Sumit Kumar Sarawgi, Hooghly V. DCIT, C.C. XI, Kolkata, Kolkata

ITA 1640/KOL/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9428 (ITAT-KOLKATA)
• Duration Of Justice: 5 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 06-09-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 28-11-2011
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU
• Keywords: Search and seizure; Document seized; Principle of natural justice; Initiation of penalty proceedings; Documents seized
• Section: 153A; 132

Judgement Text

1 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NOS. 1640 TO 1643/KOL/2011 ASSESSMENT YEARS: 2004-05 TO 2007-08 SUMIT KUMAR SARAWGI VS. DEPUTY COMMISSIONER OF INCOME-TAX, (PAN: AGKPS5273M) C.C. XI, KOLKATA. ( APPELLANT ) ( RESPONDENT ) & I.T.A NOS. 1688 TO 1690/KOL/2011 ASSESSMENT YEARS: 2005-06 TO 2007-08 DEPUTY COMMISSIONER OF INCOME-TAX, VS. SUMIT KUMAR SARAWGI C.C. XI, KOLKATA. (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 25.01.2017 DATE OF PRONOUNCEMENT: 03.02.2017 FOR THE ASSESSEE : SHRI AKKAL DUDHWEWALA, AR FOR THE REVENUE : SHRI DAVID Z. CHAWNGTHU, JCI T, SR. DR ORDER PER BENCH: ALL THESE CROSS APPEALS BY ASSESSEE AND REVENUE ARE ARISING OUT OF SEPARATE ORDERS OF CIT(A), CENTRAL-I, KOLKATA VIDE APPEAL NOS. 95 TO 9 8/CC-XI/CIT(A),C-1/10-11 DATED 27.09.2011. ASSESSMENTS WERE FRAMED BY DCIT, CENTRA L CIRCLE-XI, KOLKATA U/S. 153A/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTE R REFERRED TO AS THE ACT) FOR AYS 2004-05 TO 2007-08 VIDE HIS ORDER DATED 31.12.2009. PENALTY U/S. 271(1)(C) OF THE ACT WAS IMPOSED BY DCIT, CENTRAL CIRCLE-XI, KOLKATA VIDE HI S ORDER DATED 21.06.2010 AND 22.06.2010. THE APPEALS OF THE REVENUE ARE AGAINS T THE REDUCTION OF PENALTY AMOUNT FROM 300% TO 100% AGAINST THE ORDER OF LD CITA. THE APP EALS OF THE ASSESSEE ARE AGAINST THE CONFIRMATION OF LEVY OF PENALTY @ 100% BY THE LD CI TA. SINCE ISSUES ARE IDENTICAL WE HAVE TAKEN UP ALL THE APPEALS TOGETHER FOR HEARING AND DISPOSE OF THE SAME BY THIS CONSOLIDATED ORDER. 2 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 2. THE ONLY ISSUE TO BE DECIDED IN ALL THESE APP EALS IS AS TO WHETHER THE PENALTY U/S 271(1)(C) OF THE ACT COULD BE LEVIED IN RESPECT OF INCOME OFFERED AFTER THE SEARCH BUT IN THE RETURN FILED U/S 153A OF THE ACT. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT A SEARCH AND SEIZURE OPERATION WAS CONDUCTED ON 24.1.2008 U/S 132 OF THE ACT AT THE RESIDENCE OF TH E ASSESSEE AT 3 RD FLOOR, NEW INDIA ASSURANCE CO LTD BUILDING, G.S.ROAD, GUWAHATI ON 24 .1.2008 BESIDES CONDUCTING SEARCH IN VARIOUS FACTORY AND RESIDENTIAL PREMISES OF THE GRO UP. BESIDES A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT LOCKER NO. 26 OF HDFC BA NK, BHANGAGARH, GUWAHATI AND SOME JEWELLERIES WERE FOUND. IN THE COURSE OF SEAR CH, THE ASSESSEE WAS FOUND TO BE IN POSSESSION OF UNDISCLOSED INCOME. CONSEQUENT UPON SEARCH AND SEIZURE OPERATION, THE JURISDICTION OF THE CASE WAS TRANSFERRED. THEREAF TER PROCEEDINGS U/S 153A OF THE ACT WERE INITIATED AND RETURNS FILED ACCORDINGLY. THE AS SESSEE PLEADED THAT PURSUANT TO THE ORDER PASSED BY THE LD CIT, DHANBAD U/S 127 OF THE ACT , THE SEIZED MATERIALS WERE TRANSFERRED TO KOLKATA AND INSPECTION OF THE SEIZED RECORDS COULD BE CARRIED OUT ONLY AFTER THAT TIME AND BASED ON THE INFORMATION GATHERED FROM INSPECTION O F THE SEIZED RECORDS, THE ACTUAL EXTENT OF UNDISCLOSED INCOME COULD BE ASCERTAINED BY THE ASSE SSEE. BUT IN THE MEANWHILE, THE ASSESSEE HAD TO FILE THE RETURNS IN RESPONSE TO NOT ICE U/S 153A OF THE ACT AT A LESSER FIGURE. AFTER INSPECTION OF THE SEIZED RECORDS AND ON ASCER TAINING THE ACTUAL EXTENT OF UNDISCLOSED INCOME, THE ASSESSEE OFFERED ADDITIONAL INCOME DURI NG THE COURSE OF SECTION 153A PROCEEDINGS AND REVISED THE COMPUTATION OF INCOME. IT WAS ALSO PLEADED THAT THE ASSESSEE WAS ABLE TO SUBSTANTIATE THE UNDISCLOSED INCOME WIT H REFERENCE TO SEIZED DOCUMENTS AND THAT NO INACCURACY OR INFIRMITY IN THE WORKING OF THE UN DISCLOSED INCOME WERE FOUND BY THE LD AO. EFFECTIVELY NO ADDITIONS WERE MADE TO THE UND ISCLOSED INCOME BY THE LD AO OTHER THAN WHAT WAS DISCLOSED BY THE ASSESSEE IN THE RETURN FI LED U/S 153A OF THE ACT AND LATER REVISED DURING THE ASSESSMENT PROCEEDINGS. IT WAS FURTHER PLEADED THAT THE ASSESSEE HAD FULLY CO- OPERATED WITH THE ASSESSMENT PROCEEDINGS BY MAKING PROPER DISCLOSURE OF UNDISCLOSED INCOME AND PAYING TAXES DUE THEREON WITH INTEREST A ND SEARCH ASSESSMENTS WERE COMPLETED ACCEPTING SUCH UNDISCLOSED INCOME DECLARED BY THE ASSESSEE AND PROPER CLARIFICATIONS WERE GIVEN FOR EACH AND EVERY SEIZED DOCUMENTS. ACCORDIN GLY IT WAS PLEADED THAT THERE WAS NO CONSCIOUS OR DELIBERATE CONCEALMENT OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS OF 3 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 INCOME ON THE PART OF THE ASSESSEE WARRANTING ANY L EVY OF PENALTY. BUT THE LD AO NOT SATISFIED WITH THE PLEADINGS OF THE ASSESSEE SOUGHT TO LEVY THE PENALTY U/S 271(1)(C ) OF THE ACT ON THE GROUND THAT BUT FOR THE SEARCH, THE ASSE SSEE WOULD NOT HAVE COME FORWARD WITH THE DISCLOSURE OF UNDISCLOSED INCOME AND HENCE PENA LTY IS LEVIABLE THEREON. THE LD AO LEVIED PENALTY AS UNDER FOR VARIOUS ASSESSMENT YEAR S :- ASST YEAR AMOUNT OF PENALTY REMARKS 2004-05 32,139 300% 2005-06 21,91,752 300% 2006-07 17,67,795 300% 2007-08 22,43,964 300% THE LD CITA ON FIRST APPEAL UPHELD THE LEVY OF PENA LTY BUT REDUCED THE SAME TO 100% OF TAX SOUGHT TO BE EVADED. AGGRIEVED, BOTH THE ASSESSE E AS WELL AS THE REVENUE ARE IN APPEALS BEFORE US. 4. THE LD AR PLACED ON RECORD THE COPY OF THE SHO W CAUSE NOTICE ISSUED U/S 274 RWS 271(1)(C ) OF THE ACT FOR ALL THE ASST YEARS UNDER APPEAL BY POINTING OUT THAT THE LD AO HAD MERELY MADE A TICK MARK ON THE SAID NOTICE WITHOUT MENTIONING THE SPECIFIC CHARGE OF OFFENCE COMMITTED BY THE ASSESSEE I.E. WHETHER HE H AD CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. WHE N THE SPECIFIC CHARGE OF OFFENCE IS NOT MENTIONED, NO PENALTY U/S 271(1)(C ) OF THE ACT COU LD BE LEVIED, IN SUPPORT OF WHICH HE PLACED RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING FACTORY REPORTED IN ( 2013) 359 ITR 565 (KAR). HE ALSO PLACED ON RECORD A COPY OF THE DECISION OF THE HONBLE SUPREME COURT ON THE SAID ISSUE IN THE CASE OF CIT & ANR VS M/S SSAS EMERALD MEADOWS IN CC NO. 11485/2016 DATED 5.8.2016. HE ARGUED THAT THIS APPEAL TO HONBLE APEX COURT HA D EMANATED AGAINST THE ORDER PASSED BY THE HONBLE KARNATAKA HIGH COURT WHICH PL ACED RELIANCE ON ITS EARLIER DECISION IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING F ACTORY REPORTED IN (2013) 359 ITR 565 (KAR). HE ARGUED THAT HENCE THE RATIO LAID DOWN B Y THE HONBLE KARNATAKA HIGH COURT IN 359 ITR 565 (SUPRA) HAD BEEN APPROVED AND UPHELD BY THE HONBLE SUPREME COURT IN THE CASE REFERRED SUPRA. THE LD AR ALSO PLACED RELIAN CE ON THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF HARISH KUMAR SARAWGI VS DCIT IN ITA NOS. 1222 TO 4 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 1226 / KOL/2011 AND ITA NOS. 1496 TO 1499/KOL/2011 FOR THE ASST YEARS 2003-04 TO 2007- 08 DATED 26.8.2016 WHEREIN ON SIMILAR GROUND, THE P ENALTY U/S 271(1)(C ) OF THE ACT WAS DELETED. 5. IN RESPONSE TO THIS, THE LD DR VEHEMENTLY RELIE D ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND FROM THE PERUSAL OF THE SHOW CAUSE NOTICE I SSUED U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT, THE LD AO HAD MERELY MADE A T ICK MARK WITHOUT MENTIONING THE SPECIFIC CHARGE OF OFFENCE AND WITHOUT STRUCKING OF F THE RELEVANT PORTION IN THE SHOW CAUSE NOTICE AS TO WHETHER THE ASSESSEE HAD CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON AND G INNING FACTORY REPORTED IN (2013) 359 ITR 565 (KAR) WHICH HAS BEEN FOLLOWED BY THE SAME COURT IN THE C ASE OF CIT VS M/S SSAS EMERALD MEADOWS IN ITA NO. 380 OF 2015 DATED 23.11. 2015. WE FIND THAT THE HONBLE APEX COURT HAD APPROVED AND UPHELD THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS SUPRA VIDE ITS OR DER DATED 5.8.2016. WE ALSO FIND THAT THAT THE HONBLE KARNATAKA HIGH COURT IN THE AFORES AID DECISION HAS CONSIDERED THE EFFECT OF SEC. 271(1B) OF THE ACT, IN THE LIGHT OF THE DECISI ON OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MS.MADHUSHREE GUPTA VS. UNION OF INDIA 317 ITR 107(DEL) AND HELD THAT THE PENALTY IN SUCH CASES PURSUANT TO DEFECTIVE SHOW CA USE NOTICE IS NOT LEVIABLE, WHEREIN IT WAS HELD :- IN THE RESULT, CONCLUSIONS ARE AS FOLLOWS : (I) SE C. 271(1B) IS NOT VIOLATIVE OF ART. 14 OF THE CONSTITUTION; (II) THE POSITION OF LAW BOTH PRE AND POST AMENDMENT IS SIMILAR, INASMUCH, THE AO WILL HAVE TO ARRIVE AT A PRIMA FACIE SATISFACTIO N DURING THE COURSE OF PROCEEDINGS WITH REGARD TO THE ASSESSEE HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS, BEFORE HE INITIATES PENALTY PROCEEDING S; (III) PRIMA FACIE SATISFACTION OF THE AO THAT THE CASE MAY DESERVE THE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM THE ORDER PASSED DURING THE COURSE OF THE PROCEEDINGS. OBVIOU SLY, THE AO WOULD ARRIVE AT A DECISION, I.E., A FINAL CONCLUSION ONLY AFTER HEARING THE ASS ESSEE; (IV) AT THE STAGE OF INITIATION OF PENALTY PROCEEDING THE ORDER PASSED BY THE AO NEED NOT REFLECT SATISFACTION VIS-A-VIS EACH AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF OVERA LL SENSE GATHERED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR; (V) HOWEVER, THIS WOULD NOT DEBAR AN ASSESSEE FROM FURNISHING EVIDENCE TO REBUT THE PRIMA FACIE SATI SFACTION OF THE AO; SINCE PENALTY PROCEEDING ARE NOT A CONTINUATION OF ASSESSMENT PRO CEEDINGS; (VI) DUE COMPLIANCE WOULD BE REQUIRED TO BE MADE IN RESPECT OF THE PROVISIONS OF SS. 274 AND 275; (VII) THE PROCEEDINGS FOR 5 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 INITIATION OF PENALTY PROCEEDING CANNOT BE SET ASID E ONLY ON THE GROUND THAT THE ASSESSMENT ORDER STATES PENALTY PROCEEDINGS ARE INITIATED SEP ARATELY IF OTHERWISE, IT CONFORMS TO THE PARAMETERS SET OUT HEREINABOVE ARE MET. THE PRAYERS MADE IN THE WRIT PETITIONS ARE THUS REJECTED WITH THE CAVEAT THAT PROVISIONS OF S. 271( 1)(C) POST-AMENDMENT WILL BE READ IN THE MANNER INDICATED ABOVE. 6.1. WE FIND THAT THE CO-ORDINATE BENCH OF THIS TR IBUNAL IN THE CASE OF HARISH KUMAR SARAWGI VS DCIT VIDE ORDER DATED 26.8.2016 SUPRA HA D HELD AS UNDER :- 5.5. WE HAVE ALSO PERUSED THE SHOW-CAUSE NOTICE ISS UED U/S.274 OF THE ACT FOR ALL THE AFORESAID AYS 2003-04 TO 2007-08. THE AO IN THE SA ID SHOW CAUSE NOTICE HAS NOT STRUCK OFF THE IRRELEVANT PORTION AS TO WHETHER THE CHARGE AGAINST THE ASSESSEE IS CONCEALING PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS REGARD, THIS TRIBUNAL IN THE CASE OF SHRI SATYANANDA ACHARIYA BISWAS VS. DCIT ITA NO.5/KOL/2010 ORDER DATED 2.12 .2015 FOR AY 2003-04 HAS TAKEN THE FOLLOWING VIEW ON THE EFFECT OF NOT STRIK ING OFF THE IRRELEVANT PORTION IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT AS FOLLOWS: 9. 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 INCOM E OR CONCEALING PARTICULARS OF SUCH INCOME. ON THIS ASPECT WE FIND THAT IN THE S HOW CAUSE NOTICE 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 LE VIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS O F SUCH INCOME. 9.1. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF 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 PEN ALTY 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 ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD TH AT 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 D ECISION 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 OF 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 SA ID GROUNDS MENTIONED THEREIN 6 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE N OTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE S AID 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 RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS A RE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHE R EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD B E MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HI M AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUC H HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A P RINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT RE BUTTING 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 T O BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENC ES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFEN CES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE 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 INI TIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY 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 A NSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. O THERWISE 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 SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUN D ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE IN FORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING TH E PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUEN T TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 7 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURAT E PARTICULARS OF INCOME 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 COUR T IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CON CEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO M ARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS T O BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR P ENALTY 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. TH E 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 2 71(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 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. 8 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 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 T HE 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 INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, TH E VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIE D, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) 9.3. 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 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. THE AFORESAID RULING WILL SQUARELY APPLY TO THE FAC TS OF THE PRESENT CASE. IN THE PRESENT CASE ALSO THE SHOW CAUSE NOTICE U/S.274 OF THE ACT IS DE FECTIVE. FOLLOWING THE DECISION REFERRED TO ABOVE, WE HOLD THAT THE PENALTY IMPOSED ON THE A SSESSEE U/S.271(1)( C) OF THE ACT CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELL ED. 9 ITA NOS.1640 TO 1643 /KOL/2011 & ITANO.1688 TO 169 0/K/2011 SUMIT KUMAR SARAWGI, AYS 2004-05 TO 2007-08 6.2. IN VIEW OF AFORESAID FINDINGS AND RESPECTFULL Y FOLLOWING THE JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE AND CONSIDERING THE TOTALITY OF TH E FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE PENALTY LEVIED U/S 271(1)(C ) OF THE ACT DESERVES TO BE CANCELLED ON ALL COUNTS. ACCORDINGLY, THE GROUNDS RAISED IN THE REVENUE APPE ALS ARE DISMISSED AND THAT OF THE ASSESSEE APPEALS ARE ALLOWED. 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED AND APPEALS OF THE REVENUE ARE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 03.02.201 7 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 3 RD FEBRUARY, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: S 1 . APPELLANT DCIT, C.C. XI, KOLKATA 2 RESPONDENT SHRI SUMIT KUMAR SARAWGI, C/O SHRI SOMN ATH GHOSH, ADVCOATE, SEVEN BROTHERSLODGE, CHINSURAH, DIST. HO OGHLY, PIN-712105 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .