Shri Kedar Nath Dhoot, Kolkata V. DCIT, C.C.-XXVII, Kolkata, Kolkata

ITA 1125/KOL/2010

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3311 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 20-08-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 03-06-2010
• Court: TRIBUNAL
• Department Lawyers: SANJIT DAS
• Assessee Lawyers: A K TULSIYAN
• Keywords: Search and seizure; Document seized; Principle of natural justice; Initiation of penalty proceedings; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM] ITA NOS.1125 TO 1127/KOL/2010 ASSESSMENT YEARS : 2002-03,2005-06&2006-07 SHRI KEDAR NATH DHOOT .-VERSUS- D.C.I.T., CENTRAL CIRCLE-XXVII, KOLKATA KOLKATA (PAN:ACTPD 4965 G) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI A.K.TULSIYAN, FCA FOR THE RESPONDENT : SHRI SANJIT DAS, JCIT, SR.DR DATE OF HEARING : 21.12.2015. DATE OF PRONOUNCEMENT : 15.01.2016. ORDER PER SHRI N.V.VASUDEVAN, JM THESE ARE APPEALS BY THE ASSESSEE AGAINST THREE ORDERS OF DATED 10.02.2010 OF CIT(A)-CENTRAL-II, KOLKATA RELATING TO A.Y.2002-03, 2005-06 & 2006-07. 2. IN ALL THESE APPEALS THE ASSESSEE HAS CHALLE NGED THE ORDER OF CIT(A) WHEREBY CIT(A) CONFIRMED THE ORDER OF AO ON IMPOSING PENALT Y U/S 271(1)(C) OF THE ACT. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE PENALTY WAS IMPOSED BY THE AO ARE AS FOLLOWS :- THE ASSESSEE IS AN INDIVIDUAL. THERE WAS A SEARCH AND SEIZURE OPERATION CARRIED OUT BY THE REVENUE U/S 132(1) OF THE INCOME TAX ACT, 1961 (ACT) IN THE CASE OF RAMSWARUP GROUP. A SEARCH WAS CARRIED OUT ON 14. 09.2006. ONE SHRI ASHIS JHUNJHUNWALA, MANAGING DIRECTOR AND CHAIRMAN OF RAM SARUP GROUP WAS ALSO SEARCHED AS PART OF THE SEARCH CONDUCTED IN THE RAM SWARUP GROUP. IN HIS RESIDENTIAL PREMISES DOCUMENTS EVIDENCING TRANSACTIONS BETWEEN THE ASSESSEE AND RAMSWARUP GROUP WERE FOUND AND SEIZED. THE SEIZED DOCUMENTS R EVEAL THAT THE ASSESSEE HAD ACTED ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 2 AS A COMMISSION AGENT FOR THE RAMSWARUP GROUP IN RE SPECT OF ORDERS PROCURED BY RAMSWARUP INDUSTRIAL CORPORATION AND RAMSARUP VYAPA AR LTD FROM THE WEST BENGAL STATE ELECTRICITY BOARD. BASED ON THE DOCUMENTS SO FOUND, PROCEEDINGS U/S 153C WERE INITIATED AGAINST THE ASSESSEE. THE ASSESSEE FILED RETURN OF INCOME IN RESPONSE TO NOTICE ISSUED U/S 153C OF THE ACT. AO ACCEPTED HAVING THE INCOME IN THE FORM OF COMMISSION AND ALSO HAVING EFFECT SALES. BOTH RECEI PT OF COMMISSION AND SALE OF SALES WERE RECORDED IN THE REGULAR BOOKS OF ACCOUNTS BY T HE ASSESSEE. THE ASSESSEE FILED RETURN OF INCOME FOR A.YRS.2002-03, 2005-06 AND 200 6-07 AND OFFERED ADDITIONAL INCOME AS FOLLOWS :- I. ADDITIONAL INCOME OFFERED & ASSESSED U/S 153C : ASST.YEAR ADDITIONAL INCOME OFFERED IN THE RETURN U/S 153C ADDITIONAL INCOME ASSESSED IN THE ASST. ORDER U/S 153C ADDITION MADE BY THE A.O. 2002-03 RS.5,94,769/- RS.7,43,460/- RS.1,48,691/- 2005-06 RS.27,59,776.- RS.35,14,660/- RS.7,54,884/- 2006-07 RS.2,68,042/- RS.3,36,050/- RS.68,008/- II. BREAK UP OF ADDITION HEAD WISE INCOME OFFERED; ASST.YEAR COMMISSION INCOME PROFIT TOTAL 2002-03 RS.5,94,769/- ------- RS.5,94,769/- 2005-06 RS.23,26,842/- RS.4,32,934/- RS.27,59,776/- 2006-07 RS.2,68,042/- -------- RS.2,68,042/- III. BREAK UP OF ASSESSED INCOME & ADDITIONS MADE HEAD WISE : ASST.YEAR COMMISSION INCOME ASSESSED ADDITION ON ACCOUNT OF THE COMMISSION PROFIT ON SALES ASSESSED ADDITION ON ACCOUNT OF THE PROFIT TOTAL ADDITION (5=2+4) 2002-03 RS.7,43,460 RS.1,48,691/- ----- ----- RS.1,48,691/- 2005-06 RS.29,08,552/- RS.5,81,710/- RS.4,32,934/- RS.1,73,174/- RS.7,54,884/- 2006-07 RS.3,36,050/- RS.68,008/- ------- ------- R S.68,008/- 4. IN RESPECT OF THE ADDITIONS MADE AS AFORESAID I N THE COURSE OF ASSESSMENT PROCEEDINGS U/S 153C OF THE ACT AND THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE IN THE RETURN FILED U/S 153C OF THE ACT THE AO INITIA TED PROCEEDINGS U/S 271(1)(C) OF THE ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 3 ACT. ULTIMATELY ORDER IMPOSING PENALTY WAS PASSED W HICH WAS CONFIRMED BY CIT(A). AGGRIEVED BY THE ORDERS THE ASSESSEE HAS FILED THE PRESENT APPEALS BEFORE THE TRIBUNAL. 5. THE AMOUNT OF ADDITIONAL INCOME ASSESSED U/ S 153C OF THE ACT AND THE AMOUNT OF PENALTY IMPOSED ON THE ASSESSEE WERE AS FOLLOWS :- PENALTY IMPOSED ASST.YEAR ON THE ADDITIONAL INCOME ASSESSED IN THE ASST. ORDER U/S 153C AMOUNT OF PENALTY 2002-03 RS.7,43,460/- RS.2,25,818/- 2005-06 RS.35,14,660/- RS.11,83,033/- 2006-07 RS.3,36,050/- RS.1,28,140/- 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D BEFORE US THAT NEITHER EXPLANATION 5 NOR EXPLANATION 5A TO SECTION 271(1)(C) OF THE AC T WOULD APPLY IN THE PRESENT CASE AS THERE WAS NO SEARCH IN THE CASE OF THE ASSESSEE. IT WAS POINTED OUT BY HIM THAT THE QUESTION AS TO WHETHER THE ASSESSEE IS GUILTY OF HA VING CONCEALED PARTICULARS OF INCOME OR OF HAVING FURNISHED INACCURATE PARTICULARS OF IN COME HAS TO BE THEREFORE JUDGED IN THE LIGHT OF THE MAIN PROVISION OF SECTION 271(1)(C ) OF THE ACT. IT WAS SUBMITTED BY HIM THAT CIT(A) AS WELL AS AO IN IMPOSING PENALTY O N THE ASSESSEE CAME TO THE CONCLUSION THAT BUT FOR THE SEARCH IN THE CASE OF R AMSWARUP GROUP AND CONSEQUENT PROCEEDINGS AGAINST THE ASSESSEE U/S 153C OF THE AC T, THE INCOME IN QUESTION WOULD NOT HAVE BEEN TAXED BY THE ASSESSEE. HE POINTED OUT THAT THE REVENUE HAD PLACED RELIANCE PARTICULARLY ON THE DECISION OF THE HONBL E SUPREME COURT IN THE CASE OF UNION OF INDIA VS DHARMENDRA TEXTILE PROCESSORS 219 CTR 617 (SC) WHEREIN IT WAS LAID DOWN THAT IMPOSITION OF PENALTY ON FISCAL LOSS IS A SEVERE LIABILITY AND THEREFORE WAS NO NECESSITY TO PROVE THAT THERE WAS ANY INTENT ION TO CONCEAL PARTICULARS OF INCOME. HE POINTED OUT THAT THE HONBLE SUPREME COU RT IN A LATER DECISION RENDERED IN THE CASE OF UNION OF INDIA VS RAJASTHAN SPINNING & WEAVING MILLS 224 CTR 1 (SC) HAS EXPLAINED THE PRINCIPLE LAID DOWN IN THE CASE O F DHARMENDRA TEXTILES (SUPRA) AND HAVE HELD THAT PENALTY CAN BE IMPOSED ONLY WHEN THE CONDITIONS MENTIONED IN THE ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 4 SECTION ARE SATISFIED I.E. THERE MUST BE CONCEALMEN T OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 7. HIS NEXT SUBMISSION WAS THAT NOTICE U/S 274 OF THE ACT DOES NOT SATISFY THE SPECIFIC CHARGE AGAINST THE ASSESSEE AS TO WHETHER THE ASSES SEE IS GUILTY OF HAVING CONCEALED PARTICULARS OF INCOME OR HAVING FURNISHED INACCURAT E PARTICULARS OF INCOME. HE DREW OUR NOTICE TO THE DECISION RENDERED BY ITAT WHEREIN IT HAS BEEN HELD THAT THE FAILURE ON THE PART OF THE AO TO SPECIFY THE CHARGE AGAINST THE ASSESSEE BY STRIKING OUT THE RELEVANT PORTION OF THE SHOW CAUSE NOTICE ISSUED U/ S 274 OF THE ACT WOULD RENDER THE PROCEEDINGS FOR IMPOSITION OF PENALTY AND NULLITY. OUR ATTENTION IS DRAWN TO THE DECISION OF ITAT KOLKATA BENCH IN THE CASE OF SRI J AI PRAKASH KHAITAN VS DCIT IN ITA NO.1457 TO 1461/KOL/2012 DATED 02.12.2015. 8. THE LEARNED DR ON THE OTHER HAND RELIED ON THE ORDER OF CIT(A) AND FURTHER SUBMITTED THAT THE DEFECT IN THE SHOW CAUSE NOTICE U/S 274 OF THE ACT WILL BE CURED BY THE PROVISION OF SECTION 292B OF THE ACT. 9. WE HAVE GIVEN A CAREFUL CONSIDERATION TO TH E RIVAL SUBMISSIONS. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE S HOW CAUSE NOTICE U/S.274 OF THE ACT WHICH IS IN A PRINTED FORM AND THE AO HAS INDICATED IN THE SAID NOTICE AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE ASSESSEE FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOM E BY STRIKING OFF THE IRRELEVANT PORTION OF THE PRINTED SHOW CAUSE NOTICE. ON THIS ASPECT WE FIND THAT IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT THE AO HAS NOT STRU CK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELT OUT AS TO WHETHER THE PENALTY P ROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME O R CONCEALING PARTICULARS OF SUCH INCOME. 9.1. THE HONBLE KARNATAKA HIGH COURT IN THE CASE O F CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HA S HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 5 CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DO WN THAT CERTAIN PRINTED FORM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVE N WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PE NALTY 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 BE HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. 9.2. THE HONBLE KARNATAKA HIGH COURT IN THE CASE O F CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN T HE FOLLOWING 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 I T 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 CIVIL LIABILITY, I N FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND I MPOSING 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 I NCOME. 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 ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 6 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 PENALTY PROCEE DINGS 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, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY I MPOSING THE 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 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 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 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 PENALTY 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 INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROP RIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOM E. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS 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 ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 7 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 ITSELF 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 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 BONAFIDE, 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 BONAFIDE 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 A PPEAL, 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 ASS ESSEE. 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 MATT ER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 8 9.3. IT IS CLEAR FROM THE AFORESAID DECISION THAT O N THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECT IVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IMPOSE D. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDE RS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CON SEQUENTLY PENALTY IMPOSED IS CANCELLED. 9.4. WE MAY ALSO ADD THAT THE PROVISION OF S ECTION 292B OF THE ACT CANNOT CURE THE BASIC DEFECT IN ASSUMPTION OF JURISDICTION AND ONLY CURE THE MISTAKE, DEFECT OR OMISSION IN RETURN OF INCOME, ASSESSMENT, NOTICE OR THE PROCEEDING IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO INTENT AN D PURPOSE OF THE ACT. AS WE HAVE ALREADY SEEN THAT THE HONBLE KARNATAKA HIGH COURT IN THE DECISION REFERRED TO EARLIER VIEW THE SHOW CAUSE NOTICE AND THE REASONS MENTIONE D IN THE SHOW CAUSE NOTICE ARE PART OF THE PROCESS OF THE NATURAL JUSTICE AND THE DEFECT IN SUCH NOTICE CANNOT BE OVERLOOKED. IN VIEW OF THE AFORESAID DECISION WE DO NOT FIND ANY INFIRMITY IN THE ARGUMENTS ADVANCED BY THE LEARNED AR BEFORE US. 10. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE THEREFORE CANCEL THE ORDER S IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSEE. IN VIEW OF O UR ABOVE CONCLUSIONS ON THE ISSUE OF DEFECT IN SHOW CAUSE NOTICE U/S.274 OF THE ACT, WE ARE NOT DEALING WITH THE OTHER ARGUMENTS MADE ON MERITS OF THE ORDERS IMPOSING PEN ALTY ON THE ASSESSSEE. 11. IN THE RESULT THE APPEALS OF THE ASSESSE E ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 15.01.2016. SD/- SD/- [WASEEM AHMED] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 15.01.2016. R.G.(.P.S.) ITA NOS.1125-1127/KOL/2010 SHRI KEDAR NATH DHOO T. A.YRS.2002-03,2005-06&2006-07 9 COPY OF THE ORDER FORWARDED TO: 1. SHRI KEDAR NATH DHOOT, 113, NETAJI SUBHAS ROAD, KOLKATA-700001. 2 THE D.C.I.T., CENTRAL CIRCLE-XXVII, KOLKATA. 3. 5. CIT(A)-CENTRAL-II, KOLKATA 4. C.I.T., KO LKATA. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES