Naresh Jalan, Kolkata V. A.C.I.T.,Central Circle-1(1), Kolkata

ITA 327/KOL/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4190 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-10-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 17-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S M SURANA ADV SH JAY
• Keywords: Opportunity of being heard; Principle of natural justice; Transactions in derivatives; Retrospective amendment; Question of law; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 142(1); 250; 274; 143(2); 13; 22; 153C; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA C BENCH, KOLKATA (VIRTUAL COURT) (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI ABY T. VARKEY, JUDICIAL MEMBER) I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF...........................................................................APPELLANT [PAN: AABHN 4403 P] VS. ACIT, CENTRAL CIRCLE-1(1), KOLKATA.............................................................................RESPONDENT APPEARANCES BY: SH. S.M. SURANA, ADV. APPEARED ON BEHALF OF THE ASSESSEE. SH. JAYANTA KHANRA, JCIT, APPEARED ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : OCTOBER 13 TH , 2020 DATE OF PRONOUNCING THE ORDER : OCTOBER 22 ND , 2020 ORDER PER J. SUDHAKAR REDDY, AM : BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-20, KOLKATA [HEREINAFTER LD. CIT(A) FOR SHORT] DATED 18.02.2020 AND 19.02.2020 PASSED U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) FOR AY 2013-14. 2. AS THE ISSUE ARISING IN BOTH THESE APPEALS ARE COMMON, THEY ARE HEARD TOGETHER AND DISPOSED OFF BY WAY OF THIS COMMON ORDER. 3. IN BOTH THESE APPEALS, THE ASSESSEES CHALLENGED PENALTY LEVIED ON THEM U/S 271AAB OF THE ACT BY THE AO AND CONFIRMED BY THE LD. CIT(A). 4. THE FACTS OF BOTH THESE CASES ARE THAT, SEARCH & SEIZURE OPERATION U/S 132 OF THE ACT WAS CONDUCTED ON 13.12.2012, BY THE INVESTIGATION WING OF THE DEPARTMENT, KOLKATA AT THE RESIDENCE, AS WELL AS BUSINESS PREMISES OF THE RAMKRISHNA GROUP AND OTHERS AND ALSO AT THE RESIDENCE OF SHRI NARESH JALAN AT FLAT NO. 6A BELMONT APARTMENT, 6 TH FLOOR, 18/2 ALIPORE ROAD, KOLKATA-700 027. NOTICES WERE ISSUED U/S 142(1) AND 143(2) OF THE ACT TO THE ASSESSEES AND IN RESPONSE, THE ASSESSEES FILED THEIR RETURN OF INCOME; MR. NARESH JALAN (HUF) DECLARING TOTAL INCOME OF 3,05,45,610/- FOR THE AY 2013-14. MR. 2 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. NARESH JALAN (INDIVIDUAL) SIMILARLY FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF 4,31,08,610/- FOR THE AY 2013-14. THE RETURNED INCOME WAS ACCEPTED BY PASSING ASSESSMENT ORDER U/S 143(3) OF THE ACT ON 31.03.2015 IN BOTH THE CASES. LATER PENALTY PROCEEDINGS U/S 271AAB OF THE ACT WAS INITIATED SEPARATELY FOR BOTH THE CASES. PENALTIES WERE LEVIED AT THE RATE OF 10% OF THE UNDISCLOSED INCOME. IN BOTH THE CASES ORDERS WERE PASSED U/S 271AAB OF THE ACT ON 22.09.2015. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL WITHOUT SUCCESS. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT, A) THE NOTICE ISSUED U/S 271AAB OF THE ACT IS DEFECTIVE AS IT DOES NOT CONTAIN ANY SPECIFIC CHARGE AND HENCE THE PENALTY ORDER BASED ON SUCH DEFECTIVE NOTICE IS BAD IN LAW. B) STATEMENT OF SHRI NARESH JALAN WAS RECORDED ON 13.12.2013, WHEREIN HE HAD OFFERED AD-HOC INCOME OF 15 CRORES U/S 132(4) OF THE ACT AS INCOME EARNED BY HIS BUSINESS CONCERNS AND FAMILY MEMBERS AND HAD FURTHER STATED THAT THE DETAILS ARE BEING WORKED OUT. LATER VIDE A LETTER DATED 08.02.2013 HE SUBMITTED BIFURCATION OF THIS DECLARED INCOME. NO STATEMENT U/S 132(4) OF THE ACT WAS RECORDED FROM MR. NARESH JALAN IN THE CAPACITY OF KARTA OF HUF. THE ASSESSMENT ORDERS AS WELL AS THE ORDER SHEET ENTRIES DO NOT TALK OR DISCUSS ABOUT THE STATEMENT U/S 132(4) OF THE ACT. THAT THERE IS NO REFERENCE OF ANY SEIZED DOCUMENT IN THE ASSESSMENT ORDERS PASSED. THUS THE ASSESSMENT ORDER IS CLEARLY NOT BASED ON THE STATEMENT OR ANY MATERIAL FOUND DURING THE SEARCH WHICH IS NOT DISCLOSED OR WHICH WOULD NOT HAVE BEEN DISCLOSED. C) IT WAS NEVER THE CASE OF REVENUE THAT, COMMODITY TRANSACTIONS/PROFIT RECORDED IN OTHER DOCUMENTS FOUND IN THE SEARCH WOULD NOT HAVE BEEN DISCLOSED TO THE DEPARTMENT. THERE IS NO WHISPER ON ADDITION OF UNDISCLOSED INCOME, BASED ON A STATEMENT RECORDED U/S 132(4) OF THE ACT OR ANY OTHER MATERIAL IN THE ASSESSMENT ORDER. D) THERE IS NO GROUND FOR INITIATION OF PENALTY OR IMPOSITION THEREOF, THAT CAN BE FOUND FROM THE ASSESSMENT ORDER OR ASSESSMENT PROCEEDINGS. E) THE COMMODITY PROFITS WERE DULY RECORDED IN 'OTHER DOCUMENT'. EVEN AT THE TIME OF LIFTING OF THE PO, ON WARDROBE ON 08.02.2013, IN THE PREMISES OF RKFL, THERE IS NO FINDING THAT THESE DOCUMENTS WOULD NOT HAVE BEEN DISCLOSED BY THE ASSESSEE. THUS IT 3 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. CANNOT BE SAID THAT THERE WAS ANY UNDISCLOSED INCOME AS DEFINED FOR THE PURPOSE OF SECTION 271AAB OF THE ACT. F) IF INCOME WAS TO BE ASSESSED, BASED ON DOCUMENTS FOUND AND SEIZED FROM THE OFFICE OF RKFL, THEN PROCEEDINGS SHOULD HAVE BEEN INITIATED AGAINST THE ASSESSEE U/S 153C OF THE ACT, BY FOLLOWING DUE PROCESS OF LAW. THIS WAS NOT DONE AND HENCE THE PENALTY IS BAD IN LAW. 7. RELIANCE WAS PLACED ON A NUMBER OF CASE LAW, WHICH WOULD BE REFERRED BY US, IF NECESSARY. SPECIFICALLY IT WAS ARGUED THAT, IN THE CASE OF SMT. RASHMI JALAN IN ITA NO. 326/KOL/2020 FOR THE AY 2013-14 ORDER DATED 30.09.2020 IN THE CASE OF A MEMBER OF THE GROUP OF THE ASSESSEE, THE PENALTY LEVIED UNDER SIMILAR FACTS WAS CANCELLED. 8. THE LD. D/R, ON THE OTHER HAND RELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT, AT THE TIME OF THE FILING OF RETURN OF INCOME WHICH WAS SOLELY BASED ON THE DISCLOSURE MADE DURING THE SEARCH U/S 132(4) OF THE ACT, IT WAS CLEAR THAT THE ASSESSEE WAS REQUIRED TO PAY PENALTY AT THE RATE OF 10% OF UNDISCLOSED INCOME. HE SUBMITTED THAT PENALTY AT THE LOWEST POSSIBLE RATE UNDER THE ACT WAS LEVIED ON THE ASSESSEE AND THAT THIS IS ACCORDING TO THE LAW. HE RELIED ON THE ORDER OF THE LD. CIT(A) AS WELL AS THE AO AND SUBMITTED THAT THERE IS NO DEFECT IN THE NOTICE AND FROM THE ASSESSMENT ORDER THE CHARGE IS CLEAR. HE POINTED OUT THAT THE ASSESSEE HAS NOT POINTED OUT ANY DEFECTS BEFORE THE LOWER AUTHORITIES. 9. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD AND THE CASE LAW CITED, WE HOLD AS FOLLOWS. 10. IN THE CASE OF SHRI NARESH JALAN (HUF), THE NOTICE ISSUED U/S 271AAB OF THE ACT DATED 31.03.2015 READS AS FOLLOWS: WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR ASSESSMENT YEAR 2013-14, IT APPEARS TO ME THAT YOU HAVE NOT SATISFIED THE CONDITIONS OF THE PROVISIONS OF SECTION 271AAB OF THE INCOME TAX ACT, 1961. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 11.30 A.M. /P.M. ON 03.06.2015 AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY OR YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE, YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271. 4 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. 11. SIMILARLY, IN THE CASE OF SHRI NARESH JALAN (INDIVIDUAL) THE NOTICE ISSUED READS AS FOLLOWS: WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR ASSESSMENT YEAR 2013-14, IT APPEARS TO ME THAT YOU HAVE NOT SATISFIED THE CONDITIONS OF THE PROVISIONS OF SECTION 271AAB OF THE INCOME TAX ACT, 1961. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT 11.30 A.M. /P.M. ON 15.06.2015 AND SHOW CAUSE WHY AN ORDER IMPOSING A PENALTY OR YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE, YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE UNDER SECTION 271. 12. THIS BENCH OF THE TRIBUNAL IN THE CASE OF SMT. RASHMI JALAN (SUPRA), WHO IS A MEMBER OF THIS GROUP ON IDENTICAL FACTS ARISING FROM THE SAME SEARCH AND CONSEQUENT ASSESSMENT LEVY OF PENALTY U/S 271AAB OF THE ACT, WAS DELETED BY FOLLOWING THE PROPOSITIONS OF LAW LAID DOWN BY A CO-ORDINATE BENCH OF ITAT. IN THIS ORDER IN ITA NO. 326/KOL/2020 ORDER DATED 30.09.2020, KOLKATA B BENCH AT PAGE-6, PARA-9 TO 11, IT WAS HELD AS FOLLOWS: 9. THE NOTICE ISSUED U/S 274 R.W.S. 271 ON 31/03/2015, BY THE ASSESSING OFFICER HAS BEEN EXTRACTED BY US ABOVE. THE CHARGE IN THIS NOTICE IS NOT SPECIFIED. THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF PADAM CHAND PUNGLIYA (SUPRA) HELD AS FOLLOWS:- WE FURTHER NOTE THAT IN THE CASE IN HAND, THE AO IN THE SHOW CAUSE NOTICE HAS NEITHER SPECIFIED THE GROUNDS AND DEFAULT ON THE PART OF THE ASSESSEE NOR EVEN SPECIFIED THE UNDISCLOSED INCOME ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. FOR READY REFERENCE WE REPRODUCE THE SHOW CAUSE NOTICES ISSUED BY THE AO UNDER SECTION 274 READ WITH SECTION 271AAB ON 30TH MARCH, 2016 AND 16TH AUGUST, 2016 AS UNDER: 'NO. ACIT/CC-L/JPR/2015-16 DATED: 30.03.2016. PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. PAN - ABDPP 7196A TO, SH. PADAM CHAND PUNGALIA, 2372, MSB KA RASTA, JOHARI BAZAR, JAIPUR. WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE ME FOR THE A.Y. 2014-15, IT APPEARS TO ME THAT AS PER SECTIONS 274 AND 275 READ WITH SECTION 271AAB OF THE INCOME-TAX ACT YOU ARE LIABLE FOR PENALTY ON ASSESSED UNDISCLOSED INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT MY OFFICE ROOM NO. 103 (NA), N.C.R.B., JAIPUR AT 11.00 A.M. ON 28.04.2016 AND SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD NOT BE MADE U/S 271AAB R.W.S. 274 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE, YOU MAY REPLY TO SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE. 5 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. YOURS FAITHFULLY, SD/- (SUSHIL KUMAR KULHARI) ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, JAIPUR. 'NO. ACIT/CC-1/JPR/2016-17/928 DATED: 16.08.2016. PENALTY NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF THE INCOME TAX ACT, 1961. PAN - ABDPP 7196A TO, SH. PADAM CHAND PUNGALIA, 2372, MSB KA RASTA, JOHARI BAZAR, JAIPUR. WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE ME FOR THE A.Y. 2014-15, IT APPEARS TO ME THAT AS PER SECTIONS 274 AND 275 READ WITH SECTION 271AAB OF THE INCOME-TAX ACT YOU ARE LIABLE FOR PENALTY ON ASSESSED UNDISCLOSED INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFORE ME AT MY OFFICE ROOM NO. 103 (NA), N.C.R.B., JAIPUR AT 11.00 A.M. ON 25.08.2016 AND SHOW CAUSE WHY AN ORDER IMPOSING PENALTY ON YOU SHOULD NOT BE MADE U/S 271AAB R.W.S. 274 OF THE INCOME TAX ACT, 1961. IF YOU DO NOT WISH TO AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AUTHORIZED REPRESENTATIVE, YOU MAY REPLY TO SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFORE ANY SUCH ORDER IS MADE. YOURS FAITHFULLY, SD/- (DEVANGI SWARNKAR) ASSTT. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1, JAIPUR. THUS IT IS CLEAR THAT BOTH THE SHOW CAUSE NOTICES ISSUED BY THE AO FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271AAB ARE VERY VAGUE AND SILENT ABOUT THE DEFAULT OF THE ASSESSEE AND FURTHER THE AMOUNT OF UNDISCLOSED INCOME ON WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. EVEN THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SHEVATA CONSTRUCTION CO. (P.) LTD IN DBIT APPEAL NO. 534/2008 DATED 06.12.2016 HAS CONCURRED WITH THE VIEW TAKEN BY HONBLE KARNATAKA HIGH COURT IN CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WHICH WAS SUBSEQUENTLY UPHELD BY THE HONBLE SUPREME COURT BY DISMISSING THE SLP FILED BY THE REVENUE IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA). ACCORDINGLY, FOLLOWING THE DECISION OF THE COORDINATE BENCH AS WELL AS HONBLE JURISDICTIONAL HIGH COURT, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE INITIATION OF PENALTY IS NOT VALID AND CONSEQUENTLY THE ORDER PASSED UNDER SECTION 271AAB IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED.' 10. SIMILARLY, THE INDORE BENCH OF THE ITAT IN THE CASE OF SHRI RAVI MATHUR (SUPRA) HAS HELD AS FOLLOWS:- 7. AS REGARDS THE VALIDITY OF NOTICE UNDER SECTION 274 FOR WANT OF SPECIFYING THE GROUND AND DEFAULT, WE FIND THAT WHEN THE BASIC CONDITION OF THE UNDISCLOSED INCOME NOT RECORDED IN THE BOOKS OF ACCOUNTS DOES NOT EXISTS, THEN THE SAME HAS TO BE SPECIFIED BY THE AO IN THE SHOW CAUSE NOTICE AND FURTHER THE AO IS REQUIRED TO GIVE A FINDING WHILE IMPOSING THE PENALTY UNDER SECTION 271AAB. EVEN IF THE AO IS SATISFIED AND COME TO THE CONCLUSION THAT THE ASSESSEE HAS NOT RECORDED THE UNDISCLOSED INCOME IN THE BOOKS OF ACCOUNTS OR IN THE OTHER DOCUMENTS / RECORD MAINTAINED IN NORMAL COURSE RELATING TO SPECIFIED PREVIOUS YEAR, THE SHOW CAUSE NOTICE SHALL 6 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. ALSO SPECIFY THE DEFAULT COMMITTED BY THE ASSESSEE TO ATTRACT THE PENALTY @ 10% OR 20% OR 30% OF THE UNDISCLOSED INCOME. THERE IS NO DISPUTE THAT THE AO HAS NOT SPECIFIED THE DEFAULT AND CHARGE AGAINST THE ASSESSEE WHICH NECESSITATED THE LEVY OF PENALTY UNDER SECTION 271AAB OF THE ACT. CONSEQUENTLY, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO EXPLAIN HIS CASE FOR SPECIFIC DEFAULT ATTRACTING THE LEVY OF PENALTY IN TERMS OF CLAUSES (A) TO (C) OF SECTION 271AAB(1) OF THE ACT. THE CHANNAI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. SHRI R. ELANAOVAN (SUPRA) AT PAGES 7 TO 10 HAS HELD AS UNDER:- ' IT IS CLEAR FROM THE SUB SECTION (3) OF SECTION 271 AAB THAT SECTIONS 274 AND SECTION 275 OF THE ACT SHALL, SO FAR AS MAY BE, APPLY. SUB SECTION (1) OF SECTION 274 OF THE ACT MANDATES THAT ORDER IMPOSING PENALTY HAS TO BE IMPOSED ONLY AFTER HEARING THE ASSESSEE OR GIVING A ASSESSEE OPPORTUNITY OF HEARING. OPPORTUNITY THAT IS TO BE GIVEN TO THE ASSESSEE SHOULD BE A MEANINGFUL ONE AND NOT A FARCE. NOTICE ISSUED TO THE ASSESSEE REPRODUCED (SUPRA), DOES NOT SHOW WHETHER PENALTY PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR HAVING UNDISCLOSED INCOME WITHIN THE MEANING OF SECTION 271AAB OF THE ACT. NOTICE IN OUR OPINION WAS VAGUE. HON'BLE KARNATAKA HIGH COURT IN THE CASE OF SSA'S EMERALD MEADOWS (SUPRA) RELYING IN ITS OWN JUDGMENT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAD HELD AS UNDER:- ''2. THIS APPEAL HAS BEEN FILED RAISING THE FOLLOWING SUBSTANTIAL QUESTIONS OF LAW: (1) WHETHER, OMISSION IF ASSESSING OFFICER TO EXPLICITLY MENTION THAT PENALTY PROCEEDINGS ARE BEING INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OR THAT FOR CONCEALMENT OF INCOME MAKES THE PENALTY ORDER LIABLE FOR CANCELLATION EVEN WHEN IT HAS BEEN PROVED BEYOND REASONABLE DOUBT THAT THE ASSESSEE HAD CONCEALED INCOME IN THE FACTS AND CIRCUMSTANCES OF THE CASE? (2) WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN LAW IN HOLDING THAT THE PENALTY NOTICE UNDER SECTION 274 R.W.S. 271(1)(C) IS BAD IN LAW AND INVALID DESPITE THE AMENDMENT OF SECTION 271(1B) WITH RETROSPECTIVE EFFECT AND BY VIRTUE OF THE AMENDMENT, THE ASSESSING OFFICER HAS INITIATED THE PENALTY BY PROPERLY RECORDING THE SATISFACTION FOR THE SAME? (3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN DECIDING THE APPEALS AGAINST THE REVENUE ON THE BASIS OF NOTICE ISSUED UNDER SECTION 274 WITHOUT TAKING INTO CONSIDERATION THE ASSESSMENT ORDER WHEN THE ASSESSING OFFICER HAS SPECIFIED THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME? 3. THE TRIBUNAL HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE HOLDING THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT') TO BE BAD IN LAW AS IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1)(C) OF THE ACT, THE PENALTY PROCEEDINGS HAD BEEN INITIATED I.E., WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL, WHILE ALLOWING THE APPEAL OF THE ASSESSEE, HAS RELIED ON THE DECISION OF THE DIVISION BENCH OF THIS COURT RENDERED IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2013) 359ITR 565. 4. IN OUR VIEW, SINCE THE MATTER IS COVERED BY JUDGMENT OF THE DIVISION BENCH OF THIS COURT, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT. THE APPEAL IS ACCORDINGLY DISMISSED''. IN THE EARLIER CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) THEIR LORDSHIP HAD OBSERVED AS UNDER:- ''NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORRECT PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREMENT OF LAW; THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE;) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW; PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT 7 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. PROCEEDINGS : THOUGH PROCEEDINGS FOR IMPOSITION OF PENALTY EMANATE FROM PROCEEDINGS OF ASSESSMENT, THEY ARE INDEPENDENT AND A SEPARATE ASPECT OF THE PROCEEDINGS; THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE PROCEEDINGS ON THE MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED INVALID IN THE PENALTY PROCEEDINGS.'' VIEW TAKEN BY THE HON'BLE KARNATAKA HIGH COURT IN THE ABOVE JUDGMENT WAS INDIRECTLY AFFIRMED BY THE HON'BLE APEX COURT, WHEN IT DISMISSED AN SLP FILED BY THE REVENUE AGAINST THE JUDGMENT IN THE CASE OF SSA'S EMERALD MEADOWS (SUPRA), SPECIFICALLY OBSERVING THAT THERE WAS NO MERITS IN THE PETITION FILED BY THE REVENUE. CONSIDERING THE ABOVE CITED JUDGMENTS, WE HOLD THAT THE NOTICE ISSUED U/S.274 R.W.S. 271AAB OF THE ACT, REPRODUCED BY US AT PARA 5 ABOVE WAS NOT VALID. EX-CONSEQUENTI, THE PENALTY ORDER IS SET ASIDE. 6. SINCE WE HAVE SET ASIDE THE PENALTY ORDER FOR THE IMPUGNED ASSESSMENT YEAR, THE APPEAL FILED BY THE REVENUE HAS BECOME INFRUCTUOUS.' IN VIEW OF THE DECISION OF THE CHENNAI BENCH (SUPRA), THE SHOW CAUSE NOTICE ISSUED BY THE AO IN THE CASE OF THE ASSESSEE IS NOT SUSTAINABLE.' 10.1. SIMILAR ARE THE DECISIONS IN THE OTHER CASE-LAW RELIED UPON BY THE ASSESSEE. 11. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THESE CASE-LAW TO THE FACTS OF THE CASE, WE HAVE NO OTHER ALTERNATIVE BUT TO HOLD THAT THE PENALTY IN QUESTION IS BAD IN LAW AS THE SHOWCAUSE NOTICE ISSUED BY THE ASSESSING OFFICER DOES NOT SPECIFY THE CHARGE/S AGAINST THE ASSESSEE FOR LEVY OF PENALTY, AS REQUIRED BY LAW. THUS, ON THIS GROUND, THE PENALTY IS QUASHED. 13. CONSISTENT WITH THE VIEW TAKEN BY US IN THE CASE OF SMT. RASHMI JALAN (SUPRA) WE HOLD THAT THE SHOW CAUSE NOTICE ISSUED U/S 274 R.W.S. 271 OF THE ACT DATED 31.03.2015 IN BOTH THE CASES PROPOSING LEVY OF PENALTY U/S 271AAB OF THE ACT IS DEFECTIVE AS IT HAS NOT SPECIFIED THE CHARGE AND CONSEQUENTLY THE PENALTIES IN BOTH THE CASES LEVIED ARE BAD IN LAW. HENCE THE PENALTY LEVIED IN BOTH THE CASES IS HEREBY QUASHED. 14. AS WE HAVE ADJUDICATED THE ISSUE IN BOTH THESE CASES ON THE LEGAL GROUND OF THE NOTICE BEING DEFECTIVE, WE DO NOT DEEM IT NECESSARY TO ADJUDICATE THE ISSUE ON MERITS AS IT WOULD BE AN ACADEMIC EXERCISE. 15. IN THE RESULT, BOTH THESE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. KOLKATA, THE 22 ND OCTOBER, 2020. SD/- SD/- [ABY T. VARKEY] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22.10.2020 BIDHAN 8 I.T.A. NOS. 324 & 327/KOL/2020 ASSESSMENT YEAR: 2013-14 M/S. NARESH JALAN, HUF. COPY OF THE ORDER FORWARDED TO: 1. M/S. NARESH JALAN, HUF, 4A, HASTINGS PARK ROAD, HASTINGS, 1 ST FLOOR, KOLKATA-700 027. 2. ACIT, CENTRAL CIRCLE-1(1), KOLKATA. 3. CIT(A)-20, KOLKATA. (SENT THROUGH MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES