THIRUMALAI CHEMICALS LTD, MUMBAI V. DCIT CIR 1(3), MUMBAI

ITA 1969/MUM/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8065 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 1996-1997
• Appeal Filed On: 07-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Depreciation; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI RAJESH KUMAR , HON'BLE ACCOUNTANT MEMBER ITA NO. 1969 /MUM/201 5 (A.Y: 1996 - 97 ) M /S. THIRUMALAI CHEMICALS LTD., THIRUMALAI HOUSE, PLOT NO . 101/ 102, SION MATUNGA ESTATE, SCHEME NO. 6, ROAD NO. 29 SION (E), MUMBAI 400 022 PAN: AAACT 2015 M V. DY. CIT, CIRCLE 1(3) ROOM NO. 540 AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) ITA NO. 2059 /MUM/201 5 (A.Y: 1996 - 97) DY. CIT, CIRCLE 1(3) (2) ROOM NO. 5 64, 5 TH FLOOR , AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020 V. M /S. THIRUMALAI CHEMICALS LTD., THIRUMALAI HOUSE, PLOT NO. 101/ 102, SION MATUNGA ESTATE, SCHEME NO. 6, ROAD NO. 29 SION (E), MUMBAI 400 022 PAN: AAACT 2015 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI HIRO RAI DEPARTMENT BY : SHRI RAJESH DAMOR & SHRI CHAUDHARY ARUN KUMAR SINGH DATE OF HEARING : 26 .10.2018 DATE OF PRONOUNCEMENT : 21 .12 .2018 2 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., O R D E R PER C. N. PRASAD (JM) 1. THESE TWO APPEALS ARE FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 3, MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 30.01.2015 IN PARTLY SUSTAINING THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. 2. THE ASSESSING OFFICER LEVIED PENALTY AT 200% WHICH WAS RESTRICTED TO 100% BY THE LD. CIT(A), AGAINST THIS ORDER REVENUE AND ASSESSEE ARE IN APPEAL. 3. ASSESSEE IN ITS APPEAL CHALLENGED THE ORDER OF THE LD.CIT(A) IN PARTLY SUSTAINING THE PENALTY U/S. 271(1)(C) OF THE ACT BY RAISING THE FOLLOWING GROUNDS IN ITS APPEAL: - 1. THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN PARTLY CONFIRMING THE LEVY OF PENALTY FOR CONCEALMENT IN RESPECT OF THE LEASING TRANSACTIONS ENTERED INTO BY THE APPELLANT. THE REASON S GIVEN BY HIM IN THIS REGARD ARE INCORRECT, UNJUSTIFIED AND UNWARRANTED. 2. WITHOUT PREJUDICE TO THE GROUND NO.1 ABOVE, THE LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN MIXING UP THE LEASING TRANSACTIONS ENTERED INTO WITH DUCKFIN INTERNATIONAL LTD., AND THOS E WITH LLOYD STEEL INDUSTRIES LTD. HE HAS FAILED TO APPRECIATE THE CLEAR DIFFERENCES AND DISTINCTION BETWEEN THE LEASING TRANSACTIONS ENTERED INTO BY THE APPELLANT WITH THESE 2 PARTIES. 4. ASSESSEE ALSO RAISED ADDITIONAL GROUNDS OF APPEAL ON TECHNICAL ISSU E CONTENDING THAT THE PROCEEDINGS INITIATED U/S. 271(1)(C) OF THE ACT ARE ILLEGAL AND BAD IN LAW, THE ADDITIONAL GROUND S ARE AS UNDER: - THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT IS ILLEGAL AND INVALID. THE SHOW - CAUSE NOTICE DID NOT STRIKE OFF THE I RRELEVANT PORTION AND EVEN THE ASSESSMENT ORDER DID NOT SPECIFY THE LIMB OF SECTION 271(1)(C) FOR WHICH THE PENALTY WAS INITIATED. THUS, THERE IS NON - APPLICATION OF MIND RENDERING THE PENALTY ILLEGAL AND INVALID. 3 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBM ITTED THAT , THE ADDITIONAL GROUND FILED IS PURELY A LEGAL ISSUE AND DOES NOT REQUIRE ANY FRESH INVESTIGATIONS INTO FACTS, AND THEREFORE REQUESTED FOR ADMISSION OF THE ADDITIONAL GROUND. RELIANCE IS PLACED RELIANCE ON THE OF HON'BLE SUPREME COURT IN THE CA SE OF NTPC LTD., [229 ITR 383]. 6. LD. DR OPPOSED FOR ADMISSION OF ADDITIONAL GROUND. 7. ON HEARING BOTH THE SIDES AND PERUSING THE ADDITIONAL GROUND RAISED BY THE ASSESSEE, WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS PURELY A LEGAL GROUND AND DOES NOT REQUIRE ANY FRESH INVESTIGATIONS INTO THE FACTS. THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NTPC LTD., (SUPRA), WE ADMIT THE ADDITIONAL GROUND FOR ADJUDICATI ON. 8. WITH RESPECT TO ADDITIONAL GROUND THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT INITIATION OF THE PENALTY PROCEEDINGS ITSELF IS BAD IN LAW AS THE ASSESSING OFFICER DID NOT SPECIFY AS TO WHICH LIMB OF THE PENALTY NOTICE WAS INVOKING I.E. EITHER FOR CO NCEALMENT OF INCOME OR FOR INACCURATE PARTICULARS. IT IS SUBMITTED THAT THE CHARGE FOR WHICH THE PENALTY WAS INVOKED IS NOT SPECIFIED. REFERRING TO NOTICE ISSUED U/S . 274 R.W.S. 271 OF THE ACT, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IRRELEVANT P ORTION OF THE CHARGE WAS NOT STRICKEN OFF AND THEREFORE, THE INITIATION OF PENALTY 4 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., PROCEEDINGS IS BAD IN LAW. IT IS SUBMITTED THAT, THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER AND THE PENALTY WAS INITIATED WITHOUT APPLICATION OF MIND IN A MEC HANICAL MANNER. REFERRING TO ASSESSMENT ORDER, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER STATED IN THE ASSESSMENT ORDER THAT THE PENALTY PROCEEDINGS U/S. 271 ARE INITIATED AND WHILE PASSING THE PENALTY ORDER ASSESSING OFFICER STATE D THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS AND DEVISED AN ELABORATE DOCUMENTATION PROCEDURE TO CLAIM EXCESSIVE DEPRECIATION AND THEREFORE, IT IS A FIT CASE FOR LEVY OF PENALTY. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CHARGE FOR LEVYING T HE PENALTY IS VAGUE AND THERE IS COMPLETE NON APPLICATION OF MIND BY THE ASSESSING OFFICER. IN SUPPORT OF HIS SUBMISSIONS LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: - (I) ITA.NO. 1592 & 1593/MUM/2016 ACIT V. M/S. IDEA CELLULAR LTD., (II) ITA.N O. NO. 7332 TO 7335/MUM/2014 GLOBAL PROSERV LTD., V. ACIT (III) ITA.NO. 494/MUM/ 2015 M/S. S UMER CORPORATION V. ACIT (IV) ITA.NO. 6914 & 6915/MUM/2012, SHRI SURESH SHETH V. ITO (V) ITA.NO. 3108/MUM/2016, M/S. TATA COMMUNICATIONS TRANSFORMATION SERVICES LTD. V. DCIT (VI) ITA.NO. 7370/MUM/2014 GUPTA GEMHOUSE PVT LTD. V. ITO (VII) ITA.NO. 6149/MUM/2017 M/S. JALAN CAPITALS PVT LTD. V. DCIT 9. LD. DR PLACING RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. SMT. KAUSHALYA [75 TAXMAN 549] AND M/S. MAHARAJ GARAGE & COMPANY V. CIT SUBMITTED THAT ASSESSEE WAS AWARE OF THE CHARGE AND THEREFORE THERE IS NO INFIRMITY IN THE ORDER PASSED BY THE ASSESSING OFFICER IN INITIATING THE PENALTY PROCEEDINGS. 5 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., 10. IN REPLY THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DE CISION S OF THE BOMBAY HIGH COURT IN CIT V. SMT. KAUSHALYA (SUPRA) AND M/S. MAHARAJ GARAGE & COMPANY V. CIT HAVE BEEN CONSIDERED BY THE COORDINATE BENCH IN THE FOLLOWING CASES: - (I) TRANS CONDUCT ( INDIA ) V. ACIT IN ITA.NO. 3198/MUM/2016 DATED 10.11.2017 (II) BERMACO INDUSTRIES LIMITED V. ACIT IN ITA.NO. 2825/MUM/2016 DATED 10.11.2017. (III) P.K. JOSHUA MARARATHA TOWER V. INCOME TAX OFFICER IN ITA.NO. 4487 TO 4491/MUM/2014 DATED 07.06.2017. (IV) MRS. INDRANI SUNIL PILLAI V. ACIT IN ITA.NO. 1339/MUM/2016 DATED 19.01.2018. (V) M/S. TATA COMMUNICATION TRANSFORMATION SERVICES LTD. V. DCIT IN ITA.NO. 3108/ MUM/20 16 DATED 21.02.2018 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN VIEW OF THE ABOVE DECISIONS INITIATION OF PENALTY PROCEEDINGS IS BAD IN LAW . CONSEQUENTIALLY THE PENALTY ORDER IS BAD IN LAW. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON THE TECHNICAL ISSUE WE FIND THAT THE ASSESSING OFFICER HAS NOT MADE THE CHARGE CLEAR TO THE ASSESSEE I.E. WHETHER THE PENALTY IS INITIATED EITHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY STRIKING OFF THE IRRELEVANT PORTION OF THE CHARGE IN THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT. WE ALSO FIND FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER EXC EPT STATING THAT PENALTY PROCEEDINGS U/S. 271(1)(C) IS BEING INITIATED, HE HAS NOT MENTIONED AS TO ON WHAT CHARGE THE PENALTY PROCEEDINGS ARE INITIATED I.E. EITHER FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF 6 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., INCOME. IN THE CASE OF ORBIT ENTERPRISES V. INCOME TAX OFFICER [60 ITR (TRIB.) 252] THE MUMBAI BENCH OF THE TRIBUNAL CONSIDERED IDENTICAL SITUATION , AND CONSIDERING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V . SAMSON PERINCHERY [392 ITR 4] HELD TH AT, IF THE ASSESSING OFFICER FAILED TO SPECIFY THE CHARGE FOR WHICH THE PENALTY PROCEEDINGS ARE INITIATED THE PROCEEDINGS ARE BAD IN LAW. 12. IN THE CASE OF M/S. TATA COMMUNICATION TRANSFORMATION SERVICES LTD. V. DCIT (SUPRA) T HE COORDINATE BENCH CONSIDERING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. MAHARAJ GARAGE & COMPANY V. CIT (SUPRA) AND THE DECISION OF THE COORDINATE BENCH IN THE CASE OF MRS. INDRANI SUNIL PILLAI V. ACIT (SUPRA) AND HELD AS UNDER: - 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE CASE LAWS CITED BY BOTH THE PARTIES. THE ASSESSEE HAS CHALLENGED PENALTY ORDER PASSED BY THE AO UNDER SECTION 271(1)(C) ON THE GROUND THAT THE AO HAS ISSUED VA GUE NOTICE WITHOUT STRIKING OFF INAPPROPRIATE PORTION IN THE NOTICE WHETHER THE PENALTY HAS BEEN LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THEREFORE, THE PENALTY LEVIED ON SUCH VAGUE NOTICE CANNOT SU RVIVE. WE FIND THAT THE ISSUE OF NOTICE UNDER SECTION 274 R.W.S 271(1)(C) HAS BEEN DEALT BY THIS TRIBUNAL IN VARIOUS CASES INCLUDING IN THE CASE OF M/S. CENZAR INDUSTRIES LTD. VS. ITO IN ITA NO.1970/M/2015 DATED 29.12.17 WHEREIN AFTER CONSIDERING THE RELEV ANT FACTS AND ALSO RELIED UPON VARIOUS JUDICIAL PRECEDENTS INCLUDING THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) AND ALSO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF SHRI SAMS ON PERINCHERY VS. ACIT (SUPRA), HAS HELD THAT PENALTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) IS VOID AB INITIO AND