M/s Tulip Mines Pvt. Ltd., Kolkata V. D.C.I.T CC - XVII,kolkata, Kolkata

ITA 2407/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4426 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-10-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 27-09-2013
• Court: TRIBUNAL
• Keywords: Bogus Share capital; Search and seizure; Principle of natural justice; Question of law; Initiation of penalty proceedings
• Section: 143(3); 153A

Judgement Text

I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 1 OF 9 , , IN THE INCOME TAX APPELLATE TRIBUNAL A, BENC H KOLKATA BEFORE SHRI WASEEM AHMED, AM & SHRI K. NARASIMHA C HARY, JM ./ ITA NO.2407/KOL/2013 ( / ASSESSMENT YEAR :2005-2006) M/S TULIP MINES PVT. LTD., AVANI SIGNATURE, 2 ND FLOOR, 91A/1, PARK STREET, KOLKATA- 700016 VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- XVII, KOLKATA, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, E.M. BYE PASS,KOLKATA-700 107 ./ ./PAN/GIR NO. : AABCT 9842 M ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI A.K.TULSIAN, FCA /REVENUE BY : SHRI M.K.BISWAS, JCIT, D.R. / DATE OF HEARING : 03/10/2016 /DATE OF PRONOUNCEMENT 07/10/2016 / O R D E R PER SHRI K. NARASIMHA CHARY, JM: THIS IS AN APPEAL BY ASSESSEE CHALLENGING THE ORDER DATED 25.07.2013, IN APPEAL NO.19/CC-XVII/CIT(A)-C-1/11-12, PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-9, KOLKATA [HEREINAFTER CAL LED AS CIT(A)]. I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 2 OF 9 2. BRIEF FACTS OF THE CASE ARE THAT ORIGINAL ASSESS MENT U/S.143(3) WAS COMPLETED BY 18.12.2007, WHEREIN AN ADDITION OF RS .14,00,000/- WAS MADE BY THE ASSESSING OFFICER U/S.68 ON ACCOUNT OF UNEXP LAINED CASH CREDIT, SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF SHARE APPLICATION MONEY, WHICH WAS CONFIRMED IN APPEAL BEFORE THE LD. CIT(A), VIDE ORDER DATED 6.12.2010. ON 23.11.2007, THERE WAS A SEARCH AND SEIZURE OPERATIO NS U/S.132 OF THE ACT IN THE PREMISES OF THE ASSESSEE COMPANY AND ASSESSMENT U/S.153A WAS DONE ON 31.12.2009, WHEREIN THE ADDITION OF RS.14 LAKHS WAS MAINTAINED, SINCE EVEN AT THAT TIME THE ASSESSEE FAILED TO EXPLAIN TH E SOURCE OF ITS INCOME. AN APPEAL WAS PREFERRED AGAINST THIS ASSESSMENT BUT WA S WITHDRAWN BY THE ASSESSEE. SINCE THE ASSESSEE FAILED TO EXPLAIN THE SOURCE OF SHARE APPLICATION MONEY, THE AO CONCLUDED THAT ASSESSEE COMPANY HAS I NTRODUCED BOGUS SHARE APPLICATION MONEY INTO ITS BOOKS OF ACCOUNTS, THEREBY FURNISHED INACCURATE PARTICULARS OF INCOME AND CONCEALED THE INCOME AS SUCH INITIATED PROCEEDINGS U/S.271(1)(C) OF THE ACT, WHICH CONCLUD ED IN IMPOSITION OF PENALTY OF RS.10 LAKHS. 3. CHALLENGING THE SAME, THE ASSESSEE CARRIED THE M ATTER IN APPEAL AND THE LD. CIT(A) CONFIRMING THE PROPRIETY OF IMPOSITI ON OF PENALTY, BUT REDUCED THE SAME FROM RS.10 LAKHS TO RS.5,12,295/- BEING THE PE NALTY AT 100%. AGGRIEVED BY THE SAID IMPUGNED ORDER, THE ASSESSEE IS BEFORE US IN THIS APPEAL ON THE FOLLOWING GROUNDS :- 1) THAT THE LD.CIT(A)-C-I, KOLKATA, ERRED IN CONFI RMING PENALTY AMOUNTING TO RS.5,12,295/- @ 100% OF THE AMOUNT OF TAX WITHOU T CONSIDERING THE FACT THAT NO ADDITION WAS MADE IN THE PROCEEDIN GS UNDER SEC. I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 3 OF 9 153A OF THE INCOME TAX ACT, 1961. THE ADDITION WAS MADE IN THE ORIGINAL ASSESSMENT MADE UNDER SEC. 143(3) OF THE A CT AND PENALTY WAS ALSO IMPOSED IN RESPECT OF THE SAME. AS SUCH, T HE PENALTY HAS BEEN IMPOSED TWICE FOR A SINGLE ADDITION WHICH IS A RBITRARY, UNJUSTIFIED, ILLEGAL AND DESERVES TO BE DELETED. 4. LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT BEFORE IMPOSING PE NALTY AND SUBMITTED THAT THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME . HE POINTED OUT THAT IN THE PRINTED SHOW CAUSE NOTICE WITHOUT STRIKING OUT THE IRRELEVANT PORTION VIZ., FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME . HE DREW OUR ATTENTION TO A DECISION OF THE HONBLE KARNATAKA HI GH COURT IN 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 CH ARGE IS THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF INCOME BY STRIKING OUT THE IRRELEVANT PORTION OF PRINTE D SHOW CAUSE NOTICE, THAN THE IMPOSITION OF PENALTY ON THE BASIS OF SUCH INVALID SHOW CAUSE NOTICE CANNOT BE SUSTAINED. 5. THE LEARNED DR RELIED ON THE ORDER OF THE LD. CI T(A). HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA (P) LTD. VS. CIT 358 ITR 593 (SC) WHEREIN IT WAS HELD THAT SATISFAC TION IS NOT I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 4 OF 9 REQUIRED TO BE RECORDED IN ANY PARTICULAR MANNER OR REDUCE SUCH MANNER OF ARRIVING AT SATISFACTION IN WRITING. 6. THE POINT THAT ARISES FOR OUR CONSIDERATION IS A S TO WHETHER THE PENALTY PROCEEDINGS ARE SUSTAINABLE ON THE FACE OF DEFECTS ON THE NOTICE ISSUED U/S.271(1)(C) OF THE I.T. ACT. 7. WE HAVE GONE THROUGH THE COPY OF NOTICE U/S.274 R.W.S.271 OF THE INCOME TAX ACT ISSUED BY THE AO. IT IS A PRINTED FO RM WITH SO MANY CLAUSES. THIS NOTICE DOES NOT SPECIFICALLY POINT OUT AS TO W HETHER THERE IS ANY CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING ANY INACCURATE PARTICULARS OF SUCH INCOME BUT ACROSS THE PRINTED LINE, THERE I S A BIG TICK MARK. 8. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE 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 FINDING REGARDING THE EXIST ENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDI NGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COU LD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF T HE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANAT ION-1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIAB ILITY, 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 I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 5 OF 9 WHICH THEY INTEND IMPOSING PENALTY ON HIM AS THE SE CTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PRO CEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPAR TMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO N OT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPA RTMENT 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 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICAL LY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SH OW 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 PART ICULARS 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 G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEED LESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIO NED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E 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, PEN ALTY 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 AUTHORITY, AT THE TIM E OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSES SEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD 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 P ENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID . THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERE NCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF TH E AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASS ED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, W AS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INA CCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISH ING INACCURATE I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 6 OF 9 PARTICULARS OF INCOME ARE DIFFERENT. THUS THE ASSES SING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT W HETHER 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 CONCEALMENT OF INCOME A ND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. 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 MARKE TING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS T O 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 H AS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. THE STANDARD PRO FORMA WITHOUT STRIKING OF THE RELE VANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS FO LLOWS:- 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 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 ORDER OF THE APPELLATE AUTHORIT Y 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 EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FRO M THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BEC AUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INI TIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTI ON 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. 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 TAX AND INTER EST THAT BY ITSELF WOULD I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 7 OF 9 NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INI TIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE A SSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUD ED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIA BILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE 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 HAVE 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 S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEE DINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. 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 PARTICULAR S OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE 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 A ND SEPARATE ASPECT OF THE PROCEEDINGS. I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 8 OF 9 U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS ' CONCEALMENT OF INCOME ' AND ' FURNISHING OF INCORRECT PARTICULARS ' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDI NGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF W HICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PRO CEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) 9. LD. AR ALSO PLACED RELIANCE ON THE DECISION OF H ONBLE SUPREME COURT IN CASE OF COMMISSIONER OF INCOME-TAX VS. SSAS EME RALD MEADOWS, [2016] 73 TAXMANN.COM 248 (SC). IN THIS MATTER, THE TRIBUN AL FOLLOWED THE DECISION OF HONBLE KARNATA HIGH COURT AND HELD THAT NOTICE ISS UED U/S.274 R.W.S.271(1)(C) OF THE I.T.ACT. WAS BAD IN LAW AS IT DID NOT SPECIF Y THE THING IN WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, PENALTY PROCEEDINGS H AD BEEN INITIATED. THE HONBLE HIGH COURT HELD THAT THERE WAS NO SUBSTANTI AL QUESTION OF LAW. AGAINST THAT ORDER, AN SLP WAS FILED BEFORE THE HONBLE SUP REME COURT AND THE HONBLE SUPREME COURT ALSO HELD THAT THERE WAS NO S UBSTANTIAL QUESTION OF LAW. 10. IT IS CLEAR FROM THE AFORESAID DECISIONS THAT O N THE FACTS OF THE PRESENT CASE, 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 SOUGH T TO BE IMPOSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, W E HOLD THAT THE ORDER IMPOSING PENALTY HAS TO BE HELD AS INVALID AND CONS EQUENTLY PENALTY IMPOSED IS CANCELLED. I.T.A. NO. 2407/KOL./2013 ASSESSMENT YEAR: 2005-2006 PAGE 9 OF 9 11. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE THEREFORE CANCEL THE ORDERS IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSE E. 12. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/10/20 16. SD/ - (WASEEM AHMED) SD/ - (NARASIMHA CHARY) #$ / ACCOUNTANT MEMBER $ / JUDICIAL MEMBER /KOLKATA ; $% DATED 07/10/2016 & ()* /PRAKASH MISHRA , . / PS %&' (' / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 4 ( ) / THE CIT(A), KOLKATA. 4. 4 / CIT 5. 56 7 8 , 8 , / DR, ITAT, KOLKATA 6. 7 9 / GUARD FILE. 5 //TRUE COPY//