DHAVAL D SHAH, MUMBAI V. DCIT CEN CIR 2(3), MUMBAI

CO 8/MUM/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3807 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 12-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Opportunity of being heard; Principle of natural justice; Period of limitation; Deemed dividend; Time period of passing order
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1337 /MUM/2016 ASSESSMENT YEAR: 2009 - 10 DY. COMMISSIONER OF INCOME, CENTRAL CIRCLE2(3), OLD CGO BUILDING, 8 TH FLOOR, M.K. ROAD, MUMBAI - 400020. VS. SHRI DHAVAL D. SHAH SMAG HOUSE, 1 ST FLOOR, SAR OJINI ROAD EXT., VILE PARLE (W) MUMBAI - 400010 PAN NO. AAHPS2691E APPELLANT RESPONDENT C.O. NO. 08/MUM/2018 ASSESSMENT YEAR: 2009 - 10 SHRI DHAVAL D. SHAH SMAG HOUSE, 1 ST FLOOR, SAROJINI ROAD EXT., VILE PARLE (W) MUMBAI - 400010 VS. DY. COMMISSIONER OF INCOME, CENTRAL CIRCLE2(3), OLD CGO BUILDING, 8 TH FLOOR, M.K. ROAD, MUMBAI - 400020. PAN NO. AAHPS2691E APPELLANT RESPONDENT REVENUE BY : MR. RAM TIWARI, DR ASSESSEE BY : MR. M.P. LOHIA , AR DATE OF HEARING : 01/05 /2018 DATE OF PRONOUNCEMENT : 16/05/2018 ORDER PER N.K. PRADHAN, AM THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 2 (APPEALS) - 37 , MUMBAI [ IN SHORT CIT(A)] AND ARISE OUT OF THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER (AO) U/S 271(1)(C) OF THE INCOME TAX ACT 1961, (THE ACT). 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN TAW, THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT, ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BEING DEEMED DIVIDEND U/S.2(22)(E) OF RS1,17,50,000/ - WHICH WAS NOT OFFERED TO TAX IN THE RETURN OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELE TING THE PENALTY LEVIED U/S.271(1)(C) OF THE ACT, WITHOUT CONSIDERING THE DECISION OF THE HON'BLE ITAT, MUMBAI IN THE CASE OF SMT. SHANTIDEVI MAHAVIR PRASAD GUPTA [(2014)43 TAXMANN.COM 325], WHEREIN LEVY OF PENALTY ON SIMILAR ADDITION WAS UPHELD. 3. ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED U/S.27 1 (1)(C) OF THE ACT, ON ACCOUNT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME BY CLAIMING INTEREST EXPENSES OF RS.18,65,165/ - , WHICH WERE NOT L AID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING SUCH INCOME U/S 57(III) OF I.T. ACT. 4. ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE AND IN LAW THE LD . CIT(A) ERRED IN DELETING THE PENALTY LEV IED U/S 271(1)(C) OF THE ACT, WITHOUT CONSI DERING THE DECISION OF HON'BLE I TAT, MUMBAI IN THE CASE OF J. M. BAXI & CO. [ (2014) 44 TAXMANN.COM 140] , WHEREIN LEVY OF PENALTY ON DISA LLOWANCE OF EXPENSES WAS UPHELD. 3. THE CROSS OBJECTION FILED BY THE ASSESSEE IS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE AO HAS: SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 3 1. ERRED IN OBJECTING THE ORDER OF CIT(A), WITHOUT APPRECIATING THE FACTS OF THE CASE, ON PARTLY DELETION OF PENALTY LEVIED BY AO ON VARIOUS ADDITIONS/DISALLOWANCES MADE UNDER ASSESSMENT; 2. ERRED I N PASSING DRAFT PENALTY ORDER UNDER SECTION 27L(L)(C) OF THE ACT, WHEREAS THERE IS NO PROVISION UNDER THE INCOME TAX ACT, I96L FOR PASSING DRAFT PENALTY ORDER THEREBY ENTIRE PENALTY ORDER IS BAD IN LAW AND LIABLE TO BE QUASHED; 3. ERRED IN LEVYING PENALTY, WI THOUT APPRECIATING THAT THE PENALTY ORDER PASSED UNDER SECTION 27L(L)(C) OF THE ACT IS BAD IN LAW DUE TO NON - APPLICATION OF MIND WHICH IS EVIDENT FROM THE NOTICE U/S 274 READ WITH SECTION 271 OF THE ACT WHEREIN THE LIMB WHICH IS NOT APPLICABLE IN THE PRESE NT CASE F OR LEVY OF PENALTY WAS NOT STRUCK - OFF . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME LAX (A) - 48, [CIT(A)] HAS: - WITHOUT PREJUDICE TO ABOVE GROUND, ERRED IN PARTIALLY UPHOLDING THE PENALTY ORDER ON ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE OF RS.91,947/ - . 4. BEFORE US, AT THE BEGINNING, THE ARGUMENTS OF THE LD. DR AND THE LD. COUNSEL OF THE ASSESSEE CENTRED AROUND THE VALIDITY OF PENALTY PROCEEDINGS. THE ISSUE RELATES TO THE 3 RD GROUND RAISED BY THE ASSESSEE IN THE ABOVE CROSS OBJECTION. 5 . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (AY) 2009 - 10 ON 14.10.2009 D ECLARING TOTAL INCOME OF RS.21,90,770/ - . THE AO COMPLETED THE ASSESSMENT U/S 143(3) ON 28.12.2011 BY MAKING THE FOLLOWING ADDITION/DISALLOWANCES: SR. NO. NAME OF THE ADDITION/DISALLOWANCES AMOUNT OF ADDITION SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 4 (RS.) 1. DISALLOWANCE OF INTEREST 91,947 2. DISALLOWANCE OF INTEREST U/S 57 18,65,165 3. DEEMED DIVIDEND 1,17,50,000 TOTAL ADDITION 1,37,07,112 IN THE ABOVE ASSESSMENT ORDER COMPLETED U/S 143(3), THE AO INITIATED THE PENALTY U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. THEREAFTER, THE AO PASSED A PENALTY ORDER U/S 271(1)(C) DATED 24.03.2014 IMPOSING A PEN ALTY OF RS.46,59,047/ - AS TAX SOUGHT TO BE EVADED ON THE ABOVE AMOUNT OF RS.1,39,07,112/ - . WHILE ARRIVING AT THE ABOVE CONCLUSION, THE AO HELD THAT THE ASSESSEE IS LIABLE TO PENALTY U/S 271(1)(C) FOR CONCEALMENT OF INCOME. 6 . AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) CONFIRMED THE PENALTY LEVIED U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF INTEREST EXPENSES AMOUNTING TO RS.91,947/ - BY OBSERVING THAT CLAIMING THE DEDUCTION OF INTEREST WITHOUT SHOWIN G HOW IT WAS INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING INCOME WHICH WAS OFFERED UNDER THE HEAD OTHER SOURCES, THE APPELLANT HAS CONCEALED THE PARTICULARS OF INCOME. HOWEVER, THE LD. CIT(A) DELETED THE PENALTY LEVIED BY THE AO ON DISALLOWANCE OF INTE REST OF RS.18,65,165/ - ON THE GROUND THAT THE SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 5 APPELLANT HAD MADE A BONA FIDE CLAIM OF DEDUCTION OF INTEREST EXPENDITURE ON PLACING RELIANCE ON LAW, WHICH CANNOT BE CONSIDERED AS DISHONEST, MALA FIDE CLAIM RESULTING INTO CONCEALMENT OR INACCURATE PARTICULA RS OF INCOME. ALSO THE LD. CIT(A) DELETED THE PENALTY LEVIED BY THE AO ON ADDITION OF DEEMED DIVIDEND OF RS.1,17,50,000/ - ON THE GROUND THAT THE ISSUE OF APPLICABILITY OF SECTION 2(22)(E) IS A LEGAL PROPOSITION AND INVOLVES DEBATEABLE ISSUES, IN WHICH CASE THE LEVY OF PENALTY IS NOT JUSTIFIED. 7. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITS THAT IN THE INSTANT CASE THE NOTICE ISSUED BY THE AO U/S 271(1)(C) R.W.S. 274 DOES NOT SPECIFY THE LIMB OF SECTION 271(1)(C) FOR WHICH PENALTY PROCEEDINGS W ERE INITIATED I.E. WHETHER FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. RELYING ON THE DECISIONS CONTAINED IN THE PAPER BOOK (P/B) FILED BEFORE US , THE LD. COUNSEL SUBMITS THAT IN VIEW OF THE DECISION IN CIT V. SSAS EMERALD MEADOWS 73 TAXMANN.COM 241 (KAR), CIT V. SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 248 (SC) AND CIT V. SAMSON PERINCHERY (ITA NO. 1154/2014) DATED 05.01.2017 (BOM), THE ISSUE OF SUCH NOTICE IS BAD IN LAW. 8. ON THE OTHER HAND, THE LD. DR RELIES ON THE DECISION IN CIT V. SMT. KAUSHALYA & ORS . (1995) 216 ITR 660 (BOM) ; M/S MAHARAJ GARAGE & CO. V. CIT (INCOME TAX REFERENCE NO. 21 OF 2008) O RDER DATED 22.08.2017 OF THE HONBLE BOMBAY HIGH COURT ; SKY LIGHT HOSPITAL ITY LLP V. ACIT SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 6 [W.P.(C) 10870/2017 AND C.M. NO. 44503/2017] DATED 02.02.2018 OF HONBLE DELHI HIGH COURT ; THE ORDER OF THE ITAT E BENCH, MUMBAI DATED 05.02.2014 IN SMT. SHANTIDEVI MAHAVIR PRASAD GUPTA V. ITO (ITA NO. 7733/MUM/2010) AND THE ORDER OF THE ITAT A BENCH, MUMBAI DATED 28.09.2017 IN MS. LAUDRES AUSTIN V. ITO (ITA NO. 1683/MUM/2009) 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. WE BEGIN WITH THE DECISIONS RELIED ON BY THE LD. DR. IN THE CASE OF SMT. KAUSHALYA & ORS . (SUPRA), THE HONBLE BOMBAY HIGH COURT HELD: 9. WE WILL FIRST TAKE UP THE SHOW - CAUSE NOTICE DATED MARCH 29, 1972, PERTAINING TO THE ASSESSMENT YEARS 1968 - 69 AND 19 69 - 70. THE ASSESSMENT ORDERS WERE ALREADY MADE AND THE REASONS FOR ISSUING THE NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(C) WERE RECORDED BY THE INCOME - TAX OFFICER. THE ASSESSEE FULLY KNEW IN DETAIL THE EXACT CHARGE OF THE DEPARTMENT AGAINST HIM. I N THIS BACKGROUND, IT COULD NOT BE SAID THAT EITHER THERE WAS NON - APPLICATION OF MIND BY THE INCOME - TAX OFFICER OR THE SO - CALLED AMBIGUOUS WORDING IN THE NOTICE IMPAIRED OR PREJUDICED THE RIGHT OF THE ASSESSEE TO REASONABLE OPPORTUNITY OF BEING HEARD. AFTE R ALL, SECTION 274 OR ANY OTHER PROVISION IN THE ACT OR THE RULES, DOES NOT EITHER MANDATE THE GIVING OF NOTICE OR ITS ISSUANCE IN A PARTICULAR FORM. PENALTY PROCEEDINGS ARE QUASI - CRIMINAL IN NATURE. SECTION 274 CONTAINS THE PRINCIPLE OF NATURAL JUSTICE OF THE ASSESSEE BEING HEARD BEFORE LEVYING PENALTY. RULES OF NATURAL JUSTICE CANNOT BE IMPRISONED IN ANY STRAIGHT - JACKET FORMULA. FOR SUSTAINING A COMPLAINT OF FAILURE OF THE PRINCIPLES OF NATURAL JUSTICE ON THE GROUND OF ABSENCE OF OPPORTUNITY, IT HAS TO BE ESTABLISHED THAT PREJUDICE IS CAUSED TO THE CONCERNED PERSON BY THE PROCEDURE FOLLOWED. THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 7 DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON - STRIKING OF THE INACCURATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. THE ENTIRE FACTUAL BACKGROUND WOULD FALL FOR CONSIDERATION IN THE MATTER AND NO ONE ASPECT WOULD BE DECISIVE. IN THIS CONT EXT, USEFUL REFERENCE MAY BE MADE TO THE FOLLOWING OBSERVATION IN THE CASE OF CIT V. MITHILA MOTOR'S (P.) LTD. [1984] 149 ITR 751 (PATNA) (HEAD NOTE): UNDER SECTION 274 OF THE INCOME - TAX ACT, 1961, ALL THAT IS REQUIRED IS THAT THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY TO SHOW CAUSE. NO STATUTORY NOTICE HAS BEEN PRESCRIBED IN THIS BEHALF. HENCE, IT IS SUFFICIENT IF THE ASSESSEE WAS AWARE OF THE CHARGES HE HAD TO MEET AND WAS GIVEN AN OPPORTUNITY OF BEING HEARD. A MISTAKE IN THE NOTICE WOULD NOT INVAL IDATE PENALTY PROCEEDINGS. IN M/S MAHARAJ GARAGE & CO. (SUPRA) , THE HONBLE BOMBAY HIGH COURT AT PARA 15 HELD: THE REQUIREMENT OF SECTION 274 OF THE INCOME TAX ACT FOR GRANTING REASONABLE OPPORTUNITY OF BEING HEARD IN THE MATTER CANNOT BE STRETCHED TO T HE EXTENT OF FRAMING A SPECIFIC CHARGE OF ASKING THE ASSESSEE AN EXPLANATION IN RESPECT OF THE QUANTUM OF PENALTY PROPOSED TO BE IMPOSED, AS HAS BEEN URGED. THE ASSESSEE WAS SUPPLIED WITH THE FINDINGS RECORDED IN THE ORDER OF RE - ASSESSMENT, WHICH WAS PASSE D ON THE SAME DATE ON WHICH THE NOTICE U/S 271(1)(C) WAS ISSUED, INITIATING THE PROCEEDINGS OF IMPOSING THE PENALTY. THE ASSESSEE HAD SUFFICIENT NOTICE OF THE ACTION OF IMPOSING PENALTY. WE, THEREFORE, DO NOT FIND EITHER ANY JURISDICTION ERROR OR UNJUST EX ERCISE OF POWER BY THE AUTHORITY. IN SKY LIGHT HOSPITALITY LLP (SUPRA), THE ASSESSEE (SKY LIGHT HOSPITALITY LLP) WHO HAD TAKEN OVER ON 13.05.2016 AND ACQUIRED RIGHTS SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 8 AND LIABILITIES OF M/S SKY LIGHT HOSPITALITY PVT. LTD. UPON CONVERSION UNDER THE LIMITED LIABILITY PARTNERSHIP ACT, 2008, FILED A WRIT PETITION IMPUGNING NOTICE DATED 30.03.2017 ISSUED BY THE AO U/S 147/148 FOR THE AY 2010 - 11. THE CONTENTION OF THE ASSESSEE BEFORE THE HONBLE HIGH COURT WAS THAT NOTICE U/S 147/148 OF THE ACT DATED 30.03.2017 WAS ADDRESSED AND ISSUED TO M/S SKY LIGHT HOSPITALITY PVT. LTD., PAN NO. AALCS3800N, A COMPANY WHICH HAD CEASED TO EXIST AND WAS DISSOLVED ON 13.05.2016. IT WAS STATED THAT THE SAID NOTICE ISSUED TO A DEAD JURISTIC PERSON IS INVALID AND VOID IN THE EYES OF LAW. ALSO CONTENTIONS WERE RAISED STATING THAT SECTION 292B WAS INAPPLICABLE. THE HONBLE DELHI HIGH COURT HELD AS UNDER: 21. OUR ATTENTION WAS DRAWN TO PARASHURAM POTTERY WORKS CO. LTD. V. ITO, CIRCLE I, WARD A, RAJKOT, (1977) 106 ITR 1 (SC) WHICH RECORDS THAT THE ASSESSING OFFICER ENTRUSTED WITH THE TASK OF CALCULATING AND REALIZING T AX SHOULD FAMILIARIZE THEMSELVES WITH THE RELEVANT PROVISIONS AND BECOME WELL VERSED WITH THE LAW ON THE SUBJECT. THIS IS A SALUTARY ADVICE . INDEED, THERE HAVE BEEN LAPSES AND FAULTS RESULTING IN THE PRESENT LITIGATION. NOTICE UNDER SECTION 147/148 OF THE ACT WAS ISSUED AT THE END OF THE LIMITATION PERIOD. NOTICEABLY, ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2013 - 2014 WAS PASSED ON 31.03.20I6 , ONE YEAR EARLIER. SECOND LAPSE IS ALSO APPARENT. DESPITE CORRECTLY NOTING THE BACKGROUND, NOTICE UNDER SECTION 147/148 OF THE ACT WAS NOT ADDRESSED IN THE CORRECT NAME AND EVEN THE PAN NUMBER MENTIONED WAS INCORRECT. NEVERTHELESS, HUMAN ERRORS AND MISTAK ES CANNOT AND SHOULD NOT NULLIFY PROCEEDINGS WHICH ARE OTHERWISE VALID AND NO PREJUDICE HAD BEEN CAUSED. THIS IS THE EFFECT AND MANDATE OF SECTION 292B OF THE ACT. IN SMT. SHANTIDEVI MAHAVIR PRASAD GUPTA (SUPRA), THE TRIBUNAL HELD AS UNDER: SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 9 10. THE QUE STION BEFORE US IS NOT WHETHER THE INCOME IS OF THE NATURE OF NOTIONAL INCOME BUT THE QUESTION IS WHETHER THE ASSESSEE HAS FILED INACCURATE PARTICULARS OR CONCEALED THE TRUE FACTS. AS STATED HEREINABOVE, IN OUR HUMBLE OPINION, THE ASSESSEE HAS CONCEALED THE TRUE FACTS THEREBY FILED INACCURATE PARTICULARS. THEREFORE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). THE PENALTY U/S. 271(1)(C) IS LEVIABLE ON THE FACTS OF THE CASE. THE RELIANCE ON THE DECISION OF THE TRIBUNAL IS CLEARL Y DISTINGUISHABLE ON THE FACTS. WE, ACCORDINGLY CONFIRM THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. IN MS. LAUDRES AUSTIN (SUPRA), THE TRIBUNAL HELD THE FOLLOWING : IN THE INSTANT CASE ALSO WE HOLD THAT PENALTY PROCEEDINGS WERE INITIATED PROPERLY AS THERE IS NO DEFECT IN THE RECORDING OF SATISFACTION BY THE AO AS WELL THERE IS NO DEFECT IN THE NOTICE ISSUED U/S 271 R.W.S. 274 OF THE 1961 ACT. THE DECISION OF HONBLE BOMBAY HIGH COURT IN SAMSON PERINCHERRY (SUPRA) IS CONCERNING THE ISSUANCE OF PENALTY PROCEEDINGS UNDER ONE LIMB WHILE LEVYING OF PENALTY UNDER ANOTHER LIMB OF SECTION 271(1)(C) WHICH IS NO PERMISSIBLE AS PER RATIO OF THIS DECISION. THE HONBLE SUPREME COURT IN SSAS EMERALD MEADOWS (SUPRA) WHILE DISMISSING SLP RECORDED FINDING THAT THE HO NBLE LORDSHIPS DID NOT FIND ANY MERIT IN THIS PETITION WHICH MEANS RATIO OF DECISION OF HONBLE KARNATAKA HIGH COURT IN SSAS EMERALD MEADOWS IN ITA NO. 380 OF 2015 STOOD CONFIRMED. THE HONBLE KARNATAKA HIGH COURT IN SSAS EMERALD MEADOWS HAS AFFIRMED TH E RATIO OF JUDGMENT OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA). WE HAVE ALREADY SEEN THAT HONBLE KARNATAKA HIGH COURT IN MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS AFFIRMED THAT ALTERNATE CHARGE IS POSSIBLE UNDER BOTH THE LIMBS SIMULTANEOUSLY . 9.1 IN THE INSTANT CASE, THE AO VIDE HIS ORDER U/S 143(3) DATED 28.12.2011 HAS INITIATED THE PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. IN SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 10 THE DRAFT PENALTY ORDER U/S 271(1)(C) DATED 24.0 3.2014 , THE AO HAS IMPOSED PENALTY OF RS.46,59,047/ - FOR CONCEALMENT OF INCOME. ALSO WE FIND THAT THERE IS NO PROVISION IN THE INCOME TAX ACT, 1961 FOR A DRAFT PENALTY ORDER U/S 271(1)(C) OF THE ACT. 9.2 IT WOULD BE APPOSITE TO REFER HERE TO THE DECISION IN DILIP N. SHROFF V. JCIT (2007) 210 CTR (SC) 228, WHEREIN IT HAS BEEN HELD : 83. IT IS OF SOME SIGNIFICANCE THAT IN THE STANDARD PROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE THE F ACT 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 HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL 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 - APPL ICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. [SEE MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME TAX, KERALA STATE, (2000) 2 SCC 718] IN CIT VS. SAMSON PERINCHERRY (ITA NO. 953, 1097, 1154 & 1226 OF 2014), THE HONBLE BOMBAY HIGH COURT HELD: THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROC EEDINGS WILL NOT WARRANT/PERMIT PENALTY BEING IMPOSED FOR THE ORDER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED/NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE SHRI DHAVAL D. SHAH ITA NO. 1337/MUM/2016 & CO NO. 08/MUM/2018 11 GROUND OF WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED, AND IT CANNOT BE ON A FRESH GROUND OF WHICH THE ASSESSEE HAS NO NOTICE. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN DILIP N. SHROFF (SUPRA) AND SAMSON PERINCHERRY (SU PRA), WE HOLD THAT THE PENALTY PROCEEDINGS INITIATED BY THE AO IS BAD IN LAW. WE MAY HEREIN OBSERVE THAT SINCE THE ORDER OF THE AO HAS BEEN HELD AS BAD IN LAW ON THE PRELIMINARY GROUND, THE OTHER GROUNDS RAISED BY THE REVENUE ON MERITS BEFORE US HAVING BEE N RENDERED AS ACADEMIC, ARE THUS NOT BEING DEALT WITH. ACCORDINGLY, WE DISMISS THE APPEAL FILED BY THE REVENUE AND ALLOW THE CROSS OBJECTION RAISED BY THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 16/05/2018. SD/ - SD/ - ( MAHAVIR SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 16/05/2018 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI