JAI AMBEY ASSOCIATES, Jaipur V. ITO, Jaipur

ITA 801/JPR/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2166 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 06-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA CIT DHK
• Assessee Lawyers: RAJEEV SAGONI; ROHAN SAGONI
• Keywords: Recovery proceedings; Principle of natural justice; Initiation of penalty proceedings
• Section: 143(3); 27

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 FOT; IKY JKO] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 801/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S JAI AMBEY ASSOCIATES, 3/418-A. YADAV DAIRY FARM, GANDHI PATH, CHITRAKOOT, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD -3(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAGFJ8262K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SAGONI & SHRI ROHAN SAGONI (C. A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI R.A. VERMA (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28/11/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 25/01/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 21.06.2016 OF CIT(A), JAIPUR ARISING FROM THE PENAL TY ORDER PASSED U/S 271(1)(C) OF THE I. T. ACT FOR THE ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD . AO IN IMPOSING PENALTY OF RS. 4,95,018/- U/S 271(1)(C) OF THE INCO ME TAX ACT, 1961. ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 2 THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, A RBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE PENALTY OF RS. 4,95,018/- IMPOSED U/S 271(1)(C). 2. THE ASSESSEE FIRM CRAVES ITS RIGHT TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. THE ASSESSEE HAS ALSO RAISED THE ADDITIONAL GROU ND:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. AO HAS ERRED IN IMPOSING THE PENALTY U/S 271(1)(C) WIT HOUT SPECIFICALLY POINTING OUT IN THE SHOW CAUSE NOTICE, WHETHER THE PENALTY WAS PROPOSED ON CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. SINCE, THE ADDITIONAL GROUND RAISED BY THE ASSESSE E IS LEGALLY IN NATURE AND GOES TO THE ROOT OF THE MATTER AND THEREFORE, F IRST WE TAKE UP THE ADDITIONAL GROUND. 3. I HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CO NSIDERED THE RELEVANT MATERIAL ON RECORD FOR ADMISSION OF ADDITI ONAL GROUND. THE ASSESSEE IS CHALLENGING THE VALIDITY OF NOTICE ISSU ED U/S 274 R.W.S. 271(1)(C) OF THE IT ACT DATED 30.08.2013 THE COPY OF THE NOTICE HAS BEEN FILED BY THE ASSESSEE WHICH IS NOT IN DISPUTE. THER EFORE FOR ADJUDICATION OF THE ADDITIONAL GROUND NO INVESTIGATION OR EXAMINATI ON OF NEW FACTS IS REQUIRED BUT THE SAME CAN BE DECIDED ON THE BASIS O F THE FACTS ALREADY RECORD. ACCORDINGLY, IN VIEW OF THE DECISION OF HO NBLE SUPREME COURT IN CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383 THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTE D FOR ADJUDICATION. ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 3 4. ON THE MERITS OF THE ADDITIONAL GROUNDS:- THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER H AS NOT SPECIFIED IN THE NOTICE ISSUED U/S 274 OF THE ACT WHETHER THE ASSESS EE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTI CULARS INCOME. HE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHAN COTTON & GINNING FACTORY 359 ITR 565 AN D SUBMITTED THAT THE NOTICE ISSUED U/S 274 OF THE ACT SHOULD SPECIF ICALLY STATES THE GROUND MENTION IN SECTION 271(1)(C) OF THE IT ACT WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME SENDING A PRINTED FORM WHERE ALL GROUNDS MENTIONED IN SECTION 271 WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE ASSESSEE SHOULD KNOW THE GROUND WHICH HE HAS TO MEET FOR SPECIFICALLY OTHERWISE THE PRINCIPLES OF NATURAL JUSTICE IS OFFENDED AND ON THE BASIS OF SUCH PROCE EDING NO PENALTY CAN BE IMPOSED ON THE ASSESSEE. THUS, THE LD. AR HAS CONTE NDED THAT WHEN THE AO HAS NOT SPECIFIED THE GROUND FOR INITIATION OF P ENALTY WHICH THE ASSESSEE HAS TO MEET IN HIS EXPLANATION THE NOTICE ISSUED U/S 274 OF THE ACT IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. HE HAS ALSO RELIED UPON THE DECISION OF HONBLE JURISDICTION HIGH COURT DAT ED 06.12.2016 IN CASE OF SHEVETA CONSTRUCTION CO. VS. ITO IN ITA NO. 534/20 08 AS WELL AS DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS 73 TAXMANN.COM 241 . HENCE, LD. AR HAS PLEADED THAT T HE IMPUGNED NOTICE ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 4 ISSUED U/S 274 OF THE ACT IS NOT VALID AND LIABLE T O BE QUASHED CONSEQUENTLY THE PENALTY OF LEVY BY THE AO IS ALSO LIABLE TO BE QUASHED. 5. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE PENALTY PROCEEDING U/S 271(1)(C) OF THE ACT WERE INITIATED BY THE AO AS PER THE ASSESSMENT ORDER ON CONCEALMENT OF THE INCOME WHICH WAS SURRENDERED BY THE ASSESSEE DURING THE ASSESSMENT PROCEEDING. H E HAS REFERRED TO THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT AND S UBMITTED THAT THE ASSESSEE HAS NOT DISCLOSED THE SALE TO THE EXTENT O F RS. 16,02,000/- MADE DURING THE YEAR UNDER CONSIDERATION AND WHEN THIS F ACT WAS POINTED OUT BY THE AO AFTER GETTING THE AIR INFORMATION THEN, THE ASSESSEE SURRENDERED THE SAID AMOUNT TO TAX. HENCE, IT IS A CASE OF CONC EALMENT OF INCOME AND THE ASSESSEE ITSELF HAS OFFERED THE INCOME TO TAX W HEN THE AO DISCOVERED THE INCOME NOT OFFERED TO TAX. HE HAS RELIED UPON T HE EXPLANATION 1B OF SECTION 271(1)(C) AS WELL AS DECISION OF COORDINAT E BENCH OF THIS TRIBUNAL DATED 29.09.2017 IN CASE OF M/S AIREN METALS PVT. L TD. VS. CIT IN ITA NO. 820/JP/2016. THE LD. DR THUS SUBMITTED THAT THE DEC ISIONS RELIED UPON THE LD. AR ARE NOT APPLICABLE IN THE FACTS AND CIRCUMST ANCES OF THE CASE WHEN THE ASSESSEE SURRENDERED THE INCOME DISCOVERED BY T HE AO DURING THE COURSE OF ENQUIRY. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. IN REJOINDER THE LD. AR OF THE ASSESSEE HAS SUBMITT ED THAT THE ASSESSING ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 5 OFFICER IN THE ASSESSMENT ORDER PASSED U/S 143(3) O F THE ACT WAS NOT SURE AND CONSISTENT ABOUT THE GROUND ON WHICH THE PENALT Y WAS INITIATED. HE HAS POINTED OUT THAT AT PAGE 3 OF THE ASSESSMENT OR DER IN PARA SECOND THE AO STATED THAT THE ASSESSEE HAS WILLFULLY CONCE ALED ITS INCOME AND HAS GIVEN INACCURATE PARTICULARS OF INCOME WHILE NOT S HOWING ACTUAL SALE AND ACCORDINGLY THE PENALTY PROCEEDING WERE INITIATED S EPARATELY WHEREAS AT THE END OF THE ASSESSMENT ORDER THE AO HAS AGAIN ST ATED THAT PENALTY PROCEEDING U/S 271(1)(C) R.W.S. 274 OF THE INCOME T AX ACT HAS BEEN INITIATED SEPARATELY FOR CONCEALMENT OF INCOME OR F URNISHED INACCURATE PARTICULARS OF INCOME. THEREFORE, THE AO HAS NOT MA DE IT CLEAR ON WHAT GROUND THE PENALTY PROCEEDING WERE INITIATED. FURTH ER, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF NOTICE ISSUED U/S 274 OF THE ACT WHEREIN THE ASSESSING OFFICER HAS NOT SPECIFIED THE GROUNDS ON WHICH THE PENALTY PROCEEDING WERE INITIATED. AS REGARDS THE DECISION OF THE COORDINATE BENCH IN CASE OF M/S AIREN METALS PVT. LTD. VS. ACIT THE LD. AR HAS POINTED OUT THE SAID DECISION IS ON PECULIAR FACTS OF THE SAID CASE AND THEREFORE IS NOT APPLICABLE TO THE CASE OF THE ASSESSE. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT IN THE RETURN O F INCOME THE ASSESSEE HAS NOT DISCLOSED THE SALE OF FLATS AMOUNTING TO RS . 16,02,000 AND WHEN ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 6 THE AO POINTED OUT THE DISCREPANCY IN THE SALES DIS CLOSED BY THE ASSESSEE AND THE SALES AS PER AIR INFORMATION THE ASSESSEE S URRENDERED THE SAID INCOME AND STATED THAT DUE TO INADVERTENT MISTAKE T HE SALE AMOUNTING TO RS. 16,02,000/- WAS NOT RECORDED IN THE BOOKS OF AC COUNTS. THEREFORE, THERE IS NO DISPUTE ON THE POINT THAT THE ASSESSEE SURRENDERED THIS INCOME WHEN THE AO BROUGHT TO THE NOTICE OF THE ASSESSEE A BOUT THE DISCREPANCY IN THE SALES DECLARES BY THE ASSESSEE WHICH IS NOT MATCHING WITH THE DETAILS AS PER AIR INFORMATION. THE ASSESSING OFFIC ER THOUGH STATED IN THE ASSESSMENT ORDER THAT THE PENALTY PROCEEDING HAVE B EEN INITIATED SEPARATELY HOWEVER, THE GROUNDS ON WHICH THE PENALT Y PROCEEDING HAVE BEEN INITIATED ARE REQUIRED TO BE STATED IN THE SHO W CAUSE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE INCOME TAX ACT. I F IND THAT THE ASSESSING OFFICER HAS NEITHER SPECIFIED A PARTICULAR GROUND O R DEFAULT OF THE ASSESSEE NOR DELETED THE IRRELEVANT GROUND OR DEFAULT OF TH E ASSESSEE AS MENTIONED IN THE SHOW CAUSE NOTICE ISSUED U/S 274 DATED 30.0 8.2013. THE RELEVANT PARA OF THE NOTICE IS REPRODUCED AS UNDER:- HAVE CONCEALED THE PARTICULARS OF YOUR INCOME OR --------- FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. THOUGH THE ASSESSEE HAS SURRENDERED THIS AMOUNT TO TAX HOWEVER, IT IS AN ADDITION MADE TO THE INCOME AS DECLARED BY THE ASSE SSEE IN THE RETURN OF ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 7 INCOME AND THEREFORE, IT IS NOT THE CASE WHERE THE AO HAS NOT MADE AN ADDITION BUT THE CASE OF THE ASSESSEE FALLS IN THE CATEGORY OF ADDITION TO THE TOTAL INCOME HAS BEEN MADE BY THE AO THOUGH BAS ED ON THE SURRENDERED MADE BY THE ASSESSEE. 7. AS REGARDS THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN CASE OF M/S AIREN METALS PVT. LTD. VS. ACIT (SUPRA), I FIND THAT IN THE SAID CASE THE AO ISSUED TWO SHOW CAUSE NOTICES U/S 274 OF THE ACT AND ONLY SECOND SHOW CAUSE NOTICE ISSUED BY THE AO SPECIFIED GROUND S FOR WHICH THE PENALTY PROCEEDING WERE INITIATED TO MAKE THE ASSES SEE AWARE ABOUT THE DEFAULT COMMITTED BY THE ASSESSEE. FURTHER, IN THE SAID CASE THE ASSESSEE DID NOT RESPOND TO THE SHOW CAUSE NOTICE AND DID NO T ATTEND THE PENALTY PROCEEDING, THEREFORE, NO EXPLANATION WAS OFFERED B Y THE ASSESSEE BEFORE THE AO IN THE PENALTY PROCEEDING. ACCORDINGLY, THE SAID DECISION IS BASED ON PECULIAR FACTS OF THE SAID CASE AND CANNOT BE AP PLIED IN THE CASE IN HAND WHERE THE AO HAS ISSUED ONLY ONE SHOW CAUSE NO TICE U/S 274 WITHOUT SPECIFYING THE GROUNDS FOR WHICH THE PENALTY U/S 27 1(1)(C) WAS PROPOSED TO BE LEVIED. THE HONBLE KARNATAKA HIGH COURT IN C ASE OF CIT MANJUNATHA COTTON & GINNING FACTORY (SUPRA) HAS DEALT WITH TH IS ISSUE EXTENSIVELY AND HELD IN 59 TO 63 AS UNDER:- 59. AS THE PROVISION STANDS, THE PENALTY PROCEEDINGS C AN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER PASSED BY ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 8 THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGAR DING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENA LTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUE D UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDE R WHICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD N OT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANAT ION 1(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIV IL 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 M ADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PEN ALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT 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 STIP ULATED IN SECTION 271(L)(C) DO NOT EXIST AS SUCH HE IS NOT LI ABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FO 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 ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUST ICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PR OCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY AT TRACT 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 PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM GUILTY FOR EITHER TH E ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 9 THE EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 2 71(L)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, TH E PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUND S AND THE SAID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY 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 AUTHOR ITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS O THER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PENALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FIN AL ORDER IMPOSING PENALTY WOULD OFFEND PRINCIPLES OF NATURAL JUSTICE AND CANNOT BE SUSTAINED. THUS ONCE THE PROCEEDINGS ARE INITIATED ON ONE GROUND, THE PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROU ND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS N OT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSI TION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERI ALS IN THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME T HE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHI CH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE ACT T O INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED IN THE COU RSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF 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 T. ASHOK PAI V. CIT [2007] 292 ITR 11/161 TAXMAN 340 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INAC CURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF CIT V. MANU ENGG. [1980] 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKET ING (P.) ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 10 LTD. [2008] 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 NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CON CEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS T HE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE ST ANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. INDEPENDENT PROCEEDING 62. THE PENALTY PROCEEDINGS ARE DISTINCT FROM ASSESSME NT PROCEEDINGS, AND INDEPENDENT THEREFROM. THE ASSESSM ENT PROCEEDINGS ARE TAXING PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATING FROM PROCEEDINGS OF ASS ESSMENT ARE INDEPENDENT AND SEPARATE ASPECTS OF THE PROCEEDING. SEPARATE PROVISION IS MADE FOR THE IMPOSITION OF PENALTY AND SEPARATE NOTICES OF DEMAND ARE MADE FOR RECOVERY OF TAX AND AMOUNT O F PENALTY. ALSO SEPARATE APPEAL IS PROVIDED AGAINST ORDER OF IMPOSI TION OF PENALTY. ABOVE ALL, NORMALLY, ASSESSMENT PROCEEDINGS MUST PR ECEDE PENALTY PROCEEDINGS. ASSESSEE IS ENTITLED TO SUBMIT FRESH E VIDENCE IN THE COURSE OF PENALTY PROCEEDINGS. IT IS BECAUSE PENALT Y PROCEEDINGS ARE INDEPENDENT PROCEEDINGS. THE ASSESSEE CANNOT QUESTI ON THE ASSESSMENT JURISDICTION IN PENALTY PROCEEDINGS. JUR ISDICTION UNDER PENALTY PROCEEDINGS CAN ONLY BE LIMITED TO THE ISSU E OF PENALTY, SO THAT VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATT ER IN PENALTY PROCEEDINGS. IT IS NOT POSSIBLE TO GIVE A FINDING T HAT THE REASSESSMENT IS INVALID IN SUCH PENALTY PROCEEDINGS . CLEARLY, THERE IS NO IDENTITY BETWEEN THE ASSESSMENT PROCEEDINGS AND THE PENALTY PROCEEDINGS. THE LATTER ARE SEPARATE PROCEEDINGS TH AT MAY, IN SOME CASES, FOLLOW AS A CONSEQUENCE OF THE ASSESSMENT PR OCEEDINGS. THOUGH IT IS USUAL FOR THE ASSESSING OFFICER TO REC ORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS ARE BEING INITIATED, THIS IS MORE A MATTER OF CONVENIENCE THAN OF LEGAL REQUIREM ENT. ALL THAT THE LAW REQUIRES, SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT THEY SHOULD BE INITIATED IN THE COURSE OF THE PROCEEDINGS FOR ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 11 ASSESSMENT. IT IS SUFFICIENT, IF THERE IS SOME RECO RD SOMEWHERE, EVEN APART FROM THE ASSESSMENT ORDER ITSELF, THAT THE AS SESSING OFFICER HAS RECORDED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEALMENT OR OTHER DEFAULT FOR WHICH PENALTY ACTI ON IS CALLED FOR. INDEED, IN CERTAIN CASES, IT IS POSSIBLE FOR THE AS SESSING OFFICER TO ISSUE A PENALTY NOTICE OR INITIATE PENALTY PROCEEDI NGS EVEN LONG BEFORE THE ASSESSMENT IS COMPLETED. THERE IS NO STA TUTORY REQUIREMENT THAT THE PENALTY ORDER SHOULD PRECEDE O R BE SIMULTANEOUS WITH THE ASSESSMENT ORDER. IN POINT OF FACT, HAVING REGARD TO THE MODE OF COMPUTATION OF PENALTY OUTLIN ED IN THE STATUTE, THE ACTUAL PENALTY ORDER CANNOT BE PASSED UNTIL THE ASSESSMENT IS FINALISED. CONCLUSION 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EMERGES IS AS UNDER: (A ) PENALTY UNDER SECTION 271(L)(C) IS A CIVIL LIABILIT Y. (B ) MENS REA IS NOT AN ESS ENTIAL ELEMENT FOR IMPOSING PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. (C ) WILFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT F OR ATTRACTING CIVIL LIABILITY. (D ) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 271(L )(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDINGS UNDER SEC TION 271. (E ) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISCERNI BLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORIT Y OR REVISIONAL AUTHORITY. (F ) EVEN IF THERE IS NO SPECIFIC FINDING REGARDIN G THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT BECAUSE OF ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 12 DEEMING PROVISION. (G ) E VEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESSM ENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDIN GS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE ASSESSMENT OFFI CER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAI NED I N SECTION 1(B). (H ) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO T HE 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 LIABILITY IS ADM ITTED IS NOT AUTOMATIC. (K ) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORDER O F 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 IMPOS E PENALTY, UNLESS IT IS DISCERNIBLE 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 I F NOT IT WOULD HAVE ESCAPED FR OM TAX NET AND AS OPINED BY THE ASSESSING OFFICER I N THE ASSESSMENT ORDER. (L ) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPLANAT ION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE FAILS TO PRO VE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN ORDER IMPOSING PENALTY COULD BE PASSED. (M ) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTAN TIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL I NCOME HAVE BEEN ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 13 DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. (N ) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECT ION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBIGUITY. (O ) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATIS FACTION OR HAS NOT ISSUED ANY DIRECTION TO IN ITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE A UTHORITY AND NOT THE ASSESSING AUTHORITY. (P ) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPECIFIC ALLY STATE THE GROUNDS MENTIONED IN SECTION 271(L)(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 MENTIONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT OF LAW. (R ) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE HAS T O 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 AND FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. (T ) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSES SMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSM ENT, IT IS INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. (U ) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEEDINGS INSOFAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING OF INCORREC T PARTICULARS' ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 14 WOULD NOT OPERATE AS RES JUDICATA IN THE PENALTY PR OCEEDI NGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDING S ON MERITS. HOWEVER, THE VALIDITY OF THE ASSESSMENT OR REASSESS MENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSM ENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. I FURTHER NOTE THAT THE HONBLE SUPREME COURT IN CA SE OF CIT SSAS EMERALD MEADOWS (SUPRA) HAS DISMISSED THE SLP FILED BY THE REVENUE AGAINST THE DECISION OF HONBLE KARNATAKA HIGH COUR T WHEREIN THE DECISION IN CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACT ORY (SUPRA) WAS FOLLOWED. ACCORDINGLY, IN VIEW OF THE ABOVE FACTS A ND CIRCUMSTANCES OF THE CASE AS WELL AS THE DECISIONS CITED (SUPRA) I HOLD THAT THE NOTICE ISSUED U/S 274 R.W.S. 271(1)(C) OF THE ACT DATED 30.08.2013 I S NOT VALID AND THE SAME IS QUASHED. SINCE, THE NOTICE U/S 274 IS QUASH ED BEING INVALID CONSEQUENTIAL LEVY OF PENALTY IS ALSO DELETED. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 25/01/2018. SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL; @ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 25/01/2018 *SANTOSH ITA 801/JP/16_ M/S JAI AMBEY ASSOCIATES VS. ITO, JAIPUR 15 VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S JAI AMBEY ASSOCIATES, JAIPUR. 2. IZR;FKH @ THE RESPONDENT- THE ITO, 3(1), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 801/JP/16) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR