M/s Intergarden (India) Private Ltd., Bangalore V. ACIT, Bangalore

ITA 887/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89991 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 04-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Search and seizure; Principle of natural justice
• Section: 27; 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NOS.887 & 888(B)/2014 (ASSESSMENT YEARS : 2007-08 & 2008-09) M/S SOBHA SPACE (P) LTD. SHOBHA CORPORATE OFFICE SARJAPUR, MARATHALLI OUTER RING ROAD, DEVARABISANAHALLI, BELANDUR POST, BANGALORE-560 103 APPELLANT PAN NO.AAICS0419G VS THE ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-1(3), 3 RD FLOOR, BANGALORE-560 001 RESPO NDENT ASSESSEE BY : SHRI V.CHANDRASHEKAR, ADVOCATE REVENUE BY : DR. P.K.SRIHARI, ADDL.CIT DATE OF HEARING : 15-06-2015 DATE OF PRONOUNCEMENT : 29-06-2015 O R D E R PER SHRI VIJAY PAL RAO, JM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS BOTH DATED 28-02-2014 OF THE CIT(A)-III, BAN GALORE ARISING FROM THE PENALTY ORDERS PASSED U/S 271(1)(C ) OF THE IT ACT, 1961 FOR THE ASSESSMENT YEAR 2007-08 & 2008-09 RESPECTIVELY. 2. THE ASSESSEE HAS RAISED COMMON GROUNDS IN THESE APPEALS. ONE OF THE GROUNDS OF THE ASSESSEE IS CHALLENGING THE V ALIDITY OF NOTICE ISSUED ITA NO.887 & 888(BANG)2014 2 U/S 274 OF THE IT ACT, R.W.S.271(1)(C ) OF THE IT A CT, 1961 AND CONSEQUENTLY, THE VALIDITY OF PENALTY ORDERS PASSED U/S 271(1)(C ) OF THE ACT. FIRST WE WILL TAKE UP THIS ISSUE WITHOUT GOING INTO THE MERITS OF THE CASE. 3. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT PE NALTY PROCEEDINGS INITIATED IN THE HANDS OF THE ASSESSEE ARE BAD IN L AW IN THE ABSENCE OF CLEAR RECORDING OF HIS ALLEGATION, BY THE AO THAT THERE I S A CASE OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. I T IS CONTENDED THAT THE AO HAS NOT MENTIONED IN THE NOTICE ISSUED U/S 274 AS T O WHETHER THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PA RTICULARS OF INCOME. THE AO HAS ALSO NOT MENTIONED CLEARLY THE ALLEGATIO N IN HIS NOTICE AND THEREFORE, DEPRIVED THE ASSESSEE TO LEAD A PROPER D EFENSE. HE HAS REFERRED NOTICE U/S 274 DATED 27-12-2011 ISSUED BY THE AO A ND SUBMITTED THAT THE SAID NOTICE IS SILENT ABOUT WHAT SORT OF INCOME WAS CONCEALED BY THE ASSESSEE OR WHICH INACCURATE PARTICULARS OF SUCH IN COME WERE FURNISHED. THUS, THE IMPUGNED PENALTY ORDER IS NOT SUSTAINABLE UNDER LAW AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS DESAI & CO. IN ITA NO.5062 OF 2010 DATED 16-04-2012 AND ALSO IN CA SE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (359 ITR 565). LEARNED AR HAS FURTHER POINTED OUT THAT AN IDENTICAL ISSUE HAS BEE N CONSIDERED AND DECIDED BY THIS TRIBUNAL IN A SERIES OF DECISIONS W HEREIN THE TRIBUNAL BY FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPR A) HAS CANCELLED THE ITA NO.887 & 888(BANG)2014 3 PENALTY LEVIED U/S 271(1) (C ) OF THE IT ACT. HE HAS RELIED UPON THE FOLLOWING DECISIONS; 1. SHRI RAVINDRA VS ITO IN ITA NO.1421 & 1422(B)/20 13 DT.12-12-2014 2. M/S MATHOSHREE BUILDERS PVT.LTD VS DCIT IN ITA N O.96(B)/2013 DT.21-03- 2014. 4. ON THE OTHER HAND, LEARNED DR SUBMITTED THAT WHE N THERE IS NO AMBIGUITY IN THE ASSESSMENT ORDER AS WELL AS IN THE NOTICE U/S 274 OF THE IT ACT, 1961 THAN, THE ASSESSEE WAS NOT DEPRIVED OF AN Y OPPORTUNITY OF LEADING DEFENSE. HE HAS REFERRED THE ASSESSMENT ORDER AND SUBMITTED THAT IN THE ASSESSMENT ORDER ITSELF, THE AO HAS SPECIFICALLY MA DE A MENTION THAT THE PENALTY PROCEEDINGS U/S 271(1)(C ) INITIATED. IN THE CASE OF THE ASSESSEE, THE ADDITIONAL INCOME OF RS.25.00 LAKHS WAS DECLARE D BY THE ASSESSEE U/S 132(4) AND AFTER REDUCING THE LOSS OF RS.1,97,072/- , THE ASSESSMENT WAS MADE BY THE AO, ON THE INCOME OFFERED BY THE ASSESS EE OF RS.23,02,928/-. THUS, THERE WAS NO AMBIGUITY OR CONFUSION ABOUT THE CONCEALMENT OF INCOME AND PARTICULARS OF INCOME WHICH WERE DISCLOS ED BY THE ASSESSEE DURING THE SEARCH AND SEIZURE ACTION U/S 132 OF THE IT ACT, 1961. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION AS WELL AS THE MATERIAL ON RECORD. WE NOTE THAT THE NOTICES DATED 27-12-2011 ISSUED IN RESPECT OF BOTH THE ASSESSMENT YEARS UNDER CONSIDERATION ARE S ILENT IN RESPECT OF NATURE AND A SPECIFIC PARTICULARS OF INCOME WHICH H AS BEEN CONCEALED BY ITA NO.887 & 888(BANG)2014 4 THE ASSESSEE OR PARTICULARS OF INCOME WHICH ARE ALL EGEDLY FURNISHED INACCURATELY BY THE ASSESSEE. THE SAID NOTICE ISSUE D BY THE AO IS A STEREOTYPE PROFORMA NOTICE WITHOUT GIVING ANY DETAI LS OF THE ALLEGED CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF SUCH INCOME. THEREFORE, INSOFAR AS THE FACT OF NON-MENTIONING OF ANY SPECIFIC ALLEGATION IN THE NOTICE U/S 274 OF THE AC T IS NOT IN DISPUTE. ACCORDINGLY, THE CASE OF THE ASSESSEE IS COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS M/S MANJUNATHA COTTON & GINNING FACTORY, (SUPRA). THE CO-ORDINATE BENCH IN THE CASE OF SHRI L.RAVINDRA VS ITO (SUPRA), HAD THE OCCASION TO CONSIDER AN IDENTICAL ISSUE. IN THE SAID CASE, THE TRIBUNAL HAS DISCUSSED THE VALIDITY OF THE PENALTY LEVIED U/S 271(1)(C ) OF THE ACT IN PARA-8 TO 11 AS UNDER; 08.WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & A NR. V. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS 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 PROCEEDING S 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 ITA NO.887 & 888(BANG)2014 5 UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WHICH CONTAINS THE SATISFACTION OF THE AUTHOR ITY WHICH HAS PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORD ER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-1 OR IN EXPLANATION-1(B), THEN THOUGH P ENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, I N 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 IMPOSI NG PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR TH AT 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 N OT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GRO UND 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.887 & 888(BANG)2014 6 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE PARTICULARS OF INCOME. NO DOUBT, THE FACTS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOME CASES THERE 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 F INDING HIM GUILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SU STAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF TH E EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONFINED ONLY TO THOSE GROUNDS AND THE SA ID GROUNDS HAVE TO BE SPECIFICALLY STATED SO THAT THE ASSESSEE WOULD HAVE THE OPPORTUNITY TO MEET THOSE GROUNDS. A FTER, HE PLACES HIS VERSION AND TRIES TO SUBSTANTIATE HIS CL AIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY T O IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION OF PE NALTY PROCEEDINGS MAY BE VALID AND LEGAL, THE FINAL 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 S AME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALT Y ITA NO.887 & 888(BANG)2014 7 PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHI CH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS N OT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERM INED WITH REFERENCE TO THE INFORMATION, FACTS AND MATERIALS I N THE HANDS OF THE AUTHORITY IMPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHER DISCOVERY OF FACTS SUB SEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE OR DER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAINABLE. 61. THE ASSESSING OFFICER IS EMPOWERED UNDER THE AC T TO INITIATE PENALTY PROCEEDINGS ONCE HE IS SATISFIED I N THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS OF TOTAL INCOM E UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PART ICULARS OF INCOME ARE DIFFERENT. THUS THE ASSESSING OFFICER WH ILE ISSUING NOTICE HAS TO COME TO THE CONCLUSION THAT WHETHER I S IT A CASE OF CONCEALMENT OF INCOME OR IS IT A CASE OF FURNISH ING OF INACCURATE PARTICULARS. THE APEX COURT IN THE CASE OF ASHOK PAI REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PAR TICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 1 22 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIR GO MARKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTA INABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE ITA NO.887 & 888(BANG)2014 8 FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 09. THE FINAL CONCLUSION OF THE HONBLE COURT WAS A S FOLLOWS: 63. IN THE LIGHT OF WHAT IS STATED ABOVE, WHAT EME RGES IS AS UNDER: A) PENALTY UNDER SECTION 271(1)(C) IS A CIVIL LIAB ILITY. B) MENS REA IS NOT AN ESSENTIAL ELEMENT FOR IMPOSI NG PENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. C) WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDI ENT FOR ATTRACTING CIVIL LIABILITY. D) EXISTENCE OF CONDITIONS STIPULATED IN SECTION 2 71(1)(C) IS A SINE QUA NON FOR INITIATION OF PENALTY PROCEEDING S UNDER SECTION 271. E) THE EXISTENCE OF SUCH CONDITIONS SHOULD BE DISC ERNIBLE FROM THE ASSESSMENT ORDER OR ORDER OF THE APPELLATE AUTHORITY OR REVISIONAL AUTHORITY. F) EVEN IF THERE IS NO SPECIFIC FINDING REGARDING THE EXISTENCE OF THE CONDITIONS MENTIONED IN SECTION 27 1(1)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) I T SHOULD BE ITA NO.887 & 888(BANG)2014 9 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 AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PRO CEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA NON FOR THE A SSESSMENT OFFICER TO INITIATE THE PROCEEDINGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTION 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND TH E COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. J) IMPOSITION OF PENALTY EVEN IF THE TAX LIABILITY IS ADMITTED IS NOT AUTOMATIC. K) EVEN IF THE ASSESSEE HAS NOT CHALLENGED THE ORD ER OF ASSESSMENT LEVYING TAX AND INTEREST AND HAS PAID TA X AND INTEREST THAT BY ITSELF WOULD NOT BE SUFFICIENT FOR THE AUTHORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PE NALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND IF NOT IT WOULD H AVE ESCAPED FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ITA NO.887 & 888(BANG)2014 10 L) ONLY WHEN NO EXPLANATION IS OFFERED OR THE EXPL ANATION OFFERED IS FOUND TO BE FALSE OR WHEN THE ASSESSEE F AILS TO PROVE THAT THE EXPLANATION OFFERED IS NOT BONAFIDE, AN OR DER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUB STANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND AL L FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, NO PENALTY COULD BE IMPOSED. N) THE DIRECTION REFERRED TO IN EXPLANATION IB TO SECTION 271 OF THE ACT SHOULD BE CLEAR AND WITHOUT ANY AMBI GUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY S ATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INITIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATIS FACTION, THEN THE PENALTY PROCEEDINGS HAVE TO BE INITIATED BY THE APPELLATE AUTHORITY AND NOT THE ASSESSING AUTHORITY. P) NOTICE UNDER SECTION 274 OF THE ACT SHOULD SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I .E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING O F INCORRECT PARTICULARS OF INCOME Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIRE MENT OF LAW. ITA NO.887 & 888(BANG)2014 11 R) THE ASSESSEE SHOULD KNOW THE GROUNDS WHICH HE H AS TO MEET SPECIFICALLY. OTHERWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED. ON THE BASIS OF SUCH PROCEEDINGS, NO PENA LTY COULD BE IMPOSED TO THE ASSESSEE. S) TAKING UP OF PENALTY PROCEEDINGS ON ONE LIMB AN D FINDING THE ASSESSEE GUILTY OF ANOTHER LIMB IS BAD IN LAW. T) THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE A SSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENA LTY THOUGH EMANATE FROM PROCEEDINGS OF ASSESSMENT, IT I S INDEPENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS IN SO FAR AS 'CONCEALMENT OF INCOME' AND 'FURNISHING O F INCORRECT PARTICULARS' WOULD NOT OPERATE AS RES JUD ICATA IN THE PENALTY PROCEEDINGS. IT IS OPEN TO THE ASSESSEE TO CONTEST THE SAID PROCEEDINGS ON MERITS. HOWEVER, THE VALIDITY O F THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PE NALTY IS LEVIED, CANNOT BE THE SUBJECT MATTER OF PENALTY PRO CEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. 10. PERUSAL OF THE COPY OF THE SHOW CAUSE NOTICE IS SUED U/S. 274 OF THE ACT WAS FILED BEFORE US AT THE TIME OF H EARING, SHOWS THAT THE AO HAS NOT SPELT OUT AS TO WHETHER P ENALTY ITA NO.887 & 888(BANG)2014 12 PROCEEDINGS ARE BEING INITIATED FOR FURNISHING INAC CURATE PARTICULARS OF INCOME OR FOR CONCEALMENT OF PARTICU LARS OF INCOME. SUCH INITIATION OF PENALTY PROCEEDING HAS BEEN HELD TO BE ILLEGAL BY THE HONBLE HIGH COURT OF KARNATAK A IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) . IN THE LIGHT OF THE AFORESAID DECISION OF THE JURISDIC TIONAL HIGH COURT, WE ARE OF THE VIEW THAT THE ORDER IMPOSING P ENALTY HAS TO BE CANCELLED. ACCORDINGLY THE ORDER IMPOSING P ENALTY IS CANCELLED. 11. IN VIEW OF THE ABOVE CONCLUSIONS, THE OTHER SUB MISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE WITH R EGARD TO IMPOSITION OF PENALTY WHEN THE INCOME RETURNED BY T HE ASSESSEE IS ACCEPTED ARE NOT BEING CONSIDERED. 6. A SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF M/S MATHOSHREE BUILDERS PVT.LTD VS DCIT SUPRA. ACCORD INGLY, FOLLOWING THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS MANJUNATHA COTTON & GINNING FACTORY, (SUPRA) AS WEL L AS THE DECISIONS OF THE CO-ORDINATE BENCHES (SUPRA), WE HOLD THAT THE N OTICE ISSUED U/S 274 OF THE ACT, IS BAD IN LAW AND CONSEQUENTLY, THE PENALT Y ORDER PASSED U/S 271(1)(C ) OF THE ACT, FOR THE ASSESSMENT YEARS 200 7-08 & 2008-09 ARE SQUASHED. SINCE WE SQUASHED THE PENALTY ORDER ON THE GROUND OF VALIDITY, WE DO NOT PROPOSE TO GO INTO THE MERITS OF THE PENA LTY LEVIED U/S 271(1)(C ) OF THE ACT. ITA NO.887 & 888(BANG)2014 13 7. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE 29 TH JUNE, 2015. SD/- SD/- (JASON P BOAZ) (VI JAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER D A T E D : 29-06-2015 PLACE: BANGALORE AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER AR, ITAT, BANGALORE