M/s. Mateshwari Enterprises, Raigad V. Income-tax Officer,

ITA 1775/PUN/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7194 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUHAS S KULKARNI
• Assessee Lawyers: HARI KRISHAN
• Keywords: Depreciation; Principle of natural justice; Initiation of penalty proceedings; Fair market value
• Section: 133A; 234B; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , , !'!! # , $ % BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1775/PUN/2014 $& ' !(' / ASSESSMENT YEAR : 2007-08 M/S. MATESHWARI ENTERPRISES, A-602, TEJASWINI ENCLAVE, PLOT NO. 413/2, S. PLOT NO. 7-8, TAKKA, PANVEL, DISTT.-RAIGAD-410206 PAN : AAMFM0730F ....... / APPELLANT )& /VS. INCOME TAX OFFICER, WARD 2, PANVEL / RESPONDENT ASSESSEE BY : SHRI HARI KRISHAN REVENUE BY : SHRI SUHAS S. KULKARNI / DATE OF HEARING : 26-12-2016 / DATE OF PRONOUNCEMENT : 18-01-2017 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-I, THANE DATED 16-06 -2014 FOR THE ASSESSMENT YEAR 2007-08 UPHOLDING THE LEVY OF PENALT Y U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS THE ACT). 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A PARTNERSHIP FIRM AND IS A BUILDER AND DEVELOP ER. A SURVEY 2 ITA NO. 1775/PN/2014, A.Y. 2007-08 ACTION U/S. 133A OF THE ACT WAS CARRIED OUT AT THE BUSIN ESS PREMISES OF THE ASSESSEE FIRM ON 30-08-2007. DURING THE COURSE OF SURVEY CERTAIN DOCUMENTS WERE IMPOUNDED. ONE OF THE DOCUMENTS IMPOUND ED DURING SURVEY REFLECTED TRANSFER OF EIGHT SHOPS AND ONE OFFICE TO THE RETIRING PARTNERS OF THE FIRM I.E. SHRI DILIP SHAH AND SHRI JIGAR SHAH. THE SAID DOCUMENT IS PART OF BUNDLE NO. 5 AND IS MARKED AS DOCU MENT NO. 17 IMPOUNDED DURING SURVEY. THE SAME HAS BEEN REPRODUCED IN THE ASSESSMENT ORDER AS WELL AS PENALTY ORDER AS ANNEXURE- II. AS PER THE SAID DOCUMENT THE ASSESSEE HAD TRANSFERRED EIGHT SHOPS AND ONE OFFICE AT MARKET VALUE OF ` 1,05,03,400/- TO THE TWO RETIRING PARTNERS, WHEREAS IN THE BOOKS OF ACCOUNT AN AMOUNT OF ` 35,03,400/- WAS RECORDED IN RESPECT OF AFORESAID TRANSACTIONS. DURING THE COURSE OF A SSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED THAT THE TOTAL SALE C ONSIDERATION AS PER MARKET VALUE IS ` 1,05,03,400/-, VALUE DISCLOSED IN THE BOOKS OF ACCOUNT IS ` 47,80,000/-. THE ASSESSEE TREATED THE DIFFERENCE BETWEEN THE AMOUNT DECLARED IN BOOKS AND MARKET VALUE I.E. ` 57,23,400/- AS GOODWILL. THE ASSESSEE HAS WRITTEN OFF 1/5 TH OF THE SAID GOODWILL I.E. ` 11,44,680/- IN THE PROFIT AND LOSS ACCOUNT AND CARRIED THE BALANCE TO THE BALANCE SHEET. THE ASSESSING OFFICER WHILE FINALIZING THE ASSESSMENT, APART FROM OTHER ADDITIONS/DISALLOWANCES, ADDED BACK THE GOODWILL WRITTEN OFF AND ALSO INITIATED PENALTY PROCEEDINGS U/S . 271(1)(C) OF THE ACT. IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THE ADDITION IN RESPECT OF GOODWILL WRITTEN OFF. THE MA TTER TRAVELLED UP TO THE TRIBUNAL. THE TRIBUNAL IN ITA NO. 1079/ PN/2011 FOR THE ASSESSMENT YEAR 2007-08 DECIDED ON 30-03-2016 UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) AND REJECTED THE CONTENTIONS OF THE ASSESSEE WITH RESPECT TO WRITE OFF OF GOODWILL. THE ASSESSING OFFICER VIDE ORDER DATED 15-09-2011 LEVIED PENALT Y OF 3 ITA NO. 1775/PN/2014, A.Y. 2007-08 ` 3,85,300/- IN RESPECT OF ADDITION OF ` 11,44,680/- ON ACCOUNT OF GOODWILL WRITTEN OFF. AGGRIEVED BY THE ORDER DATED 15-09-2011 LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF I NCOME TAX (APPEALS) VIDE IMPUGNED ORDER CONFIRMED THE LEVY OF PENALTY. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSA ILING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING T HE LEVY OF PENALTY. 3. SHRI HARI KRISHAN APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED THAT THE DIFFERENCE BETWEEN THE MARKET VALUE AND THE VA LUE SHOWN IN THE BOOKS OF ASSESSEE FIRM IS TREATED AS GOODWILL. THE ASS ESSEE HAS CLAIMED ` 11,44,680/- AS DEPRECIATION ON GOODWILL AND HAS WRITTEN OFF THE SAME. ORIGINALLY, SHRI HIRALAL RANGANI (PATEL), ONE OF THE P ARTNERS OF THE ASSESSEE FIRM IN HIS STATEMENT RECORDED ON 30-08- 2007 HAD AGREED TO DISCLOSE THE AMOUNT IN THE BOOKS OF THE INDIVIDU AL PARTNERS. HOWEVER, THE SAID INCOME IS NOT TAXABLE IN THE HANDS OF PA RTNER. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I. SRI RAMALINGA CHOODAMBIKAI MILLS LTD. VS. COMMISSIONER OF INCOME TAX, 28 ITR 952 (MADRAS); II. GRINDWELL NORTON LTD. VS. ADDL. COMMISSIONER OF INCOME TAX, 50 ITR (TRIB) (S.N.) 7 (MUMBAI); III. PRINCIPAL COMMISSIONER OF INCOME TAX VS. SWASTIK INDUSTRIES, 68 TAXMANN.COM 329 (GUJARAT). 4 ITA NO. 1775/PN/2014, A.Y. 2007-08 3.1 THE LD. AR POINTED THAT THE PENALTY PROCEEDINGS INITIATE D BY THE ASSESSING OFFICER ARE LIABLE TO BE SET ASIDE AS THEY ARE DE FECTIVE. THE LD. AR POINTED THAT AT THE TIME OF RECORDING SATISFACTION FOR IN ITIATING PENALTY, THE ASSESSING OFFICER AT THE CONCLUSION OF THE FINDIN GS IN ASSESSMENT ORDER HAS OBSERVED THAT PENALTY PROCEEDING S ARE INITIATED U/S. 271(1)(C) FOR FILING WRONG PARTICULARS OF INCOME. HOWEVER, W HILE CONCLUDING THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS OBSERVED THAT SHOW CAUSE NOTICE U/S. 274 R.W.S. 271(1)(C) HAS TO BE ISSUED FOR CONCEALING OF INCOME OR FURNISHING INACCURATE PARTICULARS OF IN COME. THEREAFTER, WHILE ISSUING NOTICE U/S. 274 R.W.S. 271(1)(C) ON 29- 12-2009 THE ASSESSING OFFICER ISSUED NOTICE FOR CONCEALMENT OF INCOME AND/OR FURNISHING INACCURATE PARTICULARS OF INCOME. IF THE NOTICE WA S ISSUED FOR ONE OF THE ABOVE SAID TWO CHARGES THEN IRRELEVANT PA RTS IN THE PROFORMA NOTICE WAS NOT STRUCK OF. IN FIRST APPEAL, THE C OMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE LEVY OF PENALTY U/S. 271(1 )(C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THERE IS NO C ONSISTENCY IN THE ASSESSMENT ORDER, NOTICE ISSUED U/S. 274 R.W.S. 271 (1)(C), ORDER LEVYING PENALTY U/S. 271(1)(C) AND THE ORDER OF COMMISSIONER O F INCOME TAX (APPEALS) WITH RESPECT TO CHARGE FOR LEVY OF PENALTY. I T IS NOT CLEAR WHETHER THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR BOTH. THEREFORE, THE P ENALTY PROCEEDINGS ARE LIABLE TO BE SET ASIDE. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE RECENT DECISION OF PUNE B ENCH OF THE TRIBUNAL IN THE CASE OF KANHAIYALAL D. JAIN VS. THE ASSTT. COMMISSIONER OF INCOME TAX IN ITA NOS. 1201 TO 1205/PN/2 014 FOR THE ASSESSMENT YEARS 2003-04 TO 2007-08 DECIDED ON 30-11-20 16. 5 ITA NO. 1775/PN/2014, A.Y. 2007-08 4. PER CONTRA SHRI SUHAS S. KULKARNI REPRESENTING THE DE PARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER CONFIRMING THE LEV Y OF PENALTY U/S. 271(1)(C) IN RESPECT OF ADDITION OF ` 11,44,680/- ON ACCOUNT OF GOODWILL WRITTEN OFF. THE LD. DR SUBMITTED THAT A PERUSAL OF A SSESSMENT ORDER WOULD SHOW THAT WHILE MAKING ADDITION IN PARA 4 OF TH E ORDER, THE ASSESSING OFFICER HAS RECORDED HIS SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) FOR FILING WRONG PARTICULARS OF INCOME. HOWEVER, IN CONCLUDING PARAGRAPH OF THE ASSESSMENT ORDER , BOTH CHARGES ARE MENTIONED AS A MATTER OF PROCEDURE. THE A SSESSING OFFICER AND COMMISSIONER OF INCOME TAX (APPEALS) IN PENALTY PROCEED INGS HAVE HELD THAT PENALTY U/S. 271(1)(C) IS LEVIED FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. THUS, THERE SHOULD NOT BE ANY DOUB T IN THE MIND OF ASSESSEE REGARDING THE CHARGE FOR LEVY OF PENALTY . THE LD. DR FURTHER REFERRED TO THE ORDER OF TRIBUNAL DATED 30-03-20 16 IN ITA NO. 1079/PN/2011 WHEREIN THE CO-ORDINATE BENCH OF THE TRIB UNAL HAS UPHELD THE ADDITION ON ACCOUNT OF WRITING OFF OF GOODWILL. THE LD. DR SUBMITTED THAT IN THE ASSESSMENT ORDER, ORDER LEVYING PE NALTY U/S. 271(1)(C) AND THE ORDER OF FIRST APPELLATE AUTHORITY CONFIRMIN G THE LEVY OF PENALTY ARE CONSISTENT AND THERE IS NO AMBIGUITY WITH RESPECT TO THE CHARGE FOR LEVY OF PENALTY. THE LD. DR FURTHER POINTED THAT PENALTY CANNOT BE DELETED MERELY ON ABSURD OR ILLOGICAL INTERPRETA TION OF THE DECISIONS OR PROVISIONS OF THE ACT. THE LD. DR PLACED RELIA NCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIO NER OF INCOME TAX VS. HCIL KALINDEE ARSSPL IN ITA 480/2012 D ECIDED ON 29-07-2013. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE 6 ITA NO. 1775/PN/2014, A.Y. 2007-08 LD. AR OF THE ASSESSEE HAS ASSAILED THE ORDER OF COMMISSIO NER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY U/S. 27 1(1)(C) OF THE ACT PRIMARILY ON THE GROUND THAT THE RECORDING OF S ATISFACTION FOR LEVY OF PENALTY U/S. 271(1)(C), THE NOTICE ISSUED U/S. 274 R.W.S . 271(1)(C), ORDER LEVYING PENALTY U/S. 271(1)(C) AND THE ORDER O F FIRST APPELLATE AUTHORITY IN CONFIRMING THE LEVY OF PENALTY ARE INCO HERENT WITH RESPECT TO CHARGE FOR LEVY OF PENALTY. 6. THE PENALTY HAS BEEN LEVIED U/S. 271(1)(C) IN RESPECT OF A DDITION OF ` 11,44,680/- ON ACCOUNT OF DISALLOWANCE OF GOODWILL WRITTEN OFF . THE ASSESSING OFFICER WHILE ADJUDICATING THIS ISSUE IN PARAGRAPH 4 OF THE ASSESSMENT ORDER CONCLUDED AS UNDER : AS THE FAIR MARKET VALUE OF THE GOODS TRANSFERRED IS MUCH MORE THAN THE VALUE SHOWN IN THE RETURN OF INCOME, THEREFORE THIS AMOUNT IS TAXABLE IN THE HANDS OF THE FIRM AS HAS BEEN DONE BY THE ASSES SEE. HOWEVER, THE ASSESSEE IS NOT ENTITLED TO ANY DEDUCTION ON A/C OF GOODWILL AS DISCUSSED ABOVE. IT MAY BE MENTIONED THAT DURING THE SURVEY, THE ASSESSEE HAD TAKEN A PLEA THAT THE AMOUNT WILL BE DISCLOSED BY P ARTNERS AS PER PROVISION OF SECTION 28(V). HOWEVER NONE OF THE PA RTNERS DISCLOSED HIS AMOUNT IN THEIR INDIVIDUAL RETURN BUT HAVE 