Vaibhav Tulsyan, Kolkata V. D.C.I.T CC - I,Kolkata, Kolkata

ITA 736/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4818 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 09-03-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2013
• Court: TRIBUNAL
• Department Lawyers: KA LYAN LD
• Assessee Lawyers: AMIT KUMAR ACA LD
• Keywords: Search and seizure; Document seized; Principle of natural justice; Initiation of penalty proceedings; Documents seized
• Section: 153A; 132; 139

Judgement Text

ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH, K OLKATA BEFORE : SHRI P.M. JAGTAP , ACCOUNTANT MEMBER AND SHRI S.S VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A NOS. 736 & 737/KOL/2013 A.YS. 2006-07 & 2007-08 VAIBHAV TULSYAN VS. I.T.O WARD 29(4), KOLKATA PAN: ABSPT 2046C (APPELLANT) (RESPON DENT) FOR THE APPELLANT/ASSESSEE : SHRI AMIT KUMAR , ACA, LD.AR FOR THE RESPONDENT/ASSESSEE: SHRI KA LYAN, LD.DR DATE OF HEARING: 09-03-2016 DATE OF PRONOUNCEMENT: 27 -05 - 2015 ORDER SHRI S.S VISWANETHRA RAVI, JM THESE APPEALS OF THE ASESSEE ARISE OUT OF THE COMMO N ORDER OF THE CIT(A)- CENTRAL-III, KOLKATA IN APPEAL NOS. 25 & 26/CC-I/CI T(A)C-III/11-12/KOL DATED 28-01-2013 FOR THE ASSESSMENT YEARS 2006-07 & 2007 -08 AGAINST THE ORDER OF PENALTY LEVIED U/S. 271(1) ( C) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE APPELLANT ASSESSEE HAS INITIALLY RAISED THE FOLLOWING COMMON GROUND OF APPEAL FOR BOTH THE ASSESSMENT YEARS UNDER CONSI DERATION:- 1. THAT THE LD. CIT(A) ERRED IN CONFIRMING PENALTY AMOUNTING TO RS.23,56,670/- U/S. 271(1) ( C) OF THE INCOME TAX A CT, 1961 @ 100% OF THE TAX ALLEGED TO BE SOUGHT TO BE EVADED ON TH E AMOUNT OF ADDITIONAL INCOME VOLUNTARILY DISCLOSED BY THE ASS ESSEE U/S. 132(4) AND INCLUDED IN THE RETURN FILED U/S. 153A OF THE A CT. THE PENALTY SO LEVIED IS UNJUSTIFIED AND NEED TO BE DELETED. ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 2 3. SUBSEQUENTLY, THE ASSESSEE HAS RAISED FOLLOWING ADDITIONAL GROUND OF APPEAL FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDER ATION:- 1) THAT THE LD. AO ERRED IN NOT MENTIONING THE LIM B SEC 271(1)( C) THAT HAS BEEN VIOLATED BY THE ASSESSEE, IN THE N OTICE ISSUED U/S. 274 R.W.S 271 OF THE INCOME TAX ACT 1961. FURTHER, THE LD. AO HAS NOT RECORDED ANY SATISFACTION AS TO WHETHER THE ASSESSE E HAS CONCEALED HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF HIS INCOME IN THE PENALTY NOTICE ISSUED U/S. 274/271 OF THE INCO ME TAX ACT 1961. HENCE, THE PENALTY PROCEEDING IS BAD IN LAW AND TH E SAME IS LIABLE TO BE QUASHED. 3.1 AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD, WE ADMIT THE ADDITIONAL GROUND AS RAISED BY THE ASSESSEE SINCE THE ISSUE INVOLVED THEREIN IS A LEGAL ISSUE AND ALL THE FACTS NECESSARY FOR ADJUDICATION THEREOF ARE ALREADY ON RECORD. 4. BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SE IZURE OPERATION WAS CONDUCTED U/S. 132 OF THE ACT IN THE AROMA GROUP OF CASES ON 27-02-2009. THE ASSESSEE FILED HIS RETURN OF INCOME ON 12-11-2 010 DECLARING TOTAL INCOME OF RS. 72,34,300/- IN RESPONSE TO NOTICE DATED 02-09 -2010 ISSUED U/S. 153A OF THE ACT. DURING THE COURSE OF ASSESSMENT THE NOTICES U/ S. 143(2)/142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO WHICH THE LD.AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND MADE NECESSARY SUBMISSIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE EXPLAINED THE RETURN FILE D WITH REFERENCE TO VARIOUS SEIZED AND IMPOUNDED BOOKS, PAPERS, DOCUMENTS AND VARIOUS ASSETS, BOOKS OF ACCOUNT, BANK STATEMENTS, BILLS, VOUCHERS AND OTHE R SUPPORTING DOCUMENTS. FINALLY THE AO AFTER CONSIDERING THE VARIOUS SUBMIS SIONS/PAPERS OF THE ASSESSEE ASSESSED THE TOTAL INCOME OF THE ASSESSEE AT RS.72, 34,300/- BY STATING AS UNDER:- DURING THE COURSE OF .SEARCH .AND SEIZURE OPERATIO NS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE, CASH AMOU NTING TO RS. ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 3 1,08,34,500/- WAS FOUND. THE AMOUNT OF CASH FOUND H AS BEEN OWNED UP BY THE ASSESSEE AND THE SAME HAS BEEN CONSIDERED AS APPLICATION OF FUNDS OUT OF HIS INCOME DISCLOSED U/S 132(4). DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE, AN INVENTORY OF 12 ITEMS OF JEWELLERY MARKED AS BKT/1 TO BKT/12 (NET WEIGHT OF GOLD BEING 1839.80 GM AND DIAMOND BEING 27.10 CARAT) AND VALUE D BY THE DEPARTMENTAL VALUER AT 'RS.29,54,177/- WAS MADE. FU RTHER, DURING THE COURSE OF OPERATION OF LOCKER NO. 39 MAINTAINED BY SHRI VIMAL KUMAR TULSYAN AND SMT. NIRMALA TULSYAN WITH PUNJAB NATIONAL BANK, SHASTRI NAGAR, DHANBAD, 17 ITEMS OF JEWELLERY BEARING SL. NOS. 1 TO 17 OF NET WEIGHT 1859.040 GM AND VALUED B Y THE DEPARTMENTAL VALUER AT RS.21,58,1571- WAS MADE. OUT OF THE TOTAL JEWELLERY FOUND, JEWELLERY OF NET WEIGHT 331.50 (BE ING ITEM NOS. BKT/05 AND BKT/07) VALUED AT RS. 5,10,8701-HAS BEEN OWNED UP BY THE ASSESSEE AND THE SAME HAS BEEN CONSIDERED AS AP PLICATION OF FUNDS OUT OF HIS INCOME DISCLOSED U/S 132(4). THE R EMAINING JEWELLERY ITEMS OF NET WEIGHT OF GOLD 3367.70 GM AN D DIAMOND OF 27.10 CARAT HAVE BEEN FOUND TO FORM PART OF THE JEW ELLERY DISCLOSED BY THE ASSESSEE'S HUF AND OTHER FAMILY MEMBERS AS P ER THEIR WEALTH TAX RETURNS AND STRIDHAN RECEIVED BY SMT. ANAMIKA T ULSYAN AT THE TIME OF HER MARRIAGE. DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE, AN INVENTORY OF SILVER UTENSILS AND ARTICLES WEIGHING APPROXIMATELY 46.381 KG AND V ALUED BY THE DEPARTMENTAL VALUER AT RS.10,66,763/- WAS MADE. OUT OF THE SILVER UTENSILS AND ARTICLES INVENTORIED AS STATED ABOVE, SILVER UTENSILS AND ARTICLES OF GROSS WEIGHT 30.00 KG AND VALUED AT RS. 6,90,000/- WERE OWNED UP BY THE ASSESSEE AND THE SAME HAVE BEEN CON SIDERED AS APPLICATION OF FUNDS OUT OF HIS INCOME DISCLOSED U/ S 132(4). THE REMAINING SILVER UTENSILS AND ARTICLES WEIGHING 16. 381 KG HAVE BEEN FOUND TO FORM PART OF THE SILVER UTENSILS AND ARTIC LES DISCLOSED BY VARIOUS MEMBERS OF THE ASSESSEE'S FAMILY AS PER THE IR WEALTH TAX RETURNS. DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE, AN INVENTORY OF 5 NOS. OF KVPS OF RS. 50,000/- WAS MADE. THE SAID KVPS HAVE BEEN F OUND TO BELONG TO THE ASSESSEE AND THE SAME HAVE BEEN CONSIDERED A S APPLICATION OF FUNDS OUT OF HIS INCOME DISCLOSED U/S 132(4) FOR TH E AY 2004-05. ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 4 DURING THE COURSE OF SEARCH AND SEIZURE OPERATIONS CONDUCTED AT THE RESIDENTIAL PREMISES OF THE ASSESSEE, AN INVENTORY OF ONE FD OF RS. 1,01,649/- WAS MADE. THE SAID FD HAS BEEN FOUND TO BELONG TO THE ASSESSEE AND THE SAME HAS BEEN CONSIDERED AS APPLIC ATION OF FUNDS OUT OF HIS INCOME DISCLOSED U/S 132(4) FOR THE AY 2 006-07. IN THE DISCLOSURE PETITION FILED U/S 132(4), THE AS SESSEE HAD DISCLOSED AN AMOUNT OF RS.15,00,00,000/- AS HIS UNDISCLOSED I NCOME. 5. THEREAFTER, THE AO ISSUED NOTICE U/S. 274 R.W.S 271 OF THE ACT DATED 30- 12-2010 TO THE ASSESSEE TO SHOW CAUSE WHY PENALTY BE IMPOSED FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. IN RESPONSE T O SUCH NOTICE, THE ASSESSEE SUBMITTED AS UNDER:- 5. THE DISCLOSURE OF INCOME WAS MADE ON THE ASSURA NCE OF THE DDIT (INV) THAT NO PENALTY U/S. 271(1)( C) WOULD BE MADE ON THE DISCLOSURE MADE. THE ASSESSEE HAS ALSO QUOTED SECTION 153A(1)(A) OF THE INCOME TAX ACT, 1961 AND STATED THAT RETURN FILED IN RESPONSE TO THE NOTICE U/S. 153A OF THE I.T ACT WILL BE TREATED A S RETURN FILED U/S. 139 OF THE I.T ACT AND ALL OF THE PROVISIONS OF THE ACT WILL APPLY AS IF THE RETURN IS FILED U/S. 139 OF THE I.T ACT, 1961, THEREBY GIVING HIM THE IMMUNITY VIS A VIS DISCLOSED INCOME HE HAS STA TED THAT AS SUCH THE INCOME DISCLOSED SUO MOTO BY THE ASSESSEE IN TH E RETURN FILED CANT BE TREATED AS CONCEALED INCOME. 