Sri Ramaiah Reddy , Bangalore V. The Deputy Commissioner of Income Tax Circle-4(2)(1), Bangalore

ITA 977/BANG/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7573 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 04-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R N PARBAT
• Assessee Lawyers: V SRINIVASAN
• Keywords: Unexplained investment; Principle of natural justice; Initiation of penalty proceedings; Valuation report
• Section: 143(3); 153A; 27; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH 'C' BEFORE SHRI VIJAYPAL RAO, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.977/BA NG/2017 (ASST. YEAR 2011-12) SRI C RAMAIAH REDDY, RAMAIAH REDDY COLONY, SECTOR C, BASAVANAGAR, MARTHAHALLI, BENGALURU. . APPELLANT VS. THE DY. COMMISSIONER OF INCOME-TAX CIRCLE-4(2)(1), BENGALURU. . RESPONDENT PAN - AAVPR7873D. APPELLANT BY : SHRI V SRI NIVASAN, ADVOCATE RESPONDENT BY : SHRI R.N PAR BAT, CIT DATE OF HEARING : 12-9-2017 DATE OF PRONOUNCEMENT : 22-9-2017 O R D E R PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) - 4, BENGALUR U DATED 17/3/2017 UPHOLDING THE ORDER OF DCIT, CIRCLE-2(2), BANGALORE ITA NO.977/B/17 2 DATED 9/7/2015 LEVYING PENALTY OF RS.2,08,365/- U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR ASST. YEAR 2011-12. 2. BRIEFLY STATED, THE FACTS OF THE CASE RELEVANT FOR THIS APPEAL ARE AS UNDER:- 2.1 A SEARCH ACTION U/S 132 OF THE ACT WAS CONDUCT ED, INTER ALIA, AT THE PREMISES OF THIS INDIVIDUAL ASSESSEE ON 5/7/201 1. ON THE DATE OF SEARCH, JEWELLERY WAS FOUND WHICH WAS VALUED AT RS. 56,74,320/-. IN THE COURSE OF SEARCH, THE ASSESSEE HAD ALSO DECLARE D, INTER ALIA, A SUM OF RS.50 LAKHS AS ADDITIONAL INCOME IN RESPECT OF T HE AFORESAID JEWELLERY FOUND FOR ASST. YEAR 2011-2. THE ASSESSM ENT WAS COMPETED U/S 153A R.W 143(3) OF THE ACT VIDE ORDER DATED 26/ 2/2013, WHEREIN THE ASSESSEES INCOME WAS DETERMINED AT RS.114,42,4 3,772/- AS AGAINST REVISED DECLARED INCOME OF RS.23,97,25,547/ - DUE TO VARIOUS ADDITIONS MADE THEREIN, IN THE ORDER OF ASSESSMENT THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE HAD ONLY DECLARED THE SUM OF RS.50 LAKHS ON ACCOUNT OF UNEXPLAINED JEWELLERY AS PER THE DECLARATION U/S 132(4) OF THE ACT IN THE RETURN OF INCOME FILED FOR ASST. YEAR 2011-2; BUT HAD NOT DISCLOSED THE BALANCE RS.6 ,74,320/- IN RESPECT OF UNEXPLAINED JEWELLERY FOUND AND VALUED A T THE TIME OF SEARCH. IN THAT VIEW OF THE MATTER, THE AO INTER A LIA, MADE AN ADDITION OF RS.6,74,320/- TO THE INCOME OF THE ASSE SSEE IN RESPECT OF THE JEWELLERY FOUND. ITA NO.977/B/17 3 2.2 IN FURTHER APPEALS BEFORE APPELLATE AUTHORITIES , IN RESPECT OF THE ADDITIONS MADE IN THE ORDER OF ASSESSMENT DATED 26/ 2/2013 FOR ASST. YEAR 2011-2, THIS ADDITION OF RS.6,74,320/- IN RESP ECT OF JEWELLERY WAS UPHELD BY THE CO-ORDINATE BENCH OF THIS TRIBUNA L IN ITS ORDER IN ITA NO.1778 & 1779/BANG/2015 DATED 10/4/2015. BASE D ON THE AFORESAID ADDITION OF RS.6,74,320/-, ON ACCOUNT OF JEWELLERY BEING SUSTAINED BY THE AFORESAID ORDER OF THE TRIBUNAL (S UPRA), THE AO VIDE ORDER DATED 9/7/2015 LEVIED PENALTY U/S 171(1)(C) O F THE ACT OF RS.2,08,365/- IN RESPECT OF ADDITION OF RS.6,74,320 /- SUSTAINED ON ACCOUNT OF UNEXPLAINED INVESTMENT IN JEWELLERY. ON APPEAL, THE LD CIT(A) ALSO VIDE ORDER DATED 17/3/2017 UPHELD THE P ENALTY ORDER PASSED BY THE AO. 3.0 AGGRIEVED BY THE ORDER OF THE CIT(A)-4, BANGALO RE DATED 17/3/2017 FOR ASST. YEAR 2011-12, UPHOLDING IN THE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, THE ASSESSEE HAS PREFERRED TH IS APPEAL RAISING THE FOLLOWING ON GROUNDS:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR A S LEVYING PENALTY U/S 271 [1][C] OF THE ACT AGAINST T HE APPELLANT ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVI DENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER LEVYING PENALTY U/S.271[1][C] OF THE A CT, IS BAD IN LAW IN AS MUCH AS, THE LEARNED A.O. HAS NEIT HER REACHED ANY SATISFACTION NOR HAS SUCH SATISFACTION BEEN RECORDED IN THE ASSESSMENT ORDER AND CONSEQUENTLY, THE ITA NO.977/B/17 4 VERY INITIATION OF PROCEEDINGS U/S.271[1][C] OF THE ACT, IS NOT IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 271[1] OF THE ACT AND CONSEQUENTLY, THE ORDER OF PENALTY F OUNDED ON THE INVALID INITIATION OF PENALTY PROCEEDINGS IS LIABLE TO BE CANCELLED. 3. THE ORDER OF PENALTY PASSED U/S 271[1][C] OF THE ACT IS BAD IN LAW AS THE NOTICE ISSUED UNDER SECTION 27 4 RWS 271 OF THE ACT IS NOT DISCERNABLE WHETHER THE PENALTY PROCEEDINGS IS INITIATED FOR FURNISHING OF INACCURA TE PARTICULARS OF INCOME OR CONCEALMENT OF INCOME UNDE R THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S C ASE. 4. WITHOUT PREJUDICE TO THE ABOVE, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN LEVYING A PENALTY OF RS.2,08,3 65/- U/S 271 [1][C] OF THE ACT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 5. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE APPELLANT HAS NEITHER' CONCEALED ANY INCOME NOR FUR NISHED INACCURATE PARTICULARS OF INCOME TO WARRANT LEVY OF PENALTY AND THEREFORE, THE PENALTY LEVIED U/S.271[1][C] OF THE ACT REQUIRES TO BE CANCELLED. 6. WITHOUT PREJUDICE TO THE ABOVE, THE PENALTY LEVI ED IS HIGHLY EXCESSIVE AND LIABLE TO BE REDUCED SUBSTANTI ALLY. ITA NO.977/B/17 5 7. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGE D AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLAN T HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RE NDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTI NG THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITU TION FEES AS PART OF THE COSTS. 4. GROUNDS 1,6 & 7 ARE GENERAL IN NATURE AND NOT BEING URGED BEFORE US, ARE DISMISSED AS INFRUCTUOUS. 5. GROUNDS NO:2 AND 3 5.1 IN THESE GROUNDS (SUPRA), THE SUM AND SUBSTANCE OF THE ASSESSEES CONTENTIONS ARE THAT THE PENALTY PROCEED INGS INITIATED BY THE AO VIDE NOTICE ISSUED U/S 274 R.W.S 271 OF THE ACT DATED 26/2/2013 FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT, IS DEFECTIVE. IN THIS REGARD THE LD AR FOR THE ASSESSEE HAS PLACE D RELIANCE ON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (359 ITR 565) ( KAR) AND THE REJECTION OF THE REVENUES SLP BY THE HONBLE APEX COURT IN THE CASE OF SSAS EMERALD MEADOWS IN SLP: (CC 11485/2016 ) DATED 5/8/2016. THE LD AR ALSO FILED A COPY OF THE DECIS ION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF SHRI MOORSAVIRAPPA C BATLI IN ITA NO.668/BANG/2015 DATED 10/2/2016 IN SU PPORT OF THE ASSESSEES CASE. IT IS CONTENDED THAT IN SIMILAR C IRCUMSTANCES, AS IN ITA NO.977/B/17 6 THE CASE ON HAND, THE CO-ORDINATE BENCH HAS HELD TH AT THE PENALTY PROCEEDINGS INITIATED ON THE BASIS OF DEFECTIVE NOT ICE HAS TO BE CANCELLED. ON MERITS, THE LD AR SUBMITTED THAT THE ADDITION OF RS.6,74,320/-, ON THE BASIS OF WHICH THE SAID PENAL TY OF RS.2,08,365/- HAS BEEN LEVIED U/S 271(1)(C) OF THE ACT, CANNOT B E CONSIDERED AS UNEXPLAINED INVESTMENT AS THE SAID ADDITION HAS BEE N MADE ON THE BASIS OF VALUATION REPORT AND NO PENALTY CAN BE LEV IED ON VALUATION WHICH IS ONLY AN ESTIMATION. 5.2 PER CONTRA, THE LD DR FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED THAT SINCE THE LD CIT(A) HAD NOT CONSIDERED AND DECIDED THE GROUND OF APPEAL PERTAIN ING TO THE ISSUE OF DEFECTIVE NOTICE U/S 271 R.W.S 271 OF THE ACT FO R INITIATION OF PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, THERE FORE THE MATTER REQUIRES TO BE SENT BACK TO THE FILE OF THE CIT(A) FOR ADJUDICATION OF THIS GROUND. ON MERITS, THE LD DR CONTENDED THAT T HE ADDITION OF RS.6,74,320/- WAS SUSTAINED BECAUSE THERE WAS NO RE CONCILIATION STATEMENT FILED BY THE ASSESSEE IN SUPPORT OF THE P LEA THAT THE ENTIRE JEWELLERY HAS BEEN DECLARED. 5.3.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL PRONOUNCEMENTS CITED. AT THE OUTSET WE MAY MENTION THAT THE ASSESSEE HAS RAISED THE AFORESAID ISSUE OF DEFECTIV E NOTICE BEFORE THE LD CIT(A) AND FIND THAT THERE IS NO FINDING RENDERE D BY THE LD CIT(A) ON THIS ISSUE IN THE IMPUGNED ORDER. HOWEVER, SINC E THE FACTS OF THE ITA NO.977/B/17 7 MATTER ON THIS ISSUE ARE APPARENT FROM THE COPY OF THE SAID NOTICE ISSUED U/S 274 R.W.S 271 OF THE ACT DATED 26/2/2013 (FILED BY THE ASSESSEE AT PAGE 6 OF PAPER BOOK PAGES 1 TO 33) AND THE JUDICIAL VIEW OF COURTS AND ITAT CO-ORDINATE BENCH IN THE MATTER (SUPRA) IN OUR VIEW, NO USEFUL PURPOSE WOULD BE SERVED IN RESTORIN G THE MATTER TO THE FILE OF THE LD CIT(A) AS PRAYED FOR BY THE LD D R FOR REVENUE. WE HAVE PERUSED THE COPY OF THE NOTICE ISSUED U/S 274 R.W.S 271 OF THE ACT DATED 26/2/2013 AND FIND THAT IT REVEALS THAT T HE AO HAS NOT DELETED THE INAPPROPRIATE WORDS AND PARTS IN THE RE LEVANT PARAGRAPH OF THE NOTICE, WHEREBY IT IS NOT CLEAR AS TO WHICH DEF AULT HAS BEEN COMMITTED BY THE ASSESSEE; I.E WHETHER BY FURNISHIN G OF INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF INCOME FOR WHICH PENALTY U/S 271(1)(C) OF THE ACT IS SOUGHT TO BE LE VIED. 5.3.2 THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S MANJUNATHA COTTON & GINNING FACTORY IN (359 ITR 565 ) (KAR) HAS HELD THAT A NOTICE ISSUED U/S 274 R.WS 271 OF THE A CT WITHOUT SPECIFYING THE NATURE OF DEFAULT; I.E; WHETHER THE NOTICE IS ISSUED FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME; IS INVALID AND THE CONSEQUEN TIAL PENALTY PROCEEDINGS/ORDER ARE ALSO NOT VALID. THE RELEVANT PORTION OF THE AFORESAID JUDGMENT OF THE HONBLE KARNATAKA HIGH CO URT (SUPRA) AT PARAS 59 TO 61 ARE EXTRACTED HEREUNDER:- 59 AS THE PROVISION STANDS, THE PENALTY PROCEEDING S CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN, IF THE ORDER ITA NO.977/B/17 8 PASSED BY THE AUTHORITY CATEGORICALLY RECORDS A FIN DING REGARDING THE EXISTENCE OF ANY SAID GROUNDS MENTION ED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED, IN THE NOTICE TO BE ISSUED UNDER SECTION 274, THEY COULD CONVENIENTLY REFER TO THE SAID ORDER 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 O F RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION-I OR IN EXPLANATION- L(B), THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS' P ENAL 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 IMPOSI NG PENALTY OIL AS THE SECTION 274 MAKES IT CLEAR THAT 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( I)('C,) C/A NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENAL TY. THE PRACTICE OF THE DEPARTMENT SENDING A PRINTED FARM W HERE ALL THE GROUND MENTIONED IN SECTION 271 ARE MENTION ED 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 TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD TO BE STANDBY CONSTRUED NOTICE ITA NO.977/B/17 9 ISSUED UNDER SECTION 274 SHOULD SATISFY THE GROUND S WHICH HE HAS TO MEET SPECIFICALLY. OTHERWISE, PRINC IPLES 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. 60. CLAUSE (C) DEALS WITH TWO SPECIFIC OFFENCES, TH AT IS TO SAY, CONCEALING PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. NO DOUBT, THE FAC TS OF SOME CASES MAY ATTRACT BOTH THE OFFENCES AND IN SOM E CASES THERE MAY BE OVERLAPPING OF THE TWO OFFENCES BUT IN SUCH CASES THE INITIATION OF THE PENALTY PROCEEDING S ALSO MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENAL TY PROCEEDINGS FOR ONE OFFENCE AND FINDING THE ASSESSE E GUILTY OF ANOTHER OFFENCE OR FINDING HIM 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 QUA NON FOR INITIATION OR PROCEEDINGS, THE 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 MEE T THOSE GROUNDS. AFTER, HE PLACES HIS VERSION AND TRI ES TO SUBSTANTIATE HIS CLAIM, IF AT ALL, PENALTY IS TO BE IMPOSED, IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH H E IS CALLED UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHOR ITY, AT ITA NO.977/B/17 10 THE TIME OF IMPOSING PENALTY TO IMPOSE PENALTY ON T HE GROUNDS OTHER THAN WHAT ASSESSEE WAS CALLED UPON TO MEET. OTHERWISE THOUGH THE INITIATION 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 PENALT Y SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE TH E BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS N OT IDENTICAL WITH THE GROUND ON WHICH THE PENALTY WAS IMPOSED, THE IMPOSITION OF PENALTY IS NOT VALID. TH E VALIDITY OF THE ORDER OF PENALTY MUST BE DETERMINED 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 SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALI DATE THE ORDER 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 INCOME OR FURNISHING OF INACCURATE PARTICULARS OF T OTAL INCOME UNDER CLAUSE (C). CONCEALMENT, FURNISHING INACCURATE PARTICULARS OF INCOME ARE DIFFERENT. THU S THE ASSESSING OFFICER WHILE ISSUING NOTICE HAS TO COME TO THE ITA NO.977/B/17 11 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 PA I REPORTED IN 292 ITR 11 AT PAGE 19 HAS HELD THAT CONCEALMENT OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME CARRY DIFFERENT CONNOTATIONS. THE GUJARAT HIGH COURT IN THE CASE OF M4NU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO IVL4RKETING REPORTED IN 171 TAXMAN 156, HAS HELD THAT PENALTY H AS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVIED AND THE ACTION BEING UNCLEAR PENALTY IS NOT SUSTAINABLE. THEREFOR E, WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE F IRST LIMB BEING CONCEALMENT, THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNI SHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROF ORMA WITHOUT STRIKING OF. THE RELEVANT1 CLAUSES WILL LEA D TO AN INFERENCE AS TO NON-APPLICATION OF MIND.' 5.3.3 THE AFORESAID VIEW TAKEN BY THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF MANJUNATHA COTTON & GINNING FACTORY (SUPRA) WAS FOLLOWED BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS IN ITA NO:380 OF 2015 DATED 23/11/2 015; WHEREIN THE HONBLE COURT UPHELD THE ORDER OF CO-O RDINATE BENCH OF THIS TRIBUNAL, CANCELLING THE PENALTY LEVIED ON THE BASIS OF THE DEFECTIVE NOTICE ISSUED BY THE AO. REVENUES SLP FI LED AGAINST HE ITA NO.977/B/17 12 SAID JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF SSAS EMERALD MEADOWS (SUPRA) HAS ALSO BEEN DISMISSED BY THE HONBLE APEX COURT IN CC/1485/2016 DATED 5/8/2016. 5.3.4 RESPECTFULLY FOLLOWING THE JUDGMENTS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASES OF M/S MANJUNATHA COTTON & GINNING FACTORY (359 ITR 565( (KAR) AND SSAS EMERAL D MEADOWS IN ITA NO:380 OF 2015 DATED 23/11/2015, WE HOLD THA T THE NOTICE ISSUED BY THE AO U/S 274 R.W.S 271 OF THE ACT DATED 26/2/2013 FOR INITIATING PENALTY PROCEEDINGS IS INVALID AND CONSE QUENTLY, THE PENALTY PROCEEDINGS, CONDUCTED IN PURSUANCE THEREOF , ARE ALSO INVALID AND WE THEREFORE DELETE THE PENALTY OF RS.2,08,365/ - LEVIED U/S 271(1)(C) OF THE ACT FOR ASST. YEAR 2011-12. CONSE QUENTLY, THE GROUNDS RAISED BY THE ASSESSEE AT S.NOS. 2 AND 3 (S UPRA) ARE ALLOWED. 6. SINCE THE VERY BASIS FOR LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT HAS BEEN HELD BY US TO BE INVALID AS DISCUSSED IN P ARAS 5.1 TO 5.3.4 OF THIS ORDER (SUPRA), THE ORDER GROUNDS OF APPEAL AT S.NOS. 4 AND 5, RAISED ON THE MERITS OF THE LEVY OF PENALTY U/S 271 (1)(C) OF THE ACT REQUIRE NO ADJUDICATION BY US AT THIS STAGE. 8. IN THE RESULT, ASSESSEES APPEAL FOR ASST. YEAR 2011-12 IS ALLOWED AS INDICATED ABOVE. ITA NO.977/B/17 13 ORDER PRONOUNCED IN THE OPEN COURT ON 22ND SEPTEMBER, 2017 . SD/- SD/- (VIJAYPAL RAO) (JASO N P BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBE R BANGALORE DATED : 22/9/2017 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGAL ORE.