'PREFERR ED TO DISCLOSE THIS AMOUNT IN FIRM. THE GOODWILL DEBITED OF RS.11,44,6 80/- IS ADDED. PENALTY PROCEEDINGS ARE INITIATED U/S. 271(1)(C) FO R FILING WRONG PARTICULARS OF INCOME . A FURTHER PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT T HE ASSESSING OFFICER WHILE CONCLUDING THE ASSESSMENT OBSERVED AS UND ER: GIVE CREDIT FOR PREPAID TAXES. ISSUE D.N/CHALLAN/ R.O. ACCORDINGLY AFTER VERIFICATION OF PREPAID TAXES. C HARGE INTEREST U/S. 234A, 234B AND 234C AS APPLICABLE. ISSUE SHOW CAUS E NOTICE U/S. 274 R.W.S. 271(1)(C) AS THE ASSESSEE HAS CONCEALED INCO ME/FURNISHED INACCURATE PARTICULARS OF INCOME AS DISCUSSED IN TH E ORDER . ISSUE SHOW CAUSE NOTICE U/S. 274 R.W.S. 271B OF THE I.T. ACT. 7 ITA NO. 1775/PN/2014, A.Y. 2007-08 7. A PERUSAL OF THE ABOVE OBSERVATIONS OF THE ASSESSING O FFICER REVEAL THAT THE ASSESSING OFFICER IN FIRST INSTANCE HAS RECO RDED HIS SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) FO R FILING WRONG PARTICULARS OF INCOME AND IN CONCLUDING PARAGRAPH TH E ASSESSING OFFICER FOR ISSUING SHOW CAUSE NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT HAS INCLUDED BOTH THE CHARGES I.E. CONCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INCOME. 8. NOTICE U/S. 274 R.W.S. 271(1)(C) OF THE ACT WAS ISSUED TO THE ASSESSEE ON 29-12-2009. THE RELEVANT CONTENTS OF THE NOTICE ISSUED TO THE ASSESSEE ARE AS UNDER : NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)( C) OF THE INCOME TAX ACT, 1961 DATE-29/12/2009 TO M/S. MATESHWARI ENTERPRISES 413/2, 7-8, SECTOR-17, NEW PANVEL. SIR, WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2007-08 IT APPEARS TO ME THAT YOU :- *HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR F URNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT PAN VEL 11.30 A.M. ON DT. 18/01/2010 AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME- TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF HIS OPPORTUNITY OF BE ING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE YOU MAY SHOW CAUSE IN WRI TING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271(1)(C). YOURS FAITHFULLY, SD/- (A.K. AMBASTHA) INCOME TAX OFFICER, WARD-2 PANVEL, DISTT.:-RAIGAD. 8 ITA NO. 1775/PN/2014, A.Y. 2007-08 A BARE PERUSAL OF THE NOTICE REVEAL THAT THE ASSESSING O FFICER HAS NOT SPECIFICALLY MENTIONED WHETHER THE PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME OR BOTH. 9. THE ASSESSING OFFICER LEVIED PENALTY U/S. 271(1)(C) VIDE ORDE R DATED 15-09-2011. THE ASSESSING OFFICER IN PARAGRAPH 12 OF THE PENALTY ORDER HAS SPECIFIED THE CHARGES FOR LEVY OF PENALTY . THE PARAGRAPH 12 OF THE ORDER READS AS UNDER : 12. IN VIEW OF THE FACTS NARRATED HEREINABOVE AND CONSIDERING THE ENTIRELY OF THE CASE, I AM OF THE CONSIDERED OPINIO N THAT IT IS A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX A CT, 1961 FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND THEREBY CON CEALING PARTICULARS OF INCOME TO THE TUNE OF RS.11,44,680/-. THEREFORE, A MINIMUM PENALTY OF RS.3,85,300/- (RS. THREE LAKHS EIGHTY FIVE THOUSAND THREE HUNDRED ONLY) IS HEREBY LEVIED TO THE ASSESSEE. U/S. 271(1)(C) O F THE ACT, BEING 100% OF THE TAX SOUGHT TO BE EVADED. 10. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFO RE THE COMMISSIONER OF INCOME TAX (APPEALS), THE COMMISSIONER OF IN COME TAX (APPEALS) CONFIRMED THE LEVY OF PENALTY U/S. 271(1)(C) FOR FU RNISHING INACCURATE PARTICULARS OF INCOME. IT IS AN UNDISPUTED FACT THAT THE ADDITION WITH RESPECT TO DISALLOWANCES OF GOODWILL WRITTEN OFF H AS BEEN CONFIRMED BY THE TRIBUNAL. IT IS A WELL SETTLED LAW THAT PEN ALTY PROCEEDINGS AND ASSESSMENT PROCEEDINGS ARE SEPARATE A ND INDEPENDENT. MERELY, BECAUSE THE ADDITION IS CONFIRMED IPSO FACTO WOULD NOT MEAN THAT ADDITION WOULD RESULT IN LEVY OF PENALTY. 11. THE PENALTY PROCEEDINGS U/S. 271(1)(C) CAN BE INITIATED ONLY WHEN THE CONDITIONS LAID DOWN UNDER THE SECTION FOR LEVY OF PENA LTY ARE 9 ITA NO. 1775/PN/2014, A.Y. 2007-08 SATISFIED. PENALTY U/S. 271(1)(C) CAN BE LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME OR BOT H. CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTIC ULARS OF INCOME ARE TWO DIFFERENT OFFENCES. THERE CAN BE CERTAIN IN STANCES WHERE THERE CAN BE OVERLAPPING OF THE CHARGES. WHILE REC ORDING SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C), TH E ASSESSING OFFICER SHOULD SPECIFY THE CHARGE FOR WHICH PENALT Y IS BEING INITIATED. THE ONUS IS ON THE DEPARTMENT TO MAKE OUT A CASE FOR LEVY OF PENALTY. SIMILARLY, WHILE ISSUING NOTICE U/S. 274 OF THE ACT, TH E CHARGE FOR WHICH PENALTY PROCEEDINGS ARE INITIATED SHOULD BE DISCER NIBLE. THE PRINCIPLE OF NATURAL JUSTICE DEMANDS THAT THE ASSESSEE SH OULD KNOW THE CHARGE FOR LEVY OF PENALTY U/S. 271(1)(C) WHICH HE HAS TO DEF END IN THE PENALTY PROCEEDINGS. 12. IN THE PRESENT CASE, A PERUSAL OF THE ASSESSMENT OR DER SHOWS THAT WHILE RECORDING SATISFACTION FOR INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C), THE ASSESSING OFFICER IN PARAGRAPH 4 OF THE ORDER HAS STATED THAT THE PENALTY PROCEEDINGS ARE INITIATED U/S. 271(1)(C) FOR FILING WRONG PARTICULARS OF INCOME AND IN CONCLUDING PARAGRAPH OF THE AS SESSMENT ORDER HE HAS STATED THAT SHOW CAUSE NOTICE U/S. 274 R .W.S. 271(1)(C) TO BE ISSUED FOR CONCEALMENT OF INCOME/FURNISHING INACCURATE PA RTICULARS OF INCOME. THIS SHOWS THAT THE ASSESSING OFFICER IS HIMSELF NO T CLEAR WHETHER THE PENALTY IS TO BE LEVIED FOR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME. A FURTHER PERUSAL OF THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) WHICH HAS BEEN R EPRODUCED HERE-IN-ABOVE FURTHER REVEAL THAT THERE IS AMBIGUITY IN T HE NOTICE WITH RESPECT TO CHARGE FOR LEVY OF PENALTY. IT IS NOT CLEAR FRO M THE NOTICE WHETHER THE PENALTY IS BEING LEVIED FOR CONCEALMENT OF INCO ME OR 10 ITA NO. 1775/PN/2014, A.Y. 2007-08 FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSIN G OFFICER HAS ISSUED NOTICE WITHOUT STRIKING OF IRRELEVANT CLAUSE IN TH E STANDARD PROFORMA. SINCE, THE NOTICE ISSUED U/S. 274 IS VAGUE, THE SAME IS INVALID AND THE SUBSEQUENT PROCEEDING ARISING THEREFROM AR E THUS VITIATED. 13. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF COM MISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY REPORTED AS 359 ITR 565 HAS HELD THAT NOTICE U/S. 274 OF THE ACT S HOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULA RS OF INCOME. SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTION ED IN SECTION 271(1) ARE MENTIONED WOULD NOT SATISFY THE REQUIRE MENT OF LAW. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE OFFENDED. NO PENALTY COULD BE IMPOSED ON THE ASSESSEE ON THE BAS IS OF SUCH PROCEEDINGS. THE RELEVANT EXTRACT OF THE JUDGMENT OF HONBLE K ARNATAKA HIGH COURT READS AS UNDER : 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXIST ENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDI NGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COU LD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION O F 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 ARE IN THE NATURE O F CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE 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 CON TEST SUCH PROCEEDINGS 11 ITA NO. 1775/PN/2014, A.Y. 2007-08 AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE O F THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271( 1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTION ED IN SECTION 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 10 0% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HE LD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY OTHERWISE, PRINCI PLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON T HE 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 PART ICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES 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 OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEED LESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIO NED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEED INGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S AND THE SAID 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 GROUNDS ON WHICH HE IS CALLE D UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSI NG PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PR OCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ON CE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALS O BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF P ENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION 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 IMPOSING TH E PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE 12 ITA NO. 1775/PN/2014, A.Y. 2007-08 IMPOSITION OF PENALTY CANNOT VALIDATE 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 A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INA CCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHI NG INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS THE ASSES SING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT W HETHER IS 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 PA I REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME A ND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING WORKS RE PORTED IN [1980] 122 ITR 306 (GUJ) AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING P. LTD. REPORTED IN [2008] 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 SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIM ILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 14. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF KANHAIYALAL D. JAIN VS. THE ASSTT. COMMISSIONER OF INCOME TAX (SUPRA) HA D DELETED THE LEVY OF PENALTY UNDER SIMILAR CIRCUMSTANCES BY FOLLOWING THE DECISION RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) AND VARIO US OTHER DECISIONS. THE RELEVANT EXTRACT OF THE FINDINGS OF CO-ORDINA TE BENCH ARE AS UNDER : 23. HOWEVER, THE QUESTION WHICH IS RAISED BEFORE U S BY WAY OF ADDITIONAL GROUND OF APPEAL IS ROOT OF START OF THE PROCEEDINGS I.E. RECORDING OF SATISFACTION AND THE ISSUE OF NOTICE, WHICH HAS BEEN CHALLENGED BY THE ASSESSEE TO BE INVALID. APPLYING THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) AND CIT VS. SSAS EMERA LD MEADOWS 13 ITA NO. 1775/PN/2014, A.Y. 2007-08 (SUPRA) AND IN VIEW OF SLP BEING DISMISSED, WE FIND MERIT IN THE PLEA OF ASSESSEE THAT THE SATISFACTION RECORDED IN THE PRES ENT CASE TO INITIATE PENALTY PROCEEDINGS BOTH FOR CONCEALMENT OF INCOME AND FURNISHING OF PARTICULARS OF INCOME AGAINST ADDITIONAL INCOME OFF ERED BY THE ASSESSEE IS INCORRECT. FURTHER, WHERE THE ASSESSEE IS NOT AW ARE OF EXACT CHARGE AGAINST HIM, THE AMBIGUITY IN THE NOTICE ISSUED UND ER SECTION 274 R.W.S. 271(1)(C) OF THE ACT BY NOT STRIKING OF PORTION WHI CH IS NOT APPLICABLE, PREJUDICE THE RIGHT OF REASONABLE OPPORTUNITY TO TH E ASSESSEE, AS HE WAS NOT MADE AWARE OF EXACT CHARGE HE HAD TO FACE. IT I S A CLEAR-CUT CASE OF CONCEALMENT SINCE THE ASSESSEE HAD OFFERED ADDITION AL INCOME PURSUANT TO SEARCH CARRIED OUT AT ITS PREMISES. IT IS NOT TH E CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND HENCE, THE ASS ESSING OFFICER SHOULD HAVE RECORDED THE SATISFACTION ACCORDINGLY AND ISSU ED THE NOTICE ACCORDINGLY. 24. WE FIND NO MERIT ON THE PARTIAL RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. SMT. KAUSHALYA (SUPRA). THE HONBLE HIGH COURT HAS CLEARLY LAID DOWN THE PROPOSITION TH AT THE ASSESSING OFFICER HAS TO MAKE THE ASSESSEE FULLY AWARE OF EXA CT CHARGE OF THE DEPARTMENT AGAINST HIM. AS POINTED OUT, IN PRESENT CASE, IN THE ASSESSMENT ORDER ITSELF WHILE RECORDING SATISFACTIO N FOR INITIATING PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, EXA CT CHARGE OF THE DEPARTMENT AGAINST THE ASSESSEE IS NOT CLEAR. THE A SSESSING OFFICER RECORDS THE SATISFACTION FOR INITIATING PENALTY PRO CEEDINGS ON BOTH THE COUNTS I.E. CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE BOMBAY HIGH COUR T HAD ALSO UPHELD THE QUASHING OF PENALTY PROCEEDINGS FOR ASSESSMENT YEAR 1967-68 TO BE JUSTIFIED ON ACCOUNT OF VAGUENESS AND AMBIGUITY IN THE NOTICE ISSUED. BUT THE HONBLE HIGH COURT FURTHER HELD THAT WHERE THE ASSESSEE WAS FULLY AWARE OF EXACT CHARGE OF THE DEPARTMENT AGAINST HIM , THEN TECHNICAL NON- STRIKING OF CERTAIN TERMS IN THE NOTICE WOULD NOT I NVALIDATE THE PROCEEDINGS. WHERE THERE IS DEFAULT IN THE FIRST ST AGE OF MAKING THE ASSESSEE AWARE OF EXACT CHARGE OF THE DEPARTMENT, T HEN INITIATION OF PENALTY PROCEEDINGS ARE VITIATED AND THE SAME ARE T O BE QUASHED. THE ISSUE OF NOTICE UNDER SECTION 274 OF THE ACT ON SUC H VAGUENESS AND AMBIGUITY MAKES SUCH NOTICE INVALID AND PROCEEDINGS THEREAFTER ARE TO BE QUASHED. 25. THE HONBLE SUPREME COURT IN T. ASHOK PAI VS. C IT (SUPRA) HAD HELD AS UNDER:- 14 ITA NO. 1775/PN/2014, A.Y. 2007-08 23. SECTION 271(1)(C) REMAINS A PENAL STATUTE. THE RULE OF STRICT CONSTRUCTION SHALL APPLY THERETO. THE INGREDIENTS F OR IMPOSING PENALTY REMAIN THE SAME. THE PURPOSE OF THE LEGISLATURE THA T IT IS MEANT TO BE A DETERRENT TO TAX EVASION IS EVIDENCED BY THE INCREA SE IN THE QUANTUM OF PENALTY, FROM 20 PER CENT UNDER THE 1922 ACT TO 300 PER CENT IN 1985. 24. CONCEALMENT OF INCOME AND FURNISHING OF INAC CURATE PARTICULARS CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO A DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIG ENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERY OR SUGGESTION FALSI. 26. WHERE CONCEALMENT OF INCOME AND FURNISHING OF I NACCURATE PARTICULARS OF INCOME ARE TWO DIFFERENT CONNOTATION S, THEN AS PER PROVISIONS OF THE ACT, THE SATISFACTION HAS TO BE R ECORDED BY THE ASSESSING OFFICER BEFORE INITIATING PENALTY PROCEED INGS AS TO UNDER WHICH LIMB THE CASE OF ASSESSEE FALLS. IN THE PRESENT SET OF FACTS, THE SATISFACTION AS RECORDED BY THE ASSESSING OFFICER W HICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF DOES NOT ESTABLISH THE CASE OF REVENUE AGAINST THE ASSESSEE THAT IT IS LIABLE FOR LEVY OF PENALTY FOR CONCEALMENT UNDER WHICH LIMB I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT BY THE ASSESSING OFFICER ALSO DOES NOT SHOW CAUSE THE ASSESSEE AS TO MAKE HIM AWARE OF EXACT CHARGE LEVIED AGAINST HIM. IN THE ABSENCE OF SAME, IT CAUSES PREJUDICE TO THE RIGHT OF REASON ABLE OPPORTUNITY TO BE ALLOWED TO THE ASSESSEE BEFORE LEVY OF PENALTY UNDE R SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY, PENALTY NOTICE ISSUED IN THE PRESENT CASE SUFFERS FROM INFIRMITIES I.E. LACK OF SATISFACTION AND LACK OF NOTICE BEING ISSUED IN MAKING THE ASSESSEE AWARE OF EXACT CHARGE AGAINST H IM, HENCE THE SAME IS QUASHED. THE PENALTY PROCEEDINGS COMPLETED PURSU ANT TO SUCH NOTICE ARE VITIATED AND THE SAME ARE HELD TO BE INVALID. 15. THUS, IN VIEW OF THE FACTS OF THE CASE DISCUSSED ABOV E, WE ARE OF THE CONSIDERED VIEW THAT WHILE RECORDING SATISFACTION THE A SSESSING OFFICER HAS NOT CLEARLY SPELLED THE CHARGE ON WHICH HE INTE NDS TO LEVY PENALTY U/S. 271(1)(C) OF THE ACT. THEREAFTER, THE NOTICE IS SUED U/S. 274 IS EQUALLY VAGUE IN RECORDING THE CHARGE FOR LEVY OF PENALT Y U/S. 271(1)(C) OF THE ACT. THEREFORE, THE NOTICE AND THE SUBSEQU ENT 15 ITA NO. 1775/PN/2014, A.Y. 2007-08 PROCEEDINGS ARISING THERE FROM ARE BAD IN LAW AND ARE NO T SUSTAINABLE IN VIEW OF THE LAW LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA). 16. IN THE RESULT, IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE 18 TH DAY OF JANUARY, 2017. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 18 TH JANUARY, 2017 RK *+,$-.'/'(- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, THANE 4. ' / THE CIT-II, THANE 5. !*+ %%,- , ,- , . /01 , / DR, ITAT, A BENCH, PUNE. 6. + 2 34 / GUARD FILE. // ! % // TRUE COPY// #5 / BY ORDER, 6 7 / ASSISTANT REGISTRAR, ,- , / ITAT, PUNE