2012-TIOL-703-ITAT-KOL Sri Raajkumar Jain v ACIT A. Y.: 2004-05. Dated: 07-09-2012

Facts:

There was a search and seizure operation in the case of Sri Gopal Lal Badruka and M/s Ahura Holdings on 26.7.2006, a copy of an agreement for sale deed dated 26.8.2003 was found, according to which the assessee had entered into an agreement for purchase of plot admeasuring 1529 sq. yards @ 11570 per sq. yard from M/s Ahura Holdings. The total sale consideration worked out to Rs. 1,79,65,750. In the registered sale deed the sale consideration was mentioned as Rs. 56,20,000 which worked out @ Rs 4000 per sq. yard. During the assessment proceedings in the case of M/s Ahura Holdings, Sri Gopal Lal Badruka had confirmed that he had received entire consideration of Rs. 1,65,08,750 from the assessee for 1405 sq. yards @ 11750 per sq. yard. As the difference of Rs. 1,08,88,750 between amount admitted to have been received by Sri Gopal Lal Badruka and the amount mentioned in the registered sale deed, represents the assessee’s unaccounted purchase consideration of plot from M/s Ahura Holdings for the AY 2004-05, the AO issued notice u/s. 148. In response thereto, the assessee filed revised return admitting additional income of Rs. 1,08,88,750. The assessment was completed u/s. 143(3) r.w.s. 147 on 28.4.2010. The AO initiated penalty proceedings for concealment of income u/s. 271(1)(c) of the Act.

The AO after considering the submissions made by the assessee dropped the penalty proceedings u/s 271(1)(c) by order sheet noting as follows:

“The assessee filed a detailed explanation in response to the notice u/s. 271(1)(c) of the Act read with section 274. Considering the facts and circumstances of the case and in the light of the explanation filed, the penalty proceedings initiated u/s. 271(1)(c) of the Act are dropped.”

The CIT invoking his jurisdiction u/s. 263 of the Act held that the dropping of penalty proceedings u/s. 271(1)(c) is erroneous and prejudicial to the interest of the revenue. Aggrieved, the assessee preferred an appeal to the Tribunal.

Held:

Even an order sheet entry as to be considered as an order in view of the judgment in the case of H H Rajdadi Smt. Badan Kanwar Medical Trust v CIT (214 ITR 130)(Raj). On merits, the Tribunal noted that the additional income was offered in revised return only on evidence found in search and on the basis of the statement of acceptance of the transaction by Sri Gopal Lal Badruka of M/s Ahura Holdings. The Tribunal noted that the reply given by the assessee was considered by the AO and his conclusion is based on the explanation offered by the assessee and he has taken one possible view. If the CIT is not agreeable with that proposal he cannot say that the order of the AO is erroneous and prejudicial to the interest of the revenue. Levy of penalty is a quasi criminal proceeding. The AO must have enough material to prove that there is concealment of income or furnishing of inaccurate particulars of income. He cannot presume that there is concealment or furnishing of inaccurate particulars. The Gujarat High Court has in the case of CIT v Parmanand M. Patel (278 ITR 3) held that the CIT is not empowered to record satisfaction by invoking section 271(1)(c) of the Act and if he is not entitled to do so, on his own, he cannot do it by directing the assessing authority. The Court observed that in other words, what the CIT himself cannot do, he cannot get it done through the assessing authority by exercising revisional powers. Considering these observations, the Tribunal vacated the direction of the CIT to AO to levy penalty u/s 271(1)(c) of the Act.