Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 4823 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-12-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2003-2004
Appeal Filed On
25-08-2016
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. 772/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2003-04 SHRI LAL CHAND MITTAL B-18, SARDAR PATEL MARG CHOMU HOUSE, JAIPUR CUKE VS. THE DCIT CENTRAL CIRCLE- 3, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: ANSPC 9789 P 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 2003-04 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. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, 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.99,000/- U/S 271(1)(C) OF I.T. ACT, 1961 ON ACCOUNT OF ADDITION OF RS. 4 LAKHS MA DE U/S 69B 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 DULY CONSIDERED ASSESSEES SUBMISSI ON AND CAREFULLY GONE THROUGH PENALTY ORDER PASSED BY THE AO. I HAVE ALSO TAKEN A NOTE OF THE FACTUAL MATRIX OF THE CASE AS W ELL AS APPLICABLE CASE LAWS RELIED UPON. IN THIS CASE, AO HAD INITIATED TH E PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT IN THE ASSESSMENT ORDER PA SSED ON 31.08.2010 ON THE ADDITION MADE IN ASSESSMENT ORDER AND PURSUA NT TO APPELLATE ORDER PASSED BY LD. CIT(A) WHEREIN THE ADDITION OF RS.4,00,000/- WAS SUSTAINED BY THE LD CIT(A) IN ITA NO.212/10-11 DT. 04/10/2013, PENALTY OF RS.99,000/- HAS BEEN IMPOSED UNDER EXPLA NATION 1 TO THE PROVISION OF SECTION 271 (1)(C) OF THE ACT. BRIEFLY , FACTS OF THE CASE ARE AS UNDER: I) SEARCH WAS CONDUCTED AT THE VARIOUS BUSINESS AND RESIDENTIAL PREMISES OF THE MITTAL GROUP ON 27.08.2 008 TO WHICH THE APPELLANT BELONGS. IN RESPONSE TO NOTICE U/S 153A, THE APPELLANT FILED HIS RETURN OF INCOME ON 11.05.2010 DECLARING TOTAL INCOME OF RS.130/-. IT IS PERTINENT TO NOTE THAT NO RETURN HAD BEEN FIL ED U/S 139(1) BY THE APPELLANT FOR THIS A.Y. IN THE RETURN IN RESPONSE T O SECTION 153A, IT WAS OBSERVED BY THE AO THAT IN THE CAPITAL AMOUNT THE A PPELLANT HAD SHOWN ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 3 SUNDRY ADVANCES OF RS.4 LAKH WHICH WERE SUBSEQUENTL Y GIFTED TO SH. MURARI LAL MITTAL IN A.Y. 200708. II) DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THESE WERE SUNDRY ADVANCES GIVEN TO FARMERS FOR PURCHASE OF LAND. SUBSEQUENTLY, THESE WERE EXPLAINE D FROM PAST SAVINGS. DURING THE COURSE OF SEARCH, IT IS PERTINE NT TO NOTE THAT NO DOCUMENTARY EVIDENCE WAS FOUND TO SHOW THAT THE ASS ESSEE HAD GIVEN ANY AMOUNT OF ADVANCES TO ANYBODY FOR LAND OR OTHER WISE. III) ON PERUSAL OF STATEMENTS U/S 132(4) TAKEN DURI NG THE COURSE OF SEARCH, IT IS SEEN THAT HE DID NOT MENTIO N HAVING GIVEN ANY ADVANCE FOR LAND. WHAT EMERGES FROM HIS STATEMENTS IS THAT HE IS A PERSON OF VERY SMALL MEANS AND TOTALLY DEPENDENT ON THE OTHER MEMBERS OF THE FAMILY FOR EVEN HIS HOUSEHOLD EXPEND ITURE. IN HIS STATEMENT TAKEN ON 27.08.2008, HE HAS STATED THAT H IS MONTHLY INCOME IS RS.5,000/-. HE HAS STATED HE HAS 06 DAUGHTERS TH E ELDEST DAUGHTER WAS MARRIED IN 1984 AND THE MARRIAGE EXPENSES OF AL L THE DAUGHTERS WERE BORNE COLLECTIVELY BY THE BROTHERS OF THE FAMI LY. DURING THE COURSE OF SEARCH A VERY SMALL AMOUNT OF CASH OF RS. 18,000/- WAS FOUND AT HIS RESIDENTIAL PREMISES. THIS CLEARLY PROVES HI M TO BE A MAN OF CONSTRAINT FINANCIAL MEANS. I) THE AR OF THE APPELLANT HAS FILED A COPY OF STAT EMENT OF AFFAIRS OF THE APPELLANT AS ON 31.03.2002 AND 31.03 .2003. THE BASIC PREMISE OF THIS SUBMISSION IS THAT THE SUNDRY ADVAN CES OF RS.4 LAKH WERE CARRIED FORWARD FROM A.Y. 2002-03 TO THE BALAN CE SHEET OF A.Y. 2003-04 SO THE AMOUNT COULD NOT BE ADDED TO THE INC OME OF THE APPELLANT DURING THE A.Y. THIS CONTENTION OF THE AR OF THE APPELLANT IS NOT ACCEPTABLE BECAUSE HE HAD NOT FILED ANY RETURN OF INCOME U/S 139(1) FOR A.YS. 2002-03 OR 2003-04. THEREFORE, THE COMPUTER GENERATED STATEMENTS OF AFFAIRS AFTER THE SEARCH AR E CLEARLY AN AFTERTHOUGHT BECAUSE NO DOCUMENTARY EVIDENCE IN SUP PORT OF THESE LIABILITIES AND ASSETS WAS FOUND DURING THE COURSE OF SEARCH NOR ADMITTED TO DURING THE SEARCH PROCEEDINGS BY THE AP PELLANT. THEREFORE, THESE STATEMENTS OF AFFAIRS FILED BY THE APPELLANT DO NOT HAVE ANY EVIDENTIARY VALUE. II) THE AR HAS ALSO FILED A COPY OF THE ACCOUNTS OF ASSESSEE IN THE BOOKS OF M/S SURESH MEDICAL AGENCY AND MITTA L ENTERPRISES, AND HIS BANK ACCOUNTS. ALL THE THREE ACCOUNTS FURTHER R EITERATE THE FACT THAT HE WAS A PERSON OF VERY LIMITED FINANCIAL MEANS. NO DIRECT EVIDENCE HAS BEEN FILED REGARDING THE SOURCE OF INVESTMENT O F RS.4 LAKH IN THESE ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 4 DEBTORS. IN ABSENCE OF ANY DIRECT EVIDENCE TO EXPLA IN THE SOURCE OF RS.4 LAKH AND ADVANCE TO DEBTORS OR FARMERS AS CLAIMED, THE ADVANCES REMAIN UNEXPLAINED IN THE HANDS OF THE APPELLANT GI VEN HIS LACK OF FINANCIAL WORTH. III) FURTHERMORE, AT NO STAGE WERE THE DETAILS BY W AY OF THE NAMES, ADDRESSES OR AFFIDAVITS OF THE ALLEGED DEBTORS FILE D AT ANY STAGE OF THE PROCEEDINGS TO SUBSTANTIATE HIS SUBMISSIONS. IVI) FURTHERMORE, THE LD. CIT(A) IN THE CASE OF MUR ARI LAL MITTAL A.Y. 200708 ITA NO.445/10-111 DATED 01.03.2012 HAS DELETED THIS ADDITION OF RS.4 LAKH IN THE HANDS OF THE MURARI LA L MITTAL BY OBSERVING THAT IF THE AO WAS OF THE VIEW THAT SOURC E OF RS.4 LAKH WAS NOT PROPERLY EXPLAINED IN THE HANDS OF LAL CHAND MI TTAL AND THE ADDITION WAS MADE IN HIS HANDS THEN IT WAS NOT JUST IFIED TO MAKE THE SAME ADDITION IN THE HANDS OF MURARI LAL MITTAL IN THE YEAR WHEN THIS WAS ALLEGEDLY GIFTED TO HIM BY SH. LAL CHAND MITTAL . THUS, IT IS CLEAR THAT THE SOURCE OF THESE FUNDS HA S TO BE EXPLAINED IN THE HAND OF SH. LAL CHAND MITTAL AND T HE APPELLANT HAS REPEATEDLY FAILED TO DISCHARGE HIS ONUS. IN VIEW OF THE FACTS DISCUSSED ABOVE, THE AMOUNT OF RS.4 LAKH ADDED TO THE INCOME OF THE APPELLANT U/S 69 BY THE LD. CIT(A) IN ITA NO.212/10-11. HERE AT THIS STAGE, ASSESSEE HAS RAISED OBJECTION W ITH REGARD TO INITIATION OF PENALTY PROCEEDINGS FOR FURNISHING OF INACCURATE PARTICULARS WHEREAS IN THE PENALTY NOTICE DATED 31- 08-2010, THE AO HAS MENTIONED AS UNDER:- WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE ME FOR THE A.Y. 2003-04 IT APPEARS TO ME AS PER SECTIO N 274 READ WITH SECTION 271(1) OF THE I.T. ACT YOU ARE LIABLE FOR PENALTY FOR CONCEALMENT OF INCOME/ FURNISHING INACCURATE PARTIC ULARS OF INCOME. IN VIEW OF THIS ASSESSEE'S IS CHALLENGING THE PENAL TY PROCEEDINGS ITSELF. NOW LET ME EXPLAIN WHAT IS THE EXACT SCOPE OF THE PROVISIONS OF SECTION 292B OF THE I.T. ACT, 1961 (THE ACT)? SECTION 292-B OF THE ACT WAS INTRODUCED W.E.F. OCTO BER, 1,1975 AND STATES THAT NO RETURN OF INCOME, ASSESSMENT, NO TICE, SUMMONS OR OTHER PROCEEDINGS FURNISHED OR MADE OR ISSUED OR TA KEN OR PURPORTED TO ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 5 HAVE BEEN FURNISHED OR MADE OR ISSUED OR TAKEN IN P URSUANCE OF ANY OF THE PROVISIONS OF THE ACT SHALL BE INVALID OR SHALL BE DEEMED TO BE INVALID MERELY BY REASON OF ANY MISTAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OT HER PROCEEDINGS IF SUCH RETURN OF INCOME, ASSESSMENT, NOTICE, SUMMONS OR OTHER PROCEEDINGS IS IN SUBSTANCE AND EFFECT IN CONFORMIT Y WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THE ACT. BY CBDT CIRCULAR NO.179 DATED 30 TH SEPTEMBER, 1975, THE SCOPE OF SECTION 292B WAS EXPLAINED AND IT HAS BEEN STATED IN THE SAID CIRCULAR THAT THIS PROVISION HAS BEEN MADE TO PROVI DE AGAINST PURELY TECHNICAL OBJECTIONS WITHOUT SUBSTANCE COMING IN TH E WAY OF THE VALIDITY OF THE ASSESSMENT PROCEEDINGS ETC. THUS TH E CIRCULAR ITSELF MAKES IT CLEAR THAT IT IS ONLY TO OVERCOME TECHNICA L OBJECTIONS THAT SECTION 292-B HAS BEEN INTRODUCED. FOLLOWING CASE LAWS HAVE BEEN CITED BY THE LD. CIT(A). (I) CIT VS. R GIRDHAR, 145 ITR 246 (KAR.) (II) CIT VS. SARASWATHI AMMAL, 146 ITR 486 (MAD.) (III) SWARAN KANTA VS. CIT , 176 ITR 291 (PUNE) (IV) ASSAM CARBON PRODUCTS LTD. VS. CIT 224 ITR 57 (GAU. ) (V) SARDAR HARBINDER SINGH SEHGAL VS. CIT, 27 ITR 512 ( GAU.) (VI) VANAJA TEXTILES LTD. VS. CIT, 249 ITR 374 (KER .) HOWEVER, IN THE FOLLOWING CASES, SECTION 292B OF TH E ACT WAS HELD TO BE INAPPLICABLE:- (I) WHERE NO NOTICE HAD BEEN SERVED ON THE PROPER P ERSON, IT IS A FUNDAMENTAL INFIRMITY AND NOT A TECHNICAL IRREGULAR ITY. (A) CIT VS. PHOOLMATI DEVI (144 ITR 954 ALL) NOTIC E SENT TO MOTHER WHO WAS NOT GUARDIAN OF THE MINOR ASSESSE E. (B) GAJENDRA KUMAR BANTHIA VS. UOI (222 ITR 632 CAL ) NOTICE (II) WHERE PENALTY NOTICE U/S 271(1) WAS NOT SIGNE D [UMASHANKAR MISHRA VS. CIT (136 ITR 330 M.P)] ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 6 (III) UNSIGNED RETURN UNDER SECTION 140 IT IS A M ANDATORY TO SIGN A RETURN (KHILALDAS AND SONS VS. CIT , 225 ITR 960 (M P)] THEREFORE, IT IS CLEAR FROM THE ABOVE DECISIONS THA T IT IS ONLY TO OVERCOME CERTAIN TECHNICAL OBJECTIONS THAT SECTION 292-B CAN BE RESORTED TO. WHERE, HOWEVER, THE CLEAR PROVISIONS O F THE LAW ARE NOT ADHERED TO, SECTION 292-B CANNOT BE RESORTED TO. THE QUESTION OF APPLICATION OF SECTION 292-B CANNOT BE PREJUDGED BY FINDING THAT RETURN, NOTICE, ETC. IS N OT AS PER THE REQUIREMENT OF THE STATUTE AND IS/ARE INVALID; THE FINDING THAT THE RETURN OR NOTICE ETC. IS INVALID OR TO WHAT EXTENT IT IS I NVALID IS UNNECESSARY AND COUNTERPRODUCTIVE; IF IN THE SUBSTANCE AND IN EFFEC T RETURN, NOTICE OR ASSESSMENT IS IN CONFORMITY WITH OR ACCORDING TO IN TENT AND PURPOSE OF THE ACT, THE MISTAKE DEFECT OR OMISSION IS TO BE IG NORED AS PER THE UNDERLINING PHILOSOPHY OF SECTION 292-B OF THE ACT. ON A PLAIN READING OF THIS SECTION, IT IS OBSERVED THAT THE RETURN OF INCOME, ETC., SHALL NOT BE CONSIDERED AS INVALID MERELY BY DEFECT OR OMISSION IN SUCH RETURN OR NOTICE IF IT IS IN SUBST ANCE AND EFFECT IN CONFORMITY WITH THE INTENT AND PURPOSE OF THIS ACT. THE RATIONALE BEHIND THIS SECTION IS THAT THE RETURN OF INCOME, A SSESSMENT NOTICE, PENALTY NOTICE, SUMMONS OR OTHER PROCEEDINGS SHOULD NOT BE HELD TO BE INVALID DUE TO TECHNICAL MISTAKES, WHICH OTHERWISE DO NOT HAVE MUCH IMPACT TOUCHING ITS LEGALITY PROVIDED SUCH RET URN, ASSESSMENT/PENALTY NOTICE, SUMMONS OR OTHER PROCEED INGS, ETC., ARE OTHERWISE IN CONFORMITY WITH THE PURPOSE OF THE ACT . THE PURPOSE OF THE ACT AND IN PARTICULARLY SECTION 271(1)(C) OF T HE ACT IS TO IMPOSE PENALTY ON CONCEALED INCOME OR FURNISHING OF INACCU RATE PARTICULARS OF INCOME OF THE ASSESSEE. THIS PURPOSE IS BEST FULFILLED WHEN AO HAS CORRECTLY DETERMINED THE CORRECT CONCEALED INCOME I N THIS CASE. IT INVOLVES THE MAKING OF ASSESSMENT BY THE AO IN WHIC H THE PARTICULARS AT INCOME AS FURNISHED BY THE ASSESSEE ARE SCRUTINI ZED FOR DETERMINING THE CORRECT TOTAL INCOME AND FINALLY ON THE BASIS O F INVESTIGATION CARRIED OUT MADE ADDITIONS U/S 69 OF THE ACT WHICH HAS ALSO BEEN SUSTAINED BY THE LD. CIT(A). THE PURPOSE OF THE ACT IS PARTLY ACHIEVED WHEN THE CORRECT TOTAL INCOME IS DETERMINED EITHER BY WA Y OF MAKING ADJUSTMENTS BY THE AO AND ENHANCING THE STATED INCO ME TO THE CORRECT INCOME AND SIMULTANEOUSLY INITIATES PENALTY PROCEED INGS ON ADDITION MADE, BEING THE CONCEALED INCOME. IT, THEREFORE, TR ANSPIRES THAT IF AO IN HIS SATISFACTION NOTE IN THE ASSESSMENT ORDER ME NTIONS THAT PENALTY PROCEEDINGS INITIATED ON THE CONCEALED INCOME DETEC TED BUT IN THE ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 7 NOTICE ISSUED FAILED TO STRIKE OFF THE PORTION FOR FURNISHING INACCURATE PARTICULARS, WHICH IS OTHERWISE IN SUBSTANCE AND EFFECT IN CONF ORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT, THEN ANY TECHNICAL DEFECT IN IT WOULD NOT RENDER IT TO BE IN VALID. IN SUCH A SITUATION THE PROVISIONS OF SECTION 292-B OF THE AC T WOULD NOT COME TO THE RESCUE OF THE ASSESSEE AND THUS WILL NOT MAKE S UCH NOTICE TO BE INVALID . THE INSTANT CASE FALLS UNDER THIS CATEGORY. IT IS CLEAR FROM THE LANGUAGE OF THE PROVISION, THA T ITS AIM IS TO PREVENT ANY RETURN OF INCOME, ASSESSMENT, NOTICE OR OTHER PROCEEDINGS BEING TREATED AS INVALID MERELY BY REASON OF ANY MI STAKE, DEFECT OR OMISSION IN SUCH RETURN OF INCOME, ASSESSMENT, NOTI CE, OTHER PROCEEDINGS WHICH ARE IN SUBSTANCE AND EFFECT IN CO NFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS ACT. TH E QUESTION OF APPLICATION OF SECTION 292-B CANNOT BE PREJUDGED BY FINDING THAT RETURN, NOTICE ETC. IS NOT AS PER THE REQUIREMENT O F THE STATUTE AND IS/ARE INVALID. THIS WAY THE VERY PURPOSE OF THE SECTION T O PREVENT DECLARATION OF RETURN, NOTICE ETC. AS INVALID IS DEFEATED. THE FINDING THAT THE RETURN OR NOTICE ETC. IS INVALID OR TO WHAT EXTENT IT IS I NVALID IS UNNECESSARY AND COUNTERPRODUCTIVE. INVALID IN MY VIEW IS QUITE A ST RONG WORD AND MISTAKE, DEFECT OR OMISSION IN THE RETURN, NOTICE , ETC. CONSIDER WHETHER SUCH RETURN ETC. IS IN SUBSTANCE AND IN EFFECT IN CONFORMITY WITH OR ACCORDING TO THE INTENT AND PURPOSE OF THIS . IN OTHER WORDS, IT IS TO BE SEEN WHETHER SUCH RETURN OR NOTICE IS IN S UBSTANCE AND IN EFFECT IN CONFORMITY WITH OR IN ACCORDANCE WITH THE INTENT AND PURPOSE OF THE ACT AND NOT THE INVALIDITY OF THE RETURN E.G. IF IT IS SHOWN THAT RETURN OF INCOME, NOTICE, ETC. HAVE THE SAME OR SUBSTANTIALLY THE SAME EFFECT AS WOULD RETURN, NOTICE ETC. WITHOUT MISTAKE, DEFECT O R OMISSION WOULD HAVE, SUCH RETURN, NOTICE ETC. 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 (RETUR N, NOTICE ETC.) CANNOT BE HELD TO BE INVALID. SUBSTANCE OVER FORM THEORY IS THE UNDERLINING PHILOSOPHY OF SECTION 292-B OF THE ACT. IF IN SUBSTANCE AND IN EF FECT RETURN, NOTICE OR ASSESSMENT IS IN CONFORMITY WITH OR ACCORDING TO IN TENT AND PURPOSE OF THE INCOME-TAX ACT, THE MISTAKE, DEFECT OR OMISSION IS TO BE IGNORED. IN VIEW OF FACTS AND CIRCUMSTANCES OF THE CASE, THE PENALTY IMPOSED OF RS.99,000/- UNDER EXPLANATION 1 TO THE P ROVISION OF SECTION 271(1)(C), ON CONCEALED INCOME OF RS.4 LAKH IS HERE BY SUSTAINED. ASSESSEES APPEAL FAILS ON THIS GROUND. IN THE RESU LT, THE APPEAL STANDS DISMISSED FOR A.Y. 2003-04 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 8 2.2 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. 99,000/- 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 : - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO ERRED IN IMPOSING THE PE NALTY OF RS. 99,000/- 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 31.08.2010 ON THE ADDITION MADE IN ASSESSMENT ORDER BY MENTIONING THAT PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ARE INITIATED FOR FURNISHING I NACCURATE PARTICULARS OF INCOME. FURTHER IN THE PENALTY NOTICE U/S 274 READ WITH SEC TION 271OF I. TAX ACT DATED 31.08.2010 (COPY ENCLOSED HEREWITH) , ANNEXED WITH ASSESSMENT ORDER THE LD. AO MENTIONED THAT WHEREAS IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE ME FOR THE A. Y. 2003-04 IT APPEARS TO ME THAT AS PER SECTIONS 274 READ WITH SE CTION 271(1)(C) OF THE I.T. ACT YOU ARE LIABLE FOR PENALTY FOR CONCEAL MENT OF INCOME/FURNISHING 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. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 9 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 RECENT JUDGMENT 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 IMPOSE PENALTY U/S 271(1)(C) OF THE ACT. THE FINDIN GS OF HONBLE JURISDICTIONAL ITAT IS AS UNDER:- ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, 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 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 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 11 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. FURTHER IN THE PENALTY ORDER TOO THE LD. AO HELD THAT THE ASSESSEE HAS INTENTIONALLY CONCEALED HIS INCOME AND FURNISHED IN ACCURATE PARTICULARS OF HIS INCOME BY NOT DISCLOSING HIS CORRECT AND TRUE INCOM E IN ORIGINAL RETURN. THE LD. AO COULD NOT SPECIFIED THAT WHETHER THE ASSESSE E CONCEALED THE INCOME OR FURNISH INACCURATE PARTICULARS OF INCOME. . 5. HONBLE ITAT IN ITS RECENT JUDGMENT IN CASE OF SHRI MURARI LAL MITTAL ITA NO. 334/JP/2015 ORDER DATED 09/11/16 HAS CANCELLED 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 12 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 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 13 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 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 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 DISCLO SED U/S 153A. THEREFORE, DEEMING PROVISIONS ARE APPLICABLE. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS DISCLOSED ADDITIONAL INCOME I N RETURN FILED U/S 153A ON THE BASIS OF INCRIMINATING DOCUMENT FOUND D URING THE COURSE OF SEARCH. 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 14 ADDITION OR DISALLOWANCE IF THE OVERALL SENSE GATHE RED 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 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. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 15 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 6. 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 TO WHETHER THE PENALTY ORDER PASSED BY THE AO AND CONFIRMED BY THE CIT(A) FALLS FOR OUR CONSIDERATION IN PURSUANCE OF THE JUDGMENT OF THE H ONBLE 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 SHALL NOT BE I MPOSED, WE FIND THAT IRRELEVANT PORTION OF SUCH NOTICE WAS NOT STRU CK 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 FURN ISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PA RTICULARS OF SUCH INCOME. ON THIS ASPECT WE FIND THAT IN THE SH OW CAUSE NOTICE U/S. 274 OF THE ACT THE AO HAS NOT STRUCK OU T THE IRRELEVANT PART. IT IS THEREFORE NOT SPELL OUT AS T O WHETHER THE PENALTY PROCEEDINGS ARE SOUGHT TO BE LEVIED FOR FU RNISHING INACCURATE PARTICULARS OF INCOME OR CONCEALING PA RTICULARS OF SUCH INCOME. THE HONBLE KARNATAKA HIGH COURT I N THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN), HAS HELD THAT NOTICE U/S. 274 O F THE ACT SHOULD SPECIFICALLY STATE AS TO WHETHER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PARTICULA RS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTA IN 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 LIM B AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 16 SUBMITTED THAT IN THE PRESENT CASE, THE AFORESAID D ECISION WILL SQUARELY APPLY AND ALL THE ORDERS IMPOSING PENALTY HAVE TO BE HELD AS BAD IN LAW AND LIABLE TO BE QUASHED. 5.1 THE HONBLE KARNATAKA HIGH COURT IN THE CASE O F CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HA S LAID DOWN THE FOLLOWING PRINCIPLES TO BE FOLLOWED IN THE MATTER OF IMPOSING PENALTY U/S.271(1)(C) OF THE ACT. NOTICE UNDER SECTION 274 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FINDING RE GARDING 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 CONVENIENTLY REFER TO THE S AID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WH ICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF I T IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATI ON1 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 SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PRO CEEDINGS AND SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SA TISFY 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 LIA BILITY. 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. OTHERWISE, PRINC IPLES OF NATURAL JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTIC E IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 17 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, T HAT 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 M AY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES T HE INITIATION OF THE PENALTY PROCEEDINGS ALSO MUST BE FOR BOTH TH E OFFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING H IM 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 MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QU A 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 OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PEN ALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS O N WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUT HORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE G ROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. O THERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL ORDER IMPOSING PENALTY WOULD OFFEN D PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ON CE 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 GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSI TION 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 TH E PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAI NABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE A CT 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 CLA USE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF I NCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER IS IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURA TE PARTICULARS. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 18 THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME A ND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY D IFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI H IGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 17 1 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BE ING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASS ESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CON CEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIM ILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOM E. THE STANDARD PRO FORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON APPLICATIONOF MIND. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS F OLLOWS: 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 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 INGRED IENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DIS CERNIBLE 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 SECTION271 (1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) I T SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LE GAL FICTION CONSTITUTE CONCEALMENT BECAUSE OF DEEMING PROVISION . G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE A SSESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSM ENT OFFICER TO ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 19 INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PRO VISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. 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 OR DER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PE NALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, I T IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORIT IES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT O RDER. L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXP LANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE F AILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONA FIDE, AN O RDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SU BSTANTIATED 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 INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMP OSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY 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 SPE CIFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I.E., W HETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INCO RRECT PARTICULARS OF INCOME ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 20 Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENT IONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS 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 A ND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT 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 PROCEE DINGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF I NCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUDICATA IN T HE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LE VIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. (EMPHASIS SUPPLIED) IT IS CLEAR FROM THE AFORESAID DECISION THAT ON T HE 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 W HICH THE PENALTY IS SOUGHT TO BE IMPOSED. FOLLOWING THE DECI SION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDE RS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE T O BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELL ED. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT LEVY OF PENALTY IN THE PRESENT CASE CANNOT BE SUSTAINED.WE, THEREFORE, CANCEL THE ORDERS IMPOSING PENALTY ON THE ASSESSEE AND ALLOW THE APPEAL BY THE ASSESSEE. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 21 11. IN THE PRESENT CASE, AS WE NOTED ABOVE, THE AO FAILED TO STRIKE OUT THE IRRELEVANT PORTION IN THE SAID SHOW CAUSE NOTICE, RESPECTFULLY FOLLOWING THE ORDER ABOVE, WE CANCEL T HE PENALTY LEVIED U/S. 271(1) ( C) OF THE ACT BY THE ASSESSING OFFICER AS CONFIRMED BY THE CIT( A) FOR BOTH THE ASSESSMENT YE ARS 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 C OURSE OF PENALTY PROCEEDINGS IS NOT IN CONFORMITY WITH THE R ELEVANT PROVISIONS OF THE ACT, WE ARE OF THE VIEW THAT SECT ION 292B CAN NOT COME TO THE RESCUE OF THE REVENUE AND THE RELIA NCE OF THE LD.DR ON THE SAID PROVISION IS CLEARLY MISPLACED. T HEREFORE, PRELIMINARY ISSUE AS RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUND FOR BOTH THE ASSESSMENT YEARS 2006-07 & 2007 08 ARE ALLOWED, IN VIEW OF THE SAME THE OTHER GROUNDS RAIS ED REQUIRES NO ADJUDICATION, THEREFORE, ALL ARE DISMISSED. 12. IN THE RESULT, THE APPEALS OF ASSESSEE ARE ALL OWED. ON THE MERIT ON IMPOSING OF THE PENALTY WE SUBMIT A S UNDER: - 7. THE ASSESSMENT OF ABOVE NAMED ASSESSEE WAS COMPL ETED BY THE LD AO, WHEREIN ADDITION OF RS. 4,00,000/- WAS MADE U/S 69 OF THE I.T. ACT, 1961 ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT I N SUNDRY ADVANCES AND THE SAME WAS CONFIRMED BY THE CIT (A). 8. REGARDING SOURCE OF ADVANCE OF RS. 4,00,000/- TO SUNDRY ADVANCES THE ASSESSEE SUBMITTED FOLLOWING EXPLANATION TO THE AO: - 2. SOURCE OF SUNDRY ADVANCE OF RS. 4,00,000/- THE OPENING CAPITAL OF THE ASSESSEE IN AY 2003-04 W AS RS. 15,68,087.60 WHICH INCLUDES SUNDRY ADVANCES OF RS. 4,00,000/-. THE SUNDRY ADVANCE REPRESENTS TO ADVANCE GIVEN TO F ARMERS IN AY 2001-2002 FOR PURCHASE OF AGRICULTURAL LAND. LAT ER ON, IT WAS DISCOVERED THAT THE LAND WAS UNDER DISPUTE. THE ASSESSEE COULD RECEIVE BACK HIS MONEY IN AY 2007-08 AND THE SAID AMOUNT WAS UTILIZED FOR GIVING THE GIFT TO HIS BROT HER SHRI MURARI LAL MITTAL. THE COPY OF BALANCE SHEET FOR 31 .03.2002 AND 31.03.2003 HAS BEEN FILED IN PREVIOUS HEARING O F THE CASE. HOWEVER A COPY OF THE SAME IS AGAIN ENCLOSED HEREWI TH FOR YOUR READY REFERENCE. THE ADVANCE WAS GIVEN TO THE FOLLOWING FARMERS ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 22 (I) KALU, SHYONATH, RAMU, CHITTAR, BALU, NARAYAN, MANGILAL, HARINARAYAN, BUDHA, GOPAL, BHORIYA, RADHEYSHAYM, GOVIND NARAIN, JAGDISH, AND MOTILAL, RESIDENT OF VILLAGE JAITPURA (HAJYAWALA). THE ADVAN CE WAS GIVEN THROUGH A BROKER FOR PURCHASE OF LAND AT VILLAGE JAITPURA. 3. EXPLANATION REGARDING ADDITION OF RS. 4,00,000/- U/S 69 OF INCOME TAX ACT, 1961 THE ADVANCES OF RS. 4,00,000/- WAS GIVEN TO THE FAR MERS FOR PURCHASE OF LAND BEFORE 01.04.2002, THEREFORE THE S AME CANNOT BE TREATED AS INCOME OF THE ASSESSEE OF CURRENT YEA R AND NO ADDITION CAN BE MADE IN AY 2003-04 BY APPLYING THE PROVISIONS OF U/S 69 OF INCOME TAX ACT, 1961. YOUR ALLEGATION THAT THIS ADVANCE WAS CREATED TO GENERATE CASH WHICH WAS UTIL IZED FOR GIFT TO SHRI MURARI LAL MITTAL IS WITHOUT BASIS. IT IS A FACT THAT THE REPAYMENT RECEIVED FROM THE ABOVE SAID PERSONS WAS UTILIZED IN THE GIFT TO SHRI MURARI LAL MITTAL BUT THE ASSESSEE WAS OF 58 YEARS OLD AND HIS PAST SAVINGS WERE SUFFI CIENT TO GIVE THE ADVANCES OF RS. 4,00,000/- 9. THE ENTIRE ADDITION IS BASED ON THE STATEMENT OF AFFAIRS OF 31.03.2002 AND 31.03.2003 SUBMITTED BY THE ASSESSEE HIMSELF. T HE ASSESSING OFFICER PRESUMED THAT THE SUNDRY ADVANCE CREATED TO GENERATE CASH FOR GIFT GIVEN TO SHRI MURARI LAL MITTAL IN AY 2007-08. IN SUCH A CASE THE OPENING CAPITAL AS WELL AS OPENING ADVANCE WILL BE REDUCED AND NO ADDITION DESERVES TO MADE IN THE YEAR UNDER CONSIDE RATION. THE OPENING BALANCE IN CAPITAL ACCOUNT IN THE BALANCE SHEET AS ON 31.3.2003 IS CLOSING BALANCE OF CAPITAL ACCOUNT AS ON 31.3.2002. THE ASSETS/ INCOME PRIOR TO THE ASSESSMENT YEAR CANNOT BE CONSIDERED I N THE ASSESSMENT YEAR. HOWEVER THE LD. AO AS WELL AS CIT (A) REJECTE D THE EXPLANATIONS OF THE ASSESSEE SOLELY ON THE GROUND THAT THE ASSES SEE FAILED TO ESTABLISH THE SOURCE OF CASH OR FURNISH OTHER SUBSTANTIATING EVIDENCE TO SUPPORT THE SUBMISSION. THUS THE ADDITION WAS MADE BECAUSE OF THE TECHNICAL REASON THAT THE ASSESSEE COULD NOT FILED THE SUPPOR TING EVIDENCE IN SUPPORT OF HIS EXPLANATION OTHERWISE THE LD. AO AS WELL AS CIT (A) BOTH COULD NOT PROVE THAT THE PAYMENT OF ADVANCES W AS MADE BY THE ASSESSEE OUT OF HIS CONCEALED INCOME. 10. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E WAS NOT HAVING ANY SOURCE OF CONCEALED INCOME. THE DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER THE ASSESSEE AND DURING THE COURSE OF S EARCH NO MATERIAL ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 23 WAS FOUND TO SHOW THAT THE ASSESSEE WAS HAVING ANY CONCEALED SOURCE OF INCOME DURING THE YEAR UNDER CONSIDERATION. FURT HER IN THE ASSESSMENT ORDER THERE IS NO ANY WHISPER WHICH, EST ABLISH THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE WAS HAVIN G ANY SOURCE OF CONCEALED INCOME. 11. THE ALLEGATION IN THE ASSESSMENT ORDER THAT TH E SUNDRY DEBTORS CREATED TO GENERATE CASH WHICH WAS UTILIZED FOR GIFT TO SHR I MURARI LAL MITTAL IN AY 2007-08 IS PURELY BASED ON SUSPICION, SURMISES A ND CONJECTURES WITHOUT BRINGING ANY ADVERSE POSITIVE MATERIAL . 12 . IN THE ASSESSMENT ORDER THE LD. AO HAS NOT DISPRO VED THE CONTENTION OF ASSESSEE WHICH PROVES THAT THE EXPLANATION OF THE A SSESSEE WAS BONAFIDE. HE MERELY REJECTED THE SUBMISSION OF THE ASSESSEE B ECAUSE THE ASSESSEE COULD NOT SUBMIT THE SUPPORT EVIDENCE IN SUPPORT OF HIS SUBMISSION. SECTION 69 IS PRESUMPTIVE SECTION AND WHEN AN ASSES SEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCE OF INVESTMENT, SU CH INVESTMENT IS PRESUMED TO BE INCOME OF THE ASSESSEE. HOWEVER IN P ENALTY PROCEEDING, THE BENEFIT OF SUCH PRESUMPTION IS NOT AVAILABLE TO THE DEPARTMENT. IN THE CASE OF THE ASSESSEE THE ASSESSEE EXPLAINED THE SOU RCE OF INVESTMENT AND THE SAME WAS NOT DISPROVED BY THE ASSESSING OFFICER , THEREFORE THIS IS NOT A CASE WHERE THE ASSESSEE CONCEALED THE INCOME. 13. THE ADDITIONS MADE ARE NOT BECAUSE OF WILLFUL O R CONSCIOUS DEFAULT, BUT ONLY BECAUSE OF THE REASONS, WHICH IS OF TECHNICAL NATURE OR ESTIMATION OF INCOME, AND IN SUCH CASES PENALTY SHOULD NOT BE LEVIED. THE ASSESSEE RELY ON THE FOLLOWING DECISION OF JURISDICTIONAL HI GH 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) ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 24 14. 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. THE ASSESSMENT PR OCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. T HE ADDITIONS MADE DURING ASSESSMENT PROCEEDINGS DOES NOT LEAD TO CONC LUSION THAT THE ASSESSEE WAS HAVING SOME UNDISCLOSED INCOME OR CONC EALED THE PARTICULARS OF HIS INCOME. THE ADDITIONS IN ASSESSM ENT ORDER OR MAY BE BECAUSE OF SOME TECHNICAL REASONS WHICH ALWAYS DOES NOT MEAN THAT THE ASSESSEE HAD CONCEALED INCOME, THEREFORE FOR IM POSING A PENALTY THE ASSESSING OFFICER HAS TO PROVE THAT THE ASSESSE E WAS HAVING CONCEALED INCOME. 15. 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 SUBMITTED HIS EXPLANATION WHICH HAS NO T BEEN DISPROVED BY THE DEPARTMENT. THE DEPARTMENT HAVE NO POSITIVE MATERIAL TO PROVE THAT THE ASSESSEE HAS KNOWINGLY FURNISHED INACCURAT E PARTICULARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. 16. 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 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 UNDISCLOSED INCOME. MERELY THAT THE ADDIT IONS WERE MADE IN ASSESSMENT ORDER AND SUSTAINED BY CIT (A) IT CANNOT BE PRESUMED THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOM E OR EVADED THE TAX. IT IS SETTLED LAW THAT APPARENT IS REAL AND TO DISP ROVE THE SAME TO BE UNREAL, THE BURDEN ALWAYS LIES ON THE REVENUE IN VI EW OF THE AUTHORITATIVE PRONOUNCEMENTS REPORTED IN 131 ITR 597 (SC) AND 210 ITR 250 (RAJ); (2007) 111 TTJ 531 (JP) RELEVANT AT PAGE 537 PARA 9 . 17. THE ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDI NGS ARE TWO SEPARATE PROCEEDINGS. THE ADDITIONS MADE DURING ASSESSMENT P ROCEEDINGS DOES ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 25 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. 18. 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. 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 I TR 0333 (RAJ.) IT HAS BEEN HELD THAT MERE NON-DISCLOSURE OF TRUE PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS IS N OT SUFFICIENT TO ATTRACT THE PENALTY PROVISIONS CONTAINED IN SECTION 271(1)( C) OF THE INCOME-TAX ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 26 ACT, 1961. IN ORDER THAT PENALTY MAY BE IMPOSED, TH ERE SHOULD BE CONSCIOUS 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 C IT [2007] 291 ITR 519 (SC) HAS AGAIN REITERATED THE ABOVE PRINCIPLE IN P ARA 19 TO 28 THAT THE PENALTY SHOULD NOT BE IMPOSED SOLELY ON TH E BASIS OF FINDINGS REACHED IN QUANTUM PROCEEDINGS. IN THE CASE OF CIT VS. KRISHI TYRE RETREADING AND RUBBER INDUSTRIES REPORTED IN 360 IT R 580 (RAJ.) THE HONBLE RAJASTHAN HIGH COURT IN PARA 10 HAS HELD PENALTY PROCEEDINGS ARE ENTIRELY DISTINCT FROM ASSESSMENT P ROCEEDINGS AND, HOWSOEVER RELEVANT AND GOOD, THE FINDINGS IN ASSESS MENT PROCEEDINGS MAY BE, THEY ARE NOT CONCLUSIVE SO FAR AS THE PENAL TY PROCEEDINGS ARE CONCERNED. THE HONBLE COURT RELIED ON VARIOUS JUDGMENT INCLUDING RATIO LAID DOWN IN CASE OF DILIP N. SHROF F V. JOINT CIT [2007] 291 ITR 519 (SC). SINCE THE ASSESSEE HAS NOT ACTED DELIBERATELY IN DEFIANCE OF LAW OR WAS NOT GUILTY OF CONDUCT CONTUM ACIOUS OR DISHONEST, OR HAS NOT ACTED IN CONSCIOUS DISREGARD OF ITS OBLIGATION, PENALTY CANNOT BE LEVIED. IN THIS REGARD YOUR KIND ATTENTION IS DRAWN TOWARDS THE SUPREME COURT DECISION IN THE CASE OF HINDUSTAN STEELS LTD. VS. STATE OF ORISSA, 83 ITR 26 (SC). HONBL E 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 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. IN VIEW OF THE ABOVE SUBMISSION IT IS CLEAR THAT TH E 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 27 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 AND THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CA SE OF NANU MAL HET CHAND VS. CIT, (2007) 294 ITR 185 (ALL.). 2.4 I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOTED FROM THE RECORDS T HAT ORIGINALLY NO RETURN OF INCOME HAD BEEN FILED BY THE ASSESSEE FOR THE YE AR UNDER CONSIDERATION. IN THIS CASE, SEARCH WAS CONDUCTED ON 27-08-2008. V ARIOUS ASSETS/ BOOKS OF ACCOUNTS AND DOCUMENTS HAD BEEN FOUND AND SEIZED AS PER ANNEXURE PREPARED DURING THE COURSE OF SEARCH. ACCORDINGLY, NOTICE U/S 153A OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE ON 31-0 3-2010. IN RESPONSE TO THE SAME, THE ASSESSEE FILED THE RETURN OF INCOM E ON 11-05-2010 DECLARING NIL INCOME. IT IS NOTED FROM THE ASSESSME NT ORDER THAT THE ASSESSEE DERIVED INCOME FROM INTEREST FROM BANK. TH E AO COMPLETED THE ASSESSMENT U/S 153A/143(3) ON 31-08-2010 DETERMININ G TOTAL INCOME OF RS. 4,00,130/- BY MAKING ADDITION OF RS. 130/- ON A CCOUNT OF INCOME FROM BANK INTEREST AND RS. 4,00,000/- U/S 69 OF THE ACT. THE AO INITIATED PENALTY PROCEEDINGS U/S 274 R.W.S. 271(1) OF THE A CT FOR CONCEALMENT OF ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 28 INCOME. THE ASSESSEE PREFERRED APPEAL BEFORE THE L D. CIT(A), CENTRAL, JAIPUR AGAINST THE ASSESSMENT ORDER WHO DISMISSED T HE APPEAL OF THE ASSESSEE VIDE HER ORDER DATED 4-10-2013 IN ITA NO. 212/10-11. IN ORDER TO COMPLETE THE PENAL ACTION, A FURTHER SHOW CAUSE NOTICE U/S 271(1)(C) DATED 02-02-2015 WAS ISSUED AND SERVED UPON THE ASS ESSEE. THE ASSESSEE FILED THE REPLY BEFORE THE DCIT, CENTRAL CIRCLE-3, JAIPUR (FOR SHORT AO) FOR NOT IMPOSING THE PENALTY BUT THE REPLY OF THE ASSESSEE WAS NOT FOUND SATISFACTORY AND HE IMPOSED THE PENALTY OF RS . 99,000/- U/S 271(1)(C) OF THE ACT BY OBSERVING AS UNDER:- I HAVE CONSIDERED THE REPLY OF THE A/R OF THE ASSESSEE AND DO NOT FIND SATISFACTORY AS IS CLEAR F ORM THE ORDER OF THE AO WHEREIN THE AO FOUND IN THE BALANCE SHEET THE SUNDRY ADVANCE OF RS. 4,00,000/- WHICH HAS BEEN CREATED TO GENERATE CASH WHICH WAS UTILIZED FOR GIFT (IN CA SH) TO SHRI MURARI LAL MITTAL. THE SUBMISSION MADE BY THE ASSES SEE WAS NOT FOUND TENABLE BY THE AO AS THE ASSESSEE FAILED TO ESTABLISH THE SOURCE OF CASH AVAILABLE WITH HIM DUR ING THE RELEVANT PERIOD OF A.Y. 2003-04 WHICH WAS ULTIMATEL Y SHOWN AS GIFT TO SHRI MURARI LAL MITTAL IN ACCOUNTING PER IOD RELEVANT TO A.Y. 2007-08. THEREFORE, THE AO RIGHTL Y MADE THE ADDITION ON THIS ACCOUNT. THE LD. CIT(A)(CENTRAL), JAIPUR IN HIS ORDER IN APP EAL NO.2012/10-11 DATED 4-10-201 HAS ALSO DISMISSED THE APPEAL OF THE ASSESSEE. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 29 FURTHER THE CASE LAW CITED BY THE ASSESSEE IS DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. HENCE, THE INITIATION OF PENALTY IS WITHIN THE PROVISION OF SE CTION 271(1)(C) AND THE CONCEALMENT OF PARTICULARS OF INC OME WERE DULY BROUGHT OUT IN THE ASSESSMENT ORDER. IN VIEW OF THE FACTS DISCUSSED ABOVE, IT IS CLEAR T HAT THE ASSESSEE HAS INTENTIONALLY CONCEALED HIS INCOME AND FURNISHED INACCURATE PARTICULARS OF HIS INCOME BY NOT DISCLOSING HIS CORRECT AND TRUE INCOME IN THE ORIGI NAL RETURN. THIS SHOWS THAT THE ASSESSEE HAS COMMITTED THE DEFA ULT AS PRESCRIBED U/S 271(1) OF THE I.T. ACT,19761 AND IS THEREFORE, LIABLE FOR PENALTY. IN FIRST APPEAL, THE LD. CIT(A) CONFIRMED THE PENAL TY OF RS. 99,000/- U/S 271(1)(C) OF THE ACT. IT IS NOTED FROM THE RECORDS THAT ENTIRE ADDITION IS BASED ON STATEMENT OF AFFAIRS OF 31-03-2002 AND 31- 03-2003 SUBMITTED BY THE ASSESSEE HIMSELF. THE AO PRESUMED THAT THE SUND RY ADVANCE WAS CREATED TO GENERATE CASH FOR GIFT GIVEN TO SHRI MUR ARI LAL MITTAL IN A.Y. 2007-08. IT IS FURTHER NOTED THAT OPENING BALANCE I N CAPITAL ACCOUNT IN THE BALANCE SHEET AS ON 31-03-2003 IS CLOSING BALANCE O F CAPITAL ACCOUNT AS ON 31-03-2002. THE ASSETS/ INCOME PRIOR TO THE ASSESSM ENT YEAR CANNOT BE CONSIDERED IN THE ASSESSMENT YEAR UNDER CONSIDERATI ON. HOWEVER, THE LOWER AUTHORITIES REJECTED THE CONTENTION OF THE AS SESSEE ON THE GROUND THAT ASSESSEE FAILED TO ESTABLISH THE SOURCE OF CAS H OR FURNISHED THE OTHER ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 30 SUBSTANTIATING EVIDENCE TO SUPPORT THE SUBMISSION. IT IS ALSO NOTED THAT DURING THE YEAR THE ASSESSEE WAS NOT HAVING ANY SOU RCE OF CONCEALED INCOME. THE DEPARTMENT CARRIED OUT INTENSIVE SEARCH OVER THE ASSESSEE AND NO COGENT MATERIAL WAS FOUND TO SHOW THAT THE A SSESSEE WAS HAVING ANY CONCEALED SOURCE OF INCOME DURING THE YEAR UND ER CONSIDERATION. IT IS ALSO NOTED IN THE ASSESSMENT ORDER THAT SUNDRY DEBT ORS CREATED TO GENERATE CASH WAS UTILIZED FOR GIFT TO SHRI MURARI LAL MITTA L IN ASSESSMENT YEAR 2007-08 WAS WITHOUT BRINGING ANY ADVERSE POSITIVE M ATERIAL. NO ANY POSITIVE MATERIAL WAS BROUGHT IN PENALTY PROCEEDING TO SHOW THAT THE ASSESSEE HAD MADE WILLFUL ATTEMPT TO CONCEAL THE IN COME OR TO FURNISH INACCURATE PARTICULARS OF INCOME. THE ASSESSMENT PR OCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. THE ADDIT ION MADE DURING ASSESSMENT PROCEEDINGS DOES NOT LEAD TO CONCLUSION THAT THE ASSESSEE WAS HAVING SOME UNDISCLOSED INCOME OR CONCEALED THE PAR TICULARS OF HIS INCOME. IT IS OBSERVED THAT ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE TWO SEPARATE PROCEEDINGS. THE ADDIT ION MADE DURING ASSESSMENT PROCEEDINGS DOES NOT LEAD TO CONCLUSION THAT THE ASSESSEE WAS HAVING SOME UNDISCLOSED INCOME OR CONCEALED THE PAR TICULARS OF INCOME. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 31 THE ADDITION IN ASSESSMENT ORDER MAY BE BECAUSE OF SOME TECHNICAL REASONS WHICH DO NOT MEAN THAT THE ASSESSEE HAD CON CEALED INCOME. THEREFORE, FOR IMPOSING A PENALTY, THE AO HAD TO P ROVE THAT THE ASSESSEE 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 ASSESSEE CONCEALED HIS INCOME. THERE MUST BE INDEPENDENT FIN DING AND VARIOUS 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 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 OBSERVED THAT THE PENALTY PROCEEDINGS AR E PENAL IN NATURE, THE DEPARTMENT MUST ESTABLISH THAT THE ADDITIONS SO MAD E ARE REAL INCOME OF THE ASSESSEE. THE DEPARTMENT MUST HAVE SOME COGENT MATERIAL OR ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 32 EVIDENCE BEFORE LEVYING THE PENALTY THAT THE ASSESS EE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HIS INCOME OR HAD DELI BERATELY FURNISHED INACCURATE PARTICULARS OF INCOME. THE HON'BLE SUPR EME COURT IN THE CASE OF DILIP N SHROFF VS. JCIT (2007) 219 ITR 519 OBSER VED THAT PENALTY SHOULD NOT BE IMPOSED SOLELY ON THE BASIS FINDINGS REACHED IN QUANTUM PROCEEDINGS. IT IS ALSO NOTED FROM THE RECORDS THAT ON SIMILAR ISSUE U/S 271(1) OF THE ACT, THE ITAT JAIPUR BENCH IN THE C ASE OF SHRI MURARI LAL MITTAL VS. DCIT, CENTRAL CIRCLE- 2, JAIPUR HAD DELETED THE PENALTY 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. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 33 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, 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:- ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 34 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:- 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 35 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 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 ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 36 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. 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. ITA NO. 772/JP/2016 SHRI LAL CHAND MITTAL VS. DCIT, CENTRAL CIRCLE- 3, JAIPUR . 37 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 AND THE CASE LAWS RELIED ON (SUPRA) BY THE ASSESSEE , THE PENALTY OF RS. 99,000/- CONFIRMED BY THE LD. CIT(A) U/S 271(1)(C) OF THE ACT IS DIRECTED TO BE DELETED. THUS THE APPEAL OF THE ASSESSEE IS A LLOWED. 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-SHRI LAL CHAND MITTAL, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, 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. 772/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR
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