Candrakanth P. Sanu, Mangalore V. ACIT, Mangalore

ITA 458/BANG/2011

• Counselvise Citation: 45821114 RSA 2011
• Duration Of Justice: 1 year(s) 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 30-08-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNDER RAJAN
• Assessee Lawyers: EDMOND DSOUZA
• Keywords: Unexplained cash credit; Opportunity of being heard; Reasonable cause
• Section: 143(3); 147; 148

Judgement Text

PAGE 1 OF 12 ITA NO.458/BAN G/2011 1 INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNANT MEMBER ITA NO.458/BANG/2011 (ASST. YEAR 1996-97) SHRI CHANDRAKANTH P SANU, SANU PALACE, PVS CIRCLE, KODIALBAIL, MANGALORE. PA NO.AADFP9816C VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), MANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 30.08.20 12 DATE OF PRONOUNCEMENT : 28.09.2012 APPELLANT BY : SHRI EDMOND DSOUZA, C. A. RESPONDENT BY : SHRI SUNDER RAJAN, JCIT O R D E R PER JASON P BOAZ : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE CIT (A), MANGALORE DATED 19.1.2011 [U/S 271(1)(C) O F THE ACT]. THE RELEVANT ASSESSMENT YEAR IS 1996-1997. 2. THE ASSESSEE HAS RAISED NINE GROUNDS IN HIS GR OUNDS OF APPEAL IN AN ILLUSTRATIVE AND NARRATIVE MANNER. HOWEVER, ON A P ERUSAL OF THE SAME, IT IS OBSERVED THAT THE CRUX OF THE GRIEVANCE OF THE ASSESSEE RELA TES TO A SOLITARY ISSUE, NAMELY, THE CIT (A) ERRED IN CONFIRMING THE PENALTY IMPOSED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. 3. THE FACTS OF THE ISSUE, BRIEFLY, ARE AS UNDER: PAGE 2 OF 12 ITA NO.458/BAN G/2011 2 THE ASSESSEE, AN INDIVIDUAL AND A DEALER IN REAL ESTATE, HAD NOT FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSI DERATION EVEN THOUGH THE DUE DATE FOR FURNISHING SUCH A RETURN WAS 31.7.1996. T HEREFORE, THE AO HAD ISSUED A NOTICE U/S 148 OF THE ACT REQUIRING THE ASSESSEE TO FURNISH HIS RETURN OF INCOME. THE ASSESSEE HAD FILED HIS RETURN OF INCOME ON 29.1 0.1999, ADMITTING A TOTAL INCOME OF RS.66,750/-. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, ACCORDING TO THE ASSESEE, HE HAD, ON HIS OWN, FILED A REVISED RETUR N ALONG WITH BALANCE-SHEET, P & L ACCOUNT ETC., AND ALSO THE DETAILS OF M.G. ROAD PRO PERTY WHICH WAS NOT DISCLOSED IN THE ORIGINAL RETURN. THE AO CONCLUDED THE REASSESS MENT PROCEEDINGS U/S 143 (3) R. W. S. 147(A) OF THE ACT ON 30.3.2000 BY MAKING VARIO US ADDITIONS. SIMULTANEOUSLY, THE AO HAD INITIATED PENAL PROCEEDINGS U/S 274 R. W. S. 271 OF THE ACT AND A NOTICE WAS ISSUED ON THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES WIT H THE CIT (A) FOR RELIEF. 5. THE CIT (A) HAD IN HIS ORDER DATED 24.12.2001, AFTER DUE CONSIDERATION OF VARIOUS CONTENTIONS PUT-FORTH BY THE ASSESSEE, D ELETED ALL THE ADDITIONS MADE IN THE ASSESSMENT ORDER EXCEPT THE M.G. ROAD PROPERTY TRANSACTION WHEREIN THE AO WAS DIRECTED TO ADOPT THE PROFIT AT RS.6.55 LAKHS A S AGAINST RS.9.5 LAKHS ADOPTED BY THE AO. 6. AGGRIEVED BY THE ABOVE FINDINGS OF THE CIT (A), THE REVENUE HAD APPROACHED THE HONBLE TRIBUNAL WITH A REQUEST TO E NHANCE THE ADDITION IN RESPECT OF M.G. ROAD PROPERTY TRANSACTION FROM RS.6.55 LAKHS TO RS.10 LAKHS. THE HONBLE TRIBUNAL, ACCORDING TO THE ASSESSEE, VIDE ITS ORDER IN ITA NO. 55(PANJ) 2002 DATED 27.9.2005 DISMISSED THE REVENUES APPEAL. IN THE M EANWHILE, ACCORDING TO THE ASSESSEE, WHEN THE ISSUE WAS STILL PENDING BEFORE T HE HONBLE TRIBUNAL FOR DISPOSAL OF THE REVENUES APPEAL (SUPRA), A NOTICE U/S 148 O F THE ACT DATED 24.2.2002 WAS AGAIN SERVED ON THE ASSESSEE REQUIRING HIM TO FURNI SH HIS RETURN OF INCOME FOR THE PAGE 3 OF 12 ITA NO.458/BAN G/2011 3 AY 1996-97 AND, ACCORDINGLY, THE ASSESSEE HAD FURNIS HED HIS RETURN OF INCOME ON 24.5.2002. THE AO CONCLUDED THE ASSESSMENT U/S 143 (3) R. W. S. 147 OF THE ACT ON 30.3.2004, DETERMINING THE ASSESSEES INCOME AT RS. 1,35,09,830/- AND ALSO SIMULTANEOUSLY INITIATED PENAL PROCEEDINGS U/S 271(1 )(C) OF THE ACT. 7. AGGRIEVED BY THE SAID ORDER OF THE AO, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO HAD FOR THE ELABORATE REASONS RECORDED IN HIS ORDER DATED 14.12.2007 REJECTED THE ADDITION MADE TO THE EXTENT OF RS.1,12,50,000/- IN RESPECT OF ATTAWAR PROPERTY AND SUSTAINED THE INCOME ARRIVED AT RS.5.53,770/- BY THE AO VIDE ORDER GIVING EFFECT TO THE EARLIER ORDE R OF THE CIT (A) DATED 14.2.2002. 8. REVERTING BACK TO THE MAIN ISSUE UNDER DISPUTE , IT IS OBSERVED THAT THE AO VIDE HIS NOTICE DATED 23.6.2006 CALLED UPON THE ASSESSEE TO BE PRESENT ON 29.6.2006 IN CONNECTION WITH THE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) OF THE ACT. HOWEVER, IT WAS THE CASE OF THE ASSESSEE THAT THERE WAS NO INDICATION IN THE SAID COMMUNICATION AS TO WHETHER IT RELATES TO THE NOTICE U/S 271(1)(C) ISSUED ON 30.3.2000 OR TO THE NOTICE DATED 30.3.2004. HOWEVE R, THE AO LEVIED A PENALTY OF RS.5 LAKHS U/S 271(1)(C) OF THE ACT IN RESPECT OF CONCEALED INCOME OF M.G. ROAD PROPERTY TRANSACTION REFERRED SUPRA. 9. AGITATED, THE ASSESSEE HAD APPROACHED THE CIT (A) FOR RELIEF. AFTER HAVING GIVEN DUE WEIGHT-AGE TO THE ASSESSEES CONTE NTIONS, THE CIT (A) REJECTED THE ASSESSEES REQUEST FOR RELIEF AND WENT AHEAD IN SUS TAINING THE PENALTY IMPOSED AS WELL AS THE REOPENING OF THE ASSESSMENT. THE REASO NS RECORDED BY THE CIT (A) ARE EXTRACTED AS UNDER: (I) WITH REGARD TO ISSUANCE OF NOTICED U/S 274 R. W . S. 271 WAS VAGUE AND AMBIGUOUS ETC.: 5. I HAVE CONSIDERED THE APPELLANTS ARGUMENT AND THE CASE LAWS. HOWEVER, IN THE PRESENT CASE, I FIND THAT THOUGH TH E NOTICE DID NOT DETAIL THE OFFENCE COMMITTED BY THE APPELLANT, T HE POINT WAS PAGE 4 OF 12 ITA NO.458/BAN G/2011 4 MADE CLEAR TO THE APPELLANT AT THE TIME OF HEARING OF THE PENALTY PROCEEDINGS BY THE AO. THE INTENT OF THE NOTICE HAS BEEN CORRECTLY UNDERSTOOD BY THE APPELLANT. THE APPELLANT REPRESENTED THE CASE IN DETAIL BEFORE THE AO. THUS , FOR ALL PRACTICAL PURPOSES THE PURPOSE OF THE NOTICE ISSUED BY THE AO WAS VERY CLEAR AND IT WAS UNDERSTOOD BY THE APPELLANT WITHOUT ANY AMBIGUITY. THE ARGUMENT OF THE APPELLANT IS THEREFOR E REJECTED. (II) IN RESPECT OF ALLEGED CONCEALED INCOME OF RS. 6.55 LAKHS: 11I HAVE CONSIDERED THE ABOVE SUBMISSIONS. THE FOLLOWING PO INTS IN THIS CASE ARE NOTEWORTHY: (1) THE APPELLANT HAD NOT FURNISHED A VOLUNTARY RETURN O F INCOME THOUGH HE HAD TAXABLE INCOME; (2) EVEN IN RESPONSE TO THE 148 NOTICE, THE APPELLANT F ILED THE RETURN DISCLOSING INCOME FROM HOUSE PROPERTY AMOUNTING TO R S.66,752/-. THERE WAS NO MENTION OF THE FACT THAT THE APPELLANT WAS IN THE BUSINESS OF REAL ESTATE AND HAD SUBSTANTIAL PROFITS FROM BUSINESS; (3) AFTER DETAILED ENQUIRIES BY THE ASSESSING OFFICER, T HE APPELLANT FILED A MEMO BEFORE THE AO ON 18.1.2000 IN WHICH HE DECLARED BUSINESS PROFIT OF RS.1,47,302/- ONLY. EVEN AT THIS STAGE ALSO, THE APPELLANT DID NOT DISCLOSE COMPLETE BUSINESS PROFIT ; & (4) AFTER FURTHER PROBING BY THE AO, THE APPELLANT FILED A REVISED INCOME STATEMENT ON 15.3.2000, IN WHICH, HE ADMITTE D INCOME OF RS.8,35,625/- FROM SALE OF M.G. ROAD PROPERTY. THIS WAS DONE BY THE APPELLANT ONLY WHEN THE AO HAD GIVEN NOTICE THAT THE MONEY RECEIVED BY THE APPELLANT FROM THE PURCHASERS OF THE PROPERTY WILL BE TREATED AS UNEXPLAINED CREDITS. 12. IN THE ABOVE CIRCUMSTANCES, IT IS DIFFICULT TO AGRE E WITH THE APPELLANT THAT THE NON-DISCLOSURE OF THE PROFIT FRO M M.G. ROAD PROPERTY WAS FOR SOME BONA-FIDE REASONS. THE EXPLAN ATION FURNISHED BY THE APPELLANT IS NOT CORROBORATED BY THE FACTS OF THE CASE AND ALSO BY THE CHRONOLOGY OF EVENTS DURING THE ASSESSMENT PROCEEDINGS. 13. THE LEVY OF PENALTY IS, THEREFORE, CONFIRMED. PAGE 5 OF 12 ITA NO.458/BAN G/2011 5 10. AGITATED, THE ASSESSEE HAS COME UP WITH THE P RESENT APPEAL. DURING THE COURSE OF HEARING, THE SUBMISSIONS MADE BY THE LEARN ED A R ARE SUMMARIZED AS UNDER: (I) THAT THE CIT (A) ERRED IN CONFIRMING THE PENALT Y LEVIED AND THE REASONS GIVEN BY HIM ARE NOT SOUND, CONVINCING AND C ONTRARY TO THE ASSESSING AUTHORITYS REASONING AND, THEREFORE, THE PENALTY LEVIED IS LIABLE TO BE CANCELLED; (II) THAT HE HAD ERRED IN CONFIRMING THE PENALTY LE VIED AS THE NOTICE WHICH WAS THE FOUNDATION FOR LEVY OF PENALTY WAS VAGU E AND AMBIGUOUS; (III) THAT WHEN THE CIT (A) HIMSELF CONCEDED THAT THE NOTICE DID NOT DETAIL THE OFFENCE COMMITTED BY THE APPELLANT , HE OUGHT TO HAVE DELETED THE PENALTY; (IV) THAT THE CIT (A) ERRED IN CONFIRMING THE PENAL TY ON THE PLEA THAT THE AO HAD MADE THE POINT CLEAR TO THE ASSESSEE AT THE TIME OF HEARING OF PENAL PROCEEDINGS. AS IT WAS NOT IN ACCORDANCE WITH LAW AS CONVEYING THE OFFENCE COMMITTED BY THE ASSESSEE SHOULD BE ONLY THROUGH A NOTICE CALLING FOR OBJECTION ETC., AND NOT IN THE MANNER S UGGESTED BY THE CIT (A); - THAT HE HAD GROSSLY ERRED IN CONFIRMING THE PENALT Y BY OBSERVING THE INTENT OF THE NOTICE HAS BEEN CORRECTLY UNDERSTOOD B Y THE ASSESSEE AS HE HAD REPRESENTED THE CASE IN DETAIL BEFORE THE AO AND THAT HE HAD FAILED TO NOTE THAT THE QUESTION WAS NOT HOW AND WH AT WAY THE ASSESSEE UNDERSTOOD THE NOTICE, BUT, THE ONLY RELEVANT CONSID ERATION WAS AS TO WHETHER THE NOTICE WAS VAGUE OR AMBIGUOUS OR WHETHE R THE NOTICE DISCLOSES CORRECTLY THE OFFENCE ALLEGEDLY COMMITTED B Y THE ASSESSEE; - THAT THE ORDER PASSED U/S 271(1)(C) OF THE ACT B ASED ON THE NOTICE U/S 274 R.W.S. 271(1)(C) DATED 30.3.2000 IS BAD IN LAW AND VOID AB INITIO AS THERE WAS A LATER OPERATIVE NOTICE ISSUED UNDER SAME SECTION. DATED 30.3.2004 FOR SAME ASSESSMENT YEAR AND, THUS, ON THE ISSUE OF A SECOND NOTICE, THE EARLIER NOTICE GETS EFFACED OR BECOMES INFRACTUOUS; PAGE 6 OF 12 ITA NO.458/BAN G/2011 6 (V) THAT THE CIT (A) ERRED IN GIVING A FINDING THAT UNDER INCOME-TAX ACT, 1961, THE ORIGINAL ASSESSMENT ORDER DOES NOT B ECOME NON-EST SIMPLY BECAUSE A NOTICE U/S 148 HAS BEEN ISSUED AND THAT THE APPEAL PROCEEDINGS AND ALL OTHER PROCEEDINGS TAKEN UP WITH RESPECT TO THE ORIGINAL PROCEEDINGS CONTINUE EVEN THOUGH SUBSEQUEN TLY, A NOTICE U/S 148 IS ISSUED FOR THE SAME ASSESSMENT YEAR. RELIES ON CASE LAWS : (I) ITO V. K.L. SRIHARI (HUF) (1992) 197 ITR 694 (KAR); & (II) ITO & ANR. V. K.L. SRIHARI (HUF) & ANR. (2001) 250 ITR 193 (SC) (VI) THAT THE AO ERRED IN PASSING THE PENALTY ORDER IGNORING THE FACT THE INCOME FROM M G ROAD PROPERTY WAS DECLARED BY THE ASSESSEE ON HIS OWN ALTHOUGH IN THE ORIGINAL RETURN THE SAID IN COME WAS NOT INCLUDED ON ACCOUNT OF NON-FINALIZATION OF ACCOUNTS BY THE TH EN ACCOUNTANT WHO HAD KEPT THE ACCOUNTS PENDING AND WAS NON-COOPERATI VE AND, HENCE, THE ASSESSEE HAD NO INTENTION OF CONCEALING HIS INCOME AND/OR FURNISHED INACCURATE PARTICULARS. IN CONCLUSION, THE LEARNED AR FURNISHED A PAPER BOO K CONTAINING 1 69 PAGES WHICH CONSIST OF, INTER ALIA, COPIES OF (1) NOTICES, ORDE RS OF THE AUTHORITIES BELOW, (II) CASE LAW ETC., 11. ON THE OTHER HAND, THE LEARNED D R HAD SUPPOR TED THE ORDERS OF THE INCOME-TAX AUTHORITIES. IT WAS SUBMITTED THAT THE CIT (A) HAD RIGHTLY REJECTED THE CONTENTIONS OF THE ASSESSEE FOR THE REASONS RECORDE D IN HIS ORDER. IT WAS, THEREFORE, PLEADED THAT THE FINDINGS OF THE CIT (A) REQUIRE NO INTERVENTION OF THIS BENCH. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORDS AND ALSO THE CASE LAWS ON WHIC H BOTH PARTIES HAD PLACED STRONG RELIANCE. ON THE FACTS OF THE ISSUE AS DELIBERATED UPON COMPREHENSIVELY IN THE FORE- GOING PARAGRAPHS, WE ARE OF THE CONSIDERED VIEW THA T THERE ARE TWIN SIGNIFICANT ASPECTS WHICH REQUIRE TO BE ADJUDICATED. THEY ARE D EALT WITH AS UNDER: PAGE 7 OF 12 ITA NO.458/BAN G/2011 7 (I) ISSUE OF NOTICE U/S 274 R.W.S 271 OF THE AC T: 12.1 ON A CRITICAL PERUSAL AND VERIFICATION OF TH E NOTICE ISSUED U/S 274 R.W S. 271 OF THE ACT DATED 30.3.2000, IT HAS BEEN OBSERVE D THAT IT DOES NOT CONTAIN OR CONVEY THE OFFENCE ALLEGED TO HAVE BEEN COMMITTED BY THE ASSESSEE. THE NOTICE SENT BY THE AO TO THE ASSESSEE CONTAINED THE FOLLOW ING, NAMELY: I.T.N.S.29 NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF T HE INCOMETAX ACT, 1961 INCOM E-TAX OFFICE, TO SHRI CHANDRAKANTH P SANU, MARUTHI REAL ESTATE & DEVELOPERS, DATED: 30.3.2000 SANU PALACE, KODIALBAIL, MANGALORE WHEREAS IN THE COURSE OF PROCEEDINGS BEFORE ME FOR THE ASSESSMENT YEAR 96-97 IT APPEARS TO ME THAT YOU:- *HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH ME RETURN OF INCOME WHICH YOU WERE REQUIRED TO FURNISH BY A NOTICE GIVEN UNDER SECTION 22(1)/22(2)/34 OF THE INDIAN INCOME- TAX ACT, 1922 OR WHICH YOU WERE REQUIRED TO FURNISH UNDER SECTION 139(1) OR BY A NOTICE GIVEN UNDER SECTION 139(2)/148 OF THE INCOME-TAX AC T, 1961, NO..DATED.OR HAVE WITHOUT REASONABLE CAUSE FAILED TO FURNISH IT WITHIN THE TIME ALLOWED AND THE MANNER REQUIRED BY THE SAID SECTION 139(1) OR BY SUCH NOTICE. *HAVE WITHOUT REASONABLE CAUSE FAILED TO COMPLY WIT H A NOTICE UNDER SECTION 22(4)/23(2) OF THE INDIAN INCOME-TAX ACT, 1922 OR UNDER SECTION 14 2(1)/143(2) OF THE INCOME-TAX ACT, 1961. NO..DATED *HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR .FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. YOU ARE HEREBY REQUESTED TO APPEAR BEFO RE ME ATA.M./P.M. ON..19..AND SHOW CAUSE WHY AN ORDER IMPOSI NG A PENALTY ON YOU SHOULD NOT BE MADE UNDER SECTION 271 OF THE INCOME- TAX ACT, 1961. IF YOU DO NOT WISH TO PAGE 8 OF 12 ITA NO.458/BAN G/2011 8 AVAIL YOURSELF OF THIS OPPORTUNITY OF BEING HEARD I N 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 SECT ION 271. SEAL SD/- JOINT COMMISSIONER OF INCOME-TAX (AS ST) SPECIAL RANGE, MANGALORE *DELETE INAPPROPRIATE WORDS AND PARAGRAPHS. [REFER: P 6 7 OF PB AR] 12.2 HOWEVER, IT IS NOTICED THAT IT HAS NOT BEEN SPECIFICALLY MENTIONED AS TO WHETHER THE ASSESSEE WAS REQUIRED TO APPEAR BEFORE THE AO TO EXPLAIN WHICH OFFENCE ALLEGED TO HAVE BEEN COMMITTED BY HIM. AS P ER THE SAID NOTICE, THE ASSESSEE WAS EXPECTED TO APPEAR BEFORE THE AO. HOW EVER, THE DATE AND TIME COLUMN HAS BEEN LEFT BLANK. INAPPROPRIATE WORDS/PA RAGRAPHS HAVE NEITHER BEEN SCORED OFF NOR DELETED AS REQUIRED TO MAKE IT THE S AID NOTICE MEANINGFUL AND SENSIBLE. IN ESSENCE, THE SAID NOTICE HAS BEEN SE NT TO THE ASSESSEE IN A MECHANICAL WAY WITHOUT APPLYING HIS (AO) MIND. 12.3 AS RIGHTLY HIGHLIGHTED BY THE LEARNED AR, THE CIT (A) HAD FAIRLY CONCEDED THE ABOVE VITAL LACUNA THAT I FIND THAT THOUGH THE NOTICE DID NOT DETAIL THE OFFENCE COMMITTED BY THE APPELLANT, THE POINT WA S MADE CLEAR TO THE APPELLANT AT THE TIME OF HEARING OF THE PENALTY PROCEEDINGS BY THE ASSESSING OFFICER. AT THIS JUNCTURE, WE WOULD LIKE TO POINT OUT THAT THE MAIN PURPOSE FOR ISSUANCE OF SUCH A NOTICE WOULD BE DEFEATED, IF THE OFFENCE COMMITTED BY AN ASSESSEE, THE DATE AND TIME ON WHICH HE REQUIRES TO EXPLAIN THE SAME ETC., HAS NOT BEEN MENTIONED. IN SHORT, THE SAID NOTICE WAS SENT IN A ROUTINE AND C ASUAL MANNER WITHOUT APPLICATION OF MIND AND, THUS, THE INTENT OF ISSUANCE OF SUCH NOTI CE HAS VIRTUALLY BEEN DEFEATED. THE CIT (A) HAD FAILED TO CONSIDER AS TO WHETHER TH E NOTICE WAS VAGUE OR AMBIGUOUS AS ALLEGED BY THE ASSESSEE AND ALSO WHETHER THE NOTI CE SHALL STAND THE TESTIMONY OF LAW. INSTEAD, HE HAD DEFENDED THE ACTION OF THE A O. WE LEAVE THE MATTER AS IT IS PAGE 9 OF 12 ITA NO.458/BAN G/2011 9 WITH REGARD TO THE VALIDITY OF THE NOTICE ISSUED UND ER SECTION 274 R.W.S. 271 OF THE ACT AND RATHER, PROCEED TO DISPOSE OFF THE ISSUE ON MERITS AS TO WHETHER PENALTY HAD BEEN VALIDLY ON THE FACTS OF THIS CASE. (II) VALIDITY OF THE PENALTY ORDER PASSED U/S 271 (1)(C) OF THE ACT DT.30.6.2006: 12.4 THE ASSESSMENT ORDER U/S 143(3) R. W. S. 147 (A) OF THE ACT WAS ORIGINALLY CONCLUDED ON 30.3.2000 AND A NOTICE U/S 274 R. W. S . 271 OF THE ACT WAS SIMULTANEOUSLY ISSUED FOR ALLEGED CONCEALMENT OF INC OME. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) AND THE CIT (A) ALLOWED S UBSTANTIAL RELIEF TO THE ASSESSEE VIDE HIS ORDER DATED 24.12.2001. THE REVENUE PREFE RRED AN APPEAL BEFORE THE TRIBUNAL WHICH WAS STILL PENDING AS ON 24.4.2002. THE AO HAD, IN THE MEANWHILE, ISSUED A NOTICE U/S 147 OF THE ACT ON 24.4.2002 AND CONCLUDED THE RE-ASSESSMENT U/S 143(3) R. W. S.147 OF THE ACT ON 30.3.2004 [COU RTESY: P 30 41 OF PB AR]. SUBSEQUENTLY, THE AO PURSUED THE PENAL PROCEEDINGS I NITIATED U/S 271(1)(C) OF THE ACT ON THE BASIS OF THE NOTICE DATED 30.3.2000 [ASS T. ORDER U/S 143(3) R. W. S. 147(A) OF THE ACT DT. 30.3.2000]. 12.5 AT THIS MOMENT, WE WOULD LIKE TO ANALYZE AS T O WHETHER THE PENALTY ORDER PASSED ON 30.6.2006 BASED ON THE ORIGINAL ORD ER U/S 143(3) R. W. S. 147(A) OF THE ACT DATED 30.3.2000 HAS ANY LEGAL SANCTITY WHEN A SUBSEQUENT REASSESSMENT U/S 143(3) R. W. S. 147 OF THE ACT HAS BEEN PASSED ON 3 0.4.2004. LET US NOW EXAMINE JUDICIAL PRECEDENTS ON A SIMILAR SITUATION. (I) ITO V. K.L. SRIHARI (HUF) (1992) 197 ITR 694 (K AR): 12.6 IN CONFORMITY WITH ITS EARLIER DECISION OF TH E COURT IN CIT V. MYSORE IRON & STEEL LIMITED (1986) 157 ITR 531 (KAR), THE HONBLE JURISDICTIONAL HIGH COURT HAD RULED THAT IN THAT CASE, AFTER MAKING A REVIEW OF THE CASE LA W THIS COURT CONSIDERED THE QUESTION AS TO THE EFFECT OF RE-OPEN ING AN ASSESSMENT AND THAT THE PAGE 10 OF 12 ITA NO.458/BA NG/2011 10 ORIGINAL ASSESSMENT GETS TOTALLY EFFACED IN THAT EVENT. WHEN THERE IS A TOTAL EFFACEMENT OF THE ORIGINAL ASSESSMENT ORDER, IT IS IMPOSSIBLE TO UNDERSTAND THE CONTENTION RAISED AS TO HOW THE INTEREST LEVIED THE RE-UNDER STILL SURVIVES. 12.7 FOR APPRECIATION OF FACTS AND CLARITY, WE SHA LL REPRODUCE THE RULING OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. MYSORE IRON & STEEL LIMITED (1986) 157 ITR 531 (KAR) AS UNDER: ONCE AN ASSESSMENT IS REOPENED, THE INITIAL ORDER F OR ASSESSMENT CEASES TO BE OPERATIVE. THE EFFECTS OF THE REOPENING THE ASSESS MENT IS TO VACATE OR SET ASIDE THE INITIAL ORDER FOR ASSESSMENT AND TO SUBSTITUTE IN ITS PLACE THE ORDER MADE ON REASSESSMENT. THE RESULTING POSITION IS THAT THE O RDER OF REASSESSMENT SO MADE WILL HAVE TO TAKE THE PLACE OF THE ORIGINAL ORDER O F ASSESSMENT 12.8 FURTHER, THE HONBLE SUPREME COURT HAD, IN T HE CASE OF ITO AND ANOTHER V. K.L. SRIHARI (HUF) AND ANR (2001) 250 IT R 193 (SC) REINFORCED THE HONBLE JURISDICTIONAL HIGH COURTS VIEW BY OBSERVI NG THAT ON REASSESSMENT, ORIGINAL ASSESSMENT ORDER STAND EFFACED BY REASSESSMENT ORDER . 12.9 (II) IN THE CASE OF THE DEPUTY COMMISSIONER O F COMMERCIAL TAXES V. H.R. SRI RAMULU REPORTED IN 39 ITR 177 (SC), THE HONBLE SUPREME COURT HAD RULED THAT - THE REASON FOR THAT IS THAT ONCE AN ASSESSMENT IS REOPENED, THE INITIAL ORDER FOR ASSESSMENT CEASES TO BE OPERATIVE. THE EFFECT OF R EOPENING THE ASSESSMENT IS TO VACATE OR SET ASIDE THE INITIAL ORDER FOR ASSESSMENT AND TO S UBSTITUTE IN ITS PLACE THE ORDER MADE ON REASSESSMENT. THE INITIAL ORDER FOR ASSESSMENT CAN NOT BE SAID TO SURVIVE, EVEN PARTIALLY, ALTHOUGH THE JUSTIFICATION FOR REASSESSMENT ARISES BECAUSE OF TURNOVER ESCAPING ASSESSMENT IN A LIMITED FIELD OR ONLY WITH RESPECT TO A PART O F THE MATTER COVERED BY THE INITIAL ASSESSMENT ORDER.. 12.10 TAKING INTO ACCOUNT ALL THE FACTS OF THE IS SUE AS DISCUSSED SUPRA AND IN CONFORMITY WITH THE RATIOS LAID DOWN BY THE HONBLE J URISDICTIONAL HIGH COURT AND THE HONBLE SUPREME COURT AS WELL, WE ARE OF THE CONSID ERED VIEW THAT THE PENALTY IMPOSED BASED ON THE NOTICE U/S 271(1)(C) OF THE AC T WHICH CAME INTO EXISTENCE ON THE BASIS OF THE ORIGINAL ASSESSMENT MADE ON 30.3.2 000 HAS NO LEGAL SANCTITY. THIS IS PAGE 11 OF 12 ITA NO.458/BA NG/2011 11 BECAUSE THE ASSESSMENT HAS SINCE BEEN REOPENED U/S 148 OF THE ACT DATED 14.2.2002 AND, THUS, THE ORIGINAL ASSESSMENT ORDER DT.30.3.2000 CEASED TO BE OPERATIVE. IN ESSENCE, THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT HAS NO LEGAL SANCTION AND IT IS, ACCORDINGLY, CANCELLED. 12.11 BEFORE PARTING WITH, WE WOULD LIKE TO REITE RATE THAT THE CASE LAW RELIED ON BY THE LEARNED DR HAS NO RELEVANCE TO THE FACTS O F THE ISSUE UNDER CONSIDERATION. THE ISSUE BEFORE THE HONBLE ALLAHABAD HIGH COURT [ CIT V. GOPAL KRISHNA SINGHANIA (1973) 89 ITR 27 (ALL)] WAS ON A DIFFERENT FOOTING IN THE SENSE THAT IN THE PRESENT CASE, PENALTY HAS BEEN IMPOSED ON THE BASIS OF AN AS SESSMENT ORDER WHICH HAD CEASED TO BE OPERATIVE FOR THE DETAILED REASONS REC ORDED SUPRA. 13. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COU RT ON 28 TH SEPT., 2012. SD/- SD/- (P. MADHAVI DEVI) (JASON P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER