S.L.K. Properties, V. Income-tax Officer,

ITA 140/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2505 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Unexplained investment; Invalid notice; Search and seizure; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause; Documents seized
• Section: 143(3); 133A; 153A; 234B; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.140/PN/2014 #& & / ASSESSMENT YEAR : 2006-07 S.L. K. PROPERTIES, 289/2, MAHATMA PHULE PETH, PUNE 42. PAN NO.ABEFS6900J . / APPELLANT V/S ITO, WARD-2(1), PUNE . / RESPONDENT / ASSESSEE BY : SHRI SHARAD SHAH / REVENUE BY : SHRI HITENDRA NINAWE / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17-09-2013 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2006-07. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. THE LD. AO ERRED IN LEVYING (AND LD.CIT(A)-III) ERRED IN CONFIRMING) PENALTY OF RS.23,77,742/-. 2. THE LD. AO ERRED IN DISREGARDING THE EXPLANATION SUBMITTED BY THE ASSESSEE FOR NON LEVY OF PENALTY. / DATE OF HEARING :10.03.2016 / DATE OF PRONOUNCEMENT: 18 .03.2016 2 ITA NO.140PN/2014 3. THE APPELLANT CRAVES ITS RIGHT TO ADD TO OR ALTER THE GROUNDS OF APPEAL AT ANY TIME BEFORE OR DURING THE COURSE OF HE ARING OF THE CASE. 3. THE ASSESSEE HAS ALSO TAKEN THE FOLLOWING ADDITIONAL GROUND : THERE IS NO CLEAR SATISFACTION BY THE AO WHETHER HE IS SATISFIED FOR CONCEALMENT OR INCOME OR WHETHER FOR SUBMISSION OF INA CCURATE PARTICULARS AND HENCE THE LEVY OF PENALTY IS INVALID. 4. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO THE ADD ITIONAL GROUND SUBMITTED THAT THE SAID GROUND IS PURELY A LEGAL GROUND AND NO FRESH FACTS ARE REQUIRED TO BE INVESTIGATED. RELY ING ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF NTPC LT D. REPORTED IN 229 ITR 383 AND IN THE CASE OF JUTE CORPORA TION OF INDIA LTD. REPORTED IN 187 ITR 688 AND THE DECISION OF HO NBLE BOMBAY HIGH COURT IN THE CASE OF AHMEDABAD ELECTRICITY COMPANY REPORTED IN 199 ITR 351 HE SUBMITTED THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE SHOULD BE ADMITTED. 5. AFTER HEARING BOTH THE SIDES AND CONSIDERING THE ADDIT IONAL GROUND RAISED BY THE ASSESSEE BEING PURELY LEGAL IN NATU RE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTED FOR ADJUDICATION. 6. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITIES OF BUILDERS AND PROMOTERS. A SEARCH AND SEIZURE ACTION U/S.132 OF THE ACT WAS CONDUCTED IN THE CASES OF LADKAT GROUP. DURING THE SAID SEARCH PAGE NO.8 OF BUNDLE NO.16 W AS SEIZED AT M/S. NEW AUTO CORNER, PLOT NO.36, SOMWARPETH, PU NE WHICH IS A PAGE IN PENCIL WRITING BY SHRI GAUTAM LADKAT. IT WAS OBSERVED THAT ON THE TOP OF THIS PAGE THERE IS A NOTING SLK 3 ITA NO.140PN/2014 INVESTMENT UPTILL NOW AND BELOW THAT COLUMNS ARE MADE A S CHS AND CQ COLUMN CQ IS BLANK BUT UNDER COLUMN CH S FOLLOWING NOTINGS ARE MADE : PLOT 61,00,000 KHEDKAR BAI 25,000 ASSIGNMENT TAX 89,000 DEMARCATION 50,000 RAJU 2,00,000 GIRME 2,25,000 DEMARCATION 75,000 PLAN PASS 3,00,000 --------------- 70,64,000 --------------- 23,55,000 PER 7. THE SAID DOCUMENT WAS STATED TO BELONGING TO THE ASSSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF PROMOTERS AND BUILDERS. SHRI GAUTAM LADKAT, A PARTNER OF THE ASSESSEE FIRM, EXPLAINED ITS