Ideal Unemployed Engineers Co-operative Society Ltd., Coochbihar V. D.C.I.T., Circle - 2, Jalpaiguri, Jalpaiguri

ITA 2460/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4712 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEBASISH BANERJEE J
• Assessee Lawyers: V N DUTTA
• Keywords: Bogus purchase; Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 2460 / KOL / 2013 ASSESSMENT YEAR :2010-11 IDEAL UNEMPLOYED ENGINEERS CO- OPERATIVE SOCIETY LTD., OPP. COOCH BEHAR TRUCK STAND, P.O.KHAGRABARI, DIST. COOCH BEHAR-736 101[ AAALI 0048 L ] V/S . DCIT, CIRCLE-2, C.R. BUILDING, RACE COURSE PARA, NAYA BASTI, JALPAIGURI - 735101 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI V.N.DUTTA, ADVOCATE /BY RESPONDENT SHRI DEBASISH BANERJEE, JCIT,DR /DATE OF HEARING 19-05-2016 /DATE OF PRONOUNCEMENT 15-06-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY ASSESSEE IS AGAINST THE ORDER OF CO MMISSIONER OF INCOME TAX (APPEALS) JALPAIGURI DATED 01.08.2013. A SSESSMENT WAS FRAMED BY DCIT, CIRCLE-2, JALPAIGURI U/S 143(3) OF THE INC OME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORD ER DATED 03.12.2012 FOR ASSESSMENT YEAR 2010-11. PENALTY LEVIED U/S. 271(1) (C) OF THE ACT VIDE HIS ORDER DATED 21.01.2013. ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 2 2. ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS THAT LD . CIT(A) ERRED IN CONFIRMING THE PENALTY IMPOSED BY ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. FOR THAT THE PENALTY UNDER U/S. 271(1)(C)OF THE ACT IS OPPOSED TO REQUIREMENT OF LAW AND BAD IN LAW. 2. FOR THAT IMPOSITION OF PENALTY R.11,62,260/- U/S . 271(1)(C) OF THE ACT WITHOUT JURISDICTION, OPPOSED TO REQUIREMENT OF LAW AND BAD IN LAW. 3. FOR THAT THE IMPOSITION OF PENALTY RS.11,62,260/ - U/S 271(1)(C) OF THE ACT IS NEITHER TENABLE IN LAW NOR IN FACTS. 4. FOR THAT IMPOSITION OF PENALTY AT 200% IS WITHOU T BASIS, ARBITRARY AND BAD IN LAW. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A CO-O PERATIVE SOCIETY AND ENGAGED IN THE BUSINESS OF CONTRACTING ACTIVITY. DU RING THE COURSE OF ASSESSMENT PROCEEDING, ASSESSING OFFICER HAS MADE T HE ADDITION TO THE TOTAL INCOME OF ASSESSEE ON ACCOUNT OF FOLLOWING:- I) NON DISCLOSURE OF INTEREST INCOME EARNED ON TH E FDR OF RS.19,022/- II) CLAIM OF BOGUS PURCHASES FOR RS.18,61,658/- AT THE TIME OF ASSESSMENT, AO INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) FOR THE CONCEALMENT OF INCOME IN RELATION TO NON-DI SCLOSURE OF INCOME FROM FDR AND FOR THE BOGUS PURCHASE ON ACCOUNT OF FURNIS HING INACCURATE PARTICULARS OF INCOME. FINALLY, AO IMPOSED THE PENA LTY BY WAY OF PASSING ORDER DATED 21.01.2013 @ 200% OF THE TAX SOUGHT TO BE EVADED. 4. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A) WHO CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER:- 4. I HAVE GONE THROUGH THE SUBMISSION OF THE ASSESS EE AND HAVE SEEN THE CASE LAW CITED. IN THE CASE OF PURCHASES OF RS.18,6 1,658, IT IS SEEN THAT THIS PURCHASE WAS NOT ENTERED IN THE BOOKS OF ACCOUNT OF THE SUBSEQUENT YEAR. THEREFORE, IT WAS INDEED A BOGUS PURCHASE AND THIS ENTRY WAS MADE IN THE PURCHASE REGISTER TO REDUCE THE TAXABLE INCOME. THI S TRANSACTIONS WAS ENTERED INTO WITH MALAFIDE INTENTION OF TAX EVASION . REGARDING THE NON- DISCLOSURE OF ACCRUED INTEREST IN THE RETURN OF INC OME, THE AO IS DIRECTED TO VERIFY WHETHER THE ENTIRE INTEREST FOR ONE YEAR HAS BEEN OFFERED FOR TAX IN THE ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 3 RETURN FOR THE SUBSEQUENT YEAR. IF THIS ENTIRE INTE REST OF TWELVE MONTHS IS OFFERED FOR TAX IN THE SUBSEQUENT YEAR, THEN PENALT Y UNDER SECTION 271(1)(C) FOR THIS INTEREST AMOUNT OF RS.19,022 IS DIRECTED T O BE DELETED. THE QUANTUM OF PENALTY I.E. BETWEEN 100% TO 300% IS DISCRETION OF THE AO AND ON THE FACTS OF THE CASE, NO INTERFERENCE IS CALLED FOR. THE APPEAL OF THE ASSESSEE IS DISMISSED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) ASSESSE E CAME IN SECOND APPEAL BEFORE US. SHRI V.N DUTTA, LD. AUTHORIZED REPRESENTATIVE APPEA RING ON BEHALF OF ASSESSEE AND SHRI DEBASISH BANERJEE, LD. DEPARTMENT AL REPRESENTATIVE APPEARING ON BEHALF OF REVENUE. 5. BEFORE US LD FOR THE ASSESSEE ALSO DREW OUR ATT ENTION TO THE SHOW CAUSE NOTICE ISSUED U/S.274 OF THE ACT BEFORE IMPOS ING PENALTY AND SUBMITTED THAT THE SAID NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF HAVING FURNISHED INACCURATE PARTICULARS OF INCOME OR OF HAVING CONCEALED PARTICULARS OF SUCH INCOME. HE SUBMITTED THAT THE TWO ADDITIONS WERE MADE IN THE ASSESSMENT ORDER. FOR ONE ADDITION THE PENALTY WAS INITIATED ON ACCOUNT OF CONCEALMENT OF INCOME AND SECOND ADDITION IT WAS IN ITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. BUT THE NOTICE IS SUED UNDER SECTION 274 DOES NOT SPELL OUT THE SPECIFIC CHARGE FOR THE ADDITION MADE BY THE AO. HE FURTHER POINTED OUT THAT THE PRINTED SHOW CAUSE NOTICE DOES NOT STRIKE OUT THE IRRELEVANT PORTION VIZ., FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF SUCH INCOME. HE ALSO PO INTED OUT THAT THE ORDER PASSED BY THE AO IMPOSING THE PENALTY DOES NOT SPEL L OUT SPECIFIC CHARGE BUT JUST RECORDED THAT TAX ON PENALTY UNDER SECTION 271 (1)(C) OF THE ACT IS COMPUTED. HE DREW OUR ATTENTION TO A DECISION OF TH E HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 218 TAXMAN 423 (KAR.) WHEREIN IT WAS HELD THAT IF THE S HOW CAUSE NOTICE U/S.274 OF THE ACT DOES NOT SPECIFY AS TO THE EXACT CHARGE VIZ ., WHETHER THE CHARGE IS THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 4 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. REFERENCE WAS AL SO MADE TO SEVERAL JUDICIAL PRONOUNCEMENTS. IN PARTICULAR, OUR ATTENT ION WAS DRAWN TO A DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PRICE WATERHOUSE COOPERS PVT.LTD. VS. CIT 348 ITR 306 (SC) WHEREIN IT WAS HELD INADVERTENT E RRORS IN THE RETURN OF INCOME FILED CANNOT BE THE BASIS TO I MPOSE PENALTY U/S.271(1)(C) OF THE ACT. ON THE OTHER HAND LD DR RELIED ON THE ORDER OF TH E CIT(A). 6. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO TH E RIVAL SUBMISSIONS. THE FACTS GO TO SHOW THAT THE AO CAME TO KNOW THAT THE ASSESSEE HAD NOT DISCLOSED THE INTEREST INCOME EARNED ON THE FDR AND CLAIMED THE BOGUS PURCHASES. THE NEXT ARGUMENT THAT THE SHOW CAUSE N OTICE U/S.274 OF THE ACT WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS T O WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME . ON THIS ASPECT, WE FIND THAT IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELT OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF SUCH INCOME . 6.1 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY , 359 ITR 565 (KARN) (SUPRA), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHET HER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULA RS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HO NBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE ALL THE G ROUNDS GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 5 THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO BE HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLLOWING PRINCIPLES TO BE FOLL OWED 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 EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECT ION 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 S AID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEED INGS 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 I N SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THE Y INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AN D SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT 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 D EPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SE CTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INIT IAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE T O BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWIS E, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPO SED ON THE ASSESSEE. ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 6 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 AT TRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PE NALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER TH E 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 2 71(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, TH E PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S 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 SHOULD BE IMPOSED ONLY ON THE GROUNDS O N WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS O THER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME 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 APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHI NG INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 1 22 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKE TING ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 7 REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF P ENALTY 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 CON CEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS T HE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 6.2 THE FINAL CONCLUSION OF THE HONBLE COURT WAS A S FOLLOWS:- 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR 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 SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTH ORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT L EAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNI BLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CON CEALMENT BECAUSE 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 OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAI NED IN SECTION 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. ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 8 J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTH ORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNL ESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT H AS 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 OPINE D 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 PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOS ING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL I NCOME 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 PR OCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFAC TION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APP ELLATE 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., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING O F INCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENA LTY COULD BE IMPOSED 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. ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 9 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 INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF I NCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIE D, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECT IVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IM POSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) WE HOLD THAT THE ORDERS IMPOSING PENALTY IN THE ASSESSMENT YEAR UNDER CONSIDERATION HAS TO B E HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELLED. 6.3 FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE, THEREFORE, CANCEL TH E ORDERS IMPOSING PENALTY U/S 271(1)(C) OF THE ACT ON THE ASSESSEE AND THIS G ROUND OF THE ASSESSEES APPEAL IS ALLOWED. 7. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 15/ 06/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 15 / 06 /201 6 ITA NO.2460/KOL/2013 A.Y.2010-11 IDEAL UNEMPLOYED ENGINEEERS CO-OP SO. LTD. V. DCIT CIR-2, JAL PAGE 10 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-IDEAL UNEMPLOYED ENGINEERS CO-OP SOCIETY LTD. OPP COOCH BEHAR TRUCK STAND, P.O . KHAGRABARI, DIST. COOCH BEHAR - 736101 2. /RESPONDENT-DCIT,CIR-2,CR BUILDING, RACECOURSE PRA, NAYA BASTI,JALPAIGURI-101 3. ) *+ , , - / CONCERNED CIT JALPAIGURI 4. , , -- / CIT (A) JALPAIGURI 5. 012 33*+, , *+ , / DR, ITAT, KOLKATA 6. 267 89 / GUARD FILE. BY ORDER/ , , /TRUE COPY/ / , *+ ,