DCIT, Circle-4, Kolkata, Kolkata V. M/s Tantia Construction Ltd., Kolkata

ITA 1753/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1730 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 02-05-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 08-09-2014
• Court: TRIBUNAL
• Assessee Lawyers: MANISH TIWARI
• Keywords: Search and seizure; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 153A; 132

Judgement Text

I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NOS. 1753, 1754, 1755, 1756 & 1757/KOL/ 201 4 ASSESSMENT YEARS: 2004-2005, 05-06, 06-07, 07-08 & 2008-2009 DEPUTY COMMISSIONER OF INCOME TAX,................. .....................APPELLANT CIRCLE-4, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. TANTIA CONSTRUCTION LIMITED,.................. ........................RESPONDENT 25-27, N.S. ROAD, KOLKATA-700 001 [PAN: AABCT 0811 E] APPEARANCES BY: SHRI SALLONG YADEN, ADDL. CIT, SR. D.R., FOR THE DEPARTMENT SHRI MANISH TIWARI, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : MAY 04, 2017 DATE OF PRONOUNCING THE ORDER : MAY 12, 2017 O R D E R PER BENCH :- THESE FIVE APPEALS ARE PREFERRED BY THE REVENUE AG AINST FIVE SEPARATE ORDERS OF THE LD. COMMISSIONER OF INCOME T AX(APPEALS), CENTRAL- II, KOLKATA, DATED 22/23.05.2014, WHEREBY HE CANCEL LED THE PENALTIES IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) OF THE INCOME TAX ACT, 1961 FOR ALL THE FIVE YEARS UNDER CONSIDER ATION. 2. THE ASSESSEE IN THE PRESENT CASE IS A CONSTRUCTI ON COMPANY. THE RETURNS OF INCOME FOR ALL THE FIVE YEARS UNDER CONS IDERATION WERE ORIGINALLY FILED BY IT AS REQUIRED UNDER SECTION 13 9(1). THEREAFTER A SEARCH AND SEIZURE ACTION UNDER SECTION 132 WAS CON DUCTED IN THE CASE OF THE ASSESSEE ON 17.03.2010. CONSEQUENT TO THE SAID ACTION, NOTICES UNDER SECTION 153A WERE ISSUED BY THE ASSESSING OFFICER F OR ALL THE FIVE YEARS UNDER CONSIDERATION, IN RESPONSE TO WHICH THE RETUR NS OF INCOME WERE I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 2 OF 11 DULY FILED BY THE ASSESSEE. IN THE SAID RETURNS, A NEW CLAIM WAS MADE BY THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF UNREALIZED RETENTION MONEY FOR ALL THE FIVE YEARS UNDER CONSIDERATION AS UNDER:- ASSESSMENT YEAR AMOUNT 2004 - 2005 RS.1,35,96,919/ - 2005 - 2006 RS. 46,90,919/ - 2006 - 2007 RS.1,52,69,653/ - 2007 - 2008 RS.3,42,11,947/ - 2008 - 2009 RS.7,01,40,322/ - IN THE ASSESSMENTS COMPLETED UNDER SECTION 153A/143 (3) VIDE ORDERS DATED 16.08.2011 FOR ALL THE FIVE YEARS UNDER CONSI DERATION, THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF UNREALIZED RETENTION MONEY WAS DISALLOWED BY THE ASSESSING OFFICER. ON APPEAL, THE LD. CIT(APPEALS) VIDE HIS APPELLATE ORDERS DATED 08.10.2012 CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR ALL THE FIVE YEAR S UNDER CONSIDERATION ON THE TECHNICAL GROUND THAT THE PROCEEDINGS UNDER SECTION 153A BEING FOR THE BENEFIT OF THE REVENUE, THE ASSESSEE WAS NO T ENTITLED TO CLAIM ANY NEW DEDUCTION, WHICH HAD NOT BEEN CLAIMED IN THE OR IGINAL RETURNS FILED UNDER SECTION 139(1) OF THE ACT. 3. ON CONFIRMATION OF THE ADDITIONS MADE BY HIM ON ACCOUNT OF DISALLOWANCE OF ASSESSEES CLAIM FOR DEDUCTION ON A CCOUNT OF RETENTION MONEY FOR ALL THE FIVE YEARS UNDER CONSIDERATION, N OTICES WERE ISSUED BY THE ASSESSING OFFICER REQUIRING THE ASSESSEE TO SHO W-CAUSE AS TO WHY PENALTY UNDER SECTION 271(1)(C) SHOULD NOT BE IMPOS ED IN RESPECT OF THE SAID ADDITIONS AND SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN RESPONSE TO THE SAID NOTICES WAS NOT FOUND ACCEPTAB LE BY HIM, THE ASSESSING OFFICER PROCEEDED TO IMPOSE PENALTY UNDER SECTION 271(1)(C) FOR ALL THE FIVE YEARS UNDER CONSIDERATION AS UNDER :- ASSESSMENT YEAR AMOUNT 2004 - 2005 RS.48,77,895/ - I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 3 OF 11 2005 - 2006 RS.16,82,868/ - 2006 - 2007 RS.51,37,766/ - 2007 - 2008 RS.1,15,15,741/ - 2008 - 2009 RS.2,38,40,695/ - 4. THE ABOVE PENALTIES IMPOSED BY THE ASSESSING OFF ICER UNDER SECTION 271(1)(C) FOR ALL THE FIVE YEARS UNDER CONSIDERATIO N WERE CHALLENGED BY THE ASSESSEE IN THE APPEALS FILED BEFORE THE LD. CI T(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) CANCELLED THE SAID PENALTIES FOR THE FOLLOWING IDENTICAL REASONS GIVEN IN HIS IMPUGN ED ORDER:- 5. I HAVE CONSIDERED THE SUBMISSION OF THE APPELL ANT AND PERUSED THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER. I HAVE ALSO GONE THROUGH THE JUDICIAL DECISIONS RELIE D UPON BY THE APPELLANT. THE FACTS OF THE CASE HAVE ALREADY BEEN DISCUSSED AS ABOVE. THE APPELLANT COMPANY IS ENGAGED IN THE BUSI NESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITIES LIKE ROADS , BRIDGES AND IRRIGATION SYSTEMS ETC. AWARDED BY VARIOUS GOVERNME NT AUTHORITIES. THE APPELLANT COMPANY RAISES THE BILLS ON ITS PRINCIPALS BUT THE PRINCIPALS RETAINED CERTAIN AMOU NT OF MONEY SUBJECT TO VERIFICATION OF COMPLETION OF WORK SATIS FACTORILY. THE APPELLANT COMPANY ACCOUNTED FOR THE AMOUNT OF RETEN TION MONEY ON ACCRUAL BASIS AND CREDITED TO THE PROFIT AND LOS S ACCOUNT AND ACCORDINGLY OFFERED FOR THE TAX IN THE ORIGINAL RET URN OF INCOME FILED U/S 139(1) OF THE ACT. HOWEVER, CONSEQUENT TO THE SEARCH OPERATION WHEN THE APPELLANT COMPANY FILED THE RETU RN OF INCOME U/S 153A OF THE ACT, IT CLAIMED DEDUCTION ON ACCOUNT OF RETENTION MONEY ON THE GROUND THAT THERE IS UNCERTA INTY IN RECEIVING THE RETENTION MONEY FROM THE PRINCIPALS A ND HENCE SAME WOULD BE TAXABLE ON CASH BASIS I.E. AS AND WHE N RECEIVED. IN SUPPORT OF ITS CLAIM THE APPELLANT RELIED ON THE DECISIONS OF JURISDICTIONAL HIGH COURT AS WELL AS OTHER HIGH COU RTS. HOWEVER, THE AO DID NOT ALLOW THE CLAIM OF THE APPELLANT COM PANY PRIMARILY ON THE GROUND THAT THE COMPANY IS FOLLOWI NG THE MERCANTILE SYSTEM OF ACCOUNTING AND THAT THE INCOME WAS OFFERED FOR TAX IN THE ORIGINAL RETURN OF INCOME. H E ALSO RELIED ON CERTAIN JUDICIAL DECISIONS. IN THE APPEAL FILED BY THE ASSESSEE COMPANY, THE DISALLOWANCE MADE BY THE AD WAS UPHELD BY THE CIT(A). HOWEVER, THE DISALLOWANCE WAS CONFIRMED BY THE CIT(A) NOT ON MERITS THAT THE CLAIM OF THE APPELLANT IS WR ONG OR THE COMPANY WAS NOT ELIGIBLE FOR DEDUCTION ON ACCOUNT O F RETENTION MONEY. THE DISALLOWANCE WAS UPHELD BY THE CIT(A) ON THE TECHNICAL GROUND THAT THE SAID CLAIM WAS NOT MADE B Y THE I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 4 OF 11 ASSESSEE COMPANY IN ITS ORIGINAL RETURN FILED U/S 1 39(1) OF THE ACT AND THE APPELLANT WAS NOT ENTITLED TO MAKE A FR ESH CLAIM IN THE RETURN FILED U/S 153A OF THE ACT BECAUSE THE PR OCEEDINGS INITIATED U/S 153A OF THE ACT ARE FOR THE BENEFIT O F THE REVENUE AND FOR THE BENEFIT OF THE ASSESSEE. HOWEVER, IT IS OBSERVED THAT ON THESE FACTS, THE AA HAS HELD THAT THE APPELLANT COMPANY HAS FILED INACCURATE PARTICULARS OF ITS INCOME AND, THE REFORE, IS LIABLE FOR PENAL ACTION U/S 271(1)(C) OF THE ACT. O N CAREFUL CONSIDERATION OF THE FACTS AND IN LAW, I AM OF THE OPINION THAT THE VIEW TAKEN BY THE AO TO IMPOSE THE PENALTY IS N OT CORRECT AND JUSTIFIABLE. IN THE GIVEN FACTS OF THE CASE IT CANNOT BE SAID THAT THE APPELLANT COMPANY HAD FILED INACCURATE PAR TICULARS OF ITS INCOME IN THE RETURN FILED U/S 153A OF THE ACT. THE APPELLANT COMPANY HAD MADE THE CLAIM OF DEDUCTION OF RETENTIO N MONEY ON THE BASIS OF ACCOUNTING STANDARD AND ITS CLAIM WAS SUPPORTED BY THE JUDICIAL DECISIONS. ALL THE FACTS WERE BEFORE T HE AO. MERELY FOR THE REASON THAT THE AO DISALLOWED THE CLAIM OF THE APPELLANT WHICH WAS UPHELD BY THE CIT(A) AND THAT TOO ON THE TECHNICAL GROUND; IT CANNOT BE SAID THAT THE APPELLANT COMPAN Y HAS FILED INACCURATE PARTICULARS OF INCOME AND UNDER THE CIRC UMSTANCES, I AM OF THE OPINION THAT THE PENALTY U/S 271(1)(C) CA NNOT BE LEVIED. THIS VIEW IS SUPPORTED BY THE DECISION IN T HE CASE OF RELIANCE PETROPRODUCTS (P) LTD., KANBAY SOFTWARE IN DIA (P) LTD. AND MIMOSA INVESTMENT CO. (P) LTD. (SUPRA). IN VIEW OF ABOVE, IT IS HELD THAT THE AA WAS NOT JUSTIFIED IN IMPOSING T HE PENALTY U/S 271(1)(C) OF THE ACT AND HE IS DIRECTED TO DELETE T HE SAME. THE GROUND NO. 1 TO 3 ARE ALLOWED. AGGRIEVED BY THE ORDERS OF THE LD. CIT(APPEALS) CAN CELLING THE PENALTIES IMPOSED BY THE ASSESSING OFFICER UNDER SECTION 271( 1)(C) FOR ALL THE FIVE YEARS UNDER CONSIDERATION, THE REVENUE HAS PREFERRE D THESE APPEALS BEFORE THE TRIBUNAL. 5. AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF NINE DAYS ON THE PART OF THE REVENUE IN FILING THESE APPEALS BEFORE THE TRIBUNAL. IN THIS REGARD, THE REVENUE HAS FILED AN APPLICATION SEEKIN G CONDONATION OF THE SAID APPEALS AND KEEPING IN VIEW THE REASONS GIVEN THEREIN, WE ARE SATISFIED THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY ON THE PART OF THE REVENUE IN FILING THESE APPEALS BEFORE THE TRIBUNAL . EVEN THE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY OBJECTION IN TH IS REGARD. WE, THEREFORE, CONDONE THE SAID DELAY AND PROCEED TO DI SPOSE OF THESE APPEALS OF THE REVENUE ON MERIT. I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 5 OF 11 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE BEFORE US HAS RAISED A PRELIMINARY ISSUE CHALLENGIN G THE VALIDITY OF THE PENALTY ORDERS PASSED BY THE ASSESSING OFFICER ON THE GROUND THAT IN THE ABSENCE OF ANY SPECIFIC MENTION IN THE SHOW-CAUSE N OTICES ISSUED UNDER SECTION 274 OF THE ACT FOR THE YEARS UNDER CONSIDER ATION BY THE ASSESSING OFFICER AS TO WHETHER THE ASSEESSEE IS GUILTY OF HA VING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CON CEALED PARTICULARS OF SUCH INCOME, THE INITIATION OF PENALTY PROCEEDINGS ITSELF WAS BAD IN LAW AND THE PENALTY ORDERS PASSED IN PURSUANCE THEREOF ARE LIABLE TO BE QUASHED BEING INVALID. 7. AS REGARDS THE RIGHT OF THE ASSESSEE AS RESPONDE NT TO RAISE THIS ISSUE FOR THE FIRST TIME BEFORE THE TRIBUNAL WITHOU T FILING ANY CROSS APPEAL OR CROSS OBJECTION, THE LD. COUNSEL FOR THE ASSESSE E HAS RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS.- HAZARIMAL NAGJI & CO. [46 ITR 1168], WHEREIN IT WAS HELD AS UNDER:- READING THE PROVISIONS OF SECTION 33(4) OF 1922 AC T AND THE RELEVANT RULES IT SEEMED THAT THE POWERS OF THE APPELLATE TRIBUNAL ARE SIMILAR TO THE POWERS OF THE APPELLATE COURT UNDER THE CIVIL PROCEDURE CODE. NOW , A RESPONDENT IN AN APPEAL IS UNDOUBTEDLY ENTITLED TO SUPPORT THE DECREE WHICH IS IN HIS FAVOUR ON ANY GR OUNDS WHICH ARE AVAILABLE TO HIM, EVEN THOUGH THE DECISIO N OF THE LOWER COURT IN HIS FAVOUR MAY NOT HAVE BEEN BAS ED ON THOSE GROUNDS. A RESPONDENT, UNLESS HE HAS FILED AN APPEAL HIMSELF OR FILED CROSS-OBJECTIONS IN THE APP EAL FILED BY HIS OPPONENT, WILL NOT BE ENTITLED TO CHAL LENGE THAT PART OF THE LOWER COURT'S DECREE WHICH IS AGAI NST HIM, AND THE APPELLATE COURT WILL HAVE NO POWER OR JURISDICTION TO PERMIT HIM TO DO SO. BUT, IN SO FAR AS HE ONLY WANTS TO MAINTAIN THE DECREE OF THE LOWER COUR T WHICH IS AGAINST THE APPELLANT AND IN HIS FAVOUR, H E WILL BE ENTITLED TO SUPPORT IT ON FRESH GROUNDS ALSO IF HE CAN DO SO, AND THE APPELLATE COURT ALSO WILL HAVE JURIS DICTION TO PERMIT HIM TO DO SO, PROVIDED, OF COURSE, THAT T HE FRESH GROUNDS WHICH HE WANTS TO URGE DO NOT REQUIRE A FURTHER INVESTIGATION INTO FACTS WHICH ARE NOT ALRE ADY ON RECORD AND WERE NOT BASED ON FACTS WHICH WERE NEITH ER I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 6 OF 11 ALLEGED NOR ADMITTED NOR PROVED AND WHICH THE OTHER SIDE WAS NEVER CALLED UPON TO MEET IN THE LOWER COU RT. BUT, IF ALL THE FACTS NECESSARY TO SUSTAIN A FRESH GROUND WHICH HE WANTS TO URGE ARE UNDISPUTED FACTS WHICH A RE ALREADY ON RECORD AND THE CONTENTION WHICH HE WANTS TO RAISE IS A PURE QUESTION OF LAW, THERE IS NO REASON WHY THERE SHOULD BE ANY DIFFICULTY IN THIS WAY IN RAISI NG THE SAME, OR ANY DIFFICULTY IN THE WAY OF THE APPELLATE COURT TO ALLOW HIM TO DO SO. SINCE THE DECISION OF THE APPELLATE ASSISTANT COMMISSIONER IN INSTANT CASE WAS WHOLLY IN ASSESSEE 'S FAVOUR, THE ASSESSEE COULD NOT APPEAL, AND HAD NO OCCASION ALSO TO FILE ANY CROSS-OBJECTIONS. IF THE VIEW WAS TAKEN THAT A RESPONDENT, WHO COULD NOT HAVE APPEALE D OR FILED CROSS OBJECTIONS BECAUSE THE DECREE WAS WHOLL Y IN HIS FAVOUR, CANNOT BE PERMITTED TO RAISE A NEW GROU ND AVAILABLE TO HIM IN SUPPORT OF THE DECREE, ALTHOUGH THE SAME GROUND WOULD HAVE BEEN AVAILABLE TO HIM IF HE WAS IN THE POSITION OF AN APPELLANT, IT WOULD AMOUNT TO PUTTING HIM IN A WORSE POSITION AS A RESPONDENT THA N AS AN APPELLANT. THEREFORE, THE TRIBUNAL HAD JURISDICT ION TO ALLOW THE ASSESSEE-RESPONDENT TO URGE A FRESH GROUN D WHICH IT SOUGHT TO RAISE IN THE INSTANT APPEAL BEFO RE IT. SINCE THE CLAIM OF THE ASSESSEE OF THE NEW LEGAL IS SUE RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL AS THE RESPONDENT IS DULY SUPPORTED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS.- HAZARIMALL NAGJI & CO. (SUPRA) AND THE LD. D.R. HAS NOT RAISED ANY OBJECTION IN THIS REGARD, WE ENTERTAIN THE SAID CLA IM AND NOW PROCEED TO ADJUDICATE UPON THE SAME ON MERIT. 8. IN THIS REGARD, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE SHOW-CAUSE NOTICES ISSUED BY THE A SSESSING OFFICER FOR THE YEARS UNDER CONSIDERATION UNDER SECTION 274 IN THE PRINTED FORM TO POINT OUT THAT THE IRRELEVANT PORTION, VIZ. FURNIS HED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME WAS NOT STRUCK OFF BY THE ASSESSING OFFICER AND THIS POSITI ON CLEARLY EVIDENT FROM THE SAID NOTICES HAS NOT BEEN DISPUTED EVEN BY THE LD. D.R. IT IS OBSERVED THAT THE COORDINATE BENCH OF THIS TRIBUNAL IN THE C ASE OF SUVAPRASANNA BHATTACHARYA VS.- ACIT (IN ITA NO. 1303/KOL/2010) CITED BY THE LD. I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 7 OF 11 COUNSEL FOR THE ASSESSEE HAD AN OCCASION TO CONSIDE R A SIMILAR ISSUE IN THE IDENTICAL FACT SITUATION AND THE ORDER PASSED BY TH E ASSESSING OFFICER IMPOSING PENALTY UNDER SECTION 271(1)(C) WAS HELD T O BE INVALID BY THE TRIBUNAL RELYING ON THE DECISION OF THE HONBLE KAR NATAKA HIGH COURT IN THE CASE OF CIT & ANOTHER VS.- MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565 AFTER DISCUSSING THE PROPOS ITION LAID DOWN THEREIN IN GREAT DETAIL IN PARAGRAPH NO. 8 TO 8.2 O F ITS ORDER DATED 06.11.2015, WHICH READ AS UNDER:- 8. THE NEXT ARGUMENT THAT THE SHOW CAUSE NOTICE U /S.274 OF THE ACT WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR C ONCEALING PARTICULARS OF SUCH INCOME. ON THIS ASPECT WE FIND THAT IN THE SHOW CAUSE NOTIC E U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELT OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME. 8.1 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING P ROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FO RM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIRE MENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO B E HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. 8.2 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLL OWING PRINCIPLES TO BE FOLLOWED IN THE MATTER OF IMPOSING PENALTY U/S.271(1)(C) OF THE ACT . NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CO NTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF T HE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT I S PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED I N SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSI NG PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGH T TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT E XIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A P RINTED FARM WHERE ALL THE GROUND I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 8 OF 11 MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SA TISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED , NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPE CIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CAS ES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF TH E PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCE EDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING H IM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1 )(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALL Y STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. I T IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON T HE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, T HE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUS T BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HAND S OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FU RTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDIN GS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FU RNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURAT E PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF P ENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PRO FORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE A S TO NON-APPLICATION OF MIND. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS FO LLOWS:- I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 9 OF 11 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISI ONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOU LD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271 (L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECA USE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSE LF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD H AVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 10 OF 11 Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT E FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS ' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSES SEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANC ELLED. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF P ENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE THEREFORE CANCEL THE ORDERS IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSEE. 9. IN OUR OPINION, THE DECISION OF THE COORDINATE B ENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF SUVAPRASANNA BHATT ACHARYA VS.- ACIT RENDERED VIDE ITS ORDER DATED 06.11.2015 IN ITA NO. 1303/KOL/2010 BY RELYING ON THE DECISION OF THE HONBLE KARNATAKA HI GH COURT IN THE CASE OF CIT & ANOTHER VS.- MANJUNATHA COTTON & GINNING FAC TORY REPORTED IN 359 ITR 565 IS SQUARELY APPLICABLE IN THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE SHOW-CAUSE NOT ICES ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 FOR THE YEARS U NDER CONSIDERATION NOT BEING IN ACCORDANCE WITH LAW, THE PENALTY ORDERS PA SSED BY THE ASSESSING OFFICER IN PURSUANCE THEREOF ARE LIABLE TO BE CANCE LLED BEING INVALID. WE ACCORDINGLY UPHOLD THE IMPUGNED ORDERS OF THE LD. C IT(APPEALS) CANCELLING THE PENALTIES IMPOSED BY THE ASSESSING O FFICER UNDER SECTION I.T.A. NOS. 1753 TO 1757/KOL./2014 ASSESSMENT YEARS: 2004-2005 TO 2008-2009 PAGE 11 OF 11 271(1)(C) FOR THE YEARS UNDER CONSIDERATION AND DIS MISS THESE APPEALS OF THE REVENUE. 10. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 12, 2017. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 12 TH DAY OF MAY, 2017 COPIES TO : (1)DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. TANTIA CONSTRUCTION LIMITED, 25-27, N.S. ROAD, KOLKATA-700 001 (3) CIT(APPEALS), CENTRAL-II, KOLKATA (4) CIT, KOLKATA- , KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.