S.M.Mumtazuddin, Kolkata V. I.T.O Wd - 36(2),kolkata, Kolkata

ITA 1763/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5032 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 05-06-2013
• Court: TRIBUNAL
• Assessee Lawyers: MANISH TIWARI
• Keywords: Principle of natural justice; Retrospective amendment; Initiation of penalty proceedings
• Section: 143(3); 133A; 263; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [BEFORE HONBLE SRI N.V.VASUDEVAN, JM & SHRI WASE EM AHMED, AM] I.T.A NO. 1763/KOL/20 13 ASSESSMENT YEAR : 2003-0 4 S.H.MUMTAZUDDIN -VS.- I.T.O., WARD-36(2 ), KOLKATA KOLKATA [PAN : AANFS0982J) (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI MANISH TIWARI , FCA FOR THE RESPONDENT : NONE DATE OF HEARING : 17.03.2016. DATE OF PRONOUNCEMENT : 6.4.2016. ORDER PER N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 21.02.2013 OF CIT(A)- XX, KOLKATA, RELATING TO AY 2003-04. 2. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE O RDER OF CIT(A) WHEREBY THE CIT(A) IMPOSED PENALTY ON THE ASSESSEE U/S 271(1)(C) OF TH E ACT. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED BY THE AO ARE AS FOLLOWS :- THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENGAGED I N THE BUSINESS OF RUNNING RETAIL SHOWROOMS FOR WATCHES, CLOCKS AND TIME PIECES ETC. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y.2003-04 DECLARING THE LOSS OF RS.1,8 9,627/-. AO FRAMED AN ORDER OF ASSESSMENT U/S 144 OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.2,06,73,855/- BY ORDER DATED 27.03.2006. THIS AS SESSMENT WAS SET ASIDE BY C.I.T. IN EXERCISING OF POWERS U/S 263 OF THE ACT. SUBSEQUENT LY ORDER OF ASSESSMENT U/S 143(3) 2 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 2 WAS FRAMED BY AO ON 18.08.2008 AND THE TOTAL INCOME WAS DETERMINED AT RS.,2,10,70,840/-. 4. ON FURTHER APPEAL BY THE ASSESSEE CIT(A) VIDE HI S ORDER DATED 22.12.2009 GAVE RELIEF TO THE ASSESSEE CONSEQUENT TO WHICH ADDITION OF RS.12,77,461/- WAS ALONE SUSTAINED. THE ASSESSEE IS IN APPEAL AGAINST THE AF ORESAID ADDITION BEFORE CIT(A). HOWEVER IN THE MEANWHILE, IN RESPECT OF ADDITIONS S O SUSTAINED, AO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT IMPOSED PENALT Y ON THE ASSESSEE U/S 271(1)(C) OF THE ACT. 5. ON APPEAL BY THE ASSESSEE CIT(A) CONFIRMED THE O RDER OF AO. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. NONE APPEARED ON BEHALF OF THE REVENUE. WE H AVE HEARD THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. BEFORE THE TRIBU NAL THE LEARNED COUNSEL DREW OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 O F THE ACT BEFORE IMPOSING PENALTY AND SUBMITTED THAT THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME. HE POINTED OUT THAT THE PRINTED S HOW CAUSE NOTICE DOES NOT STRIKE OUT THE IRRELEVANT PORTION VIZ., FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME. HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNA THA COTTON & GINNING FACTORY (2013) 218 TAXMAN 423 (KAR.) WHEREIN IT WAS HELD TH AT IF THE SHOW CAUSE NOTICE U/S.274 OF THE ACT DOES NOT SPECIFY AS TO THE EXACT CHARGE VIZ., WHETHER THE CHARGE IS THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF I NCOME OR CONCEALED PARTICULARS OF INCOME BY STRIKING OUT THE IRRELEVANT PORTION OF PRINTED SHOW CAUSE NOTICE, THAN THE IMPOSITION OF PENALTY ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE SUSTAINED. 3 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 3 7. REFERENCE WAS ALSO MADE TO SEVERAL JUDICIAL PRON OUNCEMENTS. IN PARTICULAR OUR ATTENTION WAS DRAWN TO A DECISION OF THE ITAT KOLKA TA BENCH A BENCH IN THE CASE OF SHRI SATYANANDA ACHARIYA BISWAS VS. DCIT ITA NO.5/ KOL/2010 ORDER DATED 2.12.2015 FOR AY 2003-04 WHEREIN ON IDENTICAL FACTS PENALTY W AS DELETED AFTER CONSIDERING ALL THE JUDICIAL PRONOUNCEMENTS REFERRED TO ABOVE. 8. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO TH E SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE SHOW-CAUSE NOTICE ISSUED U/S.274 OF THE ACT FOR ALL THE AFORESAID AYS 2002-03 TO 2006-0 7. THE AO IN THE SAID SHOW CAUSE NOTICE HAS NOT STRUCK OFF THE IRRELEVANT PORTION AS TO WHETHER THE CHARGE AGAINST THE ASSESSEE IS CONCEALING PARTICULARS OF INCOME OR FU RNISHING OF INACCURATE PARTICULARS OF INCOME. IN THIS REGARD, THIS TRIBUNAL IN THE CASE OF SHRI SATYANANDA ACHARIYA BISWAS (SUPRA) HAS TAKEN THE FOLLOWING VIEW ON BOTH THE QU ESTION WITH REGARD TO EXISTENCE OF SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS AND THE EFFECT OF NOT STRIKING OFF THE IRRELEVANT PORTION IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT AS FOLLOWS: 7. ON THE ABOVE ISSUE THE FIRST ASPECT WHICH WE N OTICE IS THAT IN THE ORDER OF ASSESSMENT, WHICH WE HAVE EXTRACTED IN THE EARLIER PART OF THIS ORDER, NOWHERE SPELLS OUT OR INDICATES THAT THE AO WAS OF THE VIEW THAT THE ASSESSEE WAS G UILTY OF EITHER CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF I NCOME. THE OFFER TO TAX OF INCOME BY THE ASSESSEE HAS JUST BEEN ACCEPTED. IT IS NO DOUB T TRUE THAT IT IS NOT THE REQUIREMENT OF THE LAW THAT THE SATISFACTION HAS TO BE RECORDED IN A PARTICULAR MANNER, ESPECIALLY AFTER THE INTRODUCTION OF THE PROVISIONS OF SEC.271(1B) OF TH E ACT WITH RETROSPECTIVE EFFECT FROM 1.4.1989. NEVERTHELESS, AS LAID DOWN BY THE HONBL E DELHI HIGH COURT IN THE CASE OF MS.MADHUSHREE GUPTA (SUPRA), THE POSITION OF LAW BO TH PRE AND POST SEC.271(1B) OF THE ACT IS SIMILAR, INASMUCH, THE AO WILL HAVE TO ARRIV E AT A PRIMA FACIE SATISFACTION DURING THE COURSE OF PROCEEDINGS WITH REGARD TO THE ASSESS EE HAVING CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS, BEFORE HE INITIATES PENALTY PROCEEDINGS. 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. 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 ADDIT ION OR DISALLOWANCE IF OVERALL SENSE GATHERED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA (P) L TD. (SUPRA) HAS TO BE UNDERSTOOD IN THE CONTEXT OF THE FACTS OF THE SAID CASE. THE REL EVANT PORTION OF THE JUDGMENT IN THE AFORESAID CASE, READS THUS: 4 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 4 9. WE ARE OF THE VIEW THAT THE SURRENDER OF INCOME IN THIS CASE IS NOT VOLUNTARY IN THE SENSE THAT THE OFFER OF SURRENDER WAS MADE I N VIEW OF DETECTION MADE BY THE AO IN THE SEARCH CONDUCTED IN THE SISTER CONCER N OF THE ASSESSEE. IN THAT SITUATION, IT CANNOT BE SAID THAT THE SURRENDER OF INCOME WAS VOLUNTARY. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS NOT ICED THAT CERTAIN DOCUMENTS COMPRISING OF SHARE APPLICATION FORMS, BANK STATEME NTS, MEMORANDUM OF ASSOCIATION OF COMPANIES, AFFIDAVITS, COPIES OF INC OME TAX RETURNS AND ASSESSMENT ORDERS AND BLANK SHARE TRANSFER 8 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 T HE ASSESSEE. THE SURVEY WAS CONDUCTED MORE THAN 10 MONTHS BEFORE THE ASSESSEE F ILED ITS RETURN OF INCOME. HAD IT BEEN THE INTENTION OF THE ASSESSEE TO MAKE F ULL AND TRUE DISCLOSURE OF ITS INCOME, IT WOULD HAVE FILED THE RETURN DECLARING AN INCOME INCLUSIVE OF THE AMOUNT WHICH WAS SURRENDERED LATER DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS. CONSEQUENTLY, IT IS CLEAR THAT THE ASS ESSEE HAD NO INTENTION TO DECLARE ITS TRUE INCOME. IT IS THE STATUTORY DUTY O F THE ASSESSEE TO RECORD ALL ITS TRANSACTIONS IN THE BOOKS OF ACCOUNT, TO EXPLAIN TH E SOURCE OF PAYMENTS MADE BY IT AND TO DECLARE ITS TRUE INCOME IN THE RETURN OF INCOME FILED BY IT FROM YEAR TO YEAR. THE AO, IN OUR VIEW, HAS RECORDED A CATEGORIC AL FINDING THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED TRUE PART ICULARS OF INCOME AND IS LIABLE FOR PENALTY PROCEEDINGS UNDER SECTION 271 READ WITH SECTION 274 OF THE INCOME TAX ACT, 1961. 10. THE AO HAS TO SATISFY WHETHER THE PENALTY PROCE EDINGS BE INITIATED OR NOT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND THE AO IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER OR R EDUCE IT INTO WRITING. 8. THE REVENUE PLACES RELIANCE ONLY ON THE SENTENC E APPEARING IN PARA-10 OF THE JUDGMENT WITHOUT READING IT IN THE CONTEXT OF THE O BSERVATIONS IN THE LAST PORTION OF PARA-9 OF THE SAID JUDGMENT. THEREFORE EVEN THE HONBLE SUPREME COURTS DECISION SUGGESTS THAT THE SATISFACTION NEED NOT BE RECORDED IN A PARTICULAR MANNER BUT FROM A READING OF THE ASSESSMENT ORDER A S A WHOLE SUCH SATISFACTION SHOULD BE CLEARLY DISCERNIBLE. IF THE AO ACCEPTS A LL THE CONTENTIONS OF THE ASSESSEE AND THE OFFER OF INCOME THAT HAS NOT BEEN DECLARED IN THE RETURN OF INCOME TO TAX WITHOUT INDICATING EITHER DIRECTLY OR INDIRECTLY THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED IN ACCURATE PARTICULARS OF INCOME, IT CANNOT BE SAID THAT SATISFACTION FOR INI TIATION OF PENALTY PROCEEDINGS IS DISCERNIBLE FROM THE ORDER OF ASSESSMENT. IF THE A SSESSEE IN GOOD FAITH OFFERS INCOME TO TAX VOLUNTARILY PRIOR TO ANY POSITIVE DET ECTION BY THE AO, SUCH VOLUNTARY OFFER CANNOT BE TAKEN ADVANTAGE OF BY THE AO TO INITIATE PENALTY PROCEEDINGS AGAINST THE ASSESSSEE WITHOUT SPECIFYIN G THE REASONS WHY PENALTY PROCEEDINGS ARE INITIATED U/S.271(1) ( C) OF THE AC T. IN THE PRESENT CASE, WE HAVE READ THE ORDER OF ASSESSMENT AS A WHOLE AND ARE SAT ISFIED THAT SATISFACTION FOR INITIATION OF PENALTY PROCEEDINGS IS NOT DISCERNIBL E FROM THE ORDER OF ASSESSMENT. WE THEREFORE CONCUR WITH THE ARGUMENT OF THE LEARNE D COUNSEL FOR THE ASSESSSEE 5 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 5 THAT INITIATION OF PENALTY PROCEEDINGS WAS NOT PROP ER IN THE PRESENT CASE AND ON THAT GROUND THE IMPOSITION OF PENALTY U/S.271(1)( C ) OF THE ACT IS UNSUSTAINABLE. 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 IN COME OR CONCEALING PARTICULARS OF SUCH INCOME. ON THIS ASPECT WE FIN D THAT IN THE SHOW 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 P ROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF IN COME OR CONCEALING PARTICULARS OF SUCH INCOME. 9.1. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. M.ANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STAT E AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULA RS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE H ONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE ALL THE G ROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIREMENT 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 P RESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMP OSING 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 THE 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 RE GARDING 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 AUTHOR ITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORD ER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH P ENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, I N FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE M ADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PEN ALTY ON 6 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 6 HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OP PORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE C ONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUC H HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTME NT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECT ION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INIT IAL 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 IS SUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED IF THE SHOW CAUSE NOTICE 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 INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH TH E OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR F INDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SU STAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF TH E 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 SA ID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PL ACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GRO UNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN T O THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPO N TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDI NGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, T HE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDE NTICAL WITH 7 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 7 THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IM POSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATIO N, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSIN G THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHE R DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CA NNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, W AS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO 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 PART ICULARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WH ILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER I S IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING 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 VIR GO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTA INABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE 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. 8 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 8 E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORIT Y OR REVISIONAL 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 FRO M THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BEC AUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INI TIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTI ON 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. 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 INTER EST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INI TIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE A SSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND A S OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THA T THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E 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 PROCEE DINGS, IN APPEAL, 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., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPO SED TO THE ASSESSEE. 9 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 9 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 EM ANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SE PARATE ASPECT OF 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 PROCEEDI NGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHIC H 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) 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 D EFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IM POSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HO LD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELLED. 9. THE AFORESAID RULING WILL SQUARELY APPLY TO THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE ALSO SATISFACTION FOR INITIATION OF PE NALTY PROCEEDINGS U/S.271(1)( C) OF THE ACT IS NOT DISCERNIBLE FROM THE ORDER OF ASSESSMENT . THE SHOW CAUSE NOTICE U/S.274 OF THE ACT IS ALSO DEFECTIVE. FOLLOWING THE DECISION REFERRED TO ABOVE, WE HOLD THAT THE PENALTY IMPOSED ON THE ASSESSEE U/S.271(1)( C) OF T HE ACT CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. 10. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 06.04.2016. SD/- SD/- [WASEEM AHMED] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 6.4.2016. [RG PS] 10 ITA NO.1763/KOL/2013 S.H.MUMTAZUDDIN. A.YR.2003-04 10 COPY OF THE ORDER FORWARDED TO: 1.S.H.MUMTAZUDDIN, 4, RADHA BAZAR STREET, KOLKATA-7 00001. 2. ITO, WARD-36(2), KOLKATA. 3. CIT(A)-XX KOLKATA 4. CIT-XII, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSTT.REGISTRAR, ITAT, KOLKATA BENCHES