Parashuramasa R.Habib , Gadag V. Assistant Commissioner of Income Tax Circle-2(1), Hublli

ITA 104/BANG/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2756 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-02-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 16-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER IT A NO . 1 04 /BANG/ 2017 ASSESSMENT YEAR : 2012 - 13 SHRI PARASHURAMASA R HABIB, NARASINGASA PRODUCTS, NAR JAVALI BAZAR, NARASINGASA GALLI, GADAG 582 101. PAN: AANPH 0960R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 2(1), HUBLI. APPELLANT RESPONDENT APP E LLANT B Y : SHRI ASHOK A KULKARNI, ADVOCATE RESPONDENT BY : SHRI R.N. S IDDAPPAJI, ADDL . CI T(DR)(ITAT), BENGALURU. DATE OF HEARING : 21 . 02 . 2 0 1 9 DATE OF PRONOUNCEMENT : 27 . 02 . 2 0 1 9 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE OR DER DATED 29.09.2016 OF CIT(APPEALS), HUBLI RELATING TO ASSES SMENT YEAR 2012-13. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORDER O F THE CIT(A) WHEREBY THE CIT(A) CONFIRMED THE ORDER OF THE AO IMPOSING P ENALTY ON THE ASSESSEE U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (ACT). 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE AO ARE THAT THE ASSESSEE SOLD P ROPERTY AND DERIVED ITA NO.104/BANG/2017 PAGE 2 OF 11 LONG TERM CAPITAL GAIN (LTCG) ON SALE OF THE PROPER TY. HE DID NOT DECLARE LTCG IN THE RETURN OF INCOME FILED. SUBSEQUENTLY, THE FACT THAT THE ASSESSEE SOLD PROPERTY AND DID NOT DECLARE LTCG ON SALE OF PROPERTY CAME TO LIGHT ONLY, CONSEQUENT TO A SURVEY ACTION U/S.13 3A OF THE ACT. THE ASSESSEE AGREED TO THE ADDITION OF LTCG . IN RESPE CT OF THE ADDITION MADE AS AFORESAID, THE AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT AND IMPOSED PENALTY ON THE ASSESSEE WHICH WAS CONFI RMED BY THE CIT(APPEALS). HENCE, APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 3. BEFORE THE TRIBUNAL, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE NOTICE ISSUED BEFORE IMPOSING PE NALTY WAS NOT ACCORDANCE WITH LAW AND ON THIS GROUND THE ORDER IM POSING PENALTY SHOULD BE QUASHED. THE LEARNED COUNSEL FOR THE ASSESSEE AL SO DREW OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT BEFORE IMPOSING PENALTY AND SUBMITTED THAT THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME. HE POINTED OUT THAT THE SHOW CAUSE NOTICE DOES NOT STRIKE OUT THE IRRELEVAN T PORTION 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, THEN THE IMPO SITION OF PENALTY ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE S USTAINED. 4. WE HAVE ALSO PERUSED THE SHOW-CAUSE NOTICE ISSUE D U/S.274 OF THE ACT FOR ALL THE AFORESAID AYS 2012-13. THE AO IN T HE SAID SHOW CAUSE ITA NO.104/BANG/2017 PAGE 3 OF 11 NOTICE HAS NOT STRUCK OFF THE IRRELEVANT PORTION AS TO WHETHER THE CHARGE AGAINST THE ASSESSEE IS CONCEALING PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 5. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(AP PEALS). 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 THE SHOW CAUSE NOTICE U/S.274 OF THE ACT ABOUT THE CHAR GE U/S.271(1)(C) OF THE ACT IS NOT FATAL TO LEVY OF PENALTY U/S.271(1)(C) O F THE ACT. 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) TAXMANN.COM 442 (KARNATAKA) . A CO-ORDINATE BENCH, IN THE CASE OF SHRI A NAGARJU (ITA NO.2196/BANG/2016 DATED 6/4/201 8) , 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 DECI SION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & SPINNING MILLS LTD. (SUPRA) AND THEREFORE CANNOT BE FOLLOWED. THE DECISION RENDERED IN THE CASE OF SRI DURGA ENTERPRISES (SUPRA) WAS IN A TOTALLY DIFFERENT CONTEXT OF DEFECT IN NOTICE ISSUE D U/S.148 OF THE ACT WHEREIN THE ASSESSMENT YEAR WAS NOT MENTIONED AND PERIOD WI THIN WHICH THE RETURN WAS TO BE FILED WAS NOT MENTIONED. THE DEFECT WAS HELD TO BE CURABLE U/S.292B OF THE ACT. THE SAME REASONING CANNOT BE APPLIED IN THE CONTEXT OF SHOW CAUSE NOTICE U/S.274 OF THE ACT. SIMILARLY , THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SKYLIGHT HOSPITALITY LLP VS. ACIT (2018) 92 TAXMANN.COM 93(SC) WAS RENDERED IN THE CONTEXT OF SEC.148 OF THE ACT WHEREIN THE NAME OF THE ERSTWHILE COMPANY WHICH GOT CONVERTED INTO AN LLP WAS MENTIONED. THE DEFECT WAS HELD TO BE CU RABLE AND FALLING ITA NO.104/BANG/2017 PAGE 4 OF 11 WITHIN THE MISCHIEF OF SEC.292B OF THE ACT. THIS D ECISION RENDERED IN THE CONTEXT OF SEC.148 OF THE ACT, IN OUR VIEW, IS NOT RELEVANT IN THE PRESENT CASE. THE SAME REASONING WOULD APPLY TO THE DECISI ON OF THE ITAT BANGALORE IN THE CASE OF JAYSON INFRASTRUCTURE INDIA LTD. (SUPRA) . 6. THE LEARNED DR RELIED ON THE DECISION OF MUMBAI 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 DELETED FOR SO MANY REASONS AND NOT SOLELY ON THE B ASIS OF DEFECT IN SHOW CAUSE NOTICE U/S.274 OF THE ACT. THIS DECISION IS ALSO CONTRARY TO THE DECISION OF HONBLE KARNATAKA HIGH COURT, WHICH IS THE JURISDICTIONAL HIGH COURT, AS FAR AS THE BANGALORE BENCHES OF ITAT ARE CONCERNED AND IS THEREFORE NOT BINDING. 7. 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 SPECIFI CALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEAL MENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FO RM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY TH E REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PRO CEEDINGS ON 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. ITA NO.104/BANG/2017 PAGE 5 OF 11 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 HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD N OT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANAT ION-1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIV IL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE P ERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD B E MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PEN ALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY T O MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIP ULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LI ABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A P RINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE M ENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSE QUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS S ERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICT LY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. 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 ITA NO.104/BANG/2017 PAGE 6 OF 11 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 INI TIATION 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 ANSWER . IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY T O IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDI NGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PE NALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSI TION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FA CTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING TH E PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAI NABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE A CT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED I N THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLA USE (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 ITA NO.104/BANG/2017 PAGE 7 OF 11 LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTA INABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE A PPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF T HE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICA TION OF MIND. 8. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS 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 IMPOSING PENALTY F OR 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 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). ITA NO.104/BANG/2017 PAGE 8 OF 11 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 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 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. ITA NO.104/BANG/2017 PAGE 9 OF 11 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 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) 9. IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE THAT 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 S OUGHT TO BE IMPOSED. ITA NO.104/BANG/2017 PAGE 10 OF 11 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 IS BAD IN LAW AND INVALID FOR THE REASON THAT THE SHOW CAUSE NOTICE U /S 274 OF THE ACT DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO W HETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE LD. COUNSEL FURTHER BROUGHT TO OUR N OTICE THAT AS AGAINST THE DECISION OF THE HONBLE KARNATAKA HIGH COURT THE RE VENUE 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 PRE FERRED BY THE DEPARTMENT. 10. 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 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 PENALTY IN THE PRESENT CASES CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. ITA NO.104/BANG/2017 PAGE 11 OF 11 11. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF FEBRUARY, 2019. SD/- SD/- ( B.R. BASKARAN ) ( N.V . VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 27 TH FEBRUARY, 2019. / D ESAI S MURTHY / COPY TO: 1. APP ELL ANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.