K. Prakash Shetty, Bangalore V. ACIT, Bangalore

ITA 265/BANG/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6120 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: H NAGINCHAND KHINCHA
• Keywords: Search and seizure; Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 153A; 32; 27; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER S.P. NOS.86 TO 88/BANG/2014 & ITA NOS. 265 TO 267/BANG/2014 ASSESSMENT YEARS : 2006-07, 2008-09 & 2009-10 SHRI K. PRAKASH SHETTY, NO.9, ALI ASKAR ROAD, CUNNINGHAM ROAD CROSS, BANGALORE. PAN : AGAPS 5631F VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI H. NAGINCHAND KHINCHA, C.A. RESPONDENT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II(DR) DATE OF HEARING : 29.05.2014 DATE OF PRONOUNCEMENT : 05.06.2014 O R D E R PER BENCH ITA NOS.265 TO 267/BANG/14 ARE APPEALS AGAINST TH E COMMON ORDER DATED 20.06.2012 OF CIT(APPEALS)-VI, BANGALORE RELA TING TO ASSESSMENT YEARS 2006-07, 2008-09 & 2009-10. ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 2 OF 13 2. IN ALL THESE APPEALS, THE ASSESSEE HAS CHALLENG ED THE ORDER OF THE CIT(APPEALS) CONFIRMING THE ORDERS OF THE ASSESSING OFFICER IMPOSING PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (ACT) ON THE ASSESSEE. 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY U/S. 271(1)(C) OF THE ACT WAS IMPOSED BY THE AO ON THE ASSESSEE ARE A S FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. A SEARCH AND SEIZURE OP ERATION U/S. 132 OF THE ACT WAS CARRIED OUT ON 20.11.2009 IN THE CASE OF TH E ASSESSEE, WHO BELONGS TO M/S. GOLD FINCH HOTELS GROUP. SUBSEQUEN TLY ORDERS OF ASSESSMENT WERE PASSED U/S. 143(3) R.W.S. 153A OF T HE ACT FOR THE A.Y. 2006-07 ASSESSING THE TOTAL INCOME AT RS.1,37,19,15 4 WHICH WAS THE INCOME RETURNED IN THE RETURN OF INCOME FILED U/S. 153A OF THE ACT. IT IS WORTHWHILE TO NOTE THAT IN THE RETURN FILED U/S. 13 9 OF THE ACT, THE INCOME DECLARED WAS ONLY RS.32,30,690. THE DIFFERENCE BET WEEN THE INCOME ASSESSED U/S. 153A OF THE ACT AND THE INCOME RETURN ED BY THE ASSESSEE U/S. 139 OF THE ACT WAS OFFERED TO TAX BY THE ASSES SEE CONSEQUENT TO THE DISCLOSURE MADE AT THE TIME OF SEARCH. IN THE ORDE R OF ASSESSMENT DATED 30.12.2011 PASSED U/S. 153A R.W.S. 143(3) OF THE AC T, THE AO INITIATED PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT. 4. FOR THE A.Y. 2008-09, THE INCOME RETURNED U/S. 1 39 OF THE ACT WAS A SUM OF RS.30,94,607 WHEREAS THE INCOME RETURNED IN THE PROCEEDINGS U/S. 153A OF THE ACT WAS A SUM OF RS.89,96,651. THE DIF FERENCE BETWEEN THE AMOUNT RETURNED U/S. 139 AND THE AMOUNT OFFERED IN THE RETURN FILED U/S. ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 3 OF 13 153A OF THE ACT WAS CONSEQUENT TO THE SEARCH U/S. 1 32 OF THE ACT. IN THE ORDER OF ASSESSMENT, THE AO INITIATED PENALTY PROCE EDINGS U/S. 271(1)(C)/271AAA OF THE ACT. THIS ORDER OF ASSESSM ENT WAS ALSO PASSED ON 30.12.2011. 5. FOR THE A.Y. 2009-10, THE INCOME OFFERED IN THE RETURN FILED U/S. 139 WAS RS.27,50,000. THE ASSESSMENT U/S. 153A OF THE ACT WAS COMPLETED DETERMINING THE TOTAL INCOME AT RS.3,57,81318, WHIC H WAS RETURNED BY THE ASSESSEE IN THE RETURNS OF INCOME FILED U/S. 153A O F THE ACT. THE DIFFERENCE BETWEEN THE INCOME RETURNED U/S. 139 OF THE ACT AND THE INCOME RETURNED U/S. 153A OF THE ACT WAS DUE TO THE DISCLOSURE MADE BY THE ASSESSEE CONSEQUENT TO SEARCH U /S. 132 OF THE ACT. IN THIS ORDER PASSED BY THE AO ON 30.12.2011, THE AO INITIATED PENALTY PROCEEDINGS U/S. 271AAA OF THE ACT. 6. IN RESPECT OF THE ADDITIONS MADE IN THE PROCEEDI NGS U/S. 153A OF THE ACT FOR ALL THE THREE ASSESSMENT YEARS, THE AO IMPO SED PENALTY U/S. 271(1)(C) OF THE ACT ON THE ASSESSEE WAS CONFIRMED BY THE CIT(APPEALS). AGGRIEVED BY THE ORDERS OF THE CIT(APPEALS), THE AS SESSEE HAS PREFERRED APPEALS BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR. SEVERAL TECHNICAL OBJECTIONS WITH REGARD TO VALIDITY OF THE ORDER PASSED U/S. 271(1)(C) OF THE ACT WERE RAISED BY THE ASSESSEE. WE DEEM IT APPROPRIATE TO CONSIDER THE OBJECTIONS RAIS ED BY THE ASSESSEE ON ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 4 OF 13 THE VALIDITY OF THE ORDERS IMPOSING PENALTY ON THE GROUND THAT THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF THE ACT WAS DEFECTI VE FOR A.Y. 2006-07 AND THAT FOR THE A.YS. 2008-09 AND 2009-10 NOTICE U/S. 274 OF THE ACT HAD BEEN ISSUED FOR IMPOSING PENALTY U/S. 271AAA OF THE ACT, BUT THE ORDER IMPOSING PENALTY WAS PASSED U/S. 271(1)(C) OF THE ACT. 8. ON THE ABOVE OBJECTIONS, WE HAVE HEARD THE PARTI ES AT LENGTH. A COPY OF THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF TH E ACT FOR THE A.Y. 2006- 07, 2008-09 & 2009-10 IS PLACED AT PAGES 11, 12 & 1 3 OF THE ASSESSEES PAPERBOOK, THE SAME IS GIVEN AS ANNEXURES-I, II & I II TO THIS ORDER . 9. IT IS WORTHWHILE MENTIONING THAT ALL THE PENALTY ORDERS FOR THE THREE ASSESSMENT YEARS HAVE BEEN PASSED BY THE AO U/S. 27 1(1)(C) OF THE ACT. PERUSAL OF THE SHOW CAUSE NOTICE U/S. 274 FOR THE A .Y. 2008-09 AND 2009- 10 SHOWS THAT THE SHOW CAUSE NOTICE IS ONE PURPORTE D TO HAVE BEEN ISSUED U/S. 271AAA OF THE ACT. THE PROVISIONS OF SECTION 271AAA READ AS FOLLOWS:- PENALTY WHERE SEARCH HAS BEEN INITIATED. 271AAA. (1) THE ASSESSING OFFICER MAY, NOTWITHSTAND ING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, DIRECT THAT, IN A CASE WHERE SEARCH HAS BEEN INITIATED UNDER SEC TION 132 ON OR AFTER THE 1ST DAY OF JUNE, 2007 BUT BEFORE THE 1ST DAY OF JULY, 2012, THE ASSESSEE SHALL PAY BY WAY OF PENALTY, IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM COMPUTED AT THE RATE OF TEN PER CENT OF THE UNDISCLOSED INCOME OF THE SPECIFIED PREVIOUS YEAR. (2) NOTHING CONTAINED IN SUB-SECTION (1) SHALL APP LY IF THE ASSESSEE, ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 5 OF 13 ( I ) IN THE COURSE OF THE SEARCH, IN A STATEMENT UNDE R SUB- SECTION (4) OF SECTION 132, ADMITS THE UNDISCLOSED INCOME AND SPECIFIES THE MANNER IN WHICH SUCH INCOME HAS BEEN DERIVED; ( II ) SUBSTANTIATES THE MANNER IN WHICH THE UNDISCLOSE D INCOME WAS DERIVED; AND ( III ) PAYS THE TAX, TOGETHER WITH INTEREST, IF ANY, IN RESPECT OF THE UNDISCLOSED INCOME. (3) NO PENALTY UNDER THE PROVISIONS OF CLAUSE ( C ) OF SUB- SECTION (1) OF SECTION 271 SHALL BE IMPOSED UPON TH E ASSESSEE IN RESPECT OF THE UNDISCLOSED INCOME REFERRED TO IN SU B-SECTION (1). (4) THE PROVISIONS OF SECTIONS 274 AND 275 SHALL, S O FAR AS MAY BE, APPLY IN RELATION TO THE PENALTY REFERRED TO IN THIS SECTION. EXPLANATION. FOR THE PURPOSES OF THIS SECTION, ( A ) 'UNDISCLOSED INCOME' MEANS ( I ) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THI NG OR ANY ENTRY IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR TRANSACTIONS FOUND IN THE COURSE OF A SEARCH UNDER SECTION 132, WHICH HAS ( A ) NOT BEEN RECORDED ON OR BEFORE THE DATE OF SEARCH IN THE BOOKS OF ACCOUNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO SUCH PREVIOUS YEAR; OR ( B ) OTHERWISE NOT BEEN DISCLOSED TO THE CHIEF COMMISSIONER OR COMMISSIONER BEFORE THE DATE OF SEARCH; OR ( II ) ANY INCOME OF THE