DCIT, Central Circle - XXI, Kolkata, Kolkata V. Shri Subhas Sastri, Kolkata

ITA 1105/KOL/2009

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5054 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 11-05-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 25-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU ACIT
• Assessee Lawyers: A K TIBREWAL; AMIT AGARWA
• Keywords: Search and seizure; Principle of natural justice; Initiation of penalty proceedings; Tax effect
• Section: 153A; 27; 132

Judgement Text

I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NOS. 1105, 1049, 401, 882/KOL/2009 ASSESSMENT YEARS:2001-02, 2002-03, 2003-04 & 2005-0 6 DEPUTY COMMISSIONER OF INCOME TAX,................. ...................APPELLANT CENTRAL CIRCLE-XXI, KOLKATA, PODDAR COURT, 18, RABINDRA SARANI, KOLKATA-700 001 -VS.- SHRI SUBHAS SHASTRI,............................... ............................RESPONDENT FLAT NO. 1B, 2, RUP CHAND MUKHERJEE LANE, KOLKATA-700 025 [PAN : ANOPS 0619 L] & I.T.A. NOS. 818, 278, 667 & 668/KOL/2009 ASSESSMENT YEARS:2002-03, 2003-04, 2004-05 & 2005-0 6 SHRI SUBHAS SHASTRI,............................... ...............................APPELLANT FLAT NO. 1B, 2, RUP CHAND MUKHERJEE LANE, KOLKATA-700 025 [PAN : ANOPS 0619 L] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,............. ..............RESPONDENT CENTRAL CIRCLE-XXI, KOLKATA, PODDAR COURT, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI DAVID Z. CHAWNGTHU, ACIT, D.R., FOR THE DEPARTMENT SHRI A.K. TIBREWAL, FCA AND SHRI AMIT AGARWAL, ADVO CATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JANUARY 12, 2016 DATE OF PRONOUNCING THE ORDER : FEBRUARY 24, 2016 O R D E R PER SHRI P.M. JAGTAP :- OUT OF THESE EIGHT APPEALS, ONE APPEAL BEING ITA NO . 1105/KOL/2009 IS THE APPEAL OF THE REVENUE FOR ASSE SSMENT YEAR 2001- I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 2 OF 9 02, OTHER APPEAL BEING ITA NO. 667/KOL/2009 IS THE APPEAL OF THE ASSESSEE FOR A.Y. 2004-05 WHILE THE REMAINING SIX A PPEALS BEING ITA NO. 818/KOL/2009 (ASSESSEES APPEAL) AND ITA NO. 1049/K OL/2009 (REVENUES APPEAL), ITA NO. 278/KOL/2009 (ASSESSEE S APPEAL) AND ITA NO. 401/KOL/2009 (REVENUES APPEAL) AS WELL AS ITA NO. 668/KOL/2009 (ASSESSEES APPEAL) AND ITA NO. 882/KOL/2009 (REVEN UES APPEAL) ARE THE CROSS APPEALS FOR A.Y.2002-03, 2003-04 AND 2005 -06 RESPECTIVELY. SINCE ALL THESE APPEALS INVOLVE A COMMON ISSUE RELA TING TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C), THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS SINGLE CONSOLIDATED O RDER. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS AN ASTROLOGER BY PROFESSION AND DERIVES FROM HIS PROFE SSIONAL ACTIVITIES AND INVESTMENT. A SEARCH AND SEIZURE ACTION UNDER SECTI ON 132 WAS CONDUCTED IN HIS CASE ON 24.01.2006. DURING THE COURSE OF SAI D ACTION, UNDISCLOSED NATIONAL SAVINGS CERTIFICATES, KISHAN VIKASH PATRAS , BANK FIXED DEPOSITS AND BANK ACCOUNTS IN THE NAME OF THE ASSESSEE WERE FOUND BESIDES CASH AS WELL AS OTHER INCRIMINATING DOCUMENTS. CONSEQUENTLY NOTICES UNDER SECTION 153A WERE ISSUED BY THE ASSESSING OFFICER, IN RESPONSE TO WHICH THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERA TION WERE FILED BY THE ASSESSEE DECLARING THE INCOME AS UNDER:- ASSESSMENT YEAR IN COME 200 1 - 200 2 RS. 20, 86,600 / - 200 2 - 200 3 RS. 14,74,410 / - 200 3 - 200 4 RS. 15,27,500 / - 200 4 - 200 5 RS. 2,88,080 / - 200 5 - 200 6 RS. 7,26,740 / - IN THE INCOME OFFERED BY THE ASSESSEE AS ABOVE, INV ESTMENTS ETC. FOUND TO BE MADE DURING THE COURSE OF SEARCH WERE OFFERED BY THE ASSESSEE TO TAX. IN THE ASSESSMENTS COMPLETED UNDER SECTION 153A REA D WITH SECTION 143(3), THE INCOME AS RETURNED BY THE ASSESSEE FOR A.Y. 2001-02 WAS I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 3 OF 9 ACCEPTED BY THE ASSESSING OFFICER WHILE IN OTHER YE ARS I.E. A.Y. 2002-03, 2003-04 & 2005-06, HE MADE FURTHER ADDITIONS OVER A ND ABOVE THE INCOME RETURNED BY THE ASSESSEE ON THE BASIS OF FINDINGS O F THE SEARCH ACTION. HE ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 27 1(1)(C) FOR ALL THE FIVE YEARS UNDER CONSIDERATION AND SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE PENALTY NOTICES ISSUED BY HIM WAS NOT FOUND SATISFACTORY, THE ASSESSING OFFICER IMPOSED PENALTI ES UNDER SECTION 271(1)(C) IN RESPECT OF ADDITIONAL INCOME OFFERED B Y THE ASSESSEE IN THE RETURNS FILED IN RESPONSE TO NOTICES UNDER SECTION 153A AS WELL AS FURTHER ADDITIONS MADE BY HIM TO THE INCOME OF THE ASSESESE IN THE ASSESSMENTS COMPLETED UNDER SECTION 153A READ WITH SECTION 143( 3) AS UNDER:- ASSESSMENT YEAR INCOME 200 1 - 200 2 RS. 6,63,390 / - 200 2 - 200 3 RS. 5,56 ,865 / - 200 3 - 200 4 RS. 6,04,485 / - 200 4 - 200 5 RS. 26,14,026 / - 200 5 - 200 6 RS. 11,24,2 1 4 / - 3. THE PENALTIES IMPOSED BY THE ASSESSING OFFICER U NDER SECTION 271(1)(C) FOR ALL THE FIVE YEARS UNDER CONSIDERATIO N WERE CHALLENGED BY THE ASSESSEE IN THE APPEALS FILED BEFORE THE LD. CI T(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE ON BEHALF OF THE A SSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) CANCELLED THE PENALTY IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) FOR A.Y. 2001- 02 VIDE HIS APPELLATE ORDER DATED 24.03.2009, WHILE THE PENALTIES IMPOSED BY THE ASSESSING OFFICER FOR A.YS. 2002-03, 2003-04 , 2004-05 & 2005-06 WERE PARTLY SUSTAINED BY THE LD. CIT(APPEALS) VIDE HIS APPELLATE ORDERS DATED 24.03.2009, 29.12.2008, 17.02.2009 AND 17.02. 2009 RESPECTIVELY. AGGRIEVED BY THE ORDERS OF THE LD. CIT(APPEALS), TH E ASSESSEE AND REVENUE BOTH HAVE PREFERRED THEIR APPEALS BEFORE THE TRIBUN AL FOR THE RELEVANT YEARS UNDER CONSIDERATION AS MENTIONED IN PARAGRAPH NO. 1 OF THIS ORDER. I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 4 OF 9 4. AT THE TIME OF HEARING BEFORE US, THE LD. COUNSE L FOR THE ASSESSEE, AT THE OUTSET, HAS POINTED OUT THAT THE TAX EFFECT INV OLVED IN ALL THE APPEALS OF THE REVENUE FOR A.YS. 2001-02, 2002-03, 2003-04 & 2005-06 IS LESS THAN THE REVISED MONETARY LIMIT RECENTLY FIXED BY T HE CBDT VIDE CIRCULAR NO. 21/2015 DATED 10 TH DECEMBER, 2015 AT RS.10,00,000/- FOR FILING THE APPEAL BY THE REVENUE BEFORE THE TRIBUNAL AND THIS POSITION CLEARLY EVIDENT FROM THE GROUNDS RAISED BY THE REVENUE IN T HIS APPEAL IS NOT DISPUTED EVEN BY THE LD. D.R. IN CIRCULAR NO. 21/20 15 (SUPRA) RECENTLY ISSUED BY THE CBDT, THE MONETARY LIMIT FOR FILING T HE APPEALS BY THE REVENUE BEFORE THE TRIBUNAL HAS BEEN INCREASED TO R S.10,00,000/- AND AS CLARIFIED IN THE SAID CIRCULAR, THE SAID MONETARY L IMIT IS APPLICABLE RETROSPECTIVELY EVEN TO THE APPEALS PENDING BEFORE THE TRIBUNAL. THE CBDT HAS ALSO INSTRUCTED THAT SUCH PENDING APPEALS BELOW THIS SPECIFIED TAX LIMIT OF RS.10,00,000/- MAY BE WITHDRAWN/ NOT P RESSED. KEEPING IN VIEW THE INSTRUCTION GIVEN BY THE CBDT VIDE CIRCULA R NO. 21/2015 DATED 10.12.2015, WHICH IS SQUARELY APPLICABLE IN THE PRE SENT CASE, THE FOUR APPEALS FILED BY THE REVENUE FOR A.YS. 2001-02, 200 2-03, 2003-04 & 2005-06 ARE TREATED AS WITHDRAWN/NOT PRESSED AND DI SMISSED ACCORDINGLY. 5. AS REGARDS THE COMMON ISSUE INVOLVED IN ALL THE FOUR APPEALS OF THE ASSESSEE RELATING TO THE SUSTENANCE BY THE LD. CIT( APPEALS) OF THE PENALTIES IMPOSED BY THE ASSESSING OFFICER UNDER SE CTION 271(1)(C) PARTLY FOR A.Y. 2002-03, 2003-04, 2004-05 AND 2005-06, THE LD. COUNSEL FOR THE ASSESSEE HAS RAISED A PRELIMINARY ISSUE CHALLENGING THE VALIDITY OF PENALTY ORDERS PASSED BY THE ASSESSING OFFICER ON THE GROUN D THAT IN THE ABSENCE OF ANY SPECIFIC MENTION IN THE SHOW-CAUSE NOTICES I SSUED UNDER SECTION 274 OF THE ACT FOR ALL THE FOUR YEARS UNDER CONSIDE RATION BY THE ASSESSING OFFICER AS TO WHETHER THE ASSEESSEE IS GUILTY OF HA VING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CON CEALED PARTICULARS OF SUCH INCOME, THE INITIATION OF PENALTY PROCEEDINGS ITSELF WAS BAD IN LAW AND THE PENALTY ORDERS PASSED IN PURSUANCE THEREOF ARE LIABLE TO BE QUASHED BEING INVALID. HE HAS INVITED OUR ATTENTION TO THE SHOW-CAUSE I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 5 OF 9 NOTICES ISSUED BY THE ASSESSING OFFICER FOR ALL THE FOUR YEARS UNDER CONSIDERATION UNDER SECTION 274 IN THE PRINTED FORM TO POINT OUT THAT THE IRRELEVANT PORTION, VIZ. FURNISHED INACCURATE PART ICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME WAS NOT STRU CK OFF BY THE ASSESSING OFFICER. ALTHOUGH THE LD. D.R. HAS CONTEN DED IN THIS REGARD THAT THE RELEVANT PORTION IN THE PENALTY NOTICES HAVING BEEN TICKED BY THE ASSESSING OFFICER, IT IS CLEAR THAT THE OTHER CHARG E WAS NOT INVOKED BY HIM AND THERE WAS THUS NO INFIRMITY IN THE NOTICES ISSU ED BY THE ASSESSING OFFICER UNDER SECTION 274 AS ALLEGED BY THE LD. COU NSEL FOR THE ASSESESE, IT IS OBSERVED THAT THE COORDINATE BENCH OF THIS TRIBU NAL IN THE CASE OF SUVAPRASANNA BHATTACHARYA VS.- ACIT (IN ITA NO. 13 03/KOL/2010) CITED BY THE LD. COUNSEL FOR THE ASSESSEE HAD AN OCCASION TO CONSIDER A SIMILAR ISSUE IN THE IDENTICAL FACT SITUATION AND THE ORDER PASSED BY THE ASSESSING OFFICER IMPOSING PENALTY UNDER SECTION 271(1)(C) WA S HELD TO BE INVALID BY THE TRIBUNAL RELYING ON THE DECISION OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS.- MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565 AFTER DISCUSSING TH E PROPOSITION LAID DOWN THEREIN IN GREAT DETEAIL IN PARAGRAPH NO. 8 TO 8.2 OF ITS ORDER DATED 06.11.2015, WHICH READ AS UNDER:- 8. THE NEXT ARGUMENT THAT THE SHOW CAUSE NOTICE U /S.274 OF THE ACT WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR C ONCEALING PARTICULARS OF SUCH INCOME. ON THIS ASPECT WE FIND THAT IN THE SHOW CAUSE NOTIC E U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELT OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME. 8.1 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 SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING P ROPOSED 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 FO RM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIRE MENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO B E HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 6 OF 9 8.2 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLL OWING PRINCIPLES TO BE FOLLOWED IN THE MATTER OF 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 REGARDING THE EXISTENCE OF ANY SAID 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 CO NTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF T HE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT I S PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED I N SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSI NG PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGH T TO CONTEST 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 NOT E XIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A P RINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SA TISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE 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 HAVE TO BE HELD TO BE STRICTLY CONSTRUED , NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPE CIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E 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, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CAS ES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF TH E PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCE EDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING H IM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE 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 THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALL Y 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 ANSWER. I T IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON T HE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE 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 SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, T HE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUS T BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HAND S OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FU RTHER DISCOVERY OF FACTS I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 7 OF 9 SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE 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 COURSE OF ANY PROCEEDIN GS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL 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 FU RNISHING 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 FURNISHING INACCURAT E PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE 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 HELD THAT LEVY OF P ENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PRO FORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE A S TO NON-APPLICATION OF MIND. 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 REVISI ONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOU LD BY A LEGAL 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 PROCEEDINGS UNDER SECTION 271 (L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECA USE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). 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 TAX AND INTEREST THAT BY ITSE LF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS 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 I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 8 OF 9 LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD H AVE 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 FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACTS 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 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 SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(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 MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY 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 PENALTY THOUGH EMANAT E FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS ' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSES SEE 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 A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) 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 SOUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANC ELLED. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF P ENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE THEREFORE CANCEL THE ORDERS IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSEE. I.T.A. NO. 1105, 818, 1049, 278, 401, 667, 668 & 882/KOL./2009 ASSESSMENT YEARS: 2001-2002, 02-03, 02-03, 03-04, 0 3-04, 04-05, 05-06 & 2005-2006 PAGE 9 OF 9 6. IN OUR OPINION, THE DECISION OF THE COORDINATE B ENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF SUVAPRASANNA BHATT ACHARYA VS.- ACIT RENDERED VIDE ITS ORDER DATED 06.11.2015 IN ITA NO. 1303/KOL/2010 BY RELYING ON THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT & ANOTHER VS.- MANJUNATHA COTTON & GINNING FAC TORY REPORTED IN 359 ITR 565 IS CLEARLY APPLICABLE IN THE PRESENT CASE A ND RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE SHOW-CAUSE NOT ICES ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 FOR ALL THE FOU R YEARS UNDER CONSIDERATION NOT BEING IN ACCORDANCE WITH LAW, THE PENALTY ORDERS PASSED BY THE ASSESSING OFFICER IN PURSUANCE THEREO F ARE LIABLE TO BE CANCELLED BEING INVALID. WE ACCORDINGLY CANCEL THE ORDERS PASSED BY THE ASSESSING OFFICER IMPOSING PENALTIES UNDER SECTION 271(1)(C) FOR A.YS. 2002-03, 2003-04, 2004-05 & 2005-06 AND ALLOW THE A PPEALS OF THE ASSESSEE FOR THE SAID YEARS. 7. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSES SEE ARE ALLOWED, WHEREAS ALL THE FOUR APPEALS OF THE REVENUE ARE DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 24, 2016. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 24 TH DAY OF FEBRUARY, 2016 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-XXI, KOLKATA, PODDAR COURT, 18, RABINDRA SARANI, KOLKATA-700 001 (2) SHRI SUBHAS SHASTRI, FLAT NO. 1B, 2, RUP CHAND MUKHERJEE LANE, KOLKATA-700 025 (3) COMMISSIONER OF INCOME-TAX (APPEALS), CENTRAL- II, KOLKATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.