Y.C. Sandeep Reddy, Bangalore V. Asst.C.I.T., Bangalore

ITA 1012/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1510 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 30-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K SRIHARI
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 54F

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ITA NO.1012/BANG/2014 ASSESSMENT YEAR : 2008-09 SHRI Y.C. SANDEEP REDDY, NO.1010, 26 TH MAIN, 4 TH T BLOCK, JAYANAGAR, BANGALORE 560 041. PAN: AEQPC 2735J VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 4(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI PADAMCHAND KHINCHA, CA RESPONDENT BY : SHRI P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 22.09.2015 DATE OF PRONOUNCEMENT : 23.09.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 5.5.2014 OF THE CIT(APPEALS)-II, BANGALORE RELATING TO ASSESSME NT YEAR 2008-09. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF CIT(APPEALS) WHEREBY THE CIT(A) CONFIRMED THE ORDER OF ASSESSING OFFICER IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. THE FACTS AND ITA NO.1012/BANG/2014 PAGE 2 OF 10 CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON TH E ASSESSEE BY THE AO ARE AS FOLLOWS. 3. THE ASSESSEE IS AN INDIVIDUAL. HE IS ENGAGED IN THE BUSINESS OF EXECUTING CIVIL ENGINEERING CONTRACTS. THE ASSESSE E CLAIMED EXEMPTION U/S. 54F OF THE ACT IN RESPECT OF CAPITAL GAIN ON S ALE OF A PROPERTY AT BANGALORE. THE SAID CLAIM FOR EXEMPTION WAS FOUND TO BE INCORRECT BY THE AO AND ACCORDINGLY THE SAME WAS NOT ALLOWED. IN RE SPECT OF THE ADDITION MADE BY DENYING THE CLAIM OF DEDUCTION U/S. 54F OF THE ACT, THE AO INITIATED PENALTY PROCEEDINGS AND IMPOSED PENALTY ON THE ASSE SSEE U/S. 271(1)(C) OF THE ACT. 4. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) CONF IRMED THE ORDER OF AO, HENCE THIS APPEAL BY THE ASSESSEE BEFORE THE TR IBUNAL. 5. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO GROUND NO.3 RAISED BY THE ASSESSEE IN THE GROUNDS O F APPEAL, WHICH READS AS FOLLOWS:- 3. THE LEARNED ASSISTANT COMMISSIONER OF INCOME TA X, CIRCLE 4(1), BANGALORE HAS ERRED IN LEVYING PENALTY WITHOUT SPECIFYING IN THE NOTICE UNDER SECTION 271 READ WIT H SECTION 274 WHETHER THE PENALTY IS LEVIABLE FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6. ACCORDING TO THE ASSESSEE, THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT, WHICH IS ISSUED BEFORE LEVYING PENALTY U/.S 27 1(1)(C) OF THE ACT, DOES ITA NO.1012/BANG/2014 PAGE 3 OF 10 NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE SAID SHOW CAUSE NOTICE IS GIVEN AS ANNEXURE-I TO THIS ORDER . THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN) AND SUBMITTED THAT IN THE ABSENCE OF SPECIFYING THE GROUND ON WHICH PENALTY I S SOUGHT TO BE LEVIED IN THE SHOW CAUSE NOTICE, THE ENTIRE PROCEEDINGS IMPOS ING PENALTY HAVE TO BE HELD TO BE INVALID. THE LD. COUNSEL ALSO DREW OUR ATTENTION TO THE FACT THAT THE AFORESAID GROUND OF APPEAL IS A LEGAL GROUND WH ICH GOES TO THE ROOT OF THE JURISDICTION OF THE AO TO IMPOSE PENALTY AND TH EREFORE SHOULD BE ADMITTED AS AN ADDITIONAL GROUND. OUR ATTENTION WA S DRAWN TO THE ITAT BANGALORE BENCH DECISION IN THE CASE OF E. KRISHNAPPA V. ITO, ITA NOS.313 TO 315/BANG/2014, ORDER DATED 14.8.2015, WHEREIN THIS TRIBUNAL ON AN IDENTICAL REQUEST FOR ADMISSION OF ADDITIONAL GROUND, ADMITTED THE SAME OBSERVING AS FOLLOWS:- 4.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD ON THE ISSUE OF THE ADDITIONAL G ROUNDS RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF THE IMP UGNED PENALTY ORDER LEVYING PENALTY U/S.271(1)(C) OF THE ACT FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 ON THE BASIS OF DEFECTIVE NOTICES ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 RWS 271 OF THE ACT DT.29.12.2011 FOR INITIATING PENALTY PROCEEDINGS U/ S.271(1)(C) OF THE ACT. ON A CAREFUL APPRECIATION THEREOF, WE FIN D THAT THESE GROUNDS ARE PURE QUESTION OF LAW AND DO NOT INVOLVE INVESTIGATION OF ANY FACTS OTHERWISE THAN THOSE ON THE RECORDS OF THE DEPARTMENT. TAKING INTO CONSIDERATION THE MATTER BE FORE US, WE ARE OF THE CONSIDERED VIEW THAT, IN THE INTEREST OF EQUITY AND ITA NO.1012/BANG/2014 PAGE 4 OF 10 JUSTICE, THESE ADDITIONAL GROUNDS RAISED BY THE ASS ESSEE REQUIRE TO BE ADMITTED FOR CONSIDERATION IN THIS APPEAL AS THE Y GO TO THE VERY ROOT OF THE MATTER OF THE VALIDITY OF THE INITIATIO N OF THE PROCEEDINGS THAT RESULTED IN THE LEVY OF PENALTY U/ S.271(1)(C) OF THE ACT IN THE CASE ON HAND FOR ASSESSMENT YEARS 20 07-08 TO 2009-10. 7. THE LD. DR OPPOSED THE PRAYER FOR ADJUDICATION O F GROUND NO.3 RAISED BY THE ASSESSEE ON THE GROUND THAT THE SAME WAS NOT RAISED EITHER BEFORE THE AO OR THE CIT(APPEALS). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE AR E OF THE VIEW THAT THE ISSUE RAISED IN GROUND NO.3 IS PURELY A LEGAL Q UESTION AND DOES NOT INVOLVE INVESTIGATION OF ANY NEW FACT AND CAN BE DE CIDED ON THE BASIS OF FACTS ALREADY ON RECORD. KEEPING IN VIEW THE DECIS ION OF THE TRIBUNAL REFERRED TO ABOVE, WE ARE OF THE VIEW THAT THE ADDI TIONAL GROUND DESERVES TO BE ADMITTED AND THE SAME IS ACCORDINGLY ADMITTED. 9. AS FAR AS MERITS OF GROUND NO.3 RAISED BY THE A SSESSEE IS CONCERNED, 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 O F IMPOSING PENALTY U/S.271(1)(C) OF THE ACT. NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGAR DING THE ITA NO.1012/BANG/2014 PAGE 5 OF 10 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, 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, TH AT 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 ITA NO.1012/BANG/2014 PAGE 6 OF 10 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 AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME 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. ITA NO.1012/BANG/2014 PAGE 7 OF 10 THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS FO LLOWS:- 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. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), A T LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISC ERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONST ITUTE 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 PRO CEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSM ENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PRO VISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND TH E 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 AUTH ORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNL ESS IT IS ITA NO.1012/BANG/2014 PAGE 8 OF 10 DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. 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 OR DER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND AL L FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUIT Y. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, 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 SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I .E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF I NCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENA LTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING 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 ITA NO.1012/BANG/2014 PAGE 9 OF 10 EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT 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 I NCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIE D, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. 10. IN LIGHT OF THE ABOVE DECISION REFERRED TO AB OVE AND IN VIEW OF THE FACT THAT NOTICE U/S. 274 OF THE ACT IN THE PRESENT CASE DOES NOT MAKE ANY REFERENCE AS TO WHETHER THE ASSESSEE HAS CONCEALED OR FURNISHED INACCURATE PARTICULARS OF INCOME, THE ENTIRE PENALT Y PROCEEDINGS ARE HELD TO BE INVALID. PENALTY IMPOSED IS ACCORDINGLY CANCELL ED. 11. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF SEPTEMBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER ENCL: ANNEXURE-I BANGALORE, DATED, THE 23 RD SEPTEMBER, 2015. /D S/ ITA NO.1012/BANG/2014 PAGE 10 OF 10 COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.