LIABLE TO BE QUASHED, IF THE AO ISSUED VAGUE NOTICE UNDER SECTION 274 R.W.S 271(1)(C) WITHOUT STRIKING OFF IRRELEVANT PORTION OF NOTIC E AND ALSO IF THE AO HAS NOT MADE A SPECIFIC CHARGE WHETHER PENALTY PROCEEDING IS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE RELEVANT PORTION OF ORDER IS EXTRACTED BELOW: 10. WE HAVE HEARD TH E RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ALSO GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO HAS LEVIED PENALTY U/S 271(1)(C) IN RESPECT OF DISALLOWANCE OF REIMBURSEMENT OF SELLING AND DISTRIBUTION EXPENSES ON THE GROUND THAT THE 7 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME. THE AO HAS INITIATED PENALTY BY ISSUING NOTICE U/S 274 R.W.S. 271(1)(C) IN A PRINTED FORM WITHOUT STRIKING OFF OF IRRELEVANT PORTION WHICH WERE NOT APPLI CABLE TO THE FACTS OF ASSESSEE'S CASE. THE AO HAS ISSUED NOTICE WHICH STATES THAT PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ASSESSMENT ORDER, THE AO HAS INITIATED PENALTY P ROCEEDINGS ON BOTH CHARGES, I.E. FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO LEVIED THE PENALTY ON BOTH THE CHARGES, I.E. FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. RIGHT FROM THE ASSESSMENT STAGES TO LEVY OF PENALTY, THE AO HAS INITIATED PENALTY ON BOTH CHARGES WHICH IS NOT THE CASE AS PER THE PROVISIONS OF SECTION 271(1)(C) AS THE TWO CHARGES, I.E. CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACC URATE PARTICULARS OF INCOME ARE TWO DIFFERENT CONNOTATIONS. THE ISSUE OF NOTICE U/S 274 R.W.S. 271(1)(C) GOES TO THE ROOT OF THE MATTER OF ASSUMING JURISDICTION TO LEVY PENALTY U/S 271(1)(C), THEREFORE, BEFORE ISSUANCE OF NOTICE, THE AO HAS TO ARRIVE AT A SATISFACTION AS TO WHETHER PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO CANNOT TAKE BOTH THE CHARGES FOR LEVYING PENALTY BY STATING THAT THE ASSESSEE HAS CONCEALED PART ICULARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME. 11. THE PROVISIONS OF SECTION 271(1)(C) ARE VERY CLEAR AND THERE IS NO AMBIGUITY. ON A PLAIN READING OF SECTION 271(1)(C), IT IS VERY CLEAR THAT CLAUSE (C) DEALS WITH TWO SPECIFIC OFFE NCES, THAT IS TO SAY, CONCEALMENT OF 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 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 INITIATING PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR HOLDING HIM GUILTY FOR EITHER ONE OR THE OTHER CANNOT BE SUSTAINED IN LA W. THIS LEGAL PROPOSITION IS CLEARLY REITERATED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY LTD (SUPRA) WHEREIN IT WAS CATEGORICALLY HELD THAT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271( 1)(C) WHEN IT IS A SINE QUA NON INITIATION OF PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUND SHOULD BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. INITIATION OF PENALTY ON ONE GROUND AND LEVYING PENALTY ON ANOTHER GROUND WOULD CAUSE INJUSTICE TO THE ASSESSEE AS THE ASSESSEE WAS KEPT IN BLANK TO JUSTIFY HIS CASE WHETHER THE AO SOUGHT TO INITIATED PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IF THE PROCEEDINGS ARE INITIATED ON A SPECIFIC CHARGE, THEN, THE ASSESSEE CAN JUSTIFY ITS CASE BY ADVANCING ARGUMENTS ON THE CHARGE FRAMED BY THE AO. THUS, ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOU LD ALSO BE IMPOSED ON THE SAME GROUND. IF PENALTY PROCEEDINGS ARE INITIATED ON ONE GROUND AND LEVIED PENALTY ON DIFFERENT GROUND OR PENALTY PROCEEDINGS ARE INITIATED ON TWO GROUNDS, I.E. CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURAT E 8 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., PARTICULARS OF INCOME WOULD DEFINITELY VITIATE THE ENTIRE PENALTY PROCEEDINGS. 12. IN THIS CASE, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD IT IS ABUNDANTLY CLEAR THAT THE AO HAS INITIATED PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER ON BOTH THE GROUNDS , I.E. CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO ALSO LEVIED PENALTY ON BOTH THE GROUNDS OF CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH IS QUI TE CONTRARY TO THE PROVISIONS OF SECTION 271(1)(C) WHERE IT WAS CATEGORICALLY STATED THAT BOTH THE CHARGES ARE STANDING IN A DIFFERENT FOOTING AND THE AO HAS TO INITIATE PENALTY PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. INITIATION OF PENALTY BY INJECTING AND IN PLACE OF OR WOULD DEFINITELY GO AGAINST THE BASIC PROVISIONS OF THE ACT. IN THIS CASE, THE AO HAS INITIATED PENALTY ON BOTH THE GROUNDS, WHICH CANNOT BE THE CASE F OR INITIATION OF PENALTY U/S 271(1)(C) OF THE ACT. WE FURTHER OBSERVE THAT IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUND 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 VIOLATE PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THE VALIDITY OF ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE POSSESSION OF THE AUTHORITY IMPOSING PENALTY AT THE TIME, THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY. THE AO IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDING S ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME. AS ALREADY STATED, FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES. IN CASE, THE AO HAS MADE MULTIPLE ADD ITIONS, ONE MAY RELATES TO CONCEALMENT OF PARTICULARS OF INCOME AND ANOTHER MAY RELATE TO FURNISHING OF INACCURATE PARTICULARS OF INCOME, BUT SINGLE ADDITION MADE CANNOT LEAD TO AN INFERENCE OF CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCUR ATE PARTICULARS. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT BEFORE INITIATION OF PENALTY PROCEEDINGS, THE AO HAS TO ARRIVE AT A CORRECT SATISFACTION AS TO WHETHER PENALTY IS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IF THE AO FAILS TO INITIATE PENALTY PROCEEDINGS BY ISSUANCE OF PROPER NOTICE, THEN THE WHOLE PENALTY PROCEEDINGS BECOMES VITIATED AND VOID AB INITIO. 13. COMING TO THE CASE LAWS RELIED UPON BY THE ASSESSEE. THE ASSESSEE HAS RELIED U PON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY VS CIT (SUPRA), WHEREIN THE HON'BLE HIGH COURT HAS CATEGORICALLY OBSERVED THAT SENDING PRINTED FORM OF NOTICE WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 (1)(C) ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. NOTICE ISSUED U/S 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUND MENTIONED IN SECTION 271(1)(C), I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INC OME. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. INITIATING THE PENALTY PROCEEDINGS ON ONE LIMB AND HOLDING THE 9 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. THE RELEVANT PO RTION OF THE ORDER IS EXTRACTED BELOW: - ' THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT AS CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED (2007) 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALNMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING P.LTD., 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 SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER P ROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STAND AND PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFEREN CE AS TO NON - APPLICATION OF MIND.' 14. THE ASSESSEE HAS RELIED UPON DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SAMSON PERINCHERY IN INCOME TAX APPEAL NO.1154 OF 2014 & ORS ORDER DATED 5TH JANUARY, 2017. THE HON'BLE BOMBAY HIGH COURT AFTER CONSIDERING THE RATIO LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) OBSERVED THAT THE SATISFACTION OF THE AO WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED IN SECTION 271(1)(C) OF THE ACT F OR 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 THE PENALTY HAS BEEN INITIATED / NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND ON WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED AND IT CANNOT BE ON A FRESH GROUND OF WHICH ASSESSEE HAS NO NOTICE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: - 'THE ABOVE SUBMISSI ON ON THE PART OF THE REVENUE IS IN THE THE DECISION OF THE SUPREME COURT IN ASHOK PAL V/S. CIT 292 ITR [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/ CONNOTATIONS. THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR INITIATION OF PENALTY PRO CEEDINGS 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 THE PENALTY HAS BEEN INITIATED / NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HA S TO BE MADE ONLY ON THE GROUND ON WHICH THE PENALTY PROCEEDINGS HAS 10 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., BEEN INITIATED AND IT CANNOT BE ON A FRESH GROUND OF WHICH ASSESSEE HAS NO NOTICE.' 15. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS SSA'S EMERALD MEADOWS (SUPRA) WHEREIN THE HON'BLE SUPREME COURT DISMISSED SLP FILED BY THE REVENUE BY FOLLOWING THE DECISION OF THE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA) BY OBSERVING THAT NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) WAS BAD IN LAW AS IT DID NOT SPECIFY UNDER WHICH LIMB OF SECTION 271(1)(C), PENALTY PROCEEDINGS HAD BEEN INITIATED. 16. COMING TO THE CAS E LAWS RELIED UPON BY THE LD. DR. THE LD. DR RELIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SMT.KAUSHALYA (SUPRA). WE HAVE GONE THROUGH THE CASE LAW RELIED UPON BY THE LD. DR IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FI ND THAT THE ITAT, MUMBAI IN THE CASE OF DCIT VS DR. SARITA MILIND DAVARE IN ITA NO.1789/MUM/2014 DATED 21 - 12 - 2016 HAS CONSIDERED THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE LIGHT OF SUPREME COURT JUDGEMENT IN THE CASE OF DILIP N SHROFF 291 IT R 519 (SC) AND OBSERVED THAT THERE SHOULD BE APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUING NOTICE. SINCE THE CO - ORDINATE BENCH HAS ALREADY CONSIDERED THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT CASE LAW RELIED UPO N BY THE LD.DR IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 8. IN SO FAR AS THE JUDGMENT OF THE HONBLE JUDICIAL BOMBAY HIGH COURT IN THE CASE OF M/S. MAHARAJ GARAGE & COMPANY VS. CIT (SUPRA) RELIED UPON BY THE LD. D.R., THE CO - ORDINATE BENCH OF I TAT IN THE CASE OF INDRANI SUNIL PILLAI VS. ACIT IN ITA NO.1339/M/2016 DATED 19.01.18 HAS CONSIDERED THE RATIO OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. MAHARAJ GARAGE & COMPANY VS. CIT (SUPRA) AND HELD THAT THE BASIC ISSUE ARISING OUT O F THE REFERENCE APPLICATION WHICH TELL FOR CONSIDERATION OF THE HONBLE JURISDICTIONAL HIGH COURT WAS WHILE GRANTING PREVIOUS APPROVAL BY INSPECTING ASSISTANT COMMISSIONER AS PER PROVISIONS OF SECTION 271(1)(C)(III) OF THE ACT, WHETHER THE ASSESSEE WAS REQ UIRED TO BE GIVEN AN OPPORTUNITY OF BEING HEARD. WHILE CONSIDERING THE ISSUE, THE HON'BLE COURT OBSERVED THAT PROVISIONS OF SECTION 271(1)(C)(III) DOES NOT ATTRACT RULE OF PRESUMPTION OF MENSREA AS THE PENALTY IMPOSED UNDER THE SAID PROVISION IS FOR THE BR EACH OF CIVIL OBLIGATION. THE OBSERVATIONS OF THE HONBLE COURT AGAINST ISSUANCE OF SHOW CAUSE NOTICE APPEAR TO BE IN THE CONTEXT OF QUANTUM OF PENALTY PROPOSED TO BE IMPOSED AND NOT WITH REFERENCE TO THE DOING AWAY WITH THE ISSUE OF SHOW CAUSE NOTICE AS C ONTEMPLATED UNDER SECTION 274 OF THE ACT. 9. IN THE VIEW OF THE MATTER AND CONSISTENT WITH THE VIEW TAKEN BY THE COORDINATE BENCH IN THE CASE OF M/S. CENZAR INDUSTRIES LTD. VS. ITO (SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY PROCEEDINGS INITIAT ED BY THE AO BY ISSUE OF NOTICE UNDER SECTION 274 R.W.S 271(1)(C) WITHOUT STRIKING OFF THE IRRELEVANT PORTION OF NOTICE IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO, WHETHER PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. WE FURTHER NOTICED THAT THE AO HAS ISSUED PRINTED FORM OF NOTICE WITHOUT STRIKING OFF IRRELEVANT PORTION AND ALSO IN THE PENALTY ORDER HE DOES NOT SPECIFY UNDER WHICH CHARGE PENALTY HAS BEEN INITIATED. THEREFORE , WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY PROCEEDING INITIATED BY THE AO IS BAD IN LAW 11 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., AND LIABLE TO BE QUASHED. HENCE, WE QUASH THE PENALTY PROCEEDINGS AND DELETE PENALTY LEVIED BY THE AO UNDER SECTION 271(1)(C) OF THE ACT. 13. THE COORDINATE BENCH IN THE CASE OF SURESH SETH V. ITO IN ITA.NOS. 6914 & 6915/MUM/2012 DATED 20.12.2017 HELD AS UNDER: - 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THIS CASE AS COULD BE SEEN FROM THE ASSESSMENT ORDERS AS WELL AS TH E PENALTY ORDERS THAT THE ASSESSING OFFICER HAS NOT SPECIFIED THE CHARGE ON WHICH HE HAS IMPOSED THE PENALTY U/S. 271(1)(C) OF THE ACT. THE ASSESSMENT ORDER AS WELL AS THE PENALTY ORDER ONLY SHOW THAT THE INCOME TAX OFFICER IS SATISFIED THAT THE INCOME OF THE ASSESSEE FALLS WITHIN THE PURVIEW OF SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER DID NOT EVEN MENTION THAT THE ASSESSEE EITHER CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE ISSUE OF WHETHER THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT IS SUSTAINABLE IN LAW IN THE ABSENCE OF SPECIFIC CHARGE IN THE NOTICE ISSUED U/S. 274 R.W.S. 271(1)(C) OF THE ACT HAS BEEN CONSIDERED IN VARIOUS DECISIONS AND THE COORDINATE BENCH OF MUMBAI TRIBUNAL RECENTLY IN THE CASE OF M/S ORB IT ENTERPRISES V. ITO [60 ITR (TRIB.)251] HELD AS UNDER: SECTION 271(1)(C) POSTULATES THAT PENALTY PRESCRIBED THEREIN CAN BE LEVIED ON EXISTENCE OF ANY OF THE TWO SITUATIONS, NAMELY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME REFERRED TO IN SECTION 271(1)(C) DENOTE TWO DIFFERENT CONNOTATIONS. THEREFORE, IT IS IMPERATIVE FOR THE ASSESSING OFFICER TO MAKE THE A SSESSEE AWARE IN THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) AS TO WHICH OF THE TWO LIMBS ARE BEING PUT UP AGAINST HIM FOR THE PURPOSES OF LEVY OF PENALTY UNDER SECTION 271(1)(C). UNLESS THE ASSESSEE IS MADE AWARE OF THE SPECIFIC CHARG E AGAINST HIM, IT WOULD BE VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE INASMUCH AS THE ASSESSEE WOULD NOT BE IN A POSITION TO PUT UP HIS DEFENSE APPROPRIATELY. THE ASSESSING OFFICER RECORDED THAT THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) WERE INI TIATED FOR CONCEALMENT OF INCOME WHILE IN THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C), BOTH THE LIMBS OF SECTION 271(1)(C) WERE LEFT INTACT IN THE STANDARD PRINTED NOTICE, AS THE IRRELEVANT CLAUSE HAD NOT BEEN STRUCK OFF. THIS CONTRADI CTION IN THE ASSESSMENT ORDER VIS - - VIS THE PENALTY NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 271(1)(C) ON THE SAME DATE CLEARLY BROUGHT OUT A CONFUSION ON THE PART OF THE ASSESSING OFFICER, AND A SITUATION WHERE THE ASSESSEE WAS NOT AWARE ABOUT TH E CLEAR AND CRYSTALIZED CHARGE BEING MADE AGAINST HIM, THUS VIOLATING THE PRINCIPLES OF NATURAL JUSTICE. THEREFORE, THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(1)(C) WAS UNTENABLE AND SUFFERED FROM THE INFIRMITY OF N ON - APPLICATION OF MIND BY THE ASSESSING OFFICER. .. 13. AT THIS POINT, WE MAY ALSO MAKE A REFERENCE TO THE JUDGMENT OF THE HON'BLE PATNA HIGH COURT RELIED BY THE LD. CIT - DR BEFORE US. THE ISSUE BEFORE THE HON'BLE PATNA HIGH COURT WAS RELATING TO LEVY OF P ENALTY FOR SHORTFALL IN THE PAYMENT OF ADVANCE TAX PAID AS COMPARED WITH THE TAX FINALLY ASSESSED AS PAYABLE, BUT IN THE NOTICE ISSUED U/S 274 R.W.S. 273(B) OF THE ACT IT WAS INCORRECTLY MENTIONED THAT ASSESSEE HAD FAILED TO FILE ITS ESTIMATE OF ADVANCE TA X. THE HON'BLE PATNA HIGH COURT HELD THAT MENTION OF SUCH INCORRECT CHARGE WOULD NOT RENDER THE PENALTY PROCEEDINGS VOID - AB - INITIO. THE AFORESAID PARITY OF REASONING HAS BEEN RELIED UPON BY THE LD. CIT - DR BEFORE US TO STATE THAT NON - STRIKING OFF OF THE IRR ELEVANT PORTION OF THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT DOES NOT RENDER THE PROCEEDINGS INVALID. IN OUR VIEW, THE SAID DECISION DOES NOT HELP THE CASE OF THE REVENUE QUA THE ISSUE BEFORE US. FIRSTLY, THE HON'BLE PATNA HIGH COURT ITSELF NOTED THAT IT WAS A CASE OF MERE WRONG LABELLING OF THE SECTION OR SOME MISTAKE IN THE CHARGE FRAMED AGAINST THE ASSESSEE WHICH DOES NOT PREJUDICE THE ASSESSEE. SECONDLY, NON - STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT 12 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., H AS BEEN COMPLETELY DIFFERENTLY UNDERSTOOD BY THE VARIOUS HIGH COURTS, INCLUDING THAT BY THE HON'BLE JURISDICTIONAL HIGH COURT OF BOMBAY. IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA), THE HONBLE BOMBAY HIGH COURT NOTED THAT THE ORDER IMPOSING PENALTY U/S 271(1)(C) OF THE ACT HAS TO BE MADE ONLY ON THE GROUND ON WHICH THE PENALTY PROCEEDINGS HAVE BEEN INITIATED. IN THE CASE OF SHRI SAMSON PERINCHERY (SUPRA), THE REVENUE HAD PUT UP AN ARGUMENT TO THE EFFECT THAT THERE IS NO DIFFERENCE BETWEEN FURNISHING OF I NACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME. THE AFORESAID ARGUMENT HAS BEEN SPECIFICALLY REJECTED BY THE HON'BLE HIGH COURT BY REFERRING TO THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF T. ASHOK PAI, 292 ITR 11 (SC). IT WAS FURTHE R NOTED THAT THE JUDGMENT IN THE CASE OF T. ASHOK PAI (SUPRA) HAS BEEN RELIED UPON BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY & ORS., 359 ITR 565 (KARN.). THE HON'BLE HIGH COURT APPROVED THE PROPOSITION THAT ON CE THE TWO LIMBS CONTAINED IN THE NOTICE U/S 274 R.W.S. 271(1)(C) OF THE ACT, NAMELY CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE UNDERSTOOD TO BE CARRYING DIFFERENT MEANINGS/CONNOTATIONS, NON - STRIKING OFF OF THE IRRELEVANT CLAUSE OR STRIKING OFF ONE OF THE LIMBS AND IMPOSING PENALTY ON THE OTHER LIMB IS NOT AS PER LAW. THIRDLY, IT MAY BE NOTED THAT THE ISSUE BEFORE THE HON'BLE HIGH COURT WAS INCORRECT MENTIONING OF CHARGE IN THE SHOW CAUSE NOTICE, BUT THE CASE BEFORE US IS O F NON - MENTIONING OF THE CHARGE AT ALL. THEREFORE, FOR ALL THE ABOVE REASONS, NON - STRIKING OFF OF THE IRRELEVANT CLAUSE IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT CANNOT BE SAID TO BE A MERE WRONG LABELLING OF THE SECTION OR SOME MISTAKE OF TH E NATURE THAT WAS BEFORE THE HON'BLE PATNA HIGH COURT IN THE CASE OF MITHILA MOTORS (P.) LIMITED (SUPRA). THEREFORE, THE JUDGMENT OF THE HON'BLE PATNA HIGH COURT DOES NOT HELP THE CASE OF THE REVENUE BEFORE US. 9. WE ALSO FIND THAT THE HON'BLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH IN THE CASE OF PCIT V. SMT BAISETTY REVATHI (SUPRA) CONSIDERED A SIMILAR ISSUE AND HELD AS UNDER: - PERUSAL OF THE ORDER REFLECTS THAT THE ASSESSEE DID NOT RAISE THE ISSUE OF INVALIDITY OF THE PENALTY NOTICE BEFORE THE COM MISSIONER. IN HER SECOND APPEAL BEFORE THE INCOME - TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM, IN ITA NO.599/VIZAG/2014, THE ASSESSEE, FOR THE FIRST TIME, RAISED THE ISSUE THAT THE SHOW - CAUSE NOTICE UNDER SECTION 271(1)(C) DID NOT SPECIFY AS TO WHETHER IT WAS PROMPTED BY CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. DEALING WITH THIS CONTENTION, THE TRIBUNAL PLACED RELIANCE ON THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX OFFICER V/S. M/S.MANJUNATHA COTTON AND GINNING FACTORY AND OPINED THAT UNLESS THE SHOW - CAUSE NOTICE IS CLEAR AS TO WHETHER THE PENALTY PROPOSED TO BE IMPOSED IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME, NO PENALTY COULD BE IMPOSED, AS SUCH A NOTICE WOULD BE DEFECTIVE. THE TRIBUNAL TOOK NOTE OF THE FACT THAT IN THE PENALTY ORDER; THE ASSESSING OFFICER HAD NOT GIVEN A CONCLUSIVE FINDING AS TO WHETHER THE PENALTY IMPOSED WAS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND ACCORDINGLY HELD IMPOSITION OF THE PENALTY TO BE INVALID. SMT.M.KIRANMAYEE, LEARNED COUNSEL REPRESENTING SRI J.V.PRASAD , LEARNED SENIOR STANDING COUNSEL FOR THE REVENUE, WOULD ARGUE THAT THE ASSESSEE NEVER RAISED THE ISSUE AS TO AMBIGUITY IN THE SHOW - CAUSE NOTICE BEFORE ANY OF THE LOWER AUTHORITIES AND THAT THIS INDICATED SHE WAS FULLY AWARE AS TO WHAT WAS THE ALLEGATION L EVELED AGAINST HER. LEARNED COUNSEL WOULD POINT OUT THAT IN HER REPLY TO THE SHOW - CAUSE NOTICE, THE ASSESSEE SOUGHT TO EXPLAIN THE LAPSES ON HER PART WHICH EVIDENCED HER AWARENESS AS TO THE EXACT ALLEGATIONS MADE AGAINST HER IN THE SAID SHOW - CAUSE NOTICE. LEARNED COUNSEL WOULD THEREFORE ARGUE THAT RAISING THE ISSUE OF LACK OF CLARITY IN THE SHOWCAUSE NOTICE FOR THE FIRST TIME BEFORE THE TRIBUNAL WAS AN AFTERTHOUGHT AND THAT THE TRIBUNAL OUGHT NOT TO HAVE GIVEN THE ASSESSEE THE BENEFIT OF DOUBT IN THIS REGAR D. 13 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., PER CONTRA, SRI R.RAGHUNANDAN, LEARNED SENIOR COUNSEL REPRESENTING SRI T.BALA MOHAN REDDY, LEARNED COUNSEL FOR THE ASSESSEE, WOULD RELY UPON THE DECISIONS OF THE KARNATAKA AND GUJARAT HIGH COURTS AND ASSERT THAT WHEN PENAL PROCEEDINGS ARE INITIATED UN DER SECTION 271(1)(C) OF THE ACT OF 1961, AN ASSESSEE MUST BE MADE AWARE IN NO UNCERTAIN TERMS AS TO WHAT IS THE SPECIFIC ALLEGATION WHICH FORMS THE BASIS FOR THE PROPOSED PENALTY. A COPY OF THE PROFORMA NOTICE UNDER SECTION 271 READ WITH SECTION 274 OF THE ACT OF 1961 ADDRESSED TO THE ASSESSEE ON 22.03.2013 IS PRODUCED. PERUSAL THEREOF REFLECTS THAT THE IRRELEVANT CONTENTS THEREIN, WHICH HAD NO APPLICATION TO THE ASSESSEE, WERE STRUCK OUT LEAVING ONLY ONE CLAUSE WHICH READS AS UNDER: WHEREAS IN THE C OURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 2010 - 11 IT APPEARS TO ME THAT YOU HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. IT WOULD BE APPOSITE AT THIS STAGE TO CONSIDER THE JUDGMENT OF THE KARNATAKA HIGH COURT IN M/S.MANJUNATHA COTTON AND GINNING FACTORY. THEREIN, A DIVISION BENCH OF THE KARNATAKA HIGH COURT OBSERVED THAT SECTION 271 OF THE ACT OF 1961 IS A SPECIFIC PROVISION PROVIDING FOR IMPOSITION OF PENALTIES AND IS A COMPLETE CODE IN I TSELF REGULATING THE PROCEDURE FOR SUCH IMPOSITION. THE BENCH THEREFORE HELD THAT PENALTY PROCEEDINGS HAVE TO BE CONDUCTED IN ACCORDANCE THEREWITH, SUBJECT ALWAYS TO THE RULES OF NATURAL JUSTICE. IT WAS POINTED OUT THAT SECTION 271 MAKES APPROPRIATE PROVIS ION FOR LEVYING PENALTIES ON AN ASSESSEE IN DIFFERENT EVENTUALITIES AND ONE SUCH EVENTUALITY IS FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME. IT WAS HELD THAT FOR STARTING THE PENALTY PROCEEDINGS, THE CONDITION PRECEDENT IS THAT THE ASSESSING OFFICER MUST BE SATISFIED THAT A PERSON HAS EITHER CONCEALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE AWARE OF T HE GROUNDS ON WHICH IMPOSITION OF PENALTY IS PROPOSED AS HE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE A FULL OPPORTUNITY TO MEET THE CASE OF THE REVENUE SO AS TO SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AND THAT H E IS NOT LIABLE TO PAY THE PENALTY. IT WAS FURTHER HELD THAT THE PRACTICE OF THE REVENUE IN SENDING A PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW WHEN THE CONSEQUENCE OF THE ASSESSEE NO T REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAS TO PAY A PENALTY RANGING FROM 100% TO 300% OF THE TAX LIABILITY. AS THE PROVISIONS OF SECTION 271(1)(C) HAVE TO BE STRICTLY CONSTRUED, THE BENCH MANDATED THAT THE NOTICE ISSUED SHOULD SET OUT THE GROUNDS WHICH THE ASSESSEE HAS TO MEET SPECIFICALLY, OTHERWISE THE PRINCIPLES OF NATURAL JUSTICE WOULD BE OFFENDED AS THE SHOW - CAUSE NOTICE WOULD BE VAGUE. DEALING WITH CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME, THE BENCH OBSERVED THAT SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME, THERE MAY BE OVERLAPPING OF BOTH, BUT IN SUCH CASES INITIATION OF THE PENALTY PROCEEDINGS MUST BE SPECIFICALLY FOR BOTH THE OFFENCES. DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OR FINDING HIM GUILTY FOR EITHER, THE ONE OR THE OTHER, WAS HELD TO BE UNSUSTAINABLE IN LAW. IN COMMISSIONER OF INCOME TAX, GUJARAT - III V/S. MANU ENGINEERING WORKS, A DIVISION BENCH OF THE GUJARAT HI GH COURT OBSERVED THAT THE ASSESSING OFFICER MUST GIVE A POSITIVE FINDING AS TO WHETHER THERE IS CONCEALMENT OF INCOME BY THE ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY THE ASSESSEE. IN THE EVENT THERE WAS NO SUCH C LEAR - CUT FINDING, THE PENALTY ORDER WAS HELD LIABLE TO BE STRUCK DOWN. SMT.KIRANMAYEE, LEARNED COUNSEL, PLACED RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN K.P.MADHUSUDHANAN V/S. COMMISSIONER OF INCOME 14 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., TAX, COCHIN. THEREIN, THE SUPREME COURT HELD THA T IT IS NOT NECESSARY FOR THE ASSESSING OFFICER, WHILE ISSUING A NOTICE UNDER SECTION 271(1)(C), TO EXPRESSLY INVOKE EXPLANATION 1(B) APPENDED TO THE PROVISION. IT IS HOWEVER RELEVANT TO NOTE THAT EXPLANATION 1(B) MERELY ADVERTS TO A CASE OF FAILURE OF AN ASSESSEE TO SUBSTANTIATE THE EXPLANATION OFFERED WHEREBY THE AMOUNT ADDED OR DISALLOWED WHILE COMPUTING THE TOTAL INCOME OF SUCH PERSON FOR THE PURPOSES OF THE PENALTY PROVISION SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAD BE EN CONCEALED. THE SUPREME COURT OBSERVED THAT THE STATUTORY PROVISION INCLUDED THE EXPLANATION AND ONCE THE ASSESSEE WAS PUT ON NOTICE, NO EXPRESS INVOCATION OF THE EXPLANATION IS NECESSARY. THIS JUDGMENT HAS NO APPLICATION TO THE CASE ON HAND AS WHAT WE ARE CONCERNED WITH PRESENTLY IS WHETHER THE ASSESSEE IS REQUIRED TO BE PUT ON NOTICE AS TO WHETHER SHE IS TO BE PENALIZED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THESE ARE TWO DIFFERENT ACTS. CONCEAL MENT OF INCOME IS AN ACT OF OMISSION WHILE FURNISHING OF INACCURATE PARTICULARS OF INCOME IS AN ACT OF COMMISSION. THE CONSEQUENCES OF SUCH ACTS, BEING PENAL IN NATURE, AN ASSESSEE HAS TO BE INFORMED AS TO WHAT EXACTLY IS THE CHARGE AGAINST HIM SO THAT HE MAY RESPOND THERETO. NO DOUBT, IN THE PRESENT CASE, THE ASSESSEE SEEMS TO HAVE SUBMITTED HER EXPLANATION ON MERITS WITHOUT RAISING A DOUBT AS TO WHAT WAS THE PRECISE ALLEGATION LEVELED AGAINST HER. HOWEVER, WE ARE MORE CONCERNED WITH THE PRINCIPLE INVOLV ED AND NOT JUST THE ISOLATED CASE OF ITS APPLICATION AGAINST THE ASSESSEE. FURTHER, THE PENALTY ORDER DEMONSTRATES THAT THE ASSESSING OFFICER WAS NOT EVEN CERTAIN AS TO WHAT WAS THE FINDING ON THE STRENGTH OF WHICH HE IMPOSED THE PENALTY. THIS IS CLEAR FRO M THE FACT THAT THE ASSESSING OFFICER RECORDED THAT HE WAS SATISFIED THAT THE ASSESSEE HAD CONCEALED/FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF A CLEAR FINDING BY THE ASSESSING OFFICER HIMSELF, THE BENEFIT OF DOUBT CANNOT BE GIVEN TO THE REVENUE MERELY BECAUSE THE ASSESSEE DID NOT COMPLAIN OF VAGUENESS IN THE SHOW - CAUSE NOTICE EARLIER. RELIANCE PLACED BY THE REVENUE UPON MAK DATA PRIVATE LIMITED V/S. COMMISSIONER OF INCOME TAX - II, IS OF NO ASSISTANCE AS THE SUPREME COURT MERELY OBSERVED THEREIN THAT THE ASSESSING OFFICER IS NOT REQUIRED TO RECORD HIS SATISFACTION IN A PARTICULAR MANNER WHILE IMPOSING THE PENALTY OR REDUCE IT TO WRITING. THAT IS NOT THE CONTROVERSY IN THE CASE ON HAND. ON PRINCIPLE, WHEN PENALTY PROCEEDINGS ARE SOUGHT T O BE INITIATED BY THE REVENUE UNDER SECTION 271(1)(C) OF THE ACT OF 1961, THE SPECIFIC GROUND WHICH FORMS THE FOUNDATION THEREFOR HAS TO BE SPELT OUT IN CLEAR TERMS. OTHERWISE, AN ASSESSEE WOULD NOT HAVE PROPER OPPORTUNITY TO PUT FORTH HIS DEFENCE. WHEN TH E PROCEEDINGS ARE PENAL IN NATURE, RESULTING IN IMPOSITION OF PENALTY RANGING FROM 100% TO 300% OF THE TAX LIABILITY, THE CHARGE MUST BE UNEQUIVOCAL AND UNAMBIGUOUS. WHEN THE CHARGE IS EITHER CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS THEREOF, THE REVENUE MUST SPECIFY AS TO WHICH ONE OF THE TWO IS SOUGHT TO BE PRESSED INTO SERVICE AND CANNOT BE PERMITTED TO CLUB BOTH BY INTERJECTING AN OR BETWEEN THE TWO, AS IN THE PRESENT CASE. THIS AMBIGUITY IN THE SHOW - CAUSE NOTICE IS FURTHER COMPOUNDED PRESENTLY BY THE CONFUSED FINDING OF THE ASSESSING OFFICER THAT HE WAS SATISFIED THAT THE ASSESSEE WAS GUILTY OF BOTH. WE ARE THEREFORE OF THE OPINION THAT THE ORDER UNDER APPEAL DOES NOT BROOK INTERFERENCE ON ANY GROUND. WE FIND NO QU ESTION OF LAW, MUCH LESS A SUBSTANTIAL ONE, ARISING FOR CONSIDERATION WARRANTING ADMISSION OF THIS APPEAL. 10. THUS, RESPECTFULLY FOLLOWING THE SAID DECISIONS WE HOLD THAT THE PENALTY ORDERS PASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEARS 2005 - 06 & 2006 - 07 ARE NOT SUSTAINABLE IN THE ABSENCE OF SPECIFIC CHARGE MENTIONED BY THE ASSESSING OFFICER FOR WHICH THE SAID PENALTY IS IMPOSED. 15 ITA NO.1969 & 2059 /MUM/2015 (A.Y: 1996 - 97) M/S. THIRUMALAI CHEMICALS LTD., 14. RESPECTFULLY FOLLOWING THE SAID DECISION S , WE HOLD THAT THE PENALTY PROCEEDINGS INITIATED BY THE ASSESSING OFFICER ARE BAD IN LAW AND LIABLE TO BE QUASHED. HENCE WE QUASH THE PENALTY PROCEEDINGS /ORDER AND DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT. 15. AS WE HAVE DE LETED THE PENALTY ON THE TECHNICAL GROUND. WE ARE NOT GOING INTO OTHER GROUNDS AND CONTENTIONS OF THE ASSESSEE. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 21 ST DECEMBER , 2018 SD/ - SD/ - ( R AJESH KUMAR) ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 21 / 12 / 2018 GIRIDHAR , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM