M Chandra Mohan Goud, Hyd, Hyderabad V. ITO, Ward-4(4), Hyd, Hyderabad

ITA 594/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5886 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 08-12-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 26-04-2016
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Principle of natural justice; Initiation of penalty proceedings; Agreed addition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 594/HYD/2016 ASSESSMENT YEAR: 2005-06 SRI MULA CHANDRA MOHAN GOUD, HYDERABAD [PAN: AGWPM9920D] VS THE INCOME TAX OFFICER, WARD-4(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR FOR REVENUE : SMT. U. MINICHANDRAN, DR DATE OF HEARING : 14-12-2016 DATE OF PRONOUNCEMENT : 30-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, HYDERAB AD DATED 29-01-2016, CONFIRMING THE PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT [ACT] OF RS. 2,44,000/-. 2. BRIEFLY STATED, IN THE COURSE OF ASSESSMENT PROCEED INGS, ASSESSING OFFICER (AO) NOTICED THAT THERE WERE DEPOSI TS IN ORIENTAL BANK OF COMMERCE AND DEVELOPMENT CREDIT BANK TO AN EX TENT OF RS. 29,00,200/- WHICH WERE TREATED AS UNEXPLAINED INCOME AND WAS BROUGHT TO TAX. THE MATTER HAS CARRIED UPTO ITAT AN D IN THE PROCEEDINGS, AFFIDAVITS WERE FILED BY ASSESSEE FROM THE PROPRIETORS I.T.A. NO. 594/HYD/2016 :- 2 -: OF LAXMI WINES AND MALLIKARJUNA BAR & RESTAURANT, WHO WERE HIS CLOSE RELATIVES STATING THAT THE CASH DEPOSITS WERE SALES OF THE ABOVE FIRMS ROUTED THROUGH THE ACCOUNT OF ASSESSEE FOR GIVING CHEQUES/DEMAND DRAFTS TO AP BEVERAGES CORPORATION LTD. CONSIDERING THE SUBMISSIONS OF ASSESSEE, THE MATTER WA S SET ASIDE TO THE FILE OF AO TO EXAMINE THE AFFIDAVITS, ALONG WIT H OTHER EVIDENCE AND IN THE COURSE OF RE-ASSESSMENT PROCEEDINGS, AO HA S ACCEPTED ALL THE AMOUNTS, EXCEPT TWO DEPOSITS. IT IS NOTICED THA T CASH DEPOSITS AMOUNTING TO RS. 3,07,500/- IN THE DEVELOPME NT CREDIT BANK A/C AND RS. 4,31,000/- IN THE ORIENTAL BANK OF C OMMERCE A/C WERE NOT REFLECTED IN THE BOOKS OF THE ABOVE TWO CO NCERNS. ACCORDINGLY, AN AMOUNT OF RS. 7,38,500/- WAS CONFIRM ED IN THE RE- ASSESSMENT ORDERS WHICH ASSESSEE HAS ACCEPTED WITHOUT ANY FURTHER APPEAL. SINCE PROCEEDINGS U/S. 271(1)(C) WE RE INITIATED, AO LEVIED THE PENALTY. 3. BEFORE THE LD.CIT(A), IT WAS CONTENDED THAT THE ADDI TION WAS AN AGREED ADDITION IN ORDER TO BUY PEACE, EVEN THO UGH THE MONIES BELONG TO THE OTHER CONCERNS AND RELIED ON VAR IOUS CASE LAW SUCH AS; I. SANDUR MANGANESE & IRON [38 TAXMANN.COM 106]; II. CIT VS. STEEL CENTRE [51 TAXMANN.COM 127]; III. RAMA EDUCATIONAL WELFARE SOCIETY [44 TAXMANN.COM 32]; IV. VIKARAM BHATIA [47 TAXMANNN.COM 365] (ITAT, LUCKNOW) 4. LD.CIT(A) HOWEVER, IN A VERY BRIEF DECISION, CO NFIRMED THE PENALTY STATING AS UNDER: THE SUBMISSIONS OF THE APPELLANT AND THE ORDER PAS SED BY THE ASSESSING OFFICER HAVE BEEN CAREFULLY CONSIDERED. I.T.A. NO. 594/HYD/2016 :- 3 -: DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS FOUND THAT THE APPLICANT HAS NOT REFLECTED THE TWO AMOUNTS, TOTALI NG UP TO RS. 7,38,500/- IN HIS BOOKS OF ACCOUNT. THIS IS CLEAR CASE OF CON CEALMENT. SINCE THIS ISSUE WAS DECIDED AFTER THE ITAT, HYDER ABAD ORDER (SET ASIDE), I FEEL THERE IS NO NEED TO INTERFERE WITH T HE ORDER OF THE ASSESSING OFFICER. THE PENALTY ORDER IS CONFIRMED. 4.1. ASSESSEE APART FROM THE ISSUE ON MERITS ALSO RAI SED AN ADDITIONAL GROUND THAT IN THE ABSENCE OF SPECIFIC CHARGE RAISED BY THE ASSESSING OFFICER IN THE NOTICE U/S. 274 R.W.S. 271(1)(C), THE LEVY OF PENALTY U/S. 271(1)(C) IS NOT VALID. IT RELIED ON THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. VS. MANJUNATHA COTTON & GINNING FACTORY [359 ITR 565]. IT WAS SUBMITTED THAT APPEAL BY REVENUE AGAINST THE SAID JUDGME NT OF HON'BLE KARNATAKA HIGH COURT WAS DISMISSED BY THE HON 'BLE SUPREME COURT. 5. COMING TO THE MERITS, IT WAS SUBMITTED THAT THE AMOUNTS ASSESSED IN THE HANDS OF ASSESSEE ARE PERTAIN ING TO THE OTHER TWO CONCERNS AND AFFIDAVITS TO THAT EXTENT HAVE B EEN FILED WHICH HAVE NOT BEEN DISPROVED. AO MADE THE ADDITION O N THE REASON THAT THE SAID AMOUNTS WERE NOT ACCOUNTED FOR IN THE IR BOOKS OF ACCOUNT. ONCE THOSE AMOUNTS WERE ACCEPTED AS BELON GING TO THEM, IT IS NOT CORRECT TO LEVY PENALTY IN THE HANDS OF ASSESSEE WITHOUT PROVING THAT THE MONEY BELONGS TO ASSESSEE. J UST BECAUSE ASSESSEE ACCEPTED THE ADDITION TO SETTLE THE MATTERS IT IS NOT ENOUGH TO LEVY PENALTY U/S. 271(1)(C). 6. LD. DR HOWEVER, RELIED ON THE ORDERS OF THE AO TO SUBSTANTIATE THAT ON THE FACTS OF THE CASE, PENALTY IS WAR RANTED. I.T.A. NO. 594/HYD/2016 :- 4 -: 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. BEFORE GOING TO THE ASPECT OF ISSUANCE OF IMPROPER NOTICE, IT IS NEC ESSARY TO CONSIDER WHETHER PENALTY CAN BE LEVIED ON MERITS AS W ELL. AS BRIEFLY STATED ABOVE, THE AO HAS ORIGINALLY TAXED THE EN TIRE AMOUNT OF RS. 29,00,200/- AS UNEXPLAINED INCOME OF ASSESSE E. IT WAS ASSESSEES SUBMISSION THAT THE AMOUNTS DEPOSITED IN THE BANK ACCOUNT DO PERTAIN TO THE BUSINESS OF LAXMI WINES AND MALLIKARJUNA BAR & RESTAURANT. ASSESSEE FILED THE AFF IDAVITS FOR THE FIRST TIME BEFORE THE ITAT AND THE MATTER WAS RESTORED TO THE FILE OF THE AO FOR FRESH EXAMINATION. IN THE COURSE OF RE-A SSESSMENT, AO HAS EXAMINED AND BROUGHT TO TAX THE AMOUNT OF RS. 7,38 ,500/- STATING AS UNDER: 2. THE ASSESSEE FURNISHED COPIES OF THE AFFIDAVITS FILED BEFORE THE ITAT ALONG WITH THE BOOKS OF ACCOUNT OF LAXMI WINES AND MALLIKARJUNA BAR & RESTAURANT. DURING THE ASSESSMENT PROCEEDING S, IT IS NOTICED THAT THERE ARE CASH DEPOSITS IN THE SBH ACCOUNT OF THE A SSESSEE ALSO WHICH WERE NOT EXPLAINED AT THE TIME OF ORIGINAL ASSESSME NT. THE ASSESSEE SUBMITTED THAT THEY ALSO REPRESENT THE SALES OF BOT H THE ABOVE ACCOUNTS THAT IMMEDIATELY AFTER DEPOSIT OF THE CASH A BANKER S CHEQUE HAS BEEN TAKEN. THE BOOKS OF ACCOUNT FURNISHED HAVE BEEN VE RIFIED. IT IS NOTICED THAT CASH DEPOSITS AMOUNTING TO RS. 3,07,500/- IN T HE DEVELOPMENT CREDIT BANK ACCOUNT OF THE ASSESSEE AND RS. 4,31,000/- IN THE ORIENTAL BANK OF COMMERCE ACCOUNT OF THE ASSESSEE WERE NOT REFLECTED IN THE BOOKS OF THE ABOVE TWO CONCERNS. HENCE, THE AMOUNT TOTALING TO RS. 7,38,500/- IS TREATED AS UNEXPLAINED INCOME OF THE ASSESSEE.. 8. THUS, AS CAN BE SEEN FROM THE ABOVE ORDER, THE RE ASON FOR ADDING THE AMOUNTS IN THE HANDS OF ASSESSEE IS ONLY BECAUSE THE AO DID NOT FIND NECESSARY ENTRIES IN THE BOOKS OF A CCOUNT OF THE ABOVE TWO CONCERNS. IF THAT IS THE CASE, SINCE THOSE P EOPLE HAVE OWNED UP THE AMOUNTS, NECESSARY PROCEEDINGS COULD HAV E BEEN INITIATED IN THEIR HANDS. HOWEVER, IN ORDER TO SETTLE THE MATTER, ASSESSEE HAD ACCEPTED THE ADDITION AND PAID THE TAXES A CCORDINGLY. I.T.A. NO. 594/HYD/2016 :- 5 -: IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT ASS ESSEES EXPLANATION GIVEN HAS NOT BEEN DISPROVED. JUST BECAUS E AN ADDITION HAS BEEN MADE AND AGREED BY ASSESSEE, IT DOE S NOT AUTOMATICALLY LEAD TO LEVY OF PENALTY U/S. 271(1)(C). 9. ASSESSEE IN THE APPEAL HAS RAISED AN ADDITIONAL G ROUND CONTESTING THAT THE NOTICE ISSUED DOES NOT SPECIFY WHETHE R THE PROCEEDINGS WERE INITIATED FOR CONCEALMENT OF PENALT Y OR FOR FURNISHING INACCURATE PARTICULARS. THE COPY OF THE NOTICE PLACED ON RECORD DO INDICATE THAT IT IS A PRINTED PROFORMA, WITH OUT STRIKING-OFF THE RELEVANT COLUMNS AND SIMPLY SIGNED BY THE AO WHICH HAS SERVED ON ASSESSEE. ON SIMILAR FACTS, THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY [359 ITR 565] (SUPRA) HAS HELD THAT THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM WHERE ALL THE GRO UNDS MENTIONED IN 271 ARE MENTIONED WOULD NOT SATISFY THE REQUIREM ENT OF LAW WHEN THE CONSEQUENCE OF ASSESSEE NOT REBUTTING THE INITI AL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 10 % TO 300% OF TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE U/S. 274 SHOULD SATISFY THE GROUN DS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE ARE OFFENDED, IF THE SHOW CAUSE NOTICE IS VAGUE. ON TH E BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON ASSESSE E. 10. SIMILAR ISSUE HAS COME UP IN THE CASE OF M/S. N IVEE PROPERTY DEVELOPERS PRIVATE LTD., VS. ACIT IN ITA NO . 951/HYD/2016 (AY. 2005-06) DT. 11-11-2016. IN THAT CA SE, THE CO-ORDINATE BENCH (SMC) OF HYDERABAD HAS HELD AS UND ER: I.T.A. NO. 594/HYD/2016 :- 6 -: 2. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THAT IN THE NOTICE ISSUED U/S 271(1)(C), THE CHARGE IS NOT SPECIFIED. IN OTHER WORDS, THE AO HAS NOT SPECIFICALLY STATED WHETHER THE NOTICE WAS ISSUED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HON' BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTO RY REPORTED IN (2013) 35 TAXMANN.COM 250 (KAR.) AT PARA 63 HELD AS UNDER: 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: (A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIABILIT Y. (B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSING P ENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR 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 DISCERNI BLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISI ONAL AUTHORITY. (F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE 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 WH ICH 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 (1 )(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). (H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS 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 ASSESS MENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTEREST THAT BY ITSE LF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDI NGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FRO M THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SU CH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT H AS 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 ASSESSI NG OFFICER IN THE ASSESSMENT ORDER. (L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANAT ION 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 . I.T.A. NO. 594/HYD/2016 :- 7 -: (M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTAN TIATED BY THE ASSESSEE, BUT IS FOUND 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 SECT ION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEA L, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, 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 SPECIFIC ALLY 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. (R) THE ASSE SSEE SHOULD KNOW THE GROUNDS WHICH HE HAS TO MEET S PECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASS ESSEE. (S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FI N DING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSES SMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANAT E FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT O F THE PROCEEDINGS. (U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORRECT PARTICULARS' W OULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONT EST 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. RESPECTFULLY FOLLOWING THE SAME, I QUASH THE PENALTY L EVIED U/S 271(1)(C) AS BAD IN LAW. 11. SIMILARLY IN THE CASE OF LALITKUMAR M SAKHALA V S. DCIT IN ITA NO. 938/MUM/2015 (AY. 2009-10) DT. 10-08-2016 , THE CO-ORDINATE BENCH OF MUMBAI (SMC) HAS HELD AS UNDER: I.T.A. NO. 594/HYD/2016 :- 8 -: 4. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE STA TED THAT HE HAS FILED THE EXPLANATION BEFORE THE AO AND THE CIT(A) AND ALSO A RGUED THAT IN THIS CASE THE AO HAS LEVIED PENALTY FOR CONCEALMENT U/S 271 ( 1) (C) OF THE ACT, BUT WITHOUT ANY SPECIFIC CHARGE I.E. THE PENALTY FOR CO NCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. ACC ORDING TO LD. COUNSEL THE AO HIMSELF IS NOT CONVINCED ABOUT THE CHARGE. T HE LD. COUNSEL FOR THE ASSESSEE DREW MY ATTENTION TO THE PAGES 2-3 OF THE ASSESSEE'S PAPER BOOK, WHEREIN PENALTY NOTICE U/S. 271(1)( C) R.W.S 274 OF THE ACT DATED 17- 11-2011 WAS ISSUED BY THE AO TO THE ASSESSEE. THE L D. COUNSEL FOR THE ASSESSEE STATED BEFORE ME THAT THIS ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE KARNATAKA H IGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (2 013) 359 ITR 565 (KAR.). I FIND THAT THE NOTICE ISSUED U/S. 274 R. W . S. 271 OF THE ACT, DATED 17-11- 2011, CLEARLY REVEALS THAT THE AO WHILE ISSU ING THE NOTICE HAS NOT STRIKE OFF INAPPROPRIATE WORDS AND ACCORDINGLY, THE PURPOSE OF THE NOTICE ISSUED FOR LEVY OF PENALTY IS LOST. ACCORDINGLY, IT IS NOT CLEAR WHAT DEFAULT IS COMMITTED BY THE ASSESSEE I.E. WHETHER IT IS INITIA TED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME SO THAT THE PENALTY U/S. 271(1)( C) CAN BE LEVIED. I FIND THAT THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTT ON AND GINNING FACTORY (SUPRA) HAS HELD AS UNDER:- '58. IT MUST BE NOTICED THAT THIS FINDING RECORDING CONCEALMENT IN THE ORDER TO BE PASSED BY THESE AUTHORITIES IS ONLY FOR THE PURP OSE OF INITIATING. THE SAID FINDING IS NOT CONCLUSIVE; IT IS IN THE NATURE OF P RIMA FACIE SATISFACTION, WHICH AUTHORIZES THEM TO INITIATE THE PENALTY PROCEEDINGS . ONCE A PENALTY PROCEEDINGS IS VALIDLY INITIATED, THEN UNDER SECTION 274(1) AN OBLIGATION IS CAST ON THE PERSON INITIATING THE PROCEEDINGS TO ISSUE NOTICE TO THE A SSESSEE. WHEN SUCH A NOTICE IS ISSUED, IT IS OPEN TO THE ASSESSEE TO CONTEST THE A CCUSATION AGAINST HIM THAT HE HAS CONCEALED INCOME OR HE HAS FURNISHED INACCURATE PARTICULARS. AS THERE IS AN INITIAL PRESUMPTION OF CONCEALMENT, IT IS FOR THE A SSESSEE TO REBUT THE SAID PRESUMPTION. THE PRESUMPTION FOUND IN EXPLANATION 1 IS A REBUTTABLE PRESUMPTION. IF THE AUTHORITY, AFTER HEARING THE AS SESSEE AND LOOKING INTO THE MATERIAL PRODUCED IN THE SAID PROCEEDINGS BEFORE HI M IS SATISFIED THAT THOUGH THE INCOME IS UNDISCLOSED THERE WAS NO INTENT TO AV OID TAX AND THEREFORE, IF HE HOLDS THERE IS NO CONCEALMENT OF INCOME, THEN QUEST ION OF IMPOSING PENALTY WOULD NOT ARISE. IT MAY BE A CASE OF NOT DISCLOSING INCOME WITHOUT ANY INTENT TO AVOID TAX; IT MAY BE A CASE OF FURNISHING PARTICULA RS WITHOUT ANY INTENTION TO AVOIDING TAX. BOTH STAND ON THE SAME FOOTING. IT IS ONLY WHEN THE AUTHORITY IS SATISFIED THAT NON-DISCLOSURE OF INCOME OR FURNISHI NG INACCURATE PARTICULARS WAS WITH THE INTENTION OF EVADING TAX, THEN IT AMOUNT T O CONCEALMENT, IT AMOUNTS TO FURNISHING INACCURATE PARTICULARS. THEN, AT HIS DIS CRETION, HE MAY IMPOSE PENALTY AS PROVIDED UNDER THE ACT. THEREFORE, MERELY BECAUSE THE ASSESSEE ACCEPTED ADDITION OR DELETION AND DID NOT CHALLENGE THE ASSESSMENT ORDER BY WAY OF APPEAL, IT CANNOT BE CONCLUDED THAT SUCH ADD ITION OR DELETION AMOUNTS TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS. WHEN A PLEA IS TAKEN THAT IN ORDER TO AVOID LITIGATION AND PURCHAS E PEACE, THE TAX LEVIED IS PAID WITH INTEREST, IF THE ASSESSEE IS ABLE TO DEMONSTRA TE HIS BONA FIDES AND IF THE I.T.A. NO. 594/HYD/2016 :- 9 -: AUTHORITY IS SATISFIED ABOUT HIS BONAFIDES, THEN TH E QUESTION OF IMPOSING PENALTY WOULD NOT ARISE. SIMILARLY, IN CASES WHERE THOUGH T HE TAX WAS NOT ACTUALLY DUE BUT STILL THE ASSESSEE PAYS TAX WITH A HOPE OF CLAI MING DEDUCTIONS IN THE SUBSEQUENT YEARS, IF THE ASSESSEE IS ABLE TO DEMONS TRATE THERE WAS NO LIABILITY TO PAY TAX AT ALL, MERELY IF ASSESSEE PAYS TAX AND HE DOES NOT CHALLENGE ORDER, THAT WOULD NOT CONSTITUTE CONCEALMENT OF INCOME SO AS TO ENABLE THE AUTHORITIES TO IMPOSE PENALTY. SIMILARLY, IN CASES, WHERE THE LEGA L POSITION IS NOT WELL SETTLED, WHEN FEW HIGH COURTS AND TRIBUNALS HAVE TAKEN A VIE W IN FAVOUR OF THE ASSESSEE AND SOME HIGH COURTS AND TRIBUNALS HAVE TA KEN A VIEW IN FAVOUR OF THE REVENUE AND ON LEGAL ADVICE IF AN ASSESSEE RELI ES ON THE SAID LEGAL POSITION FOR NOT DISCLOSING THE INCOME AND FOR NON-PAYMENT O F TAX, CERTAINLY, THAT IS A FACT WHICH SHOULD WEIGH IN THE PENALTY PROCEEDINGS AFTER THE ASSESSEE HAS PAID TAX WITH INTEREST BEFORE IMPOSING PENALTY. 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 CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SA ID 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 SATISFACTION OF THE AUTHORITY WHICH HA S PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DIS CERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CON TAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS A RE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHE R EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD B E MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HI M AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CON TEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO N OT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SEND ING A PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTION ED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASS ESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HA VE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY 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, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENC ES 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 OFFEN CES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E 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 EXISTE NCE OF THE GROUNDS MENTIONED I.T.A. NO. 594/HYD/2016 :- 10 -: IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO 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 A NSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OT HERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUN D ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE IN FORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING TH E PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT 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 A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURAT E 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 COUR T IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CON CEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT 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 MA RKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS T O BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR P ENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO IN VOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATEL Y MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. TH E STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON- APPLICATION OF MIND.' 5. IN VIEW OF THE FACTS OF THE CASE THAT THERE IS N O SPECIFIC CHARGE RAISED BY THE AO WHILE ISSUING NOTICE U/S 274 R. W. S. SECTIO N 271 OF THE ACT, AS DISCUSSED ABOVE, THE ISSUE IS COVERED BY THE DECISI ON OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTT ON AND GINNING FACTORY (SUPRA). RESPECTFULLY FOLLOWING THE ABOVE, I ALLOW THE APPEAL OF THE ASSESSEE. I.T.A. NO. 594/HYD/2016 :- 11 -: 12. IN THE PRESENT CASE THE NOTICE DOES NOT SPECIFY FOR WHAT OFFENCE THE PROCEEDINGS ARE INITIATED. THE DECISION OF THE KARNATAKA HIGH COURT (SUPRA) AND OTHER CASES STATED ABOVE WILL EQ UALLY APPLY TO THE FACTS OF THE CASE. EVEN OTHERWISE ON MERITS ALSO THERE IS NO SCOPE FOR LEVY OF PENALTY AS CONSIDERED ABOVE. HENC E, BOTH ON PRINCIPLES OF LAW AND ALSO ON THE FACTS, THERE IS NO SCOPE FOR LEVY OF PENALTY U/S 271(1)(C) ON ASSESSEE. CONSIDERING THE ABOVE, WE HAVE NO HESITATION IN CANCELLING THE PENALTY. 13. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH DECEMBER, 2016 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 30 TH DECEMBER, 2016 TNMM COPY TO : 1. SRI MULA CHANDRA MOHAN GOUD, C/O. CH. PARTHASARA THY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST. NO. 1, ASHOK NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-4(4), HYDERABAD. 3. CIT (APPEALS)-1, HYDERABAD. 4. THE PR.CIT-1, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.