Satya Prakash Agarwal, Hyd, Hyderabad V. ITO, Ward-8(2), Hyderabad, Hyderabad

ITA 1012/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5850 (ITAT-HYDERABAD)
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 13-07-2016
• Court: TRIBUNAL
• Department Lawyers: K J RAO
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1012/HYD/2016 ASSESSMENT YEAR: 2009-10 SATYA PRAKASH AGARWAL, HYDERABAD [PAN: ACDPA8395H] VS INCOME TAX OFFICER, WARD-8(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR FOR REVENUE : SHRI K.J. RAO, DR DATE OF HEARING : 14-12-2016 DATE OF PRONOUNCEMENT : 30-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-2, HYDERABAD, DATED 25-03-2016. 2. THE APPEAL WAS FILED WITH A DELAY OF TWENTY ONE D AYS AND ASSESSEE HAS FILED AN AFFIDAVIT THAT APPEAL WAS FILED BELATEDLY DUE TO ILL-HEALTH OF ASSESSEE. CONSIDERING THE EXPLANATION O F ASSESSEE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 2 -: 3. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE, AN INDIV IDUAL, IS CARRYING ON CLOTH BUSINESS, FILED HIS RETURN OF INCOM E FOR THE YEAR UNDER CONSIDERATION ON 15-09-2009 DECLARING THEREIN A TOTAL INCOME OF RS. 4,11,230/-. THE AO COMPLETED THE ASSE SSMENT U/S. 143(3) OF THE INCOME TAX ACT [ACT] BY DETERMINING TAXA BLE INCOME OF RS. 16,18,020/- AND ALSO COMPLETED PENALTY PROCEEDI NGS LEVYING PENALTY OF RS. 3,82,995/- U/S. 271(1)(C) OF THE ACT. 4. IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE CIT(A), IN SPITE OF SUFFICIENT OPPORTUNITIES GRANTED, NEITHER ASSE SSEE NOR HIS AUTHORISED REPRESENTATIVE ATTENDED. ASSESSEE DID NOT EV EN FURNISH ANY DETAILS OR MATERIAL WITH REGARD TO THE ISSUES RAISED IN APPEAL. OBSERVING THE CALLOUS AND INDIFFERENT ATTITUDE OF ASSESS EE FOR NOT PAYING DUE ATTENTION AND CARE TO APPELLATE PROCEEDINGS , CIT(A) REJECTED THE APPEAL OF ASSESSEE DULY CONFIRMING THE PENALTY RAISED BY AO, BY STATING AS UNDER: 10. IT IS SEEN FROM THE ABOVE THAT IN SPITE OF SUF FICIENT OPPORTUNITIES PROVIDED, NEITHER THE ASSESSEE NOR AU THORIZED REPRESENTATIVE FURNISHED ANY SATISFACTORY EXPLANATI ON REBUTTING THE CONCLUSIONS DRAWN BY THE AO. THEREFORE, I AM OF TH E CONSIDERED OPINION THAT THE AO IS JUSTIFIED IN LEVYING THE PEN ALTY OF RS. 3,82,995/- ON THE CONCEALED INCOME OF RS. 11,24,420 /- AND HENCE CONFIRMED. AS A RESULT, THE GROUNDS RAISED IN THIS REGARD ARE DISMISSED. 5. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE RAISED THE FOLLOWING GROUND(S) ALONG WITH ADDITIONAL GROUND: 1. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) , IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IS NOT JUSTIFIED IN CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER. GROUND NO. 2 IS GENERAL IN NATURE. I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 3 -: ADDITIONAL GROUND : IN THE ABSENCE OF SPECIFIC CHARGE RAISED BY THE AS SESSING OFFICER IN THE NOTICE U/S. 274 R.W.S. 271(1)(C), THE LEVY OF P ENALTY U/S. 271(1)(C) IS NOT VALID. 6. LD. COUNSEL SUBMITTED THAT ASSESSEE HAS ADMITTED THE ADDITIONS CONSIDERING HIS OLD AGE AND THE NATURE OF AD DITIONS BEING MADE BY THE AO. IT WAS ALSO SUBMITTED THAT AO HAS NOT R ECORDED ANY SATISFACTION IN THE ASSESSMENT ORDER NOR SPECIFIED IN THE NOTICE, THATS WHY ADDITIONAL GROUND WAS RAISED. LD. COUNSEL R ELIED ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY [359 ITR 565]. 7. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AO TO SUBMIT THAT PENALTY IS WARRANTED AS ASSESSEE HAS ACCEPTED ADDITIO NS AND THERE IS CONCEALMENT. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF AUTHORITIES. ASSESSEE DID NOT APPEAR BEFORE THE LD.CIT(A), BUT HE HAS MADE EXPLANATION BEFORE THE ITO WHY THE SA ID ADDITION HAS BEEN ACCEPTED BY HIM. IT WAS SUBMITTED THAT HE WAS AGED 76 YEARS AND BEING SENIOR CITIZEN NOT ABLE TO CONCENTRAT E ON TAX MATTERS BECAUSE OF ILL-HEALTH AND OLD AGE. HE ALSO S UBMITTED THAT THERE WERE LOANS TAKEN FROM VARIOUS PEOPLE WHICH COUL D NOT BE PROVED AND WITH REFERENCE TO LOW WITHDRAWALS BEING A SINGLE PERSON, HE DOES NOT HAVE MUCH EXPENDITURE BUT ACCEPTE D THE ADDITION FOR LOW HOUSEHOLD WITHDRAWALS AND ANOTHER AM OUNT WHICH WAS BROUGHT TO TAX WAS S.B. INTEREST OF RS. 2,370/- WHIC H WAS MISSED WHILE FILING THE RETURN. THEREFORE, ON THE FAC TS OF THE I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 4 -: ADDITIONS MADE IN THE ASSESSMENT, WE ARE OF THE OPINION THAT THERE CANNOT BE ANY PENALTY U/S. 271(1)(C) IN THE GIVEN CIR CUMSTANCES. 9. BE THAT AS IT MAY, THE MAIN CONTENTION OF ASSESSEE IS THAT THE NOTICE U/S. 274 R.W.S. 271 IS NOT PROPER AS IT IS ONL Y A PRINTED NOTICE WITHOUT STRIKING OFF THE RELEVANT COLUMNS. AS SEEN FROM THE NOTICE PLACED ON RECORD, IT IS TRUE THAT AO HAS ISSUED A COMMON NOTICE NOT ONLY FOR CONCEALMENT OF INCOME BUT ALSO FOR FAILURE TO FURNISH RETURN AS WELL AS FAILURE TO COMPLY WITH THE N OTICE U/S. 142(1) AND 143(2). THIS IS A STANDARD PROFORMA AND ASSESSEE HAS NOT INFORMED WHY THE PROCEEDINGS WERE INITIATED. AS SEEN FROM THE ASSESSMENT ORDER ALSO, THERE IS NO RECORDING OF SATIS FACTION IN THE ORDER. THE ORDER OF THE AO IS AS UNDER: 2. THE ASSESSEE HAS CARRIED ON BUSINESS IN PURCHAS E AND SALE OF CLOTH, BOTH ON RETAIL AND WHOLESALE BASIS. ON A TOT AL TURNOVER OF RS. 1,20,10,818/-, THE ASSESSEE ADMITTED A GROSS PROFIT OF RS. 9,55,818/- WHICH GIVES A RATE OF ABOUT 8%. AS THE ASSESSEE DI D BUSINESS BOTH ON RETAIL AND WHOLESALE AND MORE OVER THE TURNOVER IS MORE THAN RS. 1 CRORE, THE GROSS PROFIT ADMITTED BY THE ASSESSEE IS NOT DI STURBED. IN OTHER WORDS, THE SAME IS ACCEPTED. 3. FROM THE CAPITAL ACCOUNT FILED BY THE ASSESSEE, IT IS NOTICED THAT THERE ARE WITHDRAWALS OF ONLY RS. 42,000/-. IT IS C LEAR THAT THE WITHDRAWALS ARE ON THE LOW SIDE AND HENCE, AN AMOUN T OF RS. 80,000/- IS ADDED BACK TOWARDS LOW WITHDRAWALS FOR WHICH THE A. R. AGREED. 4. DURING THE COURSE OF HEARING, THE ASSESSEES A.R . WAS ASKED TO EXPLAIN THE SOURCES FOR THE CASH DEPOSITS MADE IN T HE S.B. ACCOUNT OF S.B.H., DURING THE A.Y. 2009-10, AMOUNTING TO RS. 1 6,64,000/-. HE HAS EXPLAINED THAT ALL THE DEPOSITS MAY BE TREATED AS U NEXPLAINED DEPOSITS WHICH ARE INVESTED BY THE ASSESSEE IN THE TRADING O F SHARES. IT IS ALSO EXPLAINED THAT NO INCOME WAS DERIVED BY THE ASSESSE E FROM THESE TRANSACTIONS, BUT INCURRED LOSS OF RS. 5,42,530/- A ND THAT THE LOSS MAY BE TREATED AS TRADING LOSS AS THE ASSESSEE HAS TAKEN T HE BALANCE OF SHARES AS STOCK IN TRADE. THE ASSESSEE HAS FILED COPIES O F BANK STATEMENTS ALONG WITH TRANSACTIONS OF SHARES. THE AMOUNT TO BE ADDE D BACK TOWARDS UNEXPLAINED CASH DEPOSITS WOULD WORK OUT TO RS. 11, 24,420/- [RS. 16,64,000 (-) RS. 5,40,530/-]. THIS IS ASSESSED TO TAX. I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 5 -: 9.1. NOWHERE IN THE ASSESSMENT ORDER IT WAS STATED THAT AS SESSEE HAS EITHER CONCEALED PARTICULARS OF INCOME OR FURNISH ED INACCURATE PARTICULARS OF INCOME. SIMPLY A NOTICE U/S. 271(1)(C ) WAS ISSUED. UNDER THESE CIRCUMSTANCES, IT CANNOT BE GATHERED WHETHER ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR F URNISHED INACCURATE PARTICULARS OF INCOME FOR WHICH PROCEEDIN GS U/S. 271(1)(C) WERE INITIATED. IN THE ABSENCE OF RELEVANT SATISFACTION IN THE ASSESSMENT ORDER, IT CANNOT BE CONCLUDED THAT PROCEED INGS ARE VALIDLY INITIATED. FURTHER THE NOTICE ISSUED ALSO IS NO T SPECIFIC ON THE REASON FOR INITIATION OF PROCEEDINGS. 10. SIMILAR ISSUE HAS COME UP IN THE CASE OF M/S. NI VEE PROPERTY DEVELOPERS PRIVATE LTD., VS. ACIT IN ITA NO. 951/HYD /2016 (AY. 2005-06) DT. 11-11-2016. IN THAT CASE, THE CO-ORDINATE BENCH (SMC) OF HYDERABAD HAS HELD AS UNDER: 2. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THAT IN THE NOTICE ISSUED U/S 271(1)(C), THE CHARGE IS NOT SPECIFIED. IN OTHER WORDS, THE AO HAS NOT SPECIFICALLY STATED WHETHER THE NOTICE WAS ISSUED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON' BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTO RY REPORTED IN (2013) 35 TAXMANN.COM 250 (KAR.) AT PARA 63 HELD AS UNDER: 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILIT Y. (B) MENS R EA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. (D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(L )(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISI ONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 6 -: (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WH ICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION . (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESS MENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271 (L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVI SION CONTAINED IN SECTION 1(B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO T HE 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 ORDER O F ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSE LF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROC EEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT I S ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT H AS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD 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 EXPLANAT ION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED . (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTAN TIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEE N DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECT ION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY . (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASS ESSEE. I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 7 -: (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 ASSES SMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT E FROM PROCEE DINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' W OULD NOT OPERATE AS RES JUDICATA IN THE 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 LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. RESPECTFULLY FOLLOWING THE SAME, I QUASH THE PENALTY L EVIED U/S 271(1)(C) AS BAD IN LAW. 11. SIMILARLY IN THE CASE OF LALITKUMAR M SAKHALA VS. DCIT IN ITA NO. 938/MUM/2015 (AY. 2009-10) DT. 10-08- 2016, THE CO-ORDINATE BENCH OF MUMBAI (SMC) HAS HELD AS UNDER: 4. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE STA TED THAT HE HAS FILED THE EXPLANATION BEFORE THE AO AND THE CIT(A) AND ALSO ARGUED THAT IN THIS CASE THE AO HAS LEVIED PENALTY FOR CONCEALMENT U/S 271 (1) (C) OF THE ACT, BUT WITHOUT ANY SPECIFIC CHARGE I.E. THE PENAL TY FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. ACCORDING TO LD. COUNSEL THE AO HIMSELF IS NOT CONVINCED ABOUT THE C HARGE. THE LD. COUNSEL FOR THE ASSESSEE DREW MY ATTENTION TO THE PAGES 2-3 OF THE ASSESSEE'S PAPER BOOK, WHEREIN PENALTY NOTICE U/S. 271(1)( C) R.W.S 274 OF THE ACT DATED 17-11-2011 WAS ISSUED BY THE AO TO THE ASSESS EE. THE LD. COUNSEL FOR THE ASSESSEE STATED BEFORE ME THAT THIS ISSUE I S COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTO RY (2013) 359 ITR 565 (KAR.). I FIND THAT THE NOTICE ISSUED U/S. 274 R. W. S. 271 OF THE ACT, DATED 17-11- 2011, CLEARLY REVEALS THAT THE AO WHIL E ISSUING THE NOTICE HAS NOT STRIKE OFF INAPPROPRIATE WORDS AND ACCORDIN GLY, THE PURPOSE OF THE NOTICE ISSUED FOR LEVY OF PENALTY IS LOST. ACCORDIN GLY, IT IS NOT CLEAR WHAT DEFAULT IS COMMITTED BY THE ASSESSEE I.E. WHETHER I T IS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME SO THAT THE PENALTY U/S. 271( 1)( C) CAN BE LEVIED. I FIND THAT THE HON'BLE KARNATAKA HIGH COURT IN THE C ASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS HELD AS UNDE R:- I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 8 -: '58. IT MUST BE NOTICED THAT THIS FINDING RECORDING CONCEALMENT IN THE ORDER TO BE PASSED BY THESE AUTHORITIES IS ONLY FOR THE PURP OSE OF INITIATING. THE SAID FINDING IS NOT CONCLUSIVE; IT IS IN THE NATURE OF P RIMA FACIE SATISFACTION, WHICH AUTHORIZES THEM TO INITIATE THE PENALTY PROCEEDINGS . ONCE A PENALTY PROCEEDINGS IS VALIDLY INITIATED, THEN UNDER SECTION 274(1) AN OBLIGATION IS CAST ON THE PERSON INITIATING THE PROCEEDINGS TO ISSUE NOTICE TO THE A SSESSEE. WHEN SUCH A NOTICE IS ISSUED, IT IS OPEN TO THE ASSESSEE TO CONTEST THE A CCUSATION AGAINST HIM THAT HE HAS CONCEALED INCOME OR HE HAS FURNISHED INACCURATE PARTICULARS. AS THERE IS AN INITIAL PRESUMPTION OF CONCEALMENT, IT IS FOR THE A SSESSEE TO REBUT THE SAID PRESUMPTION. THE PRESUMPTION FOUND IN EXPLANATION 1 IS A REBUTTABLE PRESUMPTION. IF THE AUTHORITY, AFTER HEARING THE AS SESSEE AND LOOKING INTO THE MATERIAL PRODUCED IN THE SAID PROCEEDINGS BEFORE HI M IS SATISFIED THAT THOUGH THE INCOME IS UNDISCLOSED THERE WAS NO INTENT TO AV OID TAX AND THEREFORE, IF HE HOLDS THERE IS NO CONCEALMENT OF INCOME, THEN QUEST ION OF IMPOSING PENALTY WOULD NOT ARISE. IT MAY BE A CASE OF NOT DISCLOSING INCOME WITHOUT ANY INTENT TO AVOID TAX; IT MAY BE A CASE OF FURNISHING PARTICULA RS WITHOUT ANY INTENTION TO AVOIDING TAX. BOTH STAND ON THE SAME FOOTING. IT IS ONLY WHEN THE AUTHORITY IS SATISFIED THAT NON-DISCLOSURE OF INCOME OR FURNISHI NG INACCURATE PARTICULARS WAS WITH THE INTENTION OF EVADING TAX, THEN IT AMOUNT T O CONCEALMENT, IT AMOUNTS TO FURNISHING INACCURATE PARTICULARS. THEN, AT HIS DIS CRETION, HE MAY IMPOSE PENALTY AS PROVIDED UNDER THE ACT. THEREFORE, MERELY BECAUSE THE ASSESSEE ACCEPTED ADDITION OR DELETION AND DID NOT CHALLENGE THE ASSESSMENT ORDER BY WAY OF APPEAL, IT CANNOT BE CONCLUDED THAT SUCH ADD ITION OR DELETION AMOUNTS TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS. WHEN A PLEA IS TAKEN THAT IN ORDER TO AVOID LITIGATION AND PURCHAS E PEACE, THE TAX LEVIED IS PAID WITH INTEREST, IF THE ASSESSEE IS ABLE TO DEMONSTRA TE HIS BONA FIDES AND IF THE AUTHORITY IS SATISFIED ABOUT HIS BONAFIDES, THEN TH E QUESTION OF IMPOSING PENALTY WOULD NOT ARISE. SIMILARLY, IN CASES WHERE THOUGH T HE TAX WAS NOT ACTUALLY DUE BUT STILL THE ASSESSEE PAYS TAX WITH A HOPE OF CLAI MING DEDUCTIONS IN THE SUBSEQUENT YEARS, IF THE ASSESSEE IS ABLE TO DEMONS TRATE THERE WAS NO LIABILITY TO PAY TAX AT ALL, MERELY IF ASSESSEE PAYS TAX AND HE DOES NOT CHALLENGE ORDER, THAT WOULD NOT CONSTITUTE CONCEALMENT OF INCOME SO AS TO ENABLE THE AUTHORITIES TO IMPOSE PENALTY. SIMILARLY, IN CASES, WHERE THE LEGA L POSITION IS NOT WELL SETTLED, WHEN FEW HIGH COURTS AND TRIBUNALS HAVE TAKEN A VIE W IN FAVOUR OF THE ASSESSEE AND SOME HIGH COURTS AND TRIBUNALS HAVE TA KEN A VIEW IN FAVOUR OF THE REVENUE AND ON LEGAL ADVICE IF AN ASSESSEE RELI ES ON THE SAID LEGAL POSITION FOR NOT DISCLOSING THE INCOME AND FOR NON-PAYMENT O F TAX, CERTAINLY, THAT IS A FACT WHICH SHOULD WEIGH IN THE PENALTY PROCEEDINGS AFTER THE ASSESSEE HAS PAID TAX WITH INTEREST BEFORE IMPOSING PENALTY. NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SA ID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HA S PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DIS CERNED FROM THE SAID ORDER AND I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 9 -: IF IT IS A CASE OF RELYING ON DEEMING PROVISION CON TAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS A RE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHE R EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD B E MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HI M AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CON TEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E 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 THE DEPARTMENT SEND ING A PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTION ED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASS ESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HA VE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF N ATURAL JUSTICE IS OFFENDED IF THE SHOW 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 INACCURATE PART ICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENC ES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFEN CES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTE NCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY 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 SHOULD 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 IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OT HERWISE THOUGH THE INITIATION 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 SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUN D ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE IN FORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING TH E PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT 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 ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF TOTAL INCOME I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 10 -: UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURAT E 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 COUR T IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CON CEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT CONNOTATIONS. 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 MA RKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS T O BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR P ENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO IN VOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. TH E STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON- APPLICATION OF MIND.' 5. IN VIEW OF THE FACTS OF THE CASE THAT THERE IS N O SPECIFIC CHARGE RAISED BY THE AO WHILE ISSUING NOTICE U/S 274 R. W. S. SECTIO N 271 OF THE ACT, AS DISCUSSED ABOVE, THE ISSUE IS COVERED BY THE DECISI ON OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTT ON AND GINNING FACTORY (SUPRA). RESPECTFULLY FOLLOWING THE ABOVE, I ALLOW THE APPEAL OF THE ASSESSEE. 12. IN THE PRESENT CASE NEITHER THE ORDER NOR THE NOTICE DOES SPECIFY FOR WHAT OFFENCE THE PROCEEDINGS ARE INITIATED . THE DECISION OF THE KARNATAKA HIGH COURT (SUPRA) AND OTHER CASES STATE D ABOVE WILL EQUALLY APPLY TO THE FACTS OF THE CASE. EVEN OTHER WISE ON MERITS ALSO THERE IS NO SCOPE FOR LEVY OF PENALTY AS CONSID ERED ABOVE. HENCE, BOTH ON PRINCIPLES OF LAW AND ALSO ON THE FACTS , THERE IS NO SCOPE FOR LEVY OF PENALTY U/S 271(1)(C) ON ASSESSEE . CONSIDERING THE ABOVE, WE HAVE NO HESITATION IN CANCELLING THE PENA LTY. 13. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 30 TH DECEMBER, 2016 TNMM I.T.A. NO. 1012/HYD/2016 SATYA PRAKASH AGARWAL :- 11 -: COPY TO : 1. SATYA PRAKASH AGARWAL, C/O. CH. PARTHASARATHY & CO., 1 ST FLOOR, SOWBHAGYA AVENUE, STREET NO. 1, ASHOK NAGAR , HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-8(2), HYDERABAD. 3. CIT (APPEALS)-2, HYDERABAD. 4. PR.CIT-2, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.