Sri. Raghunath H. Baddi, Hubli V. ITO, Hubli

ITA 669/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95300 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N PRAKASH J
• Assessee Lawyers: V SRINIVASAN
• Keywords: Principle of natural justice; Initiation of penalty proceedings

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P.GEORGE, ACCOUNTANT MEMBER ITA NOS. 669/BANG/2015 ASSESSMENT YEARS : 2008- 09 SHRI RAGHUNATH H. BADDI, PROP. RAGHUNATH ENTERPRISES, BHUSPET, HUBBALLI. PAN: ABJPB 4022F VS. THE INCOME TAX OFFICER, WARD 3(3), HUBBALLI. APPELLANT RESPONDENT APPELLANT BY : SHRI V.SRINIVASAN, C.A. RESPONDENT BY : SHRI T.N.PRAKASH, JCIT(DR) DATE OF HEARING : 01.10.2015 DATE OF PRONOUNCEMENT : 01.10.2015 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST ORDER D ATED 29.01.2015 OF CIT(APPEALS), HUBBALLI, RELATING TO ASSESSMENT Y EAR 2008-09. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(APPEALS) CONFIRMING THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (ACT) ON THE ASSESSEE. ITA NO.669/BANG/2015 PAGE 2 OF 10 3. THE FACTS AND CIRCUMSTANCES UNDER WHICH PENALTY U/S. 271(1)(C) OF THE ACT WAS IMPOSED BY THE AO ON THE ASSESSEE ARE A S FOLLOWS. THE ASSESSEE IS AN INDIVIDUAL. HE IS IN THE BUSINESS O F PURCHASE AND SALE OF MASALA PRODUCTS, ONION AND POTATO ON WHOLESALE AS W ELL AS RETAIL BASIS. THE RETURN OF INCOME FOR AY 08-09 WAS FILED DECLARI NG TOTAL INCOME OF RS.1,36,990/-. THE ASSESSMENT U/S.143(3) WAS COMPL ETED ON 26.3.2010 DETERMINING TOTAL INCOME OF RS.6,12,900/-. 4. THE ADDITIONS MADE TO THE TOTAL INCOME WHILE CO MPLETING THE ASSESSMENT U/S.143(3) OF THE ACT BY THE AO WERE AS FOLLOWS:- (I) THE ASSESSEE DECLARED RENT RECEIVED ON LETTING OUT OF SHOP OF RS.41,400. AGAINST THE SAID INCOME, THE ASSESSEE C LAIMED DEDUCTION OF RS.52,685 WHICH WAS INTEREST PAID TO HDFC BANK L TD., ON LOAN BORROWED FOR REPAIRING RESIDENTIAL HOUSE WHICH WAS A DIFFERENT PROPERTY. SINCE THE REQUIREMENT FOR DEDUCTION OF I NTEREST PAID ON BORROWING AGAINST INCOME FROM HOUSE PROPERTY U/S.24 (B) OF THE ACT WAS THAT THE BORROWED FUNDS OUGHT TO HAVE BEEN USED FOR ACQUIRING OR CONSTRUCTING THE PROPERTY IN RESPECT OF WHICH INCOM E FROM HOUSE PROPERTY WAS DECLARED, THE DEDUCTION WAS DISALLOWED BY THE AO. THE AO HOWEVER ALLOWED DEDUCTION OF RS.30,000/- OUT OF THE INTEREST PAID UNDER THE 1 ST PROVISO TO SEC.24(B) OF THE ACT AS THE RESIDENTIAL HOUSE WAS VACANT DURING THE PREVIOUS YEAR AND ITS ANNUAL VALUE WAS NIL. THIS RESULTED IN AN ADDITION TO THE TOTAL INCOME OF RS.22,685/-. ITA NO.669/BANG/2015 PAGE 3 OF 10 (II) SUNDRY CREDITORS TO THE TUNE OF RS.4,53,045 AP PEARING IN THE BALANCE SHEET COULD NOT BE SATISFACTORY EXPLAINED BY THE AS SESSEE AND THEREFORE ADDITION OF THE SAID SUM WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE. 5. IN RESPECT OF THE ADDITIONS MADE IN THE ASSESSME NT PROCEEDINGS AS ABOVE, THE AO IMPOSED PENALTY U/S. 271(1)(C) OF THE ACT ON THE ASSESSEE WAS CONFIRMED BY THE CIT(APPEALS). AGGRIEVED BY TH E ORDERS OF THE CIT(APPEALS), THE ASSESSEE HAS PREFERRED APPEALS BE FORE THE TRIBUNAL. 6. WE HAVE HEARD THE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE AND THE LD. DR. SEVERAL TECHNICAL OBJECTIONS WITH REGARD TO VALIDITY OF THE ORDER PASSED U/S. 271(1)(C) OF THE ACT WERE RAISED BY THE ASSESSEE. IN AN ADDITIONAL GROUND FILED BEFORE THE TRIBUNAL, WHICH WAS FILED ALONGWITH THE MEMORANDUM OF APPEAL AND HENCE CANNOT BE SAID TO BE ADDITIONAL GROUND, THE ASSESSEE HAS CHALLENGED THE LEVY OF PENALTY AS BAD IN LAW FOR THE REASON THAT THE SHOW CAUSE NOTICE ISSUED U/S. 274 O F THE ACT DOES NOT SPECIFY AS TO WHETHER PENALTY PROCEEDING IS BEING I NITIATED FOR CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME OR FOR ANY OTHER REASON AS IRRELEVANT COLUMNS OF THE PRINT ED FORM OF NOTICE U/S. 274 HAVE NOT BEEN STRUCK OFF BY THE AO. IT IS BEIN G REFERRED AS ADDITIONAL GROUND BECAUSE IT WAS NOT SPECIFICALLY RAISED BEFOR E THE CIT(A). THE SAID GROUND BEING A LEGAL GROUND THE ASSESSEE IS ENTITLE D TO RAISE THE SAME AND HENCE, THE ADDITIONAL GROUND IS CONSIDERED FOR ADJU DICATION. ITA NO.669/BANG/2015 PAGE 4 OF 10 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFO RE US THAT THE SHOW CAUSE NOTICE ISSUED U/S. 274 OF THE ACT DOES NOT SP ECIFY AS TO WHETHER PENALTY PROCEEDING IS BEING INITIATED FOR CONCEALIN G PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME OR FOR ANY OTHER REASON AS IRRELEVANT COLUMNS OF THE PRINTED FORM OF NOTICE U/ S. 274 HAVE NOT BEEN STRUCK OFF BY THE AO. A COPY OF THE SAME IS GIVEN AS AN ANNEXURE-I TO THIS ORDER . THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN) , WHEREIN THE HONBLE HIGH COURT HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE ALL THE GROUND S GIVEN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMITTED TH AT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO BE HELD AS BAD IN LAW AND LIABLE TO BE QUAS HED. 8. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEA LS) WHEREIN THE CIT(A) HAS EXPRESSED HIS OPINION THAT THE ASSESSEE WAS FULLY AWARE OF THE CHARGE AGAINST HIM AND HE CANNOT TAKE SHELTER ON TE CHNICAL GROUNDS. ITA NO.669/BANG/2015 PAGE 5 OF 10 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HONB LE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS LAID DOWN THE FOLLOWING PRINCIPLES TO BE FOLLO WED IN THE MATTER OF IMPOSING PENALTY U/S.271(1)(C) OF THE ACT. NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN 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 ISSUE D UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDE R WHICH 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 PROCEEDINGS ARE IN THE NA TURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHE R EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTI ON 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THE Y INTEND IMPOSING 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 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 TH E DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTION ED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INIT IAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE T O BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHE RWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SH OW 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 INAC CURATE ITA NO.669/BANG/2015 PAGE 6 OF 10 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(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR 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 PENALT Y PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME T HE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUEN T 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 AC T TO 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 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 FUR NISHING ITA NO.669/BANG/2015 PAGE 7 OF 10 INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HEL D THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NO T SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON- APPLICATION OF MIND. 10. THE FINAL CONCLUSION OF THE HONBLE COURT WAS A S FOLLOWS: 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), A T LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISC ERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONST ITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PRO CEEDINGS UNDER ITA NO.669/BANG/2015 PAGE 8 OF 10 SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSM ENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PRO VISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND TH E 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 ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTH ORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNL ESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE F AILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN OR DER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND AL L FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUIT Y. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFAC TION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APP ELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I .E., WHETHER IT ITA NO.669/BANG/2015 PAGE 9 OF 10 IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF I NCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENA LTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF I NCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIE D, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. 11. IT IS CLEAR FROM THE AFORESAID DECISION THAT O N THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTICE U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS S OUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE HONBLE KARNATAKA HIG H COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT Y EARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELL ED. THE OTHER ISSUES ITA NO.669/BANG/2015 PAGE 10 OF 10 RAISED BY THE ASSESSEE IN THE GROUNDS OF APPEAL ARE NOT ADJUDICATED, IN VIEW OF THE CONCLUSION ON THE ADDITIONAL GROUND OF APPEAL. 12. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF OCTOBER, 2015. SD/- SD/- ( ABRAHAM P. GEORGE ) ( N.V. VASU DEVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER ENCL: ANNEXURE-I BANGALORE, DATED, THE 1 ST OCTOBER, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.