Sanjog Tarachand Lodha, Nashik V. Income-tax Officer,

ITA 689/PUN/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1178 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAVE
• Keywords: Invalid notice; Search and seizure; Opportunity of being heard; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause
• Section: 143(3); 153A; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NOS. 688 & 689/PN/2014 %' ( ')( / ASSESSMENT YEARS : 2007-08 & 2008-09 SANJOG TARACHAND LODHA, SHUKTIJ BUNGALOW, NEAR MAULI HOSPITAL, CAMP ROAD, MALEGAON, DISTT.- NASHIK PAN : AAHPL9935E ....... / APPELLANT ' / V/S. INCOME TAX OFFICER, CENTRAL 1, NASHIK / RESPONDENT ASSESSEE BY : WRITTEN SUBMISSION REVENUE BY : SHRI HITENDRA NINAVE / DATE OF HEARING : 13-08-2015 / DATE OF PRONOUNCEMENT : 31-08-2015 * / ORDER PER VIKAS AWASTHY, JM : THESE TWO APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAIN ST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK PA SSED U/S. 271(1)(C), CONFIRMING THE LEVY OF PENALTY FOR THE ASSESSMENT Y EARS 2007-08 AND 2008-09. BOTH THE IMPUGNED ORDERS ARE DA TED 2 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 07-02-2014. SINCE, THE FACTS IN BOTH THE APPEALS ARE SIMILA R, THE APPEALS ARE TAKEN UP TOGETHER FOR ADJUDICATION. 2. THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE IS AN INDIVIDUAL. A SEARCH U/S. 132 WAS CONDUCTED AT THE BUSINESS AND RES IDENCE PREMISES OF THE ASSESSEE ON 21-05-2009. CONSEQUENT TO SEARCH ACTION, A NOTICE U/S. 153A WAS ISSUED TO THE ASSESSEE FOR THE IMPUGNED A SSESSMENT YEARS. IN RESPONSE TO NOTICE, THE ASSESSEE FILED HIS RETU RN OF INCOME DECLARING TOTAL INCOME OF RS.10,10,000/- IN ASSESSMENT YEAR 2007-08 AND RS.3,31,310/- IN ASSESSMENT YEAR 2008-09. THE ASSE SSEE IN HIS ORIGINAL RETURN OF INCOME FILED U/S. 139 HAD DECLARED INCOME O F RS.2,17,810/- IN ASSESSMENT YEAR 2007-08. THUS, THE ADDIT IONAL INCOME OF RS.7,92,190/- WAS DECLARED IN ASSESSMENT YEAR 20 07-08. IN ASSESSMENT YEAR 2008-09, THE ASSESSEE HAD DECLARED INC OME OF RS.1,94,580/- IN HIS ORIGINAL RETURN OF INCOME FILED U/S. 139. THE ADDITIONAL INCOME DECLARED IN RETURN OF INCOME FILED U/S. 153A WAS RS.1,36,520/-. THE RETURN FILED BY THE ASSESSEE U/S. 153A IN BOTH THE IMPUGNED ASSESSMENT YEARS WERE ACCEPTED BY THE ASSES SING OFFICER WITHOUT MAKING ANY FURTHER ADDITION. PENALTY PROCEEDINGS U/S. 271(1)(C) WERE INITIATED AGAINST THE ASSESSEE. FOR THE ASSE SSMENT YEAR 2007-08 PENALTY OF RS.2,46,270/- AND IN ASSESSMENT YEAR 2 008-09 PENALTY OF RS.35,470/- WAS LEVIED U/S. 271(1)(C) VIDE SEPARATE ORDERS, BOTH DATED 28-06-2012. AGGRIEVED BY THE PENALTY ORDERS, THE ASSESSEE FILED APPEAL FOR BOTH THE ASSESSMENT YEARS BEFORE THE COMMISSIONER OF INCOME T AX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) INVOKED THE PROVIS IONS OF EXPLANATION 5A TO SECTION 271(1)(C) OF THE ACT AND UPHELD TH E FINDINGS OF ASSESSING OFFICER IN LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. AGAINST 3 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS), THE ASSE SSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL FOR BOTH THE ASSES SMENT YEARS I.E. ASSESSMENT YEARS 2007-08 AND 2008-09. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, TH E ASSESSEE HAS FILED WRITTEN SUBMISSION, THE COPY OF SAME HAS BEEN SU PPLIED TO THE OPPOSITE SIDE. THE WRITTEN SUBMISSIONS OF THE ASSESSEE AR E TAKEN ON RECORD. THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE ARE AS UN DER: SUBMISSION: 1) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE LE ARNED CIT(A) ERRED IN SUSTAINING THE PENALTY LEVIED BY THE AO [ITO (CENTR AL)-I, NASIK] FOR CONCEALMENT OF INCOME BY INVOKING EXPLANATION 5A TO SECTION 271(L)(C) WITHOUT APPRECIATING THE EXPLANATIONS AND SUBMISSIO NS OF THE ASSESSEE. WITHOUT PREJUDICE TO ABOVE, 2) IN THE SHOW CAUSE NOTICE U/S 274 R.W.S. 271(L)(C ) OF THE ACT DATED 29.12.11, NO SPECIFIC CHARGE WAS FRAMED AGAINST THE APPELLANT, I.E. 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 F OR ANY OTHER REASON AS IRRELEVANT COLUMNS OF THE PRINTED FORM OF NOTICE U/ S. 274 HAVE NOT BEEN STRUCK OFF BY THE AO. THEREFORE, PENALTY LEVIED U/S 271(L)(C), IN PURSUANCE OF INVALID NOTICE, MAY PLEASE BE DELETED. OUR VIEW STANDS FORTIFIED BY DECISION OF HON'BLE KA RNATAKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY [2013] 3 59 ITR 565 (FOLLOWED IN K.P. SHETTY VS. ACIT, ITA NO. 265/BANG ./2014): HELD: 'NOTICE U/S 274 R.W.S. 271(L)(C) SHOULD SPECIFICALL Y STATE GROUNDS MENTIONED IN SECTION 271(L)(C) I.E. WHETHER IT IS F OR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCO ME. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM WHERE ALL THE GRO UND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 10 0% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HE LD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINC IPLES OF NATURAL JUSTICE 4 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON T HE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROP RIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTIC ULARS OF INCOME. THE STANDARD YROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON APPLICATION OF MIND.' 3) FURTHER, A PRIMA FACIE SATISFACTION OF AO THAT C ASE MAY DESERVE IMPOSITION OF PENALTY SHOULD BE DISCERNIBLE FROM OR DER PASSED DURING COURSE OF ASSESSMENT PROCEEDINGS. (MADHUSHREE GUPTA V. UNION OF INDIA [20091 183 TAXMAN 100 (DELHI), CIT VS. MWP LTD. [20 14] 41 TAXMANN.COM 496]. ACCORDINGLY, THE LEARNED AO GROSSLY ERRED IN LAW IN INITIATING PENALTY PROCEEDINGS U/S 271(L)(C), IN THE ASSESSMENT ORDER FOR MERELY ON THE GROUND THAT 'THE ADDITIONAL INCOME OF RS.792190/- I S DETECTED AND DISCLOSED BY THE ASSESSEE AS A RESULT OF SEARCH ACT ION' WITHOUT RECORDING ANY OBJECTIVE SATISFACTION OR FINDING IN THE ASSESS MENT ORDER TO THE EFFECT THAT THERE IS CONCEALMENT OR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THEREFORE IT IS PRAYED TO CANCEL THE PENALT Y LEVIED U/S 271(L)(C). WITHOUT PREJUDICE TO ABOVE, 3.1) PENALTY WAS INITIATED IN PARA 6 OF THE ASSE SSMENT ORDER WITHOUT MENTIONING ANY SPECIFIC CHARGE AS CONTEMPLATED U/S 271(L)(C). (PAGE 13 OF PAPER BOOK) 3.2) IN, SHOW CAUSE NOTICE U/S 271(L)(C) NO SPEC IFIC CHARGE WAS FRAMED I.E. WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 3.3) IN PENALTY ORDER, AFTER HOLDING THAT 'THERE IS CONCEALMENT OF INCOME', THE AO SUDDENLY LEVIED PENALTY U/S 271(L)( C) FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALING PAR TICULARS OF INCOME, BOTH. THUS, IN ABSENCE OF SPECIFIC FINDING AS TO THE EXAC T NATURE OF OFFENCE, IT IS PRAYED TO CANCEL THE PENALTY LEVIED U/S 271(L)(C). 3.4) OUR VIEW STANDS FORTIFIED BY THE DECISION O F CIT V. MANJUNATHA COTTON & GINNING FACTORY [2013] 359 ITR 565 (KAR.) :- 5 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 HELD 'CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF INCOME. BUT, DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. ... 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 GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID.' SIMILAR VIEWS: - IN THE CASE OF CIT VS. JYOTI LTD. [2013] 34 TA XMANN.COM 65, THE ASSESSING OFFICER IN HIS PENALTY ORDER NOTED AS UND ER:- 'IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THE A SSESSEE CONCEALED INCOME/FURNISHED INACCURATE PARTICULARS OF INCOME. I, THEREFORE, CONSIDER IT A FIT CASE FOR LEVY OF PENALTY UNDER SECTION 271 (L)(C)' THE HON'BLE GUJRAT HIGH COURT IN THE ABOVE CASE HEL D THAT, WHERE THE ASSESSING OFFICER IN ORDER OF PENALTY DID NOT COME TO A CLEAR FINDING REGARDING THE PENALTY BEING IMPOSED ON CONCEALMENT OF INCOME OR ON FURNISHING INACCURATE PARTICULARS OF INCOME, THE TR IBUNAL WAS JUSTIFIED IN SETTING ASIDE THE IMPUGNED PENALTY ORDER. [NEW SORA THIA ENGG. CO. VS. CIT [2006] 282ITR 642 (GUJ) FOLLOWED] - DCIT VS. NEPA LIMITED [ITA NO. 683/INDORE/2013 OR DER DATED 13.10.14] S. 271(L)(C): PENALTY INITIATED WITHOUT SPECIFYING WHETHER IT IS FOR CONCEALMENT OR FOR FURNISHING INACCURATE PARTICULAR S IS INVALID. - THE HON'BLE ITAT, JODHPUR BENCH IN THE CASE OF KA NSARA BEARINGS LTD VS. ACIT [2013] 35 TAXMANN.COM 188. HELD: WHETHER ASSESSING OFFICER HAS TO CLEARLY SHOW -CAUSE ASSESSEE AS TO WHICH OF TWO DEFAULTS, [I.E., ASSESSEE HAS CONCE ALED PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME] HAVE BEEN COMMITTED BY ASSESSEE AND ONLY WHEN ASSESSEE IS PUT TO THAT DEFENCE PENALTY UNDER SECTION 271(L)(C) CAN BE IMPOSED - HE LD, YES - DCIT VS. B.J.D. PAPER PRODUCTS [2012] 17 TAXMANN. COM 11 (LUCK.) HELD: IN CASE OF IMPOSITION OF PENALTY UNDER SECTION 271( L)(C), IT IS INCUMBENT UPON THE ASSESSING OFFICER TO COME TO A POSITIVE FI NDING AS TO WHETHER 6 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 THERE WAS CONCEALMENT OF INCOME BY ASSESSEE OR WHET HER ANY INACCURATE PARTICULARS OF SUCH INCOME HAD BEEN FURNISHED BY AS SESSEE. IDENTICAL VIEWS: PADMA RAM BHARALI VS. CIT, 110ITR 54 (GAU.) RUSTOM SORAB MEDORA VS. ITO [ITA NO. 2283/AHD/2012] (AHD.) ETC. 4) EVEN CIT(A)-I, NASHIK ERRED IN LAW IN CONFIRMING THE PENALTY U/S 271(L)(C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND CONCEALMENT OF INCOME, BOTH. 5) ALL THE ABOVE GROUNDS WERE ALSO BEFORE CIT(A)-I [GR. NO. (2), (3) & (5) OF GROUNDS OF APPEAL]. HOWEVER, THE LEARNED CIT(A) SAF ELY NEGLECTED AND FAILED TO REBUT THE SAME IN HIS ORDER, FOR THE REAS ONS BEST KNOWN TO HIM. IN VIEW OF THE ABOVE, KINDLY ALLOW THE APPEAL OF TH E APPELLANT ON MERITS AND OBLIGE. IF YOUR HONOURS WANT TO DECIDE OTHERWIS E, A FURTHER OPPORTUNITY OF BEING HEARD MAY PLEASE BE ALLOWED. FURTHER, OWING TO THE EXACT IDENTICAL FACTS AND CIR CUMSTANCES OF THE CASE, IT IS REQUESTED TO DECIDE THE APPEAL FOR A.Y. 2008- 09 [689/PUN/2014] ALSO ON THE SIMILAR LINES. 4. ON THE OTHER HAND SHRI HITENDRA NINAVE REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE ORDER OF COMMISSIONE R OF INCOME TAX (APPEALS) IN BOTH THE ASSESSMENT YEARS. THE LD. DR S UBMITTED THAT THE ASSESSEE HAS CONCEALED THE INCOME AND HAD FURNISHED INACCURATE PARTICULARS OF INCOME IN HIS ORIGINAL RETURN. IT IS ONLY ON A CCOUNT OF SEARCH ACTION THAT THE ASSESSEE HAD DISCLOSED THE ADD ITIONAL INCOME. THERE WERE HUGE DISCREPANCY IN THE BOOKS OF ACCOUNT AN D THE CASH BALANCES. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS RIGH TLY INVOKED THE PROVISIONS OF EXPLANATION 5A TO SECTION 271(1)(C). THE LD. DR PRAYED FOR DISMISSING THE APPEALS OF THE ASSESSEE AND UPHOLDING THE IMPUGNED ORDERS. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. DR AND HAVE THOROUGHLY PERUSED THE WRITTEN SUBMISSION ALONG WITH PAP ER BOOK FILED 7 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 BY THE ASSESSEE. A SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT WAS CONDUCTED ON 21-05-2009 IN THE CASE OF LODHA GROUP. P URSUANT TO NOTICE ISSUED U/S. 153A, THE ASSESSEE FILED HIS RETURN OF IN COME FOR THE IMPUGNED ASSESSMENT YEARS. IN THE RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEARS, THE ASSESSEE DECLARED ADDITIONAL INCOME ADMITTED DURING THE COURSE OF SEARCH. THE ASSESSMENT WAS COMP LETED U/S. 153A R.W.S. 143(3) BY ACCEPTING THE INCOME RETURNED BY THE ASS ESSEE. THUS, NO FURTHER ADDITION WAS MADE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS. PENALTY U/S. 271(1)(C) WAS INITIATED AGAINST THE ASSESSEE ON THE ADDITIONAL INCOME ADMITTED DURING SEARCH AND RETU RNED U/S. 153A PROCEEDINGS. THE ASSESSEE HAS PLACED ON RECORD NOTICES ISSUED U/S. 271(1)(C) R.W.S. 274 OF THE ACT FOR LEVY OF PENALTY IN THE ASSESSMENT YEARS 2007-08 AND 2008-09. THE SAID NOTICES ARE AT PA GES 15 AND 16 OF THE PAPER BOOK. A PERUSAL OF NOTICES SHOW THAT THEY ARE STEREO TYPE NOTICES, WITH BLANK SPACES. SPECIFIC REASONS FOR LEVY OF PENA LTY U/S. 271(1)(C), WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OR FOR FURNISHING INACCURATE PARTICULARS OR FOR BOTH, HAVE NOT BEEN SPECIFIED . THE ASSESSEE IN HIS WRITTEN SUBMISSION HAS POINTED OUT THAT IF THE IRRELEVANT COLUMNS OF THE PRINTED FORM OF NOTICE U/S. 274 HAVE NOT BE EN STUCK OFF BY THE ASSESSING OFFICER, THE NOTICE FOR LEVY OF PENALTY U/S. 271(1)(C) SHALL BE DEEMED TO BE INVALID. IN SUPPORT OF THESE SUBMISS IONS, RELIANCE HAS BEEN PLACED ON THE DECISION OF HON'BLE KARNAT AKA HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNIN G FACTORY REPORTED AS 359 ITR 565 (KARAN). 6. A PERUSAL OF THE ORDER PASSED U/S. 271(1)(C) DATED 28-0 6-2012 LEVYING PENALTY SHOWS, THAT IN PARA 2 THE ASSESSING OFFICER HAS SPECIFICALLY MENTIONED THAT PENAL PROCEEDINGS U/S. 271(1)(C) AR E 8 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 INITIATED FOR CONCEALING THE INCOME. THE RELEVANT EXTRACT O F PARA 2 OF THE ORDER LEVYING PENALTY READS AS UNDER: 2. .SINCE ASSESSEE HAD ORIGINALLY CONCEALED INC OME TO THE EXTENT OF RS.7,92,190/-, PENALTY PROCEEDINGS U/S. 2 71(1)(C) OF THE ACT WAS INITIATED ON FINALIZATION OF ASSESSMENT PROCEED INGS. IN BOTH THE IMPUGNED ASSESSMENT YEARS, THE ORDER LEVYIN G PENALTY ARE SIMILARLY WORDED. 7. IN THE CONCLUDING PARAGRAPH OF THE ORDER, THE ASSESS ING OFFICER HAS OBSERVED THAT THE PENALTY IS LEVIED FOR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME AND CONCEALING INCOME. THE RELEVANT EXTRACT OF PARA 7 OF THE ORDER READS AS UNDER: 7. I AM SATISFIED THAT THE ASSESSEE HAS WITHOUT AN Y REASONABLE CAUSE, FURNISHED AN INACCURATE PARTICULARS OF INCOM E AND THEREBY CONCEALED HIS INCOME TO THE EXTENT OF . FURNISHING OF INACCURATE PARTICULARS OF INCOME AND CONCEALI NG OF INCOME ARE TWO DIFFERENT EXPRESSIONS HAVING DIFFERENT CONNOT ATIONS. FOR INITIATING PENALTY PROCEEDINGS, THE ASSESSING OFFICER HAS TO B E VERY SPECIFIC FOR THE REASONS OF LEVYING PENALTY, WHETHER IT IS FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALING OF INCOME OR FOR BOTH. IN THE PRESENT CASE, A PERUSAL OF NOTICE ISSUED U/S. 271(1)(C) R.W.S. 274 SHOWS THAT THE ASSESSING OFFICER HAS NOT SPECIFIED THE REA SONS FOR LEVYING OF PENALTY I.E. WHETHER IT IS FOR FURNISHING OF INACCURATE PARTICULARS OR CONCEALMENT OF INCOME OR BOTH. FURTHER, A BARE PERUSAL OF THE ORDER LEVYING PENALTY WOULD SHOW THAT THE ASSESSIN G OFFICER IS NOT CLEAR WHETHER THE PENALTY IS LEVIED FOR CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR BOTH. 9 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 8. THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CI T VS. MANJUNATHA COTTON & GINNING FACTORY (SUPRA) HAS HELD TH AT WHERE IT IS NOT CLEAR FROM THE NOTICE U/S. 274 THE REASONS FOR LEVYING OF PENALTY THE NOTICE ITSELF IS BAD IN LAW AND THE PENALTY ORDER PASSED ON THE BASIS OF SUCH NOTICE IS NOT SUSTAINABLE. THE RELEVANT EXTRACT OF T HE ORDER OF HON'BLE HIGH COURT READS AS UNDER: 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 REGARDING THE EXIST ENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PROCEEDI NGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COU LD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION O F THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE O F 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 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 O F THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271( 1)(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 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 10 0% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HE LD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINC IPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON T HE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. 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 OFFENCES 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 OFFENCES. 10 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 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 NEED LESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROUNDS MENTIO NED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEED INGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PL ACES 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 CALLE D UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSI NG PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PR OCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY W OULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ON CE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALS O BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF P ENALTY PROCEEDINGS 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 INFORMATIO N, 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 SUBSEQUENT 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 COURSE OF A NY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INA CCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHI NG INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THUS THE ASSES SING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT W HETHER 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 PA I REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME A ND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. THE GUJRAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKE TING REPORTED IN 171 TAXMN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE H AS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURA TE PARTICULARS OF 11 ITA NOS. 688 & 689/PN/2014, A.YS. 2007-08 & 2008-09 INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF T HE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 9. THUS, IN THE FACTS OF THE CASE AND DOCUMENTS ON RECO RD, WE ARE OF THE CONSIDERED VIEW THAT THE NOTICE ISSUED U/S. 271(1)(C) R. W.S. 274 IS INVALID AND THUS, THE SUBSEQUENT PENALTY PROCEEDINGS ARISIN G THERE FROM ARE VITIATED. THE IMPUGNED ORDERS ARE SET ASIDE AND THE AP PEALS OF THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 31 ST DAY OF AUGUST, 2015. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 31 ST AUGUST, 2015 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-I, NASHIK 4. ' / THE CIT (CENTRAL), NAGPUR 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE