SHRI VARAD MEHTA, Bhopal V. THE DCIT 1(1), Bhopal

ITA 693/IND/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0107 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEB JAIN
• Assessee Lawyers: GIRISH AGRAWAL
• Keywords: Income from undisclosed sources; Principle of natural justice; Source of fund; Initiation of penalty proceedings; Non compliance
• Section: 271(1)(c); 69C; 143(3); 133A; 69; 6

Judgement Text

VARAD MEHTA ITA NO.693/IND/2016 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.693/IND/2016 ASSESSMENT YEAR 2008-09 REVENUE BY S HRI R AJEE B JAIN , SR.DR ASSESSEE BY SHRI GIRISH AGRAWAL ,CA DATE OF HEARING 27 .11 . 2018 DATE OF PRONOUNCEMENT 06 .1 2 .2018 O R D E R PER MANISH BORAD, AM. THE ABOVE CAPTIONED APPEAL IS FILED AT THE INSTANCE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2008-09 AND IS DIREC TED AGAINST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX (APPEALS)- I (IN SHORT LD.CIT(A)], BHOPAL DATED 21.03.2016 WHICH IS ARIS ING OUT OF THE ORDER U/S 271(1)(C) OF THE INCOME TAX ACT 1961(IN S HORT THE ACT) DATED 28.03.2013 FRAMED BY DCIT-1(1), BHOPAL. SHRI VARA D MEHTA, B-4/301, PARAS CITY, ARERA COLONY, BHOPAL VS. DCIT 1(1), BHOPAL ( APPELLANT ) (RESPONDENT ) PAN NO. AFLPM6733Q VARAD MEHTA ITA NO.693/IND/2016 2 2. APART FROM RAISING AN ADDITIONAL GROUND CHALLENG ING THE LEGALITY OF THE INITIATION OF PENALTY PROCEEDINGS U /S 271(1)(C) OF THE ACT ON MERITS THE ASSESSEE HAS RAISED FOLLOWING GRO UNDS OF APPEAL; 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD.CIT(A)-1, BHOPAL ERRED IN CONFIRMING THE PENALTY OF RS.16,00 ,000/- U/S 271(1)(C) LEVIED BY LD.A.O WHICH IS CONTRARY TO THE FACTS AND THE APPLICABLE LAW 3. WE FIND THAT THOUGH THE ASSESSEE HAS NOT RAISED THE LEGAL GROUND AT THE TIME OF FILING THE APPEAL BUT IN OUR CONSIDERED OPINION AND FOLLOWING THE RATIO OF JUDGMENT OF HON'BLE APEX COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LIMITED 229 ITR 383(SC) AS WELL AS IN THE CASE OF JUTE CORPORATION OF INDI A 178 ITR 668 (SC) THE ADDITIONAL LEGAL GROUNDS RAISED BEFORE US DESER VES TO BE ADMITTED FOR ADJUDICATION IN AS MUCH AS THE SAME IN VOLVES POINT OF LAW WHICH DOES NOT REQUIRE ANY FURTHER INVESTIGATIO N OF FACTS. IT IS ALSO CLEAR THAT THE ISSUES RAISED IN THE ADDITIONAL GROUND OF APPEAL GOES TO THE ROOT OF THE JURISDICTION OF THE ASSESSI NG OFFICER TO LEVY THE PENALTY U/S 271(1)(C) OF THE ACT AND THEREFORE THE SAME ARE RELEVANT TO DETERMINE THE LIABILITY OF THE ASSESSEE FOR PENALTY U/S 271(1)(C) OF THE ACT. ACCORDINGLY THE ADDITIONAL GROUND IS ADMITTED FOR ADJUDICATION. VARAD MEHTA ITA NO.693/IND/2016 3 4. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING OUT THE BUSINESS OF RUNNING MARRIAGE GARDEN. INCOME OF RS.12,93,110/- SHOWN A S INCOME IN THE INCOME TAX RETURN FILED ON 31.03.2009. A SURVE Y U/S 133A OF THE I.T. ACT WAS CONDUCTED AT THE PREMISES OF THE A SSESSEE ON 22.02.2008. THE APPELLANT HAD ACCEPTED UNDISCLOSED INCOME OF RS.10 LAKHS DURING THE SURVEY AND THE SAID SURRENDE RED INCOME WAS DULY SHOWN BY THE APPELLANT IN THE RETURN OF IN COME FILED BY HIM. THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPL ETED BY ADDING PAYMENTS MADE OUT OF UNDISCLOSED SOURCES AT RS.40,00,000/-, 5,00,000/- AND RS.6,00,000/- WITH T HE INCOME RETURNED AT RS.12,93,110/- THUS ASSESSING THE TOTAL INCOME AT RS.63,93,110/- SUBSEQUENTLY PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT WERE INITIATED FOR CONCEALING THE INCOME BY FURNISHING WRONG PARTICULARS OF INCOME. THE ASSESSEE REMAINED NON COMPLIANT TO THE NOTICES OF HEARING GIVEN BY THE LEARNED ASSE SSING OFFICER (IN SHORT LD.A.O) ON VARIOUS OCCASIONS. PENALTY PROC EEDINGS COMPLETED AFTER LEVYING PENALTY OF RS.16,00,000/- O N THE CONCEALMENT OF INCOME OF RS.51,00,000/- FOR THE ALL EGED PAYMENTS MADE OUT OF UNDISCLOSED SOURCES OF INCOME FOR PURCH ASE OF VARAD MEHTA ITA NO.693/IND/2016 4 IMMOVEABLE PROPERTY. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE LD .CIT(A) AND AGAIN DID NOT APPEAR FOR ALMOST 12 OCCASIONS WHICH WAS SUFFICIENT TO INFER BY LD.CIT(A) THAT THE ASSESSEE HAS NOTHING MATERIAL TO PLACE ON RECORD TO CHALLENGE THE FINDINGS OF LD. A.O. L D.CIT(A) CONFIRMED THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT. 6. AGGRIEVED ASSESSEE IS NOW IN APPEAL BEFORE THE T RIBUNAL CHALLENGING THE LEGALITY OF THE PENALTY PROCEEDING S AS WELL AS RAISING GROUNDS ON MERITS CHALLENGING THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT AT RS.16,00,000/-. 7. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS P ER PROVISIONS OF SECTION 271(1)(C) OF THE ACT THE PENALTY CAN BE INITIATED EITHER FOR CONCEALING THE PARTICULARS OF INCOME OR FOR FURNISH ING INACCURATE PARTICULARS OF INCOME, WHEREAS THE LD.A.O HAS RECOR DED THE CHARGE AS FURNISHED WRONG PARTICULARS AND CONCEALED THE I NCOME. PLACING RELIANCE ON THE JUDGMENTS MENTIONED IN THE WRITTEN SUBMISSION REPRODUCED BELOW, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT THE LD.A.O HAS FAILED IN COMPLY THE PROVISIONS OF S ECTION 271(1)(C) OF VARAD MEHTA ITA NO.693/IND/2016 5 THE ACT BY INITIATING THE PENALTY PROCEEDINGS WITH NO SPECIFIC CHARGE. THE RELEVANT EXTRACT OF WRITTEN SUBMISSIONS GIVEN BY LD. COUNSEL FOR THE ASSESSEE ARE REPRODUCED BELOW; GROUND NO.1:IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A)-I, BHOPAL ERRED IN CONFIRMING THE PENALTY OF RS. 16,00,000 U/S 271{1}(C) LEVIED BY LD. AO WHICH IS CONTRARY TO THE FACTS AND THE APPLICABLE LAW. 1. THE QUANTUM APPEAL FOR THE ABOVE ON WHICH PENALT Y PROCEEDINGS HAVE BEEN INITIATED WAS FILED BEFORE THE HON'BLE BENCH V IDE ITA NO. 122/IND/2012 WHICH WAS DISPOSED OFF FOR NON PROSECU TION VIDE ORDER DATED OB.05.2012. 2. APPELLANT HAD FILED AN MA AGAINST THIS ORDER OF THE HON'BLE BENCH VIDE MA NO. 64/IND/2016. THIS APPLICATION OF THE APPELLA NT WAS DISMISSED BEING BARRED BY LIMITATION VIDE ORDER DATED 16.09.2016. P RESENTLY, APPELLANT IS BEFORE HON'BLE HIGH COURT AGAINST THE ORDER DISPOSI NG THE MA. 3. LD. AO HAD INITIATED PENALTY PROCEEDINGS U/S 271 (1)(C) BY STATING THAT ASSESSEE HAS FURNISHED WRONG PARTICULARS AND CONCEA LED THE INCOME. [AO PAGE 2 PARA 6] 4. LD. AO HAS FAILED TO APPLY THE PROVISIONS OF SEC TION 271 WHICH READS AS UNDER- (1) . (C) 'HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME, OR . FROM THE PLAIN READING OF THE SECTION, IT IS VERY C LEAR THAT PENALTY UNDER VARAD MEHTA ITA NO.693/IND/2016 6 SECTION 271(L)(C) CAN BE INITIATED EITHER FOR CONCE ALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. LD. AO HAS RECORDED THE CHARGE AS FURNISHED WRONG PARTICULARS AND CONCEALED THE INCOME.' LD. AO HAS FAILED IN APPLYING THE PROVISIONS OF SEC TION 271(L)(C) BY INITIATING THE PENALTY PROCEEDINGS WITH NO SPECIFIC CHARGE AS TO CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS. 5. RELIANCE IS PLACED ON FOLLOWING JUDICIAL PRECEDE NTS- A. HON'BLE KOLKATA BENCH OF ITAT IN THE CASE OF CHA NDRA PRAKASH BUBNA - [2015] 64 TAXMANN.COM 155 - ORDER DATED 21.05.201 5 - PARA 10 - 'IN THIS CASE, THE ASSESSING OFFICER HAS NOT BROUGHT OU T ANY SPECIFIC CHARGE FOR WHICH THE PENALTY HAS BEEN IMPOSED ON THE ASSES SEE U/S 271(1)(C) OF THE ACT. HE HAS NOT BROUGHT OUT WHETHER THE ASSESSE E HAS CONCEALED THE PARTICULARS OF INCOME OR WHETHER THE ASSESSEE HAS F URNISHED INACCURATE PARTICULARS OF INCOME. PARA 11- 'THE ASSESSING OFFICER IN THIS CASE LEVIED THE PENALTY FOR BOTH THE CHARGES WITHOUT MENTIONING ANY SPECIFIC CHARGE. IN CIT V. ATUL MOHAN BINDAL [2009] 317 ITR 1/183 TAXMAN 444 (SC), WHERE HON'BLE SUPREME COURT WAS CONSIDERING THE SAME PROVISION, I T OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE P ARTICULARS OF SUCH INCOME. THUS THE SATISFACTION OF THE ASSESSING OFFI CER ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME IS ESSENTIAL BEFORE LEVY ING ANY PENALTY U/S 271(1)(C). THE ASSESSING OFFICER AS IS APPARENT FRO M THE PENALTY ORDER HAS NOT SATISFIED ABOUT THE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME ON T HE PART OF THE VARAD MEHTA ITA NO.693/IND/2016 7 ASSESSEE. ON THIS BASIS ITSELF THE PENALTY DELETED. ' [EMPHASIS SUPPLIED] IN THE INSTANT CASE, AS LD. AO FAILED TO INITIATE T HE PENALTY PROCEEDINGS WITHOUT CREATING ANY SPECIFIC CHARGE, APPELLANT CON TENDS THAT THE PENALTY ORDER BE QUASHED. 6. WHILE PASSING THE PENALTY ORDER, LD. AO HAS IMPO SED PENALTY ON CONCEALMENT OF PARTICULARS OF INCOME AND THE SAME I S CONFIRMED BY LD. CIT(A) BY STATING THAT THE APPELLANT HAS NOT OFFERE D ANY EXPLANATION IN REGARD TO CONCEALMENT OF INCOME EITHER DURING PENAL TY PROCEEDINGS OR DURING APPEAL PROCEEDINGS. [CIT(A) ORDER PAGE 6 PAR A 11] APPELLANT, HAD ALREADY OFFERED DETAILED EXPLANATION ON THE VARIOUS PROPERTY DEALS RELATING TO THE ADDITION MADE BY THE LD. AO I N HIS STATEMENT RECORDED U/S 133A DURING THE COURSE OF SURVEY PROCEEDINGS. L D. CIT(A) FAILED TO CONSIDER THE SAME WHILE DISPOSING THE APPEAL. [PB 1 1- 23] 7. FROM THE ASSESSMENT ORDER, THE ADDITIONS MADE AR E WITHOUT REFERENCE TO ANY SPECIFIC SECTION UNDER WHICH THEY ARE MADE. IT MERE LY STATES - 'PAYMENTS MADE OUT OF UNDISCLOSED SOURCES'. [AO PARA 7] 8. EVEN IF IT IS PRESUMED THAT LD. AO WITHOUT REFER RING ANY SPECIFIC PROVISION MEANT ADDITION FALLING IN ONE OF THE SECTIONS FROM 69 TO 69D OF THE ACT, THESE ARE ALL DEEMING PROVISIONS. 9. A DEEMING PROVISION MAY BE INTENDED TO ENLARGE THE MEANING OF A PARTICULAR WORD OR TO INCLUDE MATTERS WHICH OTHERWISE MAYOR MA Y NOT FALL WITHIN THE MAIN PROVISION. IN CONSTRUING A LEGAL FICTION, IT I S NECESSARY TO ASSUME ALL THOSE FACTS ON WHICH ALONE THE FICTION CAN OPERATE, BUT, IT CANNOT BE EXTENDED BEYOND THE PURPOSE FOR WHICH IT IS CREATED OR BEYOND THE LANGUAGE OF THE SECTION BY WHICH IT IS CREATED. IT CANNOT BE EXTENDED BY IMPORTING ANOTHER FICTION. VARAD MEHTA ITA NO.693/IND/2016 8 10. A LEGAL FICTION CANNOT BE EXTENDED FURTHER BY S O INTERPRETING IT AS TO GO BEYOND THE LEGISLATURE'S INTENTION IN CREATING THE FICTION. THIS IS BECAUSE LEGAL FICTIONS ARE CREATED ONLY FOR A DEFINITE PURP OSE AND THEY ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND SHOULD N OT BE EXTENDED BEYOND THEIR LEGITIMATE FIELD. A LEGAL FICTION, NO DOUBT, HAS TO BE CARRIED TO ITS LOGICAL CONCLUSION BUT, THAT MUST BE WITHIN THE FRAMEWORK O F THE PURPOSE FOR WHICH IT IS CREATED. IT CANNOT BE CARRIED TO AN ILL OGICAL LENGTH. ONE SHOULD NOT ALLOW ONESELF TO BE SO CARRIED AWAY BY A LEGAL FICTION AS TO IGNORE THE WORDS OF THE VERY SECTION WHICH INTRODUCES IT OR IT S CONTENT OR SETTING IN THE STATUTE WHICH CONTAINS THAT SECTION. ALSO ONE SHOUL D NOT LOSE SIGHT OF THE PURPOSE FOR WHICH THE LEGAL FICTION WAS INTRODUCED. ACCORDINGLY, IN THE INSTANT CASE, THE PROVISIONS OF SECTION 69 TO 69D BEING DEEMING PROVISIONS CANNOT BE EXTENDED TO CREATE ANO THER FICTION FOR IMPOSING PENALTY. 11. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL P RECEDENTS- A. HON'BLE GUJARAT HIGH COURT IN THE CASE OF BARODA TIN WORKS - [1996] 221 ITR 661 - ORDER DATED 21.09.1995 - HEAD NOTE - SECTION 271(1)(C), READ WITH SECTION 69 OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME _ ASSESSMENT YEAR 1971-72 - W HETHER EXPLANATION TO SECTION 271(1)(C) INSERTED WITH EFFE CT FROM 1-4-1976 BY WHICH PRESUMPTION OF CONCEALMENT OF PARTICULARS OF INCOME IS RAISED ON ACCOUNT OF ADDITIONS HAVING BEEN MADE OR DEDUCTIONS BEING DISALLOWED IN RETURNED INCOME CANNOT BE HELD TO BE RETROSPECTIVE IN OPERATION - HELD, YES _ WHETHER FICTION CREATED UNDER SECTIONS 68, 69 , 69A, 69B AND 69C BY ITSELF, CANNOT BE EXTENDED TO PENALTY PROCEEDING S TO RAISE A PRESUMPTION ABOUT CONCEALMENT OF SUCH INCOME - HELD , YES - WHETHER ON A FINDING THAT RETURN OF INCOME WHICH IS LESS THAN 80 PER CENT OF ASSESSED INCOME IS NOT RESULT OF FRAUD OR GROSS OR WILFUL NE GLECT, PENALTY CANNOT BE SUSTAINED BY RAISING A PRESUMPTION OF CONCEALMENT O F INCOME UNDER THE VARAD MEHTA ITA NO.693/IND/2016 9 EXPLANATION TO SECTION 271(1)(C) - HELD, YES . B. HON'BLE KARNATAKA HIGH COURT IN THE CASE OF M.M. GUJAMGADI - [2007] 162 TAXMAN 211 - ORDER DATED 08.02.2005 - HEAD NOTE - SECTION 271(1)(C), READ WITH SECTION 68, OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - ASSESSING OFFICER FOUND A SUM OF RS. 2,01,000 IN BOOKS OF ACCOUNT OF ASSESSEE - ASSESSIN G OFFICER ISSUED NOTICE TO ASSESSEE ASKING HIM TO EXPLAIN SOURCE OF SAID AMOUNT - ASSESSEE REPLIED THAT HE BORROWED SAME FROM DIFFERE NT CREDITORS _ HOWEVER, DESPITE BEST EFFORTS, ASSESSEE COULD NOT S ECURE CREDITORS AS WITNESSES TO SUBSTANTIATE HIS CLAIM - HAVING NO OTH ER ALTERNATIVE, ASSESSEE VOLUNTARILY OFFERED TO TREAT SAID AMOUNT A S CASH CREDIT - ON BASIS OF SUBMISSION OF ASSESSEE, ASSESSING OFFICER PASSED AN ASSESSMENT ORDER ADDING SAID AMOUNT TO TOTAL INCOME AND ON THA T AMOUNT ASSESSEE PAID TAXES - SUBSEQUENTLY, ASSESSING OFFICER IMPOSE D PENALTY UNDER SECTION 271(1)(C) TREATING AFORESAID AMOUNT AS CONC EALED INCOME OF ASSESSEE - TRIBUNAL, HOWEVER, SET ASIDE PENALTY ORD ER - WHETHER IT COULD BE SAID THAT EXPLANATION OF ASSESSEE FOR NON-INCLUS ION OF AMOUNT IN QUESTION IN HIS RETURN OF INCOME WAS BONA FIDE - HE LD, YES - WHETHER, THEREFORE, ORDER PASSED BY TRIBUNAL SETTING ASIDE P ENALTY PROCEEDINGS WAS JUST AND PROPER - HELD, YES C. HON'BLE CHENNAI BENCH OF ITAT IN THE CASE OF T. KODEESWARAN - [2009] 33 SOT 3 - ORDER DATED 20.10.2008 - HEAD NOTE - SEC TION 271(1}(C),READ WITH SECTIONS 144AND 132,OF THE INCO ME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - ASSESSMENT YE AR 1986-87 - WHETHER THERE COULD BE NO CONCEALMENT OF INCOME FOR A PARTICULAR YEAR, WITHIN MEANING OF SECTION 271(1)(C), IF FOR THAT YE AR NO RETURN OF INCOME WAS FILED BY ASSESSEE - HELD, YES - WHETHER WHERE A DDITIONS MADE WERE WORKED OUT ON BASIS OF PURE ESTIMATION AND THOSE AD DITIONS DID NOT REPRESENT MONEY, BULLION, JEWELLERY OR OTHER VALUAB LE ARTICLE OR THING, OF VARAD MEHTA ITA NO.693/IND/2016 10 WHICH ASSESSEE WAS FOUND TO BE OWNER IN COURSE OF S EARCH, PROVISIONS OF EXPLANATION 5 TO SECTION 271(1)(C) WERE WRONGLY APP LIED TO SUCH ADDITIONS - HELD, YES D. HON'BLE JURISDICTIONAL BENCH OF INDORE ITAT IN T HE CASE OF SHRI JAYESH PARMAR - ITA NO. 279/IND/2013 - ORDER DATED 20.09.2 015 - FOLLOWING THE ABOVE MENTIONED DECISIONS DELETED THE PENALTY IMPOS ED. .' CONSIDERING THE ABOVE FACTS OF THE CASE, CIRCUMSTAN CES, SUBMISSIONS MADE, DOCUMENTS ON RECORD, JUDICIAL PRECEDENTS, THE PENALTY IMPOSED FOR RS. 16,00,000 OUGHT TO BE DELETED. 8. RELIANCE WAS PLACED ON FOLLOWING JUDGMENTS; (I) CHANDRA PRAKASH BABNA (2015) 64 TAXMANN.COM 155 (KOLKATTA-TRIB) (II) BARODA TIN WORKS (1996) 221 ITR 661 (GUJRAT) (III)M.M. GUJAMGADI (2007) 162 TAXMAN211 (JAR.) (IV) T. KODEESWARAN (2009) 33 SOT 3 (CHENNAI) (URO) (V) DHANYA KUMAR JAIN (2016) 27 ITJ 505 (TRIB. INDO RE) (VI)JAYASH PARMAR (2016) 27 ITJ 515 (TRIB. INDORE) 9. LD. COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANC E ON THE JUDGMENTS OF HON'BLE JURISDICTIONAL HIGH COURT IN T HE CASE OF CIT V/S KULWANT SINGH BHATIA ITA NO.9/2018 DATED 9.5.20 18, JUDGMENT OF HON'BLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT V SSAS EMERALAD MEADOWS ITA NO.380/2015 DATED 23.11. 2015 AND VARAD MEHTA ITA NO.693/IND/2016 11 ALSO THE JUDGMENT OF HON'BLE HIGH COURT OF KARNATAK A IN THE CASE OF CIT V/S MAJUNATHA COTTON GINNING FACTORY(2013) 359 ITR 565 IN SUPPORT OF THE LEGAL GROUND THAT EXISTENCE OF COND ITIONS STIPULATED IN SECTION 271(1)(C) OF THE ACT ARE NECESSARY FOR I NITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) AND THE ASSESSING OFFICER HAS FAILED TO MENTION THE SPECIFIC CHARGE IN THE PENALTY NOTICE I SSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT. 10. PER CONTRA DEPARTMENTAL REPRESENTATIVE VEHEMENT LY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 11. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE ISSUES RAISED BY THE ASSESSE E REVOLVES AROUND THE LEVY OF PENALTY AT RS.16,00,000/- LEVIE D BY THE LD. A.O AND CONFIRMED BY LD.CIT(A) ON THE ADDITION OF RS.51 ,00,000/- FROM UNDISCLOSED SOURCES FOR PURCHASE OF IMMOVABLE PROPE RTIES. PERUSAL OF RECORDS SHOWS THAT THE ASSESSEE REMAINING NEGLIG ENT AND NON COMPLIANT TO VARIOUS OPPORTUNITIES PROVIDED BY THE LD. A.O AS WELL AS LD.CIT(A) DURING THE COURSE OF PENALTY PROCEEDIN GS AS WELL AS APPELLATE PROCEEDINGS TOWARDS THE LEVY OF PENALTY. VARAD MEHTA ITA NO.693/IND/2016 12 12. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL, FIRSTLY RAISING THE LEGAL ISSUE PLEADING THAT LD. A.O HAS W RONGLY INITIATED THE PENALTY PROCEEDINGS BY NOT SPECIFYING THE CHARG E FOR LEVY OF PENALTY I.E. WHETHER THE PENALTY PROCEEDINGS HAS BE EN INITIATED FOR CONCEALING OF PARTICULARS OF INCOME OR FOR FURNISHI NG THE INACCURATE PARTICULARS OF INCOME. IT WAS ALSO PLEADED BY THE L D. COUNSEL FOR THE ASSESSEE THAT THOUGH THE LD. ASSESSING OFFICER HAS MADE PROPER SATISFACTION ON RECORD IN THE ASSESSMENT ORDER FOR INITIATING PENALTY PROCEEDINGS BUT IN THE NOTICE ISSUE U/S 274 R.W.S. 271(1)(C) OF THE ACT, BUT LD. A.O REMAINED SILENT BY NOT SPECIFYING AS TO WHICH CHARGE THE PENALTY PROCEEDINGS HAVE BEEN INITIATED. TO EXAMINE THIS FACT WE HAVE GONE THROUGH THE IMPUGNED NOTICE ISSUED FOR INITIATING THE PENALTY PROCEEDINGS U/S 271(1)(C) O F THE ACT WHICH IS PLACED AT PAGE-52 OF THE PAPER BOOK AND THE RELEVAN T EXTRACT IS REPRODUCED BELOW: TO SHRI VARAD MEHTA 239, SUNNY PALACE M P NAGAR ZONE-1, BHOPAL SIR / MADAM, VARAD MEHTA ITA NO.693/IND/2016 13 SUB:- PENALTY PROCEEDING U/S .. 271( 1 ) ( C) .. OF THE INCOME TAX ACT 1961 FOR THE AY 2008.09 IN CONNECTION WITH THE PENALTY PROCEEDINGS U/S, 271 (1) (C) FOR THE ASSESSMENT YEAR(S) 2008-09 YOU ARE REQUESTED TO ATT END MY OFFICE ON 18.01. 2010 AT 11.00 AM TO SHOW CAUSE WHY PENALTY SHOULD N OT BE IMPOSED. HOWEVER. IF YOU DO NOT WISH TO BE HEARD IN PERSON IN THIS RE GARD, YOU MAY SUBMIT YOUR WRITTEN SUBMISSIONS SO AS TO REACH ME BY THE ABOVE DATE WHICH WILL BE CONSIDERED BEFORE DISPOSAL OF THE MATTER. SD/- ( SHRLKANT NAMDEO ) DEPUTY GOMMISSFSONEROF1NCO ME TAX-1(1}, BHOPAL BHOPAL 13. FROM PERUSAL OF THE ABOVE SHOW CAUSE NOTICE WE FIND THAT THE LD.A.O HAS MERELY MENTIONED THE SECTION BUT THE SPE CIFIC CHARGE I.E. WHETHER THE PENALTY HAVE BEEN INITIATED FOR CONCEAL MENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME HAS NOT BEEN MENTIONED. NOW WHETHER SUCH TY PE OF NOTICE WHICH DOES NOT SPEAK ABOUT THE SPECIFIC CHARGE LEVE LED AGAINST THE ASSESSEE IS VALID AND TENABLE IN THE EYES OF LAW N EEDS TO BE EXAMINED. 14. WE FIND THAT SIMILAR ISSUE CAME UP BEFORE THE J URISDICTIONAL HIGH COURT IN THE CASE OF SHRI KULWANT SINGH BHATIA (SUPRA) VARAD MEHTA ITA NO.693/IND/2016 14 WHEREIN THE HON'BLE COURT DISCUSSED THE JUDGMENT O F HON'BLE HIGH COURT IN THE CASE OF CIT V/S MANJUNATHA COTTON GINN ING FACTORY (SUPRA) AND CIT V/S SSAS EMERALAD MEADOWS (SUPRA) HELD THAT ON DUE CONSIDERATION OF THE ARGUMENTS OF THE LD. COUNS EL FOR THE APPELLANT, SO ALSO CONSIDERING THE FACT THAT THE GR OUND MENTIONED IN SHOW CAUSE NOTICE WOULD NOT SPECIFY THE REQUIREMENT OF LAW, AS NOTICE WAS NOT SPECIFIC, WE ARE OF THE VIEW THAT LD . TRIBUNAL HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND SET SIDE THE ORDER OF PENALTY ENFORCED BY THE AUTHORITY. 15. SIMILARLY IN THE CASE OF CIT V/S MANJUNATHA GIN NING FACTORY, HON'BLE HIGH COURT OF KARNATAKA HELD THAT THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT SHOULD SPECIFICALLY MENTION THE GROUND IN SECTION 271(1)(C) WHETHER CONCEALMENT OF INCOME OR FOR FURNISHING IN ACCURATE PARTICULARS OF INCOME. SENDING PRINTED FORM WHERE ALL GROUND OF SECTION 271(1)(C ) WOULD NOT MENTIONED TH E SPECIFIC REQUIREMENT OF LAW. ASSESSEE SHOULD KNOW THE GROUND S ON WHICH HE HAS CHARGED SPECIFIC OTHERWISE OPPORTUNITIES OF NAT URAL JUSTICE DENIED. ON THE BASIS OF SUCH PROCEEDINGS NO PENALT Y COULD BE IMPOSED TO THE ASSESSEE. TAKING UP THE PENALTY PRO CEEDINGS ON ONE VARAD MEHTA ITA NO.693/IND/2016 15 LIMB AND FINDING THE ASSESSSEE IN ANOTHER LIMB IS B AD IN LAW. THOUGH IN THE INSTANT APPEAL THE LD. A.O HAS MADE P ROPER SATISFACTION IN THE BODY OF THE ASSESSMENT ORDER BU T IN THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT HE FAILE D TO MENTION THE LIMBS FOR WHICH PENALTY PROCEEDINGS HAVE BEEN INITI ATED. IT IS THE NEGLIGENCE OF THE LD. A.O IN NOT MAKING PROPER SPEC IFIC CHARGE IN THE NOTICE U/S 274 ABOUT THE ADDITION FOR WHICH PEN ALTY PROCEEDINGS HAVE BEEN INITIATED. LD. A.O SHOULD BE CLEAR AS TO WHETHER THE ALLEGED ADDITION GOES UNDER THE LIMB OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PA RTICULARS OF INCOME. MERELY ISSUING NOTICE IN GENERAL PROFORMA WILL NEGATE THE VERY PURPOSE OF NATURAL JUSTICE AS HELD BY THE HON 'BLE APEX COURT IN THE CASE OF DILIP N SHRAF 161 TAXMANN 218 THAT THE QUASI- CRIMINAL PROCEEDINGS U/S 271(1)(C) OF THE ACT OUGHT TO COMPLY WITH THE PRINCIPLES OF NATURAL JUSTICE. 14. WE THEREFORE RESPECTFULLY FOLLOWING ABOVE REFER RED JUDGMENTS AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CAS E ARE OF THE CONSIDERED VIEW THAT THE ALLEGED NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 31.12.10 IS INVALID, UNT ENABLE AND SUFFERS VARAD MEHTA ITA NO.693/IND/2016 16 FROM THE INFIRMITY OF NON APPLICATION OF MIND BY TH E ASSESSING OFFICER. WE ACCORDINGLY DIRECT TO DELETE THE PENALT Y OF RS.16,00,000/- IMPOSED U/S 271(1)(C) ON THIS GROUND ITSELF. WE ACCORDINGLY ALLOW THE ADDITIONAL GROUND RAISED BY T HE ASSESSEE ON THE LEGALITY OF THE PENALTY PROCEEDINGS INITIATED U /S 271(1)(C) OF THE ACT. SINCE THE PENALTY U/S 271(1)(C) ALSO HAS BEEN DEALT ON THE PRELIMINARY POINTS OTHER ARGUMENTS OF THE ASSESSEE DEALING WITH THE MERITS OF THE LEVY OF PENALTY ARE NOT BEEN DEALT WI TH, AS THE SAME ARE RENDERED ACADEMIC IN NATURE AND THE APPEAL OF T HE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 IS ALLOWED. 15. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . THE ORDER PRONOUNCED IN THE OPEN COURT ON 06.12.201 8. SD/- SD/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER / DATED : 06 DECEMBER, 2018 /DEV COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT (A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE