M/s Flow & Fluid Control Centre, Kolkata V. ITO, WD-34(4), KOLKATA, Kolkata

ITA 1051/KOL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4165 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 30-11-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 16-05-2016
• Court: TRIBUNAL
• Department Lawyers: H R SINGH
• Keywords: Unexplained investment; Opportunity of being heard; Valuation report
• Section: 143(3); 69

Judgement Text

1 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO. 1051/KOL/2016 ASSESSMENT YEAR: 2010-11 M/S. FLOW & FLUID CONTROL CENTRE VS. INCOME-TAX O FFICER, WARD-34(4), KOLKATA. (PAN: AABFF0404A) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 30.11.2016 DATE OF PRONOUNCEMENT: 09.12.2016 FOR THE APPELLANT: SHRI SOUMITRA CHOUDHURY, AD VOCATE FOR THE RESPONDENT: SHRI H.R. SINGH, JCIT ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)10, KOLKATA VIDE APPEAL NO. 206/CIT(A)-10/WD.34(4)/2013-14/KOL DATED 29.02.2016 . PENALTY U/S. 271(1)(C) OF THE ACT WAS IMPOSED BY ITO, WD-34(4), KOLKATA VIDE HIS ORD ER DATED 26.06.2013. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF ASSESSEE IS AS TO WHETHER THE LD CIT(A) IS JUSTIFIED IN CONFIRMING THE PENALTY U/S. 271(1) (C) OF THE ACT IN THE SUM OF RS.3,51,673/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT RETURN OF INCOME WAS FILED ON 27.09.2010 SHOWING A TOTAL INCOME OF RS.5,35,500/-. THE SAID RETURN WAS PROCESSED U/S. 143(1) OF THE ACT, THEREAFTER CASE WAS SELECTED FOR SCRUTINY ASSE SSMENT AND THE LD AO PASSED ASSESSMENT ORDER U/S. 143(3) OF THE ACT ON 21.12.2012 DETERMIN ING TAXABLE INCOME AT RS. 17,30,160/-. THE LD AO THEREAFTER ISSUED NOTICE TO THE ASSESSEE ON 21.12.2012 CALLING FOR EXPLANATION AS TO WHY PENALTY U/S. 271(1)( C) OF THE ACT SHALL NOT BE IMPOSED. IN RESPONSE TO THE SAME, THE ASSESSEE STATED THAT THE PENALTY SHOULD NOT BE IMPO SED AS THE ASSESSEE FILED EXPLANATION BEFORE THE LOWER AUTHORITIES AND ASSESSEES EXPLANA TION WAS NOT CONSIDERED WITH JUDICIAL VIEW. IT WAS ALSO SUBMITTED BEFORE THE LD AO THAT THERE WAS NO SPECIFIC CHARGE THAT WAS LEVELED ON THE ASSESSEE AS COULD BE DECIPHERED FROM THE SHOW CAUSE NOTICE AS TO WHETHER THE ASSESSEE HAD CONCEALED HIS PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD AO LEVIED PENALTY U/S 271(1)(C ) OF THE ACT ON THE ADDITIONS MADE IN THE SUM 2 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 OF RS. 5,45,841/- AND RS. 5,92,261/- AND LEVIED PE NALTY OF RS. 3,51,673/- BEING 100% OF THE TAX ON THE ADDITIONS MADE. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A), WHO CONFIRMED THE ACTION OF LD AO. AGGRIEVED, ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. AT THE TIME OF HEARING BEFORE US, THE LD AR PLAC ED THE COPY OF THE SHOW CAUSE NOTICE FOR INITIATING PENALTY PROCEEDINGS U/S 274 READ WIT H SECTION 271(1) (C ) OF THE ACT WHEREIN, THE LD AO HAD MERELY TICKED THE PORTION OF CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WITHOUT MAKING SPE CIFIC CHARGE ON THE ASSESSEE TO RESPOND. IT IS WELL SETTLED THAT THE PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE FROM ASSESSMENT PROCEEDINGS. HE PLACED RELIANCE ON THE DECISION O F THE CO-ORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF SUVAPRASANNA BHATTACHARYA V S ACIT IN ITA NO. 1303/KOL/2010 DATED 6.11.2015. IN RESPONSE TO THIS, THE LD DR FIL ED A WRITTEN SUBMISSION DATED 30.11.2016 BY PLACING RELIANCE ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAHMAT DEVELOPMENT AND ENGINEERING CORPORATION VS C IT REPORTED IN (1981) 130 ITR 602 (CAL) DATED 3.7.1980. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS WEL L SETTLED THAT THE PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE FROM ASSESSMENT PROCEEDIN GS. IT IS ALSO WELL SETTLED THAT THE LD AO SHOULD SPECIFICALLY PINPOINT THE CHARGE OF OFFENCE COMMITTED BY THE ASSESSEE INASMUCH AS TO WHETHER THE ASSESSEE HAD CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF HIS INCOME IN HIS PENALTY NOTICE. W E FIND THAT THE SHOW CAUSE NOTICE U/S.274 OF THE ACT DATED 21.12.2012, WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON FOR FURNISHING I NACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME. ON THIS AS PECT, WE FIND THAT IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. M ANJUNATHA COTTON AND GINNING FACTORY REPORTED IN 359 ITR 565 (KAR), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE 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 REQUIREMENT OF LAW. WE ALSO FIND THAT THIS CASE LAW HAS BEEN RELIED UPON IN THE FOLLOWING CASES OF THE CO-ORDINA TE BENCHES OF THIS TRIBUNAL AND OTHER TRIBUNALS :- 3 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 (I) SATYANANDA ACHARIYA BISWAS VS DCIT IN ITA NO. 0 5/KOL/2010 DATED 2.12.2015 (KOLKATA TRIBUNAL) (II) GOURI DAS MAITY VS ITO IN ITA NO. 2590/KOL/201 3 DATED 2.2.2016 (KOLKATA TRIBUNAL) (III) DEEPAK KUMAR PATWARI VS ACIT IN ITA NOS. 616 TO 618/KOL/2013 DATED 3.2.2016 (KOLKATA TRIBUNAL) (IV) RAMESH PRASAD SAO VS DCIT IN ITA NO. 997/KOL/2 011 DATED 3.2.2016 (KOLKATA TRIBUNAL) (V) DCIT VS PRATAP PROPERTIES PVT LTD IN ITA NOS. 1 386-1388/KOL/2010 DATED 10.2.2016 (KOLKATA TRIBUNAL) (VI) E KRISHNAPPA VS ITO IN ITA NOS. 313 TO 315/BAN G/2014 DATED 14.8.2015 (BANGALORE TRIBUNAL) (VII) ASHWANI KUMAR ARORA VS ACIT IN ITA NO. 844/DE L/2014 DATED 19.5.2016 (DELHI TRIBUNAL) (VIII) ITO VS GOPE M ROCHLANI IN ITA NO. 7737/MUM/2 011 DATED 24.5.2013 (MUMBAI TRIBUNAL) 6. WE FIND THAT THE LD DR HAD RELIED UPON ON THE D ECISION OF THE HONBLE CALCUTTA HIGH COURT SUPRA. IN THAT CASE, THE ASSESSEE HAD CONSTR UCTED A BUILDING. THE INVESTMENT IN CONSTRUCTION AS DISCLOSED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS LESS THAN THAT ESTIMATED BY THE VALUER. THE DIFFERENCE IN THE INV ESTMENT IN CONSTRUCTION WAS ADDED AS UNEXPLAINED INVESTMENT NOT RECORDED IN THE BOOKS OF ACCOUNTS AND AS INCOME BY INVOKING THE DEEMING PROVISIONS OF SECTION 69 OF THE ACT. I N THE ASSESSMENT PROCEEDINGS WHICH ARE REFERRED TO AS QUANTUM PROCEEDINGS, THE TRIBUNAL RE DUCED THE ESTIMATION OF THE VALUER AND THEREFORE THE ADDITION TO THE INCOME STOOD REDUCED. IN RESPECT OF THE ADDITION THAT WAS ULTIMATE SUSTAINED IN THE ASSESSMENT PROCEEDINGS, P ENALTY PROCEEDINGS U/S 271(1)(C ) OF THE ACT WERE INITIATED AGAINST THE ASSESSEE. THE AO IN ITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE FOR CONCEALMENT OF PARTICULARS OF INCOME A ND IMPOSED PENALTY FOR THE SAID CHARGE WHICH WAS CONFIRMED BY THE IAC. THE ASSESSEE PREFE RRED APPEALS BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE IAC IMPOSING PENALTIES. I N THE SAID APPEALS IT WAS CONTENDED THAT (1) THAT THE PENALTIES WERE BASED ON ADDITIONS MADE BY THE ITO AND THOSE ADDITIONS WERE BASED ON THE DEPARTMENTAL VALUERS REPORT. AS THE T RIBUNAL HAD REJECTED THAT REPORT, THE VERY BASIS OF THE IMPOSITION OF PENALTY HAD BEEN KNOCKED OUT ; (2) THE ITO HAD INITIATED PENALTY PROCEEDINGS ON THE GROUND OF CONCEALMENT OF INCOME. THE IAC HAD IMPOSED THE PENALTIES ON THE GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME. IT WAS URGED THAT THE CHARGE OF CONCEALMENT OF INCOME AND THE CHARGE OF FURNISHING INACCURATE PARTICULARS OF INCOME WERE MUTUALLY EXCLUSIVE AND THE ITO NOT HAVING INITIATED PROCEEDINGS ON THE GROUND OF FURNISHING INACCURATE PARTICULARS, THE IAC HAD NO JURISDICTIO N TO PASS ORDERS ON THIS GROUND ; (3) LASTLY 4 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 AND THIRDLY, IT WAS URGED THAT THE DIFFERENCE BETWE EN THE RETURNED INCOME AND THE ASSESSED INCOME HAD BEEN PROPERLY EXPLAINED AND THE ASSESSEE HAD PROVED THAT THE FAILURE TO RETURN THE INCOME ASSESSED BY THE ITO DID NOT ARISE FROM A NY FRAUD OR WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. UPON THESE SUBMISSIONS, IT WAS URGED THAT THE ORDERS IMPOSING THE PENALTY WERE NOT SUSTAINABLE. THE TRIBUNAL WAS , HOWEVER, UNABLE TO ACCEPT THE SAID CONTENTIONS FOR THE REASONS RECEIVED IN ITS ORDER DATED 31.5.1975 A ND UPHELD THE PENALTY ORDERS AS PASSED BY THE IAC. UPON THESE, THE FOLLOWING TWO QUESTIONS W ERE CONSIDERED BY THE HONBLE HIGH COURT :- 1. WHETHER THE TRIBUNALS FINDING OF FACT BEARING O N THE QUESTION OF PENALTY ARE PERVERSE IN THAT THEY ARE UNSUPPORTED BY AND / OR CONTRARY TO EVIDENCE ? 2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN UPHOLDING THE ORDER UNDER SECTION 271(1)(C ) ? BEFORE THE HONBLE HIGH COURT, THE CONTENTION OF TH E ASSESSEE WAS THAT THE ITO HAD INITIATED THE PENALTY PROCEEDINGS ON ONE GROUND, NAMELY, THAT THERE HAD BEEN CONCEALMENT OF INCOME BUT THE IAC HAD, ACCORDING TO THE ASSESSEE, SOUGHT TO IMPOSE PENALTY ON THE GROUND OF FURNISHING INACCURATE PARTICULARS. IT WAS, THEREFO RE, SUBMITTED THAT THE GROUNDS OF FURNISHING INCORRECT OR INACCURATE PARTICULARS OF INCOME AND C ONCEALMENT OF INCOME WERE MUTUALLY EXCLUSIVE AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE THERE WAS NO QUESTION OF EITHER CONCEALMENT OF INCOME OR FURNISHING INACCURATE PART ICULARS . DEALING WITH THE AFORESAID CONTENTION, THE HONBLE HIGH COURT HELD THAT SECTIO N 69 MAKES THE UNEXPLAINED INVESTMENT TO BE THE INCOME OF THE ASSESSEE AND THAT POSITION HAS TO BE ACCEPTED IN THE PENAL PROCEEDINGS BECAUSE THAT HAS BEEN CONFIRMED THOUGH FOR A REDUCED AMOUNT BY THE TRIBUNAL IN THE QUANTUM APPEAL WHICH WILL BE DEEMED TO BE TH E INCOME OF THE ASSESSEE FOR THAT FINANCIAL YEAR. THEREFORE, IT IS NOT OPEN BY VIRTU E OF SECTION 69 TO SAY THAT IT DOES NOT REPRESENT THE INCOME. THE LAW DEEMED SUCH AN UNEXP LAINED INVESTMENT TO BE THE INCOME OF THE ASSESSEE. UNDER SUCH A SITUATION IT IS NO LONG ER OPEN TO SAY THAT THE INFERENCE OF REJECTION OF THE ASSESSEES EXPLANATION DID NOT GIV E RISE TO THE FACT THAT THE DISPUTED AMOUNT DID NOT REPRESENT THE INCOME. THE INFERENCE FOLLO WS AS THE DEEMING PROVISION MAKES SUCH UNEXPLAINED INVESTMENT AS THE INCOME OF THE ASSESSE E BY THE FICTION OF LAW. IN SUCH A SITUATION THE NEXT QUESTION THAT BECOMES RELEVANT I S WHETHER THERE WAS ANY EXPLANATION FOR NON-DISCLOSURE OF INCOME. THERE WAS CERTAINLY NON- DISCLOSURE OF THIS INCOME. PENALTY U/S 271(1)(C ) WAS ACCORDINGLY LEVIABLE ON THE MERITS O F THE CASE. GREAT STRESS WAS LAID ON BEHALF OF THE ASSESSEE UPON THE FINDING THAT THE IN ACCURATE PARTICULARS HAD BEEN FURNISHED 5 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 WAS INCONSISTENT WITH THE CHARGE OF CONCEALMENT OF INCOME. IF THE INCOME WAS CONCEALED OR NOT RETURNED, THERE COULD NOT BE ANY QUESTION OF FU RNISHING ANY INACCURATE PARTICULARS. THOUGH THE EXPRESSIONS CONCEALMENT AND FURNISHING OF INACCURATE PARTICULARS ARE USED IN DISJUNCTIVE TERMS, THAT IS TO SAY, THERE ARE TWO SE PARATE DIFFERENT OFFENCES, COMMISSION OF ONE NEED NOT NECESSARILY MEAN THE COMMISSION OF OTHER, BUT THE COMMISSION OF ONE DOES NOT EXCLUDE OR DOES NOT ELIMINATE THE POSSIBILITY OF TH E COMMISSION OF OTHER AND VERY OFTEN, INACCURATE PARTICULARS ARE FURNISHED IN ORDER TO ST RENGTHEN THE CONCEALMENT OF INCOME OF A PARTICULAR ASSESSEE. THEREFORE, THERE IS NO SIGNIFI CANCE OF THIS ARGUMENT UPON WHICH A GREAT DEAL OF STRESS WAS LAID THAT THESE TWO CHARGES ARE MUTUALLY EXCLUSIVE. FURTHER, THESE TWO CHARGES CAN VERY OFTEN DO SUBSIST TOGETHER. EVEN IN A PARTICULAR CASE, WHETHER THE TWO CHARGES SIMULTANEOUSLY EXIST OR NOT MUST DEPEND UPO N THE ENTIRETY OF THE CIRCUMSTANCES AND THE ENTIRETY OF THE ORDER. THE HONBLE COURT THEREA FTER DEALT WITH THE FACTS OF THE CASE AND CONCLUDED THAT THE ITO HAD ASKED THE ASSESSEE TO RE CONCILE THE DIFFERENCE BETWEEN THE TWO ACCOUNTS , VIZ., THE ACCOUNTS GIVEN BY THE VALUER O F THE ASSESSEE AS WELL AS THE AMOUNT GIVEN BY THE ASSESSEE AND THE ASSESSEE WAS ASKED TO SHOW CAUSE BEFORE ACTUAL ADDITION. THE IAC IN HIS ORDER OBSERVED THAT THERE WAS GROSS AND WILL FUL NEGLECT TO DISCLOSE THE CORRECT EXPENDITURE OF THE INVESTMENT, THAT IS TO SAY, THE CORRECT QUANTUM OF INVESTMENT WAS MADE FROM THE CONCEALED INCOME. IN THAT EXPRESSION THE IAC WAS UPHOLDING BOTH CHARGES, THAT IS TO SAY IF THE ASSESSEE HAD DISCLOSED THE CORRECT EX PENDITURE OF THE INVESTMENT THAT WOULD TANTAMOUNT TO THE FURNISHING OF THE CORRECT PARTICU LARS WHICH COULD HAVE BEEN DEEMED TO HAVE BEEN THE INCOME OF THE ASSESSEE BY VIRTUE OF S ECTION 69. THEREFORE, THERE IS NO INCONSISTENCY BETWEEN THE FINDINGS MADE BY THE IAC OF THE CHARGES MADE BY THE ITO AND THE NOTICE WHICH THE ITO HAD ISSUED. THE ASSESSEE WAS TOLD CLEARLY TO RECONCILE THE DIFFERENCE AND WAS ASKED TO EXPLAIN WHY THE DIFFERE NCE AMOUNT SHOULD NOT BE TREATED AS HIS CONCEALED INCOME. THEREFORE, IN THE FACTS AND CIRC UMSTANCES OF THIS CASE, THERE WAS NO QUESTION OF OPPORTUNITY BEING GIVEN TO MEET THE CHA RGE AND THE CHARGE BEING UPHELD ON OTHER BASIS. IT WILL BE SIGNIFICANT TO NOTE THAT THE DECISION RE NDERED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF RAHMAT DEVELOPMENT AND ENGINEERING C ORPORATION, SUPRA WAS BASED ONLY ON THE FACTS OF THE CASE BEFORE THE COURT. THE HONBL E COURT ACCEPTED THE PROPOSITION THAT 6 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 SHOW CAUSE NOTICE CANNOT SPECIFY ONE CHARGE AND PEN ALTY LEVIED ON THE ASSESSEE FOR ANOTHER CHARGE. THIS WILL BE CLEAR FROM PARAGRAPH 16 OF IT S JUDGEMENT, WHICH READS THUS :- NEXT DECISION UPON WHICH RELIANCE WAS PLACED WAG A BENCH DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT V. LAKHDHIR LALJI [1972] 85 ITR 77 . THERE THE ITO ADDED A SUM OF RS. 58,000 WHICH HE HELD THAT THE ASSESSEE HAD REALISED BY THE SALE OF 1,383 BAGS OF GARLIC AND CONCEALED, AND ISSUED A NOTICE TO THE ASSESSEE UNDE R S. 274 OF THE I.T. ACT, 1961, FOR LEVYING PENALTY FOR CONCEALMENT OF INCOME. AS THE AMOUNT OF PENALTY LEVIABLE WOULD HAVE BEEN MORE THAN RS. 1,000, HE REFERRED THE CASE TO THE IAC. ON APPEAL FROM THE ASSESSMENT ORDER, THE AAC HAD HELD THAT 1,383 BAGS OF GARLIC WERE INCLUDED IN THE STOCK OF THE ASSESSEE AND THAT A SUM OF RS. 34,000 SHOULD BE ADDED ON THE FOOTING OF UNDER- VALUATION OF THE STOCK AND NOT RS. 58,000. THE IAC TOOK NOTE OF THE AAC'S ORDER AND LEVIED A P ENALTY OF RS. 7,400 UNDER S. 271(1)(C) ON THE GROUND THAT THE ASSESSEE HAD DELIBERATELY FURNI SHED INACCURATE PARTICULARS OF HIS INCOME. ON APPEAL FROM THE IAC'S ORDER LEVYING PENALTY, THE APPELLATE TRIBUNAL HELD THAT THE ORDER OF THE IAC WAS WITHOUT JURISDICTION AS HIS JURISDICTIO N WAS RESTRICTED TO THOSE ITEMS OF CONCEALMENT OF INCOME WITH REGARD TO WHICH THE ITO WAS SATISFIED THAT THERE WAS CONCEALMENT OF INCOME. ON A REFERENCE TO THE HIGH COURT IT WAS HELD THAT THE PENALTY PROCEEDINGS HAD BEEN COMMENCED AGAINST THE ASSESSEE ON A PARTICULAR FOOT ING, THAT IS TO SAY, CONCEALMENT OF INCOME, BUT THE FINAL CONCLUSION FOR LEVYING THE PENALTY WA S BASED ON A DIFFERENT FOOTING ALTOGETHER, VIZ., ON THE FOOTING OF FURNISHING INACCURATE PARTI CULARS OF INCOME. UNDER THE CIRCUMSTANCES, IT COULD NOT BE SAID THAT THE ASSESSEE HAD BEEN GIVEN A REASONABLE OPPORTUNITY OF BEING HEARD BEFORE THE ORDER IMPOSING THE PENALTY WAS PASSED. T HE VERY BASIS FOR THE PENALTY PROCEEDINGS AGAINST THE ASSESSEE INITIATED BY THE ITO DISAPPEAR ED WHEN THE AAC HELD THAT THERE WAS NO SUPPRESSION OF INCOME BY THE ASSESSEE. THE CONCLUSI ON OF THE TRIBUNAL THAT THE IAC HAD NO JURISDICTION TO IMPOSE A PENALTY UNDER S. 271(1)(C) FOR CONCEALMENT OF INCOME WAS CORRECT; NOW, AS WOULD BE EVIDENT FROM THE NARRATION OF THE FACTS OF THAT CASE, THERE THE BASIS UPON WHICH THE DIVISION BENCH OF THE GUJARAT HIGH COURT PROCEEDED WAS THAT BEFORE IMPOSING PENALTY REASONABLE OPPORTUNITY HAD NOT BEEN GIVEN T O THE ASSESSEE OF THE OFFENCE ALLEGED AGAINST HIM. NOW, IN THE FACTS AND CIRCUMSTANCES OF THIS CASE AND IN THE BACKGROUND THAT THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE BETWEE N THE TWO VALUATION REPORTS AND WAS FURTHER ASKED TO EXPLAIN WHY THE DIFFERENCE BETWEEN THE ESTIMATED VALUATION OF THE DEPARTMENTAL VALUER AND HIS OWN VALUER SHOULD NOT B E TREATED AS CONCEALED INCOME AND, THEREAFTER, TREATING IT ON THAT BASIS, PENALTY WAS IMPOSED AND THE IAC CONSIDERING THE EXPLANATION OF THE ASSESSEE UPHELD THE FINDINGS THA T THERE WAS, CONCEALMENT OF THE PARTICULARS OF INCOME WHICH WAS ALSO REVEALED FROM HIS BOOKS OF ACCOUNT, THERE WAS NO QUESTION OF THE ASSESSEE BEING NOT HEARD OR NOT GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE IN THE FACTS OF THIS CASE UNLIKE IN THE CASE BEFORE THE DIVISION BE NCH OF THE GUJARAT HIGH COURT. IT IS TRUE THAT IF NOTICE IS GIVEN IN RESPECT OF ONE OFFENCE ONLY A ND THE FINDING IS BASED ON ANOTHER THEN WE COULD SAY THAT THE LAW WAS NOT COMPLIED WITH. FURTH ER, IT WAS FOUND IN THAT CASE THAT THERE WAS NO CONCEALMENT AS SUCH. IN THIS CASE, THE POSITION IS SOMEWHAT DIFFERENT. IN THIS CASE, THE CONCEALMENT WAS FOUND AND THE TRIBUNAL UPHELD THE D ECISION THOUGH FOR A REDUCED AMOUNT . THEREFORE, IN OUR OPINION, THE OBSERVATIONS OF THE DIVISION BENCH OF THE GUJARAT HIGH COURT WOULD NOT BE APPLICABLE TO THE FACTS AND CIRCUMSTAN CES OF THE INSTANT CASE. 6.1. IN THE PRESENT CASE BEFORE THE TRIBUNAL, THE LD AO DID NOT SPECIFY THE GROUND ON WHICH HE IS PROPOSING TO IMPOSE PENALTY IN THE SHOW CAUSE NOTICE U/S 274 OF THE ACT. THE PROPOSITION LAID DOWN BY THE HONBLE CALCUTTA HIGH COURT WOULD THEREFORE BE TRUE ONLY IN A CASE WHERE SHOW CAUSE NOTICE U/S 274 OF THE ACT SPE CIFIES A PARTICULAR CHARGE AND IN THE ORDER IMPOSING PENALTY OR IN FURTHER APPELLATE ORDE RS IMPOSITION OF PENALTY IS CONFIRMED ON 7 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 SOME OTHER CHARGE. IN A CASE WHERE THE CHARGE ITSEL F IS NOT SPECIFIED IN THE SHOW CAUSE NOTICE U/S 274 OF THE ACT, WE ARE OF THE VIEW THAT THE DEC ISION RENDERED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF ACIT VS MANJUNATHA COTTON AND GINNING FACTORY REPORTED IN 359 ITR 565 (KAR) WOULD APPLY. IN THAT VIEW OF THE MAT TER, WE ARE OF THE VIEW THAT THERE IS NO CONFLICT BETWEEN THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON SUPRA AND THE HONBLE CALCUTTA HI GH COURT IN THE CASE OF RAHMAT DEVELOPMENT & ENGINEERING CORPORATION VS CIT, SUPR A. 7. IT IS CLEAR FROM THE AFORESAID DECISIONS 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 SOUGHT TO BE IMPOSED. FOLLOWIN G THE DECISION OF THE HONBLE KARNATAKA HIGH COURT WHICH HAS BEEN FOLLOWED IN THE AFORESAID TRIBUNAL DECISIONS, WE HOLD THAT THE ORDER IMPOSING PENALTY IN THE ASSESSMENT YEAR 2010- 11 HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELLED. 8. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY O F PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE THEREFORE CANCEL THE ORDERS IMPOSI NG PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSEE. IN VIEW OF OUR ABOVE CONCLU SIONS ON THE ISSUE OF NOT RECORDING OF PROPER SATISFACTION AND THE DEFECT IN SHOW CAUSE NO TICE U/S.274 OF THE ACT, WE ARE NOT DEALING WITH THE OTHER ARGUMENTS MADE ON MERITS OF THE ORDER IMPOSING PENALTY ON THE ASSESSEE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.12.2016 SD/- SD/- (S. S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED :9 TH DECEMBER, 2016 JD.(SR.P.S.) 8 ITA NO. 1051/KOL/2016 FLOW & FLUID CONTROL CENTRE, AY 2010-11 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. FLOW & FLUID CONTROL CENTRE, 26/1, STRAND ROAD, GROUND FLOOR, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-34(4), KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .