M/s Vardhman Polytex Ltd., Ludhiana V. ACIT, Ludhiana

ITA 626/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5134 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 02-01-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Business expenditure; Principle of natural justice; Initiation of penalty proceedings; Wrong claim; Difference of opinion; Onus to prove
• Section: 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.626/CHD/2016 (ASSESSMENT YEAR : 2005-06) M/S VARDHMAN POLYTEX LTD., VS. THE A.C.I.T., CHANDIGARH ROAD, CIRCLE -1, LUDHIANA. LUDHIANA. PAN: AAACV5821H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUBHASH AGGARWAL RESPONDENT BY : SHRI MANJIT SINGH DR DATE OF HEARING : 02.03.2017 DATE OF PRONOUNCEMENT : 31.05.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAIN ST THE ORDER OF CIT(APPEALS)-1, LUDHIANA DATED 28.3.20 16 RELATING TO ASSESSMENT YEAR 2005-06 CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX A CT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: 1. THAT THE LEARNED CIT(A)-1 HAS ERRED IN CONFIRMI NG THE LEVY OF PENALTY U/S 271(1)(C) AMOUNTING TO RS.1,90,867/- ON DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES IGNORING T HE FOLLOWINGS: - I) THAT NO STATUTORY NOTICE U/S 274 R.W.S. 271(1)(C) HAD BEEN ISSUED BY THE AO IN THE ASSESSMENT PROCEEDINGS ALONG WITH THE ASSESSMENT ORDER AND AS SUCH THE ORDER LEVYING THE PENALTY IS VITIATED. 2 II) THAT THE APPELLANT HAD DULY DISCLOSED ALL PARTICULARS RELATING TO THE CLAIM OF FOREIGN TRAVELLI NG EXPENSES AND AS SUCH THERE WAS NO CONCEALMENT OF PARTICULARS OF INCOME ON WHICH PENALTY COULD BE LEVIE D. III) THAT THE FOREIGN TOURS WERE UNDER TAKEN TO EXPLORE THE POSSIBILITIES OF EXPORT TO THOSE COUNTRI ES AND IN FACT EXPORT HAD BEEN MADE TO NEPAL IN THE SUBSEQUENT YEAR. 2. THAT IN ANY CASE CONFIRMATION OF PENALTY IS AGAINS T, THE LAW AND FACTS OF THE CASE. 3. THAT THE APPELLANT CRAVES LEAVE FOR PERMISSION T O ADD, AMEND OR ALTER ANY GROUND OF APPEAL AT THE TIME OF HEARING. 3. THE ONLY ISSUE IN THE PRESENT APPEAL RELATES TO LEVY OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE A CT AMOUNTING TO RS.1,90,867/- ON ACCOUNT OF DISALLOWAN CE OF FOREIGN TRAVELLING EXPENSES AMOUNTING TO RS.5,21,60 0/-. 4. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT IN T HE ASSESSMENT ORDER PASSED FOR THE IMPUGNED YEAR, THE ASSESSING OFFICER DISALLOWED FOREIGN TRAVELLING EXP ENSES AMOUNTING TO RS.5,21,600/-. THEREAFTER PENALTY U/S 271(1)(C) OF THE ACT, WAS INITIATED THEREON. DURING THE COURSE OF THE PENALTY PROCEEDINGS THE ASSESSEE VIDE ITS RE PLY DATED 7.12.2012 STATED THAT ALL THE DETAILS RELATING TO F OREIGN TRAVELLING WERE FILED DURING THE COURSE OF ASSESSME NT PROCEEDINGS AND DETAILS WERE PARTIALLY ACCEPTED IN AS MUCH AS ALL THE EXPENSES RELATING TO FOREIGN TRAVELLING HAD BEEN ALLOWED EXCEPT THE TRIP TO COUNTRIES WHERE THE ASSE SSEE COMPANY COULD NOT DEMONSTRATE ANY BUSINESS DEALINGS ETC. THE ASSESSEE RELIED UPON THE JUDGMENT OF HON'BLE SU PREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LIMITED IN SLP NO.27161 OF 2008 DATED 17.03.2010 (3 22 1TR 3 158) AND CONTENDED THAT MERELY NON-ACCEPTANCE OF CL AIM IN ASSESSMENT WOULD NOT ATTRACT PENALTY U/S 271(1)(C). THE REPLY OF THE ASSESSEE WAS CONSIDERED BUT WAS FOUND TO BE UNACCEPTABLE AS NO DOCUMENTARY EVIDENCE WAS FURNISH ED BY THE ASSESSEE, WHEN CALLED UPON BY THE ASSESSING OFF ICER, TO PROVE THE BUSINESS EXPEDIENCY OF THE FOREIGN TRAVEL LING. THEREFORE, THE PENALTY U/S 271(L)(C) WAS IMPOSED BY THE ASSESSING OFFICER FOR FURNISHING INACCURATE PARTICU LARS OF INCOME. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT (APPEALS) WHERE THE ASSESSEE FILED DETAILED SUB MISSIONS REPRODUCED AT PARA 2.1 OF THE ORDER. BRIEFLY STATE D, THE ASSESSEE SUBMITTED THAT IT HAD NOT FILED ANY INACCU RATE PARTICULARS OF INCOME AS ALL NECESSARY DISCLOSURES RELATING TO THE EXPENSES HAD BEEN DULY DISCLOSED IN THE RETURN OF INCOME. THE ASSESSEE RELIED UPON A NUMBER OF CASE LAWS IN SUPPORT OF ITS CONTENTION THAT NO PENALTY IS TO BE LEVIED IN SUCH CIRCUMSTANCES. THE ASSESSEE THEREAFTER SUBMIT TED THAT THE ASSESSING OFFICER HAD DISALLOWED THE EXPENSES R ELATING TO FOREIGN TRAVELING MERELY FOR THE REASON THAT THE AS SESSEE HAD NO BUSINESS DEALINGS IN THE COUNTRIES VISITED. THE ASSESSEE SUBMITTED THAT INCURRENCE OF EXPENDITURE WAS NOT IN DOUBT AND THE ASSESSING OFFICER HAD NOT POINTED OUT ANY S INGLE INSTANCE OF EXPENSES BEING NON-BUSINESS EXPENSES. THE ASSESSEE SUBMITTED THAT SIMPLY PRESUMING NO BUSINES S RELATION OR NON-PROCUREMENT OF BUSINESS FROM THESE COUNTRIES OR ON ACCOUNT OF NON FILING OF DOCUMENTS, THE 4 DISALLOWANCE HAD BEEN MADE AND PENALTY LEVIED. THE ASSESSEE FURTHER SUBMITTED THAT THE DISALLOWANCE MA DE ON ACCOUNT OF TRAVELING UNDERTAKEN TO NEPAL WAS NOT JU STIFIED SINCE GOODS WORTH 18500 US DOLLARS HAS BEEN EXPORTE D TO NEPAL IN THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR . THUS CLEARLY AS FAR THE TRAVELING EXPENSES INCURRED ON A CCOUNT OF TRIP UNDERTAKEN TO NEPAL IS CONCERNED, THERE WAS CL EAR BUSINESS RELATION AND THUS NO PENALTY OUGHT TO BE L EVIED ON ACCOUNT OF THE SAME. THE LD. COUNSEL FOR THE ASSES SEE PLACED COPY OF THE INVOICE EVIDENCING EXPORT OF GOO DS TO NEPAL. THE LD. CIT (APPEALS) AFTER CONSIDERING THE ASSESSEES SUBMISSIONS UPHELD THE LEVY OF PENALTY S TATING THAT THE ASSESSEE HAD CLEARLY FAILED TO PROVE THE G ENUINENESS OF THE FOREIGN TRAVELING EXPENSES BY NOT PRODUCING EVIDENCE TO PROVE THE BUSINESS PURPOSE FOR THE SAME. THE LD . CIT (APPEALS) OBSERVED THAT THE DISALLOWANCE HAD BEEN U PHELD BY THE I.T.A.T. FOR THE AFORESAID REASON. THE LD. CIT (APPEALS) FURTHER HELD THAT THOUGH THE FINDINGS IN QUANTUM PROCEEDINGS WERE NOT CONCLUSIVE, THEY DO HAVE A BEA RING ON THE PENALTY PROCEEDINGS. THE ONUS TO PROVE AN EXPE NDITURE LIES SOLELY ON THE PERSON MAKING THE CLAIM AND SINC E NO EVIDENCE WAS PRODUCED BY THE ASSESSEE IN THE PRESEN T CASE, IT WAS CLEARLY A CASE OF MAKING FALSE CLAIM OF EXPE NDITURE. THE LD. CIT (APPEALS) THEREAFTER HELD THAT THE PRES ENT CASE WAS CLEARLY COVERED UNDER EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT AND, THEREFORE, UPHELD THE LEVY OF PENAL TY. THE RELEVANT FINDINGS OF THE LD. CIT (APPEALS) AT PARA 2.2 OF THE ORDER ARE AS UNDER: 5 2.2 I HAVE CONSIDERED THE FACTS OF THE CASE, THE B ASIS OF IMPOSITION OF PENALTY AND THE SUBMISSIONS MADE DURING THE COURSE OF THE PENALTY AS WELL AS THE APP ELLATE PROCEEDINGS. THE ASSESSING OFFICER HAS DISALLOWED O NLY THOSE FOREIGN TRAVELLING EXPENSES REGARDING WHICH T HE APPELLANT FAILED TO PROVE ANY BUSINESS PURPOSE. THE CHAIRMAN CUM MANAGING DIRECTOR WENT TO NEPAL AND DUBAI AND ONE TOUR WAS MADE TO FRANKFURT VIA DUBAI. NO DOCUMENTARY EVIDENCE COULD BE FURNISHED BY THE APPEL LANT WHEN CALLED UPON BY THE ASSESSING OFFICER TO PROVE THE BUSINESS EXPEDIENCY OF THE SAID TOURS. NO SUCH EVIDENC E COULD BE PRODUCED BY THE APPELLANT BEFORE THE HON'B LE ITAT ALSO AND IN THE ABSENCE OF ANY SUCH EVIDENCE TO ESTA BLISH THAT THE SAID TOURS WERE UNDERTAKEN FOR THE BUSINES S PURPOSES, THE HON'BLE 1TAT HAS UPHELD THE QUANTUM ADD ITION, SINCE, THE APPELLANT FAILED TO PROVE THE GENUINENESS OF THE SAID EXPENSE CLAIMED BY IT, THE ASSESSING OFFICER RIGHTLY DISALLOWED THE SAID EXPENDITURE. FINDINGS IN THE QUANTUM PROCE EDINGS THOUGH NOT CONCLUSIVE, DO HAVE A BEARING ON THE PEN ALTY PROCEEDINGS. THE ONUS TO PROVE THAT AN EXPENDITURE H AS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, LIES SOLELY ON THE PERSON MAKING THE CLAIM. NO EVIDENCE C OULD BE PRODUCE BY THE AR TO PROVE THAT THE SAID EXPENDITUR E WAS FOR BUSINESS PURPOSES. MAKING A FALSE CLAIM OF EXPENDITURE OR SUPPRESSION OF RECEIPTS ARE ATTEMPTS AT REDUCING TH E TAXABLE INCOME AND PENALTY U/S 271(L)(C) IS LEVIABLE IN SUCH A C ASE, UNDER EXPLANATION 1 TO SEC 271(L)(C) WHERE A PERSON F AILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER TO BE FALSE, THE AMOUNT SO AD DED OR DISALLOWED, SHALL BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. IN VIEW OF THE SAID FACTS AND CIRCUMSTANCES, THE ASSESSING OFFICER WAS JUSTIFIED IN IMPOSING THE PENALTY U/S 271(L)(C) IN THIS CASE. THE SE GROUNDS OF APPEAL ARE DISMISSED. 6. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE RAIS ED TWO FOLD ARGUMENTS AGAINST THE LEVY OF PENALTY: 6 (1) THAT THE ADDITION MADE WAS ONLY ON ACCOUNT OF DIFFERENCE OF OPINION AND THE ASSESSEE HAD NOT CONCEALED ANY PARTICULARS OF INCOME. (2 THAT SHOW CAUSE NOTICE WAS DEFECTIVE AS IT DID N OT SPELL OUT THE GROUNDS ON WHICH PENALTY WAS SOUGHT T O BE IMPOSED. 7. THE LD. DR RELIED UPON THE ORDER OF THE CIT (APPEALS). 8. COMING TO THE FIRST ARGUMENT RAISED BY THE LD. COUNSEL FOR THE ASSESSEE, IT WAS ARGUED BEFORE US T HAT ALL FACTS RELEVANT TO THE CLAIM OF EXPENDITURE ON ACCOU NT OF FOREIGN TRAVELLING UNDERTAKEN HAD BEEN DULY DISCLOS ED AND IT WAS MERELY ON THE BASIS OF DIFFERENCE OF OPINION TH AT THE DISALLOWANCE HAD BEEN MADE. THE LD. COUNSEL FOR TH E ASSESSEE ARGUED THAT NO PENALTY WAS LEVIABLE IN SUC H CIRCUMSTANCES AND RELIED UPON THE DECISION OF THE H ON'BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETROPR ODUCTS PVT. LTD., 322 ITR 158, THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF PR. CIT VS. TORQ UE PHARMACEUTICALS P. LTD., 389 ITR 46 AND ON THE DECI SION OF THE HIMACHAL PRADESH HIGH COURT IN THE CASE OF H.P . STATE FOREST CORPORATION LTD. VS. DCIT REPORTED AT 340 IT R 204. 9. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT (APPEALS) AND STATED THAT SINCE TH E ASSESSEE HAD NOT PROVED THE EXPENSE HAD BEEN INCURRED FOR BU SINESS 7 PURPOSE, ITS CLAIM HAD REMAINED UNSUBSTANTIATED WAR RANTING THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 10. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PART IES ON THIS ASPECT AND HAVE ALSO GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW AS ALSO THE DOCUMENTS REFERRED TO BEFORE US. WE FIND THAT THE ASSESSING OFFICER HAD DISALLO WED FOREIGN TRAVELING EXPENDITURE AMOUNTING TO RS.5,21, 600/- SINCE THE ASSESSEE COULD NOT PROVE THE BUSINESS PUR POSE FOR INCURRING SUCH EXPENSES. THE SAME WAS UPHELD FOR T HE AFORESAID REASONS BY THE CIT (APPEALS) AS WELL AS T HE HON'BLE I.T.A.T. DURING PENALTY PROCEEDINGS ALSO, THE ASSE SSEE WAS UNABLE TO FURNISH ANY EVIDENCE OF BUSINESS EXPEDIEN CY. BEFORE THE CIT (APPEALS), WE FIND THAT THE ASSESSEE HAD CONTENDED THAT BECAUSE OF EFFORTS OF FOREIGN TRAVEL THE ASSESSEE COMPANY HAD STARTED EXPORT TO NEPAL AND GO ODS WORTH 18,500 US DOLLARS HAD BEEN EXPORTED TO NEPAL IN THE IMMEDIATELY SUCCEEDING YEAR I.E. ASSESSMENT YEAR 20 06-07, THUS ESTABLISHING BUSINESS PURPOSE FOR THE VISIT UN DERTAKEN TO NEPAL EXPENSES RELATING TO WHICH TRAVELING EXPEN SES AMOUNTING TO RS.1,01,556/- WERE DISALLOWED BY THE ASSESSING OFFICER. COPIES OF INVOICE ISSUED TO THE CUSTOMERS IN NEPAL WERE FILED BEFORE THE CIT (APPEALS) TO SUB STANTIATE SUBMISSIONS OF THE ASSESSEE. THIS FACT HAS NOT BEE N CONTROVERTED BY THE REVENUE, EITHER BY THE CIT (APP EALS) IN HIS ORDER PASSED IN APPEAL, OR BY THE LD. DR BEFORE US. THEREFORE, VIS--VIS THE FOREIGN TRAVEL EXPENSES IN CURRED ON ACCOUNT OF TRAVELING UNDERTAKEN TO NEPAL, WE FI ND THAT THE 8 ASSESSEE HAS OFFERED EXPLANATION FOR THE BUSINESS P URPOSE OF THE SAID TRANSACTION AND HAS ALSO ESTABLISHED THE BONAFIDES OF THE SAID CLAIM. THE SAID EXPLANATION HAVING NOT BEEN CONTROVERTED BY THE LD. DR, WE FIND THAT VIS--VIS EXPENDITURE INCURRED ON ACCOUNT OF TRAVEL UNDERTAKE N TO NEPAL IT CANNOT BE SAID THAT THERE WAS ANY CONCEALM ENT OF INCOME ON ACCOUNT OF EXPLANATION-1(A)/(B) TO SECTIO N 271(1)(C) OF THE ACT. AS FAR AS THE REST OF THE EX PENDITURE CLAIMED BY THE ASSESSEE, THE ASSESSEE HAS FAILED TO SUBSTANTIATE ITS EXPLANATION THAT THE SAME WAS INCU RRED FOR BUSINESS PURPOSE EVEN BEFORE US. EXCEPT FOR STATING THAT THE INCURRENCE OF EXPENSES HAS NOT BEEN DOUBTED BY THE REVENUE OR THAT REVENUE HAS NOT POINTED OUT HOW THE EXPENSE S WERE NOT INCURRED FOR BUSINESS PURPOSE, THE ASSESSEE HAS GIVEN NO EXPLANATION TO ESTABLISH THE BONAFIDES OF THE CLAIM . THE LANGUAGE OF THE EXPLANATION TO SECTION 271(1)(C) CL EARLY FIXES THE ONUS ON THE ASSESSEE TO EXPLAIN FACTS MATERIAL TO THE COMPUTATION OF INCOME TRULY AND CORRECTLY AND IN TH E SITUATION WHERE THE ASSESSEE IS UNABLE TO SUBSTANTI ATE ITS EXPLANATION ,TO PROVE THE BONAFIDES OF THE CLAIM MA DE .ON FAILING TO DO SO THE ASSESSEE, AS PER THE EXPLANATI ON ,IS DEEMED TO HAVE CONCEALED PARTICULARS OF ITS INCOME. IN THE PRESENT CASE, WE FIND THAT VIS--VIS THE BALANCE EX PENDITURE NO EXPLANATION HAS BEEN GIVEN BY THE ASSESSEE FOR C LAIMING THAT IT HAS BEEN INCURRED FOR THE PURPOSE OF BUSIN ESS, EXCEPT THAT ALL BILLS HAVE BEEN PROVIDED, WHICH WE FIND DOES NOT HELP THE ASSESSEE IN ESTABLISHING THE FACT AS C LAIMED BY IT. ALSO THE ASSESSEE CANNOT SHIFT THE ONUS ON THE REVENUE 9 TO PROVE THAT THE CLAIM WAS INCORRECT SINCE IT HAS FAILED TO DISCHARGE THE INITIAL ONUS PLACED UPON IT OF PROVIN G ITS CLAIM AS SUCH AND THE BONAFIDE OF THE SAID CLAIM. IN VI EW OF THE SAME, WE FIND THAT FOR THE REST OF THE EXPENDITURE, EXPLANATION-1(A)/(B) TO SECTION 271(1)(C) IS ATTRAC TED AND TO THE EXTENT OF EXPENDITURE INCURRED THEREON THE ASS ESSEE IS LIABLE TO PENALTY UNDER SECTION 271(1)(C) OF THE A CT. 11. ALTERNATIVELY THE LD. COUNSEL FOR ASSESSEE ALSO ARGUED BEFORE US THAT THE NOTICE ISSUED TO IT DID NOT SPEC IFY WHETHER THE PROVISION FOR LEVY OF PENALTY WAS INITIATED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. COPY OF THE NOTICE WAS PLAC ED ON RECORD INDICATING THAT THE RELEVANT COLUMN HAD NOT BEEN STRUCK OFF. THE LD. COUNSEL FOR THE ASSESSEE ARGUE D THAT NO PENALTY WAS LEVIABLE UNDER SUCH CIRCUMSTANCES AND R ELIED UPON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. SSAS EMERALD MEADOWS (2016) 73 TAXMANN.COM 248, IN THIS REGARD. 12. WE HAVE PERUSED THE COPY OF NOTICE PLACED BEFO RE US AND WE FIND THAT IT IS A PRINTED PERFORMA WHEREI N THE RELEVANT COLUMN HAS NOT BEEN STRUCK OFF. UNDER SIM ILAR FACTS THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CI T VS MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565 HAS HELD THAT THE PRACTICE OF DEPARTMENT SENDIN G A PRINTED FORM WHERE ALL THE GROUNDS MENTIONED U/S 27 1(1)(C) ARE OUTLINED WOULD NOT SATISFY REQUIREMENT OF LAW W HEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INIT IAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY 10 FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAI D PROVISIONS HAVE TO BE STRICTLY CONSTRUED, NOTICE IS SUED U/S 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE THE PRINCIPLE OF NATURAL JU STICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE AND ON THE BASIS OF SUCH PROVISION, NO PENALTY COULD BE IMPOSED ON T HE ASSESSEE. THE RELEVANT FINDINGS OF THE HON'BLE KAR NATAKA HIGH COURT IN THE SAID CASE ARE AS UNDER: NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE OR DER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGA RDING 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 T HE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHOR ITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF T HE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDE R 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 F ACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACC USED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD BE MAD E KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSIN G PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AN D SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTME NT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1 )(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRA CTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE G ROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SAT ISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASS ESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NA TURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICT LY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE G ROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLE S OF NATURAL 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 I S TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CA SES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE 11 OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE 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 F INDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SU STAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT I S A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PRO CEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE A SSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTE R, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLA IM, 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 IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENAL TY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPO SING 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 THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT V ALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMI NED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN T HE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE OR DER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PE NALTY 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 PROCEEDINGS THAT THERE IS CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICU LARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WH ILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHI NG OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PART ICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJRAT H IGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKET ING REPORTED IN 171 TAXMN 156, HAS HELD THAT LEVY OF PENAL TY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND T HE 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 THE CASE FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-AP PLICATION OF MIND. 12 13. THE HON'BLE APEX COURT HAS DISMISSED SLP FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE HON'BLE KA RNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS WHI CH WAS RENDERED FOLLOWING THE DECISION OF THE HIGH COURT I N THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA). 14. IN THE PRESENT CASE SINCE THE NOTICE DOES NOT SPECIFY FOR WHAT OFFENCE PROCEEDINGS WERE INITIATED , THE DECISION OF THE HON'BLE APEX COURT, AS POINTED OUT ABOVE, WILL SQUARELY APPLY TO THE FACTS OF THE CASE, FOLLO WING WHICH WE HOLD THAT THERE IS NO SCOPE FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON THE ASSESSEE. CONS IDERING THE ABOVE, WE HAVE NO HESITATION IN CANCELLING THE PENA LTY. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST MAY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH