MOOLCHAND MALI, Jaipur V. DCIT, Jaipur

ITA 220/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5091 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMAADDL CIT DR DHK
• Keywords: Recovery proceedings; Depreciation; Principle of natural justice; Cost of acquisition; Initiation of penalty proceedings
• Section: 27

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 220/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08 SHRI MOOL CHAND MALI HOUSE NO.32, BARAH JI KI GALI GANGORI BAZAR, JAIPUR CUKE VS. THE DCIT CIRCLE- 5 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AARPM 7656 B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI ANIL SHARMA, CA JKTLO DH VKSJ LS@ REVENUE BY:SHRI R.A. VERMA,ADDL.CIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 29/08/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 5/09/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-5, JAIPUR DATED 19-01-2016 FOR THE ASSESSM ENT YEAR 2007-08 RAISING THEREIN FOLLOWING GROUND:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE PENALTY O F RS. 3,11,767/- LEVIED U/S 271(1)(C ) FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS THEREOF. ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 2 2.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE F ILED THE RETURN OF INCOME ON 17-10-2007 DECLARING TOTAL INCOME OF RS. 8,97,250/-. THE RETURN WAS PROCESSED U/S 143(1) ON 30-01-2009. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND THEREFORE, THE NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON THE ASSESSEE FIXING THE CASE FOR HEAR ING. IN COMPLIANCE THEREOF, THE LD. AR OF THE ASSESSEE ATTENDED THE PR OCEEDINGS AND FURNISHED THE DETAILS AS CALLED FOR FROM TIME TO TIME BEFORE THE AO ALONGWITH BOOKS OF ACCOUNT FOR EXAMINATION. IN THIS ISSUE, THE AO O BSERVED DURING THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAD SOLD A PLOT OF LAND WITH CONSTRUCTION THEREON FOR RS. 16.51 LACS UNDER THE H EAD LAND AND BUILDING (VKI AREA). IN ORDER TO VERIFY THE SAME, THE ASSESS EE WAS REQUIRED TO FURNISH COMPLETE DOCUMENTS IN THIS REGARD. THE AO N OTICED FROM THE SALE DEEDS THAT THE ASSESSEE HAD PURCHASED A PLOT OF LAN D ON 02-12-2003 WITH VERY OLD CONSTRUCTION THEREON AT F-447, ROAD NO.2, VKI AREA MEASURING 2000 SQ. MTR WITH VERY OLD TIN SHED AND OFFICE ROOM ETC. MEASURING 4460 SQ.FT CONSTRUCTED THEREON FOR RS. 23.85 LACS (RS. 2 1 LACS COST + 2.85 LACS OVERHEADS). THE ASSESSEE HAD BEEN CLAIMING DEPRECIA TION ON THE ABOVE ASSETS WHICH CONSTITUTED LAND. FROM THE PURCHASE DE EDS, THE AO OBSERVED THAT CONSTRUCTION CARRIED OUT ON THE LAND WAS MORE THAN 10 YEARS OLD. IT IS ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 3 FURTHER NOTICED THAT THE OUT OF ABOVE PLOT OF LAND, THE ASSESSEE SOLD A PIECE OF LAND MEASURING 8.15 SQ. MTR WITH 243.51 SQ.FT CO NSTRUCTION (TIN SHED ETC.) THEREON. THE AO OBSERVED THAT THE PURCHASE DE ED CLEARLY INDICATES THAT THE ENTIRE CONSTRUCTION CARRIED OUT AT THE ABO VE PLOT OF LAND WAS MORE THAN 10 YEARS OLD. THE ABOVE CONSTRUCTION CONSISTED OF 1 TIN SHED, OFFICE ROOM AND WATCHMAN ROOM AGGREGATING AREA OF 4460 SQ. FT. THE AO THUS WORKED OUT FAIR VALUE OF THE COVERED AREA OF LAND @ 67/- PER SQ.FT WHICH CAME OUT TO RS. 3.00 LACS WITH CONSTRUCTION OF THE ABOVE PLOT OF LAND. THIS WAY, THE COST OF LAND PORTION OF THE ABOVE PROPERTY WORKED OUT AT RS. 20.85 LACS AND THE COST OF PER SQ. MTR OF LAND WORKED OUT AT RS. 1042.50 (20,85000 DIVIDED BY 2,000). THE AO FURTHER OBSERVED THAT OUT OF THE ABOVE PLOT, THE ASSESSEE HAD SOLD PLOT OF LA ND MEASURING 815 SQ. MTR WITH TIN SHED CONSTRUCTION MEASURING 243.51 SQ. FT THEREON AT RS. 16,61,715/-. THE AO TAKING THE BASE OF ABOVE CALCUL ATION, THE COST OF TIN SHED CONSTRUCTION MEASURING 243.51 SQ.FT WAS WORKED OUT AT RS. 16,315 (243.51X67). THE AO THUS OBSERVED THAT THE ASSESSEE HAD SOLD THE TIN SHED AND AFTER RETAINING IT FOR AROUND 3 YEARS BUT TO BE FAIR TOWARDS THE ASSESSEE , THE COST OF TIN SHED CONSTRUCTION WAS TA KEN AT RS. 67/- AND CONSEQUENTLY, THE COST OF LAND CAME AT RS. 16,45,00 0/- (RS. 16,61,715 ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 4 MINUS RS. 16,315/-). ACCORDING TO THE AO, THE ASSES SEE HAD SOLD A PART OF ABOVE PLOT OF LAND I.E. 815 SQ. MTR OUT OF 2000 SQ. MTR. THEREFORE, THE COST OF ACQUISITION WAS TAKEN PROPORTIONATELY BY TH E AO WHICH WAS WORKED OUT TO RS. 8,49,640/- (RS. 20,85,000 X 815/2 00). HENCE, THE AO WORKED OUT THE SHORT TERM CAPITAL GAIN AS UNDER:- SALE CONSIDERATION RS. 16,45,000/- LESS: COST OF ACQUISITION RS. 8,49,640/- SHORT TERM CAPITAL GAIN RS. 7,95,760/- RS. 7,95,760/- HENCE, THE AO ADDED THE SHORT TERM CAPITAL GAIN OF RS. 7,95,760/- TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD OF SHOR T TERM CAPITAL GAIN. THE AO THUS OBSERVED THAT THE ASSESSEE FURNISHED IN ACCURATE PARTICULARS OF INCOME AND THEREFORE, PENALTY PROCEEDINGS U/S 27 1(1) OF THE I.T. ACT WAS INITIATED SEPARATELY. 2.2 IN THE PENALTY PROCEEDINGS U/S 271(1), THE AO OBSERVED THAT THE ASSESSEE HAD DELIBRATELY FURNISHED THE INACCURATE P ARTICULARS OF INCOME AND THE SOURCE OF THE BANK DEPOSITS OF THE ASSESSEE ARE NOT EXPLICIT. HENCE, THE AO IMPOSED THE PENALTY OF RS. 3,11,767/- U/S 271(1) OF THE ACT VIDE HIS ORDER DATED 25-03-2013. ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 5 2.3 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) WHO HAS CONFIRMED THE PENALTY OF RS. 3,11,76 7/- IMPOSED BY THE AO BY OBSERVING AS UNDER:- 2.4 I HAVE CONSIDERED THE FACTS OF THE CASE, THE PENALTY ORDER AND SUBMISSIONS OF THE APPELLANT SOLD DURING THE YEAR WAS PRIMARILY IN THE FORM OF LAND WITH SOM E CONSTRUCTION THEREON. LARGE CHUNKS OF THE VALUE OF ASSET WAS ATTRIBUTABLE TO THE LAND COMPONENT. THE AO HAS WORK ED OUT THE VALUE OF LAND SOLD AT RS. 16,45,400/- AND BALAN CE RS. 5,500/- AS THE VALUE OF CONSTRUCTION, BEING VERY OL D. CLEARLY, THE LAND COMPONENT OF ASSET IN QUESTION WAS NOT A DEPRECIABLE ASSET. HOWEVER, THE ASSESSEE HAS BEEN C LAIMING DEPRECIATION THEREON AS EVIDENT FROM THE DEPRECIATI ON CHART. MOREOVER, THE PRESENTATION OF THE ASSET IN THE DEPR ECIATION CHART WAS NOT ASCERTAINABLE OR CLEAR THEREFROM THAT THE ASSET WAS PRIMARILY LAND ONLY, AND NOT A DEPRECIABLE ASSE T. THE DEPRECIATION CHART HAS OTHER BLOCKS ALSO INCLUDING LAND ON WHICH NO DEPRECIATION IS CLAIMED AND BUILDING ON WHICH DEPRECIATION IS CLAIMED. THE CORRECT APPROAC H WAS THUS TO TAKE THE LAND COMPONENT AND CONSTRUCTION CO MPONENT OF THE IMPUGNED ASSET UNDER RELEVANT HEADS AND NOT CLAIM DEPRECIATION ON THE LAND COMPONENT. HOWEVER, THE AP PELLANT HAS NOT DONE SO. THE REASON BEHIND NOT DOING SO IS STATED TO BE THE ADVICE OF THE TAX CONSULTANTS AND AUDITOR. H OWEVER, THE APPELLANT CANNOT WASH HIS HAND OFF BY SHIFTING RESPONSIBILITY TO THE TAX CONSULTANT AND AUDITOR. T HE CLAIM HAS BEEN MADE BY THE ASSESSEE IN HIS RETURN AND HE IS ANSWERABLE FOR ANY OMISSION OR COMMISSION THEREIN. THE OTHER PLEA OF THE APPELLANT THAT ALL MATERIAL FACTS ARE DISCLOSED IN RETURN, IS ALSO INCORRECT AS FIRSTLY, THE CAPITA L GAIN ON SALE OF LAND IS NOT DISCLOSED AND SECONDLY, THE PRESENTA TION OF THE ASSET IN DEPRECIATION CHART IS MISLEADING AND THE A O HIMSELF COULD ARRIVE AT THE CORRECT POSITION ONLY AFTER A P ROLONGED EXERCISE OF OBTAINING DOCUMENTS AND FACTS FINDING T HEREFROM. THUS, THE MATERIAL FACTS ARE NOT FULLY AND PROPERLY DISCLOSED ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 6 OR EVEN ASCERTAINABLE FROM THE RETURN. I THEREFORE , HOLD THAT THE APPELLANT HAS CONCEALED PARTICULARS OF INCOME I N THE RETURN FILED BY HIM AND IS HENCE LIABLE FOR LEVY OF PENALTY U/S 271(1). THE PENALTY OF RS. 3,1,767/- LEVIED U/ S 271(1)( C) IS ACCORDINGLY CONFIRMED. 2.4 NOW THE ASSESSEE IS IN APPEAL BEFORE ME WITH TH E PRAYER TO DELETE PENALTY U/S 271(1)( C) OF THE ACT WITH FOLLOWING W RITTEN SUBMISSION. 1. THE AO WHILE PASSING THE RELEVANT ASSESSMENT OR DER DATED 16.12.2009 INITIATED THE PENALTY PROCEEDINGS FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME VIDE PARA 2.5 ON PAGE NO.5 OF THE ASSESSMENT ORDER AS FOLLOWS: 2.5 THE ASSESSEE HAS FURNISHED INACCURATE PARTICU LARS OF HIS INCOME AND THEREFORE PENALTY PROCEEDINGS U/S 271(1) (C ) OF THE INCOME TAX ACT 1961 ARE BEING INITIATED SEPARATELY. 2. THE AO WHILE PASSING THE IMPUGNED PENALTY ORDER DATED 25.03.2013, VIDE OPENING LINE OF PARA-06 ON PAGE NO.3 OF THE SA ME HAS HELD THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME . 3. WHEREAS IN SUBSEQUENT LINES OF THE SAME IT HAS B EEN HELD THAT IT IS THE MATTER OF CONCEALMENT OF INCOME OR FURNISHING INACC URATE PARTICULARS OF INCOME U/S 271(1)(C) OF IT ACT 1961. 4. THE BOTH OF THE FINDINGS GIVEN BY THE AO ARE INV ALID RENDERING THE IMPUGNED PENALTY ORDER AS ILLEGAL. 5. AS HELD BY HON. KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 T AKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GU ILTY OF ANOTHER LIMB IS BAD IN LAW. (CONCLUDING PARA 63 (S) OF THE ORDER.) 6. THE ABOVE SAID JUDGMENT OF HON. KARNATAKA HIGH COURT HAS BEEN FOLLOWED BY THIS HON. BENCH IN LATEST DECISION DATE D 18.03.2016 IN THE CASE OF RADHA MOHAN MAHESHWARI V.DCIT, ITA NO.773/JP/2013. 7. THUS WHEN THE RELEVANT PENALTY PROCEEDINGS WERE INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME, HOLD ING THE ASSESSEE LIABLE FOR CONCEALMENT OF INCOME IS NOT VALID IN THE EYES OF L AW. 8. AS HELD BY HON.GUJ. HIGH COURT IN THE CASE OF C IT V. MANU ENGINEERING WORKS, 122 ITR 306, WE FIND FROM THE ORDER OF THE IAC, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRESSED IN PARA. 4 OF THE ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 7 ORDER: 'I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED I NACCURATE PARTICULARS OF SUCH INCOME'. NOW, THE LANGUAGE OF 'AND/OR' MAY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI- CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY TH E ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURN ISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDING WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN. 9. THE ABOVE SAID JUDGMENT OF HON GUJ.HIGH COURT H AS BEEN AGAIN FOLLOWED IN THE CASE OF NEW SORATHIA ENGG. CO.V. C IT, 282 ITR 642 AND IN THE CASE OF CIT V.WHITEFORD INDIA LTD. 38 TAXMANN.COM 1 5. 10. THE FACTS OF ANY DEPOSITS IN TO THE BANK IS NO T SUBJECT MATTER RELEVANT ASSESSMENT ORDER OR THE ORDER OF CIT (A). 11. THEREFORE THE FINDINGS OF THE AO MENTIONED AT PARA-07 OF THE PENALTY ORDER THAT THE ASSESSEE HAS NOT EXPLAINED THE SOU RCE OF DEPOSITS IN TO THE BANK, BUT FURNISHED INACCURATE PARTICULARS OF INCOM E. ARE PERVERSE AND OUT OF CONTEXT AND HAVE NO RELEVANCE TO THE IMPUGNED PE NALTY ORDER. 12. THUS THE IMPUGNED PENALTY ORDER BEING VAGUE AN D UNCERTAIN DO NOT DEVOID MERITS AND HOLD GOOD IN THE EYES OF LAW WHIC H MAY KINDLY BE QUASHED. 2.5 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES BELOW. 2.6 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THIS CASE, IT IS NOTICED TH AT THE PENALTY WAS INITIATED U/S 271(1) OF THE ACT FOR FURNISHING INACCURATE PA RTICULARS OF INCOME. THE PARA 6 OF AOS ORDER SHOWS THAT HE HAD LEVIED P ENALTY FOR CONCEALMENT OF INCOME OR FILING INACCURATE PARTICUL ARS OF INCOME. IT IS ALSO NOTICED IN PARA 7 OF THE PENALTY ORDER THAT TH E ASSESSEE HAD NOT SHOWN THE SOURCES OF THE BANK DEPOSITS AND DELIBERATELY F ILED THE INACCURATE ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 8 PARTICULARS OF INCOME. THIS FACT IS NOT COMING OUT OF THE FACTS AVAILABLE ON THE RECORD. NO SUCH ADDITION WAS MADE BY THE AO. TH E LD. CIT(A) CONFIRMED THE PENALTY FOR CONCEALMENT OF PARTICULAR S OF INCOME. IT IS EVIDENTLY CLEAR FROM THE RECORD THAT PENALTY WAS IN ITIATED FOR FILING INACCURATE PARTICULARS OF INCOME. THE AO LEVIED THE PENALTY EITHER FOR FILING OF INACCURATE PARTICULARS OF INCOME OR CONCE ALMENT OF INCOME WHICH INDICATES THAT THE AO WAS NOT SURE WHILE LEVY ING THE PENALTY WHETHER IT WAS FOR CONCEALMENT OF INCOME OR FOR FIL ING INACCURATE PARTICULARS OF INCOME. ON SUCH OBSERVATIONS OF THE LOWER AUTHORITIES, THE HON'BLE COURTS HAVE GIVEN ITS VERDICT AS UNDER:- (I) HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CI T VS. MANJUNATHA COTTON & GINNING FCTORY (2013) 359 ITR 5 65 HELD AS UNDER:- 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRA CT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFE NCES 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 TH E 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 CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE G ROUNDS. 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 O N 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 THE A SSESSEE WAS CALLED UPON TO MEET. OTHERWISE, THOUGH THE INITIATION OF PENALTY P ROCEEDINGS MAY BE VALID AND ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 9 LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEN D THE PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS, ONCE THE PRO CEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSI TION 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 HAND S OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FU RTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE 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 IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INA CCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING IN ACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER W HILE 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 PAI REPORTED IN [2007] 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF MANU ENGINEERING WORKS REPORTED 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 P ENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOM E. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON- APPLICATION OF MIND. INDEPENDENT PROCEEDING 62. THE PENALTY PROCEEDINGS ARE DISTINCT FROM ASSES SMENT PROCEEDINGS, AND INDEPENDENT THEREFROM. THE ASSESSMENT PROCEEDIN GS ARE TAXING PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATING FROM PROCEEDINGS OF ASSESSMENT ARE INDEPENDENT AND SEPARATE ASPECTS OF THE PROCEEDING. SEPARATE PROVISION IS MADE FOR THE IMPO SITION OF PENALTY AND SEPARATE NOTICES OF DEMAND ARE MADE FOR RECOVERY OF TAX AND AMOUNT OF PENALTY. ALSO SEPARATE APPEAL IS PROVIDED AGAINST T HE ORDER OF IMPOSITION OF PENALTY. ABOVE ALL, NORMALLY, ASSESSMENT PROCEEDING S MUST PRECEDE PENALTY PROCEEDINGS. THE ASSESSEE IS ENTITLED TO SUBMIT FRE SH EVIDENCE IN THE COURSE OF PENALTY PROCEEDINGS. IT IS BECAUSE PENALTY PROCEEDI NGS ARE INDEPENDENT PROCEEDINGS. THE ASSESSEE CANNOT QUESTION THE ASSES SMENT JURISDICTION IN PENALTY PROCEEDINGS. JURISDICTION UNDER PENALTY PRO CEEDINGS CAN ONLY BE ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 10 LIMITED TO THE ISSUE OF PENALTY, SO THAT THE VALIDI TY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIE D, CANNOT BE THE SUBJECT MATTER IN PENALTY PROCEEDINGS. IT IS NOT POSSIBLE T O GIVE A FINDING THAT THE REASSESSMENT IS INVALID IN SUCH PENALTY PROCEEDINGS . CLEARLY, THERE IS NO IDENTITY BETWEEN THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS. THE LATTER ARE SEPARATE PROCEEDINGS THAT MAY, IN SOME C ASES, FOLLOW AS A CONSEQUENCE OF THE ASSESSMENT PROCEEDINGS. THOUGH I T IS USUAL FOR THE ASSESSING OFFICER TO RECORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE BEING INITIATED, THIS IS MORE A MATTER OF CONVE NIENCE THAN OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRES, SO FAR AS T HE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT THEY SHOULD BE INITIATED IN THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT. IT IS SUFFICIENT, IF THERE IS SOME RECO RD SOMEWHERE, EVEN APART FROM THE ASSESSMENT ORDER ITSELF, THAT THE ASSESSING OFF ICER HAS RECORDED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEAL MENT OR OTHER DEFAULT FOR WHICH PENALTY ACTION IS CALLED FOR. INDEED, IN CERT AIN CASES, IT IS POSSIBLE FOR THE ASSESSING OFFICER TO ISSUE A PENALTY NOTICE OR INIT IATE PENALTY PROCEEDINGS EVEN LONG BEFORE THE ASSESSMENT IS COMPLETED. THERE IS N O STATUTORY REQUIREMENT THAT THE PENALTY ORDER SHOULD PRECEDE OR BE SIMULTA NEOUS WITH THE ASSESSMENT ORDER. IN POINT OF FACT, HAVING REGARD TO THE MODE OF COMPUTATION OF PENALTY OUTLINED IN THE STATUTE, THE ACTUAL PENALTY ORDER C ANNOT BE PASSED UNTIL THE ASSESSMENT IS FINALISED. CONCLUSION 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMER GES IS AS UNDER : (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (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 PROCEEDINGS UNDER SEC TION 271. (E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR THE ORDER OF THE APPELLATE AUTH ORITY 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 BY A LEGAL FICTION CONSTITUTE CONCEALMENT BEC AUSE OF DEEMING PROVISION. ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 11 (G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(1)(C) IS A SINE QUA NON FOR THE ASSESSING OFFICER TO INITIATE THE PROCE EDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SUB-SECTION (1B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE COMMISSIONER. (I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J) THE IMPOSITION OF PENALTY EVEN IF THE TAX LIABI LITY 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 TAX AND INTER EST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIAT E PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSME NT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY THE AUTH ORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO B E ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY TH E ASSESSING OFFICER IN THE ASSESSMENT ORDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PRO VE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACT S 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 1(B) T O SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDING S, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PR OCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AU THORITY. (P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS O F INCOME (Q) SENDING PRINTED FORM WHERE ALL THE GROUNDS MENT IONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW. ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 12 (R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPO SED TO THE ASSESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SE PARATE ASPECT OF THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T 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. HOWEVER , THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSE SSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEE DINGS. (II) HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. MANU ENGINEERING WORKS (198) 122 ITR 565 HELD AS UN DER:- HOWEVER, THE FINAL ORDER PASSED BY THE TRIBUNAL IN THE APPEAL BEFORE IT CAN BE SUSTAINED ON A DIFFERENT GROUND WH ICH ALSO AFFECTS THE JURISDICTION OF THE IAC. WE FIND FROM THE ORDER OF THE IAC, IN THE PENALTY PROCEEDINGS, THAT IS, THE FINAL CONCLUSION AS EXPRE SSED IN PARA. 4 OF THE ORDER : ' I AM OF THE OPINION THAT IT WILL HAVE TO BE SAID THAT THE ASSESSEE HAD CONCEALED ITS INCOME AND/OR THAT IT HAD FURNISHED I NACCURATE PARTICULARS OF SUCH INCOME '. NOW, THE LANGUAGE OF ' AND/OR ' MAY BE PROPER IN ISSUING A NOTICE AS TO PENALTY ORDER OR FRAMING OF CHARGE IN A CRIMINAL CASE OR A QUASI CRIMINAL CASE, BUT IT WAS INCUMBENT UPON THE IAC TO COME TO A POSITIVE FINDING AS TO WHETHER THERE WAS CONCEALMENT OF INCOME BY TH E ASSESSEE OR WHETHER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURN ISHED BY THE ASSESSEE. NO SUCH CLEAR-CUT FINDING WAS REACHED BY THE IAC AND, ON THAT GROUND ALONE, THE ORDER OF PENALTY PASSED BY THE IAC WAS LIABLE TO BE STRUCK DOWN. 2.7 CONSIDERING THE ALL THESE FACTUAL ASPECTS OF T HE CASE AND ALSO THE RATIO DECIDED BY THE HON'BLE HIGH COURTS (SUPRA), I DIRECT TO DELETE THE PENALTY LEVIED U/S 271(1) OF THE ACT. THUS THE APP EAL OF THE ASSESSEE IS ALLOWED. ITA NO. 220/JP/2016 SHRI MOOL CHAND MALI VS. DCIT , CIRCLE- 5, JAIPUR . 13 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05 /09/2 016. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05 /09/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI MOOL CHAND MALI, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE- 5, JAIPUR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 220/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR