JAYANT B. PATEL, MUMBAI V. ASST CIT CEN CIR 13,

ITA 1650/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9766 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2003-2004
• Appeal Filed On: 09-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARJU GARODIA
• Assessee Lawyers: V CHANDRA SEKHAR ASHOK SUTHAR
• Keywords: Search and seizure; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 153A

Judgement Text

1 JAYANT B PATEL / CHERYL J PATEL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI BEFORE SHRI SAKTIJIT DEY (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.1650/MUM/2017 - AY 2003-04 I.T.A NO.1651/MUM/2017 - AY 2004-05 I.T.A NO.1652/MUM/2017 - AY 2006-07 I.T.A NO.1653/MUM/2017 - AY 2007-08 I.T.A NO.3113 /MUM/2017 - AY 2001-02 SHRI JAYANT B PATEL B/27, CLIFTON SOCIETY NEAR CENTAUR HOTEL JUHU, MUMBAI-400 049 PAN : AACPP6414H VS ACIT, CENT.CIR.13, MUMBAI APPELLANT RESPONDENT I.T.A NO.1654/MUM/2017 - AY 2003-04 I.T.A NO.1655/MUM/2017 - AY 2004-05 I.T.A NO.1656/MUM/2017 - AY 2006-07 I.T.A NO.1657/MUM/2017 - AY 2007-08 SHRI CHERYL J PATEL B/27, CLIFTON SOCIETY NEAR CENTAUR HOTEL JUHU, MUMBAI-400 049 PAN : AACPP6413A VS ACIT, CENT.CIR.13, MUMBAI APPELLANT RESPONDENT APPELLANT BY S/SHRI V CHANDRA SEKHAR / ASHOK SUTHAR RESPONDENT BY ARJU GARODIA DATE OF HEARING 06 -07-2017 DATE OF PRONOUNCEMENT 26-07-2017 2 JAYANT B PATEL / CHERYL J PATEL O R D E R PER G MANJUNATHA, AM : THESE ARE NINE APPEALS FILED BY TWO DIFFERENT ASSE SSES AND ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT(A )-52, MUMBAI DATED 02-03- 2017 CONFIRMING LEVY OF PENALTY U/S 271(1)(C) OF TH E INCOME-TAX ACT, 1961 FOR THE ASSESSMENT YEARS 2001-02, 2003-04, 2004-05, 200 6-07 AND 2007-08. SINCE, FACTS ARE IDENTICAL AND ISSUE IS COMMON IN A LL THE APPEALS, WE HEARD THEM TOGETHER AND ARE DISPOSED OF BY THIS COMMON OR DER, FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE EXTRACTED FROM ITA NO.3 113/MUM/2017 FOR THE ASSESSMENT YEAR 2001-02 ARE THAT THERE WERE SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT IN THE CASE OF ASSESSEES. CONSEQ UENT TO SEARCH, ASSESSEES CASES WERE CENTRALIZED AND ACCORDINGLY NOTICES U/S 153A WERE ISSUED CALLING FOR RETURNS OF INCOME FOR SIX IMMEDIATELY PRECEDING ASS ESSMENT YEARS TO THE ASSESSMENT YEAR IN WHICH SEARCH TOOK PLACE. IN RES PONSE TO NOTICES, THE ASSESSEES HAVE FILED THEIR RETURNS OF INCOME ON 19- 05-2008. THE ASSESSMENTS WERE COMPLETED U/S 143(3) R.W.S. 153A ON 30-12-2008 . THE ITAT, J-BENCH, VIDE ITS ORDER DATED 27-10-2010 HAD SET ASIDE THE MATTER TO THE FILE OF THE AO WITH CERTAIN OBSERVATIONS. CONSEQUENT TO ITAT ORDER, TH E AO HAS TAKEN UP THE ASSESSMENTS AND ACCORDINGLY ISSUED NOTICE U/S 143(2 ) DATED 13-12-2010. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEES APPEARED 3 JAYANT B PATEL / CHERYL J PATEL AND FURNISHED THE DETAILS AND EXPLANATIONS CALLED F OR, FROM TIME TO TIME. THE AO, AFTER CONSIDERING THE EXPLANATIONS OF THE ASSES SEE COMPLETED THE ASSESSMENTS U/S 143(3) R.W.S. 153A OF THE ACT ON 16 -12-2011 BY MAKING CERTAIN ADDITION TOWARDS UNEXPLAINED MONEY, BOGUS LONG TERM CAPITAL GAIN AND BOGUS AGRICULTURAL INCOME. THE ASSESSEE CARRIED THE MATT ER IN APPEALS BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED APPEAL FILED BY ASSESSES VIDE HIS ORDER DATED 27-06-2012. 3. THEREAFTER, THE AO INITIATED PENALTY PROCEEDINGS U/ S 271(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE HAS FILED HIS REPLY TO THE SH OW CAUSE NOTICE ISSUED BY THE AO ON 21-03-2014 AND OBJECTED TO PROPOSED LEVY OF P ENALTY ON THE ADDITIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE ASSESSEES HAVE FURNISHED NECESSARY DETAILS IN SUPPO RT OF LONG TERM CAPITAL GAIN AND AGRICULTURAL INCOME. HOWEVER, THE AO HAS REJEC TED THE EXPLANATIONS OFFERED BY THE ASSESSEES, THEREFORE, IT CANNOT BE C ONSIDERED AS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE AO, AFTER CONSIDERING THE EXPLANATIONS OF THE ASSES SEES HELD THAT THE ASSESSEES HAVE CONCEALED PARTICULARS OF THEIR INCOME OR HAVE FURNISHED INACCURATE PARTICULARS OF THEIR INCOME, WHICH IS EVIDENT FROM THE FACT THAT THE BROKERS DENIED OF HAVING DONE ANY SHARE TRANSACTIONS WITH T HE ASSESSEES AND ALSO ON 4 JAYANT B PATEL / CHERYL J PATEL VERIFICATION OF THE TRANSACTIONS OF THE ASSESSEE IT IS CLEAR THAT THESE TRANSACTIONS WERE NEVER DONE THROUGH THE STOCK EXCH ANGE AND HENCE, THERE WAS DELIBERATE ATTEMPT TO CAMOUFLAGE THE INCOME INT O LTCG AND CLAIMED EXEMPTION. INSOFAR AS ADDITION TOWARDS AGRICULTURA L INCOME AND UNEXPLAINED MONEY, THE ASSESSEES HAVE FAILED TO FILE SATISFACTO RY EXPLANATIONS, THEREFORE, THE AO OPINED THAT THE ASSESSEES HAVE DELIBERATELY CONCEALED PARTICULARS OF THEIR INCOME OR HAVE FURNISHED INACCURATE PARTICULA RS OF INCOME WHICH WARRANTS LEVY OF PENALTY U/S 271(1)(C). ACCORDINGL Y, THE ASSESSING OFFICER LEVIED PENALTY EQUIVALENT TO 100% OF TAX SOUGHT TO BE EVAD ED. AGGRIEVED BY THE PENALTY ORDERS, THE ASSESSEES PREFERRED APPEALS BEF ORE CIT(A) AND CHALLENGED LEVY OF PENALTY ON TWO GROUNDS. 4. THE ASSESSEES HAVE CHALLENGED THE INITIATION OF PEN ALTY ON THE GROUND THAT THE NOTICE ISSUED BY THE AO U/S 274 R.W.S. 271(1)(C ) IS VAGUE IN NATURE AS THE AO HAS NOT STRUCK OFF ALL IRRELEVANT PORTION IN THE NOTICE SO AS TO CHARGE THE ASSESSEE WHETHER HE PROPOSED TO LEVY PENALTY ON CON CEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE ASSESSEE ALSO CHALLENGED THE PENALTY LEVIED ON MERITS TO ARGUE TH AT THE AO HAS REJECTED EXPLANATIONS OFFERED BY THE ASSESSEES ON THE GROUND THAT THE ASSESSEES HAVE FAILED TO PROVE WITH NECESSARY EVIDENCES FOR INCOME DECLARED UNDER LONG TERM CAPITAL GAIN, AGRICULTURAL INCOME AND ALSO FAILED T O EXPLAIN UNEXPLAINED MONEY 5 JAYANT B PATEL / CHERYL J PATEL FOUND DURING THE COURSE OF SEARCH. THE FACT REMAIN S THAT THE ASSESSEE HAS FILED NECESSARY EVIDENCES AND ALSO EXPLAINED TO THE AO TH AT THE LTCG DECLARED IS SUPPORTED BY PROPER BROKERS NOTE IS NOT REBUTTED B Y THE AO BEFORE LEVYING PENALTY. THE CIT(A), AFTER CONSIDERING THE EXPLANA TIONS FURNISHED BY THE ASSESSEES AND ALSO RELYING UPON CERTAIN JUDICIAL PR ECEDENTS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MA K DATA VS CIT 358 ITR 593 (SC), REJECTED ADDITIONAL GROUND RAISED BY THE ASSE SSEES CHALLENGING THE VALIDITY OF INITIATION OF PENALTY PROCEEDINGS BY HOLDING THA T THERE COULD BE A CIRCUMSTANCE WHERE THE PARTICULARS OF UNDISCLOSED I NCOME MAY CONTAIN ELEMENT OF BOTH CONCEALMENT OF INCOME AS ALSO INACC URATE PARTICULARS OF INCOME. THEREFORE, IT IS NOT ESSENTIAL THAT IN A P ARTICULAR CASE PENALTY SHOULD BE LEVIED ONLY EITHER ON CONCEALMENT OF INCOME OR F OR FURNISHING INACCURATE PARTICULARS OF INCOME. AGGRIEVED BY THE CIT(A)S O RDER, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE ASSESSEES HAVE RAISED AS MANY AS 5 GROUNDS OF A PPEAL. FROM THESE FIVE GROUNDS OF APPEAL, THE ASSESSEES HAVE CHALLENG ED LEVY OF PENALTY ON TWO GROUNDS; VIZ. I) CHALLENGED THE NOTICE ISSUED U/S 2 74 R.W.S. 271(1)(C) ON THE GROUND THAT THE NOTICE ISSUED BY THE AO DOES NOT SP ECIFY AS TO WHETHER THE AO PROPOSED TO INITIATE PENALTY FOR CONCEALMENT OF INC OME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME; (II) THE ASSESSEE S CHALLENGED LEVY OF PENALTY 6 JAYANT B PATEL / CHERYL J PATEL ON MERIT TO ARGUE THAT THEY HAD EXPLAINED ADDITIONS MADE BY THE AO TOWARDS LONG TERM CAPITAL GAIN, AGRICULTURAL INCOME AND UNE XPLAINED MONEY WHICH CANNOT BE SUMMARILY REJECTED SO AS TO CONCLUDE THAT HE HAD DELIBERATELY CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME. 6. WE SHALL FIRST TAKE UP THE LEGAL ISSUE RAISED BY TH E ASSESSEE. THE ASSESSEE HAS CHALLENGED INITIATION OF PENALTY PROCEEDINGS ON THE GROUND THAT PENALTY NOTICES ISSUED BY THE AO U/S 274 R.W.S. 271(1)(C) O F THE ACT DATED 16-12-2011 IS WITHOUT APPLICATION OF MIND AS THE AO HAS NOT SPECI FIED UNDER WHICH LIMB, HE PROPOSED TO LEVY PENALTY U/S 271(1)(C) OF THE ACT. THE LD.AR REFERRING TO THE COPY OF NOTICE ISSUED U/S 274 R.W.S. 271 DATED 16-1 2-2011 SUBMITTED THAT THE AO ISSUED A PRINTED FORM OF NOTICE, WHICH CONTAINS ALL ALLEGATIONS THAT MAY BE MADE U/S 271(1)(C) WITHOUT STRIKING OFF THE IRRELEV ANT PORTION IN THE NOTICE WHICH CLEARLY INDICATES THAT THE AO HAS NOT APPLIED HIS MIND BEFORE INITIATION OF PENALTY PROCEEDINGS. THE LD.AR FURTHER SUBMITTED T HAT THE NOTICE DOES NOT SPECIFY AS TO WHETHER IT IS FOR CONCEALMENT OF INCO ME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHICH IS A PRECOND ITION FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT. THE ASSESSEE SHOULD KNOW UNDER WHICH LIMB THE AO IS CHARGING OR ACCUSING THE ASSESSEE, WHETHER IT IS FO R CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULA RS OF INCOME. INITIATION OF PENALTY UNDER ONE LIMB AND LEVYING PENALTY UNDER AN OTHER LIMB VIOLATES THE 7 JAYANT B PATEL / CHERYL J PATEL PRINCIPLES OF NATURAL JUSTICE AS THE ASSESSEES ARE NOT GIVEN TO KNOW UNDER WHICH LIMB THEY HAVE TO JUSTIFY THE PROPOSED INITIATION O F PENALTY PROCEEDINGS. IN SUPPORT OF HIS ARGUMENT, HE RELIED UPON THE DECISIO N OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SAMSON PERINCHERY IN IT A NO.1154 OF 2014 DATED 05- 01-2017 AND ALSO THE DECISION OF ITAT, MUMBAI BENCH C IN THE CASE OF DR SARITA MILIN DAVARE VS ACIT ITA NO.2187/MUM/2014 DA TE 12-12-2016. THE ASSESSEE ALSO RELIED UPON THE DECISION OF HONBLE K ARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY LTD 359 ITR 565 (KAR). 7. ON THE OTHER HAND, THE LD.DR STRONGLY SUPPORTED THE ORDER OF CIT(A) AND SUBMITTED THAT WHEN PENALTY PROVISIONS ARE PERUSED WITH VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS VERY CLEAR THAT COMBINING OF PARTICULARS OF INCOME, FURNISHING OF INACCURATE PARTICULARS OF INCOME AND ALSO DEEMED CONCEALMENT OF INCOME, WHEREVER THERE IS A DIFFERENCE BETWEEN THE RETURNED INCOME AND ASSESSED INCOME, THERE IS AN INFERENCE OF CONCEALME NT AS A RESULT OF LAW. THE LD.DR FURTHER SUBMITTED THAT CONCEALMENT PENALTY PR OCEEDINGS CAN BE INITIATED ON TWO CHARGES, I.E. (I) CONCEALMENT OF PARTICULARS OF INCOME AND (II) FURNISHING OF INACCURATE PARTICULARS OF INCOME. IF THE PROCEE DINGS ARE INITIATED ON CHARGE OF CONCEALMENT THEN PENALTY CANNOT BE LEVIED ON THE CHARGE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND VICE VERSA. I N THIS CASE, THE AO HAS ISSUED A NOTICE HIGHLIGHTING THE CHARGE FRAMED ON THE ASSE SSEE WHICH IS EVIDENT THAT 8 JAYANT B PATEL / CHERYL J PATEL THE AO HAS INITIATED PENALTY ON BOTH THE CHARGES, I .E. FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. MERELY NON STRIKING OFF OF THE IRRELEVANT PORTION IN THE N OTICE OR MISTAKE IN THE LANGUAGE USED IN THE NOTICE CANNOT, BY ITSELF, INVA LIDATE THE ISSUANCE OF PENALTY NOTICE AND CONSEQUENT PENALTY PROCEEDINGS. 8. THE LD.DR REFERRING TO THE DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF SMT. KSAUSALYA & ORS. 216 ITR 666 (BOM) SUB MITTED THAT THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING TH E ASSESSEE ABOUT THE PROPOSAL TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON STRIKING OFF OF THE INAPPROPRIATE WORDINGS CANNOT, BY ITSELF, INVAL IDATE THE NOTICE. THE LD.DR, REFERRING TO ANOTHER DECISION OF HONBLE PATNA HIGH COURT IN THE CASE OF CIT VS MITHILA MOTORS (P) LTD (1984) 16 TAXMAN 224 (PAT) S UBMITTED THAT U/S 274 OF THE I.T. ACT, ALL THAT IS REQUIRED IS THAT THE ASSE SSEE SHOULD BE GIVEN AN OPPORTUNITY TO SHOW CAUSE . NO STATUTORY NOTICES H AVE BEEN PRESCRIBED IN THIS BEHALF. HENCE, IT IS SUFFICIENT IF THE ASSESSEES W ERE AWARE OF THE CHARGES THEY HAD TO MEET AND WERE GIVEN AN OPPORTUNITY OF BEING HEARD. A MISTAKE IN THE NOTICE WOULD NOT INVALIDATE THE PENALTY PROCEEDINGS . THE DR REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS SAMSON PERINCHERY (SUPRA) AND THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA 9 JAYANT B PATEL / CHERYL J PATEL COTTON & GINNING FACTORY LTD (SUPRA) SUBMITTED THAT IN THE CASES BEFORE THE HONBLE BOMBAY HIGH COURT AS WELL AS KARNATAKA HIGH COURT, THE QUESTION BEFORE THE HIGH COURT WAS WHETHER THE AO CAN INITIA TE PENALTY PROCEEDINGS UNDER ONE LIMB AND LEVY PENALTY UNDER ANOTHER LIMB. IN THOSE FACTS AND CIRCUMSTANCES, THE HONBLE COURTS HELD THAT THE AO CANNOT INITIATE PENALTY PROCEEDINGS ON ONE LIMB AND LEVY PENALTY ON ANOTHER LIMB. IN THIS CASE, ON PERUSAL OF THE NOTICE ISSUED BY THE AO U/S 274, IT IS ABUNDANTLY CLEAR THAT THE AO HAS CHARGED THE ASSESSEE ON TWO GROUNDS, I.E. FO R CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF HIS INCOME. THEREFORE, THE CASE LAWS RELIED UPON BY THE LD.AR A RE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD. THE AO LEVIED PENALTY U/S 271(1)(C) ON THE GROUND T HAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME. TH E AO ISSUED NOTICE U/S 274 R.W.S. 271(1)(C) OF THE INCOME-TAX ACT, 1961. ON P ERUSAL OF THE NOTICE ISSUED BY THE AO, WE FIND THAT THE AO HAS ISSUED A PRINTED FO RM OF NOTICE WITHOUT STRIKING OFF IRRELEVANT PORTION IN THE NOTICE. WE FURTHER OBSERVE FROM THE NOTICE ISSUED BY THE AO THAT THE AO HAS HIGHLIGHTED THE PORTION CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF YOUR INCOME. THE ISSUE OF NOTICE U/S 274 R.W.S 271(1)(C) GOES TO THE ROOT OF THE MATTER. BY 10 JAYANT B PATEL / CHERYL J PATEL ISSUING NOTICE U/S 274, THE AO ASSUMES JURISDICTION TO LEVY PENALTY U/S 271(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FUR NISHING INACCURATE PARTICULARS OF INCOME. THEREFORE, BEFORE ISSUANCE OF NOTICE, THE AO HAS TO ARRIVE AT A SATISFACTION AS TO WHETHER HE HAS FRAME D THE ASSESSEE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE NOTICE SHOULD SPECIFY THE CONDITIONS S PECIFIED IN SECTION 271(1)(C) I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. UNLESS THE AO SPECIFIES THE GROUNDS ON WHICH HE PROPOSED TO LEVY THE PENALTY, IT IS DIFFICULT FOR T HE ASSESSEE TO JUSTIFY HIS CASE. IF THE PENALTY IS PROPOSED TO BE INITIATED FOR CONCE ALMENT OF PARTICULARS OF INCOME AND PENALTY IS LEVIED FOR FURNISHING OF INAC CURATE PARTICULARS OF INCOME OR VICE VERSA, THEN THE ASSESSEE WILL NOT HAVE ANY CHANCE TO SUBSTANTIATE ITS STAND BEFORE THE AO. THEREFORE, THE AO SHOULD SPEC IFY IN THE NOTICE, THE GROUND ON WHICH HE WANTED TO CHARGE THE ASSESSEE. IN CASE, THE NOTICE IS ISSUED U/S 274 R.W.S. 271(1)(C) WITHOUT SPECIFYING THE GROUND ON WHICH THE PENALTY IS PROPOSED TO BE INITIATED, THEN DEFINITEL Y, IT IS A CASE OF NON APPLICATION OF MIND BY THE AO WHICH VITIATES PENALT Y PROCEEDINGS. 10. IN THIS CASE, ON PERUSAL OF NOTICE ISSUED BY THE AO U/S 274 R.W.S. 271(1)(C) WE FIND THAT THE NOTICE IS ISSUED IN A PRINTED FORM WITHOUT SPECIFYING ON WHICH LIMB THE AO IS PROPOSED TO INITIATE THE PENALTY. S ENDING THE NOTICE IN A PRINTED 11 JAYANT B PATEL / CHERYL J PATEL FORM OF NOTICE WHERE ALL THE GROUNDS MENTIONED IN S ECTION 271(1)(C), ARE MENTIONED, WOULD NOT SATISFY THE REQUIREMENT OF LAW . IN THIS CASE, THE AO PROPOSED TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH IS EVIDENT FROM THE FAC T THAT IN THE ASSESSMENT ORDER, THE AO STATED THAT PENALTY U/S 271(1)(C) WAS PROPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. EVEN IN THE NOTICE ISSUED U/S 274, THE AO MENTIONED BOTH THE GROUNDS, I.E. CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME, BUT HE HAS LEVIED PENALTY FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FROM THE ABOVE, IT IS CLEAR THAT THE AO HAS NOT ARRIVED AT A SATISFACTION BEFORE INITIATION OF PENALTY PROCEEDINGS WHETHER HE HAD CH ARGED THE ASSESSEE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. INITIATING PENALTY ON ONE GROUND AND FINDI NG THE ASSESSEE GUILTY ON ANOTHER GROUND VIOLATES THE PRINCIPLES OF NATURAL J USTICE AS THE ASSESSEE CANNOT HAVE AN IOTA OF JUSTIFYING HIS CASE BEFORE THE AUTH ORITIES. THEREFORE, WE ARE OF THE VIEW THAT IF THE NOTICE IS ISSUED U/S 274 R.W.S . 271(1)(C) WITHOUT SPECIFYING THE GROUND ON WHICH THE PENALTY IS PROPOSED TO BE L EVIED OR WITHOUT STRIKING OFF THE IRRELEVANT PORTION IN THE NOTICE INVALIDATE S THE PENALTY PROCEEDINGS. 11. THE HONBLE KARNATAKA HIGH COURT ,IN THE CASE OF CI T VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WHILE DECIDING SIM ILAR ISSUE OF VAGUE NOTICE AT 12 JAYANT B PATEL / CHERYL J PATEL PARAGRAPH 16 OF THE ORDER OBSERVED THAT CLAUSE (C) OF SECTION 271(1) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY CONCEALMENT O F PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 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 THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BU T DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY OF EITHER ONE OR THE OTHER CA NNOT BE SUSTAINED IN LAW. IT IS NOT OPEN TO THE AUTHORITY AT THE TIME OF IMPOSING P ENALTY TO IMPOSE PENALTY ON 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 N ATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS, ONCE THE PENALTY PROCEEDINGS A RE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROU ND. 12. AN IDENTICAL ISSUE CAME UP BEFORE THE JURISDICTIONA L HIGH COURT OF BOMBAY IN THE CASE OF CIT VS SAMSON PERINCHERY (SUPRA). T HE HONBLE HIGH COURT, WHILE DEALING WITH THE ISSUE OF NOTICE ISSUED U/S 274 OF THE ACT, IN A STANDARD PROFORMA WITHOUT HAVING STRUCK DOWN IRRELEVANT CLAU SES THEREIN, BY FOLLOWING THE DECISION OF HONBLE KARNATAKA HIGH COURT, IN TH E CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA), HELD THAT THE AO SHOULD BE CLEAR AS TO WHICH 13 JAYANT B PATEL / CHERYL J PATEL OF THE TWO LIMBS UNDER WHICH PENALTY IS IMPOSABLE H AS BEEN CONTRAVENED OR INDICATE THAT BOTH HAVE BEEN CONTRAVENED WHILE INIT IATING PENALTY PROCEEDINGS. IT CANNOT BE THAT THE INITIATION WOULD BE ONLY ON O NE LIMB, I.E. FURNISHING OF INACCURATE PARTICULARS OF INCOME, WHILE IMPOSITION OF PENALTY IS ON THE OTHER LIMB, I.E. CONCEALMENT OF INCOME. THE COURT FURTHE R DISCUSSED THAT THE TRIBUNAL ALSO NOTED THAT NOTICE ISSUED U/S 274 OF T HE ACT IS IN THE STANDARD PROFORMA WITHOUT HAVING STRUCK DOWN THE IRRELEVANT CLAUSES THEREIN WHICH INDICATES NON APPLICATION OF MIND ON THE PART OF TH E AO WHILE ISSUING THE PENALTY NOTICE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW:- 3 THE IMPUGNED ORDER OF THE TRIBUNAL IMPOSED UPON T HE RESPONDENT-ASSESSEE. THIS BY HOLDING THAT INITIATIO N OF PENALTY UNDER SECTION 271 (1) (C) OF THE ACT BY ASSESSING O FFICER WAS FOR FURNISHING INACCURATE PARTICULARS OF INCOME THE ORD ER IMPOSING PENALTY IS FOR CONCEALMENT OF INCOME. THE IMPUGNED ORDER HOLDS THAT THE CONCEALMENT OF INCOME AND THE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THEREFORE, THE ASSESSING OFFICER SHOULD BE CLEAR AS TO WHICH OF THE PENALTY IS IMPOSABLE, HAS BEEN CONTRAVENED OR BOTH HAVE BEEN CONTRAVENED WHILE INITIATING PENA LTY PROCEEDINGS. IT CANNOT BE THAT THE INITIATION WOULD BE ONLY ON O NE LIMB I.E FOR FURNISHING INACCURATE PARTICULARS OF INCOME WHILE I MPOSITION OF THE OTHER LIMB I.E. CONCEALMENT OF INCOME. FURTHER, TH E TRIBUNAL ALSO NOTED THAT NOTICE ISSUED UNDER SECTION 274 OF THE A CT IS IN A STANDARD PROFORMA, WITHOUT HAVING STRIKED OUT IRRELEVANT CLA USES THEREIN. THIS INDICATES NON-APPLICATION OF MIND ON THE PART OF TH E ASSESSING OFFICER WHILE ISSUING THE PENALTY NOTICE. 4. THE IMPUGNED ORDER RELIED UPON THE FOLLOWING EXT RACT OF KARNATAKA HIGH COURT(S) DECISION IN CIT V/S. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 TO DELETE THE PENALTY:- A THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO 14 JAYANT B PATEL / CHERYL J PATEL INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED I N THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOM E UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUIN G NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT AS CASE OF FURNIS HING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED [20071 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 1 22 ITR 306 AND THE DELHI\HIGH COURT IN THE CASE OF VIRGO MARKETING P. LTD.,171TAXMN 156, HAS HELD THAT LEVY OF PENALTY HA S 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 APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTI CULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF T HE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NO N- APPLICATION OF MIND.' 5 THE GRIEVANCE OF THE REVENUE BEFORE US IS THAT TH ERE IS NO DIFFERENCE BETWEEN FURNISHING OF INACCURATE P ARTICULARS OF INCOME AND CONCEALMENT. THUS, DISTINCTION DRAWN BY THE IMPUGNED ORDER IS BETWEEN TWEELDLEDUM AND TWEEDLEDE E. IN THE ABOVE VIEW, THE DELETION OF THE PENALTY, IS UNJUSTI FIED. 6. THE ABOVE SUBMISSION ON THE PART OF THE REVENUE IS IN THE FACE OF THE DECISION OF THE SUPREME COURT IN ASHOK PAI V/S. CIT 292 ITR 11 [RELIED UPON IN MANJUNATH COTTON & GINNING FACTORY (SUPRA)] WHEREIN IT IS OBSERVED THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1)(C) OF THE ACT, CARRY DIFFERENT MEANINGS/ CON NOTATIONS. THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICE R WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTIO N 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/ PERMIT PENALTY BEING IMPOSED FOR THE OTHER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH TH E PENALTY HAS 15 JAYANT B PATEL / CHERYL J PATEL BEEN INITIATED/NOTICE ISSUED. IT MUST, THEREFORE, F OLLOW THAT E ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND OF WHICH PENALTY PROCEEDINGS HAS BEEN INITIATED, AND IT CANN OT BE ON A FRESH O OF WHICH THE ASSESSEE HAS NO NOTICE. 7 THEREFORE, THE ISSUE HEREIN STANDS CONCLUDED IN F AVOUR OF THE RESPONDENT-ASSESSEE BY THE DECISION OF THE K ARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTON AND GINNING F ACTORY (SUPRA). NOTHING HAS BEEN SHOWN TO US IN THE PRESEN T FACTS WHICH WOULD WARRANT OUR TAKING A VIEW DIFFERENT FRO M THE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATH COTTO N AND GINNING FACTORY (SUPRA). 13. THE ASSESSEE RELIED UPON THE DECISION OF ITAT, MUMB AI BENCH B IN THE CASE OF DR. SARITA MILIND DAVARE (SUPRA). THE CO-O RDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR FACTS AND ALSO CONSIDERING THE RATIO OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SMT. KUSHALYA & OTHERS 216 IT R 660 (BOM) AND ALSO AFTER ANALYZING THE PROVISIONS OF SECTION 292BB, HELD THA T THE AO HAS ISSUED A NOTICE THAT TOO INCORRECT ONE IN A ROUTINE MANNER. FURTHE R, THE NOTICE DID NOT SPECIFY THE CHARGE FOR WHICH THE PENALTY NOTICE WAS ISSUED. THE TRIBUNAL FURTHER REFERRING TO THE SUBMISSIONS OF THE LD.DR WITH REGA RD TO THE PROVISIONS OF SECTION 292BB OBSERVED THAT MERE PERCEPTION IN ASSE SSMENT PROCEEDINGS WILL NOT CURE THE DEFECT IN THE NOTICE. ONCE THE NOTICE IS NOT IN CONFORMITY WITH THE PROVISIONS PROVIDED IN THE ACT, THEN IT INVALIDATES THE PROPOSED PROCEEDINGS. 14. COMING TO THE CASE LAWS RELIED UPON BY THE LD.DR, T HE LD.DR RELIED UPON THE DECISION OF BOMBAY HIGH COURT, IN THE CASE OF C IT VS SMT. KAUSHALYA & OTHERS (SUPRA). WE HAVE GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD.DR 16 JAYANT B PATEL / CHERYL J PATEL AND FIND THAT THE HONBLE HIGH COURT WHILE DECIDING THE ISSUE OF LEGALITY OF NOTICE ISSUED U/S 274 OBSERVED THAT THE ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSA L TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DO NE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON STRIKING OFF THE INACCURA TE PORTION IN THE NOTICE BY ITSELF WILL NOT INVALIDATE THE NOTICE. THOUGH THE DECISION RELIED UPON BY THE ASSESSEE SQUARELY COVERS THE MATTER IN DISPUTE BEFO RE US, BECAUSE OF THE LATEST DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS SAMSON PERINCHERY (SUPRA), WHEREIN THE HIGH COURT HAS CONS IDERED THE RATIO OF THE JUDGEMENT OF THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA), WE PRE FER TO FOLLOW THE DECISION RENDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS SAMSON PERINCHERY (SUPRA). WE FURTHER OBSERVE THAT THE DE CISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA), HAS BEEN CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S SSAS EMERALD MEADOWS JUDGEMENT DATED 11-01-2017, W HILE DISMISSING THE SLP FILED BY THE REVENUE WHEREIN IT WAS HELD THAT THE D IVISION BENCH OF HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS MANJU NATHA COTTON & GINNING FACTORY (SUPRA), HAS CONSIDERED THE VALIDITY OF NO TICE ISSUED U/S 274 AND HELD THAT NOTICE IS VAGUE IF THE NOTICE DID NOT SPECIFY THE GROUND ON WHICH THE 17 JAYANT B PATEL / CHERYL J PATEL PENALTY PROCEEDINGS HAD BEEN INITIATED, AS TO WHET HER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. ISSUING PRINTED FORM OF NOTICE WITHOUT STRIKING OFF OF IRRE LEVANT PORTION IN THE NOTICE OR WITHOUT MENTIONING THE REASONS FOR WHICH PENALTY PR OCEEDINGS ARE INITIATED VITIATES THE PENALTY PROCEEDINGS. SINCE, THE SLP F ILED BY THE REVENUE IS DISMISSED, THE LAW LAID DOWN BY THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA), BECOMES FINAL AND IN TURN, IT WAS FOLLOWED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SAMSON PERINCHERY (SUPRA). THEREFORE, THE DECISION RENDERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SAM SON PERINCHERY (SUPRA) IS BINDING ON US AND HENCE, THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE SAID CASE IS FOLLOWED. 15. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATI OS OF THE CASE LAWS DISCUSSED HEREINABOVE, WE ARE OF THE VIEW THAT NOTI CE ISSUED BY THE AO U/S 274 R.W.S. 271(1)(C) IS VAGUE IN NATURE WHICH DID NOT S PECIFY AS TO WHETHER PENALTY PROCEEDINGS IS INITIATED FOR CONCEALMENT OF PARTICU LARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND HEN CE, THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) IS INVALID AND CONSEQUENT INIT IATION OF PENALTY PROCEEDINGS IS ABSURD AND REDUNDANT. THEREFORE, THE CONSEQUENT LEVY OF PENALTY U/S 271(1)(C) IN ALL THE CASES UNDER APPEAL IS VOID AB INITIO; HENCE THE PENALTY 18 JAYANT B PATEL / CHERYL J PATEL ORDERS ARE HEREBY QUASHED. 16. IN THE RESULT, APPEALS FILED BY THE ASSESSEES ARE A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JULY, 2017. SD/- SD/- (SAKTIJIT DEY) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 26 TH JUL, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI