Sri.Alavikutty, Vengara,Malappuram V. The DCIT, Calicut

ITA 524/COCH/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6273 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-01-2019
• Assessment Year: 2007-2008
• Appeal Filed On: 15-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: P V VIJAYAN ITP
• Keywords: Rectification of order; Search and seizure; Principle of natural justice; Source of fund; Initiation of penalty proceedings; Capital Gains
• Section: 271(1)(c); 153A; 201; 292BB; 274; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFOR E S/ SHRI CHANDRA POOJARI , AM & GEORGE GEORGE K., J M I .T . A. NO . 524 / COCH/ 20 1 8 ASSESSMENT YEAR : 20 07 - 08 SHRI K. ALAVIKUTTY, KURUKKAN HOUSE, VALIYORA, VENGARA, MALAPPURAM. [PAN: AQUIPA 5278L] VS. THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRAL CIRCLE - 2, CALICUT. (ASSESSEE - APPELLANT) (REVENUE - RESPONDE NT) A SSESSEE BY SHRI P.V. VIJAYAN, ITP REVENUE BY SMT. A.S. BINDHU, SR. DR D ATE OF HEARING 16 / 0 1/ 201 9 DATE OF PRONOUNCEMENT 24 / 0 1 /201 9 O R D E R PER CHANDRA POOJA RI, AM: TH IS APPE AL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE OR DER OF THE CIT (A) - III , KOCHI DATED 21/08/2018 AND PERTAIN S TO THE A SSESSMENT YEAR 2007 - 08. 2. THERE WAS A DELAY OF 6 DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. THE LD. A R SUBMITTED THAT THE SHORT DELAY OF 6 DAYS WAS DUE TO INADVERTENT MISTAKE ON THE PART OF THE ASSESSEE AND P RAYED TO CONDONE THE DELAY FOR WHICH THE LD. DR HAS NOT OPPOSED IT. IN OUR OPINION, THERE IS GOOD AND SUFFICIENT REASON FOR I.T.A. NO . 524 /COCH/ 201 8 2 CONDONING THE SHORT DEL AY OF 6 DAYS. ACCORDINGLY, WE CONDONE THE DELAY AND THE APPEAL IS TAKEN UP FOR ADJUDICATION. 3 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. YOUR PETITIONER IS VERY MUCH AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS ) - III, K OCHI. THIS ORDER IS QUITE ARBITRARY AND OPPOSED TO LAW AND FACTS OF THE CASE. THE APPELLANT WAS WORKING ABROAD. A SEARCH U/S. 132 OF THE ACT WAS CONDUCTED AT THE RESIDENTIAL PREMISES OF SRI. T ASHRAF, THE BROTHER - IN - LAW OF THE APPELLANT AND CERTAIN DOCUMENTS RELATING TO THE PURCHASE OF LANDED PROPERTIES BY THE APPELLANT, AND HIS BROTHERS WERE FOUND OUT , ON THE BASIS OF WHICH NOTICES U/S. 153 ISSUED TO THE APPELLANT FOR 6 YEARS (2002 - 03 TO 2007 - 08) ON 24 - 11 - 2009. THE APPELLANT AND HIS 7 BROTHERS ARE DOING BUSINESS ABROAD AND HAS NO INCOME EARNED IN INDIA FROM ANY SOURCE AND HENCE HE FILED NIL RETURNS FOR ALL THE YEARS ON 10 - 12 - 2009. AS THE ASSESSMENTS W ERE BARRED BY LIMITATION, THE A 0 GOT ONLY HARDLY 20 DAYS TO COMPLETE ALL THE ASS ESSMENTS. THE APPELL ANT FILED ALL THE DETAILS AND EXPLAINED THE INVESTMENTS AND SOURCE OF FUNDS WITH EVIDENCE. AN AMOUNT OF RS. 23 LAKHS WAS GIVE N AS ADVANCE FOR THE PROPERTIES PURCHASED BY THEIR FATHER OUT OF THE MONEY SENT TO H IM BY DEMAND DRAFTS BY HIS SONS . IN THEIR ABSEN CE, HE WAS LOOKING AFTER THEIR AFFAIRS HERE. BUT HE EXPIRED DURING THE FY 2006 - 07. THOUGH THE APPELLANT REQUESTED FOR SOME TIME TO GATHER THOSE DETAILS, THE SAME WAS DENIED AND THE ASS ESSMEN T WAS COMPLETED HURRIEDLY MAKING A TOTAL ADDITION OF RS. 13,13,400 / - . PENALTY NOTICE U/S 271(1)( C) OF THE ACT W AS ALSO INITIATED SEPARATELY. WITHOUT CONSIDERING THE RECTIFICATION PETITION OR THE APPELLANT'S SUBMISSIONS, PENALTY U/S. 27I(1)( C) OF THE ACT WAS ALSO LEVIED ON THE ENTIRE ADDITION AMOUNTING TO RS.3,50,900 / - . AGGRIEVED TO THE ABOVE ARBITRARY ORDERS, APPEALS WERE FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) - III, K OCHI. THE C I T(A) HAS TAKEN UP BOTH THE APPEALS TOGETHER AND AFTER HEARING THE APPELLANT, BOTH THE APPEALS WERE VIRTUALLY DISMISSED WITHOUT CO NSIDERING ANY OF THE GROUNDS OR ADDITIONAL GROUNDS FILED EXCEPT THE PETITION TILED FOR RECTIFICATION OF MISTAKES CREPT IN THE ASS ESSMEN T ORDER BY THE ASSESSING OFFICER. WHILE DISMISSING THE APPEAL OF THE C OMMISSIONER OF INCOME TAX (APPEALS) HAS NOT CONSIDE RED ANY OF THE FACTS OR ADDITIONAL GROUNDS SUBMITTED BY THE APPELLANT REGARDING THE LEVY OF PENALTY U/S. 27I(1)( C) OF THE ACT ALSO. 2. THE ASSESSING OFFICER HAS NOT MENTIONED ANY REASON FOR INITIATING PENALTY PROCEEDINGS U/S. 271( 1)( C) OF THE ACT EXCEPT P ENALTY PROCEEDINGS ARE INITIATED AND ENCLOSED A FORMAL PRINTED NOTICE WHERE HE HAS NOT MENTIONED I.T.A. NO . 524 /COCH/ 201 8 3 THE CORRECT REASON. A COPY OF THE P ENALTY NOTICE IS ENCLOSED. HENCE THE PENALTY PROCEEDINGS CANNOT BE SAID AS VALIDLY INITIATED. IT IS SUBMITTED THAT THE ITA T DELHI BENCH 'G' NEW DELHI IN THE CASE OF M/S. ABR AUTO (P) LTD . VS. ACIT, CIRCLE( 1 ), NEW DELHI ( I.T.A. NO. 6236/ DEL/ 2015 ( AY - 2009 - 10) HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE APPELLANT BY DELETING THE PENALTY WITHOUT CONSIDERING THE ISSUES ON MERI TS. WHILE PASSING THE ORDER, THE C I T(A) - III, KOCHI HAS COMMENTED ON THIS ARGUMENT OF THE AR AS IT IS SEEN THAT THE ASSESSING OFFICER HAS CLEARLY SPELT OUT IN THE ASSESSMENT ORDER ITSELF, AS TO WHY AND ON WHAT AMOUNT PENALTY IS BEING LEVIED AND THEREFORE NOT STRIKING OFF THE INACCURATE PARTICULAR IS IMMATERIAL. THIS VIEW OF THE LD. CIT(A) - III , KOCHI APPEARS TO BE AGAINST JUSTICE. 4 . THE FACTS OF THE CASE ARE THAT THERE WAS A SEARCH AT THE PREMISES OF T. ASHRAF ON 12/09/2007 AND CERTAIN DOCUMENTS WERE SEIZED PERTAINING TO THE ASSESSEE. AS SUCH NOTICE U/S 153A R.W.S 153C WAS ISSUED TO THE ASSESSEE FOR THE ASSESSMENT YEAR 2007 - 08. THE RETURN OF INCOME WAS FILED ON 10 - 12 - 2009 DECLARING AN INCOME OF RS. NIL. THE ASSESSMENT WAS COMPLETED ON 31/12/2009 ON A TOTAL INCOME OF RS. 13,13,400 / - TAKING INTO ACCOUNT THE INVESTMENTS MADE AND THE SHORT TERM CAPITAL GAINS ACCRUED TO THE ASSESSEE ON THE SALE OF PROPERTY WHICH WAS NOT DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE - U/S 153C. THEREFORE, THE ASSESSING OFFICER INITIATED P ENALTY PROCEEDINGS U/S 271(L)(C) . IN REPLY TO THE NOTICE ISSUED U/S. 271(1)(C), THE ASSESSEE SUBMITTED THAT HE HAD DISCLOSED THE INCOME AS HIS INCOME IN SPITE OF THE SAME PERTAINING TO THAT OF HIMSELF AND 7 OTH ERS TO PURCHASE PEACE AND COOPERATE WITH THE DEPARTMENT AND THAT THE ASSESSEE HA D PAID THE TAX ON THE INCOME ASSESSED. THE TAX SOUGHT TO BE EVADED ON THE CONCEALED INCOME IS WAS RS. 3,50,900 / - FOR THE ASSESSMENT YEAR 2007 - 08 . T HE ASSESSING OFFICER WAS OF I.T.A. NO . 524 /COCH/ 201 8 4 THE OPINION THAT BUT FOR THE SEARCH AND SEIZURE OF THE DOCUMENTS IN THE PREMISES OF SHRI T. ASHRAF, THE ASSESSEE WOULD NOT HAVE DISCLOSED THE INCOME. THE INCOME WAS DISCLOSED ONLY AFTER THE ISSUE OF NOTICE U/S. 153C OF THE ACT. HENCE, THE ASSESSING OFFICE R LEVIED PENALTY OF RS.3,50,900/ - U/S. 271(1)(C) OF THE ACT. 5 . ON APPEAL, THE CIT(A) RESTRICTED THE ADDITION OF RS.13,13,400/ - TO RS. 7,32,760/ - (I.E. RS.5,80,640/ - + RS.1,93,400/ - ). ACCORDINGLY, HE DIRECTED THE ASSESSING OFFICER TO REWORK THE QUANTU M OF PENALTY LEVIABLE. THE CIT(A) OBSERVED THAT THE ASSESSEES CLAIM THAT HE OFFERED THE AMOUNT OF RS.5,80,640/ - VOLUNTARILY DURING THE COURSE OF SEARCH AND THEREFORE, PENALTY U/S. 271(1)(C) NEED NOT HAVE BEEN LEVIED IS FACTUALLY INCORRECT AS THE ASSESSE E DID NOT DISCLOSE THIS INCOME IN THE RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S. 153C. THE CIT(A) NOTICED THAT THE ASSESSING OFFICER HAD CLEARLY SPELT IN THE ASSESSMENT ORDER ISELF AS TO WHY AND ON WHAT AMOUNT PENALTY IS BEING LEVIED AND THEREFORE, NOT STRIKING OFF THE INACCURATE PARTICULAR IS IMMATERIAL. IN VIEW OF THE ABOVE, THE CIT(A) DIRECTED THE ASSESSING OFFICER RECALCULATE THE AMOUNT OF PENALTY LEVIABLE AFTER GIVING APPEAL EFFECT TO THE QUANTUM APPEAL. 6 . AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 7 . BEFORE US, THE ASSESSEE MADE A PRIMARY OBJECTION THAT NOTICE ISSUED U/S. 274 OF THE ACT DOES NOT SPECIFY THE SPECIF IC CHARGE AGAINST THE ASSESSEE AS TO I.T.A. NO . 524 /COCH/ 201 8 5 WHETHER THE ASSESSEE IS GUILTY OF HAVING CONCEALED PARTICULARS OF INCOME OR HAVING FURNISHED INACCURATE PARTICULARS OF INCOME . HE SUBMITTED THAT UNLESS THE ASSESSING OFFICER SPECIFIED THE CHARGE AGAINST THE ASSESSEE BY STRIKING OUT THE RELEVANT PORTION OF THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF THE ACT, WOULD RENDER THE PROCEED ING FOR IMPOSITION OF PENALTY AS NULL AND VOID. HE DREW OUR ATTENTION TO THE COPY OF THE NOTICE ISSUED U/S. 274 DATED 31 /12/20 09 FOR THE ASSESSMENT YEAR 200 7 - 08 . 8 . THE LD. AR ALSO RELIED ON THE FOLLOWING JUDGMENTS TO THIS EFFECT : 1. H. LAKSHMINARAYANA VS. ITO (41 ITR (TRIB) 465) (BANGALORE) 2. DEEPAK KUMAR PATWARI VS. ACIT, CENTRAL CIRCLE X - KOLKATA (ITA NOS. 616 TO 618/KOL/2013 DT. 3.2.2016) ( ITAT, KOLKATA) 3. DR. SARITA MILIND DAVARE VS. ACIT CC - 40 (ITA NO. 2187/MUM/2014 DT. 21/12/2 016 )(ITAT MUMBAI E BENCH) 4. JAHANGIR VS. ACIT (ITA NO. 1261/MUM/2011 - ITAT, MUMBAI) 5. ORBIT ENTERPRISES VS. ITO, MUMBAI (ITA NOS. 1596 & 1597/MUM/2014 DT. 01/09/2017) (ITAT, MUMBAI BENCH C) 6. CIT, BANGALORE VS. SSAS EMERALD MEADOWS (ITA 380/2015 D T. 23/11/2015(KAR.) 7. CIT & ANOTHER VS. SSAS EMERALD MEADOWS (SLP/2016 8. GANGADHARA PALO VS. REVENUE OFFICE & ANOTHER (2011) 4 SCC 690(SC) 9. MATHEWSONS AGENCIES PVT. LTD. VS. ACIT, KOCHI (ITA NOS. 93&94/COCH/2016 DT. 05/10/2017) (COCHIN BENCH). 1 0. CIT VS. MANJUNATHA COTTON AND GINNING FACTORY & OTHERS (2013) 359 ITR 565 (KAR.) I.T.A. NO . 524 /COCH/ 201 8 6 9 . ON THE OTHER HAND, T HE LD. DR SUBMITTED THAT THE ASSESSEE WAS GIVEN AN OPPORTUNITY BEFORE THE AUTHORITIES AND THE ASSESSEE HAS PARTICIPATED IN THE PENALTY PROCEEDING S. HENCE, THE ASSESSEE CANNOT RAISE THIS ISSUE BEFORE THE TRIBUNAL. HE FURTHER SUBMITTED THAT THE ERROR IN THE ISSUANCE OF NOTICE U/S. 274 COULD BE CURED IN VIEW OF THE PROVISIONS OF SEC. 292B AND SEC. 292BB OF THE ACT. HE SUBMITTED THAT THE PENALTY ORDER WHICH WAS DECIDED BY THE CIT(A) ON MERIT OUGHT TO BE CONFIRMED. 10 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THE SHOW CAUSE NOTICE U/S.274 OF THE ACT DATED 31/12/2009 WHICH IS IN A PRINTED FORM AND THE AO HAS INDICATED IN THE SAID NOTICE AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE ASSESSEE FOR 'FURNISHING INACCURATE PARTICULARS OF IN COME' OR 'CONCEALING PARTICULARS OF SUCH INCOME' BY NOT STRIKING OFF THE IRRELEVANT PORTION OF THE PRINTED SHOW CAUSE NOTICE. ON THIS ASPECT WE FIND THAT IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS NOT S PELT OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR 'FURNISHING INACCURATE PARTICULARS OF INCOME' OR 'CONCEALING PARTICULARS OF SUCH INCOME'. 1 1 . THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY , 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE I.T.A. NO . 524 /COCH/ 201 8 7 IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON'BLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE ALL THE GROUNDS 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 ING THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND THE ORDERS IMPOSING PEN ALTY HAVE TO BE HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. 1 2 . THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLLOWING PRI NCIPLES TO BE FOLLOWED 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 PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CAT EGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACT ION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION - 1 OR IN EXPLANATION - 1(B), THEN THOUGH PENAL TY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM A S THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS I.T.A. NO . 524 /COCH/ 201 8 8 IN N ATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF N ATURAL JUSTICE IS OFFENDED IF THE SHOW 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, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUND S MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY T O MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPO SING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND C ANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, TH E IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY O F FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COURSE OF ANY P ROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME 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 I.T.A. NO . 524 /COCH/ 201 8 9 OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURA TE 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 REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO B E CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS T HE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON - APPLICATION OF MIND.' 12.1 THE FINAL CONCLUSION OF THE HON'BLE COURT WAS AS FOLLOWS: - '63 . IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILITY. B) MENS REA IS NOT AN ESSENTI AL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMEN T IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271 . E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTEN CE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C) , AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASS ESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B) . I.T.A. NO . 