GOPI BAI FOUNDATION, Jaipur V. ACIT, Jaipur

ITA 760/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4818 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJINDER SINGH CIT DR DHK
• Keywords: Reopening of assessment; Bogus purchase; Depreciation; Search and seizure; Principle of natural justice; Opportunity of cross examination; Initiation of penalty proceedings; Reason to believe; Reassessment proceedings; Capital expenditure
• Section: 153A; 27; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH HKKXPUN] YS[KK LNL; DS LE{K BEFORE: SHRI BHAGCHAND, ACCOUNTANT MEMBER VK;DJ VIHY LA-@ ITA NO. 760/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2006-07 M/S. GOPI BAI FOUNDATION 112, SHAKTI NAGAR KOTA CUKE VS. THE ACIT CENTRAL CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AAATG 3137 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VIJAY GOYAL, CA JKTLO DH VKSJ LS@ REVENUE BY :SHRI RAJINDER SINGH, ADDL.CIT - DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/12/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 29 /12/2016 VKNS'K@ ORDER PER BHAGCHAND, AM THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF THE LD. CIT(A)-4, JAIPUR DATED 15-06-2016 FOR THE ASSESSM ENT YEAR 2006-07 RAISING THEREIN FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IN NOT ALLOWING THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF SHANKAR LAL KHANDELWAL VS. DCIT IN ITA NO. 878/JP/2013 DATED 11 -03- ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 2 2016 AND REJECTING THE CONTENTION OF THE ASSESSEE T HAT LEVY OF PENALTY U/S 271(1)(C) IS BAD IN LAW AS THE LD. AO I NITIATED THE PENALTY U/S 271(1)(C) UNDER BOTH THE LIMBS I.E. CON CEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PART ICULARS OF INCOME AND AT THE TIME OF NOTICE U/S 274 HE SIMPLY HAS TICKED IN PRESCRIBED PROFORMA CONCEALED PARTICULARS OF IN COME OR FURNISHED INACCURATE PARTICULARS OF INCOME WITHOUT DELETING EITHER LIMB OF PENALTY. IT IS CONTENDED THAT THE JU RISDICTIONAL AND LEGAL MISTAKE IS NOT CURABLE U/S 292B OF THE I. T. ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE IMPOSITION OF PENALTY OF RS. 1,22,400/- U/S 271(1)( C) OF I.T. ACT, 1961. 2.1 APROPOS GROUND NO. 1 AND 2 OF THE ASSESSEE, THE FACTS OF THE CASE AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS U NDER:- 3.1.2. I HAVE CONSIDERED ASSESSEE'S SUBMISSION AND CAREFULLY GONE THROUGH PENALTY ORDER PASSED BY THE AO. I HAVE CAREFULLY GONE THROUGH THE REASSESSMENT ORDER PASSED ON 25-03-2014 AGAINST WHICH ASSESSEE DID NOT PREFER APPEAL. I HAVE ALSO TAKEN A NOTE THAT OF THE FACTUAL MATRI X OF THE CASE AS WELL AS APPLICABLE CASE LAWS. HERE IN THIS CASE, ASSESSEE HAS RAISED TECHNICAL OBJECTION WITH REGARD TO INITI ATION OF PENALTY PROCEEDINGS. IT IS CLEAR FROM THE LANGUAGE OF THE PROVISION THAT ITS AIM IS TO PREVENT ANY RETURN OF INCOME ASSESSMENT, NOTICE OR OTHER PROCEEDINGS BEING TREAT ED AS INVALID MERELY BY REASON OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOME, ASSESSMENT, NOTICE OR OTH ER PROCEEDINGS BEING TREATED AS INVALID MERELY BY REAS ON OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOM E, ASSESSMENT, NOTICE, OTHER PROCEEDINGS WHICH ARE IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCORDING TO THE I NTENT AND PURPOSE OF THIS ACT. THE QUESTION OF APPLICATION OF SECTION ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 3 292B CANNOT BE PREJUDGED BY FINDING THAT RETURN, NO TICE, ETC. IS NOT AS PER THE REQUIREMENT OF THE STATUTE AND IS / ARE INVALID. THIS WAY THE VERY PURPOSE OF THE SECTION TO PREVENT DECLARATION OF RETURN, NOTICE, ETC. AS INVALID IS D EFEATED. THE FINDING THAT THE RETURN OR NOTICE ETC. IS INVALID O R TO WHAT EXTENT IS INVALID IS UNNECESSARY AND COUNTERPRODUCT IVE. INVALID IN MY VIEW IS QUITE A STRONG WORD AND MIS TAKE, DEFECT OR OMISSION IN THE RETURN, NOTICE, ETC. CO NSIDER WHETHER SUCH RETURN ETC. IS IN SUBSTANCE AND IN EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURP OSE OF THIS ACT.. IN OTHER WORDS, IT IS TO BE SEEN WHETH ER SUCH RETURN OR NOTICE IS IN SUBSTANCE AND IN EFFECT IN C ONFORMITY WITH OR IN ACCORDANCE WITH THE INTENT AND PURPOSE O F THE ACT AND NOT THE VALIDITY OF THE RETURN E.G. IF IT IS SH OWN THAT RETURN OF INCOME, NOTICE ETC. HAVE THE SAME OR SUBSTANTIAL LY THE SAME EFFECT AS WOULD RETURN, NOTICE ETC. WITHOUT MI STAKE, DEFECT OR OMISSION WOULD HAVE SUCH RETURN, NOTICE E TC. MUST BE GIVEN EFFECT TO AND CANNOT BE TREATED AS INVALID . IF IN SUBSTANCE AND IN EFFECT, THE INTENT AND PURPOSE OF THE ENACTMENT HAS BEEN SERVED, THE ACTION (RETURN, NOTI CE, ETC.) CANNOT BE HELD TO BE INVALID. SUBSTANCE OVER FROM THEORY IS THE UNDERLINING PHILOSOPHY OF SECTION 292B OF THE ACT. IF IN SUBST ANCE AND IN EFFECT RETURN, NOTICE OR ASSESSMENT IS IN CONFOR MITY WITH OR ACCORDING TO INTENT AND PURPOSE OF THE INCOME-TAX A CT, THE MISTAKE, DEFECT OR OMISSION IS TO BE IGNORED. IN VI EW OF THESE FACTS AND CIRCUMSTANCES, ASSESSEE'S OBJECTION WITH REGARD TO PENALTY PROCEEDINGS INITIATED U/S 271(1) OF THE AC T IS HEREBY DISMISSED. FURTHER, IT IS ALSO SUBMITTED THAT NO INDEPENDENT INQUIRIES IN THIS REGARD WERE CARRIED OUT IN THE CA SE OF THE ASSESSEE AND THE OPPORTUNITY OF CROSS EXAMINE TO TH E PERSONS WERE ALSO NOT PROVIDED. FINALLY, AO IMPOSED PENALTY TREATING RS. 4,00,000/- AS CONCEALED INCOME OF ASSESSEE BY H OLDING ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 4 THAT THE ASSESSEE HAD WILLFULLY CONCEALED ITS INCOM E AND HAD GIVEN INACCURATE PARTICULARS OF ITS INCOME BY TAKI NG BOGUS BILLS. THE FACT OF BOGUS ACCOMMODATION ENTRY BILL H AS NOT BEEN CONTROVERTED BY THE ASSESSEE WHICH FULLY SUPPO RTS AOS CONTENTION. IN VIEW OF THESE FINDINGS, IT IS NOT RE QUIRED ON THE PART OF THE AO TO ACCORD NECESSARY OPPORTUNITY TO C ROSS EXAMINE SHRI SANJAY D SONWANI DIRECTOR OF M/S. WASHINGTON SOFTWARE LTD. ASSESSEE HAS ALSO NOT CONTROVERTED AOS FINDING GIVEN IN PARA 4 OF THE AS SESSMENT ORDER. AO HAS ALSO INCORPORATED ASSESSEE'S SUBMISSI ON MADE IN THIS REGARD IN PG 4 OF THE ASSESSMENT ORDER. FUR THER, POST SEARCH OPERATION, ALL CONCERNS EXCEPT THE ASSESSEE OF THE CAREER POINT GR' APPROACHED HON'BLE SETTLEMENT COMMISSION, NEW DELHI. AO HAS IN PARA 9 PG 6 OF THE ASSESSMENT ORDER HAS MENTIONED INTER ALIA AS UNDER: - .9. FURTHER IT IS ALSO WORTHWHILE TO MENTION HERE THAT IN THE CAREER POINT GROUP OF KOTA IN WHICH ASSESSEE BELONGS, DURING THE PROCEEDING BEFOR E THE INCOME TAX SETTLEMENT COMMISSION, NEW DELHI (ISTC) ADMITTED THAT THEY HAD OBTAINED BOGUS BILLS AGAINST PURCHASE OF SOFTWARE FROM M/S. WASHINGTON SOFTWARE LTD. MUMBAI. IN THIS GROUP CASES, THE HON'BLE ISTC HAS PASSED THE ORDER ON 31-03-2013. THIS FACT HAS ALSO NOT BEEN CONTROVERTED BY THE ASSESSEE EVEN AT THIS APPELLATE STAGE. NOW, IN VIEW OF THESE FINDINGS, AO IS QUITE JUSTIFIED IN MAKING OUT A CAS E OF CONCEALMENT OF INCOME INASMUCH AS FURNISHING OF IN ACCURATE PARTICULARS OF INCOME OF RS. 4,00,000/- AND THEREBY LEVYING OF PENALTY OF RS. 1,22,400/- U/S 271(1) OF THE ACT . IN VIEW OF THESE FACTS, ASSESSEE CANNOT TAKE SHELTER BEHIND THE AFOREMENTIONED CASE LAWS RELIED UPON BECAUSE FACTS HERE ARE TOTALLY DIFFERENT FROM THEIRS. ACCORDINGLY, PENALTY LEVIED BY THE AO IS HEREBY SUSTAINED. ASSESSEE'S APPEAL FAILS . ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 5 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASS ESSEE SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN NOT FOLLOWING THE DECISION OF JURISDICTION ITAT JAIPUR BENCH IN THE CASE OF SHANKAR LAL KHANDE LWAL (SUPRA) AND ALSO ERRED IN CONFIRMING THE IMPOSITION OF PENALTY OF RS. 1,22,400/- U/S 271(1)(C) OF THE ACT IN THE CASE OF THE ASSESSEE TR UST. THE LD. AR OF THE ASSESSEE ALSO FILED THE WRITTEN SUBMISSION TO THIS EFFECT AS UNDER:- 2.1 GROUND NO 1 & 2 ARE REGARDING HOLDING THAT RS . 4,00,000/- IS INCOME WHICH HAS BEEN CONCEALED BY ASSESSEE AND INA CCURATE PARTICULARS WERE FILED AND ERRED IN IMPOSING PENALTY OF RS. 1,22,400 /-/- UNDER SECTION 271(1)(C) OF I.T. ACT, 1961. SUBMISSION OF THE ASSESSEE . 1. THE LD. AO INITIATED THE PENALTY PROCEEDING U/S 271(1)(C) OF INCOME TAX ACT IN THE ASSESSMENT ORDER DATED 25.03.2014 IN PARA 11 OF THE ASSESSMENT ORDER THE LD AO INITIATED PENALTY BY MEN TIONING THAT PENALTY PROCEEDINGS U/S 271(1)(C) ARE BEING INITIA TED SEPARATELY FOR CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME. IN THE ASSESSMENT ORDER THE LD. AO FURTHER CONCLUDE D IN PARA 12 BY MENTIONING THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT HAS BEEN INITIATED FOR CONCEALMENT OF INCOME/FURNIS HING INACCURATE PARTICULARS OF INCOME. FURTHER IN THE PENALTY NOTICE U/S 274 READ WITH SECTION 271 OF I.TAX ACT DATED 25.03.2014 (COPY ENCLOSED HEREWITH) , WHICH IS PRE PRINTED PRESCRIBED FORM ANNEXED WITH A SSESSMENT ORDER THE LD. AO TICKED ON 271(1)(C) CONCEALED PARTICULARS OF YOURS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THUS THE PENALTY PROCEEDINGS WERE INITIATED WITHOUT SPECIFYING THE LIMB FOR REASONS IN THE PENALTY NOTICE TO IMPOSE TH E PENALTY I.E. WHETHER THE PENALTY WAS INITIATED FOR CONCEALMENT O F PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THEREFORE THE INITIATION AND IMPOSING OF PENALTY PROCEEDINGS IS WRONG, BAD IN LAW, IN VALID AND VOID AB INITIO. ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 6 2. THE NOTICE U/S 271 SHOULD BE SPECIFIC ON IMPOSIN G OF PENALTY U/S 271(1)(C) OF INCOME TAX ACT, 1961 I.E. CONCEALED PA RTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. RE LIANCE IS PLACED ON THE DECISION IN THE CASE OF H. LAKSHMINARAYANA VS. ITO, ITAT BANGLORE TRIBUNAL ITA NOS. 992 TO 996/BAN/2014 ORDE R DATED 3RD JULY, 2015 WHEREIN THE DECISION OF HON'BLE KARNATAKA HIGH COU RT IN THE CASE OF CIT & ANR. VS MANJUNATHA COTTON AND GIN NING FACTORY HAS BEEN CONSIDERED WHEREIN IT HAS BEEN HELD THAT P ENALTY PROCEEDING IS A CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTI ON 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND T O IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR TH AT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE F ULL OPPORTUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE C ONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMP OSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSES SEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PE NALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PE NALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAIN ED. ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALT Y SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUN D ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID. THEREFORE, IN NOTICE U/S 274 IS TO BE MARKED APPROPRIATE ON TH E BASIS OF LEVY OF PENALTY. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT ITEM WILL LEAD TO AN INFERENCE AS NON-APPLICATION OF MIN D. 3. HONBLE ITAT JAIPUR BENCH, JAIPUR IN ITS JUDGMEN T IN ITA 878/JP/2013 DATED 11.03.2013 IN THE CASE OF SHANKAR LAL KHANDELWAL VS DCIT HELD THAT WHEN ASSESSING OFFICER HAS MENTIONED AT THE TIME OF INITIATION OF PENALTY PROCEEDING UND ER BOTH THE LIMBS I.E. CONCEALED THE PARTICULARS OF INCOME AND FURNISHED I NACCURATE PARTICULARS OF INCOME BUT AT THE TIME OF NOTICE U/S 274 HE SIMPLY HAS TICKED IN PRESCRIBED PROFORMA CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WITHOUT DELETING EITHER LIMB OF PENALTY EVEN HE HAS NOT PUT AND IN THE NOTICE IT SELF BETWEEN TWO LIMBS THAN THE INITIATION OF PENALTY PROCEEDINGS CA NNOT BE CONSIDERED AS PER LAW AND ASSESSING OFFICER DID NOT HAVE ANY J URISDICTION TO ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 7 IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. THE FINDIN GS OF HONBLE JURISDICTIONAL ITAT IS AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THIS CASE, THE LD ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS FOR CONCEALING OF PAR TICULARS OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME VIDE OR DER DATED 31/12/2009. NOTICE U/S 274 READ WITH SECTION 271-272 OF THE ACT WAS ISSUED ON 30/12/2009 BY TICKING OF THE NOTICE AS UNDER:- U/S 271(1)(C):- CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD ASSESSING OFFICER AGAIN GAVE NOTICE DURING T HE COURSE OF PENALTY PROCEEDINGS ON 23/1/2012 WHEREIN HE GAVE SHOW CAUSE NOTICE U/S 271(1)(C) FOR IMPOSING OF PENALTY WITHOUT SPECIFYING THE LIMB FOR REASONS TO IMPOSE THE PENALTY, WHETHER IT IS FOR CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD CIT(A) HAS CONSIDERED ALL THE ASPECT AND HELD THAT EXPLANATION 5A TO SECTION 271(1)(C) IS APPLICABLE AS IN THIS CASE, A SEARCH W AS CARRIED OUT AFTER 01/6/2007 AND THE ASSESSEE HAS FURNISHED RETURN FOR A.Y. 2007-08 BEFORE SEARCH AND ADDITIONAL INCOME HAS BEEN DISCLOSED U/S 153A.THEREFORE, DEEMING PROVISIONS ARE APPLICABLE. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS DISCLOSED ADDITIONAL INCOME IN RETURN FILED U/S 153A ON THE BASIS OF INCRIMINATING DOCUMENT FOUND DURING THE COURSE OF S EARCH. WE HAVE CONSIDERED VIEW THAT EXPLANATION 5A IS NOT REQUIRED TO BE MENTIONED BY THE ASSESSING OFFICER SPECIFICALLY AT THE TIME OF INITIATION OR EVEN IN THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSI NG OFFICER, BUT BASIC DEFECT WE FOUND THAT THE LD ASSESSING OFFICER HAS M ENTIONED AT THE TIME OF INITIATION OF PENALTY PROCEEDING UNDER BOTH THE LIM BS I.E. CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PART ICULARS OF INCOME BUT AT THE TIME OF NOTICE U/S 274 HE SIMPLY HAS TICKED IN PRESCRIBED PROFORMA CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME WITHOUT DELETING EITHER LIMB OF PENALTY EVEN HE HAS NOT PUT AND IN THE NOTICE ITSELF BETWEEN TWO LIMBS. THE AMENDED PROVIS IONS OF SUB-SECTION (1B) OF SECTION 271 HAS BEEN CONSIDERED BY THE HON'BLE D ELHI HIGH COURT IN THE CASE OF MADHU SHREE GUPTA VS. UOL, 317 ITR 107 WHER EIN IT HAS BEEN HELD THAT AT THE STAGE OF INITIATION OF PENALTY PROCEEDI NGS, THE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS A VIS EACH AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GA THERED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. IT WOULD BE SUFFICIENT COMPLIANCE WITH THE LAW THAT THERE IS A PRIMA FACIE EVIDENCE FOR CO NCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCO ME. EVEN AFTER THIS SECTION, THE ASSESSING OFFICER HAS TO SATISFY THE P ARTICULAR LIMB OF INITIATION OF PENALTY IMPOSABLE U/S 271(1)(C) OF THE ACT AT TH E TIME OF ASSESSMENT PROCEEDINGS. THE HONBLE KARNATAKA HIGH COURT IN TH E CASE OF CIT VS. M/S MANJUNATHA COTTON & GINNING FACTORY & ORS.(2013) 35 9 ITR 565 (KARN) HELD THAT SENDING PRINTED FORM WHERE ALL THE GROUND S MENTIONED IN SECTION 271 WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE A SSESSEE SHOULD KNOW THE ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 8 GROUND WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE , THE PRINCIPLE OF NATURAL JUSTICE IS OFFENDED ON THE BASIS OF SUCH PROCEEDING S, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE. THE HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF TEJ BHAN COTTON GINNING & PRESSING FACTORY VS. CIT, ROHTAK (SUPRA) HAS HELD THAT THE ASSESSING OFFICER IN ASSE SSMENT ORDER HAS SATISFIED HIMSELF REGARDING INITIATION OF PENALTY PROCEEDINGS , WHICH WAS TANTAMOUNT TO SATISFACTION HAVE RECORDED TO THE FACT ON THE BA SIS OF ADDITION MADE BY THE ASSESSING OFFICER FOR CONCEALED INCOME IN ASSESSMEN T ORDER. THE HONBLE COURT HAS CONFIRMED THE PENALTY EVEN PENALTY PROCEE DINGS INITIATED BY THE ASSESSING OFFICER BY MENTIONING PENALTY PROCEEDING FOR CONCEALING/FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS EXPRESSED DIFFERENT VIEW ON INITIATION OF PENALTY PROCEEDINGS EVEN NOTICE U/S 274 ISSUED BY P UTTING OBLIQUE BETWEEN CONCEALING AND FURNISHING OF INACCURATE PARTICULARS OF INCOME WHEREAS THE HONBLE KARNATAKA HIGH COURT HAS HELD THAT THE ASSE SSING OFFICER HAS TO SATISFY AT THE TIME OF INITIATION OF PENALTY PROCEE DING AND ISSUING NOTICE U/S 274 OF THE ACT THAT WHETHER PENALTY IS FOR CONCEALE D PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE RE WERE TWO OPINIONS OF THE HONBLE COURTS. THE HON'BLE SUPREME COURT HAS H ELD THAT IN CASE OF TWO VIEWS OF THE COURT, FAVOURABLE VIEW OF THE ASSESSEE WOULD BE TAKEN AS HELD IN THE CASE OF CIT VS VEGETABLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) AND A RECENT D ECISION IN THE CASE OF CIT VS. VATIKA TOWNSHIP P LTD. (2014) 367 ITR 466 ( SC). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT INITIATION OF PENALTY P ROCEEDINGS IS NOT AS PER LAW AND ASSESSING OFFICER DID NOT HAVE ANY JURISDIC TION TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. AS THE MATTER HAS BEEN DE CIDED ON TECHNICAL ISSUE, WE ARE NOT EXPRESSING ANY VIEW ON MERIT OF THE CASE . ACCORDINGLY, WE DELETE THE PENALTY CONFIRMED BY THE LD CIT(A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 4. HONBLE ITAT IN ITS RECENT JUDGMENT IN CASE OF S HRI MURARI LAL MITTAL ITA NO. 334/JP/2015 ORDER DATED 09/11/16 HAS CANCELED THE PENALTY ON THE SAME GROUNDS FOLLOWING THE DECISION OF SHRI SHANKER KHANDELWAL. THE FINDINGS OF HONBLE ITAT A RE AS UNDER:- 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORD TH AT THE ASSESSEE IS AN INDIVIDUAL DECLARING INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS OR PROFESSION AS PROPRIETOR OF M/S. MITTAL ENTERPRISES. THE RETURN U/S 139(1) OF THE ACT WAS FILED ON 25-10-200 4 BY THE ASSESSEE DECLARING TOTAL INCOME OF RS. 1,51,100/-. SEARCH AN D SEIZURE OPERATIONS WERE CARRIED OUT ON 27-08-2008 ON RESIDENTIAL AND B USINESS PREMISES OF THE ASSESSEE. THE RETURN U/S 153 OF THE I.T. ACT WAS FILED ON 31-03- 2009 DECLARING TOTAL INCOME OF RS. 5,85,090/- WHICH INCLUDED ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 9 ADDITIONAL INCOME SURRENDER OF RS.4,53,819/-. THE A SSESSMENT WAS MADE BY THE AO U/S 153A/143(3) OF I.T. ACT ON TOTAL INCOME OF RS. 6,18,980/- WHICH INCLUDED THE ADDITION OF RS. 33,89 2/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE MADE FROM VARIOUS EXPENS ES. IN PENALTY PROCEEDINGS, THE AO IMPOSED THE PENALTY OF RS. 1,36 ,145/- BEING 100% OF TAX PAYABLE ON ADDITIONAL INCOME OF RS. 4,53,819 /- DECLARED BY THE ASSESSEE. THE LD. CIT(A) HAF CONFIRMED THE ACTION O F THE AO. IT IS NOTED FROM THE RECORD THAT THE AO HAD INITIATED PENALTY P ROCEEDINGS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE NOTICE ALSO, THE AO HAS NOT SPECIFIE D FOR WHICH SPECIFIC REASON THE PENALTY PROCEEDINGS HAS BEEN INITIATED W HETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. ULTIMATELY, THE AO LEVIED THE PENALTY FOR C ONCEALMENT OF INCOME. THE HON'BLE KARNATAKA HIGH COURT IN THE CAS E OF CIT & ANR VS. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 56 5 HELD AS UNDER:- THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF C IVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE P ERSON WHO IS ACCUSED OF THE CONDITIONS MENTIONED IN SECTION 271 SHOULD B E MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PEN ALTY ON HIM AS SECTION 274 MAKES IT CLEAR THAT THE ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPORTUNITY T O MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULA TED 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 W HERE ALL THE GROUNDS MENTIONED IN SECTION 271 ARE MENTIONED WOUL D NOT SATISFY THE REQUIREMENT OF LAW WHEN THE CONSEQUENCES OF THE ASSESSEE NOT REBUTTING THE INITIAL PRESUMPTION IS SERIOUS IN NAT URE AND HE HAD TO PAY PENALTY FROM 100 PER CENT. TO 300 PER CENT. OF THE TAX LIABILITY. 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. OTHERWIS E, THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW-CAUSE NO TICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. IT IS ALSO NOTED THAT SIMILAR TYPE OF ISSUE WAS DEC IDED IN FAVOUR OF THE ASSESSEE BY ITAT COORDINATE BENCH IN THE CASE OF SH ANKAR LAL KHANDELWAL VS. DCIT, CENTRAL CIRCLE- 1, JAIPUR VIDE ITS ORDER DATED 11-03-2016 IN ITA NO. 878/JP/2013 FOR THE ASSESSMEN T YEAR 2007-08 BY OBSERVING AS UNDER:- ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 10 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN TH IS CASE, THE LD ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS FOR CONCEALING OF PARTICULARS OF INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME VIDE ORDER DATED 31/12/2009. NOTICE U/S 274 READ WITH SECTION 271-272 OF THE ACT WAS ISSUED ON 30/12/2009 BY TICKING OF THE NOTICE AS UNDER:- U/S 271(1)(C):- CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD ASSESSING OFFICER AGAIN GAVE NOTICE DURING T HE COURSE OF PENALTY PROCEEDINGS ON 23/1/2012 WHEREIN HE GAVE SH OW CAUSE NOTICE U/S 271(1)(C) FOR IMPOSING OF PENALTY WITHOUT SPECI FYING THE LIMB FOR REASONS TO IMPOSE THE PENALTY, WHETHER IT IS FOR CONCEALED PARTICULAR S OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE LD CIT(A) HAS CONSIDERED ALL THE ASPECT AND HELD THAT EXPLANATION 5A TO SECTION 271(1)(C) IS APPLICABLE AS IN THIS CASE, A SEARCH WAS CARRIED OUT AFTER 01/6/2007 AND THE ASSESSEE HAS FURNISHED RETURN FOR A.Y. 2007-08 BEFORE SEARCH AND ADDITIONAL INCOME HAS BEEN DISCLOSED U/S 153A. THEREFORE, DEEM ING PROVISIONS ARE APPLICABLE. IT IS UNDISPUTED FACT THAT THE ASSE SSEE HAS DISCLOSED ADDITIONAL INCOME IN RETURN FILED U/S 153A ON THE B ASIS OF INCRIMINATING DOCUMENT FOUND DURING THE COURSE OF S EARCH. WE HAVE CONSIDERED VIEW THAT EXPLANATION 5A IS NOT REQUIRED TO BE MENTIONED BY THE ASSESSING OFFICER SPECIFICALLY AT THE TIME OF INITIATION OR EVEN IN THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, BUT BASIC DEFECT WE FOUND THAT THE LD ASSE SSING OFFICER HAS MENTIONED AT THE TIME OF INITIATION OF PENALTY PROC EEDING UNDER BOTH THE LIMBS I.E. CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCOME BUT AT THE TIME OF NOTICE U/S 274 HE SIMPLY HAS TICKED IN PRESCRIBED PROFORMA CONCEALED PARTICULARS OF INCOME OR FURNISH ED INACCURATE PARTICULARS OF INCOME WITHOUT DELETING EITHER LIMB OF PENALTY EVEN HE HAS NOT PUT AND IN THE NOTICE ITSELF BETWEEN TWO LI MBS. THE AMENDED PROVISIONS OF SUBSECTION (1B) OF SECTION 271 HAS BE EN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MADHU S HREE GUPTA VS. UOL, 317 ITR 107 WHEREIN IT HAS BEEN HELD THAT AT T HE STAGE OF INITIATION OF PENALTY PROCEEDINGS, THE ORDER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACTION VIS A VIS EAC H AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHE RED FROM THE ORDER IS THAT A FURTHER PROGNOSIS IS CALLED FOR. IT WOULD BE SUFFICIENT ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 11 COMPLIANCE WITH THE LAW THAT THERE IS A PRIMA FACIE EVIDENCE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. EVEN AFTER THIS SECTION, THE ASSESSING OFFICER HAS TO SATISFY THE PARTICULAR LIMB OF INITIATION OF PENALTY IMPOSABLE U/S 271(1)(C) OF THE ACT AT THE TIME OF ASSESSMENT PROCEEDINGS. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S MANJUNATHA COTTON & GINNING FACTORY & ORS.(2013) 35 9 ITR 565 (KARN) HELD THAT SENDING PRINTED FORM WHERE ALL THE GROUNDS MENTIONED IN SECTION 271 WOULD NOT SATISFY THE REQU IREMENT OF LAW. THE ASSESSEE SHOULD KNOW THE GROUND WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE, THE P RINCIPLE OF NATURAL JUSTICE IS OFFENDED ON THE BASIS OF SUCH PROCEEDING S, NO PENALTY COULD BE IMPOSED TO THE ASSESSEE.THE HONBLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF TEJ BHAN COTTON GINNING & PRES SING FACTORY VS. CIT, ROHTAK (SUPRA) HAS HELD THAT THE ASSESSING OFF ICER IN ASSESSMENT ORDER HAS SATISFIED HIMSELF REGARDING INITIATION OF PENALTY PROCEEDINGS, WHICH WAS TANTAMOUNT TO SATISFACTION H AVE RECORDED TO THE FACT ON THE BASIS OF ADDITION MADE BY THE ASSES SING OFFICER FOR CONCEALED INCOME IN ASSESSMENT ORDER. THE HONBLE C OURT HAS CONFIRMED THE PENALTY EVEN PENALTY PROCEEDINGS INIT IATED BY THE ASSESSING OFFICER BY MENTIONING PENALTY PROCEEDING FOR CONCEALING/FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS EXPRESSED D IFFERENT VIEW ON INITIATION OF PENALTY PROCEEDINGS EVEN NOTICE U/ S 274 ISSUED BY PUTTING OBLIQUE BETWEEN CONCEALING AND FURNISHING O F INACCURATE PARTICULARS OF INCOME WHEREAS THE HONBLE KARNATAKA HIGH COURT HAS HELD THAT THE ASSESSING OFFICER HAS TO SATISFY AT THE TIME OF INITIATION OF PENALTY PROCEEDING AND ISSUING NOTICE U/S 274 OF THE ACT THAT WHETHER PENALTY IS FOR CONCEALED PARTICULARS O F INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE RE WERE TWO OPINIONS OF THE HONBLE COURTS. THE HON'BLE SUPREME COURT HAS HELD THAT IN CASE OF TWO VIEWS OF THE COURT, FAVOURABLE VIEW OF THE ASSESSEE WOULD BE TAKEN AS HELD IN THE CASE OF CIT VS VEGETA BLE PRODUCTS LTD. (1973) 88 ITR 192 (SC) AND A RECENT DECISION IN THE CASE OF CIT VS. VATIKA TOWNSHIP P LTD. (2014) 367 ITR 466 ( SC).THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT INITIATION OF PE NALTY PROCEEDINGS IS NOT AS PER LAW AND ASSESSING OFFICER DID NOT HAVE A NY JURISDICTION TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. AS THE MATTER HAS BEEN DECIDE D ON TECHNICAL ISSUE, WE ARE NOT EXPRESSING ANY VIEW ON MERIT OF T HE CASE. ACCORDINGLY, WE DELETE THE PENALTY CONFIRMED BY THE LD CIT(A). ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 12 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 5. HONBLE KOLKOTTA ITAT IN THE CASE OF VAIBHAV TUL SYAN VERSUS I.T.O WARD 29 (4) , KOLKATA I.T.A NOS. 736 & 737/KO L/2013 DATED: 27MAY 2016 [2016 (11) TMI 1030] HAS CANCELLED THE P ENALTY ON THE SAME GROUND. 10. HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MA TERIAL AVAILABLE ON RECORD. THE QUESTION BEFORE US IS AS T O WHETHER THE PENALTY ORDER PASSED BY THE AO AND CONFIRMED BY THE CIT(A) FALLS FOR OUR CONSIDERATION IN PURSUANCE OF THE JUDGMENT OF T HE 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 PENALTY SH ALL 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 C ONCEALMENT OF PARTICULARS OF SUCH INCOME. WE FIND THAT THE ASSESS EE AS RELIED ON THE ORDER DATED 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. THE RELEVANT FINDIN GS OF THE SAID TRIBUNAL ORDER IS REPRODUCED HEREIN BELOW FOR BETTE R 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 NOTICE U /S. 274 OF THE ACT THE AO HAS NOT STRUCK OUT THE IRRELEVANT PART. IT IS TH EREFORE NOT SPELL OUT AS TO WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FURNISHING INACCURATE PARTICULARS OF INCOME OR C ONCEALING PARTICULARS OF SUCH INCOME. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 OF TH E ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING P ROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FUR NISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS F URTHER LAID DOWN THAT CERTAIN PRINTED FORM WHERE ALL THE GROUNDS GIV EN IN SECTION 271 ARE GIVEN WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 13 HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIM B AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT W AS SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUAR ELY 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 (SUPR A) HAS 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 PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY PRO CEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD 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 SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN E XPLANATION1 OR IN EXPLANATION1(B), THEN THOUGH PENALTY PROCEEDINGS AR E 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 SECTI ON 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND I MPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSES SEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPOR TUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LI ABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FA RM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY 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 LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE IS SUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDE D IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 14 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 ATTRA CT BOTH THE OFFENCES AND IN SOME CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PE NALTY PROCEEDINGS ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOT HER 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 TH E EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUN ITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE I MPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLE S OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON T HE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEE DINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, T HE IMPOSITION 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 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 I N THE COURSE 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 INCOME ARE DIF FERENT. 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 COUR T IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HEL D THAT CONCEALMENT ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 15 OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI H IGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 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 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 TO BE A PPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURA TE PARTICULARS OF INCOME. THE STANDARD PRO FORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON APPLICATIONOF M IND. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS FOLLOWS: 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EM ERGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIA BILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOS ING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIE NT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 27 1(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SEC TION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCE RNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORIT Y OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING T HE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION271(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FRO M THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASS ESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTI ON 1(B). ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 16 H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE T O THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMISSIONER . I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILIT Y IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDE R OF 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 PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERN IBLE FROM 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 WOU LD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLA NATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PRO VE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN ORDER IMPO SING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBS TANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONA FIDE AND ALL FACT S RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO S ECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SA TISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDING S, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECI FICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(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 MENTIO NED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 17 R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HA S TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPO SED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE AS SESSMENT 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 PROCEEDI NGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PR OCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSU ANCE 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 PENALTY IMPOSED IS CANCELLED. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF P ENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED. WE, THEREFORE, CANCEL 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 NOTIC E, RESPECTFULLY FOLLOWING THE ORDER ABOVE, WE CANCEL THE PENALTY LE VIED U/S. 271(1) ( C) OF THE ACT BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT( A) FOR BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION. HAVI NG HELD THAT THE NOTICE ISSUED BY THE AO U/SEC 274 R/W SEC 271(1)(C) OF THE ACT DURING ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 18 THE COURSE OF PENALTY PROCEEDINGS IS NOT IN CONFORM ITY WITH THE RELEVANT PROVISIONS OF THE ACT, WE ARE OF THE VIEW THAT SECT ION 292B CAN NOT COME TO THE RESCUE OF THE REVENUE AND THE RELIANCE OF THE LD.DR ON THE SAID PROVISION IS CLEARLY MISPLACED. THEREFORE, PRE LIMINARY ISSUE AS RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUND FOR BOTH THE ASSESSMENT YEARS 2006-07 & 200708 ARE ALLOWED, IN V IEW OF THE SAME THE OTHER GROUNDS RAISED REQUIRES NO ADJUDICATION, THEREFORE, ALL ARE DISMISSED. 12. IN THE RESULT, THE APPEALS OF ASSESSEE ARE AL LOWED. ON THE MERIT ON IMPOSING OF THE PENALTY WE SUBMIT A S UNDER: - 6. REGARDING THE VALIDITY OF ADDITION MADE BY LD. A O WE MAY SUBMIT AS UNDER: - A) THE CASE OF THE ASSESSEE WAS REOPENED SOLELY ON THE BASIS OF STATEMENT OF SHRI SANJAY D. SONAWANI DIRECTOR OF W ASHINGTON SOFTWARES LTD, 47, 2B, GOVINDA CHAMBERS, KARVE ROAD , PUNE RECORDED ON 16.03.2011 AND WHEREIN HE ADMITTED THAT HIS COMPANY WAS ENGAGED IN ISSUING NON-GENUINE BOGUS SA LES BILLS IN ORDER TO HELP THE PARTIES TO INFLATING THEIR EXP ENSES AND IN THE LIST OF THE PARTIES TO WHOM BILLS WERE PROVIDED THE ASSESSEE WAS ONE PARTY WHO PURCHASED THE SOFTWARE FROM THIS COMP ANY VIDE BILL NO. WSL/INV/36/2006-07 DATED 03.03.2006 RS. 4, 00,000/- . HOWEVER NO INDEPENDENT INQUIRIES IN THIS REGARD W ERE CARRIED OUT IN THE CASE OF THE ASSESSEE AND THE OPPORTUNITY OF CROSS EXAMINE TO THE PERSONS WERE ALSO NOT PROVIDED. B) THE INCOME TAX DEPARTMENT CARRIED OUT SEARCH OPE RATION OVER THE ASSESSEE GROUP ON 04.12.2009 AND DURING THE COU RSE OF SEARCH OPERATIONS NO EVIDENCE WAS FOUND TO SHOW THA T THE ASSESSEE WAS INFLATING THE EXPANSES AND HAVING SOME UNDISCLOSED FUNDS. THE ASSESSMENT FOR AY 2006-07 WA S COMPLETED U/S 153A OF INCOME TAX ACT, 1961 ON 15.12 .2011. THEREFORE THERE IS NO REASON IN POSSESSION OF THE A SSESSEE THAT INCOME HAD ESCAPED BY ASSESSEE. C) THERE WAS NO REASON TO BELIEVE THAT ANY INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE HANDS OF THE ASSE SSEE. EXCEPT TO STATEMENT OF ABOVE NAMED PERSON WHICH WAS RECORD ED BEHIND THE BACK OF THE ASSESSEE AND OPPORTUNITY OF CROSS E XAMINATION ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 19 WAS NOT PROVIDED TO ASSESSEE THERE IS NO OTHER POSI TIVE MATERIAL WITH DEPARTMENT TO PROVE THAT THE ASSESSEE ESCAPED THE INCOME. IN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT PROCEEDINGS AND IN THE STATEMENTS OF SHRI SANJAY D. SONAWANI IT WAS ALLEGED THAT THE BOGUS BILLS WERE ISSUED BY THIS COMPANY IN ORDER TO HELP THE PARTIES TO INFLATING THEIR EXP ENSES. BUT IN THE CASE OF THE ASSESSEE THE SOFTWARE WAS PURCHASED FOR THE SCHOOL NAMING GLOBAL PUBLIC SCHOOL BEING RUN BY THE ASSE SSEE AND THE INCOME OF THE SCHOOL IS EXEMPTED U/S 10(23C)(II IAD) OF INCOME TAX ACT, 1961, THEREFORE THERE IS NO MOTIVE WITH THE ASSESSEE TO INFLATE THE EXPENSES. FURTHER THE SOFTW ARE EXPENSE WAS CAPITALIZED AS FIXED ASSETS ON WHICH THE ASSESS EE ONLY CLAIMED THE DEPRECIATION. D) THE ASSESSEE HAD DULY PURCHASED THE SOFTWARE ON 03.06.2006 FOR RS. 4,00,000/- FROM ABOVE NAMED COMPANY AND MAD E THE PAYMENT THROUGH A/C PAYEE CHEQUE. WITHOUT MAKING NE CESSARY INQUIRIES THE RELIANCE OF STATEMENT OF ABOVE NAMED PARTY IS BEING MADE WHICH CAN BE GIVEN BY HIM FOR HIS OWN RE ASONS. THE PERSON WHO SOLD THE SOFTWARE TO THE ASSESSEE CL AIMED TO BE REPRESENTATIVE OF WASHINGTON SOFTWARES LTD AND APPR OACHED TO THE TRUSTEES OF THE ASSESSEE FOR SALES OF THE SOFTW ARE RELATED TO SCHOOL MANAGEMENT. AFTER PURCHASING THE SOFTWARE TH E PERSON GAVE THE BILL OF WASHINGTON SOFTWARES LTD AND THERE AFTER THE PAYMENT AGAINST BILL WAS MADE THROUGH A/C PAYEE CHE QUE IN THE NAME OF ABOVE NAMED COMPANY. E) IN THE STATEMENT OF SHRI SANJAY D. SONAWANI RECO RDED ON 16.03.2011 THE PERSON ADMITTED THAT HE WAS SIGNING THE BOGUS SALES BILLS BUT FROM THE PERUSAL OF SALES BILL SUPP LIED TO ASSESSEE IT SEEMS THAT SOME OTHER PERSON WAS SIGNED THE SALE S BILL SUPPLIED TO THE ASSESSEE AND NO QUESTION WAS ASKED FROM SHRI SANJAY D. SONAWANI THAT WHO SIGNED THE BILL AND IN WHAT AUTHORITY/CAPACITY HE SIGNED THE BILL. THERE IS POS SIBILITY THAT THE PERSON WHO ACTUALLY SUPPLIED THE SOFTWARE TO AS SESSEE MIGHT HAVE ARRANGED THE BILL IN THE NAME OF ASSESSEE FROM THIS COMPANY FOR THE REASONS BEST KNOWN TO HIM AND IN TH IS CASE NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE A S THE ASSESSEE ACTUALLY PURCHASED THE SOFTWARE. ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 20 F) THUS THE ENTIRE ADDITION WAS MADE SOLELY ON THE BASIS OF STATEMENT OF SHRI SANJAY D. SONAWANI WHICH WAS RECO RDED BEHIND THE BACK OF THE ASSESSEE AND OPPORTUNITY OF CROSS EXAMINATION WAS NOT PROVIDED TO THE ASSESSEE. FURTH ER EXCEPT TO THE STATEMENT OF SHRI SANJAY D. SONAWANI THERE IS N O OTHER MATERIAL WITH THE DEPARTMENT TO PROVE THAT THE ASSE SSEE ACTUALLY NOT PURCHASED THE SOFTWARE. AS STATED EARLIER THERE MAY BE POSSIBILITY THAT THE PERSON WHO ACTUALLY SUPPLIED T HE SOFTWARE TO THE ASSESSEE MIGHT HAVE ARRANGED THE BILL FROM THIS COMPANY IN THE NAME OF ASSESSEE. THUS FROM THE STATEMENT OF SH RI SANJAY D. SONAWANI A SUSPICIOUS CAN ONLY BE DRAWN THAT THE ASSESSEE MIGHT HAVE TAKEN THE BOGUS BILL FOR PURCHASES OF SO FTWARE BUT WITHOUT EXAMINING/COLLECTING THE OTHER EVIDENCES AN D LOOKING TO THE SURROUNDING CIRCUMSTANCES IT CANNOT BE CONCL UDE THAT THE ASSESSEE ACTUALLY TOOK THE BOGUS BILL. IN THE CASE OF THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS NO OTHE R EXERCISE WAS DONE FOR PROVING THAT THE ASSESSEE ACTUALLY HAS NOT PURCHASED THE SOFTWARE AND SOLELY RELIANCE WAS MADE OVER THE STATEMENT OF SHRI SANJAY D. SONAWANI. G) THE LD. AO MADE THE ADDITION SOLELY RELYING ON T HE STATEMENTS OF ABOVE NAMED PERSONS WITHOUT HAVING ANY INDEPENDE NT MATERIAL TO PROVE THE FACTS TO BE CORRECT AND WITHO UT PROVING THE MOTIVE BEHIND TAKING THE BOGUS BILL MORE SO WHEN TH E EXPENSES WAS AN CAPITAL EXPENDITURE WHICH WAS NOT RECORDED I N P&L A/C AND THE ENTIRE INCOME OF THE ASSESSEE WAS EXEMPT FR OM TAX. 7. HOWEVER TO AVOID THE PROLONGED LITIGATION THE AS SESSEE HAS NOT FILED THE APPEAL AGAINST THE ASSESSMENT ORDER WHICH DOES NOT MEAN THAT THE ASSESSEE ACCEPTED TO THE ACTION OF THE LD. AO. THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARAT E PROCEEDINGS. THE ADDITIONS MADE DURING ASSESSMENT PROCEEDINGS DO ES NOT LEAD TO CONCLUSION THAT THE ASSESSEE WAS HAVING SOME UNDISC LOSED INCOME OR CONCEALED THE PARTICULARS OF HIS INCOME. THE ADDITI ONS IN ASSESSMENT ORDER MAY BE BECAUSE OF SOME TECHNICAL REASONS WHIC H ALWAYS DO NOT MEAN THAT THE ASSESSEE HAD CONCEALED INCOME, THEREF ORE FOR IMPOSING A PENALTY THE ASSESSING OFFICER HAS TO PROVE THAT THE ASSESSEE WAS HAVING CONCEALED INCOME WHICH WAS NOT PROVED IN THE CASE O F THE ASSESSEE. 8 . THE LD. AO NOT BROUGHT ANY POSITIVE MATERIAL/FIND ING/EVIDENCE ON RECORD TO PROVE THAT THE ASSESSEE WAS HAVING SOME U NDISCLOSED INCOME THE LD. AO HAS NOT BROUGHT ON RECORD ANY MATERIAL T O SHOW THAT THE EXPLANATION OF THE ASSESSEE WAS FALSE. THE EXPLANAT ION OF THE ASSESSEE ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 21 WAS NOT REJECTED ON THE STRENGTH OF MATERIAL. THE A DDITIONS MADE ARE NOT BECAUSE OF WILLFUL OR CONSCIOUS DEFAULT, BUT ONLY B ECAUSE OF THE REASONS, WHICH IS OF TECHNICAL NATURE OR ESTIMATION OF INCOM E, AND IN SUCH CASES PENALTY SHOULD NOT BE LEVIED. THE ASSESSEE RELY ON THE FOLLOWING DECISION OF JURISDICTIONAL HIGH COURT: - 1) SHIV LAL TAK VS CIT [2001] 251 ITR 373 (RAJ): 2) CIT VS HARSHVARDHAN CHEMICALS & MINERALS LTD [ 2003] 133 TAXMAN 320 (RAJ) 3) HARI GOPAL SINGH V/S CIT, 258 ITR 85 (P&H) 4) ADDL. CIT V/S AGARWAL MISHTHAN BHANDAR, 131 I TR 619 (1981)(RAJ.) 5) CIT V/S M. M. RICE MILL, 253 ITR 17 (2002) (P &H) 9. IN THE PENALTY ORDER THE PENALTY WAS IMPOSED BY RELYING THE FINDING OF ASSESSMENT ORDER. NO FURTHER POSITIVE MATERIAL WAS BROUGHT ON RECORD TO PROVE THAT THE ASSESSEE HAS ACTUALLY CONCEALED T HE INCOME THE PENALTY U/S. 271 (1)(C) IS NOT AUTOMATIC. THE FINDI NGS OF THE AO IN QUANTUM PROCEEDING ARE NOT BINDING IN PENALTY PROCE EDINGS. NO ANY POSITIVE MATERIAL WAS BROUGHT IN PENALTY PROCEEDING S TO SHOW THAT THE ASSESSEE HAS MADE WILLFUL ATTEMPT TO CONCEAL THE IN COME OR TO FURNISH INACCURATE PARTICULARS OF INCOME. 10. THE CASE LAW RELIED BY THE AO ARE ALSO NOT APPL ICABLE IN THE CASE OF THE ASSESSEE AS IN THE CITED CASE LAWS THE PENALTY WAS CONFIRMED BECAUSE THE ASSESSEE KNOWINGLY FURNISH INACCURATE PARTICULA RS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME WHILE IN THE CA SE OF THE ASSESSEE THE ASSESSEE PRODUCED COMPLETED BOOKS OF ACCOUNTS/D ETAILS WHICH WERE AVAILABLE WITH IT AND CO OPERATED IN THE ASSESSMENT PROCEEDINGS. THE DEPARTMENT HAVE NO POSITIVE MATERIAL TO PROVE THAT THE ASSESSEE HAS KNOWINGLY FURNISHED INACCURATE PARTICULARS OF INCOM E OR CONCEALED THE PARTICULARS OF INCOME. 11. EVEN AFTER THE ASSESSMENT PROCEEDINGS, TO LEVY AND SUSTAIN THE PENALTY, THE FUNDAMENTAL CRITERIA IS AS TO WHETHER THE REVEN UE HAS ESTABLISHED CONCEALED INCOME BY BRINGING THE COGENT AND RELIABL E EVIDENCE OR ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 22 WHETHER THE REVENUE HAS PROVED THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS FALSE AND NOT BONAFIDE. IN THE INSTANT CASE, THE REVENUE HAS NOT BROUGHT ANY COGENT AND RELIABLE MATERIAL OR EVI DENCE ON RECORD TO PROVE THE UNDERSTATEMENT OF REVENUE. MERELY THAT TH E ADDITIONS WERE MADE IN ASSESSMENT ORDER IT CANNOT BE PRESUMED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR EVADED THE T AX. IT IS SETTLED LAW THAT APPARENT IS REAL AND TO DISPROVE THE SAME TO B E UNREAL, THE BURDEN ALWAYS LIES ON THE REVENUE IN VIEW OF THE AUTHORITA TIVE PRONOUNCEMENTS REPORTED IN 131 ITR 597 (SC) AND 210 ITR 250 (RAJ); (2007) 111 TTJ 531 (JP) RELEVANT AT PAGE 537 PARA 9 . 12. THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDI NGS ARE TWO SEPARATE PROCEEDINGS. THE ADDITIONS MADE DURING ASSESSMENT P ROCEEDINGS DOES NOT LEAD TO CONCLUSION THAT THE ASSESSEE WAS HAVING SOME UNDISCLOSED INCOME OR CONCEALED THE PARTICULARS OF HIS INCOME. THE ADDITIONS IN ASSESSMENT ORDER MAY BE BECAUSE OF SOME TECHNICAL R EASONS WHICH ALWAYS DOES NOT MEAN THAT THE ASSESSEE HAD CONCEALE D INCOME, THEREFORE FOR IMPOSING A PENALTY THE ASSESSING OFFI CER HAS TO PROVE THAT THE ASSESSEE WAS HAVING CONCEALED INCOME. THE PENAL TY U/S. 271(1)(C) IS NOT AUTOMATIC AND FOR IMPOSING THE PENALTY U/S 2 71(1)(C) OF INCOME TAX ACT, 1961 THE LD. AO HAS TO BROUGHT ON RECORD A NY POSITIVE MATERIAL TO SHOW THAT THE ASSESSEE CONCEALED HIS IN COME. THERE MUST BE INDEPENDENT FINDING AS HELD A) HONBLE CALCUTTA HIGH COURT IN THE CASE OF DURGA KA MAL RICE MILLS V/S. CIT (2004) 265 ITR 25 (CAL.). V). HELD THAT THE FINDINGS OF THE QUANTUM PROCEEDING S STAGE ARE NOT BINDING IN PENALTY PROCEEDINGS. THERE MUST BE INDEP ENDENT FINDING B) RANI SATI COAL SUPPLIER VS. ITO 26 TW 440; HELD THAT THE ADDITION MADE IN QUANTUM ASSESSMENT A ND LATER ON SUSTAINED IS NOT SUFFICIENT GROUND FOR IMPOSITION O F PENALTY U/S 271(1) (C). C) SUNIL KUMAR GANGWAL VS. DCIT 32 TAXWORLD 139 HELD THAT FINDING IN QUANTUM PROCEEDINGS ARE NOT BI NDING IN THE PENALTY PROCEEDINGS, FOR IMPOSITION OF PENALTY, IND EPENDENT FINDINGS ARE REQUIRED. ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 23 13. IN THE PRESENT CASE, THE ASSESSEE HAS PROVED HI S EXPLANATION TO BE GENUINE. PENALTY PROCEEDINGS BEING PENAL IN CHARACT ER, THE DEPARTMENT MUST ESTABLISH THAT THE ADDITIONS SO MADE ARE REAL INCOME OF THE ASSESSEE THE DEPARTMENT MUST HAVE BEFORE IT BEFORE LEVYING PENALTY COGENT MATERIAL OR EVIDENCE FROM WHICH IT COULD BE INFERRED THAT THE ASSESSEE HAS CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELIBERATELY FURNISHED INACCURATE PARTICULARS IN RE SPECT OF THE SAME AND THAT THE DISPUTED AMOUNT IS A REVENUE RECEIPT. THE PENALTY CANNOT BE LEVIED SOLELY ON THE BASIS OF THE REASONS GIVEN IN THE ORIGINAL ORDER OF ASSESSMENT. IN THE CASE SHARMA (J.P.) AND SONS V. COMMISSIONER OF INCOME-TAX REPORTED IN [1985] 151 ITR 0333 (RAJ.) IT HAS BEEN HELD THAT MERE NON-DISCLOSURE OF TRUE PARTICULARS OF INC OME OR FURNISHING OF INACCURATE PARTICULARS IS NOT SUFFICIENT TO ATTRACT THE PENALTY PROVISIONS CONTAINED IN SECTION 271(1)(C) OF THE INCOME-TAX AC T, 1961. IN ORDER THAT PENALTY MAY BE IMPOSED, THERE SHOULD BE CONSCI OUS CONCEALMENT OF PARTICULARS OR INACCURATE PARTICULARS MUST HAVE BEEN FURNISHED DELIBERATELY BY THE ASSESSEE. THE HONBLE SUPREME COURT IN CASE OF DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519 (SC) HAS AGAIN REITERATED THE ABOVE PRINCIPLE IN PARA 19 TO 28 THAT THE PENALTY SHOULD NOT BE IMPOSED SOLELY ON THE BASIS OF FINDIN GS REACHED IN QUANTUM PROCEEDINGS. IN THE CASE OF CIT VS. KRISHI TYRE RETREADING AND RUBBER INDUSTRIES REPORTED IN 360 ITR 580 (RAJ. ) THE HONBLE RAJASTHAN HIGH COURT IN PARA 10 HAS HELD PENALTY PROCEEDINGS ARE ENTIRELY DISTINCT FROM ASSESSMENT PROCEEDINGS AND, HOWSOEVER RELEVANT AND GOOD, THE FINDINGS IN ASSESSMENT PROCEEDINGS MA Y BE, THEY ARE NOT CONCLUSIVE SO FAR AS THE PENALTY PROCEEDINGS ARE CO NCERNED. THE HONBLE COURT RELIED ON VARIOUS JUDGMENT INCLUDING RATIO LAID DOWN IN CASE OF DILIP N. SHROFF V. JOINT CIT [2007] 291 ITR 519 (SC). SINCE THE ASSESSEE HAS NOT ACTED DELIBERATELY IN DE FIANCE OF LAW OR WAS NOT GUILTY OF CONDUCT CONTUMACIOUS OR DISHONEST, OR HAS NOT ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION, PENALTY CANN OT BE LEVIED. IN THIS REGARD YOUR KIND ATTENTION IS DRAWN TOWARDS THE SUP REME COURT DECISION IN THE CASE OF HINDUSTAN STEELS LTD. VS. STATE OF ORISSA, 83 ITR 26 (SC). HONBLE APEX COURT HAS HELD THAT AN ORDER IMPOSING PENALTY FOR FAILURE TO CARRY OUT A STATUTORY OBLIGATION IS THE RESULT OF A QUASI-CRIMINAL PROCEE DING AND PENALTY WILL NOT ORDINARILY BE IMPOSED UNLESS THE PARTY OBLIGED, EITHER ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS GUILTY OF CO NDUCT CONTUMACIOUS OR DISHONEST, OR ACTED IN CONSCIOUS DISREGARD OF IT S OBLIGATION. PENALTY WILL NOT ALSO BE IMPOSED MERELY BECAUSE IT IS LAWFU L TO DO SO. WHETHER PENALTY SHOULD BE IMPOSED FOR FAILURE TO PERFORM A STATUTORY OBLIGATION ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 24 IS A MATTER OF DISCRETION OF THE AUTHORITY TO BE EX ERCISED JUDICIALLY AND ON A CONSIDERATION OF ALL THE RELEVANT CIRCUMSTANCE S. EVEN IF A MINIMUM PENALTY IS PRESCRIBED, THE AUTHORITY COMPET ENT TO IMPOSE THE PENALTY WILL BE JUSTIFIED IN REFUSING TO IMPOSE PEN ALTY, WHEN THERE IS A TECHNICAL OR VENIAL BREACH OF THE PROVISIONS OF THE ACT OR WHERE THE BREACH FLOWS FROM A BONA FIDE BELIEF THAT THE OFFEN DER IS NOT LIABLE TO ACT IN THE MANNER PRESCRIBED BY THE STATUTE. 2.2 GROUND NO. 2: - THE ASSESSEE DO NOT WANTS TO ADD, ALTER AND AMEND T HE GROUNDS OF APPEAL. IN VIEW OF THE ABOVE SUBMISSION IT IS CLEAR THAT T HE ADDITION IN TOTAL INCOME DO NOT REPRESENT TO REAL INCOME OF ASSESSEE BUT IS ON ACCOUNT OF ADDITIONS MADE FOR TECHNICAL REASONS, THEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE INCOME OR FILED INACCURA TE PARTICULARS. YOUR HONOUR IS REQUESTED KINDLY TO CANCEL THE PENALTY SO IMPOSE D BY THE AO AND CONFIRMED BY LD CIT(A) 2.3 THE LD. DR RELIED ON THE ORDERS OF THE AUTHORIT IES BELOW. 2.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT THE ASSESSEE IS TRUST AND RUNNING A SCHOOL UNDER THE NAME OF M/S. GLOBAL PUBLIC SCHOOL AT KOTA. THE RETURN OF INCOME DECLARING TOTAL LOSS OF RS. 5,57,920/- WAS FILED BY THE ASSESSEE ON 31-10-2006. THE INCOME OF THE ASSESSEE IS EXEMPT U/S 10(23C) (IIIAD) OF INCOME TAX ACT, 1961 AS THE ASSESSEE IS CARRYING EDUCATIONAL ACTIVITIES. THE DEPARTMENT CAR RIED OUT SEARCH OPERATIONS OVER THE CAREER POINT GROUP ON 04-12-200 9. THE ASSESSEE BELONGS TO THIS GROUP. IN THIS CASE THE ORIGINAL RE TURN U/S 139 (1) WAS FILED ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 25 ON 31/10/2006 DECLARING LOSS OF RS. 5,57,920/-. IN RESPONSE TO NOTICE U/S 153C OF INCOME TAX ACT, THE ASSESSEE FILED RETURN U /S 153C ON 29/07/2011 DECLARING THE LOSS OF RS. 5,57,920/-. TH E ASSESSMENT U/S 153A WAS COMPLETED ON 15/12/2011 ACCEPTING THE RETURNED LOSS. LATER ON THE CASE WAS RE-OPENED U/S 148 OF I.T. ACT, 1961 SOLELY ON THE BASIS OF STATEMENT OF SHRI SANJAY D. SONAWANI DIRECTOR OF W ASHINGTON SOFTWARES LTD, 47, 2B, GOVINDA CHAMBERS, KARVE ROAD, PUNE REC ORDED ON 16.03.2011 WHEREIN HE ADMITTED THAT HIS COMPANY WAS ENGAGED IN ISSUING NON-GENUINE/ BOGUS SALES BILLS IN ORDER TO HELP THE PARTIES TO INFLATE THEIR EXPENSES AND IN THE LIST OF THE PARTIES TO WHOM BIL LS WERE PROVIDED THE ASSESSEE WAS ONE PARTY WHO PURCHASED THE SOFTWARE F ROM THIS COMPANY VIDE BILL NO. WSL/INV/36/2006-07 DATED 03.03.2006 R S. 4,00,000/-. IN THE REASSESSMENT PROCEEDINGS, IT WAS HELD THAT THE ASSESSEE HAS TAKEN BOGUS PURCHASE BILL OF RS. 4,00,000/- AGAINST PURCH ASE OF SOFTWARE. IT WAS HELD THAT ASSESSEE HAS NOT PURCHASED THE SOFTWARE F ROM M/S WASHINGTON SOFTWARE LTD AND MONEY SHOWN TO HAVE BEEN PAID FOR SOFTWARE WAS RETURNED BACK TO THE ASSESSEE. IT WAS FURTHER HELD THAT THE SOFTWARE WAS PURCHASED FROM SOMEWHERE ELSE FROM THE UNDISCLOSED MONEY WHICH WAS ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 26 ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THUS THE AO HAD NO OTHER ALTERNATIVE BUT TO TREAT THE AMOUNT USED FOR PURCHA SE OF SOFTWARE AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED THIS AMOUNT OF RS. 4,00,000/- TO THE TOTAL INCOME OF THE ASSESSEE. THI S WOULD RESULT IN AN ADDITION OF RS. 4.00 LACS. ACCORDING TO THE AO, THI S UNDISCLOSED INCOME IS NOT ELIGIBLE FOR EXPENDITURE U/S 10(23C)(IIIAD) AS THE SAME IS NOT EARNED SOLELY FROM IMPARTING OF EDUCATIONAL ACTIVITIES. AC CORDING TO THE AO, IT IS CLEAR THAT THE ASSESSEE HAS WILLFULLY CONCEALED ITS INCOME AND HAS GIVEN INACCURATE PARTICULARS OF INCOME BY TAKING BOGUS BI LLS. THUS THE AO VIDE HIS ORDER ASSESSMENT ORDER DATED 25-03-2014 INITIAT ED THE PENALTY PROCEEDINGS SEPARATELY U/S 271(1) OF THE ACT FOR C ONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME. FU RTHER THE A.O. IMPOSED A PENALTY OF RS. 1,22,400/- U/S 271(1)(C) OF I.T. ACT, 1961 VIDE ORDER DATED 24-09-2014 BEING 100% OF TAX LAVIABLE O N RS. 4,00,000/- TREATING THE SAME AS CONCEALED INCOME OF ASSESSEE A ND HOLDING THAT THE ASSESSEE HAD WILLFULLY CONCEALED ITS INCOME AND HAS GIVEN INACCURATE PARTICULARS OF ITS INCOME BY TAKING BOGUS BILL. TH E LD. CIT(A) CONFIRMED THE ACTION OF THE AO IN IMPOSING THE PENALTY OF RS. 1,22,400/-. IT IS ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 27 OBSERVED THAT ASSESSMENT PROCEEDINGS AND PENALTY PR OCEEDINGS ARE TWO SEPARATE PROCEEDINGS. THE ADDITION MADE DURING ASSE SSMENT PROCEEDINGS DOES NOT LEAD TO CONCLUSION THAT THE ASSESSEE WAS H AVING SOME UNDISCLOSED INCOME OR CONCEALED THE PARTICULARS OF INCOME. THE ADDITION IN ASSESSMENT ORDER MAY BE BECAUSE OF SOME TECHNICA L REASONS WHICH DO NOT MEAN THAT THE ASSESSEE HAD CONCEALED INCOME. TH EREFORE, FOR IMPOSING A PENALTY, THE AO HAD TO PROVE THAT THE A SSESSEE WAS HAVING CONCEALED INCOME. THE PENALTY U/S 271(1)(C) OF THE ACT IS NOT AUTOMATIC AND FOR IMPOSING PENALTY U/S 271(1)(C) OF THE ACT, THE AO HAD TO BROUGHT ON RECORD ANY POSITIVE MATERIAL TO SHOW THAT THE AS SESSEE CONCEALED HIS INCOME. THERE MUST BE INDEPENDENT FINDING AND VARIO US HON'BLE COURTS HELD AS UNDER:- A) HONBLE CALCUTTA HIGH COURT IN THE CASE OF DURGA KAMAL RICE MILLS V/S. CIT (2004) 265 ITR 25 (CAL.). V). HELD THAT THE FINDINGS OF THE QUANTUM PROCEEDING S STAGE ARE NOT BINDING IN PENALTY PROCEEDINGS. THERE MUST BE INDEP ENDENT FINDING B) RANI SATI COAL SUPPLIER VS. ITO 26 TW 440; HELD THAT THE ADDITION MADE IN QUANTUM ASSESSMENT A ND LATER ON SUSTAINED IS NOT SUFFICIENT GROUND FOR IMPOSITION O F PENALTY U/S 271(1) (C). C) SUNIL KUMAR GANGWAL VS. DCIT 32 TAXWORLD 139 ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 28 HELD THAT FINDING IN QUANTUM PROCEEDINGS ARE NOT BI NDING IN THE PENALTY PROCEEDINGS, FOR IMPOSITION OF PENALTY, IND EPENDENT FINDINGS ARE REQUIRED. IT IS ALSO NOTED FROM THE RECORDS THAT ON SIMILAR I SSUE U/S 271(1) OF THE ACT, THE ITAT JAIPUR BENCH IN THE CASE OF SHRI MUR ARI LAL MITTAL VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR HAD DELETED THE PEN ALTY VIDE ORDER DATED 9-11-2016 IN ITA NO. 333 & 334/JP/2015 BY OBSERVING AS UNDER:- 2.5 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORD THAT THE ASSESSEE IS AN INDIVIDUAL DECLARING INCOME FROM HOUSE PROPERTY AND INCOME FROM BUSINESS OR PROFESSION AS PROPRIETOR OF M/S. MITTAL ENTERPRISES. THE RETURN U /S 139(1) OF THE ACT WAS FILED ON 25-10-2004 BY THE ASSESSEE DECLARING TOTAL INCOME OF RS. 1,51,100/-. SEARCH AND SEIZURE OPERATIONS WERE CARRIED OUT ON 27-08-2008 ON RESIDENTIAL AND B USINESS PREMISES OF THE ASSESSEE. THE RETURN U/S 153 OF THE I.T. ACT WAS FILED ON 31-03-2009 DECLARING TOTAL INCOME OF R S. 5,85,090/- WHICH INCLUDED ADDITIONAL INCOME SURREND ER OF RS.4,53,819/-. THE ASSESSMENT WAS MADE BY THE AO U/ S 153A/143(3) OF I.T. ACT ON TOTAL INCOME OF RS. 6,18 ,980/- WHICH INCLUDED THE ADDITION OF RS. 33,892/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE MADE FROM VARIOUS EXPEN SES. IN PENALTY PROCEEDINGS, THE AO IMPOSED THE PENALTY OF RS. 1,36,145/- BEING 100% OF TAX PAYABLE ON ADDITIONAL INCOME OF RS. 4,53,819/- DECLARED BY THE ASSESSEE. THE LD . CIT(A) HAD CONFIRMED THE ACTION OF THE AO. IT IS NOTED FRO M THE RECORD THAT THE AO HAD INITIATED PENALTY PROCEEDING S FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. IN THE NOTICE ALSO, THE AO H AS NOT SPECIFIED FOR WHICH SPECIFIC REASON THE PENALTY PRO CEEDINGS HAS BEEN INITIATED WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. UL TIMATELY, ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 29 THE AO LEVIED THE PENALTY FOR CONCEALMENT OF INCOME . THE HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR VS. MANJUNATHA COTTON & GINNING FACTORY, 359 ITR 565 HE LD AS UNDER:- THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE 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 THEY INTEN D IMPOSING PENALTY ON HIM AS SECTION 274 MAKES IT CLEAR THAT T HE ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND 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 FORM WHERE ALL THE GROUNDS MENTIONED IN SEC TION 271 ARE MENTIONED WOULD NOT SATISFY THE 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 PER CENT. TO 300 PER CENT. OF THE TAX LIABILITY. AS THE SAID PRO VISIONS HAVE TO BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPE CIFICALLY. OTHERWISE, THE PRINCIPLES OF NATURAL JUSTICE IS OFF ENDED IF THE SHOW- CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEED INGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. IT IS ALSO NOTED THAT SIMILAR TYPE OF ISSUE WAS DEC IDED IN FAVOUR OF THE ASSESSEE BY ITAT COORDINATE BENCH IN THE CASE OF SHANKAR LAL KHANDELWAL VS. DCIT, CENTRAL CIRCLE- 1, JAIPUR VIDE ITS ORDER DATED 11-03-2016 IN ITA NO. 878/JP/2013 FOR THE ASSESSMEN T YEAR 2007- 08 BY OBSERVING AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON T HE RECORD. IN THIS CASE, THE LD ASSESSING OFFICER INIT IATED PENALTY PROCEEDINGS FOR CONCEALING OF PARTICULARS O F INCOME AND FOR FURNISHING INACCURATE PARTICULARS OF INCOME VIDE ORDER DATED 31/12/2009. NOTICE U/S 274 READ WITH SEC TION 271-272 OF THE ACT WAS ISSUED ON 30/12/2009 BY TICKI NG OF THE NOTICE AS UNDER:- ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 30 U/S 271(1)(C):- CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THE LD ASSESSING OFFICER AGAIN GAVE NOTICE DURING TH E COURSE OF PENALTY PROCEEDINGS ON 23/1/2012 WHEREIN HE GAVE SHOW CAUSE NOTICE U/S 271(1)(C) FOR IMPOSING OF PENALTY WITHOUT SPECIFYING THE LIMB FOR REASONS TO I MPOSE THE PENALTY, WHETHER IT IS FOR CONCEALED PARTICULAR S OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. THE LD CIT(A) HAS CONSIDERED ALL THE ASPECT AND HELD THA T EXPLANATION 5A TO SECTION 271(1)(C) IS APPLICABLE A S IN THIS CASE, A SEARCH WAS CARRIED OUT AFTER 01/6/2007 AND THE ASSESSEE HAS FURNISHED RETURN FOR A.Y. 2007-08 BEFO RE SEARCH AND ADDITIONAL INCOME HAS BEEN DISCLOSED U/S 153A. THEREFORE, DEEMING PROVISIONS ARE APPLICABLE. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS DISCLOSED ADD ITIONAL INCOME IN RETURN FILED U/S 153A ON THE BASIS OF INCRIMINATING DOCUMENT FOUND DURING THE COURSE OF S EARCH. WE HAVE CONSIDERED VIEW THAT EXPLANATION 5A IS NOT REQUIRED TO BE MENTIONED BY THE ASSESSING OFFICER SPECIFICALLY AT THE TIME OF INITIATION OR EVEN IN T HE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, BUT B ASIC DEFECT WE FOUND THAT THE LD ASSESSING OFFICER HAS MENTIONED AT THE TIME OF INITIATION OF PENALTY PROC EEDING UNDER BOTH THE LIMBS I.E. CONCEALED THE PARTICULARS OF INCOME AND FURNISHED INACCURATE PARTICULARS OF INCO ME BUT AT THE TIME OF NOTICE U/S 274 HE SIMPLY HAS TICKED IN PRESCRIBED PROFORMA CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WITHOUT D ELETING EITHER LIMB OF PENALTY EVEN HE HAS NOT PUT AND IN T HE NOTICE ITSELF BETWEEN TWO LIMBS. THE AMENDED PROVISIONS OF SU B- SECTION (1B) OF SECTION 271 HAS BEEN CONSIDERED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF MADHU SHREE GUPTA VS. UOL, 317 ITR 107 WHEREIN IT HAS BEEN HELD THAT AT THE STAGE OF INITIATION OF PENALTY PROCEEDINGS, THE ORD ER PASSED BY THE ASSESSING OFFICER NEED NOT REFLECT SATISFACT ION VIS A ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 31 VIS EACH AND EVERY ITEM OF ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHERED FROM THE ORDER IS THAT A FUR THER PROGNOSIS IS CALLED FOR. IT WOULD BE SUFFICIENT COMP LIANCE WITH THE LAW THAT THERE IS A PRIMA FACIE EVIDENCE FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. EVEN AFTER THIS S ECTION, THE ASSESSING OFFICER HAS TO SATISFY THE PARTICULAR LIMB OF INITIATION OF PENALTY IMPOSABLE U/S 271(1)(C) OF TH E ACT AT THE TIME OF ASSESSMENT PROCEEDINGS. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M/S MANJUNATHA COTTON & GINNING FACTORY & ORS.(2013) 35 9 ITR 565 (KARN) HELD THAT SENDING PRINTED FORM WHERE A LL THE GROUNDS MENTIONED IN SECTION 271 WOULD NOT SATIS FY THE REQUIREMENT OF LAW. THE ASSESSEE SHOULD KNOW THE GROUN D WHICH HE HAS TO MEET SPECIFICALLY, OTHERWISE, THE PRI NCIPLE OF NATURAL JUSTICE IS OFFENDED ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED TO THE ASS ESSEE. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF TEJ BHAN COTTON GINNING & PRESSING FACTORY VS. CIT, ROHTAK (SUPRA) HAS HELD THAT THE ASSESSING OFFICER IN ASSESSMENT ORDER HAS SATISFIED HIMSELF REGARDING IN ITIATION OF PENALTY PROCEEDINGS, WHICH WAS TANTAMOUNT TO SATISFACTION HAVE RECORDED TO THE FACT ON THE BASIS OF ADDITION MADE BY THE ASSESSING OFFICER FOR CONCEALE D INCOME IN ASSESSMENT ORDER. THE HONBLE COURT HAS CONFIRMED THE PENALTY EVEN PENALTY PROCEEDINGS INIT IATED BY THE ASSESSING OFFICER BY MENTIONING PENALTY PROCEED ING FOR CONCEALING/FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE HONBLE PUNJAB & HARYANA HIGH COURT HAS EXPRESSE D DIFFERENT VIEW ON INITIATION OF PENALTY PROCEEDINGS EVEN NOTICE U/S 274 ISSUED BY PUTTING OBLIQUE BETWEEN CONCEALING AND FURNISHING OF INACCURATE PARTICULARS OF INCOME WHEREAS THE HONBLE KARNATAKA HIGH COURT HAS HELD THAT THE ASSESSING OFFICER HAS TO SATISFY AT THE TI ME OF INITIATION OF PENALTY PROCEEDING AND ISSUING NOTICE U/S 274 OF THE ACT THAT WHETHER PENALTY IS FOR CONCEALED PA RTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F INCOME. ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 32 THERE WERE TWO OPINIONS OF THE HONBLE COURTS. THE HON'BLE SUPREME COURT HAS HELD THAT IN CASE OF TWO V IEWS OF THE COURT, FAVOURABLE VIEW OF THE ASSESSEE WOULD B E TAKEN AS HELD IN THE CASE OF CIT VS VEGETABLE PRODUC TS LTD. (1973) 88 ITR 192 (SC) AND A RECENT DECISION IN THE CASE OF CIT VS. VATIKA TOWNSHIP P LTD. (2014) 367 ITR 466 (SC). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT INITIAT ION OF PENALTY PROCEEDINGS IS NOT AS PER LAW AND ASSESSING OFFICER DID NOT HAVE ANY JURISDICTION TO IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. AS THE MATTER HAS BEEN DECIDE D ON TECHNICAL ISSUE, WE ARE NOT EXPRESSING ANY VIEW ON ME RIT OF THE CASE. ACCORDINGLY, WE DELETE THE PENALTY CONFIRM ED BY THE LD CIT(A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. IN VIEW OF THE ABOVE DELIBERATIONS AND RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINATE BENCH IN THE CASE OF SH ANKAR LAL KHANDELWAL VS. DCIT, CENTRAL CIRCLE- 1, JAIPUR (SUP RA), THE PENALTY CONFIRMED BY THE LD. CIT(A) IS DIRECTED TO BE DELET ED. THUS THE APPEAL OF THE ASSESSEE IS ALLOWED. IT IS ALSO NOTED THAT THE LD. AR OF THE ASSESSEE RE LIED ON VARIOUS CASE LAWS (SUPRA) INCLUDING THE JUDGEMENT OF ITAT, KOLKATA BE NCH IN THE CASE OF VAIBHAH TULSYAN VS. ITO, WARD- 29(4), KOLKATA (ITA NO. 736 & 737/KOL/2013 DATED 27-05-2016). IN THE CASE OF VAIB HAH TULSYAN VS. ITO, ITAT ALLOWED THE APPEAL OF THE ASSESSEE ON THE ISSUE OF PENALTY U/S 271(1) OF THE ACT. IN VIEW OF THE ABOVE DELIBERATI ONS, FACTS OF THE CASE ITA NO. 760/JP/2016 M/S. GOPI BAI FOUNDATION VS. ACIT, CENTRAL CIRCLE- 3, JAIPUR . 33 AND THE CASE LAWS RELIED ON (SUPRA) BY THE ASSESSEE , THE PENALTY OF RS. 1,22,400/- CONFIRMED BY THE LD. CIT(A) U/S 271(1)(C ) OF THE ACT IS DIRECTED TO BE DELETED. THUS THE APPEAL OF THE ASSE SSEE IS ALLOWED. 3.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 29 /12/ 2016. SD/- HKKXPUN ( BHAGCHAND) YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29 /12/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT-M/S. GOPI BAI FOUNDATION ,KOTA 2. IZR;FKHZ@ THE RESPONDENT- THE ACIT, CENTRAL CIRCLE- 3, JAIP UR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 760/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR