Income Tax Appeal No. 239 of 2003 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 239 of 2003 Date of decision: 23.11.2010 The Commissioner of Income-Tax Bathinda --- Appellant Versus M/s. Jindal and Co. Kotkapura --- Respondent CORAM: HON’BLE MR. JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Ms. Savita Saxsena,. Standing Counsel for the appellant-Revenue. Mr. R.L. Gupta, Advocate for the respondent. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act, 1961 (for short “the Act”) has been filed by the Revenue against the order dated 17.6.2003, passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, (in short “the Tribunal”) in ITA No. 816/ASR/1996, relating to the assessment year 1988-89. The following substantial questions of law have been claimed for determination by this Court: Income Tax Appeal No. 239 of 2003 2 i) Whether on the facts and in the circumstances of the case the Hon’ble ITAT is justified in law in confirming the decision of learned CIT(A), Bathinda, deleting the penalty of Rs. 66,480/- levied under Section 271(1)(c) of the Income Tax Act, 1961? ii) Whether on the facts and in the circumstances of the case the Hon’ble ITAT is justified in law in confirming the learned CIT(A)’s action in not providing the Department an opportunity under rule 46A of the Income Tax Rules to confront the assessee on the fresh plea taken and evaluate the evidence produced in support thereof? iii) Whether on the facts and in the circumstances of the case the Hon’ble ITAT is justified in law in not appreciating that the assessee had already taken benefit of telescoping the additions of Rs. 32,750/- and Rs. 20,000/-, with the addition of Rs. 1,00,000/-, thus, any change of stand tantamounts to an infringement of the principle of estoppel? iv) Whether on the facts and in the circumstances of the case the Hon’ble ITAT is justified in law in allowing relief by observing that penalty proceedings are distinct and different than assessment proceedings even when the assessee had adduced no additional evidence and made no fresh plea before the assessing officer during penalty proceedings? The facts, in brief, necessary for adjudication and as narrated in the appeal, are that the respondent-assessee filed its return for the assessment year 1988-1989 on 28.8.1988 declaring income at Rs.49,560/-. Later on, it was noticed by the Income Tax Officer that the Income Tax Appeal No. 239 of 2003 3 assessee had not accounted for certain bank drafts on the dates, the same were purchased. In particular, it was found that draft No. 646906 for a sum of Rs. 1,00,000/- dated 17.3.1988 was entered in the books of account on 18.3.1988. Confronted with this situation, the assessee in order to save itself from penal action, filed its revised return on 29.11.1991 declaring the income at Rs. 1,49,560/- by surrendering the aforesaid amount of Rs. 1,00,000/-.. The case of the assessee was selected for scrutiny and the assessing officer completed assessment under Sections 185(4)/143(3) of the Act, at an income of Rs. 2,33,600/-, vide order dated 3.8.1992 as against the returned income of Rs. 49,560/- filed initially, and Rs. 1,49,560/- shown in the revised return. The assessing officer while doing so, made additions of Rs. 59,750/- and Rs.3,574/- on account of squared up accounts and unaccounted money, besides Rs. 20,000/- agreed to by the assessee. Separate proceedings under Section 271(1)(c) for levy of penalty were also ordered to be initiated against the assessee. The Commissioner of Income Tax (Appeals), [hereinafter referred to as “CIT(A)”], in the appeal carried by the assessee, allowed relief of Rs. 22,750/- by sustaining the addition of Rs. 30,574/-, vide order dated 15.3.1993. The CIT(A), while granting the relief observed that there was no basis for making addition of Rs. 59,750/- on account of squared up accounts introduced from 17.8.1987 to 19.12.1987 and the purchase of drafts of heavy amounts was subsequent to the above period and the peak of investment would work out to Rs. 1,30,584/- as mentioned by the assessing officer himself. The assessee then filed appeal before the Tribunal. The Tribunal vide its order dated 16.7.1999, upheld the addition of Rs. Income Tax Appeal No. 239 of 2003 4 30,574/- sustained by CIT(A) but granted relief to the assessee by holding that the assessee was entitled for telescoping the benefit with the trading account addition of Rs. 20,000/-, with the addition sustained on account of cash credit. In the penalty proceedings initiated separately in terms of the assessment order dated 3.8.1992, the Assessing Officer imposed penalty of Rs. 66,480/- under Section 271(1)(c) vide order dated 10.9.1993. On appeal by the assessee, CIT(A) vide order dated 30.8.1996, deleted the penalty which order was upheld by the Tribunal while dismissing the appeal of the revenue vide order dated 17.6.2003. Hence, this appeal by the revenue. We have heard learned counsel for the parties and have perused the record. The point for determination in this appeal is, whether the penalty under Section 271(1)(c) of the Act deleted by the CIT(A) and upheld by the Tribunal was justified? The CIT(A) while deleting the penalty had recorded as under:- “I have carefully considered the submissions made by the ld. Counsel of the appellant. The ld. Counsel has also filed a copy of cash book indicating that the appellant was having cash balance of Rs.74902/- on 15.3.1988 which the appellant was able to utilize for the purpose of purchasing the draft of Rs.103574/-. The contention of the ld. Counsel carries substantial weight and in my view since the appellant was having cash balance of Rs.74902/- in hand it was definitely Income Tax Appeal No. 239 of 2003 5 utilized by the appellant for purchase of draft of Rs.103574/- on 15.3.1988. The ld. Counsel has also submitted that the amount of draft of Rs.103574/- was duly debited in the books of a/c on 16.3.1988 when the appellant was having sufficient cash balance. Therefore, keeping in view the facts of the case, in my view, the AO should have allowed the credit of Rs.74902/- for the purpose of considering the liability of penalty u/s 271(1)(c). It is also seen from the assessment order that an amount of Rs.20000/- has been added in the total income of the appellant with the following observations:- “Addition agreed by the assessee as per order sheet entry dated 6.3.1992 in trading account.” Thus, the amount of Rs.20000/- was also available with the appellant for utilization for purchase of draft of Rs.103574/- on 15.3.1988. Hence the total amount available with the appellant was Rs.94902/-. Thus the contention of the ld. Counsel that the appellant was having only deficit of Rs.8672/- is correct and justified which is very negligible. It is also seen that the AO has wrongly taken into a/c a sum of Rs.27,000/- for the purpose of levying the penalty since no addition was made by the AO for this amount. The contention of the ld. Counsel that since the ld. CIT(A) has ordered the addition of Rs.27,000/- penalty proceedings should have been initiated at his end also carries substantial weight. Therefore, keeping in view the penalty imposed by the AO under Section 271(1)(c) at Income Tax Appeal No. 239 of 2003 6 Rs.66480/- is considered to be not correct and justified. Hence, the penalty order of the AO is cancelled”. The aforesaid order was upheld by the Tribunal on 17.6.2003 with the following observations:- “We have heard both the parties at length and have also gone through the material available on the record. In the instant case, the AO initiated penalty proceedings in respect of the addition of Rs. 1,30,574 which comprised of Rs. 1,03,574/- on account of addition for the purchase of draft and Rs. 27,000/- on account of squared up credits. It is true that the A.O. made the addition of Rs. 59,750/- on account of cash credit which the learned CIT(A) had deleted vide his order dated 15.3.1993. However. he made another addition of Rs. 27,000/- in respect of three cash credits in the name of S/Sh. Babu Ram, Jai Gopal and Shimla Rani, amounting to Rs. 9,000/- each. It is also noticed that the learned CIT(A) had not initiated the penalty proceedings in respect of the addition of Rs. 27,000/-. Therefore, the A.O. was not justified in considering this amount of Rs. 27,000/- for the purpose of levying penalty under Section 271(1)(c) of the I.T. Act. As regards the amount of Rs. 74,902/- available with the assessee on 15.3.1988 for the purpose of purchase of draft amounting to Rs. 1,03,574/-, it is noticed that such plea was not taken by the assessee during the assessment proceedings. However, it is well settled that the assessment proceedings are different and distinct from the penalty proceedings and the plea which has not been taken during Income Tax Appeal No. 239 of 2003 7 the assessment proceedings can be taken during the penalty proceedings. It is also not in dispute that the powers of the CIT(A) are co-terminus with that of the A.O. and the learned CIT(A) can take into account the facts which the AO ought to have considered. In the instant case, the learned CIT(A) after proper verification of the cash book of the assessee found that the cash balance of Rs. 74,902/- was available with the assessee on 15.3.1988. Therefore, the learned CIT(A) was justified in holding that the A.O. should have allowed the credit of Rs. 74,902/- for the purchase of draft of Rs. 1,03,574/- while levying the penalty under Section 271(1)(c) of the I.T. Act. Similarly, the assessee agreed to surrender a sum of Rs. 20,000/- during the assessment proceedings on account of trading addition and that surrender was made by the assessee suo-moto before any detection by the department. That surrender of Rs. 20,000/- can also not be considered as concealed income of the assessee. We, therefore, considering the facts of the present case as narrated hereinabove hold that the learned CIT(A) rightly deleted the penalty amounting to Rs. 66,480/- imposed by the A.O. under Section 271(1)(c) of the I.T Act.” The appellate authorities on appreciation of material on record had come to the conclusion that the amount of Rs. 74,902/- was available as cash in hand on 15.3.1988 for preparation of draft and further Rs. 20,000/- was surrendered on agreed basis in the trading account before its detection by the Department. It was also observed Income Tax Appeal No. 239 of 2003 8 that the benefit of the aforesaid amount was available to the assessee. Further, the Tribunal had recorded that no penalty was ordered to be initiated by CIT(A) with respect to addition of Rs. 27,000/- which was made by him on account of three unexplained cash credits. In the light of the aforesaid findings recorded by the appellate authorities, it was concluded that levy of penalty by the assessing officer amounting to Rs. 66,480/- was not justified. Learned counsel for the appellant remained unsuccessful in his attempt to point out any illegality or perversity in the findings recorded by the appellate authorities. His only effort was to persuade this Court for re-appreciation of the evidence which is not permissible under Section 260A of the Act. Accordingly, there is no merit in the appeal and the same is dismissed. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL) November 23, 2010 JUDGE *rkmalik*