M/s. Toyota Kirloskar Motor Private Limited, Bangalore V. The Deputy Commissioner Of Income Tax (LTU), Circle- 1, Bangalore

ITA 216/BANG/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3980 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 29-10-2020
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K MISHRA CIT BENGALURU
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Transfer pricing; Principle of natural justice; International transaction; Initiation of penalty proceedings
• Section: 271(1)(c); 143(3); 274; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B R BAS KARAN , ACCOUNTANT MEMBER ITA NO . 216/ BANG / 2020 ASSESSMENT YEAR : 2006 - 07 TOYOTA KIRLOSKAR MOTOR PRIVATE LIMITED, PLOT NO.1, BIDADI INDUSTRIAL AREA, RAMANAGAR DISTRICT, BANGALORE. PAN: AAACT 5415B VS. THE DEPUTY COMMISSIONER OF INCOME TAX, LTU, CIRCLE 1, BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI PADAMCHAND KHINCHA, CA . RESPONDENT BY : SHRI R.K. MISHRA, CIT( DR)(ITAT), BENGALURU DATE OF HEARING : 29 . 1 0 .2020 DATE OF PRONOUNCEMENT : 03. 1 1 .2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESEE AGAINST THE ORDE R DATED 11.12.2019 OF THE CIT(APPEALS), BENGALURU-10, BENGA LURU RELATING TO ASSESSMENT YEAR 2006-07. 2. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE O RDER OF THE CIT(A) CONFIRMING THE ORDER OF THE AO IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT). 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY WAS IMPOSED ON THE ASSESSEE BY THE AO ARE THAT THE ASSESSEE WHICH IS A COMPANY ENGAGED IN MANUFACTURE OF MULTI-UTILITY VEHICLE, FI LED RETURN OF INCOME FOR ITA NO.216/BANG/2020 PAGE 2 OF 10 AY 2006-07 ON 22.11.2006 DECLARING NIL INCOME. THE CASE WAS TAKEN UP FOR SCRUTINY AND REFERENCE WAS MADE TO THE TRANSFER PRICING OFFICER (TPO) AS PER THE PROVISION OF SECTION 92CA OF THE ACT. AS SESSMENT U/S 143(3) WAS COMPLETED ON 18.10.2010 ON A TOTAL INCOME OF RS. 30 7,83,31,369. THE TOTAL INCOME INCLUDED RS. 240,11,91.692 BEING TRANSFER PR ICING ADJUSTMENT ON ACCOUNT OF DETERMINATION OF ARM'S LENGTH PRICE (ALP ) OF INTERNATIONAL TRANSACTIONS WITH THE AE OF THE ASSESSEE. PENALTY P ROCEEDINGS WERE INITIATED ACCORDINGLY. THE ASSESSEE FILED AN APPEAL BEFORE ITAT WHICH WAS SUBSEQUENTLY WITHDRAWN AND AN APPLICATION FOR MUTUA L AGREEMENT PROCEDURE (MAP) WAS MADE. AS PER MAP, THE ALP WAS D ETERMINED AT RS. 91,80,00,000. BEFORE THE AO, IT WAS CONTENDED THAT THE ADDITION WAS MADE ON ACCOUNT OF MAP RESOLUTION AND THAT THERE WAS NO WILFUL CONCEALMENT. BUT THE AO DID NOT AGREE WITH THE CONTENTION MADE B Y ASSESSEE AND HELD THAT PENALTY U/S 271(1)(C) IS LEVIABLE ON AGREED AD DITIONS ALSO. ACCORDINGLY, HE LEVIED PENALTY OF RS. 30,89,98,800 U/S 271(1)(C) . 4. AGGRIEVED WITH THE ORDER U/S 271(1)(C) PASSED BY THE DCIT, LTU, CIRCLE-1, BANGALORE, THE ASSESSEE FILED APPEAL BEFO RE THE CIT(APPEALS), WHO CONFIRMED THE ORDER OF THE AO. 5. BEFORE THE TRIBUNAL THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE NOTICE ISSUED BEFORE IMPOSING PENALTY WAS NOT ACCORDANCE WITH LAW AND ON THIS GROUND THE ORDER IMPOSING PENALTY SHOUL D BE QUASHED. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTE NTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT BEFORE IMPOS ING PENALTY AND SUBMITTED THAT THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULA RS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME. HE POINTED OUT THAT THE SHOW CAUSE NOTICE DOES NOT STRIKE OUT THE IRRELEVANT POR TION VIZ., FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PAR TICULARS OF SUCH INCOME. HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE KARNATAKA HIGH COURT IN ITA NO.216/BANG/2020 PAGE 3 OF 10 THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 218 TAXMAN 423 (KAR.) WHEREIN IT WAS HELD THAT IF THE SHOW CAUSE NOTICE U/S.274 OF THE ACT DOES NOT SPECIFY AS TO THE EXACT CHARGE VIZ., WHETHER THE CHARGE IS THAT THE ASSESSEE HAS FURNISHED INACCURA TE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME BY S TRIKING OUT THE IRRELEVANT PORTION OF PRINTED SHOW CAUSE NOTICE, THAN THE IMPO SITION OF PENALTY ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE S USTAINED. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 6. WE HAVE ALSO PERUSED THE SHOW-CAUSE NOTICE ISSUE D U/S.274 OF THE ACT. THE AO IN THE SAID SHOW CAUSE NOTICE HAS NOT STRUCK OFF THE IRRELEVANT PORTION AS TO WHETHER THE CHARGE AGAINST THE ASSESS EE IS CONCEALING PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE AO HAS PLACED A TICK MARK IN THE PRINTED FORM OF NO TICE WHICH HAS BOTH THE CHARGES I.E., HAVE CONCEALED THE PARTICULARS OF YO UR INCOME OR FURNISHED IN ACCURATE PARTICULARS OF SUCH INCOME. THE CIT(A) H AS CONSTRUED THE PLACING OF TICK MARK IN THE BEGINNING OF THE LETTER S HAVE CONCEALED AS AKIN TO INITIATION OF PENALTY PROCEEDINGS ON THE GROUND OF CONCEALING PARTICULARS OF INCOME. THIS APPROACH OF THE CIT(A) IS CONTRARY TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNA THA COTTON & GINNING FACTORY (SUPRA). THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFI CALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEAL MENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FO RM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY TH E REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PRO CEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY ON ANOTHER LIMB OF SEC.271 (1)(C) OF THE ACT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & A NR. V. MANJUNATHA ITA NO.216/BANG/2020 PAGE 4 OF 10 COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN T HE FOLLOWING PRINCIPLES TO BE FOLLOWED IN THE MATTER OF IMPOSING PENALTY U/ S.271(1)(C) OF THE ACT:- NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FIN DING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTION ED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD N OT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS A RE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE COND ITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY O N HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCE S OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 10 0% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS H AVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FAC TS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN ITA NO.216/BANG/2020 PAGE 5 OF 10 SUCH CASES THE INITIATION OF THE PENALTY PROCEEDING S ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE G ROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QU A NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDI NGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SA ID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE I S CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON T HE GROUNDS 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 OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALS O BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTI CAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDIT Y OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNO T VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED I N THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THU S 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 A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PA I REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT ITA NO.216/BANG/2020 PAGE 6 OF 10 CONCEALMENT 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 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 ASS ESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOU T STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON-APPLICATION OF MIND. 8. THE FINAL CONCLUSION OF THE HONBLE COURT WAS A S FOLLOWS:- 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILIT IES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEED INGS UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF T HE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATIO N 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT 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(L)(C) IS A S INE ITA NO.216/BANG/2020 PAGE 7 OF 10 QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDI NGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT H AS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPE D FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR WHEN TH E ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERE D IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAV E BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INI TIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY ITA NO.216/BANG/2020 PAGE 8 OF 10 PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) 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 Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHIN G 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 MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIE D, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS . THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) ITA NO.216/BANG/2020 PAGE 9 OF 10 7. IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS S OUGHT TO BE IMPOSED. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS IN ITA NO.380 OF 2015 DATED 23.11.2015 WHER EIN THE HONBLE KARNATAKA HIGH COURT FOLLOWING ITS OWN DECISION IN THE CASE OF CIT VS MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 IT R 565 TOOK A VIEW THAT IMPOSING OF PENALTY U/S 271(1)(C) OF THE ACT I S BAD IN LAW AND INVALID FOR THE REASON THAT THE SHOW CAUSE NOTICE U/S 274 OF TH E ACT DOES NOT SPECIFY THE CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. THE LD. COUNSEL FURTHER BROUGHT TO OUR NOTICE THAT AS A GAINST THE DECISION OF THE HONBLE KARNATAKA HIGH COURT THE REVENUE PREFERRED AN APPEAL IN SLP IN CC NO.11485 OF 2016 AND THE HONBLE SUPREME COURT BY ITS ORDER DATED 05.08.2016 DISMISSED THE SLP PREFERRED BY THE DEPARTMENT. 8. WE HAVE ALREADY OBSERVED THAT THE SHOW CAUSE NOT ICE ISSUED IN THE PRESENT CASE U/S 274 OF THE ACT DOES NOT SPECIFY TH E CHARGE AGAINST THE ASSESSEE AS TO WHETHER IT IS FOR CONCEALING PARTICU LARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE SH OW CAUSE NOTICE U/S 274 OF THE ACT DOES NOT STRIKE OUT THE INAPPROPRIATE WO RDS. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT IMPOSITION O F PENALTY CANNOT BE SUSTAINED. THE PLEA OF THE LD. COUNSEL FOR THE ASSE SSEE WHICH IS BASED ON THE DECISIONS REFERRED TO IN THE EARLIER PART OF TH IS ORDER HAS TO BE ACCEPTED. WE THEREFORE HOLD THAT IMPOSITION OF PENALTY IN THE PRESENT CASES CANNOT BE SUSTAINED AND THE SAME IS DIRECTED TO BE CANCELLED. ITA NO.216/BANG/2020 PAGE 10 OF 10 9. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS 3 RD DAY OF NOVEMBER, 2020. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVAN ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 03 RD NOVEMBER, 2020. / DESAI S MURTHY / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.