6. THE ASSESSEE HAS CITED EXPLANATION 5A TO SECTION 271(1)9 C) AND TRIED TO EXPLAIN THAT THE AMOUNT OF RS. 70,00,0 00/-, WHICH IS UNDISCLOSED INCOME FOR THE ASSESSMENT YEAR 2006-07 HAS BEEN COVERED IN THE DISCLOSURE PETITION FILED BY SRI VA IBHAV TULSYAN ALONG WITH THE SOURCE FROM WHICH SUCH UNDISCLOSED INCOME WAS EARNED. IT WAS ALSO STATED THAT THE ENTIRE TAX ALONG WITH INTE REST ON THE UNDISCLOSED INCOME. HE HAS ALSO QUOTED VARIOUS JUDG EMENTS OF ITATS AS WELL AS HIGH COURTS. ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 5 6. THE AO AFTER EXAMINING AND CONSIDERING THE VARI OUS SUBMISSIONS OF THE ASSESSEE REGARDING IMPOSING OF PENALTY U/S. 271(1)( C) AND IMPOSED PENALTY @ RS.23,56,670/- FOR A.Y 2006-07 AND RS.25,13,837/- FOR A.Y 2007-08. 7. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE TH E CIT-(A). THE CIT-(A) OPINED THAT THE ASSESSEE HAD DISCLOSED ADDITIONAL I NCOME FOR THE ASSESSMENT YEARS 2006-07 AND 2007-08 ONLY TO COVER UP AND TAKE CARE OF THE OMISSIONS AND MISTAKES IN THE SEIZED DOCUMENTS. THE CIT(A) CONF IRMED THE IMPUGNED PENALTY BY OBSERVING AS UNDER:- IN THE INSTANT CASE SEARCH U/S. 132 WAS CONDUCTED ON 27.02.2009 I.E AFTER 01.06.2007. THE APPELLANT HA D ADMITTED ADDITIONAL UNDISCLOSED INCOME FOR THE A.YRS 2006-07 AND 2007-08 TO COVER UP AND TAKE CARE OF THE OMISSIONS/MISTAKES IN THE SEIZED DOCUMENTS. THAT MEANS THE ADDITIONAL UNDISCLOSED I NCOME WAS ADMITTED BASED ON SEIZED DOCUMENTS AND PREVIOUS YE AR RELEVANT TO A.YRS. 2006-07 AND 2007-08 HAD EXPIRED BEFORE THE DATE OF SEARCH. FURTHER, THE APPELLANT HAD NOT DECLARED SUCH ADDIT IONAL UNDISCLOSED INCOME IN THE RETURNS OF INCOME FURNISHED FOR THOSE ASSESSMENT YEARS BEFORE THE DATE OF SEARCH. IN VIEW OF THE SPECIFIC PROVISIONS OF EXPLANATION 5A OF SECTION 271(1)( C) AND ON FACTS OF THE INSTANT CASES IT IS HELD THAT PENALTY U/S. 271(1) ( C) HAS RIGHTLY LEVIED BY THE AO IN T HESE CASES. THEREFORE, LEVY OF PENALTY OF RS. 23,56,670/- FOR A.Y 2006-07 AND RS.25,13,837/- FOR A.Y 2007-08 IN THESE CASES IS CO NFIRMED. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US B Y RAISING THE ADDITIONAL GROUND OF APPEAL AS ABOVE. 9. DURING THE COURSE OF HEARING BEFORE US THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED AND PRAYED TO DECIDE THE PRELIMINARY ISS UE BEING ADDITIONAL GROUND AS RAISED BY THE ASSESSEE BEFORE US. THE LD. COUNSEL A LSO SUBMITTED THAT THE AO HAS NOT RECORDED ANY SATISFACTION AS TO WHETHER THE AS SESSEE HAS CONCEALED HIS ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 6 INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF H IS INCOME. HE ALSO DREW OUR ATTENTION TO THE NOTICE DATED 30-12-2010 AND SUBMIT TED THAT THE NOTICE DOES NOT SPECIFY AS TO WHETHER THE ASSESSEE IS GUILTY OF BE ING FURNISHED INACCURATE PARTICULARS OF INCOME OR CONCEALED PARTICULARS OF S UCH INCOME. HE ALSO SUBMITTED THAT IN THE SAID NOTICE THE AO HAS FAILED TO STRIKE OUT THE IRRELEVANT PORTION OF THE PRINTED SHOW CAUSE NOTICE. IN THIS REGARD, HE RELIE D ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), WHE REIN IT HAS BEEN HELD THAT THE NOTICE ISSUED U/S. 274 OF THE ACT SHOULD SPEC IFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCE ALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. HE ALSO RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF SUVAPRASANNA B HATTACHARYA VS. ACIT, CIR- 55, KOLKATA DATED 06-11-2015. ON THE CONTRARY, THE LD. DR HAS RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND THE JUDGMENT O F THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF BINANI INDUSTRI ES. HE ALSO ARGUED THAT IF A MISTAKE COMMITTED BY THE AO IN LEVYING PENALTY THAT CAN BE RECTIFIED U/S. 292 B OF THE ACT. 10. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. THE QUESTION BEFORE US IS AS TO WHETHER THE PENALT Y ORDER PASSED BY THE AO AND CONFIRMED BY THE CIT(A) FALLS FOR OUR CONSIDERATION IN PURSUANCE OF THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT SUPRA . THAT ON PERUSAL OF THE SAID SHOW CAUSE NOTICE DATED 30-12-2010 ISSUED U/S. 274 R.WS. 271(1)( C) OF THE ACT PURPORTEDLY ISSUED TO SHOW CAUSE WHY THE PENALT Y SHALL NOT BE IMPOSED, WE FIND THAT IRRELEVANT PORTION OF SUCH NOTICE WAS NOT STRUCK OUT BY THE AO. THEREFORE, THE SAID NOTICE IS NOT CLEAR WHETHER IT WAS ISSUED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALMENT OF PARTICULARS OF SUCH INCOME. ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 7 WE FIND THAT THE ASSESSEE AS RELIED ON THE ORDER DA TED 06-11-2015 IN THE CASE OF SUVAPRASSANNA BHATTACHARYA VS. ACIT, KOLKATA IN ITA NO. 1303/KOL/2010 FOR THE AY 2006-07 IS APPLICABLE TO THE CASE ON HAND. T HE RELEVANT FINDINGS OF THE SAID TRIBUNAL ORDER IS REPRODUCED HEREIN BELOW FOR BETTER UNDERSTANDING:- 8. THE NEXT ARGUMENT THAT THE SHOW CAUSE NOTICE U/ S. 274 OF THE ACT WHICH IS IN A PRINTED FORM DOES NOT STRIKE OUT AS TO WHETHER THE PENALTY IS SOUGHT TO BE LEVIED ON THE FOR FURNISHI NG INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS O F SUCH INCOME. ON THIS ASPECT WE FIND THAT IN THE SHOW CAUSE NOTIC E U/S. 274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS THEREFORE NOT SPELL OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF IN COME OR CONCEALING PARTICULARS OF SUCH INCOME. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 5 65 (KARN), HAS HELD THAT NOTICE U/S. 274 OF THE ACT SHOULD SPE CIFICALLY 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 DOW N THAT CERTAIN PRINTED FORM WHERE ALL THE GROUNDS 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 SUBMIT TED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO BE HELD AS BAD IN L AW AND LIABLE TO BE QUASHED. 5.1 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HA S LAID DOWN THE FOLLOWING PRINCIPLES TO BE FOLLOWED IN THE MATT ER 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 PAS SED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING 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 ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 8 CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE S AID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEED INGS 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 MENTION ED IN SECTION 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 NOT E XIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPA RTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECT ION 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 B E HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWIS E, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPO SED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT 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 MAY BE OV ERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF TH E PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS 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 PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOS E GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. A FTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUND S ON WHICH HE IS ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 9 CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS O THER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FIN AL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROU ND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROU ND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS N OT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IM POSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT 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 CONC EALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURATE PARTICU LARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INAC CURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 