DHANRAJ MILLS P. LTD,MUMBAI vs. ACIT (OSD)-II CEN RG-7, MUMBAI

आदेश / O R D E R

Per Joginder Singh (Judicial Member) This bunch of six appeals is by the assessee against the impugned orders of the Ld. First Appellate Authority, Mumbai, challenging imposition/confirmation of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter the Act) (ITA No.3830 & 3833/Mum/2009, & 4116/Mum/2012) and u/s 273 of the Act (ITA No.3831 & 3832/Mum/2009).

2.1. On the other hand, Dr. D. Daniel, ld. Special Counsel for the Department, contended that pursuant to the direction from the Hon'ble jurisdictional High Court, the Tribunal has taken a decision, therefore, there is no question of admission of substantial question of law, for which, our attention was invited to the order of the decision from Hon'ble jurisdictional High Court. It was contended that this appeal has not been admitted and advocates from both sides admitted that the matter may be sent to the 4 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 Tribunal. Reliance was placed upon the decision in order dated 30/09/2007, (2017) 98 CCH 39 (Mumbai High Court) (Para-7), 216 ITR 660 (Bom.). So far as the merits of the cases concerned, the ld. Special Counsel, explained that the assessee himself disclosed the stocks and the units in its books of accounts and later on changed its version by claiming the same as finance charges. It was asserted that it is a case of security scam and no proof of finance transaction was at any stage produced by the assessee. It was claimed that the statement of Shri Champaklal was recorded, wherein; he categorically admitted the fault of the assessee. It was contended that assessee was provided sufficient opportunity, wherein, nothing was produced by the assessee and finally the Tribunal confirmed the addition on the basis of which penalty was imposed/confirmed. The crux of the argument is that the assessee was aware that the particulars of income were concealed and thus bogus claim was made by furnishing inaccurate particulars of income. Our attention was invited to the penalty order, wherein, it has been clearly mentioned that assessee has concealed its income. It was contended that penalty notice is merely a procedure for providing opportunity to explain its case by the assessee.

2.2. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that original assessment was completed u/s 143(1) of 5 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 the Act on a total income of Rs.46,19,390/- on 30/12/1988. The assessment was reopened u/s 147/148 of the Act. In response to notice u/s 148 of the Act, the assessee declared same income as declared in the original return. The ld. Assessing Officer completed the assessment at a total income of Rs.7,56,29,780/- on 28/02/1995 against the returned income of Rs.46,19,390/-. The assessee is a notified person, notified by the Special Court, in connection with security scam. The Assessing Officer made the following additions:-

(a) Rs.6,69,35,305/- u/s 68 of the Act representing funds from unexplained sources

(b) Rs.3,85,248/-, being undisclosed interest income,

(c) Rs.33,96,164/- being interest payable to M/s Champaklal Devidas,

(d) Rs.3,526/-, being depreciation disallowed and (e) Rs.2,000/- u/s 40A(12) of the Act.

2.3. So far as, addition u/s 68 of the Act is concerned, the ld. Assessing Officer, during assessment proceedings, found that the assessee has indulged in huge transaction in securities through its bank accounts maintained in Andhra Bank, Fort Branch, Mumbai. The ld. Assessing Officer

6 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 asked the assessee to furnish the necessary details with respect to these transactions. In spite of repeated opportunities, provided to the assessee, such details could not be furnished. The notices were also remained un- complied. At later stage, it was claimed by the assessee that it never entered into these transactions and the funds were arranged by a broker. As per the Revenue, this explanation also remained unsubstantiated. It was noticed by the Assessing Officer that substantial amount was transacted through this account, which resulted into credit balance of Rs.6,69,35,305/-. The assessee could not explained the source of these credits. The stand of the Revenue is that the assessee generated huge asset and got benefit from the funds, the source of which was never explained, therefore, addition u/s 68 was made.

2.4. So far as, interest payable to M/s Champaklal Devidas is concerned, it was notices by the Assessing Officer that interest of Rs.33,96,164/- was shown as payable on account of loan received from M/s Champaklal Devidas. This interest amount was claimed as interest paid by the assessee to M/s Champaklal Devidas. However, the assessee did not furnish any confirmation to this effect. The statement of Champaklal Devidas was recorded, wherein, he denied that any interest was recoverable from the assessee. Considering the totality of facts, the claimed amount was disallowed and added to the income of the assessee.

7 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 2.5. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the assessee is a notified person, notified by the Special Court in connection with security scam cases. The assessee indulged in huge transactions in securities through its bank account maintained with Andhra Bank, Fort Branch, Mumbai. As observed in the assessment order as well as in the impugned order, the assessee did not furnish the necessary details with regard to the transactions and the notices sent to the concerned parties remained un-complied with. The assessee also could not explain the source of the credits. The assessee got the benefit of the funds, which were out of unexplained sources. Even on quantum addition, the Tribunal sustained the addition. In the absence of any plausible explanation, it is evident that the assessee concealed its income, which arose from the transactions of sale and purchase of securities and specifically, these transactions did not feature in the profit and loss account of the assessee and merely showed in the balance sheet as credit balance in Andhra Bank. The assessee did not discharge its onus to explain the credit balance at any stage.

2.6. Now, we shall deal with the argument of the ld. counsel for the assessee that substantial question of law

8 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 was admitted by the Hon'ble jurisdictional High Court vide order dated 27/08/2009, therefore, it has become debatable, consequently, penalty is not leviable. We note that the Hon'ble jurisdictional High Court vide order dated 27/08/2009 heard the respective parties. In para-2, it has been mentioned as under:-

“At the outset, Ld. Counsel appearing for the assessee makes a statement that assessee does not want to press questions said to be question of law bearing no. (iii) and (vi). The statement made is taken on record.

So far as, remaining questions are concerned, after some debate, both advocates, ultimately, submitted that the matter remitted back to the Tribunal for consideration afresh by setting aside the impugned order to that extent without examining merits or demerits thereof, so far as, questions nos. (i), (ii), (iv) and (v) raised in the present appeal.”

2.7. In the aforesaid background/factual matrix, the Hon'ble High Court set aside the issues (ITA No.1353 of 2009) to the file of the Tribunal with a direction to re- examine and re-adjudicate afresh, the nature and the character of the transaction involved in the appeal with further direction to allow additional evidence, if any, filed by the assessee and thereafter adjudicate the same. In this background, the matter was examined by the Tribunal and was decided against the assessee vide order dated 29/10/2014 (pages 31 to 40 of the paper book). It is noted that the Tribunal has duly noted that the assessee was 9 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 asked to explain the amount of Rs.6,69,35,305/- and also its nature. The Tribunal also considered the case laws relied upon by the assessee along with the argument from both sides. The Tribunal has also discussed section 106 of the Evidence Act and finally, concluded that the assessee could not adduce any evidence in support of its contention with respect to the impugned transactions and even in the year 2014, no confirmation were filed by the assessee at any stage either from Andhra Bank or from the broker M/s Champaklal Devidas and concluded that the assessee miserably failed in discharging its onus cast upon it by virtue of section 68 of the Act r.w.s 106 of the Evidence Act, thus, in view of the overall factual matrix, additions were sustained.

2.8. Before us, the assessee wants shelter on technical grounds. The Hon'ble High Court never admitted the substantial question of law to the extent that the issue has become debatable. As mentioned earlier, rather, the ld. counsel for the assessee made a statement that the assessee does not want to press questions said to be the questions of law and after considering this statement, the matter was remitted back to the Tribunal for fresh consideration. In our humble opinion, in the background of factual matrix, there was no substantial question of law on the basis of which, it can be said that issue has become debatable. Since, the assessee never discharged its onus u/s 68 of the Act r.w.s

10 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 106 of the Evidence Act, therefore, we don’t find any merit in the claim of the assessee. As per the provisions of section 68 of the Act, the assessee is expected to offer an explanation with respect to the nature and source of cash credits to the satisfaction of the Assessing Officer. For ready reference section 68 of the Act is reproduced hereunder:-

“68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.”

