Appeal details
Counselvise Citation
[2018] 121 COUNSELVISE.COM (IT) 6232 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
11-04-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2011-2012
Appeal Filed On
16-08-2017
Judgement Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 658/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 SHRI DILIP KUMAR ARORA PROP. M/S SHRI ARORA PLYWOOD, NASIRABAD ROAD, AJMER. CUKE VS. THE ITO, WARD-2(2), AJMER. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AGKPA 0070 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDE NT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S. L. PODDAR (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SMT. POONUM RAI (DCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 14/03/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 11 / 04/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 26.07.2017 OF CIT (A), AJMER FOR THE ASSESSMENT YEA R 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE ORDER DATED 29.03.2014 PASSED BY THE LEARN ED ASSESSING OFFICER UNDER SECTION 271(1)(C) OF THE IN COME TAX ACT, 1961 WITHOUT STRIKING OFF THE IRRELEVANT P ORTION OF ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 2 THE PRINTED SHOW CAUSE NOTICE VIZ., 'FURNISHED INAC CURATE PARTICULARS OF INCOME' OR 'CONCEALED PARTICULARS OF SUCH INCOME' IS BAD IN LAW. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ORDER PASSED BY THE LEARNED. ASSESSING OFF ICER UNDER SECTION 271(1)(C) OF THE ACT IS AGAINST THE P RINCIPLES OF JUDICIAL CONSISTENCY AND THEREFORE, BAD IN LAW. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 13,61,173/- U/S 271(1)(C)/154 OF THE INCOME TAX ACT , 1961 WITHOUT CONSIDERING THE SUBMISSION OF THE ASSESSEE. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT(A) HAS ERRED IN DECIDING THE APPEAL OF THE ASSESSEE WITHOUT CONSIDERING THE ADJOURNMENT APPLIC ATIONS AND SUBMISSIONS FILED BY THE AR OF THE ASSESSEE. 5. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. THE ASSESSEE HAS ALSO RAISED THE ADDITIONAL GROUNDS AS UNDER:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ORDER O F THE LEARNED. ASSESSING OFFICER U/S 271(1)(C) OF THE INC OME TAX ACT ON THE BASIS OF NOTICE DATED 29.03.2014 WHICH I S VOID-AB- INITIO AND ISSUED WITHOUT APPLICATION OF MIND BY TH E LEARNED A.O. WITHOUT STRIKING OFF THE IRRELEVANT PORTION OF THE PRINTED SHOW CAUSE NOTICE VIZ., 'FURNISHED INACCURATE PARTI CULARS OF INCOME' OR 'CONCEALED PARTICULARS OF SUCH INCOME' I S BAD IN LAW.' 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN PASSING TWO SEPARATE ORDERS FO R ITA NO.32/2016-17 WHICH IS THE APPEAL AGAINST THE ORDER DATED ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 3 17.03.2016 UNDER SECTION 271(1)(C) OF THE INCOME TA X ACT AND FOR ITA NO.351/2016-17 WHICH IS THE APPEAL AGAI NST THE ORDER DATED 22.11.2016 PASSED UNDER SECTION 271(1)( C)/154 OF THE INCOME TAX ACT, 1961 AND THE FIRST ORDER DAT ED 17.03.2016 MERGED IN THE SUBSEQUENT ORDER DATED 15.11.2016. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN LAW IN CONFIRMING, THE ORDER PASSE D BY THE LEARNED ASSESSING OFFICER UNDER SECTION 271(1)(C) O F THE ACT, WHICH IS AGAINST THE PRINCIPLES OF JUDICIAL CONSIST ENCY AND THEREFORE, BAD IN LAW.' 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN CONFIRMING THE PENALTY OF RS. 13,61,173/- U/S 271(1)(C)/154 OF THE INCOME TAX ACT , 1961 WITHOUT CONSIDERING THE SUBMISSION OF THE ASSESSEE. 5. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE TH E LEARNED CIT (A) HAS ERRED IN DECIDING THE APPEAL OF THE ASSESSEE WITHOUT CONSIDERING THE ADJOURNMENT APPLIC ATIONS AND SUBMISSIONS FILED BY THE AR OF THE ASSESSEE. 6. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. WE HAVE HEARD THE LD. AR AS WELL AS THE LD. DR O N THE ADMISSION OF ADDITIONAL GROUNDS. THE LD. AR OF THE ASSESSEE H AS SUBMITTED THAT THOUGH THIS GROUND WAS NOT TAKEN BEFORE THE LD. CIT (A) HOWEVER, THE ASSESSEE HAS RAISED THIS GROUND IN THE ORIGINAL GRO UNDS AS PER FORM NO. 36 WHILE FILING THE APPEAL. THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE GOES TO THE ROOT OF THE MATTER BEING THE V ALIDITY OF SHOW CAUSE ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 4 NOTICE ISSUED BY THE AO U/S 274 AND THEREFORE, THE JURISDICTION OF THE ASSESSING OFFICER HAS BEEN QUESTIONED BY THE ASSESS EE. HE HAS FURTHER CONTENDED THAT FOR ADJUDICATION OF THE ADDITIONAL G ROUNDS, NO NEW FACTS ARE REQUIRED TO BE INVESTIGATED BUT THE FACTS ALREA DY ON RECORD ARE REQUIRED TO BE CONSIDERED FOR DECIDING THE QUESTION LAW. THE LD. AR HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT I N CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383. THE LD. AR HAS ALSO RELIED UPON THE DECISION OF SPECIAL BENCH OF MUMBAI BENCHE S OF THE TRIBUNAL IN CASE OF MAHINDRA & MAHINDRA LTD. VS. DY. CIT 122 TTJ 577 AND SUBMITTED THAT THERE IS NOT EMBARGO ON ANY PARTY TO RAISE A LEGAL GROUND FOR THE FIRST TIME BEFORE THE TRIBUNAL PROVI DED THE RELEVANT MATERIAL FOR DECIDING THE QUESTION IS ALREADY EXIST ED ON RECORD AND NO FURTHER INVESTIGATION OF FACTS IS REQUIRED. HENCE, THE LD. AR HAS SUBMITTED THAT WHEN THE ADDITIONAL GROUNDS RAISED B Y THE ASSESSEE IS PURELY LEGAL IN NATURE AND DOES NOT REQUIRE ANY FRE SH INVESTIGATION OF FACTS AND ALSO GOES TO THE ROOT OF THE MATTER THEN, THE SAME MAY BE ADMITTED FOR ADJUDICATION ON THE MERITS. 3. ON THE OTHER HANDS, THE LD. DR HAS RAISED STRON G OBJECTION AGAINST THE ADMISSION OF ADDITIONAL GROUND AND SUBM ITTED THAT THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY BY THE AO IN THE PENALTY ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 5 PROCEEDINGS AS WELL AS BY THE LD. CIT(A) IN THE FIR ST APPELLATE PROCEEDINGS BUT THE ASSESSEE DID NOT RAISE SUCH OBJ ECTION AGAINST THE VALIDITY OF NOTICE ISSUED U/S 274 OF THE ACT. THE L D. DR HAS FURTHER CONTENDED THAT IN THE ABSENCE OF DISCLOSING A REASO NABLE CAUSE WHICH HAS PREVENTED THE ASSESSEE FROM RAISING SUCH GROUND BEFORE THE AUTHORITIES BELOW THE ADDITIONAL GROUND RAISE AT TH IS STAGE CANNOT BE ACCEPTED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. WE NOTE THAT THE ASSESSEE HAS R AISED A LEGAL ISSUE IN THE ADDITIONAL GROUNDS REGARDING THE VALIDITY OF SHOW CAUSE NOTICE ISSUED BY THE AO FOR INITIATION OF THE PENALTY PROC EEDINGS U/S 271(1)(C) OF THE I.T. ACT. THE COPY OF SHOW CAUSE NOTICE IS A VAILABLE ON RECORD AND THE REVENUE HAS NOT DISPUTED THE SHOW CAUSE NOT ICE ISSUED BY THE AO U/S 274 OF THE ACT AS FILED BY THE ASSESSEE. THE REFORE, FOR ADJUDICATION OF THE ADDITIONAL GROUNDS, NO NEW FACT S ARE REQUIRED TO BE INVESTIGATED BUT THE SAME CAN BE DECIDED ON THE BAS IS OF THE FACTS ALREADY AVAILABLE ON RECORD. WE FURTHER NOTE THAT T HE ISSUE RAISED BY THE ASSESSEE IN THIS ADDITIONAL GROUNDS GOES TO THE ROO T OF THE MATTER BEING CHALLENGING THE JURISDICTION OF THE AO FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT AS SHOW CAUSE NOTICE ISSUED BY THE AO AS U/S 274 OF THE ACT ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 6 ITS SUFFERS FROM ILLEGALITY THEREFORE, THE ALLEGED LEGALITY IN THE SHOW CAUSE NOTICE AND CONSEQUENTIAL ORDER PASSED U/S 271 (1)(C) ARE PURELY LEGAL IN NATURE. HENCE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT (SUPRA) WE ADMIT THE ADDITIONAL GROUNDS FOR ADJUDICATION ON MERITS. 5. ON MERITS OF ADDITIONAL GROUNDS:- THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS ISSUED SHOW CAUSE NOTICE DATED 29.03.2014 U/S 274 R.W.S. 271 OF THE I.T. ACT HOWEVER, THE AO HAS NOT SPECIFIED THE CHARGE AGAINST WHICH THE AO P ROPOSED TO LEVY THE PENALTY U/S 271(1)(C) OF THE ACT. HE HAS REFERRED T O THE NOTICE AND SUBMITTED THAT THE ASSESSING OFFICER HAS NEITHER SP ECIFIED NOR STRIKE OFF THE IRRELEVANT PART OF THE NOTICE BUT THE STENO TY PE PRINTED NOTICE HAS BEEN ISSUED BY THE AO WHEREIN NO SPECIFIC ALLEGATIO NS WERE MADE WHETHER THE ASSESSEE HAS CONCEALED PARTICULAR OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THUS, THE NOTICE WAS ISSUED IN A ROUTINE MANNER WITHOUT APPLICATION OF MIND AND WITH OUT SPECIFYING THE DEFAULT ON THE PART OF THE ASSESSEE WHETHER CONCEA LMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE LD. AR HAS SUBMITTED THAT WHEN THE SHOW CAUSE NOTICE DID N OT CONTAIN ANY SPECIFIC CHARGE BEING CONCEALMENT OF PARTICULARS IN COME OR FURNISHING ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 7 INACCURATE PARTICULARS OF INCOME THEN, THE SAID NOT ICE SUFFERS FROM ILLEGALITY AS HELD BY THE HONBLE KARNATAKA HIGH CO URT IN CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY 359 ITR 565 WHICH HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS 242 TAXMAN 150. THE LD. AR HAS ALSO RELIED UPON A SERIES OF DECISIONS ON THIS POINT AND SUBMITTED THA T THE TRIBUNAL HAS HELD THAT A DEFECTIVE NOTICE WHICH HAS NOT SPELT OU T SPECIFICALLY THE GROUNDS ON WHICH THE PENALTY WAS SOUGHT TO BE LEVIE D IS NOT A CURABLE DEFECT AND THEREFORE, THE CONSEQUENTIAL PENALTY LEV IED U/S 271(1)(C) OF THE ACT IS NOT SUSTAINABLE AND LIABLE TO BE DELETED . THE LD. AR HAS FURTHER SUBMITTED THAT THE HONBLE JURISDICTIONAL H IGH COURT SHEVETA CONSTRUCTION COMPANY PVT. LTD VS. ITO VIDE DECISION DATED 06.12.2016 IN DB ITA NO. 534/2008 HAS ALSO DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT WHEN THE ADDIT ION WAS MADE BY THE AO U/S 69 OF THE IT ACT ON ACCOUNT OF EXCESS ST OCK THEN THE NATURE OF DEFAULT IS ALREADY STATED IN THE ASSESSMENT ORDE R. THE ASSESSING OFFICER HAS ALSO RECORDED A SATISFACTION FOR INITIA TION OF PENALTY U/S 271(1)(C) OF THE ACT. HENCE, THERE IS NO DEFECT IN THE NOTICE ISSUED U/S ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 8 274 OF THE ACT. THE LD. DR HAS FURTHER CONTENDED TH AT THE ASSESSEE DID NOT RAISE THESE ISSUES/GROUNDS BEFORE THE AO OR LD. CIT(A). HENCE, THE NATURE OF DEFAULT WAS NOT QUESTIONED BEFORE THE AUT HORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE ASSESSING OFFICER INITIATED PENALTY U/S 271(1)(C) VIDE SHOW CAUSE NOT ICE DATED 29.03.2014 WHEREIN THE AO HAS NOT SPECIFIED THE CHARGE/DEFAULT ON THE PART OF THE ASSESSEE AGAINST WHICH THE AO SOUGHT TO LEVY THE PE NALTY U/S 271(1)(C) OF THE ACT. THE RELEVANT PART OF THE NOTICE IS AS U NDER:- CONCEALED PARTICULAR OF INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME. THUS, IT IS CLEAR THAT THE ASSESSING OFFICER HAS N OT SPELT OUT OF A SPECIFIC GROUND ON WHICH THE PENALTY WAS PROPOSED TO BE LEVI ED BUT A GENERAL ALLEGATIONS WERE STATED IN THE SHOW CAUSE NOTICE. T HE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) WHILE DEALING WITH AN IDENTICAL ISS UE OF VALIDITY OF NOTICE U/S 274 R.W.S. 271 HAS HELD IN PARA 59 TO 63 AS UND ER:- 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS C AN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGAR DING 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 S AID ORDER WHICH ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 9 CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HA S PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANATION 1(B), THEN THOUGH PENALTY PROCEEDING S 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 AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PRO CEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(L)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SA TISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASS ESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NAT URE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILI TY. 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 NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE O FFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(L)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 10 PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY 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 SHOU LD 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 IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSES SEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATIO N 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 S AME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEE DINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE IN FORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY I MPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHE R DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNO T VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAI NABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT T O INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME 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 INACCURA TE PARTICULARS. THE APEX COURT IN THE CASE OF T. ASHOK PAI V. CIT [2007] 292 ITR 11/161 TAXMAN 340 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INC OME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF CIT V. MANU ENGG. [1980] 122 ITR 306 AND THE DELHI HIGH ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 11 COURT IN THE CASE OF CIT V. VIRGO MARKETING (P.) LT D. [2008] 171 TAXMAN 156 , HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BE ING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASS ESSING 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 ST ANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES W ILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. INDEPENDENT PROCEEDING 62. THE PENALTY PROCEEDINGS ARE DISTINCT FROM ASSESSME NT PROCEEDINGS, AND INDEPENDENT THEREFROM. THE ASSESSM ENT PROCEEDINGS ARE TAXING PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATING FROM PROCEED INGS OF ASSESSMENT ARE INDEPENDENT AND SEPARATE ASPECTS OF THE PROCEEDING. SEPARATE PROVISION IS MADE FOR THE IMPO SITION OF PENALTY AND SEPARATE NOTICES OF DEMAND ARE MADE FOR RECOVERY OF TAX AND AMOUNT OF PENALTY. ALSO SEPARATE APPEAL IS PROVIDED AGAINST ORDER OF IMPOSITION OF PENALTY. ABOVE ALL, NORMALLY, ASSESSMENT PROCEEDINGS MUST PRECEDE PENALTY PROCEED INGS. ASSESSEE IS ENTITLED TO SUBMIT FRESH EVIDENCE IN TH E COURSE OF PENALTY PROCEEDINGS. IT IS BECAUSE PENALTY PROCEEDI NGS ARE INDEPENDENT PROCEEDINGS. THE ASSESSEE CANNOT QUESTI ON THE ASSESSMENT JURISDICTION IN PENALTY PROCEEDINGS. JUR ISDICTION UNDER PENALTY PROCEEDINGS CAN ONLY BE LIMITED TO THE ISSU E OF PENALTY, SO THAT VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT M ATTER IN PENALTY PROCEEDINGS. IT IS NOT POSSIBLE TO GIVE A FINDING T HAT THE REASSESSMENT IS INVALID IN SUCH PENALTY PROCEEDINGS . CLEARLY, THERE IS NO IDENTITY BETWEEN THE ASSESSMENT PROCEEDINGS A ND THE PENALTY PROCEEDINGS. THE LATTER ARE SEPARATE PROCEE DINGS THAT MAY, IN SOME CASES, FOLLOW AS A CONSEQUENCE OF THE ASSESSMENT PROCEEDINGS. THOUGH IT IS USUAL FOR THE ASSESSING O FFICER TO RECORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS AR E BEING ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 12 INITIATED, THIS IS MORE A MATTER OF CONVENIENCE THA N OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRES, SO FAR AS T HE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT THEY SHOULD BE I NITIATED IN THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT. IT IS SUF FICIENT, IF THERE IS SOME RECORD SOMEWHERE, EVEN APART FROM THE ASSES SMENT ORDER ITSELF, THAT THE ASSESSING OFFICER HAS RECORD ED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEAL MENT OR OTHER DEFAULT FOR WHICH PENALTY ACTION IS CALLED FOR. IND EED, IN CERTAIN CASES, IT IS POSSIBLE FOR THE ASSESSING OFFICER TO ISSUE A PENALTY NOTICE OR INITIATE PENALTY PROCEEDINGS EVEN LONG BE FORE THE ASSESSMENT IS COMPLETED. THERE IS NO STATUTORY REQU IREMENT THAT THE PENALTY ORDER SHOULD PRECEDE OR BE SIMULTANEOUS WITH THE ASSESSMENT ORDER. IN POINT OF FACT, HAVING REGARD T O THE MODE OF COMPUTATION OF PENALTY OUTLINED IN THE STATUTE, THE ACTUAL PENALTY ORDER CANNOT BE PASSED UNTIL THE ASSESSMENT IS FINA LISED. CONCLUSION 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: (A ) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIABILIT Y. (B ) MENS REA I S NOT AN ESSENTIAL ELEMENT FOR IMPOSING PENALTY 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(L )(C) IS A SIN E QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SEC TION 271. (E ) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORIT Y OR REVISIONAL AUTHORITY. ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 13 (F ) EVEN IF THERE IS NO SPECIFIC FIND ING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNI BLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CON CEALMENT BECAUSE OF DEEMING PROVISION. (G ) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESS MENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). (H ) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO T HE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. (I ) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J ) IMPOSITION OF PENALTY EVEN IF THE TAX LIAB ILITY IS ADMITTED IS NOT AUTOMATIC. (K ) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER O F ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TAX AND INTER EST THAT BY ITSELF 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 SUCH UNE ARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD HAV E 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 PRO VE THAT THE EXPLANATION OFFERED IS NOT BONAFI DE, AN ORDER IMPOSING PENALTY ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 14 COULD BE PASSED. (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 I NCOME 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 DIR ECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, TH EN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE A UTHORITY AND NOT THE ASSESSING AUTHORITY. (P ) NOTICE UNDER SECTION 274 OF THE ACT SHO ULD SPECIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(C), I.E., WHETH ER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T 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 ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. (S ) T AKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FIN DING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T ) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSES SMENT ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 15 PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDING S OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. (U ) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENA LTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDING S ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR R EASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. BY FOLLOWING THE SAID DECISION IN CASE OF CIT VS. M ANJUNATH COTTON AND GINNING FACTORY (SUPRA) THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT SSAS EMERALD MEADOWS (SUPRA) HAS AGAIN DECIDED THI S ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE SLP FI LED BY THE REVENUE AGAINST THE SAID DECISION OF HONBLE KARNATAKA HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT REPORTED IN 242 TAXMAN 150.THUS, THE DECISION OF HONBLE KARNATAKA HIGH CO URT IN CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) HA S NOT DISTURBED BY THE HONBLE SUPREME COURT. WE FURTHER NOTE THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SHEVETA CONSTR UCTION COMPANY PVT. LTD VS. ITO (SUPRA) HAS CONSIDERED AN IDENTICAL ISS UE IN PARA 5 TO 10 AS UNDER:- ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 16 5. COUNSEL FOR THE APPELLANT RELIED UPON THE DECIS ION OF ANDHRA PRADESH HIGH COURT IN CASE OF CHENNAKESAVA PHARMACE UTICALS VS. COMMISSIONER OF INCOME TAX REPORTED IN (2012) 349 I TR 196, WHEREIN IT HAS BEEN HELD AS UNDER:- IN RELIANCE PETROPRODUCTS (P.) LTD.'S CASE (1 SUPRA ), THE SUPREME COURT ALSO HELD THAT IMPOSITION OF PENALTY IS UNWAR RANTED WHEN THERE IS NO FINDING IN THE ASSESSMENT ORDER THAT DE TAILS SUPPLIED BY THE ASSESSEE WERE FOUND TO BE FALSE. THIS INDICA TES THAT THE VIEW TAKEN BY THE DELHI HIGH COURT IN RAM COMMERCIA L ENTERPRISES LTD.'S CASE (6 SUPRA) WHICH HAS BEEN AP PROVED IN DILIP N. SHROFF'S CASE (10 SUPRA) CONTINUES TO BE VALID A ND THIS PART OF THE JUDGMENT IN DILIP N. SHROFF'S CASE (10 SUPRA) H AS NOT BEEN OVER RULED AND CONTINUES TO BE GOOD LAW. MOREOVER, THE DECISION OF THE DELHI HIGH COURT IN RAM COMMERCIAL ENTERPRIS ES (SUPRA) WAS ALSO FOLLOWED BY THE SAME HIGH COURT IN CIT V. M.K. SHARMA (9SUPRA) AND SLP(C) NO. 17591 OF 2008 FILED AGAINST THE SAID DECISION WAS DISMISSED BY THE SUPREME COURT ON JULY 18, 2008. APPLYING THE ABOVE PRINCIPLE THAT THE ASSESSING OFF ICER SHOULD RECORD IN THE ASSESSMENT ORDER HIS SATISFACTION THA T THE ASSESSEE HAD EITHER CONCEALED THE INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME IN HIS RETURN BEFORE IMPOSING PENALTY, WE NOTICED THAT IN THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 198283 (WHICH IS TH E SUBJECT MATTER OF I.T.T.A.NO.29 OF 2000) AND FOR THE ASSESS MENT YEAR 198384 (WHICH IS SUBJECT MATTER OF I.T.T.A.NO.33 OF 2000), NO SUCH SATISFACTION IS RECORDED. 6. ANOTHER DECISION OF SUPREME COURT IN CASE OF DIL IP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX & ANR. (2007) 291I TR 519 (SC) IT HAS BEEN HELD AS UNDER IT IS OF COME SIGNIFICANCE THAT IN THE STANDARD P ROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE T HE FACT THAT THE ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 17 SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGR APHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, T HE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD P ROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOM E OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, T HE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDE R OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUA TIONS. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON-APP LICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPL ES OF NATURAL JUSTICE. THE INCOME TAX OFFICER HAD MERELY HELD THAT THE ASS ESSEE IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS AND NOT OF CONCEALMENT OF INCOME; WHICH FINDING WAS ARRIVED AT ALSO BY THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX APPEL LATE TRIBUNAL. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THERE ARE ENOUGH MATERIAL TO SHOW THAT THE ACTION ON THE PART OF THE APPELLANT MAY NOT BE SAID TO BE SUCH WHICH WOULD AT TRACT THE PENAL PROVISION UNDER S. 271(1)(C). FOR THE REASONS AFOREMENTIONED, THE IMPUGNED JUDGMENT CANNOT BE SUS TAINED. 7. HE CONTENDED THAT WHILE CONCLUDING THE ASSESSMEN T ORDER THE OFFICER MUST BE CLEAR WHETHER IT IS THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE DETAIL. HE CANNOT HAVE BOT H THE THINGS. 7.1 HOWEVER, MR. SINGHI APPEARING FOR THE DEPARTMEN T SUBMITS THAT A PERUSAL OF THE ORDER OF PENALTY MAKES IT AMP LY CLEAR THAT BOTH THE THINGS ARE FULFILLED. IN THAT VIEW OF THE MATTER THE VIEW TAKEN BY THE TRIBUNAL IS REQUIRED TO BE AC CEPTED. 8. WE HAVE HEARD MR. PRAKUL KHURANA AND MR. ANUROOP SINGHI. 9. TAKING INTO CONSIDERATION THE DECISION OF THE AN DHRA PRADESH HIGH COURT WHICH VIRTUALLY CONSIDERED THE S UBSEQUENT LAW AND THE LAW WHICH WAS PREVAILING ON THE DATE TH E DECISION WAS RENDERED ON 27.08.2012. IN VIEW OF THE OBSERVAT IONS MADE ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 18 IN THE SAID JUDGMENT, WE ARE OF THE OPINION THAT TH E CONTENTION RAISED BY THE APPELLANT IS REQUIRED TO BE ACCEPTED AND IN THE FINDING OF ASSESSING OFFICER IN THE ASSESSMENT ORDE R IT IS HELD THAT THE AO, HAS TO GIVE A NOTICE AS TO WHETHER HE PROPOSES TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHIN G INACCURATE PARTICULARS. HE CANNOT HAVE BOTH THE CONDITIONS AND IF IT IS SO HE HAS TO SAY SO IN THE NOTICE AND RECORD A FINDING IN THE PENALTY ORDER. 10. IN THAT VIEW OF THE MATTER, THE ISSUE IS ANSWER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. ACCORDINGLY, IN VIEW OF THE BINDING PRECEDENT WE HO LD THAT WHEN THE AO HAS NOT SPECIFICALLY INDICATED THE GROUNDS FOR INIT IATION OF PROCEEDINGS FOR LEVY OF PENALTY IS FOR CONCEALMENT PARTICULAR O F INCOME OR FOR FURNISHING INACCURATE PARTICULAR OF INCOME THEN, TH E SAID SHOW CAUSE NOTICE SUFFERS FROM ILLEGALITY AND CONSEQUENTIAL OR DER PASSED BY THE AO U/S 271(1)(C) IS NOT SUSTAINABLE AND LIABLE TO BE Q UASHED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED U/S 271(1)(C ) AND DELETE THE PENALTY OF LEVIED BY THE AO U/S 271(1)(C) OF THE A CT. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/04/2018. SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:-11/04/2018. ITA NO. 658/JP/2017 SHRI DILIP KUMAR ARORA VS. ITO 19 * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI DILIP KUMAR ARORA, AJMER. 2. IZR;FKHZ@ THE RESPONDENT - ITO, WARD-2(2), AJMER. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 658/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR
