CHANDRU K MIRCHANDANI, MUMBAI V. ITO 14(3)(3), MUMBAI

ITA 5368/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1419 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 19-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 5368/MUM/2014 (ASSESSMENT YEAR: 2009-10) SHRI CHANDRU K. MIRCHANDANI VS. INCOME TAX OFFICER - 14(3)(3) C/O. SORABI HORMUSJI & CO. 22, MANGALDAS ROAD MUMBAI 400002 6 TH FLOOR, EARNEST HOUSE NARIMAN POINT MUMBAI 400021 PAN AFTPM3209F APPELLANT RESPONDENT APPELLANT BY: SHRI M. SUBRAMANIAN RESPONDENT BY: SHRI RAJAT MITTAL DATE OF HEARING: 30.03.2017 DATE OF PRONOUNCEMENT: 05.04.2017 O R D E R PER JASON P. BOAZ, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)- 25, MUMBAI DATED 15.07.2014 FOR A.Y. 2009-10 WHEREI N THE ASSESSEE WAS GRANTED PARTIAL RELIEF IN RESPECT OF PENALTY OF ` 9,29,562/- LEVIED BY THE ASSESSING OFFICER (AO) UNDER SECTION 271(1)(C) OF T HE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT'). 2. THE FACTS OF THE CASE, BRIEFLY STATED ARE AS UNDER: - 2.1 THE ASSESSEE, PROP. M/S. C.C. PHARMA, ENGAGED I N THE BUSINESS OF DISTRIBUTING GOODS OF M/S. CHAMPION PHOTOCHEMISTRY, FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 31.07.2009 DECLARING IN COME OF ` 9,97,113/- FROM BUSINESS, OTHER SOURCES AND HOUSE PROPERTY. TH E RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE C ASE WAS THEN TAKEN UP FOR SCRUTINY. THE ASSESSMENT WAS COMPLETED UNDER SE CTION 143(3) OF THE ACT VIDE ORDER DATED 20.12.2011 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT ` 34,14,200/-. NOTICE UNDER SECTION 274 R.W.S. 271 OF THE ACT WAS ISSUED SIMULTANEOUSLY ON 31.12.2011 FOR INITIAT ING PENALTY ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 2 PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. THE AO VIDE ORDER DATED 27.09.2013 LEVIED PENALTY OF ` 9,29,562/- ON FOUR ADDITIONS/DISALLOWANCES AGGREGATING TO ` 25,31,284/- WHICH ARE LISTED HEREUNDER: - (I) INCOME FROM HOUSE PROPERTY ON MEHAR - DAD PROPERTY ` 10,29,364/ - (II) DIFFERENCE ON INCOME FROM HOUSE PROPERTY OF HARI NIWAS PROPERTY ` 5,68,761/ - (III) EXPENSES DISALLOWED CLAIMED AGAINST INTEREST INCOME ` 6,28,866/ - (IV) SOCIETY AND MAINTENANCE CHARGES DISALLOWED ` 3,04,293/ - 2.2 ON APPEAL, THE LEARNED CIT(A) VIDE THE IMPUGNED ORDER DATED 15.07.2014 DELETED THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE ISSUES LISTED AT (I) AND (II) IN PAR A 2.1 (SUPRA) AND UPHELD THE LEVY OF PENALTY ON ISSUES LISTED AT S.NOS. (III) AN D (IV) OF PARA 2.1 (SUPRA). 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A)-25, MUMBAI DATED 15.07.2014 FOR A.Y. 2006-07, THE ASSESSEE HAS PREFERRED THIS A PPEAL RAISING THE FOLLOWING GROUNDS: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) - 25. MUMBAI [CIT(A)] ERRED IN PARTLY CONFIRMING THE ORDER OF TH E LEARNED INCOME TAX OFFICER, WARD 14(3)(3), MUMBAI (ASSESSING OFFIC ER) LEVYING PENALTY U/S.271 (1)(C) OF THE ACT. YOUR APPELLANT SUBMITS THAT THE ORDER U/S.271(1)(C ) IS ILLEGAL, BAD-IN-LAW AND THE SAME OUGHT TO BE CANCELLED. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER LEVYING PENALTY U/S.271(1)(C) OF THE ACT AM OUNTING TO RS.2,13,752 IN RESPECT OF ADDITION OF RS.6,28,866 M ADE TO THE TOTAL INCOME ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED AGAINST INTEREST INCOME. YOUR APPELLANT SUBMITS THAT THE PENALTY OF RS.2,13 ,752 IS WRONGLY LEVIED AND THE SAME OUGHT TO BE CANCELLED. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDE R OF THE ASSESSING OFFICER LEVYING PENALTY U/S.271(1)(C) OF THE ACT AM OUNTING TO RS. 1,03,429 IN RESPECT OF ADDITION OF RS.3,04,293 MADE TO THE TOTAL INCOME ON ACCOUNT OF DISALLOWANCE OF SOCIETY MAINTE NANCE AND OTHER CHARGES CLAIMED YOUR APPELLANT SUBMITS THAT THE PENALTY OF RS.1,03 ,429 IS WRONGLY LEVIED AND THE SAME OUGHT TO BE CANCELLED. 4. YOUR APPELLANT CARVES LEAVE TO ADD TO, ALTER, AM END OR VARY ALL OR ANY OF THE AFORESAID GROUND(S) OF APPEAL AS THEY/TH EIR REPRESENTATIVE MAY DEEM FIT. ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 3 3.2.1 SUBSEQUENTLY, VIDE LETTER DATED 24.11.2016, T HE ASSESSEE HAS FILED A PETITION FOR ADMISSION OF ADDITIONAL GROUNDS OF APP EAL WHICH ARE AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE & IN LAW, THE PENALTY PROCEEDINGS INITIATED VIDE NOTICE U/S. 271( 1)(C) DATED 30.12.2011 IS INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE PENALTY ORDER DATED 27.09.2013 PASSED U/S 271(1)(C) IS INVALID AND BAD IN LAW. 3.2.2 WE HAVE HEARD BOTH PARTIES ON THE ISSUE OF AD MISSION OF THE ADDITIONAL GROUNDS SOUGHT TO BE RAISED BY THE ASSES SEE IN THIS APPEAL (SUPRA). ACCORDING TO THE LEARNED A.R. OF THE ASSES SEE, THESE GROUNDS WERE INADVERTENTLY OMITTED TO BE TAKEN EARLIER AND BEING PURELY LEGAL GROUNDS, PRAYED THAT THE SAME BE ADMITTED IN VIEW OF THE DEC ISION OF THE HON'BLE APEX COURT IN THE CASE OF NTPC LTD. VS. CIT (229 IT R 383) (SC). AFTER DUE CONSIDERATION OF THE ASSESSEES SUBMISSIONS AND THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE ADDITIONAL GROUNDS RAISED ARE TO BE ADMITTED BEING LEGAL GROUNDS THAT WOULD GO TO THE VERY ROOT OF THE MATTER AND ACCORDINGLY ADMIT THE SAME FOR CONSIDERATION AND ADJUDICATION I N THIS APPEAL FOLLOWING THE RATIO OF THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF NTPC LTD. VS. CIT (SUPRA). 4. ADDITIONAL GROUNDS OF APPEAL 1 & 2 VALIDITY OF PE NALTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) VIDE NOTICE DATED 30.12.2011 AND CONSEQUENT PENALTY ORDER DATED 27.09 .2013 4.1.1 AT THE OUTSET, THE BENCH HEARD BOTH PARTIES O N THE ADDITIONAL GROUNDS RAISED. IN THESE GROUNDS, THE ASSESSEE CONT ENDS THAT THE PENALTY PROCEEDINGS INITIATED UNDER SECTION 271(1)(C) OF TH E ACT ARE INVALID AND BAD IN LAW AS THE SHOW CAUSE NOTICE ISSUED UNDER SECTIO N 274 R.W.S. 271 OF THE ACT ON 30.12.2011 FOR A.Y. 2006-07 IS AMBIVALENT; I N SO FAR AS IT DOES NOT MENTION OR INDICATE AS TO WHETHER THE INITIATION OF PENALTY IS FOR CONCEALING OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULA RS OF INCOME AND CONSEQUENTLY THE PENALTY ORDER DATED 27.09.2013 LEV YING PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS INVALID AND BAD IN LAW. 4.1.2 IN THIS REGARD THE LEARNED A.R. OF THE ASSESS EE DREW THE ATTENTION OF THE BENCH TO THE NOTICE ISSUED BY THE ASSESSING OFF ICER, I.E. THE ITO WARD ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 4 14(3)(3), MUMBAI UNDER SECTION 274 R.W.S. 271(1)(C) OF THE ACT DATED 30.12.2011 (COPY PLACED AT PG. 1 OF PAPER BOOK). IT IS IS SUBMITTED THAT THE NOTICE IS A STANDARD PRINTED NOTICE WHICH DOES NOT INDICATE THE REQUIRED PARTICULARS, I.E. AS TO WHETHER THE INITIATION OF P ENALTY IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, SINCE THE AO HAS NOT DELETED THEREIN THE INAPPROPRIATE WORDS AND PARAGRAPHS; THEREBY EVIDENCING TOTAL NON-APPLICATION OF MIND BY THE AO AND OF HIS NOT BEING CLEAR AS TO UNDER WHICH OF THE TWO LIMBS THE PENALT Y WAS TO BE CONSIDERED FOR LEVY. THE LEARNED A.R. CONTENDS THAT THE SAID P ENALTY PROCEEDINGS HAVE BEEN INITIATED ON ALL POSSIBLE GROUNDS. HOWEVER, IN THE ORDER DATED 27.09.2013 LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT, THE PENALTY HAS BEEN LEVIED (I) FOR CONCEALMENT OF INCOME IN RE SPECT OF THE DISALLOWANCE OF EXPENSES OF ` 2,28,866/- CLAIMED AGAINST INTEREST INCOME, WHEREAS IN THE ASSESSMENT ORDER THERE IS NO MENTION OF WHETHER PEN ALTY PROCEEDINGS WAS BEING INITIATED FOR CONCEALMENT OF INCOME OR FURNIS HING OF INACCURATE PARTICULARS AND (II) FOR FURNISHING OF INACCURATE P ARTICULARS OF INCOME IN RESPECT OF DISALLOWANCE OF ` 3,04,293/- BEING SOCIETY MAINTENANCE AND OTHER CHARGES; WHEREAS IN THE ORDER OF ASSESSMENT P ROCEEDINGS ARE STATED TO BE TAKEN UP FOR CONCEALMENT OF INCOME. IN SUPPOR T OF THE PROPOSITION THAT THE SAID NOTICE DATED 30.12.2011 ISSUED UNDER SECTION 274 R.W.S. 271 OF THE ACT FOR INITIATING PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WAS INVALID AND BAD IN LAW, AS PER THE CONTENTI ONS LISTED OUT ABOVE, THE LEARNED AR PLACED RELIANCE ON THE FOLLOWING JUDICIA L PRONOUNCEMENTS: - (I) CIT VS. SAMSON PERINCHERY (ITA NO. 114 OF 2014 AND OTHERS DATED 05.01.2017) OF THE HON'BLE BOMBAY HIGH COURT (II) MANJUNATHA COTTON AND GINNING FACTORY (359 ITR 565) (HON'BLE KARNATAKA HIGH COURT) (III) PRECISION CONTAINEURS LTD. IN ITA NO.S. 3448 & 3449/MUM/2011 DATED 04.01.2017 4.2 PER CONTRA, THE LEARNED D.R. FOR REVENUE SUPPOR TED THE ORDERS OF THE LEARNED CIT(A). 4.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS ON THE IS SUES RAISED IN THESE ADDITIONAL GROUNDS AND PERUSED AND CAREFULLY CONSID ERED THE MATERIAL ON ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 5 RECORD; INCLUDING THE JUDICIAL PRONOUNCEMENTS CITED . THE ISSUE FOR CONSIDERATION IS TO EXAMINE WHETHER OR NOT PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS EXIGIBLE IN THE FACTS AND CIRCUMSTANC ES OF THE CASE, AS LAID OUT ABOVE. IN OUR CONSIDERED VIEW, PROCEEDINGS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE INITIATED ONLY IF THE A O IS SATISFIED THAT ANY PERSON HAS CONCEALED PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME; ONLY THEN CAN HE HOLD THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MENTIONED IN SECTION 271(1)( C)(III) OF THE ACT. 4.3.2 WE FIND THAT THE COORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF PRECISION CONTAINEURS LTD. VS. ACIT IN ITA NOS. 344 8 & 3449/MUM/2011 DATED 04.01.2017 HAS IN SIMILAR CIRCUMSTANCES, WHER E THE NOTICE UNDER SECTION 274 R.W.S. 271 OF THE ACT DID NOT MENTION A S TO WHETHER THE INITIATION OF PENALTY PROCEEDINGS WAS FOR CONCEALME NT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME, CON SIDERED THE ISSUE AND AFTER TAKING INTO CONSIDERATION THE RATIO OF THE DE CISIONS OF THE HON'BLE APEX COURT IN DILIP N. SHROFF (2007) 291 ITR 519 (S C), DHARMENDRA TEXTILE PROCESSERS & OTHERS (2008) 306 ITR 277 AND DCIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) AND OF THE HON'BLE KARNATAKA HIGH COURT IN MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KAR), HELD THE NOTICE ISSUED UNDER SEC TION 274 R.W.S. 271 OF THE ACT TO BE INVALID SINCE IT WAS DEFECTIVE AND IS SUED WITHOUT APPLICATION OF MIND BY THE AO. CONSEQUENTLY, THE ORDER LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT WAS HELD TO BE INVALID AND CAN CELLED. IN ITS ORDER, THE COORDINATE BENCH AT PARAS 5.2.1 TO 5.2.4 THEREOF HE LD AS UNDER: - 5.2.1 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH P ARTIES ON THE ISSUES RAISED IN THESE ADDITIONAL GROUNDS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. THE ISSUE FOR CONSIDERATION B EFORE US IS TO EXAMINE WHETHER OR NOT PENALTY UNDER SECTION 271(1) (C) OF THE ACT IS EXIGIBLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE ON HAND AS LAID OUT ABOVE. IN OUR CONSIDERED VIEW, PROCEEDINGS UNDER SE CTION 271(1)(C) OF THE ACT CAN BE INITIATED ONLY IF THE AO IS SATISFIE D IN THE COURSE OF PROCEEDINGS UNDER THE ACT THAT ANY PERSON HAS CONC EALED PARTICULARS OF INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF INCOME AND ONLY THEN CAN HE DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY THE SUM MENTIONED IN SECTION 271(1)(C)(III) OF THE ACT. ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 6 5.2.2 THE EXPRESSION CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME, HAVE NOT BEEN DEFINED, BUT REFER TO DIFFERENT ACTS ON THE PART OF THE ASSE SSEE. THE HON'BLE APEX COURT IN THE CASE OF DILIP N. SHROFF VS. JCIT (291 ITR 519 (SC) ON THE ISSUE OF IMPOSITION OF PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT AT PARAGRAPHS 95 TO 97 THEREOF HAS HELD/OBSERVED AS UN DER: - IT IS OF SOME SIGNIFICANCE THAT IN THE STANDARD PR OFORMA USED BY THE AO IN ISSUING A NOTICE DESPITE THE FACT THAT TH E SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, THE AO HIMSEL F WAS NOT SURE AS TO WHETHER HE HAD PROCEEDED ON THE BASIS TH AT THE ASSESSEE HAD CONCEALED HIS INCOME OR HE HAD FURNISH ED INACCURATE PARTICULARS. EVEN BEFORE US, THE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDER OF ASSESS MENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUATIONS . THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON-APP LICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPL ES OF NATURAL JUSTICE. [SEE MALABAR INDUSTRIAL CO. LTD. VS. CIT ( 2000) 159 CTR (SC) 1 : (2000) 2 SCC 718]. WE HAVE, HOWEVER, NOTICED HEREINBEFORE THAT THE ITO HAD MERELY HELD THAT THE ASSESSEE IS GUILTY OF FURNISHING OF I NACCURATE PARTICULARS AND NOT OF CONCEALMENT OF INCOME; ON A PERUSAL OF THE NOTICES ISSUED UNDER SECTION 2 74 R.W.S. 271 OF THE ACT FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT FOR BOTH ASSESSMENT YEARS 1996-97 AND 1997 -98 IN THE CASE ON HAND, WE FIND THAT IN THE STANDARD PROFORMA (ITN S-29) USED BY THE AO FOR ISSUING THE SAID NOTICES, THE AO HIMSELF IS NOT CERTAIN AS TO WHETHER HE HAS TO PROCEED ON THE BASIS THAT THE ASS ESSEE HAS CONCEALED HIS INCOME OR HAD FURNISHED INACCURATE PA RTICULARS OF HIS INCOME. 5.2.3 THE HON'BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS P. LTD. (2010) 322 ITR 158 (SC), WHIL E REFERRING TO ITS DECISIONS IN THE CASE OF DILIP N. SHROFF VS. JCIT ( 2007) 291 ITR 519 AND UOI VS. DHARMENDRA TEXTILE PROCESSORS (2008) 30 6 ITR 277, IN PARA 9 OF ITS ORDER HAS OBSERVED AND CLARIFIED THAT THE BASIC REASON WHY THE DECISION IN DILIP N. SHROFF (SUPRA) WAS OVE RRULED BY DHARMENDRA TEXTILE PROCESORS (SUPRA) WAS ONLY TO TH E EFFECT THAT MENS REA WAS NOT TO BE CONSIDERED AN ESSENTIAL INGREDIEN T FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. NO FAUL T, HOWEVER, WAS FOUND WITH THE REASONING IN THE DECISION OF DILIP S HROFF. AT PARA 9 OF THE ORDER IN RELIANCE PETROPRODUCTS P. LTD. (SUPRA) , THEIR LORDSHIPS HELD/CLARIFIED THE POSITION AS UNDER: - THEREFORE, IT IS OBVIOUS THAT IT MUST BE SHOWN THA T THE CONDITIONS UNDER SECTION 271(1)(C) MUST EXIST BEFORE THE PENAL TY IS IMPOSED. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEN D UPON THE ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 7 RETURN FILED BECAUSE THAT IS THE ONLY DOCUMENT, WHE RE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN SUC H PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARI SE. IN DILIP N. SHROFF VS. JOINT CIT [2007) 6 SCC 329, THIS COURT E XPLAINED THE TERMS 'CONCEALMENT OF INCOME' AND 'FURNISHING INACC URATE PARTICULARS'. THE COURT WENT ON TO HOLD THEREIN THA T IN ORDER TO ATTRACT THE PENALTY UNDER SECTION 271(1)(C), MENS R EA WAS NECESSARY, AS ACCORDING TO THE COURT, THE WORD 'INA CCURATE' SIGNIFIED A DELIBERATE ACT OR OMISSION ON BEHALF OF THE ASSESSEE. IT WENT ON TO HOLD THAT CLAUSE (III) OF SECTION 271(1) (C) PROVIDED FOR A DISCRETIONARY JURISDICTION UPON THE ASSESSING AUTHO RITY, INASMUCH AS THE AMOUNT OF PENALTY COULD NOT BE LESS THAN THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF SUCH CONCEALMENT O F PARTICULARS OF INCOME, BUT IT MAY NOT EXCEED THREE TIMES THEREO F. IT WAS POINTED OUT THAT THE TERM 'INACCURATE PARTICULARS' WAS NOT DEFINED ANYWHERE IN THE ACT AND, THEREFORE, IT WAS HELD THA T FURNISHING OF AN ASSESSMENT OF THE VALUE OF THE PROPERTY MAY NOT BY ITSELF BE FURNISHING INACCURATE PARTICULARS. IT WAS FURTHER H ELD THAT THE ASSESSING OFFICER MUST BE FOUND TO HAVE FAILED TO P ROVE THAT HIS EXPLANATION IS NOT ONLY NOT BONA FIDE BUT ALL THE F ACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS INCOME WERE NOT DISCLOSED BY HIM. IT WAS THEN HELD THAT THE EXPLANA TION MUST BE PRECEDED BY A FINDING AS TO HOW AND IN WHAT MANNER, THE ASSESSEE HAD FURNISHED THE PARTICULARS OF HIS INCOME. THE CO URT ULTIMATELY WENT ON TO HOLD THAT THE ELEMENT OF MENS REA WAS ES SENTIAL. IT WAS ONLY ON THE POINT OF MENS REA THAT THE JUDGMENT IN DILIP N. SHROFF VS. JOINT CIT WAS UPSET. IN UNION OF INDIA VS. DHAR AMENDRA TEXTILE PROCESSORS, AFTER QUOTING FROM SECTION 271 EXTENSIV ELY AND ALSO CONSIDERING SECTION 271(1)(C), THE COURT CAME TO TH E CONCLUSION THAT SINCE SECTION 271(1)(C) INDICATED THE ELEMENT OF ST RICT LIABILITY ON THE ASSESSEE FOR THE CONCEALMENT OR FOR GIVING INACCURA TE PARTICULARS WHILE FILING RETURN, THERE WAS NO NECESSITY OF MENS REA. THE COURT WENT ON TO HOLD THAT THE OBJECTIVE BEHIND THE ENACT MENT OF SECTION 271(1)(C) READ WITH EXPLANATIONS INDICATED WITH THE SAID SECTION WAS FOR PROVIDING REMEDY FOR LOSS OF REVENUE AND SU CH A PENALTY WAS A CIVIL LIABILITY AND, THEREFORE, WILFUL CONCEA LMENT IS NOT AN ESSENTIAL INGREDIENT FOR ATTRACTING CIVIL LIABILITY AS WAS THE CASE IN THE MATTER OF PROSECUTION UNDER SECTION 276C OF THE ACT. THE BASIC REASON WHY DECISION IN DILIP N. SHROFF VS. JOINT CI T WAS OVERRULED BY THIS COURT IN UNION OF INDIA VS. DHARAMENDRA TEX TILE PROCESSORS, WAS THAT ACCORDING TO THIS COURT THE EFFECT AND DIF FERENCE BETWEEN SECTION 271(1)(C) AND SECTION 276C OF THE ACT WAS L OST SIGHT OF IN THE CASE OF DILIP N. SHROFF VS. JOINT CIT HOWEVER, IT M UST BE POINTED OUT THAT IN UNION OF INDIA VS. DHARAMENDRA TEXTILE PROC ESSORS, NO FAULT WAS FOUND WITH THE REASONING IN THE DECISION IN DIL IP N. SHROFF VS. JOINT CIT, WHERE THE COURT EXPLAINED THE MEANING OF THE TERMS 'CONCEAL' AND 'INACCURATE'. IT WAS ONLY THE ULTIMAT E INFERENCE IN DILIP N. SHROFF VS. JOINT CIT TO THE EFFECT THAT ME NS REA WAS AN ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 8 ESSENTIAL INGREDIENT FOR THE PENALTY UNDER SECTION 271(1)(C) THAT THE DECISION IN DILIP N. SHROFF VS. JOINT CIT WAS OVERR ULED. 5.2.4 IN THE ABOVE VIEW OF THE MATTER, THE FINDING RENDERED BY THE HON'BLE APEX COURT IN THE CASE OF DILIP N. SHROFF ( SUPRA); IN RESPECT OF HOLDING THAT INAPPROPRIATE WORDS AND PARAGRAPHS IN THE STANDARD PROFORMA OF THE NOTICES ISSUED UNDER SECTION 274 R. W.S. 271 OF THE ACT AS USED BY THE AO WERE REQUIRED TO BE DELETED AND T HE SAME NOT HAVING BEEN DONE, THE IMPUGNED NOTICES ISSUES ON 13 .12.2007 FOR ASSESSMENT YEARS 1996-97 AND 1997-98; THEN THE FACT THE IMPUGNED NOTICES/ORDERS SUFFER FROM NON-APPLICATION OF MIND STILL HOLDS GOOD AND IS INTACT. THIS LEGAL POSITION HAS ALSO BEEN RE ITERATED BY THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 357 ITR 565 (KAR) A ND WHICH HAS ALSO NOT BEEN INTERFERED WITH BY THE HON'BLE APEX C OURT ON THE APPEAL FILED AGAINST IT BY REVENUE. BEFORE US, NO CONTRARY JUDGEMENT OF THE HON'BLE APEX COURT HAS BEEN CITED OR REFERRED. WE, THEREFORE, WHILE TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANC ES OF THE CASE ON HAND AND APPLYING THE RATIO AND DERIVING SUPPORT FR OM THE AFORESAID DECISIONS OF THE HON'BLE APEX COURT (DISCUSSED SUPR A), HOLD THAT THE NOTICES DATED 13.12.2007 ISSUED FOR INITIATION OF P ENALTY PROCEEDINGS UNDER SECTION 247 R.W.S. 271 OF THE ACT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR ASSESSMENT YEARS 1 996-97 AND 1997-98 ARE DEFECTIVE AND ISSUED WITHOUT APPLICATION OF MIN D AND ARE THEREFORE INVALID AND CONSEQUENTLY THE ORDERS LEVYING PENALTY UNDER SECTION 271(1)(C) OF THE ACT FOR BOTH ASSESSMENT YEARS 1996 -97 AND 1997-98 ARE ALSO INVALID AND LIABLE TO BE CANCELLED. IN THI S VIEW OF THE MATTER, THE ADDITIONAL GROUNDS 1 AND 2 RAISED BY THE ASSESS EE FOR BOTH ASSESSMENT YEARS 1996-97 AND 1998-99 ARE ALLOWED. 4.3.3 THIS LEGAL POSITION HAS BEEN REITERATED BY TH E HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KAR) AND WHICH HAS NOT BEEN INT ERFERED WITH BY THE HON'BLE APEX COURT IN THE APPEAL PREFERRED AGAINST IT BY REVENUE. THIS PROPOSITION HAS BEEN AFFIRMED AND UPHELD BY THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SAMSON PERINCHERY (SUP RA). BEFORE US, NO CONTRARY JUDGEMENT OF THE HON'BLE HIGH COURTS OR OF HON'BLE APEX COURT, REFERRED TO AND FOLLOWED BY THE COORDINATE BENCH IN ITS ORDER IN PRECISIONS CONTAINEURS LTD. (SUPRA) HAS BEEN BROUGHT TO OUR NO TICE OR CITED OR REFERRED TO. THEREFORE, TAKING INTO CONSIDERATION T HE FACTS AND CIRCUMSTANCES OF THE CASE ON HAND AND APPLYING THE RATIO AND DERIVING SUPPORT FROM THE DECISION OF THE HON'BLE APEX COURT RELIED ON BY THE COORDINATE BENCH IN ITS ORDER (SUPRA), WE HOLD THAT THE NOTICE DATED 30.12.2011 ISSUED FOR INITIATION OF PENALTY PROCEED INGS UNDER SECTION ITA NO. 5368/MUM/2014 SHRI CHANDRU K. MIRCHANDANI 9 271(1)(C) OF THE ACT FOR A.Y. 2006-07 IS DEFECTIVE AND ISSUED WITHOUT APPLICATION OF MIND AND IS THEREFORE INVALID AND BA D IN LAW. CONSEQUENTLY THE ORDER DATED 27.09.2013 LEVYING PENALTY UNDER SE CTION 271(1)(C) OF THE ACT FOR A.Y. 2006-07 IS ALSO INVALID AND LIABLE TO BE CANCELLED. IN THIS VIEW OF THE MATTER THE IMPUGNED ORDER OF THE LEARNED CIT (A) IS REVERSED AND THE ADDITIONAL GROUNDS 1 AND 2 RAISED BY THE ASSESSEE F OR A.Y. 2006-07 ARE ALLOWED. 5. SINCE THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT FOR A.Y. 2006-07 HAS BEEN HELD TO BE INVALID AND CANCELLED, AND THE ASSESSEES GRIEVANCE HAS BEEN ADDRESSED BY ALLOWING THE ADDITI ONAL GROUNDS RAISED IN THIS REGARD, THE OTHER GROUNDS OF APPEAL AT S. NOS. 1 TO 4 RAISED ON THE MERITS OF LEVY OF THE SAID PENALTY UNDER SECTION 27 1(1)(C) OF THE ACT ARE RENDERED ACADEMIC IN NATURE AND REQUIRE NO ADJUDICA TION AT THIS STAGE. 6. IN THE RESULT, THE ASSESSEES APPEAL FOR A.Y. 2009- 10 IS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH APRIL, 2017. SD/ - SD/ - (SANDEEP GOSAIN) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 5 TH APRIL, 2017 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -25, MUMBAI 4. THE CIT - 14, MUMBAI 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.