SHRI GULAM FAROOQ ANSARI, Jaipur V. INCOME TAX OFFICER, Jaipur

ITA 913/JPR/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6171 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Keywords: Recovery proceedings; Principle of natural justice; Initiation of penalty proceedings
• Section: 153A; 132; 10

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH HKKXPAN] YS[KK L NL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, A M VK;DJ VIHY LA- @ ITA NO. 912 & 913/JP/2017 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 & 2010-11 SHRI GULAM FAROOQ ANSARI 3261-62, MAJID MANSION, NAWAB KA CHOURAHA, GHAT GATE, JAIPUR. CUKE VS. THE ITO, WARD-2(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABPF 0454 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI VIJAY GOYAL (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 05/04/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 23 / 04/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE COMPOSITE ORDER OF CIT (A), JAIPUR DATED 29.09.2017 ARISING FROM PENALTY ORDER PASSED U/S 271(1)(C) OF THE I.T. ACT FOR THE ASSESSMENT YEARS 2009-10 & 2010-11 RESPECTIVELY. THE ASSESSEE HAS RAISED THE COMMON GROUNDS IN THESE APPEALS. THE GROUNDS RAISED FOR THE ASSESSMENT YEAR 2009-10 ARE REPRODUCED AS UNDER:- ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN REJECTING THE LEGAL CONTENT ION OF THE ASSESSEE THAT THE INITIATION AND IMPOSING OF PENALT Y PROCEEDING IS WRONG, BAD IN LAW, IN-VALID AND VOID-AB-INITIO AS T HE LD AO INITIATED/IMPOSED THE PENALTY U/S 271(1)(C) OF INCO ME TAX ACT, 1961 WITHOUT SPECIFYING THE LIMB FOR REASONS IN THE PENALTY NOTICE TO IMPOSE THE PENALTY I.E.. WHETHER IT IS FO R CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACC URATE PARTICULARS OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN CONFIRMING THE PENALTY U/S 271(1)(C) OF I.T. ACT, 1961 ON THE ADDITIONAL INCOME OF RS. 29,0 1,920/- DECLARED BY THE ASSESSEE IN HIS RETURN OF INCOME FI LED U/S 153A OF THE ACT. 3. THE ASSESSEE PRAYS FOR LEAVE TO ADD, TO AMEND, T O DELETE, OR MODIFY THE ALL OR ANY GROUNDS OF APPEAL ON OR BEFOR E THE HEARING OF APPEAL. 2. GROUND NO. 1 IS REGARDING THE VALIDITY OF INITIA TION OF PROCEEDINGS U/S 271(1)(C) OF THE ACT AS THE AO HAS NOT SPECIFIE D THE GROUNDS IN THE SHOW CAUSE NOTICE ISSUED U/S 274 OF THE ACT WHETHER IT IS FOR CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISH ING OF INACCURATE PARTICULARS OF INCOME. THERE WAS SEARCH U/S 132 ON 22.09.2010 IN THE CASE OF SHREE RAM GROUP, JAIPUR TO WHICH THE ASSESS EE BELONGS. IN RESPONSE TO THE NOTICE U/S 153A OF THE ACT THE ASSE SSEE FILED HIS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 30,44,970/- FOR THE ASSESSMENT ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 3 YEAR 2009-10 WHICH INCLUDES RS. 29,01,920/- AS INCO ME SURRENDERED AT THE TIME OF SEARCH. SIMILARLY IN THE ASSESSMENT YEA R 2010-11 THE ASSESSEE IN THE RETURN OF INCOME FILED U/S 153A OF THE ACT HAD OFFERED THE INCOME TO TAX AS SURRENDERED DURING THE SEARCH. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT PROCEEDING U/S 153A OF THE ACT MADE VARIOUS ADDITIONS AND ACCORDINGLY, THE TOTAL I NCOME OF THE ASSESSEE WAS ASSESSED AT RS. 4,09,95,690/- FOR THE ASSESSMENT YEAR 2009-10 AND RS. 2,25,61,940/- FOR THE ASSESSMENT YE AR 2010-11. THUS, THE AO MADE ADDITION OF RS. 3,76,00,000/- FOR THE A SSESSMENT YEAR 2009-10 AND RS. 2,07,00,000/- FOR THE ASSESSMENT YE AR 2010-11. THE ASSESSEE CHALLENGED THE ACTION OF THE AO IN THE QUA NTUM PROCEEDINGS BEFORE THE LD. CIT(A) HOWEVER, IN THE MEAN TIME THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S 271(1)(C) OF THE ACT BY ISSUING THE SHOW CAUSE NOTICE DATED 31.03.2013. THE QUANTUM APPEALS WERE DECIDED BY THE LD. CIT(A) VIDE ORDER DATED 12.10.2015 WHEREBY PART RELIEF WAS GRANTED TO THE ASSESSEE. THE ASSESSEE FURTHER CARRI ED THE MATTER TO THIS TRIBUNAL AND FINALLY THIS TRIBUNAL HAS DELETED THE ADDITIONS MADE BY THE AO IN THE ASSESSMENT FRAMED U/S 153A OF THE ACT FOR BOTH THE YEARS EXCEPT THE INCOME SURRENDERED BY THE ASSESSEE. SUBS EQUENTLY, THE AO AS LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT IN R ESPECT OF THE INCOME ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 4 SURRENDERED BY THE ASSESSEE FOR BOTH THE YEARS. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT( A) BUT COULD NOT SUCCEED. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT IS NOT SUST AINABLE AS THE ASSESSING OFFICER HAS NOT SPECIFIED THE GROUND AND CHARGE AGAINST WHICH THE PENALTY WAS PROPOSED TO BE LEVIED WHETHER IT WA S CONCEALMENT OF PARTICULARS OF INCOME OR FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME. THEREFORE, THE INITIATION OF PENALTY PROCE EDING IS BAD IN LAW AND VOID-AB-INTIO. THE LD. AR HAS REFERRED TO THE S HOW CAUSE NOTICE ISSUED BY THE AO U/S 274 R.W.S. 271 AND SUBMITTED T HAT THE ASSESSING OFFICER HAS NOT SPECIFIED THE GROUND FOR WHICH THE PENALTY WAS PROPOSED TO BE LEVIED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY 359 ITR 565 AS WELL AS DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. SSAS EMERALD MEADOWS 242 TAXMAN 150. THE LD. AR HAS ALSO RELIED UPON TH E DECISION OF HONBLE OF JURISDICTIONAL HIGH COURT IN CASE OF SHEVETA CONSTRUCTION COMPANY PVT. LTD VS. ITO VIDE DECISION DATED 06.12.2016 IN DB ITA NO. 534/2008. HENCE, THE LD. AR OF THE ASSESSEE ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 5 HAS SUBMITTED THAT WHEN THE AO HAS NOT SPECIFIED TH E CHARGE IN THE SHOW CAUSE NOTICE THEN THE ASSESSEE WAS NOT GIVEN A N OPPORTUNITY TO EXPLAIN AND REPLY TO THE CHARGE OF THE ASSESSING OF FICER. 4. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E PENALTY IS LEVIED IN RESPECT OF THE SURRENDER INCOME WHICH IS UNDISCLOSED INCOME OF THE ASSESSEE, THEREFORE, THE QUESTION OF EXPLAIN ING THE CHARGE DOES NOT ARISE WHEN THE ASSESSEE HIMSELF HAS SURRENDERED THE INCOME WHICH IS NOTHING BUT CONCEALMENT OF PARTICULARS OF INCOME . HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON RECORD. THE ISSUE BEFORE US IS THE VAL IDITY OF SHOW CAUSE NOTICE U/S 274 OF THE ACT ISSUED ON 31.03.2013. WE NOTE THAT IDENTICAL NOTICES WERE ISSUED FOR BOTH THE ASSESSMENT YEARS A ND THE ASSESSING OFFICER HAS NOT SPECIFIED THE CHARGE/GROUND FOR WHI CH THE PENALTY WAS PROPOSED TO BE LEVIED U/S 271(1)(C) OF THE ACT. IT IS PERTINENT TO NOTE THAT AT THE TIME OF ISSUE OF NOTICE DATED 31.03.201 3 THE ASSESSING OFFICER INITIATED THE PENALTY PROCEEDINGS FOR LEVY OF PENALTY U/S 271(1)(C) IN RESPECT OF THE ENTIRE AMOUNT OF ADDITI ONS MADE BY THE AO AS WELL AS THE AMOUNT WHICH WAS SURRENDERED BY THE ASSESSEE. THEREFORE, THE NOTICE ISSUED BY THE AO U/S 274 OF T HE ACT IS FOR INITIATION ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 6 OF PENALTY PROCEEDING AGAINST THE ENTIRE INCOME ASS ESSED BY THE AO. THOUGH SUBSEQUENTLY THE ADDITIONS MADE BY THE AO WE RE DELETED BY LD CIT(A) AND FURTHER BY THIS TRIBUNAL IN THE QUANTUM PROCEEDINGS HOWEVER, THAT SUBSEQUENT DECISIONS OF THE APPELLATE AUTHORITIES WOULD NOT RECTIFY THE DEFICIENCY AND ILLEGALITY FROM WHIC H THE NOTICE ISSUED U/S 274 OF THE ACT SUFFERS WHEN IT WAS ISSUED ON 31.03. 2013. THUS, IT IS NOT A CASE WHERE THE PENALTY PROCEEDINGS WERE INITIATED BY THE AO ONLY IN RESPECT OF THE INCOME SURRENDERED BY THE ASSESSEE B UT THE SHOW CAUSE NOTICES WERE ISSUED FOR LEVY OF PENALTY IN RESPECT OF THE ENTIRE INCOME WHICH IS MORE THAN RS. 4 CRORES FOR THE ASSESSMENT YEAR 2009-10 AND RS. 2 CRORES FOR THE ASSESSMENT YEAR 2010-11. HENCE , WE DO NOT AGREE WITH THE CONTENTION OF THE LD. DR THAT THE PENALTY WAS FINALLY LEVIED IN RESPECT OF THE INCOME SURRENDERED BY THE ASSESSEE A ND HENCE THE VALIDITY OF SHOW CAUSE NOTICE U/S 274 OF THE ACT CA NNOT BE QUESTIONED. SINCE, THE SHOW CAUSE NOTICE WAS ISSUED FOR LEVY OF PENALTY IN RESPECT OF THE ENTIRE INCOME THEREFORE, THE AO WAS BOUND TO SP ECIFIC THE CHARGE AGAINST THE ASSESSEE AND THE GROUND ON WHICH THE PE NALTY WAS PROPOSED TO BE LEVIED. THE HONBLE KARNATAKA HIGH C OURT IN CASE OF CIT VS. MANJUNATH COTTON AND GINNING FACTORY (SUPRA) WH ILE DEALING WITH AN ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 7 IDENTICAL ISSUE OF VALIDITY OF NOTICE U/S 274 R.W.S . 271 HAS HELD IN PARA 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 THE AUTHORITY CATEGORICALLY RECORDS A FINDING REGAR DING 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 WHICH HA S PASSED THE ORDER. HOWEVER, IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORDER AND IF IT IS A CASE O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANATION 1(B), THEN THOUGH PENALTY PROCEEDING S ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE CONDITIONS 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(L)(C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FORM 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 LIABILI TY. 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 JUSTICE IS OFFENDED IF THE SHOW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASS ESSEE. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, THAT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INAC CURATE ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 8 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 THE O FFENCES. BUT DRAWING UP PENALTY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE GUILTY OF ANOTHER OFFENCE OR FINDING HIM G UILTY FOR EITHER THE ONE OR THE OTHER CANNOT BE SUSTAINED IN LAW. IT IS NEEDLESS TO POINT OUT SATISFACTION OF THE EXISTENCE OF THE GROU NDS MENTIONED IN SECTION 271(L)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS AND THE SAID GROUNDS HAVE TO BE SPECI FICALLY 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 SHOU LD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLED UPON TO A NSWER. IT IS NOT OPEN TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON THE GROUNDS OTHER THAN WHAT ASSES SEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATIO N OF PENALTY 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 PENALTY PROCEE DINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE IN FORMATION, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY I MPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FURTHE R DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNO T VALIDATE THE ORDER OF PENALTY WHICH, WHEN PASSED, WAS NOT SUSTAI NABLE. 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). ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 9 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. THE APEX COURT 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 INACCURATE PARTICULARS OF INC OME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN T HE CASE OF CIT V. MANU ENGG. [1980] 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING (P.) LT D. [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 BE ING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASS ESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT , 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 W ILL 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 PROCEED INGS OF ASSESSMENT ARE INDEPENDENT AND SEPARATE ASPECTS OF THE PROCEEDING. SEPARATE PROVISION IS MADE FOR THE IMPO SITION OF PENALTY AND SEPARATE NOTICES OF DEMAND ARE MADE FOR RECOVERY OF TAX AND AMOUNT OF PENALTY. ALSO SEPARATE APPEAL IS PROVIDED AGAINST ORDER OF IMPOSITION OF PENALTY. ABOVE ALL, NORMALLY, ASSESSMENT PROCEEDINGS MUST PRECEDE PENALTY PROCEED INGS. ASSESSEE IS ENTITLED TO SUBMIT FRESH EVIDENCE IN TH E COURSE OF PENALTY PROCEEDINGS. IT IS BECAUSE PENALTY PROCEEDI NGS 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, ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 10 SO THAT VALIDITY OF THE ASSESSMENT OR REASSESSMENT IN PURSUANCE OF WHICH PENALTY IS LEVIED, CANNOT BE THE SUBJECT M ATTER 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 A ND THE PENALTY PROCEEDINGS. THE LATTER ARE SEPARATE PROCEE DINGS THAT MAY, IN SOME CASES, FOLLOW AS A CONSEQUENCE OF THE ASSESSMENT PROCEEDINGS. THOUGH IT IS USUAL FOR THE ASSESSING O FFICER TO RECORD IN THE ASSESSMENT ORDER THAT PENALTY PROCEEDINGS AR E BEING INITIATED, THIS IS MORE A MATTER OF CONVENIENCE THA N OF LEGAL REQUIREMENT. ALL THAT THE LAW REQUIRES, SO FAR AS T HE PENALTY PROCEEDINGS ARE CONCERNED, IS THAT THEY SHOULD BE I NITIATED IN THE COURSE OF THE PROCEEDINGS FOR ASSESSMENT. IT IS SUF FICIENT, IF THERE IS SOME RECORD SOMEWHERE, EVEN APART FROM THE ASSES SMENT ORDER ITSELF, THAT THE ASSESSING OFFICER HAS RECORD ED HIS SATISFACTION THAT THE ASSESSEE IS GUILTY OF CONCEAL MENT OR OTHER DEFAULT FOR WHICH PENALTY ACTION IS CALLED FOR. IND EED, IN CERTAIN CASES, IT IS POSSIBLE FOR THE ASSESSING OFFICER TO ISSUE A PENALTY NOTICE OR INITIATE PENALTY PROCEEDINGS EVEN LONG BE FORE THE ASSESSMENT IS COMPLETED. THERE IS NO STATUTORY REQU IREMENT THAT THE PENALTY ORDER SHOULD PRECEDE OR BE SIMULTANEOUS WITH THE ASSESSMENT ORDER. IN POINT OF FACT, HAVING REGARD T O THE MODE OF COMPUTATION OF PENALTY OUTLINED IN THE STATUTE, THE ACTUAL PENALTY ORDER CANNOT BE PASSED UNTIL THE ASSESSMENT IS FINA LISED. 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 ESSENTIAL ELEMENT FOR IMPOSING P ENALTY FOR BREACH OF CIVIL OBLIGATIONS OR LIABILITIES. ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 11 (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 I S NO SPECIFIC FINDING REGARDING THE EXISTENCE OF TH E CONDITIONS MENTIONED IN SECTION 271(L)(C), AT LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISCERNI BLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CON CEALMENT BECAUSE OF DEEMING PROVISION. (G ) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE ASSESS MENT 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 CONTAINED IN SECTION 1(B). (H ) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO T HE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND THE COMMI SSIONER. (I ) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. (J ) IMPOSITION OF PENALTY EV EN IF THE TAX LIABILITY IS ADMITTED 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 INITIAT E PENALTY ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 12 PROCEEDINGS OR IMPOSE PENALTY, UNLESS IT IS DISCERN IBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNE ARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT HAS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILITY CAME TO BE ADMITTED AND I F NOT IT WOULD HAVE ESCAPED FROM TAX NET AND AS OPINED BY TH E ASSESSING OFFICER IN 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 OFF ERED 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 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 INITIATE PENALTY PROCEE DINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, TH EN 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 SPECIFICALLY 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. ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 13 (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 FI NDING 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 EMANA TE FROM PROCEEDINGS OF ASSESSMENT, IT IS INDEPENDEN T 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' WOULD NOT OPERATE AS RES JU DICATA IN THE PENALTY PROCEEDINGS. 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. T HE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED AS INVALID IN THE PENALTY PROCEEDINGS. BY FOLLOWING THE SAID DECISION IN CASE OF CIT VS. M ANJUNATH COTTON AND GINNING FACTORY (SUPRA) THE HONBLE KARNATAKA HIGH COURT IN CASE OF CIT SSAS EMERALD MEADOWS (SUPRA) HAS AGAIN DECIDED THI S ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE SLP FI LED BY THE REVENUE AGAINST THE SAID DECISION OF HONBLE KARNATAKA HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT REPORTED IN 242 TAXMAN 150. THUS, THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CASE OF CIT VS. ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 14 MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) HAS N OT BEEN DISTURBED BY THE HONBLE SUPREME COURT. WE FURTHER NOTE THAT THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF SHEVETA CONSTR UCTION COMPANY PVT. LTD VS. ITO (SUPRA) HAS CONSIDERED AN IDENTICAL ISS UE IN PARA 5 TO 10 AS UNDER:- 5. COUNSEL FOR THE APPELLANT RELIED UPON THE DECIS ION OF ANDHRA PRADESH HIGH COURT IN CASE OF CHENNAKESAVA PHARMACE UTICALS VS. COMMISSIONER OF INCOME TAX REPORTED IN (2012) 349 I TR 196, WHEREIN IT HAS BEEN HELD AS UNDER:- IN RELIANCE PETROPRODUCTS (P.) LTD.'S CASE (1 SUPRA ), THE SUPREME COURT ALSO HELD THAT IMPOSITION OF PENALTY IS UNWAR RANTED WHEN THERE IS NO FINDING IN THE ASSESSMENT ORDER THAT DE TAILS SUPPLIED BY THE ASSESSEE WERE FOUND TO BE FALSE. THIS INDICA TES THAT THE VIEW TAKEN BY THE DELHI HIGH COURT IN RAM COMMERCIA L ENTERPRISES LTD.'S CASE (6 SUPRA) WHICH HAS BEEN AP PROVED IN DILIP N. SHROFF'S CASE (10 SUPRA) CONTINUES TO BE VALID A ND THIS PART OF THE JUDGMENT IN DILIP N. SHROFF'S CASE (10 SUPRA) H AS NOT BEEN OVER RULED AND CONTINUES TO BE GOOD LAW. MOREOVER, THE DECISION OF THE DELHI HIGH COURT IN RAM COMMERCIAL ENTERPRIS ES (SUPRA) WAS ALSO FOLLOWED BY THE SAME HIGH COURT IN CIT V. M.K. SHARMA (9SUPRA) AND SLP(C) NO. 17591 OF 2008 FILED AGAINST THE SAID DECISION WAS DISMISSED BY THE SUPREME COURT ON JULY 18, 2008. APPLYING THE ABOVE PRINCIPLE THAT THE ASSESSING OFF ICER SHOULD RECORD IN THE ASSESSMENT ORDER HIS SATISFACTION THA T THE ASSESSEE HAD EITHER CONCEALED THE INCOME OR FURNISHED INACCU RATE PARTICULARS OF INCOME IN HIS RETURN BEFORE IMPOSING PENALTY, WE NOTICED THAT IN THE ASSESSMENT ORDERS PASSED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 198283 (WHICH IS TH E SUBJECT MATTER OF I.T.T.A.NO.29 OF 2000) AND FOR THE ASSESS MENT YEAR ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 15 1983-84 (WHICH IS SUBJECT MATTER OF I.T.T.A.NO.33 O F 2000), NO SUCH SATISFACTION IS RECORDED. 6. ANOTHER DECISION OF SUPREME COURT IN CASE OF DIL IP N. SHROFF VS. JOINT COMMISSIONER OF INCOME TAX & ANR. (2007) 291I TR 519 (SC) IT HAS BEEN HELD AS UNDER IT IS OF COME SIGNIFICANCE THAT IN THE STANDARD P ROFORMA USED BY THE ASSESSING OFFICER IN ISSUING A NOTICE DESPITE T HE FACT THAT THE SAME POSTULATES THAT INAPPROPRIATE WORDS AND PARAGR APHS WERE TO BE DELETED, BUT THE SAME HAD NOT BEEN DONE. THUS, T HE ASSESSING OFFICER HIMSELF WAS NOT SURE AS TO WHETHER HE HAD P ROCEEDED ON THE BASIS THAT THE ASSESSEE HAD CONCEALED HIS INCOM E OR HE HAD FURNISHED INACCURATE PARTICULARS. EVEN BEFORE US, T HE LEARNED ADDITIONAL SOLICITOR GENERAL WHILE PLACING THE ORDE R OF ASSESSMENT LAID EMPHASIS THAT HE HAD DEALT WITH BOTH THE SITUA TIONS. THE IMPUGNED ORDER, THEREFORE, SUFFERS FROM NON-APP LICATION OF MIND. IT WAS ALSO BOUND TO COMPLY WITH THE PRINCIPL ES OF NATURAL JUSTICE. THE INCOME TAX OFFICER HAD MERELY HELD THAT THE ASS ESSEE IS GUILTY OF FURNISHING OF INACCURATE PARTICULARS AND NOT OF CONCEALMENT OF INCOME; WHICH FINDING WAS ARRIVED AT ALSO BY THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX APPEL LATE TRIBUNAL. IN THE FACTS AND CIRCUMSTANCES OF THE CAS E, THERE ARE ENOUGH MATERIAL TO SHOW THAT THE ACTION ON THE PART OF THE APPELLANT MAY NOT BE SAID TO BE SUCH WHICH WOULD AT TRACT THE PENAL PROVISION UNDER S. 271(1)(C). FOR THE REASONS AFOREMENTIONED, THE IMPUGNED JUDGMENT CANNOT BE SUS TAINED. 7. HE CONTENDED THAT WHILE CONCLUDING THE ASSESSMEN T ORDER THE OFFICER MUST BE CLEAR WHETHER IT IS THE CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE DETAIL. HE CANNOT HAVE BOT H THE THINGS. 7.1 HOWEVER, MR. SINGHI APPEARING FOR THE DEPARTMEN T SUBMITS THAT A PERUSAL OF THE ORDER OF PENALTY MAKES IT AMP LY CLEAR ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 16 THAT BOTH THE THINGS ARE FULFILLED. IN THAT VIEW OF THE MATTER THE VIEW TAKEN BY THE TRIBUNAL IS REQUIRED TO BE AC CEPTED. 8. WE HAVE HEARD MR. PRAKUL KHURANA AND MR. ANUROOP SINGHI. 9. TAKING INTO CONSIDERATION THE DECISION OF THE AN DHRA PRADESH HIGH COURT WHICH VIRTUALLY CONSIDERED THE S UBSEQUENT LAW AND THE LAW WHICH WAS PREVAILING ON THE DATE TH E DECISION WAS RENDERED ON 27.08.2012. IN VIEW OF THE OBSERVAT IONS MADE IN THE SAID JUDGMENT, WE ARE OF THE OPINION THAT TH E CONTENTION RAISED BY THE APPELLANT IS REQUIRED TO BE ACCEPTED AND IN THE FINDING OF ASSESSING OFFICER IN THE ASSESSMENT ORDE R IT IS HELD THAT THE AO, HAS TO GIVE A NOTICE AS TO WHETHER HE PROPOSES TO LEVY PENALTY FOR CONCEALMENT OF INCOME OR FURNISHIN G INACCURATE PARTICULARS. HE CANNOT HAVE BOTH THE CONDITIONS AND IF IT IS SO HE HAS TO SAY SO IN THE NOTICE AND RECORD A FINDING IN THE PENALTY ORDER. 10. IN THAT VIEW OF THE MATTER, THE ISSUE IS ANSWER ED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. ACCORDINGLY, IN VIEW OF THE BINDING PRECEDENT WE HO LD THAT WHEN THE AO HAS NOT SPECIFICALLY INDICATED THE GROUNDS FOR INIT IATION OF PROCEEDINGS FOR LEVY OF PENALTY WHETHER IT IS FOR CONCEALMENT O F PARTICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME, THEN THE SAID SHOW CAUSE NOTICE SUFFERS FROM ILLEGALITY AND CONSEQUENT IAL ORDER PASSED BY THE AO U/S 271(1)(C) IS NOT SUSTAINABLE AND LIABLE TO BE QUASHED. ACCORDINGLY, WE SET ASIDE THE IMPUGNED ORDER PASSED U/S 271(1)(C) AND DELETE THE PENALTY OF LEVIED BY THE AO U/S 271(1)( C) OF THE ACT. ITA NO. 912&913/JP/2017 SHRI GULAM FAROOQ ANSARI VS. ITO 17 6. GROUND NO. 2 RELATES TO CONFIRMING THE PENALTY U /S 271(1)(C) ON THE ADDITIONAL INCOME OF RS. 29,01,920/- FOR A.Y. 2 009-10 AND RS. 16,51,000/- FOR A.Y. 2010-11 DECLARED BY THE ASSESS EE IN HIS RETURN OF INCOME FILED U/S 153A OF THE ACT. SINCE, WE HAVE DE CIDED GROUND NO. 1 IN FAVOUR OF THE ASSESSEE AND QUASHED THE PENALTY O RDERS THEREFORE, GROUND NO. 2 OF THE ASSESSEE HAS BECOME INFRUCTUOUS . IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE AR E PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/04/2018. SD/- SD/- HKKXPAN FOT; IKY JKO (BHAGCHAND) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/04/2018. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI GULAM FAROOQ ANSARI, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT - ITO, WARD-2(1), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 912 & 913/JP/2017} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR