Sri. Kiran Kumar Jain, Mysore V. ITO, Bangalore

ITA 952/BANG/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95322 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJASEKAR
• Keywords: Sale consideration of property below Jantri Value; Business income; Principle of natural justice; Initiation of penalty proceedings; Reasonable cause; Revised return
• Section: 50C; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS. 952 & 953/BANG/2015 ASSESSMENT YEAR : 2007-08 SRI KIRAN KUMAR JAIN PAN: AALPJ 8332R SRI RAMU JAIN, PAN: ABEPJ 7312D # 719, WEST 3 RD CROSS, ASHOKA ROAD, MYSORE. VS. THE INCOME TAX OFFICER, WARD 2(1), MYSORE. APPELLANT RESPONDENT APPELLANTS BY : SHRI SURESH MUTHUKRISHNAN, CA RESPONDENT BY : SHRI M. RAJASEKAR, ADDL. CIT(DR) DATE OF HEARING : 05.11.2015 DATE OF PRONOUNCEMENT : 06.11.2015 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THESE APPEALS BY THE DIFFERENT ASSESSEES ARE DIRE CTED AGAINST THE COMMON ORDER DATED 05.02.2015 OF THE CIT(APPEALS), MYSURU RELATING TO ASSESSMENT YEAR 2007-08. ITA NOS.952 & 953/BANG/2015 PAGE 2 OF 11 2. THE ONLY ISSUE INVOLVED IN THESE APPEALS RELATE TO IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE ACT. 3. THE FACTS MATERIAL ARE THAT THE ASSESSEE PURCHAS ED LAND SITUATED AT SR.NO.71/3, VAJAMANGALA GRAMA MEASURING 1.39 ACRES FOR A CONSIDERATION OF RS.1,97,500 ALONG WITH HIS BROTHER. THIS IS REGI STERED AS DOCUMENT NO.MYN-1-13721-2005-06 AND DT. 22.11.2005. THIS LAN D WAS A DRY LAND AND NO AGRICULTURAL OPERATION HAD BEEN CARRIED ON I N THIS LAND PRIOR TO THE PURCHASE AND IT REMAINED A DRY LAND THROUGHOUT. NOT EVEN DRY CROPS WERE RAISED. THE SAID LANDS WERE NEVER PUT TO USE FOR AG RICULTURAL PURPOSES AND NO ATTEMPT TO USE IT FOR AGRICULTURAL PURPOSES WAS ALSO MADE LIKE MAKING IT ARABLE. 4. THE LAND HELD BY THE ASSESSEE JOINTLY WITH HIS B ROTHER WAS SOLD FOR A CONSIDERATION OF RS.3,00,000 DURING FINANCIAL YEAR ENDING 31.03.2007. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE AO POI NTED OUT THAT THE SUB- REGISTRAR HAD FOR PURPOSE OF STAMP DUTY VALUED THE SAID PROPERTY AT RS.19.75LAKHS. BASED ON SUB-REGISTRAR VALUATION, TH E AO INVOKED THE PROVISION OF SECTION 50C AND LEVIED THE CAPITAL GAI N ON DIFFERENTIAL AMOUNT. FURTHER, DURING THE COURSE OF ASSESSMENT OR PENALTY PROCEEDINGS, THE AO HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTION OR ANY CONCEALMENT OF INCOME OR PROCEEDS OF SALE. THE RECOURSE RESORTED B Y THE AO WAS ONLY INVOKING THE LEGAL FICTION OF SECTION 50C AND LEVI ED THE CAPITAL GAIN. THE MATTER WAS CARRIED BEFORE CIT(A) WHO UPHELD THE ORD ER OF THE AO. ITA NOS.952 & 953/BANG/2015 PAGE 3 OF 11 5. MEANWHILE, THE AO ISSUED SHOW-CAUSE NOTICE FOR L EVYING PENALTY U/S 271 (1)(C) AND THE ASSESSEE REPLIED THAT THE MATTER IS PENDING BEFORE THE TRIBUNAL AND REQUESTED TO KEEP THE PROCEEDING UNDE R ABEYANCE TILL IT REACHES FINALITY. THE AO HOWEVER PASSED PENALTY OR DER U/S. 271(1)(C) OF THE ACT DATED 27.03.2012 IMPOSING PENALTY ON THE AS SESSEES. THE TRIBUNAL BY ORDER DATED 14.08.2014 HAS ALLOWED THE QUANTUM A PPEALS OF THE ASSESSEES IN ITA NOS.274 & 275(BANG)2011. 6. AGAINST THE PENALTY ORDER U/S. 271(1)(C) PASSED BY THE AO, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(APPEALS). THE CIT(APPEALS) HELD AS FOLLOWS:- WHILE THE A() ASSESSED INCOMES UNDER THE HEAD CAPI TAL GAIN, THE HONBLE ITAT DIRECTED TO ASSESS THE SAME UNDER THE HEAD BUSINESS. NEVERTHELESS, THE FACT STILL REMAINS THAT , THE INCOME THERE FROM IS CONCEALED AND THE APPELLANT DID FILE INACCURATE PARTICULARS REGARDING THE SAME TILL THE DATE OF SUR VEY. HENCE, 1 AGREE WITH THE FINDINGS OF THE AO THAT, T HIS IS THE FIT CASE FOR LEVY OF PENALTY. TO THAT EXTENT I AGRE E WITH THE FINDINGS OF THE AO. HOWEVER, THE AO IS DIRECTED TO RESTRICT THE PENALTY BASED ON THE REVISED COMPUTATION BY TREATIN G THE INCOME UNDER THE HEAD BUSINESS AND LEVY THE PENALTY VIA ME DIA BETWEEN THE MINIMUM AND MAXIMUM IN THE SAME RATIO AS PER TH E PENALTY ORDER. TO THAT EXTENT, THE APPELLANTS GET RELIEF. 7. THUS, THE CIT(APPEALS) PARTLY ALLOWED THE APPEAL S OF THE ASSESSEES. 8. AGGRIEVED, THE ASSESSEES ARE IN APPEALS BEFORE U S ON THE FOLLOWING GROUNDS OF APPEAL:- ITA NOS.952 & 953/BANG/2015 PAGE 4 OF 11 1. THE ORDER OF THE LEARNED CIT[A] IN CONFIRMING THE ACTION OF THE LEARNED A.O. TO LEVY PENALTY U/S.271[1][C] O F THE ACT, IN PRINCIPLE AND DIRECTING THE LEARNED A.O. TO LIMIT T HE SAME TO THE EXTENT OF THE INCOME AS RELATING TO BUSINESS IN R ESPECT OF THE INCOME ASSESSED UNDER THE HEAD CAPITAL GAINS ON T HE SALE OF PROPERTY UNDER THE ORDER OF ASSESSMENT IMPUGNED IN APPEAL BEFORE AND ALLOWED BY THE HONBLE ITAT IS CONTRARY TO LAW, EQUITY, WEIGHT OF EVIDENCE, FACTS AND CIRCUMSTANCES OF THE CASE AND THEREFORE, LIABLE TO BE CANCELLED. 2. THE LEARNED CIT[A] FAILED TO APPRECIATE THAT TH E APPELLANT HAS CHALLENGED THE VALIDITY OF THE ASSESSMENT ORDER IN THE COURSE OF WHICH THE PROCEEDINGS FOR THE INITIATING THE LEV Y OF PENALTY WAS INITIATED AND THE IMPUGNED PENALTY ORDER WAS PASSED WAS AS BAD IN LAW AS THE REVISED RETURN OF INCOME FILED WAS BA D IN LAW AND NOT VOLUNTARY, WHICH FACT WAS NOT DISPUTED BY THE D EPARTMENT AND FURTHER, THE GAINS ON THE SALE OF THE PROPERTY WAS ASSESSABLE NOT IN THE HANDS OF THE APPELLANT BUT IN THE HANDS OF THE AOP CONSISTING OF THE APPELLANT AND HIS BROTHER AND AT ANY RATE AS SESSING THE INCOME UNDER THE HEAD CAPITAL GAINS BY INVOKING T HE PROVISIONS OF SECTION 50C OF THE ACT, WAS BAD IN LA W, WHICH WAS ACCEPTED BY THE HONBLE ITAT AND THE HONBLE ITAT D ELETED THE ADDITION MADE UNDER THE HEAD CAPITAL GAINS AND DI D NOT GIVE ANY SPECIFIC DIRECTION TO ASSESS THE INCOME UNDER T HE HEAD BUSINESS INSTEAD AND THEREFORE, THE LEARNED CIT[A] WOULD NOT BE JUSTIFIED IN DIRECTING THE LEARNED A.O. TO LEVY THE PENALTY ON THE INCOME ATTRIBUTABLE UNDER THE HEAD BUSINESS WHEN NO INCOME WAS ATTRIBUTABLE TO THE SALE OF THE ASSET WAS EITHE R ADMITTED AS BUSINESS INCOME IN THE ORIGINAL RETURN FILED OR ASS ESSED AS BUSINESS INCOME BY THE A.O. IN THE IMPUGNED ASSESSM ENT ORDER. 3. THE LEARNED CIT[A] FAILED TO APPRECIATE THAT THE LEARNED A.O. WAS NOT SPECIFIC AS TO THE EXACT DEFAULT ACTIO NABLE U/S.271[1][C] OF THE ACT IN THE NOTICE AS HE WAS VA CILLATING BETWEEN TWO SEPARATE ACTIONABLE DEFAULT AND THEREFO RE, THE LEVY OF PENALTY U/S.271[1][C] FINALLY ON ONE OF TWO DEFAULT S IS BAD IN LAW AND CONTRARY TO THE RATIO OF THE DECISION OF THE HO NBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY REPORTED IN 359 ITR 565 AND DECISIO N OF THE HONBLE ITAT, BANGALORE BENCH C IN THE CASE O F SRINIDHI GOLD IN ITA NO.493/BANG/2013 DATED 19/12/2 014 AND THE PENALTY LEVIED REQUIRES TO BE CANCELLED. ITA NOS.952 & 953/BANG/2015 PAGE 5 OF 11 4. WITHOUT PREJUDICE TO THE ABOVE, THE PENALTY LEV IED WAS BAD IN LAW AS NO INCOME ATTRIBUTABLE TO THE SALE OF THE PROPERTY WAS ASSESSABLE IN THE HANDS OF THE APPELLANT IN INDIVI DUAL STATUS AND THE SAME WAS ASSESSABLE IN THE HANDS OF THE AOP CON SISTING OF THE APPELLANT AND HIS BROTHER AS MEMBERS OF THE AOP AND NON- OFFERING OF THE INCOME IN THE HANDS OF THE APPELLAN T WAS THUS DUE TO REASONABLE CAUSE AND THEREFORE, NO PENALTY WAS L EVIABLE AT ALL. 5. THE ORDER OF LEARNED C1T[A] IN CONFIRMING THE P ENALTY IN PRINCIPLE IS ON A ERRONEOUS APPRECIATION OF THE FAC TS OF THE CASE AND THE ERRONEOUS UNDERSTANDING AND INTERPRETATION OF THE ORDER OF THE HONBLE ITAT AND IS IN VIOLATION OF THE PRINCIP LES OF NATURAL JUSTICE AND CONSEQUENTLY, THE PENALTY LEVIED BY THE A.O. AND SUSTAINED BY THE LEARNED CIT[A] REQUIRES TO BE CANC ELLED. 6. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS. 9. THE LEARNED AR HAS FILED A COPY OF THE NOTICE IS SUED U/S. 274 R.W.S. 271 OF THE ACT DATED 24.12.2009. A PERUSAL OF THE NOTICE REVEALS THAT THE AO HAS NOT DELETED INAPPROPRIATE WORDS AND PARTS IN THE 4 TH PARA OF THE NOTICE, WHEREBY IT IS NOT CLEAR AS TO THE DEFAULT C OMMITTED BY THE ASSESSEE, I.E. FURNISHING OF INACCURATE PARTICULARS OF INCOME OR CONCEALING THE PARTICULARS OF INCOME FOR WHICH PENALTY IS SOUGHT T O BE LEVIED. 10. WE FIND THAT THE HONBLE HIGH COURT OF KARNATAK A IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN) HAS HELD THAT SUCH A NOTICE IS INVALID AND THE CONSEQUENTIAL PENA LTY PROCEEDINGS ARE ALSO NOT VALID. THE RELEVANT PORTION OF THE JUDGMENT AT PARAS 59 TO 61 IS EXTRACTED HEREUNDER FOR REFERENCE:- ITA NOS.952 & 953/BANG/2015 PAGE 6 OF 11 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 REGAR DING THE EXISTENCE OF ANY SAID GROUNDS MENTIONED THEREIN AND THEN PENALTY 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 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 PROCEEDINGS ARE IN THE NA TURE 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 THE Y INTEND IMPOSING PENALTY ON HIM AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AN D 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 TH E DEPARTMENT SENDING A PRINTED FARM WHERE ALL THE GROUND MENTION ED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY 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% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE T O BE HELD TO BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUNDS WHICH HE HAS TO MEET SPECIFICALLY. OTHE RWISE, PRINCIPLES OF NATURAL JUSTICE IS OFFENDED IF THE SH OW CAUSE NOTICE IS VAGUE. ON THE BASIS OF SUCH PROCEEDINGS, NO PENALTY COULD BE IMPOSED ON THE ASSESSEE. 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 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(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR ITA NOS.952 & 953/BANG/2015 PAGE 7 OF 11 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 SAME GROU ND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, T HE IMPOSITION OF PENALTY IS NOT VALID. THE VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED WITH REFERENCE TO THE 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 AC T 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 CLAUSE (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 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 FUR NISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CO NNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO MARKETING REPORTED IN 171 TAXMAN 156, HAS HEL D THAT LEVY OF PENALTY HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE POSITION BEING UNCLEAR PENALTY IS NO T SUSTAINABLE. THEREFORE, WHEN THE ASSESSING OFFICER PROPOSES TO I NVOKE THE FIRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS T O BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT ITA NOS.952 & 953/BANG/2015 PAGE 8 OF 11 STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN IN FERENCE AS TO NON- APPLICATION OF MIND. 11. 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 PROCEEDINGS 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 271(1)(C), A T LEAST THE FACTS SET OUT IN EXPLANATION 1(A) & (B) IT SHOULD BE DISC ERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONST ITUTE 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 ASSESSM ENT OFFICER TO 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 TH E COMMISSIONER. I) THE IMPOSITION OF PENALTY IS NOT AUTOMATIC. ITA NOS.952 & 953/BANG/2015 PAGE 9 OF 11 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 AUTH ORITIES EITHER TO INITIATE PENALTY PROCEEDINGS OR IMPOSE PENALTY, UNL ESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS O N ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES 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 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 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 AMBIGUIT Y. 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 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 SPEC IFICALLY STATE THE GROUNDS MENTIONED IN SECTION 271(1)(C), I .E., WHETHER IT IS FOR CONCEALMENT OF INCOME OR FOR FURNISHING OF I NCORRECT 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. 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. ITA NOS.952 & 953/BANG/2015 PAGE 10 OF 11 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 IS INDEP ENDENT AND SEPARATE ASPECT OF THE PROCEEDINGS. U) THE FINDINGS RECORDED IN THE ASSESSMENT PROCEED INGS 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 LEVIE D, CANNOT BE THE SUBJECT MATTER OF PENALTY PROCEEDINGS. THE ASSESSMENT OR REASSESSMENT CANNOT BE DECLARED A S INVALID IN THE PENALTY PROCEEDINGS. 12. THE COORDINATE BENCH OF THIS TRIBUNAL WHERE SIM ILAR NOTICE HAS BEEN ISSUED U/S. 274 R.W.S. 271 OF THE I.T. ACT IN THE C ASE OF PRESIDENCY BUILDERS & DEVELOPERS IN ITA NO.826/BANG/2014 BY ORDER DATED 14.05.2015 HAS DELETED THE PENALTY U/S. 271(1)(C) OF THE ACT, FOLL OWING THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) . 13. RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE HIGH COURT OF KARNATAKA IN THE CASE OF MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) AND THE CO-ORDINATE BENCH DECISION IN THE CASE OF PRESIDENCY BUILDERS & DEVELOPERS (SUPRA), WE HOLD THAT THE NOTICE ISSUED U/S. 274 R.W.S. 2 71 OF THE ACT DATED 24.12.2009 IS INVALID AND CONSEQUENTL Y, THE PENALTY PROCEEDINGS ARE ALSO INVALID AND ACCORDINGLY WE DEL ETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT. ITA NOS.952 & 953/BANG/2015 PAGE 11 OF 11 14. SINCE THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT HAS BEEN DELETED, THE OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSEE REGARDING LEVY OF THE PENALTY ON MERITS REQUIRE NO ADJUDICATION AT THIS S TAGE. 15. IN THE RESULT, BOTH THE APPEALS BY THE ASSESSEE S ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF NOVEMBER, 2015. SD/- SD/- ( JASON P. BOAZ ) (ASHA VIJAYARAGHAVAN ) ACCOUNTANT MEMBER JUDICIAL M EMBER BANGALORE, DATED, THE 6 TH NOVEMBER, 2015. /D S/ COPY TO: 1. APPELLANT 2. RESPONDENTS 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.