CENZAR INDUSTRIES LTD, MUMBAI V. ITO 5(1)(3), MUMBAI

ITA 1970/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7857 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Wrong claim; Corroborative evidences
• Section: 115JB

Judgement Text

1 ITA 1970/MUM/2015 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.1970/MUM/2015) (ASSESSMENT YEAR:2006-07) M/S CENZAR INDUSTRIES LTD OVAL HOUSE, 2 ND FLOOR OPP NAGINDAS MASTER ROAD BRITSH HOTEL LANE, FORT MUMBAI-400 001 PAN : AABCC4342F VS ITO-5(1)(3), MUMBAI APPELLANT RESPONDEDNT APPELLANT BY SHRI RAJIV KHANDELWAL RESPONDENT BY SHRI RAJAT MITTAL DATE OF HEARING 14-11-2017 DATE OF PRONOUNCEMENT 29 -12-2017 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT(A)- 10, MUMBAI DATED 26-02-2015 AND IT PERTAINS TO AY 2 006-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT (A) ERRED IN COMING TO THE CONCLUSI ON THAT THERE WAS A CONCEALMENT AND DEFAULT WITHIN THE MEANING OF SEC 271 (1) (C) AND IN CONFIRMING PENALTY OF RS. 1,70,0 0,000/- LEVIED BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, 2 ITA 1970/MUM/2015 THE LEARNED CIT (A) ERRED IN COMING TO THE CONCLUSI ON THAT THERE WAS CONCEALMENT OF INCOME PARTICULARLY CONSID ERING THE FACT THAT THE AMOUNT CONTRIBUTED BY SAGEM WAS IN TH E NATURE OF INCOME AS AGAINST THE CONTENTION OF YOUR APPELLANT THAT THIS WAS A RECEIPT IN RESPECT OF REIMBURSEMENT OF EXPENSES TO BE INCURRED BY YOUR APPELLANT TOWARDS SALES PROMOTION WHICH CLEARLY EST ABLISHES THAT THERE WAS A RECEIPT TOWARDS EXPENSES AND HENCE THIS RECEIPT WAS DEDUCTIBLE FROM EXPENSES INCURRED AND THE LEARN ED CIT (A) DIFFERED BY COMING TO THE CONCLUSION THAT THIS IS A RECEIPT TO BE REFLECTED ON INCOME SIDE OF THE PROFIT & LOSS A/C B UT THE MAIN FACT WAS IGNORED THAT ANY OF THE TREATMENT TO THIS RECEIPT DID NOT HAVE ANY IMPACT ON THE PROFIT FOR THE YEAR AS IT MA KES NO DIFFERENCE WHETHER THERE IS INCREASE IN RECEIPT OR DEDUCTION FROM PAYMENT MADE ON THE PROFIT FOR THE YEAR. 3. THE LEARNED CIT (A) FURTHER ERRED IN COMING TO THE CONCLUSION THAT DEDUCTION IN RESPECT OF RS.4,77,58,412/- CLAIM ED BY YOUR APPELLANT HAS NOT BEEN FULLY ESTABLISHED AND HENCE THERE WAS CONCEALMENT THOUGH YOUR APPELLANT HAD CLAIMED DEDUC TION OF NET AMOUNT SPENT AMOUNTING TO RS.1,80,86,421/- (MAD E UP OF EXPENDITURE RS.9,53,2 1,476/- LESS REIMBURSEMENT RS .7,72,35,055/- ) ONLY AND HENCE IT CANNOT BE SAID THAT THERE WAS C ONCEALMENT OF RS.4,77,58,412/WITHIN THE MEANING OF SECTION 271 (1) (C) AS DENIAL OF DEDUCTION OF EXPENDITURE DOES NOT AMOUNT TO CONCEALMENT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE I T CANNOT BE SAID THAT THERE WAS A CONCEALMENT WITHIN THE MEANING OF SEC 271(1) (C) ATTRACTING LEVY OF PENALTY U/S 271 ( 1) (C) OF THE I.T. ACT, 1961 AND LEARNED CIT (A) ERRED IN LEVYING SUCH A HU GE PENALTY ONLY ON ACCOUNT OF SHORT COMING IN THE PROOF REQUIR ED TO BE FURNISHED FOR CLAIMING DEDUCTION. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LEARNED CIT (A) ERRED IN NOT AGREEING WITH YOUR APPELLANT'S SUBMISSION THAT ORDER OF PENALTY IS BARRED BY LIMIT ATION AND SAME IS PASSED AFTER THE END OF TIME BY WHICH IT OUGHT T O HAVE BEEN PASSED AND HENCE DESERVES TO BE CANCELLED. 2. THE ASSESSEE FILED A PETITION FOR ADMISSION OF ADDI TIONAL GROUND O 14-11- 2017 CHALLENGING THE VALIDITY OF PENALTY PROCEEDING S ON THE GROUND THAT PENALTY 3 ITA 1970/MUM/2015 ORDER PASSED BY THE AO U/S 271(1)(C) OF THE ACT IS BAD IN LAW AND VOID AB INITIO AS THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) IS NO T IN ACCORDANCE WITH LAW. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT FROM THE NOTI CE IT IS NOT DISCERNIBLE AS TO WHY PENALTY IS INITIATED, WHETHER IT IS FOR FURNISH ING INACCURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF INCOME AS THE AO HAS I SSUED PRINTED FORM OF NOTICE WITHOUT STRIKING OFF IRRELEVANT PORTION IN T HE NOTICE. THE LD.AR FURTHER SUBMITTED THAT RIGHT FROM THE ASSESSMENT PROCEEDING S TO PENALTY PROCEEDINGS, THE AO HAS INITIATED PENALTY FOR CONCEALMENT OF PAR TICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME WHIC H IS EVIDENT FROM THE ASSESSMENT ORDER AS WELL AS PENALTY ORDER. AT BOTH THE PLACES, HE HAS TAKEN TWO LIMBS TOGETHER, THEREFORE, THE PENALTY ORDER PASSED BY THE AO U/S 271(1)(C) IS BAD IN LAW AND LIABLE TO BE QUASHED. THE LD.AR FUR THER SUBMITTED THAT ADDITIONAL GROUND RAISED BY THE ASSESSEE TAKING A L EGAL PLEA IS EMANATING FROM THE ORDERS OF THE ASSESSING OFFICER AND NO NEW FACT S OR EVIDENCES HAS BEEN BROUGHT ON RECORD, THEREFORE, THE ADDITIONAL GROUND MAY BE ADMITTED FOR ADJUDICATION. 3. THE LD.DR, ON THE OTHER HAND, STRONGLY OPPOSED ADMI SSION OF ADDITIONAL GROUND. 4. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON RECORD, WE FIND THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE C HALLENGING VALIDITY OF PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) IS A LEGAL PLEA WHICH EMANATES FROM THE 4 ITA 1970/MUM/2015 ORDERS OF THE AUTHORITIES BELOW. WE FURTHER NOTICE THAT NO NEW FACTS OR EVIDENCE IS BROUGHT ON RECORD IN SUPPORT OF ADDITIONAL GROUN D RAISED BY THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A DDITIONAL GROUND RAISED BY THE ASSESSEE IS REQUIRED TO BE ADMITTED AND HENCE, ADMIT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE AND DISPOSE OF THE SAME, ON MERITS. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF WATCHES AND CALCULATOR S, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 30-11-2006 DECLA RING TOTAL INCOME AT NIL BY CLAIMING DEDUCTION U/S 80IC OF RS.1,65,30,520 AND B OOK PROFIT U/S 115JB AT RS.1,61,27,608. THE ASSESSMENT WAS COMPLETED U/S 1 43(3) ON 31-12-2008, INTERALIA MAKING ADDITION TOWARDS DISALLOWANCE OF R EIMBURSEMENT OF SELLING AND DISTRIBUTION EXPENSES OF RS.4,77,58,412. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE C IT(A), VIDE ORDER DATED 17- 01-2012 HAS CONFIRMED DISALLOWANCE OF SELLING AND D ISTRIBUTION EXPENSES. THE ASSESSEE PREFERRED FURTHER APPEAL BEFORE THE ITAT. THE ITAT, VIDE ITS ORDER DATED 12-06-2013 IN ITA NO.1811/MUM/2012 HAS UPHELD THE ORDERS OF THE AO AND CONFIRMED DISALLOWANCE OF SELLING AND DISTRIBUT ION EXPENSES. 6. IN THE MEANTIME, THE AO HAS INITIATED PENALTY PROCE EDINGS U/S 271(1)(C) AND ASKED THE ASSESSEE TO SHOW WHY PENALTY SHOULD N OT BE LEVIED FOR CONCEALMENT OF INCOME. IN RESPONSE TO NOTICE, THE ASSESSEE SUBMITTED THAT NO PENALTY COULD BE LEVIED U/S 271(1)(C) FOR CONCEALME NT OF PARTICULARS OF INCOME 5 ITA 1970/MUM/2015 IN RESPECT OF DISALLOWANCE OF SELLING AND DISTRIBUT ION EXPENSES AS REJECTION OF CLAIM IS NEITHER CONCEALMENT NOR FURNISHING OF INAC CURATE PARTICULARS OF INCOME. THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS TAKE N ONLY A DIFFERENT VIEW IN THE ABSENCE OF SUPPORTING EVIDENCES LIKE VOUCHERS A ND BILLS. THEREFORE, DISALLOWANCE OF EXPENDITURE CLAIMED CANNOT BE CONSI DERED AS CONCEALMENT OF PARTICULARS OF INCOME SO AS TO LEVY PENALTY U/S 271 (1)(C) OF THE ACT. THE AO, AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE A SSESSEE AND ALSO RELYING UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF SANGHVI SWISS REFILLS PVT LTD VS ACIT 255 CTR 251 (BOM) OBSERVED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPE CT OF REIMBURSEMENT OF SELLING AND DISTRIBUTION EXPENSES, WHICH WARRANTS L EVY OF PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY, THE AO LEVIED PENALTY OF RS.1.70 CRORE U/S 271(1)(C) FOR CONCEALMENT OF PARTICULARS OF INCOME AND ALSO F URNISHING OF INACCURATE PARTICULARS OF INCOME. 7. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A). BEFORE THE CIT(A), THE ASSESSEE HAS REITER ATED ITS SUBMISSIONS MADE BEFORE THE AO TO ARGUE THAT DISALLOWANCE OF EXPENSE S CANNOT BE TREATED AS CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME SO AS TO LEVY PENALTY. THE CIT(A), AFTER CO NSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE OBSERVED THAT DISALLOWA NCE OF REIMBURSEMENT OF SELLING AND DISTRIBUTION EXPENSES RESULTED IN REDUC TION OF ACTUAL PROFIT WHICH 6 ITA 1970/MUM/2015 TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF EXPENSES LEADING TO CONCEALMENT OF TRUE INCOME IN TERMS OF PROVISIONS O F SECTION 271(1)(C) OF THE ACT. ACCORDINGLY, THE CIT(A) HELD THAT THE AO WAS RIGHT IN LEVYING PENALTY U/S 271(1)(C) OF THE ACT. THE CIT(A) FURTHER OBSERVED THAT AS REGARDS THE ALTERNATIVE PLEA OF THE ASSESSEE THAT NET EXPENSES CLAIMED AFTER ADJUSTMENT OF REIMBURSEMENT AMOUNT IS TO BE CONSIDERED FOR LEVY O F PENALTY IS AGAIN A MISLEADING ACT, BECAUSE BY DEBITING ONLY THE NET AM OUNT OF RS.1,80,86,421 AFTER ADJUSTING THE BOGUS CLAIM OF EXPENSES ON GOLD COINS OF RS.4,77,58,412 THE ASSESSEE WAS TRYING TO CONCEAL THE AMOUNT OF RS.4,7 7,58,412. THEREFORE, THE AO IS JUSTIFIED IN LEVYING PENALTY ON THIS AMOUNT. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. THE LD.AR FOR THE ASSESSEE REFERRING TO THE ADDITIO NAL GROUNDS OF APPEAL SUBMITTED THAT PENALTY PROCEEDINGS INITIATED BY THE AO U/S 271(1)(C) IS BAD IN LAW AND LIABLE TO BE QUASHED AS THE AO HAS ISSUED V AGUE NOTICE IN A PRINTED FORM WITHOUT STRIKING OFF IRRELEVANT PORTION, WHICH IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO BEFORE INITIATION OF PENALTY WHICH VITIATES PENALTY PROCEEDINGS. THE LD.AR FURTHER SUBMITTED THAT THE AO HAS NOT FRAMED ANY SPECIFIC CHARGE ON WHICH HE INTENDED TO IMPOSE PENA LTY WHICH IS CLEAR FROM NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) WHERE HE HAS MENTIONED BOTH THE CHARGES WHICH CANNOT BE THE CASE BECAUSE BOTH THE CHARGES I N PENALTY PROCEEDINGS OPERATE IN TWO DIFFERENT FIELDS. THE LD.AR FURTHER SUBMITTED THAT IN THE NOTICE ISSUED U/S 274, THE AO HAS NOT SATISFIED HIMSELF AB OUT THE CLEAR CHARGE, UNDER 7 ITA 1970/MUM/2015 WHICH THE PENALTY IS LEVIABLE, WHETHER IT IS FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO RIGHT FROM THE ASSESSMENT PROCEEDINGS TO THE LEVY OF PENALTY, INITIATED PENALTY PROCEEDINGS ON BOTH CHARGES, I.E. CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME. EVEN IN THE PENA LTY ORDER, HE HAS LEVIED THE PENALTY FOR BOTH THE CHARGES. THUS, HE SUBMITTED T HAT SUCH A LEVY OF PENALTY IS NOT TENABLE IN VIEW OF THE LAW LAID DOWN IN CATENA OF DECISIONS INCLUDING THAT OF HONBLE KARNATAKA HIGH COURT IN CIT VS MANJUNATHA C OTTON & GINNING FACTORY 359 ITR 565 (KARN). THE LD.AR FURTHER SUBM ITTED THAT THE AO HAS TO ARRIVE AT A SATISFACTION AS TO WHETHER THE PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH SHOULD BE SPECIFIED IN THE NOTICE AS I SSUANCE OF NOTICE U/S 274 R.W.S 271(1)(C) GOES TO THE ROOT OF THE MATTER. ON CE THE AO HAS NOT ARRIVED AT A CORRECT SATISFACTION, THEN THE WHOLE PROCEEDINGS AR E VOID AB INITIO AND LIABLE TO BE QUASHED. IN THIS REGARD, HE RELIED UPON PLETHOR A OF JUDGEMENTS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF T ASHOK PAI VS CIT (2007) 292 ITR 11 (SC). THE LD.AR FURTHER RELIED UPON THE FOLLOWING CASE LAWS:- 1. MAHERJI KASHINATH HOLDINGS PVT LTD - ITA NO.25 55/MUM/2012 2. REKHA BHUPENDRA DALAL - ITA NO.3363/MUM/2016 3. DR SARITA MILIND DAVARE - ITA 2187 AND 1789MU M/2014 4. UNIVERSAL MUSIC INDIA PVT LTD ITA NO.6752/MUM/ 2014 5. SHRI SAMSON PERINCHERY - IT NOS 4625 TO 4630/MU M/2013 8 ITA 1970/MUM/2015 6. SSAS EMERALD MEADOWS 242 TAXMANN 180 (SC 9. ON THE OTHER HAND, THE LD.DR SUBMITTED THAT THE ENT IRE FACTS AND CIRCUMSTANCES LEADING TO THE LEVY OF PENALTY HAS TO BE SEEN AND SIMPLY BECAUSE PENALTY HAS BEEN INITIATED ON ONE CHARGE AND LEVIED ON A DIFFERENT CHARGE OR PENALTY HAS BEEN INITIATED ON BOTH CHARGES DOES NOT MEAN THAT WHOLE PENALTY PROCEEDINGS GET VITIATED. THE LD.DR FURTHER SUBMIT TED THAT SECTION 271(1)(C) PROVIDES FOR LEVY OF PENALTY UNDER BOTH THE CHARGES AND IF THE AO IN THE PENALTY ORDER HAS LEVIED PENALTY ON ANYONE OF THE CHARGES, THEN ALSO IT CANNOT BE HELD THAT PENALTY ORDER IS BAD IN LAW. THE LD.DR REFERR ING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SMT. KAUSHA LYA (1995) 216 ITR 660 (BOM) STATED THAT THE VAGUENESS AND AMBIGUITY IN TH E NOTICE ARE MERE MISTAKE IN LANGUAGE USED OR MERE NON STRIKING OFF OF INAPPROPR IATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE ISSUED U/S 274. THE AO HAS B ROUGHT OUT CLEAR FACTS OF CONCEALMENT OF PARTICULARS OF INCOME IN RESPECT OF DISALLOWANCE OF REIMBURSEMENT OF SELLING AN DISTRIBUTION EXPENSES W HICH WARRANTS LEVY OF PENALTY AND ACCORDINGLY LEVIED PENALTY U/S 271(1)(C ). THEREFORE, THE ORDER OF THE LOWER AUTHORITIES SHOULD BE UPHELD. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND ALSO GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. THE AO HAS LEVIED PENALTY U/S 271(1)(C) IN RESPECT OF DISALLOW ANCE OF REIMBURSEMENT OF SELLING AND DISTRIBUTION EXPENSES ON THE GROUND THA T THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME. THE 9 ITA 1970/MUM/2015 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 WHI CH WERE NOT APPLICABLE TO THE FACTS OF ASSESSEES CASE. THE AO HAS ISSUED NOTICE WHICH STATES THAT PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF IN COME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ASSESSMEN T ORDER, THE AO HAS INITIATED PENALTY PROCEEDINGS ON BOTH CHARGES, I.E. FOR CONCE ALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INC OME. THE AO LEVIED THE PENALTY ON BOTH THE CHARGES, I.E. FOR CONCEALING TH E 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 INACCURATE PARTICULARS OF INCOME ARE TWO DIFFERENT CONNOTATIONS. THE ISSUE O F NOTICE U/S 274 R.W.S. 271(1)(C) GOES TO THE ROOT OF THE MATTER OF ASSUMIN G 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 P ARTICULARS OF INCOME. THE AO CANNOT TAKE BOTH THE CHARGES FOR LEVYING PENALTY BY STATING THAT THE ASSESSEE HAS CONCEALED PARTICULARS 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 10 ITA 1970/MUM/2015 (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SA Y, CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E 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. BU T INITIATING PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR HOLDING HIM GUILTY FOR EITHER ONE OR THE OTHER C ANNOT BE SUSTAINED IN LAW. THIS LEGAL PROPOSITION IS CLEARLY REITERATED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY LTD (SUPRA) WHEREIN IT WAS CATEGORICALLY HELD THAT SATISFACTION OF THE EXISTEN CE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON INITIAT ION OF PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S 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 G ROUND AND LEVYING PENALTY ON ANOTHER GROUND WOULD CAUSE INJUSTICE TO THE ASSESSE E 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 SPEC IFIC 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 GRO UND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. IF PENALTY PROCEEDI NGS ARE INITIATED ON ONE GROUND AND LEVIED PENALTY ON DIFFERENT GROUND OR PE NALTY PROCEEDINGS ARE 11 ITA 1970/MUM/2015 INITIATED ON TWO GROUNDS, I.E. CONCEALMENT OF PARTI CULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME WOUL D 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 O F INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO ALSO L EVIED PENALTY ON BOTH THE GROUNDS OF CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH IS QUITE CON TRARY 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 I NITIATE 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 C ASE, THE AO HAS INITIATED PENALTY ON BOTH THE GROUNDS, WHICH CANNOT BE THE CA SE FOR 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 O N THE GROUND OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET OTHERWISE THOUGH T HE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDE R 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 IMPOSI NG PENALTY AT THE TIME, THE 12 ITA 1970/MUM/2015 ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY. THE AO IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATI SFIED IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME. AS ALREADY STATED, FA CTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES. IN CASE, THE AO HAS MADE MULTIP LE ADDITIONS, ONE MAY RELATES TO CONCEALMENT OF PARTICULARS OF INCOME AND ANOTHER MAY RELATE TO FURNISHING OF INACCURATE PARTICULARS OF INCOME, BUT SINGLE ADDITI ON MADE CANNOT LEAD TO AN INFERENCE OF CONCEALMENT OF PARTICULARS OF INCOME A ND FURNISHING OF INACCURATE PARTICULARS. THEREFORE, WE ARE OF THE CONSIDERED V IEW THAT BEFORE INITIATION OF PENALTY PROCEEDINGS, THE AO HAS TO ARRIVE AT A CORR ECT 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 PENALT Y PROCEEDINGS BECOMES VITIATED AND VOID AB INITIO. 13. COMING TO THE CASE LAWS RELIED UPON BY THE ASSESSEE . THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY VS CIT (SUPRA) , WHEREIN THE HONBLE 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 13 ITA 1970/MUM/2015 CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. INITIATING THE PENALTY PROCEEDINGS ON ONE LIMB AND HOLDING THE ASSESSEE GU ILTY OF ANOTHER LIMB IS BAD IN LAW. THE RELEVANT PORTION OF THE ORDER IS EXTRA CTED BELOW:- THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME ARE DIFFE RENT. 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 (2 007) 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALNMENT OF INCOM E AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI H IGH COURT IN THE CASE OF VIRGO MARKETING P.LTD., REPORTED IN 171 TA XMAN 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 P ENALTY IS NOT SUSTAINABLE. THEREFORE , WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT , THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PATICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 14. THE ASSESSEE HAS RELIED UPON DECISION OF HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS SAMSON PERINCHERY IN INCOME TAX APPEAL NO.1154 OF 2014 & ORS ORDER DATED 5 TH JANUARY, 2017. THE HONBLE BOMBAY HIGH COURT AFTE R CONSIDERING THE RATIO LAID DOWN BY THE HONBLE KARN ATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) OBSERVED THAT THE 14 ITA 1970/MUM/2015 SATISFACTION OF THE AO WITH REGARD TO ONLY ONE OF T HE TWO BREACHES MENTIONED IN SECTION 271(1)(C) OF THE ACT FOR INITIATION OF PENA LTY PROCEEDINGS WILL NOT WARRANT / PERMIT PENALTY BEING IMPOSED FOR THE OTHE R BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPOND TO THE GROUND ON WHICH TH E PENALTY HAS BEEN INITIATED / NOTICE ISSUED. IT MUST, THEREFORE, FOL LOW 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 GROU ND OF WHICH ASSESSEE HAS NO NOTICE. THE RELEVANT PORTION OF THE ORDER IS EXTRA CTED BELOW:- THE ABOVE SUBMISSION 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 A ND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(1)( C) OF THE ACT, CARRY DIFFERENT MEANINGS/ CONNOTATIONS. THEREFORE, THE SA TISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF TH E TWO BREACHES MENTIONED UNDER SECTION 271(1)(C) OF THE ACT, FOR I NITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/ PERMIT PENALT Y BEING IMPOSED FOR THE OTHER BREACH. THIS IS MORE SO, AS AN ASSESS EE WOULD RESPOND TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED / NOTICE ISSUED. IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PEN ALTY 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 WHI CH ASSESSEE HAS NO NOTICE. 15. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF CIT VS SSAS EMERALD MEADOWS (SUPRA) WHEREIN THE HONBLE SUPREME COURT DISMISSED SLP FILED BY THE REVENUE BY FOLLOWING THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJ UNATHA 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 SE CTION 271(1)(C), PENALTY 15 ITA 1970/MUM/2015 PROCEEDINGS HAD BEEN INITIATED. 16. COMING TO THE CASE LAWS RELIED UPON BY THE LD.DR. THE LD.DR RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS SMT.KAUSHALYA (SUPRA). WE HAVE GONE THROUGH THE CA SE LAW RELIED UPON BY THE LD.DR IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FIND THAT THE ITAT, MUMBAI IN THE CASE OF DCIT VS DR. SARITA MILIND DA VARE IN ITA NO.1789/MUM/2014 DATED 21-12-2016 HAS CONSIDERED TH E DECISION RENDERED BY HONBLE BOMBAY HIGH COURT IN THE LIGHT OF SUPREME C OURT JUDGEMENT IN THE CASE OF DILIP N SHROFF 291 ITR 519 (SC) AND OBSERV ED THAT THERE SHOULD BE APPLICATION OF MIND ON THE PART OF THE AO AT THE TI ME OF ISSUING NOTICE. SINCE THE CO-ORDINATE BENCH HAS ALREADY CONSIDERED THE JUD GEMENT OF HONBLE BOMBAY HIGH COURT, WE ARE OF THE VIEW THAT CASE LAW RELIE D UPON BY THE LD.DR IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 17. IN THIS VIEW OF THE MATTER AND CONSIDERING THE RATI OS OF THE CASE LAWS DISCUSSED ABOVE, WE ARE OF THE CONSIDERED VIEW THAT PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) IS VOID AB INITIO AND LIABL E TO BE QUASHED AS THE AO HAS ISSUED VAGUE NOTICE U/S 274 R.W.S. 271(1)(C) WITHOU T STRIKING OFF OF IRRELEVANT PORTION OF NOTICE WHICH IS A CLEAR CASE OF NON APPL ICATION OF MIND BY THE AO BEFORE INITIATION OF PENALTY PROCEEDINGS. WE FURTH ER NOTICE THAT FROM THE ASSESSMENT STAGE TO LEVY OF PENALTY, THE AO HAS INI TIATED PENALTY ON BOTH CHARGES, I.E. CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME WHICH IS NOT SO IN THE CASE OF PENALTY U/S 16 ITA 1970/MUM/2015 271(1)(C) OF THE ACT. THEREFORE, WE ARE OF THE CON SIDERED VIEW THAT THE PENALTY PROCEEDINGS INITIATED BY THE AO IS BAD IN LAW AND H ENCE, WE QUASH THE PENALTY PROCEEDINGS AND DELETE THE PENALTY LEVIED U/S 271(1 )(C) OF THE ACT. 17. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH DECEMBER, 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI