M/s Rytara SAhakari Sakkare Karkhane Niyamitha , Bagalkot V. The Income TAx Officer Ward-2 , Bagalkot

CO 17/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8778 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C H SU NDAR RAO CIT BENGALURU
• Assessee Lawyers: VANI H
• Keywords: Depreciation; Principle of natural justice; Initiation of penalty proceedings; Condonation of delay
• Section: 271(1)(c); 92B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI JASON P. BOAZ , ACCOUNTANT MEMBER I TA NO. 1277 / BANG / 2018 ASSESSMENT YEAR : 201 0 - 1 1 THE INCOME TAX OFFICER, WARD 2, BAGALKOT. VS. M/S. RYTARA SAHAKARI SAKKARE KARKHANE NIYAMITA, RANNANAGAR, TIMMAPUR. TQ. MUDHOL. DIST. BAGALKOT. PAN: AAAAR 0428E APP EL L ANT RESPONDENT CO NO.17/BANG/2019 [IN I TA NO. 1 2 77 / BANG / 201 8 ] ASSESSMENT YEAR : 20 1 0 - 11 M/S. RYTARA SAHAKARI SAKKARE KARKHANE NIYAMITA, RANNANAGAR, TIMMAPUR. TQ. MUDHOL. DIST. BAGALKOT. PAN: AAAAR 0428E VS. THE INCOME TAX OFFICER, WARD 2, BAGALKOT. CROSS OBJECTOR RESPONDENT R EVENUE BY : SHRI C.H. SU NDAR RAO, CIT( DR)(ITAT ), BENGALURU. A SSESSEE BY : SMT . VANI H., ADVOCATE DATE OF HEARING : 27.0 2 . 201 9 DATE OF PRONOUNCEMENT : 03. 0 4 . 201 9 ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 2 OF 12 O R D E R PER N V VASUDEVAN, VICE PRESIDENT THE APPEAL IS BY THE REVENUE AGAINST THE ORDER D ATED 14.02.2018 OF CIT(APPEALS), BELAGAVI, RELATING TO ASSESSMENT YEAR 2010-11. THE ASSESSEE HAS FILED C.O.NO.17/BANG/2019 AGAINST THE VERY SAME ORDER OF CIT(A). 2. IN THE APPEAL BY THE REVENUE, THE REVENUE HAS CH ALLENGED THE ORDER OF THE CIT(A) WHEREBY THE CIT(A) CANCELLED THE ORDE R OF THE AO IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE INCOM E TAX ACT, 1961 (ACT). IN THE CROSS OBJECTION THE ASSESSEE HAS SUBMITTED T HAT THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT HAS TO BE QUAS HED ON THE GROUND THAT THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT, BE FORE IMPOSING PENALTY DOES NOT SPECIFY THE EXACT CHARGE AGAINST THE ASSES SEE AND THEREFORE EVEN ON THIS BASIS THE PENALTY IMPOSED U/S.271(1)(C) OF THE ACT CANNOT BE SUSTAINED. 3. THERE IS A DELAY OF ABOUT 150 DAYS IN FILING THE CO BY THE ASSESSEE. THE NOTICE IN REVENUES APPEAL WAS SERVED ON THE AS SESSEE ON 14.8.2018. THE CO WAS NOT FILED WITHIN THE TIME WITHIN WHICH I T OUGHT TO HAVE BEEN FILED FOR THE REASON THAT THE MANAGING DIRECTOR OF THE AS SESSEE, WHICH IS A STATE GOVERNMENT UNDERTAKING, WAS TRANSFERRED IN DECEMBER , 2018 AND NO NEW MANAGING DIRECTOR WAS APPOINTED BY THE STATE GOVERN MENT. THE FILING OF CO HAD THEREFORE TO BE APPROVED BY THE BOARD. IT T OOK TIME TO TAKE SUCH APPROVAL AND HENCE THE DELAY IN FILING CO. AN AFFI DAVIT BY SHRI S.K.KULKARNI, ACCOUNTS OFFICER OF THE ASSESSEE HAS BEEN FILED IN SUPPORT OF THE PETITION FOR CONDONATION OF DELAY IN FILING CO. ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 3 OF 12 4. THOUGH THE LEARNED OPPOSED THE PRAYER FOR CONDON ATION OF DELAY IN FILING CO, WE ARE OF THE VIEW THAT IN THE LIGHT OF THE REASONS ADDUCED FOR THE DELAY IN FILING CO, THE SAME DESERVES TO BE CONDONE D. THE ASSESSEE IS NOT GUILTY OF GROSS NEGLIGENCE OR LATCHES. HENCE T HE DELAY IN FILING THE CO IS CONDONED. 5. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE AO ARE THAT THE ASSESSEE IS A C O-OPERATIVE SOCIETY ENGAGED IN MANUFACTURE AND SALE OF SUGAR CLAIMED DE PRECIATION OF RS.10,23,53,309/-. THE CORRECT CLAIM OF DEPRECIATI ON PERMISSIBLE WAS ONLY RS.1,44,74,986/-. IN THE COURSE OF ASSESSMENT PROC EEDINGS WHEN THE MISTAKE WAS POINTED OUT, THE ASSESSEE FILED A REVIS ED STATEMENT OF DEPRECIATION. ACCORDINGLY, THE DEPRECIATION CLAIM WAS DISALLOWED TO THE EXTENT OF EXCESS CLAIM MADE IN THE RETURN OF INCOME . BESIDES THE ABOVE THERE WERE CERTAIN DISALLOWANCES OF EXPENSES UNDER SEC.40(A)(IA) OF THE ACT. 6. IN RESPECT OF THE ADDITION MADE AS AFORESAID THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND IMPOSED PE NALTY ON THE ASSESSEE WHICH WAS DELETED BY THE CIT(A). HENCE, APPEAL BY T HE REVENUE BEFORE THE TRIBUNAL. IN THE CROSS OBJECTION THE ASSESSEE HAS SUBMITTED THAT THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT HAVE T O BE QUASHED ON THE GROUND THAT THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT, BEFORE IMPOSING PENALTY DOES NOT SPECIFY THE EXACT CHARGE AGAINST THE ASSESSEE AND THEREFORE EVEN ON THIS BASIS THE PENALTY IMPOSE D U/S.271(1)( C) OF THE ACT CANNOT BE SUSTAINED. 7. BEFORE THE TRIBUNAL THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE NOTICE ISSUED BEFORE IMPOSING PENALTY WAS NOT IN ACCORDANCE WITH LAW AND ON THIS GROUND THE ORDER IMPOSING PENALTY S HOULD BE QUASHED. THE ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 4 OF 12 LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTE NTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT BEFORE IMPOS ING PENALTY AND SUBMITTED THAT THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULA RS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME. HE POINTED OUT THAT THE SHOW CAUSE NOTICE DOES NOT STRIKE OUT THE IRRELEVANT POR TION VIZ., FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PAR TICULARS OF SUCH INCOME. HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 218 TAXMAN 423 (KAR.) WHEREIN IT WAS HELD THAT IF THE SHOW CAUSE NOTICE U/S.274 OF THE ACT DOES NOT SPECIFY AS TO THE EXACT CHARGE VIZ., WHETHER THE CHARGE IS THAT THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME BY S TRIKING OUT THE IRRELEVANT PORTION OF PRINTED SHOW CAUSE NOTICE, THAN THE IMPO SITION OF PENALTY ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE S USTAINED. 8. WE HAVE ALSO PERUSED THE SHOW-CAUSE NOTICE ISSUE D U/S.274 OF THE ACT. THE AO IN THE SAID SHOW CAUSE NOTICE HAS NOT S TRUCK OFF THE IRRELEVANT PORTION AS TO WHETHER THE CHARGE AGAINST THE ASSESS EE IS CONCEALING PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. 9. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A) . HE PLACED RELIANCE ON THE DECISION OF THE HONBLE ITAT BANGAL ORE BENCH IN THE CASE OF SHRI P.M. ABDULLA VS. ITO ITA NO.1223 & 1224/BANG/2 012 ORDER DATED 17.10.2016 TAKING A VIEW THAT ABSENCE OF SPECIFIC MENTION IN T HE SHOW CAUSE NOTICE U/S.274 OF THE ACT ABOUT THE CHARGE U/ S.271(1)(C) OF THE ACT IS NOT FATAL TO LEVY OF PENALTY U/S.271(1)(C) OF THE A CT. IN COMING TO THE AFORESAID CONCLUSION, THE BENCH FOLLOWED DECISION O F HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRI DURGA ENTERPRISES (2014) ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 5 OF 12 TAXMANN.COM 442 (KARNATAKA) . A CO-ORDINATE BENCH IN THE CASE OF SHRI A NAGARJU (ITA NO.2196/BANG/2016 DATED 6/4/2018) , HAS CONSIDERED THE DECISION CITED BY THE LEARNED DR IN THE CASE OF P.M. ABDULLAH (SUPRA) AND HAS HELD THAT THE SAME IS CONTRARY TO THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & SPINNING MILLS LTD., (SUPRA) AND THEREFORE CANNOT BE FOLLOWED. THE DECISION REN DERED IN THE CASE OF SRI DURGA ENTERPRISES (SUPRA) WAS IN A TOTALLY DIFFERENT CONTEXT OF DEFECT IN NOTICE ISSUED U/S.148 OF THE ACT WHEREIN THE ASSESS MENT YEAR WAS NOT MENTIONED AND PERIOD WITHIN WHICH THE RETURN WAS TO BE FILED WAS NOT MENTIONED. THE DEFECT WAS HELD TO BE CURABLE U/S.2 92B OF THE ACT. THE SAME REASONING CANNOT BE APPLIED IN THE CONTEXT OF SHOW CAUSE NOTICE U/S.274 OF THE ACT. FOR THE SAME REASON, THE DECIS ION CITED BY THE LEARNED DR IN THE CASE OF SHRI MAHESH M.GANDHI VS. ACIT ITA NO.2976/MUM/2016 ORDER DATED 27.2.2017 CANNOT ALSO BE FOLLOWED. 10. THE LEARNED DR RELIED ON THE DECISION OF MUMBA I ITAT IN THE CASE OF EARTHMOVING EQUIPMENT SERVICE CORPORATION VS. DCIT 22(2), MUMBAI, (2017) 84 TAXMANN.COM 51 . IN THIS CASE THE ITAT MUMBAI DID NOT FOLLOW THE DECISION RENDERED IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) FOR THE REASON THAT PENALTY IN THAT CASE WAS DELET ED FOR SO MANY REASONS AND NOT SOLELY ON THE BASIS OF DEFECT IN SH OW CAUSE NOTICE U/S.274 OF THE ACT. THIS DECISION IS ALSO CONTRARY TO THE DECISION OF HONBLE KARNATAKA HIGH COURT WHICH IS THE JURISDICTION HIGH COURT AS FAR AS THE BANGALORE BENCHES OF ITAT ARE CONCERNED AND IS THER EFORE NOT BINDING. 11. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STAT E AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PAR TICULARS OF INCOME OR ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 6 OF 12 FOR FURNISHING INACCURATE PARTICULARS OF INCOME. T HE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE A LL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIRE MENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS O N ONE LIMB AND FIND THE ASSESSEE GUILTY ON ANOTHER LIMB OF SEC.271(1)(C) OF THE ACT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLLOWING PRINCIPLES TO BE FOLLOWED IN THE MATTER OF IMPOSING PENALTY U/S.271( 1)(C) OF THE ACT. NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGAR DING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUE D UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDE R WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HA S PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION- 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NA TURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHE R EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTI ON 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THE Y INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AN D SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO N OT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF TH E DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTION ED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INIT IAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE T O BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHE RWISE, ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 7 OF 12 PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SH OW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE O FFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOU LD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO A NSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSES SEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATIO N OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE S AME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME T HE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUEN T TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE A CT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED I N THE COURSE OF ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 8 OF 12 ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOM E UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FUR NISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HEL D THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NO T SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON- APPLICATION OF MIND. 12. THE FINAL CONCLUSION OF THE HONBLE COURT WAS A S FOLLOWS:- 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER:- A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 9 OF 12 E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTH ORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT L EAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD B E DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LE GAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION . G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSM ENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSME NT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIR Y CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH T AX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOU LD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE F AILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 10 OF 12 M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PR OCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFAC TION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APP ELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFIC ALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I .E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURN ISHING OF INCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO P ENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FI NDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT I S INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCOR RECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 11 OF 12 PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PRO CEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) 13. IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE, THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGH T TO BE IMPOSED. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS IN ITA NO.380 OF 2015 DATED 23.11.2015 WHEREIN THE HONBLE KARNATAKA HIGH COURT FOLLOWING ITS OWN DECISION IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 IT R 565 TOOK A VIEW THAT IMPOSING OF PENALTY U/S 271(1)(C) OF THE ACT I S BAD IN LAW AND INVALID FOR THE REASON THAT THE SHOW CAUSE NOTICE U/S 274 OF TH E ACT DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE LD. COUNSEL FURTHER BROUGHT TO OUR NOTICE THAT AS A GAINST THE DECISION OF THE HONBLE KARNATAKA HIGH COURT THE REVENUE PREFERRED AN APPEAL IN SLP IN CC NO.11485 OF 2016 AND THE HONBLE SUPREME COURT BY ITS ORDER DATED 05.08.2016 DISMISSED THE SLP PREFERRED BY THE DEPARTMENT. 14. WE HAVE ALREADY OBSERVED THAT THE SHOW CAUSE NO TICE ISSUED IN THE PRESENT CASE U/S 274 OF THE ACT DOES NOT SPECIFY TH E CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALING PARTICU LARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE SH OW CAUSE NOTICE U/S 274 OF THE ACT DOES NOT STRIKE OUT THE INAPPROPRIATE WO RDS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IMPOSITION O F PENALTY CANNOT BE ITA NO. 2199/BANG/2018 & CO 129/BANG/2018 PAGE 12 OF 12 SUSTAINED. THE PLEA OF THE LD. COUNSEL FOR THE ASSE SSEE, WHICH IS BASED ON THE DECISIONS REFERRED TO IN THE EARLIER PART OF TH IS ORDER, HAS TO BE ACCEPTED. WE THEREFORE HOLD THAT IMPOSITION OF PENA LTY IN THE PRESENT CASES CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. 15. IN THE RESULT, THE APPEAL BY THE REVENUE IS DIS MISSED, WHILE THE CO IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF APRIL, 2019. SD/- SD/- ( JASON P. BOAZ ) ( N.V . VASU DEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 3 RD APRIL, 2019. / D ESAI S MURTHY / COPY TO: 1. THE APP ELLANT 2. T HE R ESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUA R D F ILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.