2.9. As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden

11 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company vs CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon’ble Apex Court in P. Mohankala (2007)(291 ITR 278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR 807)(SC) and also CIT vs Durga Prasad More (72 ITR 807)(SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) further supports the case of the 12 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 Revenue. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT vs Korlay Trading Company Ltd. 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee (CIT vs R.S. Rathaore) 212 ITR 390 (Raj.). The Hon’ble Guwahati High Court in Nemi Chandra Kothari vs CIT (264 ITR 254)(Gau) held that transaction by cheques may not be always sacrosanct. In the present appeal, the assessee neither fulfilled the conditions enshrined u/s 68 of the Act nor produced necessary evidence for its claim.

2.10. The ratio laid down in ACIT vs Rajeev Tandon 294 ITR (AT) 219 (Del.), which was confirmed by Hon’ble High Court , in 294 ITR 488, supports the case of the Revenue. Identical ratio was laid down in CIT vs Anil Kumar 392 ITR 552 (Del.), wherein it was held that mere identification of the donor and movement of gift through banking channel is not sufficient to prove the genuineness of gift. Keeping in view, the totality of facts, attendant circumstances, human

13 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 probabilities, and in the absence of plausible explanation by the assessee, relevant material, and non-fulfillment of ingredients enshrined in section 68 of the Act, we find that onus cast upon the assessee was never discharged.

2.11. In the aforesaid background, now, we shall deal with section 271(1)(c) of the Act, which is reproduced hereunder for ready reference and analysis:-

“271. (1) If the Assessing Officer or the Commissioner (Appeals) or the 47[Principal Commissioner or] Commissioner in the course of any proceedings under this Act, is satisfied that any person— (a) [* * *] (b) has failed to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub- section (1) of section 142 or sub-section (2) of section 143or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, he may direct that such person shall pay by way of penalty,— (i) [* * *] (ii) in the cases referred to in clause (b), in addition to tax, if any, payable by him, a sum of ten thousand rupees for each such failure ; (iii) in the cases referred to in clause (c) or clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,— (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the 14 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012

Commissioner (Appeals) or the 48[Principal Commissioner or] Commissioner to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed. Explanation 2.—Where the source of any receipt, deposit, outgoing or investment in any assessment year is claimed by any person to be an amount which had been added in computing the income or deducted in computing the loss in the assessment of such person for any earlier assessment year or years but in respect of which no penalty under clause (iii) of this sub-section had been levied, that part of the amount so added or deducted in such earlier assessment year immediately preceding the year in which the receipt, deposit, outgoing or investment appears (such earlier assessment year hereafter in this Explanation referred to as the first preceding year) which is sufficient to cover the amount represented by such receipt, deposit or outgoing or value of such investment (such amount or value hereafter in this Explanation referred to as the utilised amount) shall be treated as the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the first preceding year; and where the amount so added or deducted in the first preceding year is not sufficient to cover the utilised amount, that part of the amount so added or deducted in the year immediately preceding the first preceding year which is sufficient to cover such part of the utilised amount as is not so covered shall be treated to be the income of the assessee, particulars of which had been concealed or inaccurate particulars of which had been furnished for the year immediately preceding the first preceding year and so on, until the entire utilised amount is covered by the amounts so added or deducted in such earlier assessment years. Explanation 3.—Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish undersection 139 in respect of any assessment year commencing on 15 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 or after the 1st day of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause (i) of sub- section (1) of section 142 or section 148 and the Assessing Officer or the Commissioner (Appeals) is satisfied that in respect of such assessment year such person has taxable income, then, such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such assessment year, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice under section 148..”

2.12. If the aforesaid provisions of the Act is analyzed with the facts of the present appeal, we are of the view that before penalty is imposed the entirety of circumstances must reasonably point to the conclusion that the disputed amount represent the income and the assessee has consciously concealed the particulars of income or has deliberately furnished inaccurate particulars as was held by Hon’ble Apex Court in CIT vs Anwar Ali 76 ITR 696. Proceedings can be initiated at any time as was held in Jyoti Prakash Mitter vs UOI 112 ITR 378 (Cal.). In AM Shah and Company vs. CIT 108 taxman 137 (Guj). It was held that concealment/inaccuracy must be considered up to final stage. The Hon’ble jurisdictional High court in the Shereton apparels vs ACIT 256 ITR 20 (Bom.) held that books of account refers to those books which are maintained for income tax purposes. The assessee has maintained its books of accounts in such a manner so that the legitimate taxes, due to the Department, are reduced without the permission of the law meaning thereby with wrong intention

16 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 and such books are not depicting true pictures of its accounts. Our view find support from the decision of the Tribunal dated 13/01/2012 in the case of Shreeji Traders vs DCIT (2012) 21 Taxman.com 541 (Mumbai ITAT). Therein also additional income was filed u/s 153A, pursuant to a search leading to detection of incriminating documents, showing suppress sales/purchases, it was held that assessee would not have disclosed the income which was found during the course of search. The penalty was held to be rightly imposed. It is pertinent to mention here that the aforesaid conclusion was arrived at by the Tribunal even after considering the following cases. i. K.P. Madhusudan vs CIT (2001) 251 ITR 99 (SC)(Para -3) ii. CIT vs Reliance Petro Product Ltd. 322 ITR 158 (SC) (Para-5). iii. Sheraton Appealers vs. ACIT 256 ITR 20 (Bom) (para-6) iv. CIT vs Kanhaiyalal Sarupaia 299 ITR 19 (Raj.)(Para-11) v. ACIT vs Kirit Dahyabhai Patel 121 ITD 159 (Ahd.)(para-12) vi. CIT vs S.D.V. Chandru 266 ITR 175 (mad.)(Para-12) vii. Ajit B. Zota vs ACIT 40 SOT543 (Mum)(para-12) viii. Mahendra Mittal vs. ACIT 132 ITD 80 (Mum) (para-12) ix. CIT vs Shri Sunil V.Sangoi (ITA Nos. 615 to 619/Mum/2010) (para-12) x. ACIT vs Rupesh Bhalidas Patel 309 ITR (AT) 217 (Ahd) (para- 14) xi. CIT vs Avinash Ch. Gupta 40 SOT 85 (Kol.) (Para-14) xii. DCIT vs Omkareshwar R. Kalantri 42 DTR 489 (Pune)

17 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 xiii. Sarla M. Ahuja vs DCIT (ITA No.1301/PN/2007 (para-16)

2.13. If the totality of facts and the judicial pronouncements discussed hereinabove including relied upon by the ld. representatives from both sides are analyzed, we find that the penalty was imposed by the Assessing Officer for concealment of income. The stand of the Assessing Officer was affirmed by the Ld. First Appellate Authority and also by the Tribunal. Thus, the totality of facts clearly indicates that from the beginning itself the assessee tried to conceal its income in such a way so that the legitimate tax, due to the Department, can be reduced with an intention to defraud the Revenue. There is a difference between tax planning and tax avoidance. It is a clear case of concealment of income, therefore, in our humble opinion, even the decision from Hon’ble Apex Court in Reliance Petro Products (322 ITR 158)(SC) cannot come to the rescue of the assessee. It is not a case of bona-fide mistake wherein a benefit of the decision in CIT vs Skyline Auto Products pvt. Ltd. 271 ITR 335 (MP) can be extended to the assessee, rather it is a case of intentional concealment of income. For imposing penalty u/s 271(1)(c) of the Act either there should be concealment of income or furnishing of inaccurate particulars of income. The term “books of account” referred to in sub-clause(1) of Explanation 5 to section 271(1)(c) of the Act means books of account which have been maintained for determining any source of income

18 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 for the purposes of computation of total income and for charging income tax thereon. Meaning thereby, in such books of account the assessee is expected to provide credible data and information with the purpose of filing tax return. A credible accounting record provides the best foundation for filing return of both direct and indirect taxes. This is not possible unless the main objectives of the books of accounts are to maintain a record of business, to calculate profit earned or loss suffered during the relevant period, to depict the financial position of the business, to portray the liquidity position, to provide up-to-date information of assets and liabilities with a view to derive information so as to prepare profit and loss account and draw a balance sheet to determine income and source thereof. It cannot be understood to mean to compilation are collection of sheets in one volume, thus books of accounts are those books of account which are maintained for the purposes of income tax Act and not diaries maintained for private record. Power to impose penalty u/s 271(1)(c) of the Act depends upon the satisfaction of the Assessing Officer in the course of the assessment proceedings. Our view finds support from the ratio laid down by the full Bench of Hon’ble Delhi High Court in CIT vs Rampur Engineering Company Ltd. (2009) 309 ITR 143 (Del.)(FB). Even otherwise, the word “income” is read to include losses. It becomes crystal clear that even in a case where on account of addition concealed income is returned loss stand reduced and even if final assessed income is loss

19 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 penalty is leviable because income includes deemed income also. Our view find support from the decision in CIT vs Unipol Chemicals Intermediates Ltd. 211 taxman 45 (SC), CIT vs Gold coin Health Food Pvt. Ltd. 304 ITR 308 (SC) and CIT vs RMP Plasto (P.) Ltd. (2009) 184 taxman 372 (SC). Before penalty can be imposed, the entirety of circumstances must reasonably point to the conclusion that the disputed amount represented income and the assessee has consciously concealed as was held in CIT vs Anwar Ali 76 ITR 696 (SC). In view of these facts and the foregoing discussions, the stand of the ld. Commissioner of Income tax (Appeals) is upheld.

2.14. So far as the contention of the ld. counsel for the assessee that appropriate section was not mentioned or inapplicable language contained in the notice was not deleted is concerned, the Ld. counsel for the assessee argued that in the notice of penalty the Assessing Officer has not specified whether the penalty is proposed on concealment of facts/income or for filing inaccurate particulars of income. The notice of penalty proceeding is illegal. Thus, further action initiated by the Assessing Officer and subsequent order of penalty is invalid. The Ld. counsel of the assessee further relied upon various decisions of the Tribunal like:-

(a) Hafiz Contactor versus ACIT in ITA 6222&23/M/2013 (b) Samson Parincherry versus ACIT in (c) Gangaben P Chaudhary versus ITO in ITA No.696/M/2013

20 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012

(d) Sanghavi Savla Commodity Broker P. Limited versus ACIT in 1746/M/2011 (e) A.R. Chadha Versus ACIT 80 ITD (Delhi)TM (f) JNC international versus ITO in (g) Rahman Krishnamachari sold Vs ACIT(2015) (D1) GJX -1712- TPAN (h) Ramkumar jalan versus ITO (105 Taxman 296) Bom (i) CIT versus Manjunatha Cotton & Ginning Factory 359 ITR 565 2.15. On the other hand, the Ld. Special Counsel, Dr. D. Daniel, argued that the Assessing Officer issued non statutory notice and not striking of the column or making a specific reference in the said notice whether the penalty is initiated or concealment of particular or furnished inaccurate particular are not fatal. The assessee duly participated in the penalty proceeding and was given opportunity by Assessing Officer to substantiate his explanation in the said proceeding. The assessee is now precluded from taking such technical objection in view of section 292BB of the Act, when he himself not objected either before Assessing Officer or before Ld. Commissioner of Income Tax (Appeal). The assessee has never disclosed during the penalty proceeding or at the stage of first appellate proceeding that assessee suffered any prejudice for nondisclosure of specific limb of the section 271(1) (c) of the Act for levy of the penalty. The Learned Special Counsel

21 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 argued that section 274 contains that opportunity of hearing be given to the assessee before claiming the penalty. The language of the section does not speak about the issuance of notice. Opportunity of hearing is always larger than the issuance of notice. The issuance of notice is an administrative device for informing the assessee about the proposal of levy of penalty in order to enable him to explain why it should not be levied against him. If it is taken for the sake of argument that mere mistake in the language in the notice for non-striking off of ‘inaccurate particular’ or marking on ‘concealment of income’ portion cannot by itself invalidate the notice. Entire facts and backgrounds thereof are to be kept in mind. Every concealment of facts may ultimately result in filing of or furnishing inaccurate particular. It was further argued that no statutory notice has been prescribed in this behalf in the income tax Act. The assessee was very well aware about that the charge against the assessee is concealment of income. The Ld. Special Counsel further relied upon the decision of jurisdictional High Court in CIT versus Smt. Kaushalya ( 216 ITR 660)(Bom) , decision of Patna High Court in CIT versus Mithila Motors 149 ITR 751 (Pat) and the judgment of Hon’ble Apex Court in MAK DATA P. Ltd 358 ITR593(SC).

2.16. We have considered the rival contention and gone through the various decisions relied by them. We have also gone through the order of penalty passed by Assessing

22 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 Officer and the order passed by Ld. Commissioner of Income Tax (Appeal). We are conscious that any of the party may raise legal issue at this stage, if the same can be emanated from the record of the case. The Hon’ble jurisdictional High Court in CIT Vs Smt. Kaushalya (supra) while dealing with the similar ground about the limb of charge, whether mere mistake in language used or mere not striking off of inaccurate portion cannot by itself invalidate notice issued under section 274 of the Act. The language of the section does not speak about the issuance of notice. All that is required is that the assessee be given an opportunity of show cause. The issuance of notice is an administrative device for informing the assessee about the proposal of levy of penalty in order to enable him to explain why it should not be levied against him. If it is taken for the sake of argument that mere mistake in the language in the notice for non-striking off of ‘inaccurate particular’ or marking on ‘concealment of income’ portion cannot by itself invalidate the notice. Entire facts and backgrounds thereof are to be kept in mind. Every concealment of fact may ultimately result in filing of or furnishing inaccurate particular. It was further argued that no statutory notice has been prescribed in this behalf in the Income tax Act.

2.17. The Hon’ble Karnataka High Court in CIT Versus Manjunatha Cotton & Ginning Factory (supra) held that notice under section 274 of the act should specifically state

23 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 the grounds mentioned in section 271(1)(c) that is, whether it is for concealment of income or for furnishing of inaccurate particular of income, sending printed form where all the grounds mentioned in the section 271 are mentioned would not specify the requirement of law, the assessee should know the grounds which he has to meet specifically. Otherwise, the Principles of Natural Justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee. Taking up the penalty proceeding on one limb and finding the assessee guilty on another limp is also bad in law. Though the penalty proceeding emanate from proceeding of assessment, they are independent and separate aspect of proceeding. All the other decisions relied by the Ld counsel for the assessee is based on the decision of CIT Vs Manjunatha Cotton & Ginning Factory (supra), wherein the decision of CIT Vs Kaushlya (supra) was not brought in the notice of coordinate bench of Mumbai Tribunal.

2.18. The Hon’ble Karnataka High Court in CIT Versus SSA’S Emerald Meadows in of 2015 order dated 23/11/2015, while dismissing the appeal of Revenue followed the decision of CIT Versus Manjunatha Cotton & Ginning Factory (supra). Against the judgment of Karnataka High Court the Revenue filed Special Leave Petition before the Hon’ble Apex Court and the same was dismissed vide SLP (CC No. 11485/2016) on 05/08/2016. There is no 24 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 dispute to the settled proposition of law that dismissal of the Special Leave Petition in limine by Hon’ble Apex Court does not mean that the reasoning of the judgment of the High Court against which the Special Leave Petition has been filed before this Court stands affirmed or the judgment and order impugned merges with such order of this Court on dismissal of the petition. It simply means that Apex Court did not consider the case for worth examining for the reason, which may be other than merit of the case. Nor such an order of Apex Court operates as res-judicata. An order rejecting the Special Leave Petition at the threshold without detailed reasons therefore does not constitute any declaration of law or a binding precedent. And the similar view was expressed in various judgments, viz, A. The Workmen of Cochin Port Trust Vs The Board of Trustees of the Cochin Port Trust & Anr AIR 1978 SC 1283; B. Ahmedabad Manufacturing & Calico Printing Co Ltd Vs The Workmen & Anr AIR 1981 SC 960; C. Indian Oil Corporation Ltd. Vs. State of Bihar & Ors. AIR 1986 SC 1780; D. Supreme Court Employees’ Welfare Association Vs. Union of India & Ors. AIR 1990 SC 334; E. Yogendra Narayan Chowdhury & Ors Vs. Union of India & Ors AIR 1996 SC 751; F. Union of India & Anr. Vs Sher Singh & Ors, AIR 1997 SC 1796; G. V.M. Salgaocar & Bros. (P) Ltd. Vs. Commissioner of Income Tax AIR 2000 SC 1623;

25 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012

H. Saurashtra Oil Mills Association Gujrat Vs. State of Gujrat & Anr. AIR 2002 SC 1130; I. Union of India & Ors Vs. Jaipal Singh (2004) 1 SCC 121; and J. Y. Satyanarayan Reddy Vs Mandal Revenue Officer, Andhra Pradesh (2009) 9 SCC 447.

2.19. The Hon’ble Apex Court in Kunhayammed & Ors Vs State of Kerala & Anr. AIR 2000 SC 2587, considered the similar issue and some of the earlier judgments and came to the conclusion that dismissal of special leave petition in limine by a non-speaking order may not be a bar for further reconsideration of the case for the reason that the Court might not have been inclined to exercise its discretion under Article 136 of the Constitution of India. The declaration of law will be governed by Article 141 where the matter has been decided on merit by a speaking judgment as in that case doctrine of merger would come into play. This Court laid down the following principles:- “(i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law.

(ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is up to the disposal of prayer for special leave to file an appeal. The second stage

26 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal.

(iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter.

(iv) An order refusing special leave to appeal may be a non- speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed.

(v) If the order refusing leave to appeal is a speaking order, i.e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the Apex Court of the country. But, this does not amount to saying that the 27 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 order of the court, tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res-judicata in subsequent proceedings between the parties.” 2.20. As there is no declaration of law which may be governed by Article 141 of the Constitution of India in the case of CIT Versus SSA’S Emerald Meadows dismissed by Hon’ble Apex Court, vide SLP (CC No. 11485/2016) on 05/08/2016. The judgment of Hon’ble Jurisdictional High Court in CIT Vs Kaushalya (supra) is still having a binding force on us. Thus, with utmost regards to the judgment of Karnataka High Court in CIT Vs Manjunatha Cotton & Ginning Factory (supra) we are bound to follow the judgment of jurisdictional High Court in CIT Vs Kaushalya (supra). Our view also find support from a decision of the Mumbai Bench of the Tribunal in the case of Dhawal K. Jain vs Income Tax Officer (ITA No.996/Mum/2014) order dated 30/09/2016. With these observations, the argument of ld. counsel of the assessee on the legal/technical ground is rejected. Thus, all these four appeals are, therefore, dismissed and the stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed.

28 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 has to be deleted. It was contended that it was a debatable issue and loss has been accepted by the Tribunal and merely quantum addition was confirmed does not mean that income was concealed.

3.1. On the other hand, the ld. Special Counsel for the Department, explained that section has been mentioned at the top of the penalty notice, therefore, the claim of the assessee that no section was mention is factually incorrect. The addition/penalty was rightly claimed to be made by contending that the cases relied upon by the ld. counsel for the assessee are not applicable to the facts.

3.2. On perusal of the notice issued u/s 273 r.w.s 274, (page-35 of the paper book), it was fairly agreed by the ld. counsel for the assessee that section 273(2)(b) of the Act has been mentioned in the aforesaid notice. Since, we have deliberated upon the facts/case laws in detail, while deliberating/adjudicating the appeals of the assessee u/s 271(1)(c) of the Act in earlier paras of this order, therefore, considering the elaborate discussion made therein and the factual matrix available on record, on identical reasoning, we find that the assessee neither paid the advance tax nor filed the estimate of advance tax payable in terms of section 209A of the Act, the assessee failed to fulfill the statutory obligation. The original return was accepted u/s 143(1) of the Act and as a result, effectively, the subsequent

29 Dhanraj Mills Pvt. Ltd. to 3831/Mum/2009 and ITA Nos. 4115 & 4116/Mum/2012 assessment is the only assessment in the case of the assessee. Even bona-fide belief is not borne out of facts. Considering the totality of facts, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal), thus, these appeals are also dismissed.

Finally, the appeals of the assessee are dismissed.

This Order was pronounced in the open court on 21/03/2017.