WRITINGS ON SAID DOCUMENTS. IN VIEW OF THE AB OVE, NOTICE U/S.153C WAS ISSUED TO THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO CONFRONTED THE ASSESS EE ABOUT SUCH NOTINGS. ACCORDING TO THE AO THE SAID DOCUMENT RE FLECTED INVESTMENT IN A PROJECT BEING UNDERTAKEN BY SLK PROPE RTIES (ASSESSEE FIRM) WHICH WAS NOT ACCOUNTED FOR IN THE BOOKS O F ACCOUNT MAINTAINED BY THE FIRM. 8. AFTER CONSIDERING THE EXPLANATION PUTFORTH BY THE ASSE SSEE THE AO CONCLUDED THAT THE PAYMENTS REFLECTED IN THE SAID DOCUMENT DO NOT FIND ANY PLACE IN THE REGULAR BOOKS OF AC COUNT MAINTAINED BY THE ASSESSEE. HE ACCORDINGLY TREATED THA T THE AMOUNT OF RS.70,64,000/- REPRESENTED UNEXPLAINED INVESTMEN T BY THE ASSESSEE WHICH HE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 ITA NO.140PN/2014 9. IN APPEAL THE CIT(A) UPHELD THE ACTION OF THE AO. ON FURTHER APPEAL THE TRIBUNAL ALSO UPHELD THE ORDER OF THE CI T(A). IN THE MEANTIME, THE AO HAD INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T ACT. REJECTING THE VARIOUS EXPLANAT IONS GIVEN BY THE ASSESSEE THE AO LEVIED PENALTY OF RS.23,77,742 /- BEING 100% OF TAX SOUGHT TO BE EVADED. IN APPEAL THE L D.CIT(A) UPHELD THE PENALTY SO LEVIED BY THE AO. 10. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUB MITTED THAT THERE IS NO CLEAR SATISFACTION BY THE AO AS TO WHET HER HE IS LEVYING PENALTY FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. REFERRING TO THE COPY OF THE ASSESSMENT ORDER HE DREW THE ATTENTION OF THE BENCH T O PARA 10 OF THE ORDER WHICH READS AS UNDER : 10. THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T . ACT, 1961 FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHI NG INACCURATE PARTICULARS OF SUCH INCOME ARE SEPARATELY INITIATED. 12. REFERRING TO BOTTOM OF THE ASSESSMENT ORDER HE SUB MITTED THAT THE AO HAS AGAIN MENTIONED TO ISSUE NOTICE U/S.274 R.W.S. 271(1)(C) OF THE I.T. ACT FOR CONCEALMENT OF INCOME AS DISCUSS ED IN THE BODY OF ORDER. REFERRING TO THE NOTICE ISSUED U/S.274 R.W.S. 271(1)(C) VIDE LETTER DATED 22-03-2012 HE SUBMITTED THAT H ERE ALSO THERE IS NO MENTION AS TO WHETHER THE PENALTY HAS BEEN LEVIED FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. 5 ITA NO.140PN/2014 13. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SANJOG TARACHAND LODHA VS. ITO VIDE ITA NOS. 688 AND 689/PN/2014 ORDER DATED 31-08-2015 FOR A.YRS. 2007 -08 AND 2008-09 HE SUBMITTED THAT THE TRIBUNAL, FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CI T VS. MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 IT R 565, HAS HELD THAT WHERE IT IS NOT CLEAR FROM THE NOTICE U/S.27 4 THE REASONS FOR LEVYING PENALTY THE NOTICE ITSELF IS BAD IN LAW AN D THE PENALTY ORDER PASSED ON THE BASIS OF SUCH NOTICE IS NOT SUSTAINABLE. SINCE IN THE INSTANT CASE ADMITTEDLY IT IS NOT CLEAR FROM THE NOTICE ISSUED U/S.274 REGARDING THE REASONS FOR LEVY OF PENALTY, THEREFORE, THE NOTICE ITSELF HAS TO BE HELD AS BAD IN LAW AND INVALID AND CONSEQUENTLY THE PENALTY ORDER PASSED ON THE BASIS OF SUCH INVALID NOTICE IS NOT SUSTAINABLE. 14. SO FAR AS THE MERIT OF THE CASE IS CONCERNED THE LD . COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PA RA 9 OF THE ASSESSMENT ORDER WHICH READS AS UNDER : MERELY BECAUSE THE INVESTMENT UPTIL THE SEARCH PERIOD APPROXIMATELY MATCHES WITH THE FIGURE APPEARING ON THE SAID PAPER CANNOT MEAN THAT IT IS EXPLAINED. ASSESSEE HAS TO SHOW EV ERY ENTRY IN THE BOOKS OF ACCOUNTS, IF AT ALL ASSESSEES CONTENTION BE CONSIDERED. IN ABSENCE OF THAT, THE ONLY CONCLUSION W HICH CAN BE DRAWN FROM THE CONTENTS OF THE PAPER AND THE STATEMEN T OF THE ASSESSEE IS THAT THE INVESTMENT FIGURES MENTIONED ON THE P APER REPRESENT THE CASH INVESTMENT WHICH DOES NOT FIND PLACE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE, AN AMOUNT OF RS.70,64,000/- REPRESENTS THE UNEXPLAINED INVESTMENT BY M/S. SLK PROPERTIES. THE FIRM M/S. SLK PROPERTIES CAME INTO E XISTENCE DURING THE F.Y. 2005-06 AND MOST OF THE NARRATIONS IN THE ABOVE PAPER APPEAR TO BE THOSE RELATED TO PROPERTY AND INI TIAL INVESTMENT RELATED TRANSACTIONS AND FURTHER, AS NO DATE IS MENTION ED ON THIS PAGE, THE SAME ARE TREATED AS THE UNEXPLAINED INVESTME NT FOR THE ASSTT. YEAR 2006-07. 15. HE SUBMITTED THAT THE AO HAS NOT GIVEN A DEFINITE CONCLUSION. HE HAS NOT ISSUED ANY NOTICE TO THE LAND OWN ERS AND 6 ITA NO.140PN/2014 PASSED THE ASSESSMENT ORDER ONLY ON THE BASIS OF THE PAPER SEIZED. HE SUBMITTED THAT PENALTY PROCEEDINGS AND QUANT UM PROCEEDINGS ARE SEPARATE AND DISTINCT AND THE ASSESSEE CAN ALWAYS BRING NEW FACTS OR MAKE NEW ARGUMENTS DURING PE NALTY PROCEEDINGS. THEREFORE, EVEN ON MERIT ALSO, NO PENALTY IS LEVIABLE SINCE THE ADDITION IS BASED ON A PAPER SEIZED FROM THIRD PARTY AND THE AO HAS NOT MADE PROPER VERIFICATION BY ISSUE OF NOTICE TO ANY OF THE LANDLORDS. HE ACCORDINGLY SUBMITTED THAT PENALTY CANNOT BE LEVIED U/S.271(1)(C) OF THE I.T. ACT. 16. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER H AND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED T HAT THE QUANTUM ADDITION HAS BEEN UPHELD BY THE TRIBUNAL. THE ASSESSEE HAS NOT DISCLOSED THE AMOUNT OF INVESTMENT IN CASH IN ITS BOOKS OF ACCOUNT FOR WHICH ADDITION WAS MADE BY THE A O WHICH HAS BEEN UPHELD BY THE CIT(A) AND FURTHER BY THE T RIBUNAL. THEREFORE UNDER THESE CIRCUMSTANCES LEVY OF PENALTY U/S.2 71(1)(C) OF THE I.T. ACT IS JUSTIFIED. 17. AS REGARDS THE RELIANCE ON THE DECISION OF THE KARNA TAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) IS CONCERNED FOR TREATING THE NOTICE U/S.2 74 AS BAD IN LAW FOR NOT CLEARLY MENTIONING THE REASONS FOR LEVY OF PENALTY HE SUBMITTED THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MAK DATA PVT. LTD. VS. CIT REPORTED IN 358 ITR 593 IS APPLICABLE. REFERRING TO PARA 10 OF THE ORDER HE SUBMITT ED THAT THE HONBLE SUPREME COURT IN THE SAID DECISION HAS HELD T HAT THE AO HAS TO SATISFY WHETHER THE PENALTY PROCEEDINGS BE INITIATED OR NOT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND TH E AO IS 7 ITA NO.140PN/2014 NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MA NNER OR REDUCE IT INTO WRITING. THE HONBLE SUPREME COURT WHILE DE CIDING THE ISSUE HAS FOLLOWED THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILE PROCESSO RS REPORTED IN 13 SCC 369 AND CIT VS. ATUL MOHAN BINDAL REP ORTED IN 9 SCC 589. HE ACCORDINGLY SUBMITTED THAT THE ADDITION AL GROUND RAISED BY THE ASSESSEE SHOULD BE DISMISSED. 17.1 THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SUB MITTED THAT THE DECISION IN THE CASE OF MAK DATA (P) LTD. (SUPR A) IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. HE SUBMITTED THAT SINCE THE COORDINATE BENCH OF THE TRIBUNAL HAS ALREADY CONSIDERED IDENTICAL ISSUE AND DELETED THE PENALTY HOLDING THAT THE NOTICE ISSUED U/S.271(1)(C) R.W.S.274 IS INVALID IN A SITUATION WHERE IT IS NOT CLEAR FROM SUCH NOTICE REASONS FOR LEVYING OF PENALTY AND THE NOTICE HAS BEEN HE LD TO BE INVALID, THEREFORE THIS BEING A COVERED MATTER THE ADDITIONA L GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED AND THE PENALTY BE DELETED. 18. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE P APER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDER ED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO MAD E ADDITION OF RS.70,64,000/- TO THE TOTAL INCOME OF THE ASSESS EE ON THE BASIS OF A PAPER TITLED PAGE 8 BUNDLE NO.16 SEIZED FRO M THE PREMISES OF M/S. NEW AUTO CORNER, PLOT NO.36, SADASHIV PETH , PUNE, A CONCERN BELONGING TO THE ASSESSEE GROUP. THE 8 ITA NO.140PN/2014 DOCUMENTS SEIZED SHOW INVESTMENT OF AN AMOUNT OF RS.70,64,000/- BY THE ASSESSEE WHICH WAS NOT RECORDED I N ITS BOOKS OF ACCOUNT. THE AO ACCORDINGLY MADE ADDITION OF RS.70,64,000/- ON ACCOUNT OF UNDISCLOSED INVESTMENT WHICH H AS BEEN UPHELD BY THE CIT(A). EVEN THE FURTHER APPEAL FILED BY THE ASSESSEE WAS ALSO DISMISSED BY THE TRIBUNAL. THUS, THE IS SUE OF QUANTUM ADDITION HAS BEEN DECIDED AGAINST THE ASSESSEE. WE FIND THE AO IN VIEW OF THE ADDITION OF RS.70,64,000/- ON ACCOU NT OF UNDISCLOSED INVESTMENT INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT AND LEVIED PENALTY OF RS.23,77,742/ - BEING 100% OF TAX SOUGHT TO BE EVADED WHICH HAS BEEN U PHELD BY THE CIT(A). 19. THE FIRST PLANK OF ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS REGARDING THE VALIDITY OF THE PENALTY ORDER IN VIEW OF AN INVALID NOTICE FOR LEVY OF PENALTY. ACCORDING TO HIM IN PAR A 10 OF THE ASSESSMENT ORDER THE AO HAS INITIATED PENALTY PR OCEEDINGS U/S.271(1)(C) OF THE I.T. ACT, 1961 FOR CONCEALING THE PARTICULA RS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. EVEN AT THE END OF THE ASSESSMENT ORDER THE A O MENTIONS ISSUE NOTICE U/S. 274 R.W.S. 271(1)(C) ALSO OF THE A CT, 1961 FOR CONCEALMENT OF INCOME AS DISCUSSED IN THE BODY O F THE ASSESSMENT ORDER. FURTHER THE NOTICE DATED 22-03-201 2 FOR PENALTY PROCEEDINGS U/S. 271(1)(C) DOES NOT SPEAK CLEARLY AS TO WHETHER SUCH PENALTY IS BEING LEVIED FOR CONCEALMENT OF INCO ME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THEREFORE , ACCORDING TO HIM, IN VIEW OF THE DECISION OF HONBLE KARNAT AKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING 9 ITA NO.140PN/2014 FACTORY (SUPRA) WHICH HAS BEEN FOLLOWED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SANJOG TARACHAND L ODHA (SUPRA) SUCH PENALTY NOTICE IS BAD IN LAW WHERE IT IS NOT CLEAR FROM THE NOTICE U/S.274 ABOUT THE REASONS FOR LEVYING PEN ALTY. ACCORDING TO HIM, THE PENALTY ORDER PASSED ON THE BASIS OF SUCH INVALID NOTICE IS NOT SUSTAINABLE. 20. WE FIND MERIT IN THE ABOVE SUBMISSION OF THE LD. COUNSE L FOR THE ASSESSEE. ADMITTEDLY, THE AO IN THE BODY OF THE ASSESSMENT ORDER AT PARA 10 HAS INITIATED PENALTY PROCE EDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE. AT THE END OF THE ASSESSMENT ORDER THE AO MENTIONS ISSUE NOTICE U/S. 274 R.W.S.271(1)(C) FOR CONCEALMENT OF INCOME AS DISCUSSED IN THE BODY OF THE ORDER. THE RELEVANT PARA 10 AND LAST PART OF THE ASSESSMENT ORDER READ AS UNDER : 10. THE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T . ACT, 1961 FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHI NG INACCURATE PARTICULARS OF SUCH INCOME ARE SEPARATELY INITIATED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ASSESSED U/S.153A(B) R.W.S.153C OF THE I.T. ACT, 1961. CHARGE INTEREST DUE AS PER SECTION 234A, 234B & 234C OF THE I .T. ACT, 1961. GIVE CREDIT FOR PREPAID TAXES AFTER VERIFICATION. I SSUE NOTICE U/S.274 R.W.S.271(1)(C) OF THE I.T. ACT, 1961 FOR CONCEALMEN T OF INCOME AS DISCUSSED IN THE BODY OF ORDER. 21. WE FURTHER FIND FROM THE NOTICE ISSUED U/S.274 R.W.S.271(1)(C) DATED 31-12-2008 IS ALSO SILENT ON THE REASON S FOR INITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T.ACT, 1961. 10 ITA NO.140PN/2014 22. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SANJOG TARACHAND L ODHA VS. ITO VIDE ITA NOS. 688 AND 689/PN/2014 ORDER DATED 31- 08- 2014 FOR A.YRS. 2007-08 AND 2008-09. WE FIND THE TRIBUNAL UNDER IDENTICAL CIRCUMSTANCES HAD HELD THE NOTICE ISSUED U/S.271(1)(C) R.W.S. 274 AS INVALID AND CANCELLED THE PENALTY LEVIED ON THE BASIS OF SUCH INVALID NOTICE BY OBSERVING AS UNDER: 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. DR A ND HAVE THOROUGHLY PERUSED THE WRITTEN SUBMISSION ALONG WITH PA PER BOOK FILED BY THE ASSESSEE. A SEARCH AND SEIZURE ACTION U/S. 13 2 OF THE ACT WAS CONDUCTED ON 21-05-2009 IN THE CASE OF LODHA GROU P. PURSUANT TO NOTICE ISSUED U/S. 153A, THE ASSESSEE FILED HIS RETURN O F INCOME FOR THE IMPUGNED ASSESSMENT YEARS. IN THE RETURN OF INC OME FOR THE IMPUGNED ASSESSMENT YEARS, THE ASSESSEE DECLARED ADDITIONAL INCOME ADMITTED DURING THE COURSE OF SEARCH. THE ASSESSME NT WAS COMPLETED U/S. 153A R.W.S. 143(3) BY ACCEPTING THE IN COME RETURNED BY THE ASSESSEE. THUS, NO FURTHER ADDITION WAS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. PENALTY U/S. 271(1)(C) WAS INITIATED AGAINST THE ASSESSEE ON THE ADDIT IONAL INCOME ADMITTED DURING SEARCH AND RETURNED U/S. 153A PROCEEDINGS. THE ASSESSEE HAS PLACED ON RECORD NOTICES ISSU ED U/S. 271(1)(C) R.W.S. 274 OF THE ACT FOR LEVY OF PENALTY IN THE ASSESSMENT YEARS 2007-08 AND 2008-09. THE SAID NOTICES ARE AT PAG ES 15 AND 16 OF THE PAPER BOOK. A PERUSAL OF NOTICES SHOW THAT T HEY ARE STEREO TYPE NOTICES, WITH BLANK SPACES. SPECIFIC REASONS FOR LE VY OF PENALTY U/S. 271(1)(C), WHETHER IT IS FOR CONCEALMENT OF PART ICULARS OR FOR FURNISHING INACCURATE PARTICULARS OR FOR BOTH, HAVE N OT BEEN SPECIFIED. THE ASSESSEE IN HIS WRITTEN SUBMISSION HAS POINTED OUT THAT IF THE IRRELEVANT COLUMNS OF THE PRINTED FORM O F NOTICE U/S. 274 HAVE NOT BEEN STUCK OFF BY THE ASSESSING OFFICER, THE NO TICE FOR LEVY OF PENALTY U/S. 271(1)(C) SHALL BE DEEMED TO BE INVAL ID. IN SUPPORT OF THESE SUBMISSIONS, RELIANCE HAS BEEN PLACED ON THE DEC ISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M ANJUNATHA COTTON & GINNING FACTORY REPORTED AS 359 ITR 565 (KA RAN). 6. A PERUSAL OF THE ORDER PASSED U/S. 271(1)(C) DATED 28-06- 2012 LEVYING PENALTY SHOWS, THAT IN PARA 2 THE ASSESSING OFFICER HAS SPECIFICALLY MENTIONED THAT PENAL PROCEEDINGS U/S. 271 (1)(C) ARE INITIATED FOR CONCEALING THE INCOME. THE RELEVANT E XTRACT OF PARA 2 OF THE ORDER LEVYING PENALTY READS AS UNDER: 2. .SINCE ASSESSEE HAD ORIGINALLY CONCEALED INCOME TO THE EXTENT OF RS.7,92,190/-, PENALTY PROCEEDINGS U/S . 271(1)(C) OF THE ACT WAS INITIATED ON FINALIZATION O F ASSESSMENT PROCEEDINGS. 11 ITA NO.140PN/2014 IN BOTH THE IMPUGNED ASSESSMENT YEARS, THE ORDER LEVYING PENALTY ARE SIMILARLY WORDED. 7. IN THE CONCLUDING PARAGRAPH OF THE ORDER, THE ASSE SSING OFFICER HAS OBSERVED THAT THE PENALTY IS LEVIED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALING INCOME. THE REL EVANT EXTRACT OF PARA 7 OF THE ORDER READS AS UNDER: 7. I AM SATISFIED THAT THE ASSESSEE HAS WITHOUT ANY REASONABLE CAUSE, FURNISHED AN INACCURATE PARTICULARS OF INCOME AND THEREBY CONCEALED HIS INCOME TO THE EXTEN T OF . FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALING OF INCOME ARE TWO DIFFERENT EXPRESSIONS HAV ING DIFFERENT CONNOTATIONS. FOR INITIATING PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS TO BE VERY SPECIFIC FOR THE REASONS OF LEVY ING PENALTY, WHETHER IT IS FOR FURNISHING OF INACCURATE PARTICULA RS OF INCOME OR CONCEALING OF INCOME OR FOR BOTH. IN THE PRESENT CASE , A PERUSAL OF NOTICE ISSUED U/S. 271(1)(C) R.W.S. 274 SHOWS THAT THE ASSE SSING OFFICER HAS NOT SPECIFIED THE REASONS FOR LEVYING OF P ENALTY I.E. WHETHER IT IS FOR FURNISHING OF INACCURATE PARTICULAR S OR CONCEALMENT OF INCOME OR BOTH. FURTHER, A BARE PERUSAL OF THE OR DER LEVYING PENALTY WOULD SHOW THAT THE ASSESSING OFFICER IS NOT CLEA R WHETHER THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME OR F URNISHING OF INACCURATE PARTICULARS OF INCOME OR BOTH. 8. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) HAS HELD THAT WHERE IT IS NOT CLEAR FROM THE NOTICE U/S. 274 THE REASONS FO R LEVYING OF PENALTY THE NOTICE ITSELF IS BAD IN LAW AND THE PENAL TY ORDER PASSED ON THE BASIS OF SUCH NOTICE IS NOT SUSTAINABLE. THE RELE VANT EXTRACT OF THE ORDER OF HON'BLE HIGH COURT READS AS UNDER: NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS CA N BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE O RDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDIN G 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 CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER . HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RE LYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS AR E IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITI ONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNI TY 12 ITA NO.140PN/2014 TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXI ST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM WHERE ALL THE GROU ND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SAT ISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSE E NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NAT URE 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 SATIS FY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWI SE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW C AUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PE NALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT I S TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCU RATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CA SES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY B E OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFE NCE 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 EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)( C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDIN GS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY ST ATED 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 IMP OSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CA LLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHE R 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 OF FEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, T HE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHER E THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS I MPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE T O THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE A UTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED A ND FURTHER DISCOVERY OF FACTS SUBSEQUENT 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 TH E COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOM E OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER 13 ITA NO.140PN/2014 CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTIC ULARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETH ER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CAS E OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PART ICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJRAT H IGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 12 2 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRG O MARKETING REPORTED IN 171 TAXMN 156, HAS HELD THAT L EVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH I T IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINAB LE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HA S TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNIS HING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFOR MA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 9. THUS, IN THE FACTS OF THE CASE AND DOCUMENTS ON REC ORD, WE ARE OF THE CONSIDERED VIEW THAT THE NOTICE ISSUED U/S. 271(1)(C) R.W.S. 274 IS INVALID AND THUS, THE SUBSEQUENT PENALTY P ROCEEDINGS ARISING THERE FROM ARE VITIATED. THE IMPUGNED ORDERS ARE SET ASIDE AND THE APPEALS OF THE ASSESSEE ARE ALLOWED. 23. SO FAR AS RELIANCE ON THE DECISION OF MAK DATA PVT. LTD . BY THE LD. DEPARTMENTAL REPRESENTATIVE IS CONCERNED THE SA ME IN OUR OPINION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT C ASE. THE DECISION IN THE CASE OF MAK DATA PVT. LTD. HAS TO BE UNDERSTOOD IN THE CONTEXT OF THE FACTS OF THE SAID CASE . THEREFORE, BEFORE RELYING ON A PARTICULAR SENTENCE OR PARA GRAPH OF THE SAID DECISION ONE HAS TO READ THE PRECEDING PARAGRA PH OF THE SAID DECISION WHICH READ AS UNDER: 9. WE ARE OF THE VIEW THAT THE SURRENDER OF INCOME IN THIS CASE IS NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURREN DER WAS MADE IN VIEW OF DETECTION MADE BY THE AO IN THE SEARCH CONDU CTED IN THE SISTER CONCERN OF THE ASSESSEE. IN THAT SITUATION, IT CAN NOT BE SAID THAT THE SURRENDER OF INCOME WAS VOLUNTARY. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOTICED THAT CERTAIN DOCUMENT S COMPRISING OF SHARE APPLICATION FORMS, BANK STATEMENTS, MEMORANDUM OF ASSOCIATION OF COMPANIES, AFFIDAVITS, COP IES OF INCOME TAX RETURNS AND ASSESSMENT ORDERS AND BLANK SHARE TRANSFER DEEDS DULY SIGNED, HAVE BEEN IMPOUNDED IN THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A CONDUCTED ON 16 .12.2003, IN THE CASE OF A SISTER CONCERN OF THE ASSESSEE. THE SURVEY WAS 14 ITA NO.140PN/2014 CONDUCTED MORE THAN 10 MONTHS BEFORE THE ASSESSEE FILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTION OF THE ASSESSEE TO MAKE FULL AND TRUE DISCLOSURE OF ITS INCOME, IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INCLUSIVE OF THE AMOUNT WHICH WAS SURRENDERE D LATER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. CONSEQUEN TLY, IT IS CLEAR THAT THE ASSESSEE HAD NO INTENTION TO DECLARE ITS TRUE INCOME. IT IS THE STATUTORY DUTY OF THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN THE SOURCE OF PAYMEN TS MADE BY IT AND TO DECLARE ITS TRUE INCOME IN THE RETURN OF INCO ME FILED BY IT FROM YEAR TO YEAR. THE AO, IN OUR VIEW, HAS RECORDED A CA TEGORICAL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED TR UE PARTICULARS OF INCOME AND IS LIABLE FOR PENALTY PROCE EDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961. THEREFORE, THE RELIANCE ONLY ON THE SENTENCE APPEARING IN PARA 10 OF THE JUDGEMENT WITHOUT READING IT IN THE CONTEXT UNDE R WHICH SAID OBSERVATION WAS MADE IN PARA 9 IS MISPLACED BY THE LD. DEPARTMENTAL REPRESENTATIVE. 24. A PLAIN READING OF THE DECISION OF HONBLE SUPREME COURT FROM PARA 9 AND 10 COMBINEDLY SUGGEST THAT THE SATISFAC TION NEED NOT BE RECORDED IN A PARTICULAR MANNER BUT FROM A READING OF THE ASSESSMENT ORDER AS A WHOLE SUCH SATISFACTION SHO ULD BE CLEARLY DISCERNIBLE. THEREFORE, THE RELIANCE BY THE LD. DEPARTMENTAL REPRESENTATIVE ON THE DECISION OF MAK DATA PVT. LTD. IN OUR OPINION IS MISPLACED AND NOT APPLICABLE TO THE FAC TS OF THE PRESENT CASE. THIS VIEW OF OURS FINDS SUPPORT FROM THE DECISION OF KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF SUVAPRASANNA BHATAACHARYA VS. ACIT IN ITA NO.1303/KOL/2 010 ORDER DATED 06-11-2015 FOR A.Y. 2006-07. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT SINCE IT IS NOT CLEAR FROM THE NOTICE U/S.274 THE REASONS FOR LEVYING OF PENALTY AS TO WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THEREFORE, THE NOTICE ITSE LF IS BAD IN LAW AND INVALID. THEREFORE, THE PENALTY ORDER PASSE D 15 ITA NO.140PN/2014 SUBSEQUENTLY ON THE BASIS OF SUCH INVALID NOTICE ALSO HAS TO BE HELD AS BAD IN LAW. WE ACCORDINGLY CANCEL THE PENALTY LEV IED BY THE AO. SINCE THE ASSESSEE SUCCEEDS ON THIS TECHNICAL G ROUND THE ARGUMENTS ON MERIT IS NOT BEING ADJUDICATED BEING AC ADEMIC IN NATURE. 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-03-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE ; DATED : 18 TH MARCH, 2016. ) *#,! -! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT (A) - I I , PUNE 4. 5. 6. THE CIT-II, PUNE $ ''(, (, / DR, ITAT, B PUNE; - / GUARD FILE. / BY ORDER , // TRUE COPY // // $ ' //TRUE C /0 ' ( / SR. PRIVATE SECRETARY (, / ITAT, PUNE