Shri Suresh Kanjibhai Pethani, Surat V. The Income Tax Officer,Ward-9(4), (Now ITO, Ward-3(3)(4)), Surat

ITA 2065/AHD/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2314 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-02-2022
• Assessment Year: 2005-2006
• Appeal Filed On: 12-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Keywords: Unexplained investment; Principle of natural justice; Initiation of penalty proceedings; Set aside
• Section: 147; 148; 271(1)(c); 143(3); 274; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM &DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.2065/AHD/2015 (िनधाŊरणवषŊ / Assessment Year: (2005-06) (Virtual Court Hearing) Shri Suresh Kanjibhai Pethani 145, Samrat Society, Nr. Spinning Mill, L.H.Road, Varachha, Surat Vs. Income Tax Officer, Ward-9(4), [Re-designated as ITO Ward- 3(3)(4)], Aaykar Bhavan, Majura Gate, Surat-395002 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: AKKPP 9313 R (Appellant ) (Respondent) Assessee by : Shri P.M. Jagasheth, F.C.A Respondent by : Ms. Anupama Singla, Sr-DR सुनवाईकीतारीख/ Date of Hearing : 01/03/2022 घोषणाकीतारीख/Date of Pronouncement : 08/04/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee pertaining to the assessment year 2005-06, is directed against the order passed by the Learned Commissioner of Income Tax(Appeals)-1,Surat [‘CIT(A)’ for short] dated 25.05.2015, which in turn arises out of a penalty order passed by the Assessing Officer (‘AO' for short) u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide order dated 12.03.2014. 2. Grounds of appeal raised by the assessee are as follows:- “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in levying penalty of Rs.9,96,260/- u/s 271(1)(c) of the Income Tax Act, 1961. 2. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper.” 3. Additional grounds of appeal raised by the assessee is as follows:- “On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in levying penalty u/s 271(1)(c) of the Income Tax Act, 1961, which is time-barred. Page | 2 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani 4. The relevant material facts, as culled out from the material on record, are as follows. The assessee, before us is an individual and filed his return of income on 03.03.2006, declaring total income at Rs.1,01,670/-. Thereafter the case was re- opened u/s 147 of the Act after recording reasons and Assessing Officer issued notice u/s 148 of the Act on 20.08.2010. The assessment was completed u/s 143(3) r.w.s. 147 of the Act on 26.12.2011, determining total income of Rs.31,01,670/- after making addition of Rs.30,00,000/-, on account of unaccounted investment. The penalty proceedings also initiated u/s 274 r.w.s 271(1)(c) of the Act on account of concealment of income (Vide assessment order para 6). On the basis of inquiry conducted by the ADIT(Inv.), Surat, the statement of Shri Suresh K. Pethari was recorded. The assessee has disclosed Rs.30 lakhs as undisclosed income on account of ‘on-money’ paid to Shri Mahendra B Chavda on purchase of land. The assessee in his sworn statement u/s 131, recorded on 26.11.2009, stated that he purchased land at Block No.112 at Kadodara Village, Tal: Palsana, along with four other partners and paid Rs.52,21,000/- towards the cost of land. The assessee has admitted ‘on-money’ payment of Rs.30,00,000/-. Therefore, assessing officer held that the assessee has knowingly and deliberately concealed the particulars of his income to the extent of Rs.30,00,000/-. Therefore, assessing officer imposed penalty u/s 271(1)(c) of the Act to the tune of Rs.9,96,263/-. 5. Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the penalty imposed by assessing officer. Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before us. 6. Before us, Shri P.M.Jagasheth, Ld. Authorized Representative (AR) for the assessee begins by pointing out that penalty proceedings initiated by assessing officer is time barred. To prove the stand to the effect that penalty proceedings were time barred, Ld. AR of the assessee took us through paper book page-1, wherein the various dates/events have been mentioned to demonstrate that penalty u/s 271(1)(c) was passed beyond the time limit. The chart of the events are reproduced below: Page | 3 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani 06.09.2013 Hon'ble ITAT had dismissed appeal for non-prosecution 11.02.2014 penalty show cause notice u/s 271(1)(c) of the Act issued final opportunity 12.03.2014 penalty order u/s 271(1)(c) was passed 30.07.2014 Miscellaneous application filed before the Tribunal 25.05.2015 CIT(A) order passed in respect of penalty u/s 271(1)(c) of the Act and dismissed 10.10.2016 Tribunal had allowed MA filed by the assessee The Ld. AR for the assessee submits that assessee’s appeal was dismissed by the Tribunal on account of non-prosecution thereafter assessee filed Miscellaneous Application before Tribunal and the Tribunal has re-called its order. Therefore, when the order of the Tribunal has been recalled then after assessing officer should have issued fresh notice u/s 271(1)(c) of the Act, to levy the penalty. Since the assessing officer has not issued fresh notice, after recalling the order of Tribunal, therefore, the order of assessing officer is time barred and it is the order which is not existed in the eyes of law, therefore, penalty imposed by the assessing officer may be quashed. 7. Without prejudice, Shri Jagasheth, also contends that notice issued by the assessing officer under section 274 read with section 271(1) (c ) of the Act, is defective, as there is no definite charge specified in the notice, hence penalty imposed under section 271(1) (c ) of the Act, may be quashed. 8.On the other hand, Ld. Sr. Departmental Representative (Sr.DR) for the Revenue submits that assessing officer has passed the penalty order within time limit prescribed under the Act, therefore, penalty order should not be quashed merely because the Tribunal has recalled its order, which was dismissed on account of non-prosecution, as the original assessment order and penalty order are living Page | 4 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani orders and existed/active in the eye of law. Apart from this, ld DR relied on the findings of assessing officer. 9. We have heard the rival parties and have gone through the material placed on record. We find substance in the alternative arguments advanced by the ld Counsel to the effect that notice issued by the assessing officer under section 274 read with section 271(1) (c ) of the Act, is defective. Therefore, let us first examine the notice issued under section 271(1) (c ) of the Act, which is reproduced below: 10. Having gone through the notice issued under section 271(1) (c ) of the Act, as noted above, we observed that none of the limbs has been ticked by the assessing officer. That is, assessing officer has not ticked any of the limbs, therefore it is not clear whether assessing officer has initiated the penalty on account of furnishing Page | 5 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani inaccurate particulars of income or concealment of particulars of income. Thus, from the above notice for initiation of penalty under section 271(1)(c ) of the Act, we see that there is no fix charge whether assessee has concealed the particulars of income or furnished inaccurate particulars of income. It is by now well settled that while issuing a notice under section 271(1)(c) of the Act, the Assessing Officer is required to specify as to what is the default on the part of the assessee, as to whether the case is one of furnishing inaccurate particulars, or whether it is a case of concealment of income, or both. 11. As stated above, no clear finding was given by the assessing officer regarding the invocation of the limb in the penalty notice. We note that Hon`ble Supreme Court in the case of T Ashok Pai - 292 ITR 11 (SC) held that “concealment of income” and “furnishing of inaccurate particulars of income” carry different connotations. From the facts of the present case, it is abundantly clear that Assessing Officer has not fixed the charge on the assessee. 12.If the Income Tax Act is analysed, it is seen that there are three different ways in which the statutory requirements are enforced, namely: (i) by levying interest (ii) by imposing penalties if the default has been occasioned without reasonable cause and (iii) by punishing the assessee treating the assessee in default as an offence, if it is proved that it was caused by willful failure. These are the three varying degrees of defaults and the statute clearly keeps up the distinction between the three modes. In Hindustan Steel Ltd. v. State of Orissa [83 ITR 26), the Hon`ble Supreme Court observed that whether the penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all relevant circumstances and that even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose a penalty when there is a mere technical or venial breach of the provisions of the Act. Again in Mansukhlal & Bros v. CIT [73 ITR 546], the Hon`ble supreme court had observed that the penalty is not uniform and its imposition depends upon the exercise of discretion Page | 6 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani by the taxing authorities and is imposed as a part of the machinery for assessment of tax liability. The words may direct that such person shall pay by way of penalty in section 271(1) (c) leave a certain amount of discretion in imposition of penalty which need not be imposed when there is a minor breach of the law and when having regard do the facts ends of justice require that the assessee should not be penalized. So also where the circumstances of a case establish that the mistake is accidental and inadvertent and there is no material at all to justify any want of bona fide or any gross neglect, imposition of penalty is not justified. [Mahadeshwara Movies 144 ITR 127 (kar)]. 13. We note that Hon`ble Bombay High Court in the case of Mohd. Farhan A. Shaikh,[2021] 125 taxmann.com 253 (Bombay) held that where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice, not striking off irrelevant matter would vitiate penalty proceedings. The findings of the Hon`ble Court is reproduced below: “Summary: 160. From all the judgments we have quoted about the scope of penalty proceedings under section 271 (1)(c), read with section 274, of the IT Act, we gather the following: (a) Penalty under section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. (e) The existence of such conditions should be discernible from the assessment order or the order of the appellate authority or the revisional authority. (f) Even if there is no specific finding regarding the existence of the conditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and 1(B) it should be discernible from the said order which would be a legal fiction constitute concealment because of deeming provision. (g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under section 271(1)(c) is a sine qua non for the Assessing Officer to Page | 7 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani initiate the proceedings because of the deeming provision in sub-section (IB). (h) The imposition of penalty is not automatic. (i) The imposition of penalty even if the tax liability is admitted is not automatic. (j) Even if the assessee has not challenged the order of assessment levying tax and has even paid tax, that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty. (k) If the explanation offered, even though not substantiated by the assessee, but is found bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (l) The direction referred to in Explanation 1(B) to section 271 of the Act should be clear and without any ambiguity. (m) If the Assessing Officer has recorded no satisfaction or has issued no direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the assessing authority. (n) Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. [We must, however, admit that it is a contested conclusion.] (o) Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. [This, too, eludes unanimity] (p) The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. Based on such proceedings, no penalty could be imposed to the assessee. (q) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (r) The penalty proceedings are distinct from the assessment proceedings. (s) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on the merits. (italics supplied and elaboration omitted) 161. In fact, these have been admirably summarised by Manjunatha. And we acknowledge our debt to the decision that has saved our labour. 162. As aptly pointed out by the referring Division Bench, before this Court there are two sets of cases. One set of cases is led by Kaushalya, a decision earliest in point of time. The other set does not have a lead case; they all have been cryptic but stand persuaded by Manjunatha. For that reason, we have discussed the Karnataka High Court's decision in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: (1) Samson Perinchery; (2) Goa Coastal Resorts and Recreation (P.) Ltd.; (3) New Era Sova Min; and (4) Goa Dourado Promotions (P.) Ltd. On the opposite plank is Kaushalya. All by co-equal Benches, though. Page | 8 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani 163. We have already discussed what constitutes the ratio decidendi or case holding and what it takes to be a precedent. Now, we will see what makes a precedent conflict with another. The Precedential Conflict: 164. To cut the discussion short, we will take aid of the latest Supreme Court judgment on this point. In Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161 ("Mavilayi"), the question concerns the deductions a primary agricultural credit society can claim under section 80P(2)(a) (i) of the IT Act, after the introduction of section 80P(4) of that Act. Two Division Benches of Kerala High Court have taken conflicting views—the latter decision being unaware of the former one. Finally, that precedential conflict stood resolved through a Full Bench decision in Mavilayi Service Co-operative Bank Ltd. v. CIT[2019 (2) KHC 287]. This Full Bench decision was taken to Supreme Court. That is how, on 12 January 2021, a three-Judge Bench of the Supreme Court has decided Mavilayi. 165. Mavilayi has noted that the Full Bench of Kerala High Court has reached its conclusion based on the Supreme Court's judgment Citizen Cooperative Society Ltd. v. Asst. CIT, Hyderabad [(2017) 9 SCC 364]. Indeed, Mavilayi acknowledges that the Kerala High Court's Full Bench did follow Citizen Cooperative. Case (supra) But it holds that in Citizen Cooperative Society Ltd. Case (supra) the counsel for the assessee advanced no argument that "the assessing officer and other authorities under the IT Act could not go behind the registration of the co-operative society in order to discover as to whether it was conducting business in accordance with its bye-laws". That sets Citizen Cooperative apart, according to Mavilayi. 166. In this context, Mavilayi case (supra) holds that only the ratio decidendi of a judgment binds as a precedent. To elaborate on this proposition, Mavilayi service co-operative case (supra) refers to State of Orissa v. Sudhanshu Sekhar Misra [1968] 2 SCR 154, which holds that a decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein, nor what logically follows from the various observations made in it. Then, it quotes Dalbir Singh v. State of Punjab [1979] 3 SCR 1059. Though it was from the dissenting judgment, Mavilayi Case (supra) points out, it remained uncontradicted by the majority: [A]ccording to the well-settled theory of precedents every decision contains three basic ingredients: "(i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above." For the purposes of the parties themselves and their privies, ingredient (iii) is the material element in the decision for it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedents, ingredient (ii) is the vital element in the decision. This indeed is the ratio decidendi[ 16 ]. 167. Then, Mavilayi applied the above principle and held that the ratio decidendi in Citizen Cooperative would not depend upon the conclusion arrived at on facts in that case. For the case is an authority for what it actually decides in law and not for what may seem to logically follow from it. Do Goa Dourado Promotions case (supra) and Kaushalya case (supra) conflict? Page | 9 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani 168. As we have seen Goa Dourado Promotions case (supra) concludes the case based on the reasoning given in Samson Perincherry, and New Era Sova Mine (supra). 169. The relates to Goa Coastal Resorts and Recreation (P.) Ltd. (supra) In that one, the learned Division Bench has held: 6. Besides, we note that the Division Bench of this Court in Samson(supra) as well as in New Era Sova Mine(supra) has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine, the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in a matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine and therefore, warrant no interference. 170. Samson Perinchery, case (supra) too, has held that the notice issued under section 274 of the Act should strike off irrelevant clauses. And New Era Sova Mine has endorsed the Tribunal's view that "the penalty notices in these cases were not issued for any specific charge, that is to say, for concealment of particulars of income or furnishing of inaccurate particulars". In fact, Samson Perincherry relies on Karnataka High Court's SSA's Emerald Meadows, Case (supra) which, as we have already seen, has followed Manjunatha. So, in a sense, it is a conflict between Kaushalya and Manjunatha if we take comity, rather than stare decisis, as the reckoning factor. 171. That said, as Mavilayi found distinguishing features in Citizen Cooperative; here, too, the fact situation as obtained in Kaushalya has been seen in none of these decisions: Goa Dourado Promotions, Goa Coastal Resorts and Recreation, case (supra) Samson Perinchery case (supra), New Era Sova Mine—not even in Manjunatha. Granted, in both sets of cases, the proposition is this: To an assessee facing penalty proceedings, the Revenue must supply complete, unambiguous information so that he may defend himself effectually. This proposition has given rise to this question: Where should the assessee gather the required information from? 172. Goa Dourado Promotions and other cases have held that the information must be gathered from the notice under section 271(1)(c) read with section 274 of the IT Act. No other source was in the Court's contemplation. In Kaushalya, both the proposition and the question were the same. But it has one extra input: the order in assessment proceedings. So it has held that the notice alone is not the sole source of information; the assessment proceedings, too, may shed light on the issue and inform the assessee on the scope of penalty proceedings. Whether assessment proceedings can be a source of information and whether it can complement the notice have not been considered in Goa Dourado Promotions Case (supra) and other cases. 173. We, however, accept that the Revenue, often, adopts a pernicious practice of sending an omnibus, catch-all, printed notice. It contains both relevant and irrelevant information. It assumes, perhaps unjustifiably, that whoever pays tax is or must be well-versed in the nuances of tax law. So it sends a notice without specifying what the assessee, facing penalty proceedings, must meet. In justification of what it omits to do, it will ask, rather expect, the assessee to look into previous proceedings for justification of its action in the later proceedings, which are, undeniably, independent. It forgets that a stitch in time saves nine. Its one cross or tick mark clears the cloud, enables the assessee to mount an effective defence, and, in the end, its diligence avoids a load of litigation. Is not prejudice writ large on the face of the mechanical methods the Page | 10 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani Revenue adopts in sending a statutory notice to the assessee under section 271 (1) (c) read with section 274 of the Act? Pragmatically speaking, Kaushalya casts an extra burden on the assessee and assumes expertise on his part. It wants the assessee to make up for the Revenue's lapses. Ex Post and Ex Ante Approaches of Adjudication: 174. In ex-post adjudication, the Court looks back at a disaster or other event after it has occurred and decides what to do about it or how to remedy it. In an ex-ante adjudication, the Court looks forward, after an event or incident, and asks what effects the decision about this case will have in the future—on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 17 ]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Smt. Kaushalya's case (supra) approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not depend on the assessment proceeding for their outcome. Assessment proceedings hardly influence the penalty proceedings, for assessment does not automatically lead to a penalty. 176. Second, not always do we find the assessment proceedings revealing the grounds of penalty proceedings. Assessment order need not contain a specific, explicit finding of whether the conditions mentioned in section 271(1)(c) exist in the case. It is because Explanations 1(A) and 1(B), as the deeming provisions, create a legal fiction as to the grounds for penalty proceedings. Indeed, the Apex Court in CIT v. Atul Mohan Bindal [2009] 183 Taxman 444/317 ITR 1, has explained the scope of section 271(1)(c) thus: "[E]xplanation 1, appended to section 27(1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false, or the explanation offered by him is not substantiated, and he fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, for the purposes of section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income." 177. That is, even if the assessment order does not contain a specific finding that the assessee has concealed income or he is deemed to have concealed income because of the existence of facts which are set out in Explanation 1, if a mere direction to initiate penalty proceedings under clause (c) of sub-section (1) is found in the said order, by legal fiction, it shall be deemed to constitute satisfaction of the Assessing Officer for initiation of penalty proceedings under the said clause (c). In other words, the Assessing Officer's satisfaction as to be spelt out in the assessment order is only prima facie. Even if the assessment order gives no reason, a mere direction for penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious Page | 11 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice—and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice— not striking off the irrelevant matter—vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? 184. Indeed, Smt. Kaushalya case (supra) did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non- application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Smt. Kaushalya case (supra) closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Smt. Kaushalya case (supra) .In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non- application of mind and prejudice. Page | 12 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff Case (supra) on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff case (supra), for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff case (supra), on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff Case (supra) treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice.” 14.Thus, we note that notice under section 271(1)(c) of the Act, issued by the assessing officer, does not speak about any specific charge for which the penalty on the assessee is to be levied. It is not clear as to whether the assessee is being penalized for the concealment of income or for the furnishing of inaccurate particulars of income. The Assessing Officer did not strike off the irrelevant portion in the notice, therefore it is not clear for which particular default the assessee is being penalized. Considering these facts, and the precedents applicable Page | 13 ITA No.2065/AHD/2015 A.Y. 05-06 Sh. Suresh K Pethani to these facts, we are of the view that penalty should not be imposed on the assessee. Accordingly, we delete the penalty. 15. Before parting, we would like to make clear that since we have adjudicated the assessee`s appeal based on the alternative plea raised by the ld Counsel, (notice being defective), therefore, we do not deal with other arguments of ld Counsel. 16.In the result, appeal of the assessee is allowed. Order pronounced on 08/04/2022 by placing the result on the notice board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 08/04/2022 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat rue copy/