EON AVIATION PVT. LTD., MUMBAI V. DCIT, 5(1), MUMBAI

ITA 3011/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6699 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 25-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: AARATI VISSANJI
• Keywords: Invalid notice; Depreciation; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Bad and doubtful debts; Revenue expenditure
• Section: 143(3); 27

Judgement Text

1 ITA 3011/MUM/2016 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F, MUMBAI BEFORE SHRI MAHAVIR SINGH(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NO.3011/MUM/2016 (ASSESSMENT YEAR: 2011-12) EON AVIATION PVT LTD DB HOUSE, GEN. A.K. VAIDYA MARG, GOREGAON (E), MUMBAI-63 PAN : AABCE8158R VS DCIT 5(1), MUMBAI APPELLANT RESPONDENT APPELLANT BY SMT. AARATI VISSANJI RESPONDENT BY SMT. POOJA SWAROOP DATE OF HEARING 19-06-2018 DATE OF PRONOUNCEMENT 29-06-2018 O R D E R PER G MANJUNATHA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT(A)-10, MUMBAI DATED 19-02-2016 AND IT PERTA INS TO AY 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LD. CIT(A) ERRED IN LAW AND IN FACTS IN PASSING THE ORDER U/S. 250 OF THE ACT AND DISMISSING THE APPEAL OF THE APPELLA NT. 2. THE LD. CIT(A) AND ERRED IN LAW AND IN FA CTS NOT APPRECIATING THAT THE PROVISIONS OF EXPLANATION 1 TO U/S. 271{L)(C) OF TH E ACT CAN BE INVOKED ONLY IN RESPECT OF CONCEALMENT OF PARTICULARS OF INCOME. 3. THE LD. CIT(A) ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE INITIATION OF PENALTY PROCEEDINGS BY THE ASSESSING OFFICER WAS NOT IN ACCORDANCE WITH PROVISIONS OF THE ACT. 4. THE LD. CIT(A) ERRED IN LAW AND IN FACTS CONFIRMING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(L)(C) OF THE ACT AMO UNTING TO RS. 79,05,625/-. 2 ITA 3011/MUM/2016 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF HIRING AND RENTING OF HE LICOPTERS AND AEROPLANES, FILED ITS RETURN OF INCOME FOR AY 2011- 12 ON 30-09-2011 DECLARING LOSS OF RS.39,84,49,162. THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) ON 26-03-2014 DETERMINING TOTA L LOSS AT RS.37,19,35,762 AFTER MAKING DISALLOWANCE OF RS.2,6 3,52,083 TOWARDS EXCESSIVE CLAIM OF DEPRECIATION AND BAD DEBTS AND A LSO DISALLOWANCE OF EXPENSES OF RS.1,61,316 U/S 40(A)(IA) FOR FAILURE T O DEDUCT TAX AT SOURCE ON THE BASIS OF REVISED STATEMENT OF TOTAL INCOME F ILED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. THEREAFTER, AO INIT IATED PENALTY PROCEEDINGS U/S 271(1)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF DISALLOWANCE OF CLAIM OF EXCESSIVE LO SS BEING PROVISION FOR DOUBTFUL DEBTS AND LOSS ON SALE OF FIXED ASSETS. A CCORDINGLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO EXPLAIN AS TO WHY PENALTY SHALL NOT BE LEVIED FOR FURNISHING INACCURATE PARTI CULARS OF INCOME. IN RESPONSE TO SHOW CAUSE NOTICE, ASSESSEE SUBMITTED T HAT IT HAS NEITHER CONCEALED PARTICULARS OF INCOME NOR FURNISHED INACC URATE PARTICULARS OF INCOME IN RESPECT OF EXCESSIVE CLAIM OF LOSS ON ACC OUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AND LOSS ON ACCOUNT OF SALE OF FIXED ASSETS AS THE SAME HAS BEEN WITHDRAWN BY FILING REVISED STATE MENT OF TOTAL INCOME BEFORE COMPLETION OF ASSESSMENT. THEREFORE, THE SA ME CANNOT BE 3 ITA 3011/MUM/2016 CONSIDERED AS FURNISHING INACCURATE PARTICULARS OF INCOME, WHICH LEADS TO CONCEALMENT OF PARTICULARS OF INCOME. THE AO, AFTE R CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO RELYI NG UPON CERTAIN JUDICIAL PRECEDENTS, INCLUDING THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICATIONS INDIA LTD 327 ITR 5 10 (DEL) HELD THAT THE ASSESSEE HAS DELIBERATELY FILED INACCURATE PART ICULARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE I.T. ACT, 1961 R.W. EXPLANATION 1 THEREOF AND ACCORDINGLY, LEVIED PENAL TY OF RS.79,05,625 WHICH IS 100% OF TAX SOUGHT TO BE EVADED. THE RELE VANT PORTION OF THE ORDER OF THE AO IS EXTRACTED BELOW:- 5. EXPLANATION 1 TO SECTION 271(L)(C) AUTOMATICALL Y COMES INTO OPERATION I'RI RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON, WHEN THERE IS FAILURE TO OFFER ANY EXPLANAT ION, OR AN EXPLANATION OFFERED IS FOUND TO BE FALSE, OR NOT SUBSTANTIATED, AS HELD IN THE CASE OF CIT VS. A SREENIVASA PAI 242 ITR 29 (KERALA). THE HON'BLE KERALA HIGH COURT FURTHER HELD THAT THE AMOUNT ADDED OR DISALLO WED IN COMPUTING THE TOTAL INCOME IS DEEMED TO REPRESENT THE INCOME IN R ESPECT OF WHICH THE PARTICULARS HAVE BEEN CONCEALED. AS PER THE PROVISI ONS OF THE EXPLANATION 1, THE ONUS TO ESTABLISH THAT THE EXPLANATION OFFER ED WAS BONA FIDE 'AND ALL FACTS RELATING TO THE SAME, AND MATERIAL TO THE COM PUTATION OF HIS INCOME, HAVE BEEN DISCLOSED BY HIM, WILL BE ON THE PERSON C HARGED WITH'.'CONCEALMENT. IN THIS CONNECTION, FURTHER REL IANCE IS PLACED ON THE CASE OF WESTERN AUTOMOBILES (INDIA) VS CIT (112 ITR 1048 ) WHEREIN THE BOMBAY HIGH COURT HAS HELD THAT WHERE THE ASSESSEE AGREE TO INCLUSION OF AMOUNT, ONUS SHIFTS ON ASSESSEE IN PENALTY PROCE EDINGS TO SHOW THAT THE AMOUNT WAS NOT THE CONCEALED INCOME. HON'BLE DELHI HIGH COURT IN THE CASE OF DURGA TIMBER WORKS VS CIT (79 ITR 63) HAS HELD THAT IT WOULD AMOUNT TO LAYING AN IMPOSSIBLE BURDEN 1 OF PROOF ' ON DEPARTMENT AND MAKING PROVISIONS FOR IMPOSITION'; OF PENALTY W HOLLY UNWORKABLE, IF EVEN AFTER ADMISSION BY ASSESSEE THAT CERTAIN AMOUN T COULD BE TREATED AS ITS INCOME, THE DEPARTMENT HAS STILL TO 'PROVE BY I NDEPENDENT EVIDENCE THAT THE ASSESSEE HAD CONCEALED ITS INCOME. FURTH ER, THE HONBIE MP HIGH COURT IN THE CASE OF ADDITIONAL COMMISSIONER OF INCOME BHARTIYA BHANDAR (122 ITR 622) HAS HELD THAT THE TRIBUNAL WAS .NOT RIGHT IN HOLDIN G THAT EVEN IN THE PRESENCE OF ADMISSION 'BY THE ASSE SSE,THE DEPARTMENT SHOULD PROVE ITS INDEPENDENT EVIDENCE THAT THE REPR ESENTED THE CONCEALED 4 ITA 3011/MUM/2016 INCOME OF THE ASSESSEE. 6. IT IS CLEAR THAT ENOUGH MATERIAL WAS BROUG HT ON ; RECORD TO PROVE THAT THE ASSESSEE MADE A CONSCIOUS ATTEMPT TO EVADE TAXE S BY; FURNISHING INACCURATE PARTICULARS OF INCOME. HENCE IT IS JUSTIFIED TO LEV Y PENALTY U/S.271(1)(C) OF THD IT ACT, 1961. 7. IN A RECENT DECISION OF THE LARGER BENCH O F THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S. DHARMENDRA PROCESSORS (3 06 IF R 277) IT WAS HELD THAT LEVY OF PENALTY IS A CIVIL LIABILITY AN D WILLFUL CONCEALMENT IS NOT ESSENTIAL INGREDIENT FOR ATTRACTING A CIVIL LIABILI TY AS IN THE MATTER OF PROSECUTION U/S.276C OF THE ACT. IT WAS HELD BY THE HON'BLE SUP REME COURT AFTER CONSIDERING, THE PROVISIONS OF SECTION 271(L)(C) AN D THE EXPLANATION APPENDED THERETO THAT THE EXPLANATIONS APPENDED TO SECTION 271(L)(C) OF THEC INCOME- TAX ACT ENTIRELY INDICATE THE ELEMENT OF STRICT LIA BILITY ON THE ASSESSEE FOR CONCEALMENT OR FOR GIVING INACCURATE PARTICULARS WH ILE FILING THE RETURN. THIE JUDGEMENT IN DILIP; N SHROFF'S CASE(2007) 8 SC ALE 304(SC) HAS NOT CONSIDERED THE EFFECT AND RELEVANCE OF SECTION 276C OF THE INCOME-TAX ACT. THE OBJECT BEHIND THE ENACTMENT OF SECTION 271(L)(C ) READ WITH THE EXPLANATION INDICATES SAID SECTION HAS BEEN ENACTED TO PROVIDE FOR A REMEDY FOR LOSS OF REVENUE. THE PENALTY UNDER THAT PROVISI ON IS A CIVIL LIABILITY. WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTR ACTING CIVIL LIABILITY AS IS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276 C OF THE INCOME-TAX ACT.: .FURTHER, THE HIGH COURT OF DELHI IN THE CASE OF CI T VS. ZOOM COMMUNICATION (P)LTD. 327JITR 510 HAS HELD AS UNDER:- 'SO LONG AS THE ASSESSEE HAS NOT CONCEALED ANY MATERIAL FACT OR THE FACTUAL INFORMATION GIVEN BY HIM HAS NOT BEEN FOUND TO.BE INCORRECT, HE WILL NOT BE LIABLE TO IMPOSITION OF PENALTY UNDER S. 271(1)L(C) , EVEN IF NOT SUBSTANTIATED, IS FOUND TO BE BONA FIDE. IF THE EX PLANATGION IS NEITHER SUBSTANTIATED, IS FOUND TO BE BONA FIDE, EXPLN.1 TO S.271(1)(C) WOULD COME INTO PLAY AND THE ASSESSEE WILL BE LIABLE TO T HE PRESCRIBED PENALTY. THE ASSESSEE CONCERNED IS A COMPANY WHICH DECLARED AN INCOME OF RS. 1,21,49,861 AND ACCOUNTS OF WHICH ARE MANDATORILY S UBJECTED TO AUDIT. IT IS NOT THE CASE OF THE ASSESSEE THAT IT WAS ADVISED THAT THE AMOUNT O F INCOME-TAX PAID BY IT COULD BE CLAIMED AS A REVENUE,. EXPENDITURE. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT DEDUCTION OF INCOME-TAX PAID BY IT WAS DEBATABLE ISSUE. IN FACT, IN VIEW OF THE SPECIFIC P ROVISIONS CONTAINED IN S. 40(A)(II), NO SUCH ADVICE COULD BE GIVEN BY AN AUDI TOR OR OTHER TAX EXPERT. NO SUCH ADVICE HAS BEEN CLAIMED BY THE ASSESSEE EVE N WITH RESPECT TO THE AMOUNT CLAIMED AS DEDUCTION ON ACCOUNT OF CERTAIN E QUIPMENT HAVING BECOME USELESS AND HAVING BEEN, WRITTEN OFF. THE TRIBUNAL WAS ENTIRELY WRONG IN SAYING THAT S. 32(L)(III) APPLIES TO SUCH A DEDUCTION. THUS IT WAS THE TRIBUNAL WHICH TOOK THE VIEW THAT S. 32(1)(II) COULD BE ATTRACTED TO THE DEDUCTION CLAIMED BY THE ASSESSEE. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT IT WAS UNDER A BONA FIDE BELIEF THAT THESE TWO AMOUNTS COULD BE : CLAIMED AS REVENUE EXPENDITURE. THE ASSESSEE, IN FA CT, OUTRIGHTLY CONCEDED BEFORE THE AO THAT THESE AMOUNTS COULD NOT HAVE BEEN CLAIMED AS REVENUE DEDUCTIONS. THE ONLY PLEA.TAKEN BY THE DSSESSEE BEFORE FHE IT. AUTHORITIES WAS THAT IT WAS DUE TO OVERSIGHT THAT THE AMOUNT OF INCOME-TAX PAID BY THE ASSESSEE AS WELL AS THE AMOUNT CLAIMED AS DEDUCTION ON ACCOUNT OF CERTAIN EQUIPMENT BEING WRITTEN OFF COULD NOT BE ADDED BACK IN THE COMPUTATION OF INCOME, IT IS TRUE THAT MERE SUBMITTING A CLAIM WHI CH IS INCORRECT IN LAW WOULD NOT AMOUNT TO GIVING INACCURATE PARTICULARS O F THE INCOME OF THE 5 ITA 3011/MUM/2016 ASSESSEE, BUT IT CANNOT BE DISPUTED THAT THE CLAIM- MADE BY THE ASSESSEE NEEDS TO BE BONA FIDE. IF THE CLAIM BESIDES BEING INCORRECT IN LAW IS MALA FIDE, EXPLN. 1 TO S. 271(1) WOULD COME IN TO PLAY AND WORK TO THE DISADVANTAGE OF THE ASSESSEE 8. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, I AM OF THE OPINION THAT THE ASSESSEE COMPANY 'HAS DELIBERATELY FILED INACCURATE PARTICULARS OF INCOME WITHIN THE MEANING OF SECTION 271 (L)(C) OF THE I T ACT, 1961 READ WITH EXPLANATION 1 THERETO. FROM THE ABOVE IT IT CAN BE CONCLUDED THAT THE ASSESSEE FILED INACCURATE PAR TICULARS.AND SOUGHT TO EVADE TAX ON RS. RS. 2,63,52,083/-. I, THEREFORE, HOLD TH AT ASSESSEE HAS SOUGHT TO EVADE TAX ON RS. RS. 2,63,52,083 /- AND P ENALTY U/S. 271 (L)(C) READ WITH EXPLANATION 1 OF THE IT ACT, 1961 IS ATTR ACTED IN ITS CASE. I THEREFORE, HOLD THE ASSESSEE AS A DEFAULTER U/S.271 (L)(C) AND ACCORDINGLY I LEVY PENALTY ASUNDER:- 9. THE CALCULATION OF TAX SOUGHT TO BE EVADED IS.AS UNDER:- INCOME SOUGHT TO BE EVADED - RS. 2,63,52,0837 TAX THEREON - RS. 79,05,625/- MINIMUM PENALTY @ 100% - RS, 79,05,625/- MAXIMUM PENALTY @ 300% - RS. 2,37,16,8757- CONSIDERING THE FACTS OF THE CASE I AM SATISFIED TH AT MINIMUM PENALTY OF RS. 79,05,625/- BE LEVIED IN HE CASE OFHE ASSESSEE.,1 THEREFORE DIR ECT: THE ASSESSEE TO PAY A SUM OF RS. 79,05,625/- BY WAY OF PENALTY U/S. 271(L)(C) OF THE I.T. ACT, 1961. ISSUE DEMAND NOTICE AND CH ALLAN ACCORDINGLY. 3. AGGRIEVED BY THE PENALTY ORDER, ASSESSEE PREFERR ED APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE ASSESSEE SUBMI TTED THAT THE AO HAS LEVIED PENALTY WITHOUT RECORDING SPECIFIC SATISFACT ION AS TO WHICH LIMB OF THE PENAL PROVISIONS U/S 271(1)(C) ATTRACTS WHICH I S EVIDENT FROM THE FACT THAT THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) IS VAGUE IN NATURE. THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS NOT DELE TED OR STRUCK OFF INAPPLICABLE PORTION IN THE NOTICE WHICH IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO BEFORE INITIATION OF PENALTY PROC EEDINGS U/S 271(1)(C). THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS LEVI ED PENALTY FOR 6 ITA 3011/MUM/2016 FURNISHING INACCURATE PARTICULARS OF INCOME BY INVO KING PROVISIONS OF EXPLANATION 1 WHICH RELATES TO CASE OF CONCEALMENT OF PARTICULARS OF INCOME, THEREFORE, LEVYING OF PENALTY ON THE BASIS OF FURNISHING OF INACCURATE PARTICULARS OF INCOME IS INCORRECT. EVE N ON MERITS, ASSESSEE SUBMITTED THAT IT HAS FILED NECESSARY MATERIALS REQ UIRED FOR COMPUTATION OF INCOME IN THE RETURN OF INCOME, THEREFORE, THE A O WAS INCORRECT IN HOLDING THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME IN RESPECT OF EXCESSIVE CLAIM OF LOSS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AND LOSS ON SALE OF FIXED ASSETS WIT HOUT APPRECIATING THE FACT THAT THOSE ITEMS ARE PART OF REGULAR RETURN FI LED BY THE ASSESSEE, THOUGH THE CLAIM MADE BY THE ASSESSEE IS NOT SUBSTA NTIATED UNDER LAW. THE LD.CIT(A), AFTER CONSIDERING RELEVANT SUBMISSIO NS OF THE ASSESSEE HELD THAT IF THE ASSESSEE HAS FURNISHED THE EXPLANA TION BUT SUCH EXPLANATION IS NOT SATISFACTORY OR TRUE, THEN THE A O CAN REJECT SUCH EXPLANATION AND PROCEED TO LEVY PENALTY U/S 271(1)( C). IN THIS CASE, AO HAS LEVIED PENALTY ON TWO COUNTS, I.E. FIRSTLY, THE EXCESS CLAIM OF LOSS HAS COME TO LIGHT ONLY DUE TO THE FINDINGS OF THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT NOT BY VOLUNTARY ACT OF THE ASSESSEE. SECONDLY, IT IS CLEARLY EVIDENT THAT HAD THE CASE N OT BEEN SELECTED FOR SCRUTINY, THE EXCESS LOSS CLAIMED BY THE ASSESSEE W OULD NOT HAVE SEEN THE LIGHT OF THE DAY. THEREFORE, THE LD.CIT(A) OPI NED THAT THE AO WAS 7 ITA 3011/MUM/2016 CORRECT IN LEVYING PENALTY U/S 271(1)(C) FOR FURNIS HING INACCURATE PARTICULARS OF INCOME. AGGRIEVED BY THE ORDER OF C IT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD.AR FOR THE ASSESSEE, AT THE OUTSET SUBMIT TED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE ON TE CHNICAL GROUNDS BY NUMEROUS DECISIONS OF HIGH COURTS AND TRIBUNALS, WH ERE THE COURTS HAVE TAKEN A CONSISTENT VIEW THAT IF THE AO LEVIED PENALTY ON INVALID NOTICE WITHOUT STRIKING OFF IRRELEVANT PORTION IN T HE NOTICE, THEN THE WHOLE PROCEEDINGS IS VITIATED, CONSEQUENTLY, PENALTY LEVI ED U/S 271(1)(C) CANNOT SURVIVE. THE LD.AR REFERRING TO THE DECISIO N OF ITAT IN THE CASE OF M/S TATA COMMUNICATIONS TRANSFORMATIONS SERVICES LTD VS DCIT IN ITA NO.3108/MUM/2016 DATED 21-02-2018 SUBMITTED THA T THE SAID DECISION HAS CONSIDERED THE LAW LAID DOWN BY THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS SSAS EMERALD MEADOWS ( 2017) 242 TAXMAN 180 (SC) AND ALSO THE DECISION OF KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (2018) 218 TAXMAN 423 WHERE IT WAS HELD THAT THE PENALTY PROCE EDINGS INITIATED U/S 271(1)(C) WITHOUT VALID NOTICE IS A CLEAR CASE OF N ON APPLICATION OF MIND BY THE AO AND CONSEQUENT LEVY OF PENALTY U/S 271(1) (C) CANNOT SURVIVE. 5. THE LD.DR, ON THE OTHER HAND, STRONGLY SUPPORTIN G THE ORDER OF THE CIT(A) SUBMITTED THAT THE CIT(A) HAS BROUGHT OUT CL EAR FACTS TO THE EFFECT 8 ITA 3011/MUM/2016 THAT ALTHOUGH THE AO HAS NOT FRAMED THE ASSESSEE UN DER A PARTICULAR CHARGE, AT THE TIME OF INITIATION OF PENALTY U/S 27 1(1)(C), BUT WHILE LEVYING PENALTY U/S 271(1)(C), THE AO CLEARLY LEVIED PENALT Y FOR FURNISHING INACCURATE PARTICULARS OF INCOME IN RESPECT OF EXCE SS CLAIM OF LOSS ON ACCOUNT OF PROVISION FOR BAD AND DOUBTFUL DEBTS AND LOSS ON SALE OF FIXED ASSETS WITHIN THE MEANING OF EXPLANATION 1 TO SECTI ON 271(1)(C). THEREFORE, THERE IS NO MERIT IN THE ARGUMENT OF THE ASSESSEE THAT THE WHOLE PENALTY PROCEEDINGS IS VITIATED MERELY FOR TH E REASON THAT THE INITIAL NOTICE ISSUED BY THE AO IS NOT STRUCK OFF ALL INAPP ROPRIATE PORTION IN THE SAID NOTICE. IN THIS REGARD HE RELIED UPON THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SMT KAYSALY A & OTHERS (1995) 216 ITR 650 (BOM) AND ALSO THE DECISION OF BOMBAY H IGH COURT IN THE CASE OF MAHARAJ GARAGE COMPANY VS CIT IN INCOME TAX REFERENCE NO.21 OF 2008 DATED 22.08.17. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ISSUE OF INVALID NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) AND CONSEQUENT PENALTY PROCEEDINGS IS LIABLE TO BE QUASHED IS NO LONGER AN ISSUE RES INTEGRA. THE HONBLE KARNATAKA HIGH C OURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA) HAS CLEARLY HELD THAT ISSUE OF PENALTY NOTICE UNDER ONE LIMB AND LEV YING PENALTY ON ANOTHER LIMB IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO. THE 9 ITA 3011/MUM/2016 HONBLE SUPREME COURT IN THE CASE OF CIT VS SSAS E MERALD MEADOWS (SUPRA) HAS DISMISSED SLP FILED BY THE DEPARTMENT I N THE LIGHT OF RATIO LAID DOWN BY HONBLE KARNATAKA HIGH COURT IN THE CA SE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA). THUS, THE LAW IS VERY CLEAR INASMUCH AS THE ISSUE OF VAGUE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) BEFORE LEVY OF PENALTY U/S 271(1)(C). TH E CO-ORDINATE BENCH OF ITAT, MUMBAI BENCH H IN THE CASE OF M/S TATA COMM UNICATIONS TRANSFORMATIONS SERVICES LTD VS DCIT (SUPRA) HAS CO NSIDERED THE ISSUE IN THE LIGHT OF VARIOUS DECISIONS RENDERED BY HONB LE SUPREME COURT AND BOMBAY HIGH COURT AND HELD THAT PENALTY PROCEEDINGS INITIATED U/S 274 R.W.S. 271(1)(C) WITHOUT STRIKING OFF IRRELEVANT PO RTION OF NOTICE IS A CLEAR CASE OF NON APPLICATION OF MIND BY AO AS TO WHETHER THE PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF IN COME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE RELEVANT POR TION OF THE ORDER IS EXTRACTED BELOW:- 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH THE CASE LAWS CITED BY BOTH THE PARTIE S. THE ASSESSEE HAS CHALLENGED PENALTY ORDER PASSED BY THE AO UNDER SEC TION 271(L)(C) ON THE GROUND THAT THE AO HAS ISSUED VAGUE NOTICE WITHOUT STRIKING OFF INAPPROPRIATE PORTION IN THE NOTICE WHETHER THE PENALTY HAS BEEN LEVIED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME, THEREFORE, THE PENALTY LEVIED ON SUCH VAGUE NOTICE CANNOT SURVIVE. WE FIND THAT THE ISSUE OF NOTICE UNDER SECTION 274 R.W.S 271(L)( C) HAS BEEN DEALT BY THIS TRIBUNAL IN VARIOUS CASES INCLUDING IN THE CASE OF M/S. CENZAR INDUSTRIES LTD. VS. ITO IN ITA NO.L970/M/2015 DATED 29.12.17 WHEREI N AFTER CONSIDERING THE RELEVANT FACTS AND ALSO RELIED UPON VARIOUS JUDICIA L PRECEDENTS INCLUDING THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) AND ALSO THE DECIS ION OF HON'BLE BOMBAY 10 ITA 3011/MUM/2016 HIGH COURT IN IHE CASE OF SHRI SAMSON PERINCHERY VS . ACIT (SUPRA), HAS HELD THAT PENALTY PROCEEDINGS INITIATED UNDER SECTION 27 1(L)(C) IS VOID AB INITIO AND LIABLE TO BE QUASHED, IF THE AO ISSUED VAGUE NOTICE UNDER SECTION 274 R.W.S 27I(L)(C) WITHOUT STRIKING OFF IRRELEVANT PORTION O F NOTICE AND ALSO IF THE AO HAS NOT MADE A SPECIFIC CHARGE WHETHER PENALTY PROCEEDI NG IS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE RELEVANT PORTION OF ORDER IS EXTRACTED BELOW: '10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED T HE MATERIAL AVAILABLE ON RECORD AND ALSO GONE THROUGH THE ORDERS OF AUTHORITIES BEL OW. THE AO HAS LEVIED PENALTY U/S 271(L)(C) IN RESPECT OF DISALLOWANCE OF REIMBURSEMEN T OF SELLING AND DISTRIBUTION EXPENSES ON THE GROUND THAT THE ASSESSEE HAS CONCEA LED PARTICULARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME. TH E AO HAS INITIATED PENALTY BY ISSUING NOTICE U/S 274 R.W.S. 271(L)(C) IN A PRINTED FORM WITHOUT STRIKING OFF OF IRRELEVANT PORTION WHICH WERE NOT APPLICABLE TO THE FACTS OF ASS ESSEE'S CASE. THE AO HAS ISSUED NOTICE WHICH STATES THAT PENALTY HAS BEEN INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IN THE ASSESSMENT ORDER, THE AO HAS INITIATED PENALTY PROCEEDINGS ON BOTH CHARGE S, I.E. FOR CONCEALING THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. THE AO LEVIED THE PENALTY ON BOTH THE CHARGES, I.E. FOR CONCEALIN G THE PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. RIGHT F ROM THE ASSESSMENT STAGES TO LEVY OF PENALTY, THE AO HAS INITIATED PENALTY ON BOTH CH ARGES WHICH IS NOT THE CASE AS PER THE PROVISIONS OF SECTION 271(L){C) AS THE TWO CHARGES, I.E. CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F INCOME ARE TWO DIFFERENT CONNOTATIONS. THE ISSUE OF NOTICE U/S 274 R.W.S. 271 (L}(C) GOES TO THE ROOT OF THE MATTER OF ASSUMING JURISDICTION TO LEVY PENALTY U/S 271(L) (C), THEREFORE, BEFORE ISSUANCE OF NOTICE, THE AO HAS TO ARRIVE AT A SATISFACTION AS T O WHETHER PENALTY PROCEEDINGS ARE INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO CANNOT TAKE BOTH THE CHARGES FOR LEVYING PENALTY BY STATING THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AND ALSO FURNISHED INACCURATE PARTICULARS OF INCOME. 