524 /COCH/ 201 8 10 H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEA LS AND THE 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 ORDER OF ASSESSMENT LEVYING TAX AND INTEREST AN D HAS PAID TAX AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUD ED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUN D TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION 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 APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) 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 Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. I.T.A. NO . 524 /COCH/ 201 8 11 R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOS ITION OF PENALTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. T HE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' WO ULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS.' 1 3 . 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 DATED 31 /12/2009 IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INV ALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELLED. 1 4 . WE MAY ALSO ADD THAT THE PROVISION OF SECTION 292B OF THE ACT CANNOT CURE THE BASIC DEFECT IN ASSUMPTION OF JURISDICTION AND ONLY CURE THE MIS TAKE, DEFECT OR OMISSION IN RETURN OF INCOME, ASSESSMENT, NOTICE OR THE PROCEEDING IS IN I.T.A. NO . 524 /COCH/ 201 8 12 SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO INTENT AND PURPOSE OF THE ACT. AS WE HAVE ALREADY SEEN THAT THE HON'BLE KARNATAKA HIGH COURT IN THE DECISION RE FERRED TO EARLIER VIEW THE SHOW CAUSE NOTICE AND THE REASONS MENTIONED IN THE SHOW CAUSE NOTICE ARE PART OF THE PROCESS OF THE NATURAL JUSTICE AND THE DEFECT IN SUCH NOTICE CANNOT BE OVERLOOKED. IN VIEW OF THE AFORESAID DECISION WE DO NOT FIND ANY INFIRMIT Y IN THE ARGUMENTS ADVANCED BY THE LEARNED AR BEFORE US. 1 5 . THE CONTENTION OF THE LD. DR IS THAT THE ASSESSEE HAS PARTICIPATED IN THE PENALTY PROCEEDINGS AND HENCE THE ERROR, IF ANY THAT HAS OCCURRED WOULD BE CURED IN VIEW OF THE PROVISIONS OF SEC. 292 B/292BB OF THE ACT. OPPOSING THE SAID CONTENTION, RELIANCE WAS PLACED ON THE DECISION RENDERED BY THE BANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI K. PRAKASH SHETTY VS. ACIT (ITA NOS. 265 TO 267/BANG/2014 DT. 05/06/2014) WHEREIN IT WAS HELD THAT THE PROVISIONS OF SEC.292BB WOULD NOT COME TO THE RESCUE OF THE REVENUE, WHEN THE NOTICE WAS NOT IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THE ACT. IN OUR VIEW, THE NOTICE ISSUED BY THE ASSESSING OFFICER WAS NOT IN SUBSTANCE, AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THE ACT, SINCE THE ASSESSING OFFICER DID NOT SPECIFY THE CHARGE FOR WHICH PENALTY PROCEEDINGS WERE INITIATED AND FURTHER THERE WAS NON - APPLICATION OF MIND ON THE PART OF THE ASSESSING OFFICER. I.T.A. NO . 524 /COCH/ 201 8 13 1 6 . FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE , THEREFORE , CANCEL THE ORDER IMPOSING PENALTY ON THE A SSESSEE AND ALLOW THE APPEAL OF THE A SSESSEE. 17. IN THE RESULT, THE AP PEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH JANUARY, 2019 SD/ - SD/ - (GEORGE GEORGE K.) (CHANDRA POOJARI) J UDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 24 TH JANUARY, 2019 GJ COPY TO: 1 . SHRI K. ALAVIKUTTY, KURUKKAN HOUSE, VALIYORA, VENGARA, MALAPPURAM. 2 . THE DEPUTY COMMISSIONER OF INCOME - TAX, CENTRA L CIRCLE - 2, CALICUT. 3. COMMISSIONER OF INCOME - TAX(APPEALS) - III , KO CHI . 4. THE COMMISSIONER OF INCOME - TAX, CENTRAL, KOCHI. 5 . D. R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN I.T.A. NO . 524 /COCH/ 201 8 14