1 22 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKE TING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF P ENALTY 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 CON CEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS T HE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PRO FORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS FO LLOWS:- ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 10 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 AUTH ORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(1)(C), AT L EAST 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 AS SESSMENT 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 CONTAI NED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE 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 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 AUTHORITI ES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND I F NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 11 L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPO SING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE 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 SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PR OCEEDINGS, 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., W HETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCORREC T 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 JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY 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 INCOR RECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PR OCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDING S ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 12 PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) IT IS CLEAR FROM THE AFORESAID DECISION THAT ON 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 SOUGHT TO BE IMPOSED. FOLLOWING THE DECISION OF THE HONBLE KARN ATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE TO BE HELD AS INVALID AND CONSEQUENTLY P ENALTY IMPOSED IS CANCELLED. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF P ENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE, THEREFORE, CA NCEL THE ORDERS IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPE AL BY THE ASSESSEE. 11. IN THE PRESENT CASE, AS WE NOTED ABOVE, THE AO FAILED TO STRIKE OUT THE IRRELEVANT PORTION IN THE SAID SHOW CAUSE NOTICE, R ESPECTFULLY FOLLOWING THE ORDER ABOVE, WE CANCEL THE PENALTY LEVIED U/S. 271(1) ( C ) OF THE ACT BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT-(A) FOR BOTH THE AS SESSMENT YEARS UNDER CONSIDERATION. HAVING HELD THAT THE NOTICE ISSUED B Y THE AO U/SEC 274 R/W SEC 271(1)(C) OF THE ACT DURING THE COURSE OF PENALTY P ROCEEDINGS IS NOT IN CONFORMITY WITH THE RELEVANT PROVISIONS OF THE ACT, WE ARE OF THE VIEW THAT SECTION 292B CAN NOT COME TO THE RESCUE OF THE REVE NUE AND THE RELIANCE OF THE LD.DR ON THE SAID PROVISION IS CLEARLY MISPLACED. T HEREFORE, PRELIMINARY ISSUE AS RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROU ND FOR BOTH THE ASSESSMENT ITA NOS. 736 & 737/KOL/2013-C-JM VIABHAV TULSYAN 13 YEARS 2006-07 & 2007-08 ARE ALLOWED, IN VIEW OF T HE SAME THE OTHER GROUNDS RAISED REQUIRES NO ADJUDICATION, THEREFORE, ALL ARE DISMISSED. 12. IN THE RESULT, THE APPEALS OF ASSESSEE ARE AL LOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 27 /05 /2016 COPY OF THE ORDER FORWARDED TO: 1.. THE APPELLANT/ASSESSEE : SHRI VAIBHA TULSYAN 7 06 SHANTINIKETAN BUILDING CAMAC STREET, KOLKATA- 700016. 2 THE RESPONDENT/DEPARTMENT- THE DY. COMMISSIONER OF INCOME TAX CC-I, AAYKAR BHAWAN (POORVA) 110 SHANTIPALLY, KOL-1 07. 3 4. . /THE CIT, /THE CIT(A) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR ** PRADIP SPS SD/- P.M. JAGTAP, ACCOUNTANT MEMBER SD/- S.S VISWANETHRA RAVI, J JU DICIAL MEMBER DATE 27 /05 /2016