11. THE PROVISIONS OF SECTION 271(L)(C) ARE VERY CLEAR AND THERE IS NO AMBIGUITY. ON A PLAIN READING OF SECTION 271(L)(CL, IT IS VERY CLEA R THAT CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALMENT OF PARTICULAR S OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACT S OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES, THERE MAY BE OVERLA PPING OF THE TWO OFFENCES BUT IN SUCH CASES, THE INITIATION OF THE PENALTY PROCEEDIN GS ALSO MUST BE FOR BOTH THE OFFENCES. BUT INITIATING PENALTY PROCEEDINGS FOR ON E OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR HOLDING HIM GUILTY FOR EITHER ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. THIS LEGAL PROPOSITION IS CLEARLY REITERATED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATNA COTTON & GINNING FACTORY LTD (SUPRA) WHEREIN IT WAS CATEGORICALLY HELD THAT SATISFACTION OF THE EXIS TENCE OF THE GROUNDS MENTIONED IN SECTION 271FL)(CL WHEN IT IS A SINE QUA NON INITIATION OF PROCEEDINGS , THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S AND THE SAID GROUND SHOULD BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. INITIATION OF PENALTY ON ONE GROUND AND LE VYING PENALTY ON ANOTHER GROUND WOULD CAUSE INJUSTICE TO THE ASSESSEE AS THE ASSESSE E WAS KEPT IN BLANK TO JUSTIFY HIS CASE WHETHER THE AO SOUGHT TO INITIATED PENALTY FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. IF THE PROCEEDINGS ARE INITIATED ON A SPECIFIC CHARGE, THEN, THE ASSESSEE CAN JUSTIFY ITS CASE BY ADVANCING ARGUMENTS ON THE CHARGE FRAMED BY THE AO. THUS, ONC E THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED O N THE SAME GROUND. IF PENALTY PROCEEDINGS ARE INITIATED ON ONE GROUND AND LEVIED PENALTY ON DIFFERENT GROUND OR PENALTY PROCEEDINGS ARE INITIATED ON TWO GROUNDS, I. E. CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULAR S OF INCOME WOULD DEFINITELY VITIATE THE ENTIRE PENALTY PROCEEDINGS. 12. IN THIS CASE, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD IT IS ABUNDANTLY CLEAR THAT THE AO HAS INITIATED PENALTY PROCEEDINGS IN THE ASS ESSMENT ORDER ON BOTH THE GROUNDS, I.E. CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE AO ALSO LEVIED PENALTY O N BOTH THE GROUNDS OF CONCEALMENT OF PARTICULARS OF INCOME AND ALSO FURNISHING OF INA CCURATE PARTICULARS OF INCOME WHICH 11 ITA 3011/MUM/2016 IS QUITE CONTRARY TO THE PROVISIONS OF SECTION 271( LJ(C) WHERE IT WAS CATEGORICALLY STATED THAT BOTH THE CHARGES ARE STANDING IN A DIFFERENT F OOTING AND THE AO HAS TO INITIATE PENALTY PROCEEDINGS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. INITIATION OF PEN ALTY BY INJECTING AND IN PLACE OF OR WOULD DEFINITELY GO AGAINST THE BASIC PROVISIONS OF THE ACT. IN THIS CASE, THE AO HAS INITIATED PENALTY ON BOTH THE GROUNDS, WHICH CANNOT BE THE CASE FOR INITIATION OF PENALTY U/S 271(L)(C) OF THE ACT. WE FURTHER OBSERVE THAT I T IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE G ROUND OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET OTHERWISE THOUGH THE INITIATI ON OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALT Y WOULD VIOLATE PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THE VALIDITY OF OR DER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIA LS IN THE POSSESSION OF THE AUTHORITY IMPOSING PENALTY AT THE TIME, THE ORDER WA S PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNO T VALIDATE THE ORDER OF PENALTY. THE AO IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PR OCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEAL MENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME. AS ALREADY STATED, FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES. IN CASE, THE AO HAS MADE MULTIPLE ADDITIONS, ONE MAY RELATES TO CONCEALMENT OF PARTICULARS OF INCOME AND ANOTHER MAY RELATE TO FURNISHING OF INACCURATE PARTICULARS OF INCOME, BUT SINGLE ADD ITION MADE CANNOT LEAD TO AN INFERENCE OF CONCEALMENT OF PARTICULARS OF INCOME A ND FURNISHING OF INACCURATE PARTICULARS. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT BEFORE INITIATION OF PENALTY PROCEEDINGS, THE AO HAS TO ARRIVE AT A CORRECT SATI SFACTION AS TO WHETHER PENALTY IS INITIATED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. IF THE AO FAILS TO INITIATE PENALTY PROCEEDINGS BY ISSUANCE OF PROPER NOTICE, THEN THE WHOLE PENALTY PROCEEDINGS BE COMES VITIATED AND VOID AB INITIO. 13. COMING TO THE CASE LAWS RELIED UPON BY THE ASSES SEE. THE ASSESSEE HAS RELIED UPON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN T HE CASE OF MANJUNATHA COTTON & GINNING FACTORY VS CIT (SUPRA), WHEREIN THE HON'BLE HIGH COURT HAS CATEGORICALLY OBSERVED THAT SENDING PRINTED FORM OF NOTICE WHERE A LL THE GROUNDS MENTIONED IN SECTION 271(L)(C) ARE MENTIONED WOULD NOT SATISFY RE QUIREMENT OF LAW. NOTICE ISSUED U/S 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GR OUND MENTIONED IN SECTION 271(L)(C), I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED . INITIATING THE PENALTY PROCEEDINGS ON ONE LIMB AND HOLDING THE ASSESSEE GUILTY OF ANOT HER LIMB IS BAD IN LAW. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW:- ' THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT T O INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY PROCEEDIN GS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL INCOME ARE DIFFERENT. THUS, THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME T O THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT AS CASE OF FURNISHING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PA I REPORTED (2007) 292 ITR 11 (SC) AT PAGE 19 HAS HELD THAT CONCEALNMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. 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 P.LTD., REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AN D THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFIC ER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE A PPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOM E. THE STAND AND PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INF ERENCE AS TO NON-APPLICATION OF MIND.' 14. THE ASSESSEE HAS RELIED UPON DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS SAMSON PERINCHERY IN INCOME TAX APPEAL NO. 1154 OF 2014 & ORS ORDER DATED 5 TH JANUARY, 2017. THE HON'BLE BOMBAY HIGH COURT AFTER CO NSIDERING THE RATIO LAID DOWN BY THE HON'BLE KARNATAKA HIGH COURT IN THE CA SE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) OBSERVED THAT THE SATISFACT ION OF THE AO WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED IN SECTION 271(L}( C) OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT / PERMIT PENALTY BEING IMPOSED FOR THE OTHER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPON D TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED / NOTICE ISSUED. IT MUST , THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND ON WHICH THE PENALTY 12 ITA 3011/MUM/2016 PROCEEDINGS HAS BEEN INITIATED AND IT CANNOT BE ON A FRESH GROUND OF WHICH ASSESSEE HAS NO NOTICE. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW:- 'THE ABOVE SUBMISSION ON THE PART OF THE REVENUE IS IN THE THE DECISION OF THE SUPREME COURT IN ASHOK PAL V/S. CIT 292 ITR [RELIE D UPON IN MANJUNATH COTTON & GINNING FACTORY (SUPRA)] - WHEREIN IT IS OBS ERVED THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS OF INCOME IN SECTION 271(LJ(C) OF THE ACT, CARRY DIFFERENT MEANINGS/ CONNOTATIONS . THEREFORE, THE SATISFACTION OF THE ASSESSING OFFICER WITH REGARD TO ONLY ONE OF THE TWO BREACHES MENTIONED UNDER SECTION 271(L)(C) OF THE ACT, FOR INITIATION OF PENALTY PROCEEDINGS WILL NOT WARRANT/ PERMIT PENALTY BEING IM POSED FOR THE OTHER BREACH. THIS IS MORE SO, AS AN ASSESSEE WOULD RESPON D TO THE GROUND ON WHICH THE PENALTY HAS BEEN INITIATED / NOTICE ISSUED . IT MUST, THEREFORE, FOLLOW THAT THE ORDER IMPOSING PENALTY HAS TO BE MADE ONLY ON THE GROUND ON WHICH THE PENALTY PROCEEDINGS HAS BEEN INITIATED AND IT C ANNOT BE ON A FRESH GROUND OF WHICH ASSESSEE HAS NO NOTICE.' 15. THE ASSESSEE HAS ALSO RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS SSA'S EMERALD MEADOWS (SUPRA) WHEREIN THE HON 'BLE SUPREME COURT DISMISSED SLP FILED BY THE REVENUE BY FOLLOWING THE DECISION O F THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPRA) BY OBSERVING THAT NOTICE ISSUED U/S 274 R.W.S. 271(L)(C) WAS BAD IN LAW AS IT DID NOT SPEC IFY UNDER WHICH LIMB OF SECTION 271(LHC), PENALTY PROCEEDINGS HAD BEEN INITIATED. 16. COMING TO THE CASE LAWS RELIED UPON BY THE LD. DR. THE LD. DR RELIED UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CI J_VS SMT.KAUSHALYA (SUPRA). WE HAVE GONE THROUGH THE CASE LAW RELIED UPON BY THE LD . DR IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND FIND THAT THE ITAT, MUMBAI IN THE CASE OF DCIT VS DR. SARITA MILIND DAVARE IN ITA NO.L789/MUM/2014 DATED 21-12-2016 HAS C ONSIDERED THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE LIGHT OF SUPREME CO URT JUDGEMENT IN THE CASE OF DILIP N SHROFF 291 ITR 519 (SC) AND OBSERVED THAT THERE SHOULD BE APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF ISSUING NOTICE. SINCE THE CO-ORDINATE BENCH HAS ALREADY CONSIDERED THE JUDGEMENT OF HON'BLE BOMBAY HIGH COURT , WE ARE OF THE VIEW THAT CASE LAW RELIED UPON BY THE LD.DR IS NOT APPLICABLE TO THE FAC TS OF THE'PRESENT CASE.' 8. IN SO FAR AS THE JUDGMENT OF THE HON'BJE JUDICIA L BOMBAY HIGH COURT IN THE CASE OF M/S. MAHARAJ GARAGE & COMPANY VS. CIT ( SUPRA) RELIED UPON BY THE LD. D.R., THE CO-ORDINATE BENCH OF ITAT IN T HE CASE OF TNDRANI SUNIL PILLAI VS. ACIT IN ITA NO.L339/M/2016 DATED 19.01.1 8 HAS CONSIDERED THE RATIO OF THE HON'BLE JURISDICTIONAL HIGH COURT IN T HE CASE OF M/S. MAHARAJ GARAGE & COMPANY VS. CIT (SUPRA) AND HELD THAT THE BASIC ISSUE ARISING OUT OF THE REFERENCE APPLICATION WHICH TELL FOR CONSIDE RATION OF THE HON'BLE JURISDICTIONAL HIGH COURT WAS WHILE GRANTING PREVIO US APPROVAL BY INSPECTING ASSISTANT COMMISSIONER AS PER PROVISIONS OF SECTION 271(L)(C)(III) OF THE ACT, WHETHER THE ASSESSEE WAS REQUIRED TO BE GIVEN AN OPPORTUNITY OF BEING HEARD. WHILE CONSIDERING THE I SSUE, THE HON'BLE COURT OBSERVED THAT PROVISIONS OF SECTION 271(L)(C)(III) DOES NOT ATTRACT RULE OF PRESUMPTION OF MENSREA AS THE PENALTY IMPOSED UNDER THE SAID PROVISION IS FOR THE BREACH OF CIVIL OBLIGATION. THE OBSERVATION S OF THE HON'BLE COURT AGAINST ISSUANCE OF SHOW CAUSE NOTICE APPEAR TO BE IN THE CONTEXT OF QUANTUM OF PENALTY PROPOSED TO BE IMPOSED AND NOT W ITH REFERENCE TO THE DOING AWAY WITH THE ISSUE OF SHOW CAUSE NOTICE AS C ONTEMPLATED UNDER SECTION 274 OF THE ACT. 9. IN THE VIEW OF THE MATTER AND CONSISTENT WITH TH E VIEW TAKEN BY THE CO- ORDINATE BENCH IN THE CASE OF M/S. CENZAR INDUSTRIE S LTD. VS. ITO (SUPRA), 13 ITA 3011/MUM/2016 WE ARE OF THE CONSIDERED VIEW THAT THE PENALTY PROC EEDINGS INITIATED BY THE AO BY ISSUE OF NOTICE UNDER SECTION 274 R.W.S 271(L )(C) WITHOUT STRIKING OFF THE IRRELEVANT PORTION OF NOTICE IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO, WHETHER PENALTY HAS BEEN INITIATED FOR CONC EALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF I NCOME. WE FURTHER NOTICED THAT THE AO HAS ISSUED PRINTED FORM OF NOTI CE WITHOUT STRIKING OFF IRRELEVANT PORTION AND ALSO IN THE PENALTY ORDER HE DOES NOT SPECIFY UNDER WHICH CHARGE PENALTY HAS BEEN INITIATED. THEREFORE, WE ARE OF TH E CONSIDERED VIEW THAT THE PENALTY PROCEEDING INITIATED BY THE A O IS BAD IN LAW AND LIABLE TO BE QUASHED. HENCE, WE QUASH THE PENALTY PROCEEDINGS AN D DELETE PENALTY LEVIED BY THE AO UNDER SECTION 271(L)(C) OF THE ACT. 7. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH T HE VIEW TAKEN BY THE CO-ORDINATE BENCH, WE ARE OF THE CONSIDERED VIEW TH AT THE AO HAS INITIATED PENALTY U/S 271(1)(C) BY ISSUING SHOW CAU SE NOTICE U/S 274 WITHOUT STRIKING OFF INAPPLICABLE PORTION IN THE NO TICE. THEREFORE, IT IS A CLEAR CASE OF NON APPLICATION OF MIND BY THE AO AS TO WHETHER PENALTY HAS BEEN INITIATED FOR FURNISHING OF INACCURATE PAR TICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF INCOME. EVEN IN THE PENALTY ORDER, THE AO HAS LEVIED PENALTY UNDER EXPLANATION 1 TO SECTION 2 71(1)(C) WHICH IS APPLICABLE FOR DEEMED CONCEALMENT OF PARTICULARS OF INCOME. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS NOT C LEAR WHILE INITIATING PENALTY U/S 271(1)(C) AND HENCE, THE WHOLE PENALTY PROCEEDINGS IS VITIATED AND CONSEQUENTLY, PENALTY LEVIED BY THE AO U/S 271(1)(C) CANNOT SURVIVE. HENCE, WE DIRECT THE AO TO DELETE PENALTY LEVIED U/S 271(1)(C) OF THE ACT. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. 14 ITA 3011/MUM/2016 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2018. SD/- SD/- (MAHAVIR SINGH) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 29 TH JUNE, 2018 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER SR.PS, ITAT, MUMBAI