SPECIFIED PREVIOUS YEAR REPRESENTED, EITHER WHOLLY OR PARTLY, BY ANY ENTRY IN RESPECT OF AN EXPENSE RECORDED IN THE BOOKS OF ACCO UNT OR OTHER DOCUMENTS MAINTAINED IN THE NORMAL COURSE RELATING TO THE SPECIFIED PREVIOUS YEAR WHICH IS FO UND ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 6 OF 13 TO BE FALSE AND WOULD NOT HAVE BEEN FOUND TO BE SO HAD THE SEARCH NOT BEEN CONDUCTED; ( B ) 'SPECIFIED PREVIOUS YEAR' MEANS THE PREVIOUS YEAR ( I ) WHICH HAS ENDED BEFORE THE DATE OF SEARCH, BUT THE DATE OF FILING THE RETURN OF INCOME UNDER SUB- SECTION (1) OF SECTION 139 FOR SUCH YEAR HAS NOT EXPIRED BEFORE THE DATE OF SEARCH AND THE ASSESSEE HAS NOT FURNISHED THE RETURN OF INCOME FOR THE PREVIOUS YEAR BEFORE THE SAID DATE; OR ( II ) IN WHICH SEARCH WAS CONDUCTED. 10. IT IS NOT IN DISPUTE THAT THE PROVISIONS OF SEC TION 271AAA ARE APPLICABLE TO THE CASE OF THE ASSESSEE AS THE SEARC H U/S. 132 IN THE CASE OF THE ASSESSEE WAS CONDUCTED AFTER 1.6.2007 BUT BEFOR E 1.7.2012. THEREFORE IT WAS NECESSARY FOR THE AO TO DISCLOSE IN THE SHOW CAUSE NOTICE AS TO WHETHER PENALTY IS BEING LEVIED U/S.271AAA OF THE A CT OR U/S.271(1)( C) OF THE ACT. 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFO RE US THAT THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF THE ACT DOES NOT SP ECIFY AS TO WHETHER PENALTY PROCEEDING IS BEING INITIATED FOR CONCEALIN G PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR ANY OTHER REASON AS IRRELEVANT COLUMNS OF THE PRINTED FORM OF NOTICE U/ S. 274 HAVE NOT BEEN STRUCK OFF BY THE AO. IT WAS FURTHER POINTED OUT T HAT FOR THE A.YS. 2008-09 AND 2009-10, PENALTY PROCEEDINGS IN THE SHOW CAUSE NOTICE IS CLAIMED TO ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 7 OF 13 HAVE BEEN INITIATED U/S. 271AAA OF THE ACT, WHEREAS THE PENALTY HAS BEEN IMPOSED U/S. 271(1)(C) OF THE ACT. 12. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTEN TION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN) , WHEREIN THE HONBLE HIGH COURT HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE ALL THE GROUND S GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED TH AT 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 QUAS HED. 13. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEA LS) WHEREIN THE CIT(A) HAS EXPRESSED HIS OPINION THAT THE ASSESSEE WAS FULLY AWARE OF THE CHARGE AGAINST HIM AND HE CANNOT TAKE SHELTER ON TE CHNICAL GROUNDS. 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HONB LE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 8 OF 13 FACTORY (SUPRA) HAS LAID DOWN THE FOLLOWING PRINCIPLES TO BE FOLLO WED 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 REGAR DING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUE D UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDE R WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HA S 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 EXPLANATION- 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NA TURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHE R EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTI ON 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 TH E DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTION ED IN SECTION 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. OTHE RWISE, 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 INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE O FFENCES. BUT ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 9 OF 13 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 NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED 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 GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOU LD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO A NSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSES SEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATIO N 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 THE S AME 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 DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME T HE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUEN T 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 FUR NISHING 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 MARKETING REPORTED IN 171 TAXMAN 156, HAS HEL D ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 10 OF 13 THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NO T SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON- APPLICATION OF MIND. 15. 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 AUTHORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), A T LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISC ERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONST ITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PRO CEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSM ENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PRO VISION CONTAINED IN SECTION 1(B). ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 11 OF 13 H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND TH E COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE 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 HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE F AILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN OR DER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND AL L FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUIT Y. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, 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 OF I NCORRECT PARTICULARS OF INCOME. ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 12 OF 13 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. 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 T HE 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. 16. IT IS CLEAR FROM THE AFORESAID DECISION THAT ON THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS S OUGHT TO BE IMPOSED. THE SHOW CAUSE NOTICE IS ALSO BAD FOR THE REASON TH AT IN THE A.YS. 2008-09 AND 2009-10 THE SHOW CAUSE NOTICE REFERS TO IMPOSIT ION OF PENALTY U/S. 271AAA, WHEREAS THE ORDER IMPOSING PENALTY HAS BEEN PASSED U/S. 271(1)(C) OF THE ACT. IN OUR VIEW, THE AFORESAID D EFECT CANNOT BE SAID TO BE CURABLE U/.S 292BB OF THE ACT, AS THE DEFECT CANNOT BE SAID TO BE A NOTICE ITA NO.265 TO 267/BANG/2014 & SP NOS.86 TO 88/BANG/2014 PAGE 13 OF 13 WHICH IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THE ACT. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALT Y IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY P ENALTY IMPOSED IS CANCELLED. 17. SINCE THE APPEALS HAVE BEEN DECIDED, THE STAY P ETITIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ARE DISMISSED AS INFRUCTUOUS. 18. IN THE RESULT, THE APPEALS ARE ALLOWED, WHILE T HE STAY PETITIONS ARE DISMISSED AS INFRUCTUOUS. PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF JUNE , 2014 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 5 TH JUNE , 2014 . /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.