment of Rs. 60,13,406/- made to Tuticorin Trexim Pvt. Ltd. and revised the loss to Rs. 289,22,28,400/- under the normal provisions and „book loss‟ under Sec. 115JB at Rs. 296,59,10,017/-. The A.O in the backdrop of the fact that the assessee had already disallowed the entire amount paid to Tuticorin Trexim Pvt. Ltd. (now known as Makesworth Project Developers Pvt. Ltd) in the „return of income‟ filed under Sec. 148 of the Act, therefore, accepted the same and did not make any further disallowance in its hands. The A.O while culminating the reassessment proceedings initiated penalty proceedings under Sec. 271(1)(c) of the Act for „furnishing of inaccurate particulars of income‟ by the assessee in respect of the aforesaid amount of Rs.60,13,406/- which was earlier claimed by the assessee as an expenditure in its „books of account‟.

P a g e | 47 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. 41. The A.O after the culmination of the assessment proceedings issued a „Show Cause‟ notice (for short „SCN‟) under Sec. 274 r.w. Sec. 271(1)(c) of the Act, dated 02.02.2015 calling upon the assessee to explain as to why penalty may not be imposed on it under Sec. 271(1)(c). The explanation furnished by the assessee did not find favour with the A.O, who being of the view that as the assessee had furnished inaccurate particulars of its income as envisaged in Sec. 271(1)(c) in respect of the aforesaid amount of Rs. 60,13,406/-, therefore, imposed a penalty of Rs.20,34,034/-.

P a g e | 48 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd. 44. The appeal of the revenue is dismissed in terms of our aforesaid observations.

Order pronounced in the open court on 16/03/2018.

Sd/- Sd/- (Rajendra) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER भुंफई Mumbai; ददनांक 16.03.2018 Ps. Rohit Kumar आदेश की प्रनिलऱपि अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. 3. आमकय आमुक्त(अऩीर) / The CIT(A)- 4. आमकय आमुक्त / CIT ववबागीम प्रतततनधध, आमकय अऩीरीम अधधकयण, भुंफई / 5. DR, ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रतत //True Copy// आदेशधिुसधर/ BY ORDER, उि/सहधयक िंजीकधर (Dy./Asstt. Registrar) आयकर अिीऱीय अधर्करण, भुंफई / ITAT, Mumbai

P a g e | 49 ITA Nos. 7245 to 7249/Mum/2016- A.Y. 2007-08 to 2011-12 DCIT Vs. M/s Reliance General Insurance Company Ltd.