Nandkishor Tulsidas Katore, Nashik V. Assistant Commissioner of Income-tax,

ITA 2179/PUN/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0361 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 07-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 09-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Depreciation; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Additional depreciation; Retrospective amendment; Initiation of penalty proceedings; Retraction; Revised return; Documents seized
• Section: 143(3); 133A; 153A; 27; 148; 132; 2; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO S . 2 1 74 TO 2180 /PN/20 1 4 / ASSESSMENT YEAR S : 20 02 - 03 TO 2008 - 09 NANDKISHOR TULSIDAS KATORE NANDKISHOR TULSIDAS KATORE SURYA NURSING HOME, BEHIND REGIMENTAL PLAZA, NASHIK ROAD, NASHIK, MAHARASHTRA . / APPELLANT PAN: A BIPK9348L VS. THE ASST . COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE - 1, NASHIK . / RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / RESPOND ENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 0 8 . 1 2 .201 6 / DATE OF PRONOUNCEMENT: 14 . 1 2 .201 6 / ORDER PER SUSHMA CHOWLA, JM: T HIS BUNCH OF APPEAL S FILED BY THE ASSESSEE ARE AGAINST CONSOLIDATED ORDER OF CIT( A ) - I , NASHIK , DATED 3 0 . 1 0 .201 4 RELATING TO ASSESSMENT YE AR S 2002 - 03 TO 2008 - 09 AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 2 2 . THE ONLY ISSUE RAISED IN THIS BUNCH OF APPEALS IS AGAINST LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. UNDER SECTION 271(1)(C) OF THE ACT. 3. THE ISSUE ARISIN G IN ALL THE APPEALS IS SIMILAR AND HENCE, ALL THE APPEALS ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING MADE TO THE FACTS AND ISSUES IN ITA NO.2175/PN/2014 IN WHICH ASSESSMENT WAS COMPLET ED UNDER SECTION 143(3) R.W.S. 153A OF THE ACT . THOUGH THE FIRST YEAR OF APPEAL RELATES TO ASSESSMENT YEAR 2002 - 03 , HOWEVER, THE ASSESSMENT IN THE SAID YEAR WAS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT. 4 . THE ASSESSEE IN ITA NO.2175/PN/2014 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY. THE PENALTY MAY PLEASE BE CANCELLED. CANCELLED. 2 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY. WHEN SECTION 153A STARTS WITH NON OBSTANTE CLAUSE EXCLUDING SECTION 139 AND 147, THE RETURN FILED UNDER SECTION 153A IS THE FIRST RETURN UNDER SECTION 153A. THE INCOME RETU RNED IS ACCEPTED BY THE LEARNED A O . THERE IS NO ADDITION TO INCOME HENCE THE PENALTY MAY PLEASE BE CANCELLED. 3 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY WHEN THE AMOUNT D ECLARED WAS INCLUDED IN THE RETURN OF INCOME FILED BY THE APPELLANT UNDER SECTION 153A AND THERE WAS NO RETRACTION. THE PENALTY MAY PLEASE BE CANCELLED. 4 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED I N CONFIRMING THE PENALTY WHEN THE AMOUNTS DECLARED DURING SEARCH / SURVEY PROCEEDINGS WERE ON AGREED BASIS TO BUY PEACE AND TO AVOID LONG STRESSED LITIGATION SUBJECT TO NON - LEVY OF PENALTY, THE PENALTY MAY PLEASE BE CANCELLED. 5 . ON THE FACTS AND IN THE C IRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY. THE AMOUNTS DECLARED WERE ON ESTIMATE BASIS. THE PENALTY CANNOT BE LEVIED WHEN THE ADDITIONS ARE MADE ON ESTIMATE BASIS. THE PENALTY MAY PLEASE BE CANCEL LED. 6 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY WHEN IT IS THE PERSONAL PRESUMPTION OF THE LEARNED ASSESSING OFFICER AND CONFIRMED BY CIT (A) PRESUMPTION OF THE LEARNED ASSESSING OFFICER AND CONFIRMED BY CIT (A) THAT HAD THE SEARCH HAS NOT B EEN CONDUCTED, THE ADDITIONAL INCOME WOULD NOT HAVE BEEN UNEARTHED. THE PENALTY CANNOT BE LEVIED ON PRESUMPTION. THE PENALTY MAY PLEASE BE CANCELLE D. ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 3 7 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CON FIRMING THE PENALTY, WHEN THE LEARNED ASSESSING OFFICER BRINGS NO CORROBORATIVE EVIDENCE ON RECORDS. THE PENALTY ASSESSING OFFICER BRINGS NO CORROBORATIVE EVIDENCE ON RECORDS. THE PENALTY MAY PLEASE BE CANCELLED. 8 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING TH E PENALTY, WHEN NO PROPER SATISFACTION IS RECORDED IN THE ASSESSMENT ORDER OR PENALTY ORDER BY THE LEARNED ASSESSING OFFICER. PENALTY IS NOT LEVIABLE ON THE BASIS OF THE OPINION OF THE LEARNED ASSESSING OFFICER. THE PENALTY MAY PLEASE BE CANCELLED. 9 . O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY IGNORING THE NUMBER OF DECISIONS APPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. THE SAME MAY PLEASE BE CONSIDERED IN ITS PROPER PERSPECTIVE. FOR EXAMPLE PREM ARORA (2012) 149 TTJ (DEL) 590, THE RETURN FILED U / S 153A IS TREATED AS FIRST RETURN AND PENALTY CANNOT BE LEVIED WITH REFERENCE TO RETURN FILED UNDER SECTION 139. ACIT VS. V.N.DEVDOSS (2013) 157 TTJ 168 (CHEN) WHERE IN I T IS HELD THAT RETURN UNDER SECTION 153A IS FIRST RETURN. DEVIDAS SUKHANI VS. DCIT (2013) 158 TTJ (JODH) 42 IT IS HELD THAT WHERE THE ASSESSEE FILED REVISED RETURNS SHOWING ADDITIONAL INCOME AFTER SEARCH AND INCOME DECLARED WAS ACCEPTED, NO PENALTY COU LD BE LEVIED UNDER SECTION 271( 1 )(C). SMT. PRAMILA D. ASHTEKAR & OTHERS VS . IT O (2013) 154 TTJ (PUNE)(UO) THE PENALTY MAY PLEASE BE CANCELLED. 10. WITHOUT PREJUDICE TO THE ABOVE ADDITIONAL GROUND OF APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, ON VERIFICATION OF PENALTY ORDER, IT IS SEEN THAT THE LEARNED ASSESSING OFFICER HAS LEVIED THE PENALTY WITHOUT CONSIDERING THE REDUCTION GRANTED BY CIT (A) IN QUANTUM APPEAL AS SUCH THE PENALTY ORDER IS AB INITIO INVALID AND MAY PLEASE BE CANCELLED. 5. BRIEFLY, IN THE FACTS OF THE CASE, SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT AT THE RESIDENTIAL PREMISES OF ASSESSEE UNDER SECTION 132(1) OF THE ACT ON 16.01.2009 AND CERTAIN BOOKS OF ACCOUNT AND DOCUMENTS WERE SEIZED FROM THE PREMISES. SIMULTANEOUSLY, SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT AT THE HOSPITAL PREMISES I.E. SURYA NURSING HOME, NASHIK AND CERTAIN BOOKS OF ACCOUNT AND PAPERS WERE IMPOUNDED. DURING THE COURSE OF SEARCH, INCRIMINATING DOCUMENTS MARKED A S A - 3, A - 1/1 TO A - 1/4 & A - 8 WERE SEIZED. FURTHER, DURING THE DOCUMENTS MARKED A S A - 3, A - 1/1 TO A - 1/4 & A - 8 WERE SEIZED. FURTHER, DURING THE COURSE OF SURVEY AT THE HOSPITAL PREMISES, INCRIMINATING DOCUMENTS MARKED AS A - ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 4 36, A - 38 & A - 39 WERE IMPOUNDED. NONE OF THESE DOCUMENTS RELATED TO ASSESSMENT YEAR 2003 - 04 I.E. INSTANT ASSESSMENT YEAR BUT WHEN THE ASSESSEE RECONSTRUCTED ITS BOOKS OF ACCOUNT AFTER SURVEY AND SEARCH & SEIZURE, THE ASSESSEE NOTED THAT CERTAIN ASSETS HAD REMAINED TO BE DISCLOSED IN THE ORIGINAL RETURN OF INCOME. SUCH ASSETS WERE ON ACCOUNT OF FURNITURE & FIXTURES, MA CHINERY, INSURANCE POLICIES AND CERTAIN PERSONAL EXPENSES. THE ASSESSEE HAD ORIGINALLY FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2,36,714/ - . HOWEVER, AFTER THE ISSUE OF NOTICE UNDER SECTION 153A OF THE ACT, THE ASSESSEE FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.5,71,710/ - , WHICH INCLUDED THE ADDITIONAL INCOME OF RS.3,72,947/ - . 6. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION ON FURNITURE & FIXTURES AND MACHINERY. THE ASSESSING OFFICER NOTED THAT THE ASSETS WERE ACQUIRED BY MAKING CASH PAYMENTS AND DURING THE COURSE OF SEARCH, NONE OF THESE BILLS OR VOUCHERS WE RE FOUND AT THE PREMISES OF ASSESSEE. NO INVENTORY OF ASSETS WAS PREPARED BY THE SEARCH P ARTY. DURING THE COURSE OF SEARCH OR DURING POST SEARCH ENQUIRY, THE ASSESSEE NEVER BROUGHT TO THE NOTICE OF AUTHORIZED OFFICERS ANY SUCH ASSETS. UNDER THE CIRCUMSTANCES, THE ASSESSING OFFICER DISALLOWED ADDITIONAL DEPRECIATION ON ASSETS OF RS. 37,947/ - . FURTHER, THE ASSESSING OFFICER NOTED THAT THOUGH THE ASSESSEE HAD DECLARED ADDITIONAL INCOME OF RS.3,72,947/ - IN THE RETURN OF INCOME FILED UNDER SECTION 153A OF THE ACT, BUT THE SAME WAS NOT SHOWN IN THE RETURN OF INCOME FILED UNDER SECTION 139(1) OF THE ACT. THE SAID ASSETS WERE DETECTED CONSEQUENT TO SEARCH AND SEIZURE OPERATIONS AND HENCE, THE ASSESSEE WAS HELD TO HAVE CONCEALED THE PARTICULARS OF INCOME WITHIN MEANING OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. THE PENALTY PROCEEDINGS WERE IN ITIATED SEPARATELY FOR SUCH ADDITION. THE ASSESSING OFFICER WHILE PASSING THE ORDER LEVYING PENALTY ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 5 UNDER SECTION 271(1)(C) OF THE ACT NOTED THAT THE ADDITIONAL INCOME WAS OFFERED IN THE RETURNS OF INCOME FILED UNDER SECTION 153A OF THE ACT WHICH WAS ON T HE BASIS OF INCRIMINATING EVIDENCES FOUND DURING THE COURSE OF SEARCH. THE PLEA OF ASSESSEE THAT THE ADDITIONAL INCOME WAS OFFERED ON AGREED BASIS AND HENCE, DOES NOT WARRANT LEVY OF PENALTY FOR CONCEALMENT, WAS REJECTED. FURTHER, THE ASSESSING OFFICER O BSERVED THAT EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS CLEARLY ATTRACTED IN THE CASE AND THE SAME DOES NOT ACCORD ANY IMMUNITY FROM LEVY OF PENALTY. IN VIEW THEREOF, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INC OME BY FURNISHING OF INACCURATE PARTICULARS OF THE SAME AND HENCE, PENALTY WAS LEVIED AT RS.1,17,479/ - . 7. BEFORE THE CIT(A), THE ASSESSEE MADE ELABORATE SUBMISSIONS WHICH ARE REPRODUCED IN THE ORDER OF CIT(A). THE CIT(A) VIDE PARA 6 NOTED THAT SEARCH UN DER SECTION 132 OF THE ACT WAS CONDUCTED AT THE ASSESSEES RESIDENTIAL / BUSINESS PREMISES ON 16.09.2010. THE ASSESSEE WAS RUNNING HOSPITAL / NURSING HOME AT NASHIK ROAD, NASHIK. THE CIT(A) FURTHER STATES THAT SEARCH UNDER SECTION 13 2 OF THE ACT LEAD TO SEIZURE OF NUMBER OF INCRIMINATING DOCUMENTS IN THE FORM OF ROUGH PAGES, NOTE BOOKS, DIARIES, RECEIPT BOOKS, ETC. WHICH CONTAINED DETAILS OF SUPPRESSED RECEIPTS ON ACCOUNT OF OPD / IPD AND ENDOSCOPY CHARGES RECEIVED FROM THE PATIENTS. DURING INVESTIGATION , THE ASSESSEE ADMITTED THE FACT OF SUPPRESSION OF RECEIPTS FROM THE OPD PATIENTS. THE TOTAL SUPPRESSED RECEIPTS ON ACCOUNT OF OPD PATIENTS FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 WERE ESTIMATED AT RS.15.40 CRORES. THE ASSESSEE HAD DISCLOSED THIS AMOUNT AS UNDISCLOSED INCOME FOR THE RESPECTIVE YEARS. FURTHER, THE ASSESSEE HAD DECLARED SUPPRESSED RECEIPTS ON ACCOUNT OF ENDOSCOPY CHARGES ESTIMATED AT RS.4.50 LAKHS FOR ASSESSMENT YEAR 2005 - 06. THE ASSESSEE HAD ALSO DECLARED SUPPRESSED RECEIPTS ON ACCOUNT O F IPD PATIENTS FOR ASSESSMENT YEAR 2003 - 04 TO 2008 - 09, ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 6 WHICH WERE ESTIMATED AT RS.22,12,750/ - FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09. FURTHER, THE ASSESSEE WAS FOUND TO HAVE DECLARED RS. 15,51,235/ - AS HIS ADDITIONAL INCOME FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN INSURANCE POLICIES AND MUTUAL FUNDS. THE ASSESSEE ALSO DISCLOSED RS.6 LAKHS FOR ASSESSMENT YEAR 2002 - 03 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN CONSTRUCTION OF HOUSE AND FOR ASSESSMENT YEAR 2003 - 04 RS.1.70 LAKHS FOR CONSTRUCTION OF HOSPITAL. THE CIT(A) WAS OF THE VIEW THAT WHERE THE ADDITIONAL INCOME WAS BASED ON VARIOUS DOCUMENTS FOUND AND SEIZED FROM THE ASSESSEES PREMISES DURING THE COURSE OF SEARCH, THEN IF THE RETURN OF INCOME WAS ACCEPTED UNDER SECTI ON 143(3) R.W.S. 153A OF THE ACT, THE ASSESSEE WAS LIABLE TO LEVY OF PENALTY, IN VIEW OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. THE ORDER OF ASSESSING OFFICER IN THIS REGARD WAS UPHELD. THE CONTENTION OF ASSESSEE THAT IT HAD VOLUNTARILY MADE DIS CLOSURE FOR PEACE OF MIND AND TO AVOID LITIGATION, WAS NOT ACCEPTED, IN VIEW OF SEIZURE OF VARIOUS PAPERS / DOCUMENTS GIVING DETAILS WAS NOT ACCEPTED, IN VIEW OF SEIZURE OF VARIOUS PAPERS / DOCUMENTS GIVING DETAILS OF UNACCOUNTED RECEIPTS / INVESTMENT / EXPENDITURE. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COUR T IN MAK DATA P. LTD. VS. CIT IN CIVIL APPEAL NO.9772 OF 2013, JUDGMENT DATED 30.10.2013 AND THE APPEAL OF ASSESSEE WAS DISMISSED BY THE CIT(A). 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE POINTED OUT THAT BOTH DURING THE COURSE OF SEARCH UNDER SECTION 132 OF THE ACT AT THE RESIDENCE OF ASSESSEE AND SURVEY ON THE HOSPITAL OF ASSESSEE, CERTAIN DISCREPANCIES WERE FOUND. HOWEVER, THE SOURCE OF DISCREPANCIES OR MISMATCH IN INVESTMENT WAS THE INCOME GENERATED FROM HO SPITAL , WHEREIN THE ASSESSEE DECLARED UNRECORDED SUPPRESSED RECEIPTS OF THE HOSPITAL. HE FURTHER POINTED OUT THAT THE ASSESSEE ON 13.03.2009 DURING CONTINUATION OF SEARCH HAD WORKED OUT THE ADDITIONAL INCOME ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 7 YEAR - WISE AND DECL ARED THE SAME. HE POINTED OUT THAT DURING THE COURSE OF SEARCH, EVIDENCES OF JEWELLERY, INVESTMENT, INSURANCE POLICIES, ETC. WERE FOUND, SOURCE OF WHICH INVESTMENTS WAS OUT OF INCOME GENERATED FROM HOSPITAL. WITH REGARD TO ASSESSMENT YEARS 2003 - 04, 2004 - 05 AND 2005 - 06, THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT NO SPECIFIC INVENTORY WAS PREPARED AND THE ASSESSEE DECLARED THE VALUE OF ASSETS AS SUCH. HE STRESSED THAT THERE IS NO MERIT IN LEVY OF PENALTY FOR CONCEALMENT SINCE T HE SATISFACTION RECORDED BY THE ASSESSING OFFICER DOES NOT SPECIFY THE CHARGE, EXCEPT TO SAY THAT EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS ATTRACTED. HE STRESSED THAT FIRST PROPOSITION RAISED IN THE PRESENT APPEAL IS CHALLENGING THE APPLICABILITY OF EXPLANATION 5A. HE POINTED OUT THAT SINCE THE INCOME HAS BEEN OFFERED IN THE HANDS OF ASSESSEE ON ACCOUNT OF SURVEY, THEN EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS NOT APPLICABLE. HE STRESSED THAT SEARCH WAS AT THE RESIDENCE OF ASSESSEE, WHER EIN ONLY CERTAIN INVESTMENTS WERE FOUND AND THE SOURCE OF SAID ASSESSEE, WHER EIN ONLY CERTAIN INVESTMENTS WERE FOUND AND THE SOURCE OF SAID INVESTMENTS WAS OUT OF INCOME FROM THE HOSPITAL AND HENCE, PART OF THE INCOME DECLARED PURSUANT TO SURVEY AND CONSEQUENTLY NOT DECLARED BECAUSE OF SEARCH. THE NEXT PLEA RAISED BY THE LEARNED A UTHORIZED REPRESENTATIVE FOR THE ASSESSEE WAS THAT THE PERUSAL OF ASSESSMENT ORDER WOULD REFLECT THAT PRIMA FACIE SATISFACTION AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT HAS BEEN SATISFIED AS PER ASSESSING OFFICER IS NOT D I SCERNABLE FROM THE ORDER IT SELF. IN THIS REGARD, RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN MS. MADHUSHREE GUPTA & ANOTHER VS. UNION OF INDIA & ANOTHER, (2009) 317 ITR 107 (DEL), WHEREIN EXPLANATION 1B UNDER SECTION 271(1)(C) OF THE ACT WAS APPLIE D. HE FURTHER REFERRED TO THE DECISION OF HONBLE HIGH COURT OF KARNATAKA IN CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 241 (KAR) , WHERE SIMILAR QUESTION WAS RAISED AND THE HONBLE HIGH COURT HELD THAT PENALTY ORDER WAS LIABLE TO BE QUASHED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 8 OUT THAT THE HONBLE SUPREME COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT AND HENCE, THE RATIO LAID DOWN BY THE HONBLE HIGH COURT STANDS. HE FURTHER RELIED ON THE RATIO LAID DOWN BY THE P UNE BENCH OF TRIBUNAL ON SIMILAR ISSUE IN KANHAIYALAL D. JAIN VS. ACIT IN ITA NOS.1201 TO 1205/PN/2014, RELATING TO ASSESSMENT YEARS 2003 - 04 TO 2007 - 08 . HE FURTHER REFERRED TO THE NOTICE ISSUED UNDER SECTION 271(1)(C) OF THE ACT AND POINTED OUT THAT EVEN THE SAID NOTICE WAS NOT CLEAR AS TO WHICH LIMB HAS BEEN STRUCK OFF. THE CHARGE MADE BY THE ASSESSING OFFICER DURING THE COURSE OF PENALTY PROCEEDINGS WAS HELD TO BE VAGUE AND HENCE, NO MERIT IN THE PENALTY ORDER PASSED PURSUANT TO SUCH VAGUE SATISFACTION. HE FURTHER POINTED OUT THAT THE ASSESSMENT PROCEEDINGS FOR ASSESSMENT YEAR 2002 - 03 WERE COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT, WHEREIN ALSO SATISFACTION TO INITIATE PENALTY PROCEEDINGS WAS VAGUE . I N RESPECT OF ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 , T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FAIRLY POINTED OUT THAT EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS ASSESSEE FAIRLY POINTED OUT THAT EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS ATTRACTED. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACING RELIANCE ON THE OR DERS OF AUTHORITIES BELOW POINTED OUT THAT THE ASSESSING OFFICER VIDE PARA 7 HAS CLEARLY HELD THAT THE DEFAULT IS OF CONCEALMENT OF INCOME AND HENCE, NO MERIT IN THE STAND OF LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE BEFORE US DUAL ACTION WAS TAKEN AGAINST THE ASSESSEE I.E. SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE RESIDENCE OF ASSESSEE ON 16.01.2009 . S IMULTANEOUSLY, SURVEY WAS CARR IED OUT AT THE HOSPITAL OF ASSESSEE ON 16.01.2009. DURING THE COURSE OF SURVEY, EVIDENCE OF CERTAIN UNACCOUNTED RECEIPTS, ROUGH PAGES, NOTE BOOKS, DIARIES, RECEIPT BOOKS, ETC. WERE FOUND. THE ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 9 ASSESSEE ADMITTED THE FACT OF SUPPRESSION OF RECEIPTS FROM OPD , IPD, ENDOSCOPY CHARGES, ETC. THE ASSESSEE HAS DECLARED SUPPRESS ED RECEIPTS FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 ON ESTIMATE BASIS AS UNDER: - RECEIPTS FROM OPD FOR A.Y. 2003 - 04 TO 2008 - 09 - RS. 15 , 40 ,000/ - RECEIPTS IPD PATIENTS FOR A.Y. 2003 - 04 TO 2 008 - 09 - RS. 22,12,750/ - ENDOSCOPY CHARGES FOR A.Y. 2005 - 06 - RS. 4,50,000/ - 12. FURTHER, FROM THE RESIDENCE OF ASSESSEE, CERTAIN RECEIPTS OF INVESTMENTS / EXPENDITURE WERE FOUND DURING THE COURSE OF SEARCH. THE CASE OF ASSESSEE BEFORE US IS THAT THE SOURCE OF SAID INVESTMENT WAS ALSO OUT OF RECEIPTS FROM THE HOSPITAL AND THOUGH THE EVIDENCE WAS FOUND FROM THE RESIDENCE OF ASSESSEE DURING THE COURSE OF SEARCH BUT IT RELATED BACK TO THE SURVEY CONDUCTED AT THE HOSPITAL PREMISES OF ASSESSEE. THE ASSESS EE HAD DECLARED ADDITIONAL INCOME OF RS. 15,51,235/ - FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN INSURANCE POLICIES AND MUTUAL FUNDS, RS.6 LAKHS FOR ASSESSMENT YEAR 2002 - 03 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN CONSTRUC TION OF ASSESSMENT YEAR 2002 - 03 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN CONSTRUC TION OF HOUSE AND RS.1.70 LAKHS FOR ASSESSMENT YEAR 2003 - 04 ON INVESTMENT IN CONSTRUCTION OF HOSPITAL. THE ASSESSEE IS A SOLE PROPRIETOR OF HOSPITAL AND HAD DISCLOSED ADDITIONAL INCOME IN THE RETURN OF INCOME PURSUANT TO NOTICE ISSUED UNDER SECTION 153A O F THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS VEHEMENTLY STATED BEFORE US THAT THE BASIS OF ADDITIONAL INCOME WAS SURVEY AND NOT SEARCH AND ONCE THE ADDITIONAL INCOME WAS BASED ON SURVEY PROCEEDINGS, THEN EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS NOT APPLICABLE. THE DETAILS OF ORIGINAL RETURN OF INCOME FILED AND THE RETURNS OF INCOME FILED UNDER SECTION 148 OF THE ACT FOR ASSESSMENT YEAR 2002 - 03 AND UNDER SECTION 153A OF THE ACT FOR ASSESSMENT YEARS 2003 - 04 TO 2008 - 09 AND A LSO THE INCOME ASSESSED THEREAFTER AND THE PENALTIES IMPOSED FROM YEAR TO YEAR IS TABULATED HEREUNDER: - ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 10 A.Y. INCOME AS PER ORIGINAL RETURN OF INCOME ( ` ) DATE OF ORIGINAL RETURN OF INCOME INCOME AS PER RETURN U/S 148/153A ( ` ) INCOME ASSESSED U/S 148/15 3A ( ` ) INCOME CONCEALED ( ` ) PENALTY IMPOSED U/S 271(1)(C) ( ` ) 2002 - 03 3,42,664 06/08/2002 9,47,960 9,47,960 6,05,291 1,80,052 2003 - 04 2,36,714 08/01/2004 5,71,710 6,09,657 3,72,947 1,17,479 2004 - 05 2,38,950 30/10/2004 6,05,710 7,56,152 5,60,437 1,55,71 3 2005 - 06 2,97,960 26/02/2005 8,73,410 9,91,232 7,16,379 2,35,927 2006 - 07 8,41,190 31/10/2006 14,57,430 17,11,731 8,70,949 2,93,160 2007 - 08 13,65,163 30/10/2007 16,45,164 17,20,604 3,55,442 1,19,641 2008 - 09 11,39,880 03/10/2008 15,34,880 16,00,084 4,60 ,210 1,56,425 13. THE PERUSAL OF ABOVE DETAILS REFLECTS THAT THE RETURNED INCOME HAS BEEN ACCEPTED WITH MINOR VARIATIONS IN THE FINAL ASSESSED INCOMES. THE ISSUE WHICH ARISES FOR ADJUDICATION BEFORE US IS THAT WHERE THE ADDITIONAL INCOME HAS BEEN DECLA RED IN HIS HANDS WHETHER THE SAME IS LIABLE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE FIRST ISSUE RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IS THAT IN CASE ANY INCOME IS DECLARED PURSUANT TO SURVEY, THEN THE SAME I S NOT COVERED UNDER EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. WE FIND MERIT IN THE STAND OF ASSESSEE IN THIS REGARD, WHEREIN EXPLANATION THE ACT. WE FIND MERIT IN THE STAND OF ASSESSEE IN THIS REGARD, WHEREIN EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT CATEGORICALLY PROVIDES THAT THE SAME IS APPLICABLE IN CASE OF SEARCHES. HOWE VER, THE STATUTE IS SILENT ABOUT THE ADDITIONAL INCOME OFFERED BY THE PERSONS IN THE REVISED RETURN OF INCOME FILED PURSUANT TO SURVEY PROCEEDINGS. THE ADDITIONAL INCOME WAS DECLARED DURING THE SURVEY AND IF OFFERED BY THE PERSON IN THE REVISED RETURN OF INCOME FILED THEREAFTER, THEN THE SAME DOES NOT PARTAKE THE NATURE OF ADDITIONAL INCOME TAKEN NOTE IN EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE DELHI HIGH COURT IN CIT VS. SAS P HARMACEUTICALS REPORTED IN 335 ITR 259 (DEL), WHEREIN IT HAS BEEN HELD AS UNDER: - 12. AFTER CONSIDERING THE RESPECTIVE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE PARTIES, WE ARE OF THE VIEW THAT THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE HAS TO PREVAIL AS IT CARRIED SUBSTANTIAL WEIGHT. IT IS TO BE KEPT IN MIND THAT S. 271(1)(C) OF THE ACT IS A PENAL PROVISION AND SUCH A PROVISION HAS TO BE STRICTLY CONSTRUED. UNLESS THE CASE FALLS WITHIN THE FOUR CORNERS OF THE SAID PROVISION, PENALTY CANNOT BE I MPOSED. SUB - S. (1) OF S. 271 STIPULATES CERTAIN CONTINGENCIES ON THE HAPPENING WHEREOF THE AO OR THE CIT(A) MAY DIRECT PAYMENT OF PENALTY BY THE ASSESSEE. WE ARE CONCERNED HEREWITH THE FUNDAMENTALITY PROVIDED IN CL. (C) OF S. ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 11 271(1) OF THE ACT, WHICH AUTHO RIZES IMPOSITION OF PENALTY WHEN THE AO IS SATISFIED THAT THE ASSESSEE HAS EITHER : A) CONCEALED THE PARTICULARS OF HIS INCOME; OR (B) FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. 13. IT IS NOT THE CASE OF FURNISHING INACCURATE PARTICULARS OF INCO ME, AS IN THE IT RETURN, PARTICULARS OF INCOME HAVE BEEN DULY FURNISHED AND THE SURRENDERED AMOUNT OF INCOME WAS DULY REFLECTED IN THE IT RETURN. THE QUESTION IS WHETHER THE PARTICULARS OF INCOME WERE CONCEALED BY THE ASSESSEE OR NOT. IT WOULD DEPEND UPON THE ISSUE AS TO WHETHER THIS CONCEALMENT HAS REFERENCE TO THE IT RETURN FILED BY THE ASSESSEE, VIZ., WHETHER CONCEALMENT IS TO BE FOUND IN THE IT RETURN. 14. WE MAY, FIRST OF ALL, REJECT THE CONTENTION OF THE LEARNED COUNSEL FOR THE REVENUE RELYING UPON THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT OCCURRING IN SUB - S. (1) OF S. 271 OF THE ACT AND CONTENDING THAT EVEN DURING SURVEY WHEN IT WAS FOUND THAT THE ASSESSEE HAD CONCEALED THE PARTICULAR OF HIS INCOME, IT WOULD AMOUNT TO CONCEALM ENT IN THE COURSE OF ANY PROCEEDINGS. THE WORDS IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT ARE PREFACED BY THE SATISFACTION OF THE AO OR THE CIT(A). WHEN THE SURVEY IS CONDUCTED BY A SURVEY TEAM, THE QUESTION OF SATISFACTION OF AO OR THE CIT(A) OR THE CIT DOES NOT ARISE. WE HAVE TO KEEP IN MIND THAT IT IS THE AO WHO INITIATED THE PENALTY PROCEEDINGS AND DIRECTED THE PAYMENT OF PENALTY. HE HAD NOT RECORDED ANY SATISFACTION DURING THE COURSE OF SURVEY. DECISION TO INITIATE PENALTY PROCEEDINGS WAS TAK EN WHILE MAKING ASSESSMENT ORDER. IT IS, THUS, OBVIOUS THAT THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT CANNOT HAVE THE REFERENCE TO SURVEY PROCEEDINGS IN THIS CASE. 15. IT NECESSARILY FOLLOWS THAT CONCEALMENT OF PARTICULARS OF INCOM E OR FURNISHING OF INACCURATE PARTICULAR OF INCOME BY THE ASSESSEE HAS TO BE IN THE IT RETURN FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF THIS COURT IN RETURN FILED BY IT. THERE IS SUFFICIENT INDICATION OF THIS IN THE JUDGMENT OF THIS COURT IN THE CASES OF CIT VS. MOHAN DAS HASSA NAND (1983) 34 CTR (DEL) 361 : (1983) 14 1 ITR 203 (DEL) AND IN RELIANCE PETROPRODUCTS (P) LTD. (SUPRA), THE SUPREME COURT HAS CLINCHED THIS ASPECT, VIZ., THE ASSESSEE CAN FURNISH THE PARTICULARS OF INCOME IN HIS RETURN AND EVERYTHING WOULD DEPEND UPON THE IT RETURN FILED BY THE ASSESSEE. THIS VI EW GETS SUPPORTED BY EXPLNS. 4 AS WELL AS 5 AND 5A OF S. 271 OF THE ACT AS CONTENDED BY THE LEARNED COUNSEL FOR THE RESPONDENT. 16. NO DOUBT, THE DISCREPANCIES WERE FOUND DURING THE SURVEY. THIS HAS YIELDED INCOME FROM THE ASSESSEE IN THE FORM OF AMOUNT SURRENDERED BY THE ASSESSEE. PRESENTLY, WE ARE NOT CONCERNED WITH THE ASSESSMENT OF INCOME, BUT THE MOOT QUESTION IS AS TO WHETHER THIS WOULD ATTRACT PENALTY UPON THE ASSESSEE UNDER THE PROVISIONS OF S. 271(1)(C) OF THE ACT. OBVIOUSLY, NO PENALTY CAN BE IM POSED UNLESS THE CONDITIONS STIPULATED IN THE SAID PROVISIONS ARE DULY AND UNAMBIGUOUSLY SATISFIED. SINCE THE ASSESSEE WAS EXPOSED DURING SURVEY, MAY BE, IT WOULD HAVE NOT DISCLOSED THE INCOME BUT FOR THE SAID SURVEY. HOWEVER, THERE CANNOT BE ANY PENALTY O NLY ON SURMISES, CONJECTURES AND POSSIBILITIES. SEC. 271(1)(C) OF THE ACT HAS TO BE CONSTRUED STRICTLY. UNLESS IT IS FOUND THAT THERE IS ACTUALLY A CONCEALMENT OR NON - DISCLOSURE OF THE PARTICULARS OF INCOME, PENALTY CANNOT BE IMPOSED. THERE IS NO SUCH CONC EALMENT OR NON - DISCLOSURE AS THE ASSESSEE HAD MADE A COMPLETE DISCLOSURE IN THE IT RETURN AND OFFERED THE SURRENDERED AMOUNT FOR THE PURPOSES OF TAX. 17. WE, THUS, ANSWER THE QUESTIONS AS FORMULATED ABOVE, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENU E FINDING NO FAULT WITH THE DECISIONS OF THE CIT(A) AS WELL AS THE TRIBUNAL. AS A RESULT, THIS APPEAL IS DISMISSED. 14. ANOTHER FACET WHICH HAS TO BE CONSIDERED IS THAT THE ADDITIONAL INCOME WAS OFFERED DURING THE COURSE OF SURVEY, WHICH WAS CONDUCTED AT THE PREMISES OF ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 12 ASSESSEE. HOWEVER, IT WAS THE ASSESSING OFFICER WHO INITIATED PENALTY PROCEEDINGS AGAINST THE ASSESSEE AND LEVIED THE SAME. THE HONBLE DELHI HIGH COURT HAS CATEGORICALLY LAID DOWN THAT WHERE THE ASSESSING OFFICER HAD NOT RECORDED ANY SA TISFACTION DURING THE COURSE OF SURVEY, THE DECISION TO INITIATE PENALTY PROCEEDINGS BEING TAKEN WHILE MAKING THE ASSESSMENT ORDER, THEN IT WAS HELD THUS, THE EXPRESSION IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT COULD NOT HAVE THE REFERENCE TO SURVE Y PROCEEDINGS, IN THIS CASE. SINCE THE ASSESSEE HAD MADE COMPLETE DISCLOSURE IN THE RETURN AND SURRENDERED THE AMOUNT FOR THE PURPOSE OF TAX, THE HONBLE HIGH COURT HELD THAT THERE WAS NO SUCH CONCEALMENT OF NON - DISCLOSURE AND THE ASSESSEE WAS HELD TO BE NOT LIABLE FOR LEVY OF PENALTY. APPLYING THE SAID PROPOSITION TO THE FACTS OF THE PRESENT CASE, WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO LEVY OF PENALTY ON THE ADDITIONAL INCOME WHICH WAS DECLARED BY THE ASSESSEE DURING THE COURSE OF SURVEY AND WAS OFF ERED TO TAX IN THE REVISED RETURN OF INCOME FILED AFTER THE SURVEY. THE REVISED RETURN OF INCOME FILED AFTER THE SURVEY. 1 5 . NOW, COMING TO THE SECOND ASPECT OF THE ISSUE I.E. RECORDING OF SATISFACTION. THE PERUSAL OF ASSESSMENT ORDER REFLECTS THE SATISFACTION RECORDED WHILE PASSING ASSESSMENT ORDER BY THE ASSESSING OFFICER IS VAGUE. IT ONLY SAYS THAT PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT ARE SEPARATELY INITIATED. HOWEVER, IT IS NOT CLEAR AS TO UNDER WHICH LIMB PENALTY PROCEEDINGS ARE INITIATED AGAINST THE ASSESSEE WHILE THE ASSESSING OFF ICER IS MAKING CHARGE UNDER EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT. THE ASSESSING OFFICER STATES THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF SUCH INCOME BUT WHILE INITIATING PENALTY PROCEEDINGS, PRIMA FACIE , THE SATISFACTION RECORDED DOES N OT DISCERNABLE AS TO UNDER WHICH LIMB OF SECTION THE SATISFACTION IS SO RECORDED. EVEN THE NOTICE ISSUED LEVYING PENALTY IS NOT CLEAR AS TO WHICH LIMB HAS TO BE SATISFIED BY THE ASSESSEE AND CONSEQUENTLY, THE ASSESSEE IS DE P RIVED FROM PROPER SHOW CAUSE NO TICE IN THIS REGARD. FURTHER, ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 13 EVEN THE ORDER LEVYING PENALTY IS NOT CLEAR AS TO UNDER WHICH LIMB THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT HAS BEEN LEVIED. THE ASSESSING OFFICER SAYS THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF HIS INCOME BY FURNI SHING OF INACCURATE PARTICULARS OF THE SAME. WE FIND THAT THIS ISSUE OF RECORDING OF SATISFACTION BEFORE INITIATING PENALTY PROCEEDINGS ISSUE OF NOTICE AND THE LEVY OF PENALTY HAS BEEN CONSIDERED BY THE PUNE BENCH OF TRIBUNAL IN KANHAIYALAL D. JAIN VS. AC IT IN ITA NOS.1201 TO 1205/PN/2014, RELATING TO ASSESSMENT YEARS 2003 - 04 TO 2007 - 08, ORDER DATED 30.11.2016 AND IT HAS BEEN HELD AS UNDER: - 13. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT BUNCH OF APPEALS IS JURISDICTIONAL ISSUE OF LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE REQUIREMENT OF SECTION IS THAT WHERE THE ASSESSING OFFICER OR THE COMMISSIONER OF APPEALS OR THE PRINCIPAL COMMISSIONER OR COMMISSIONER, IN THE COURSE OF ANY PROCEEDINGS UN DER THE ACT, IS SATISFIED THAT ANY PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, THEN HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE AMOUNTS AS SPECIFIED IN SUB - CLAUSE (III) WHICH WOU LD BE IN ADDITION TO TAX, IF ANY, PAYABLE BY THE SAID PERSON. THE SECTION THUS REQUIRES THE CONCERNED OFFICER TO RECORD SATISFACTION IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, THAT THE PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED I NACCURATE PARTICULARS OF HIS INCOME. AFTER RECORDING THE SATISFACTION, DURING THE COURSE OF PARTICULARS OF HIS INCOME. AFTER RECORDING THE SATISFACTION, DURING THE COURSE OF PENALTY PROCEEDINGS ALSO, THE CONCERNED OFFICER HAS COME TO A FINDING THAT AS TO WHETHER THE PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCU RATE PARTICULARS OF SUCH INCOME AND THEREAFTER, LEVY THE PENALTY ACCORDINGLY. THE WORD USED BETWEEN THE TWO ACTS I.E. CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME IS OR. SO THE PENALTY LEVIED BY THE CONCE RNED OFFICER IS ON SATISFACTION OF ANY OF THE LIMBS AND NOT THE SATISFACTION OF BOTH THE LIMBS. WHERE THE ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME IN PARTICULAR CIRCUMSTANCES, THEN THE ASSESSING OFFICER MAY RECORD SATISFACTION TO THAT EFFECT AND I NITIATE PENALTY PROCEEDINGS AND THEREAFTER ON FIXATION OF CHARGE, LEVY THE PENALTY FOR SUCH ACT OF CONCEALING THE PARTICULARS OF INCOME. SIMILARLY, IN CASES WHERE THE ASSESSEE CONCERNED HAD FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, THEN SIMILAR EXE RCISE HAS TO BE CARRIED OUT BY THE CONCERNED OFFICER. 14. THE FIRST STAGE OF INVOCATION OF PROVISIONS OF SECTION 271(1)(C) OF THE ACT IS THE SATISFACTION TO BE RECORDED BY THE ASSESSING OFFICER, WHICH ADMITTEDLY, HAS TO BE DURING THE COURSE OF ASSESSMEN T PROCEEDINGS. SO, WHERE THE ASSESSMENT PROCEEDINGS ARE PENDING, THEN THE ASSESSING OFFICER HAS TO APPLY HIS MIND AND ON BEING SATISFIED, HE HAS TO GIVE A FINDING THAT THE ASSESSEE BEFORE HIM HAS EITHER CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INA CCURATE PARTICULARS OF INCOME IN RESPECT OF THE ISSUE BEFORE HIM. THEREAFTER, THE NOTICE SHOULD BE ISSUED TO SUCH PERSON BY THE CONCERNED OFFICER, WHEREIN IT SHOULD BE CLEAR THAT THE ASSESSEE HAS TO JUSTIFY ITS CASE EITHER FOR CONCEALMENT OF INCOME OR FUR NISHING OF INACCURATE PARTICULARS OF INCOME. THERE MAY BE CASES WHERE THERE IS ISSUE OF BOTH CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME, BASED ON THE NATURE OF ADDITIONS, THEN IN SUCH CASES, SATISFACTION AND NOTICE THEREON SH OULD SPECIFY EXACT CHARGE AGAINST THE ASSESSEE. THE CHARGE HAS TO BE FURTHER SPECIFIED WHILE COMPLETING PENALTY PROCEEDINGS AND THE ASSESSING OFFICER HAS TO COME TO A CONCLUSION AS TO WHETHER IT IS CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE QUESTION WHICH FURTHER ARISES WHERE THE SATISFACTION RECORDED BY THE ASSESSING OFFICER AND THE NOTICE ISSUED ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 14 THEREAFTER IS WITHOUT APPLICATION OF MIND, THEN CAN THE SUBSEQUENT ORDER PASSED LEVYING PENALTY BE HELD TO BE VALID?. THE HONBLE KARNATAKA HIGH COURT IN CIT & ANR. VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAD DEALT UPON THE ISSUE OF NOTICE UNDER SECTION 274 OF THE ACT FOR THE PURPOSE OF LEVYING PENALTY FOR CONCEALMENT AND OBSERVED AS UNDER: - 59. AS THE PROVIS ION STANDS, THE PENALTY PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITI ATED, 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 NOT BE DISCERNED FROM THE SAI D ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION - 1 OR IN EXPLANATION - 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON 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 CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CO NSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON T HE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING 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 DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE 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 GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFI NED ONLY TO THOSE GROUNDS AND THE SAID 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 S HOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION O F 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 ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 15 IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 6 1. 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 UNDER CLAUSE (C). CONCEALM ENT, FURNISHING INACCURATE PARTICULARS OF 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 A CASE OF FURNISHING OF INACCURATE PARTICULARS. THE AP EX COURT IN THE CASE OF ASHOK PAI REPORTED IN [2007] 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING WORKS R EPORTED IN [1980] 122 ITR 306 (GUJ) AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING P. LTD. REPORTED IN [2008] 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFOR MA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON - APPLICATION OF MIND . 15. THE HONBLE KARNATAKA HIGH COURT HAS LAID DOWN THE PROPOSITION THAT THE ASSESSING OFFICER IS TO BE SATISFIED IN THE COURSE OF PROCEEDINGS THAT THERE IS EITHER CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME UNDER CLAUSE (C) TO SECTION 271(1) OF THE ACT. IT HAS BEEN CATEGORICALLY HELD THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. T HE HONBLE HIGH COURT HAS THUS, LAID DOWN THAT THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO CONCLUSION THAT WHETHER IT IS CASE OF WHILE ISSUING NOTICE HAS TO COME TO CONCLUSION THAT WHETHER IT IS CASE OF CONCEALMENT OF INCOME OR CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE RELIANCE IN THIS REGARD WAS PLACED ON THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN T. ASHOK PAI VS. CIT (2007) 292 ITR 11 (SC), WHEREIN AT PAGE 19 IT WAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATION. APPLYING THE SAID PROPOSITION, IT WAS HELD THAT WHERE THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILARLY, FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THE STANDARD PROFORMA WITHOUT STRIKING OF RELEVANT CLAUSES, AS PER THE HONBLE HIGH COURT WOULD LEAD TO INFERENCE AS TO NON - APPLICATION OF MIND. 16. FURTHER, THE HONBLE KARNATAKA HIGH COURT IN CIT VS. SSAS EMERALD MEADOWS (SUPRA) HAS DISMISSED THE APPEAL OF REVENUE, WHERE THE TRIB UNAL HAD ALLOWED THE APPEAL OF ASSESSEE HOLDING THAT THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT TO BE BAD IN LAW AS IT DOES NOT SATISFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT UNDER WHICH IT HAS BEEN INITIAT ED THE HONBLE HIGH COURT HAD RELIED ON DECISION OF DIVISION BENCH OF THE COURT RENDERED IN CIT & ANR. VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA). THE HONBLE SUPREME COURT IN CIT VS. SSAS EMERALD MEADOWS (SUPRA) HAS DISMISSED THE SPECIAL LEAVE P ETITION. 17. THE PUNE BENCH OF TRIBUNAL IN M/S. SAI VENKATA CONSTRUCTION VS. ADDL. CIT (SUPRA) AND IN SANJOG TARACHAND LODHA VS. ITO (SUPRA) HAVE APPLIED THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT (SUPRA) AND HELD THAT WHERE THERE IS NO STR IKING OFF OF EITHER OF LIMBS, THEN NOTICE ISSUED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT WAS INVALID AND SUBSEQUENT PENALTY PROCEEDINGS WERE HELD TO BE VITIATED. 18. THE MUMBAI BENCH OF TRIBUNAL IN SANGHAVI SAVLA COMMODITY BROKERS P. LTD. VS. ACIT IN ITA NO.1746/MUM/2011, RELATING TO ASSESSMENT YEAR 2007 - 08, ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 16 ORDER DATED 22.12.2015 WHILE DECIDING SIMILAR ISSUE, WHEREIN THE ASSESSING OFFICER HAD INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME WITHOUT STRIKING INAPPROPRIATE WORD S OR ANY PARTS OF NOTICE AND PROCEEDED TO LEVY PENALTY FOR CONCEALMENT, THEN FOLLOWING THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT, THE TRIBUNAL HELD THAT NOTICE ISSUED FOR INITIATING PENALTY PROCEEDINGS WERE INVALID AND CONSEQUENTLY PENALTY PR OCEEDINGS WERE INVALID. 19. SIMILAR PROPOSITION HAS BEEN LAID DOWN BY KOLKATA BENCH OF TRIBUNAL IN SHRI DEEPAK KUMAR PATWARI VS. ACIT IN ITA NOS.616 TO 618/KOL/2013, RELATING TO ASSESSMENT YEARS 2007 - 08 TO 2009 - 10, ORDER DATED 03.02.2016 AND IT HAS BEEN FURTHER HELD THAT THE PROVISIONS OF SECTION 292B OF THE ACT CANNOT CURE THE BASIC DEFECT IN ASSUMPTION OF JURISDICTION AND COULD ONLY CURE THE MISTAKE, DEFECT OR OMISSION IN THE RETURN OF INCOME, ASSESSMENT, NOTICE OR THE PROCEEDINGS. THE TRIBUNAL FURTHE R HELD THAT SHOW CAUSE NOTICE AND THE REASONS MENTIONED IN THE SHOW CAUSE NOTICE WERE PART OF PROCESS OF NATURAL JUSTICE AND THE DEFECT IN SUCH NOTICE COULD NOT BE OVERLOOKED. SIMILAR PROPOSITION HAS FURTHER BEEN LAID DOWN IN OTHER DECISIONS OF VARIOUS BE NCHES OF TRIBUNAL WHICH HAVE BEEN RELIED UPON BY THE ASSESSEE BEFORE US. 20. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED HEAVY RELIANCE ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. SMT. KAUSHALYA (SUPRA). IN THE FACTS OF THE CASE BEFORE THE HONBLE BOMBAY HIGH COURT, THE HONBLE HIGH COURT QUASHED THE PENALTY LEVIED FOR ASSESSMENT YEAR 1967 - 68 AS THE SAME WAS IMPOSED WITHOUT AFFORDING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. IN RESPECT OF OTHER TWO YEA RS WHERE THERE WAS NON - STRIKING OF INACCURATE PORTION, THE HONBLE HIGH COURT HELD THAT THE SAME WOULD NOT INVALIDATE THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT. IT WAS FURTHER HELD THAT THE ASSESSMENT ORDERS WERE ALSO MADE AND REASONS FOR ISSUING NOT ICE UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT WERE RECORDED BY THE ASSESSING OFFICER AND SINCE THE ASSESSEE FULLY KNEW IN DETAIL THE EXACT CHARGE OF DEPARTMENT AGAINST HIM, IT COULD NOT BE SAID THAT EITHER THERE WAS NON - APPLICATION OF MIND BY THE ITO O R SO - CALLED AMBIGUITY WORDING IN THE NOTICE IMPAIRED OR PREJUDICED THE RIGHT OF ASSESSEE OF REASONABLE OPPORTUNITY OF BEING HEARD. THE JURISDICTIONAL HIGH COURT DELIBERATED UPON THE PROVISIONS OF SECTION 274 OF THE ACT WHICH CONTAINED PRINCIPLE OF NATURAL JUSTICE OF THE ASSESSEE BEING HEARD BEFORE LEVYING PENALTY. IT ALSO HELD THAT MERE MISTAKE IN THE LANGUAGE USED OR MERE NON - STRIKING OF INAPPROPRIATE PORTION COULD NOT ITSELF BE INVALIDATED THE NOTICE. IT WAS HELD THAT THE ENTIRE FACTUAL BACKGROUND WOUL D FALL FOR CONSIDERATION IN THE MATTER AND NO ONE ASPECT WOULD BE DECISIVE. 21. IN RESPECT OF ASSESSMENT YEAR 1967 - 68, THE HONBLE HIGH COURT IN CIT VS. SMT. KAUSHALYA (SUPRA) ACKNOWLEDGED THAT THERE COULD EXIST A CASE WHERE VAGUENESS AND AMBIGUITY IN T HE NOTICE COULD DEMONSTRATE NON - APPLICATION OF MIND BY THE AUTHORITY AND / OR ULTIMATE PREJUDICE TO THE RIGHT OF OPPORTUNITY OF HEARING CONTEMPLATED UNDER SECTION 274 OF THE ACT. THE SHOW CAUSE NOTICE FOR ASSESSMENT YEAR 1967 - 68 WAS ISSUED EVEN BEFORE THE ASSESSMENT ORDER WAS MADE AND WHERE THE ASSESSEE HAD NO KNOWLEDGE OF EXACT CHARGE OF DEPARTMENT AGAINST HIM AS IN THE NOTICE NOT ONLY THERE WAS USE OF WORD OR BETWEEN THE GROUP OF CASES BUT THERE WAS USE OF WORD DELIBERATELY ALSO. THE HONBLE HIGH CO URT HELD THAT NOTICE CLEARLY DEMONSTRATED NON - APPLICATION OF MIND ON THE PART OF ASSESSING OFFICER. THE VAGUENESS AND AMBIGUITY IN THE NOTICE HAD ALSO PREJUDICED THE RIGHT OF REASONABLE OPPORTUNITY TO THE ASSESSEE SINCE HE DID NOT KNOW OF EXACT CHARGES HE HAD TO FACE. IN THIS BACKGROUND, QUASHING OF PENALTY PROCEEDINGS FOR ASSESSMENT YEAR 1967 - 68 WAS HELD TO BE JUSTIFIED. APPLYING THE SAID PRINCIPLE LAID DOWN BY THE JURISDICTIONAL HIGH COURT, APPLICATION OF MIND BEFORE ISSUING THE NOTICE UNDER SECTION 27 4 OF THE ACT HAS TO BE CONSIDERED. THE HONBLE HIGH COURT CLEARLY HELD THAT WHERE THERE IS VAGUENESS AND AMBIGUITY IN THE NOTICE ISSUED WHICH COULD DEMONSTRATE NON - APPLICATION OF MIND BY THE AUTHORITY WHICH IN TURN, WOULD ULTIMATELY PREJUDICE THE RIGHT OF OPPORTUNITY OF HEARING OF THE ASSESSEE AS CONTEMPLATED UNDER SECTION 274 OF THE ACT, THEN SUCH NOTICE IS INVALID. ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 17 22. NOW, COMING TO THE FACTS OF THE CASE BEFORE US, WHEREIN SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT ON CHHORIYA GROUP OF CONCERNS ON 22.08.2008 AND DECLARATION OF RS.11.44 CRORES WAS MADE IN THE HANDS OF WHOLE GROUP FOR VARIOUS YEARS. CONSEQUENT TO THE NOTICES ISSUED UNDER SECTION 153A OF THE ACT FOR VARIOUS YEARS, DIFFERENT ENTITIES FILED THE RETURN OF INCOME FOR THE RESPECTIVE YEARS AND CUMULATIVELY FOR RS.13.99 CRORES AS ADDITIONAL INCOME. THE INCOME WAS DECLARED ON ACCOUNT OF ON - MONEY ON SALE OF PLOTS, WHICH WAS DETECTED FROM THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH. ADMITTEDLY, EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT IS ATTRACTED IN SUCH CASES. HOWEVER, THE CASE OF ASSESSEE BEFORE US IS THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT PROCEEDINGS HAD TO BE SATISFIED THAT THE ASSESSEE HAD EITHER CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME AND IS LIABLE TO LEVY OF PENALTY UNDER SECTION 271(1)(C) R.W.S. EXPLANATION 5A OF THE ACT. THE NOTICE IS TO BE ISSUED TO THE ASSESSEE UNDER SECTION 274 OF THE ACT. BEFORE ISSUING SUCH NOTICE, SATISFACTION HAS TO COME OUT FROM THE PROCEEDINGS GOING ON BEFORE THE ASSESSING OFFICER. THE PERUSAL OF ASSESSMENT ORDER PASSED IN THE PRESENT CASE REFLECTS THAT THE ASSESSING OFFICER WHILE INITIATING PROCEEDINGS HAS RECORDED SATISFACTION AS TO THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND H AS ALSO CONCEALED THE INCOME. THE ONLY SOURCE OF ADDITION IN THE HANDS OF ASSESSEE IS ADDITIONAL INCOME OFFERED BY THE ASSESSEE PURSUANT TO SEARCH OPERATIONS. IN SUCH CIRCUMSTANCES, IT IS CATEGORICALLY A CASE OF CONCEALMENT. HOWEVER, THE ASSESSING OFFIC ER REFERS TO BOTH THE LIMBS OF SECTION 271(1)(C) OF THE ACT AND THE SATISFACTION RECORDED IN THIS CASE SUFFERS FROM INFIRMITY. FURTHER, EVEN IN THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT, IRRELEVANT PART HAS NOT BEEN STRUCK OFF. WHILE COMPLETING PENA LTY PROCEEDINGS ALSO, THE ASSESSING OFFICER MAKES REFERENCE TO BOTH THE LIMBS I.E. CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME AND IN THE FINAL, LEVIES PENALTY FOR CONCEALMENT OF INCOME. 23. HOWEVER, THE QUESTION WHICH IS RA ISED BEFORE US BY WAY OF ADDITIONAL GROUND OF APPEAL IS ROOT OF START OF THE PROCEEDINGS I.E. RECORDING OF SATISFACTION GROUND OF APPEAL IS ROOT OF START OF THE PROCEEDINGS I.E. RECORDING OF SATISFACTION AND THE ISSUE OF NOTICE, WHICH HAS BEEN CHALLENGED BY THE ASSESSEE TO BE INVALID. APPLYING THE RATIO LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN CIT & ANR. VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) AND CIT VS. SSAS EMERALD MEADOWS (SUPRA) AND IN VIEW OF SLP BEING DISMISSED, WE FIND MERIT IN THE PLEA OF ASSESSEE THAT THE SATISFACTION RECORDED IN THE PRESENT CASE TO INITIATE PE NALTY PROCEEDINGS BOTH FOR CONCEALMENT OF INCOME AND FURNISHING OF PARTICULARS OF INCOME AGAINST ADDITIONAL INCOME OFFERED BY THE ASSESSEE IS INCORRECT. FURTHER, WHERE THE ASSESSEE IS NOT AWARE OF EXACT CHARGE AGAINST HIM, THE AMBIGUITY IN THE NOTICE ISSU ED UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT BY NOT STRIKING OF PORTION WHICH IS NOT APPLICABLE, PREJUDICE THE RIGHT OF REASONABLE OPPORTUNITY TO THE ASSESSEE, AS HE WAS NOT MADE AWARE OF EXACT CHARGE HE HAD TO FACE. IT IS A CLEAR - CUT CASE OF CONCEALM ENT SINCE THE ASSESSEE HAD OFFERED ADDITIONAL INCOME PURSUANT TO SEARCH CARRIED OUT AT ITS PREMISES. IT IS NOT THE CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME AND HENCE, THE ASSESSING OFFICER SHOULD HAVE RECORDED THE SATISFACTION ACCORDINGLY AN D ISSUED THE NOTICE ACCORDINGLY. 24. WE FIND NO MERIT ON THE PARTIAL RELIANCE PLACED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE DECISION OF JURISDICTIONAL HIGH COURT IN CIT VS. SMT. KAUSHALYA (SUPRA). THE HONBLE HIGH COURT HAS CLEARLY LAID DOWN THE PROPOSITION THAT THE ASSESSING OFFICER HAS TO MAKE THE ASSESSEE FULLY AWARE OF EXACT CHARGE OF THE DEPARTMENT AGAINST HIM. AS POINTED OUT, IN PRESENT CASE, IN THE ASSESSMENT ORDER ITSELF WHILE RECORDING SATISFACTION FOR INITIATIN G PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT, EXACT CHARGE OF THE DEPARTMENT AGAINST THE ASSESSEE IS NOT CLEAR. THE ASSESSING OFFICER RECORDS THE SATISFACTION FOR INITIATING PENALTY PROCEEDINGS ON BOTH THE COUNTS I.E. CONCEALMENT OF INCOME AND FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE BOMBAY HIGH COURT HAD ALSO UPHELD THE QUASHING OF PENALTY PROCEEDINGS FOR ASSESSMENT YEAR 1967 - 68 TO BE JUSTIFIED ON ACCOUNT OF VAGUENESS AND AMBIGUITY IN THE NOTICE ISSUED. BUT THE HONBLE HIGH COURT FURTHER HELD THAT WHERE THE ASSESSEE WAS FULLY AWARE OF EXACT CHARGE OF THE DEPARTMENT AGAINST HIM, THEN TECHNICAL NON - STRIKING ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 18 OF CERTAIN TERMS IN THE NOTICE WOULD NOT INVALIDATE THE PROCEEDINGS. WHERE THERE IS DEFAULT IN THE FIRST STAGE OF MAKING THE AS SESSEE AWARE OF EXACT CHARGE OF THE DEPARTMENT, THEN INITIATION OF PENALTY PROCEEDINGS ARE VITIATED AND THE SAME ARE TO BE QUASHED. THE ISSUE OF NOTICE UNDER SECTION 274 OF THE ACT ON SUCH VAGUENESS AND AMBIGUITY MAKES SUCH NOTICE INVALID AND PROCEEDINGS THEREAFTER ARE TO BE QUASHED. 25. THE HONBLE SUPREME COURT IN T. ASHOK PAI VS. CIT (SUPRA) HAD HELD AS UNDER: - 23. SECTION 271(1)(C) REMAINS A PENAL STATUTE. THE RULE OF STRICT CONSTRUCTION SHALL APPLY THERETO. THE INGREDIENTS FOR IMPOSING PENALTY RE MAIN THE SAME. THE PURPOSE OF THE LEGISLATURE THAT IT IS MEANT TO BE A DETERRENT TO TAX EVASION IS EVIDENCED BY THE INCREASE IN THE QUANTUM OF PENALTY, FROM 20 PER CENT UNDER THE 1922 ACT TO 300 PER CENT IN 1985. 24. CONCEALMENT OF INCOME AND FURNISHI NG OF INACCURATE PARTICULARS CARRY DIFFERENT CONNOTATIONS. CONCEALMENT REFERS TO A DELIBERATE ACT ON THE PART OF THE ASSESSEE. A MERE OMISSION OR NEGLIGENCE WOULD NOT CONSTITUTE A DELIBERATE ACT OF SUPPRESSION VERY OR SUGGESTION FALSI. 26. WHERE CONCE ALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME ARE TWO DIFFERENT CONNOTATIONS, THEN AS PER PROVISIONS OF THE ACT, THE SATISFACTION HAS TO BE RECORDED BY THE ASSESSING OFFICER BEFORE INITIATING PENALTY PROCEEDINGS AS TO UNDER WHICH LIMB THE CASE OF ASSESSEE FALLS. IN THE PRESENT SET OF FACTS, THE SATISFACTION AS RECORDED BY THE ASSESSING OFFICER WHICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF DOES NOT ESTABLISH THE CASE OF REVENUE AGAINST THE ASSESSEE THAT IT IS LIABLE FOR LEVY OF PEN ALTY FOR CONCEALMENT UNDER WHICH LIMB I.E. FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE NOTICE ISSUED UNDER SECTION 274 OF THE ACT BY THE ASSESSING OFFICER ALSO DOES NOT SHOW CAUSE THE ASSESSEE AS TO MAKE HIM AWARE OF EXACT CHARGE LEVIED NOT SHOW CAUSE THE ASSESSEE AS TO MAKE HIM AWARE OF EXACT CHARGE LEVIED AGAINST HIM. IN THE ABSENCE OF SAME, IT CAUSES PREJUDICE TO THE RIGHT OF REASONABLE OPPORTUNITY TO BE ALLOWED TO THE ASSESSEE BEFORE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. CONSEQUENTLY, PENALTY NOTICE ISSUED IN THE PRE SENT CASE SUFFERS FROM INFIRMITIES I.E. LACK OF SATISFACTION AND LACK OF NOTICE BEING ISSUED IN MAKING THE ASSESSEE AWARE OF EXACT CHARGE AGAINST HIM, HENCE THE SAME IS QUASHED. THE PENALTY PROCEEDINGS COMPLETED PURSUANT TO SUCH NOTICE ARE VITIATED AND TH E SAME ARE HELD TO BE INVALID. 27. NOW, COMING TO THE MERITS OF CASE, THE ASSESSEE HAD OFFERED ADDITIONAL INCOME ON ACCOUNT OF ON - MONEY ON SALE OF PLOTS. THE ASSESSING OFFICER HAD ACCEPTED THE SAME AND HAD INITIATED PENALTY PROCEEDINGS UNDER SECTION 271( 1)(C) OF THE ACT. THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS RELATING TO SECTION 271(1)(C) OF THE ACT ISSUED ENHANCEMENT NOTICE TO THE ASSESSEE. THEREAFTER, HE HAD GONE THROUGH THE SEIZED DOCUMENTS AND ELABORATELY REFERRED TO THEM AND EVEN REP RODUCED THE SCANNED COPIES OF SUCH DOCUMENTS AND COMES TO CONCLUSION THAT LOANS WERE RECEIVED FROM RATANLAL BAFNA, BUT STILL UPHOLDS THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT. ONCE THE FINDING OF CIT(A) IS THAT THESE ARE LOANS RECEIVED FROM BA FNA AND ARE NOT ON - MONEY RECEIVED ON SALE OF PLOTS, THEN IN CASES WHERE PENALTY PROCEEDINGS HAVE BEEN INITIATED ON A DIFFERENT FOOTING AND THE CIT(A) REVERSES THE SAME AND HOLDS THE SAME TO BE LOANS RECEIVED BY THE ASSESSEE, THERE IS CHANGE IN OPINION AND BASIS FOR LEVY OF PENALTY FOR CONCEALMENT VARIES. IN SUCH CIRCUMSTANCES, THERE IS NO MERIT IN LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND THERE IS NO MERIT AT ALL IN LEVYING THE PENALTY @ 150%. ACCORDINGLY, WE ALLOW THE CLAIM OF ASSESSEE EVEN ON MERITS. THUS, THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AND ADDITIONAL GROUND OF APPEAL RAISE D BY THE ASSESSEE ARE ALLOWED. ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 19 1 6 . ANOTHER ASPECT RAISED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US WAS IN RESPECT OF DECISION OF HONBLE HIGH COURT OF KARNATAKA IN CIT VS. SSAS EMERALD MEADOWS (SUPRA) . THE SUBSTANTIAL QUESTIONS WHICH WERE RAISED BEFORE THE HONBLE HIGH COURT ARE AS UNDER: - (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRC UMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALID DESPITE THE AMENDMENT OF SECTION 271(1 B) WITH RETROSPECTIVE EFFECT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? 1 7 . THE HONBLE HIGH COURT HAD ALLOWED THE CLAIM OF ASSESSEE WHERE THE ASSESSING OFFICER HAD NOT EXPLICITLY MENTIONED THAT AS TO WHETHER THE PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULAR S OF INCOME, SUFFERS FROM INFIRMITY EVEN IF IT IS ESTABLISHED THAT THE ASSESSEE HAD CONCEALED THE INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THE APEX COURT HAS DISMISSED THE SLP FILED BY THE DEPARTMENT. APPLYING THE SAID PRINCIPLE, WE HOLD THAT EVEN IF IT IS ESTABLISHED THAT THE ADDITIONAL INCOME IS ON ACCOUNT OF CONCEALMENT OF INCOME BUT WHILE RECORD ING SATISFACTION FOR INITIATING PENALTY PROCEEDINGS, THE ASSESSING OFFICER SHOULD EXPLICITLY MENTIONS AS TO WHETHER PENALTY IS BEING INITIATED FOR CONCEALMENT OR INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IN THE ABSENCE OF THE SAME, NOT ICE ISSUED IN SUCH CIRCUMSTANCES, WHICH ALSO IS NOT CLEAR AS TO WHICH LIMB OF SECTION 271(1)(C) OF THE ACT IS ATTRACTED, STANDS VITIATED AND THE PENALTY ORDER PASSED CONSEQUENT TO SUCH NOTICE IS INVALID IN LAW. ACCORDINGLY, WE DELETE THE PENALTY LEVIED UN DER SECTION 271(1)(C) OF THE ACT IN THE CASE OF ASSESSEE. THE GROUND OF APPEAL NO.8 RAISED BY THE ASSESSEE IS THUS, ALLOWED. OTHER GROUNDS OF APPEAL RAISED ON MERITS OF ISSUE BECOME ACADEMIC AND ALSO ADDITIONAL GROUND OF APPEAL. ITA NO S . 2 1 74 TO 2180/ PN /201 4 NANDKISHOR T. KATORE 20 1 8 . THE FACTS IN ASSESS MENT YEARS 2003 - 04 TO 2006 - 07 ARE IDENTICAL AND ACCORDINGLY, OUR DECISION IN ASSESSMENT YEAR 2003 - 04 WOULD APPLY . T HOUGH FOR ASSESSMENT YEAR 2002 - 03 IS COMPLETED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT BUT THE SATISFACTION RECORDED FOR INITIATING PENAL TY IS VAGUE AND HENCE, OUR DECISION IN ASSESSMENT YEAR 2003 - 04 WOULD APPLY AND THE PENALTY NOTICE ISSUED UNDER SECTION 271(1)(C) OF THE ACT IS VITIATED AND PENALTY ORDER IS INVALID. THOUGH IN ASSESSMENT YEARS 2007 - 08 AND 2008 - 09, EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT MAY BE ATTRACTED BUT THE SATISFACTION RECORDED FOR INITIATING PENALTY PROCEEDINGS IS VAGUE AND NOT EXPLICIT. HENCE, THE NOTICE ISSUED THEREUNDER IS VITIATED AND THE PENALTY ORDER PASSED IS INVALID IN LAW. 1 9 . IN THE RESULT, ALL THE APPEALS OF ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON THIS 14 TH DAY OF DECEM BER , 201 6 . SD/ - SD/ - ( ANIL CHATURVEDI ) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 14 TH DECEM BER , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A) - 1 , NASHIK ; 4. / THE C I T - CENTRAL, NAGPUR ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY O RDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE