Smt. Roopa Suryanarayana, Bangalore V. ITO, Bangalore

ITA 997/BANG/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1524 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-11-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUKMINI ATTIR JT
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings; Revised return
• Section: 142(1); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS. 997 TO 1001/BANG/2014 (ASST. YEARS : 2004-05 TO 2008-09) SMT. ROOPA SURYANARAYANA, PROP. YASHASVI PACKS, NO.44, 4 TH CROSS, AD HALLI, MAGADI MAIN ROAD, BANGALORE-560 040. . APPELLANT PAN: ADMPR 9875K VS. THE INCOME-TAX OFFICER, WARD - 2(4), BANGALORE. . RESPONDENT APPELLANT BY : SMT. SHEETAL BORKAR, ADVOCATE RESPONDENT BY : SMT. RUKMINI ATTIR, JT. CIT(DR) DATE OF HEARING : 12-11-2015 DATE OF PRONOUNCEMENT : 18-11-2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THESE APPEALS ARE DIRECTED AGAINST THE PENALTY ORD ER U/S 271(1)(C) OF THE ACT DATED 10/3/2011 PASSED BY THE INCOME-TAX OFFICER, WARD-2(4), BANGALORE FOR THE ASSESSMENT YE ARS 2004-05 TO ITA NOS.997 TO10 01/B/14 2 2008-09. SINCE THE FACTS OF ALL THE ASSESSMENT YEA RS ARE IDENTICAL, THEREFORE THESE APPEALS ARE DISPOSED OFF IN THIS CO MMON APPELLATE ORDER FOR SAKE OF CONVENIENCE. THE APPELLANT IS AN INDIVIDUAL FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEARS 2004- 05 TO 2008-09. 2. THE APPELLANT FURNISHED REVISED (BELATED) RETURN ON 2.7.2010 DECLARING AN ADDITIONAL INCOME OF RS.13,92,280/-, R S.3,13,743, RS.14,71,266/- RS.4,32,003/- AND RS.7,83,288/- FOR THE ASST. YEARS 2004-05, 2005-06, 2006-07, 2007-08 AND 2008-09 RESP ECTIVELY, UNDER THE HEAD INCOME FROM OTHER SOURCES WHICH WA S OMITTED IN THE ORIGINAL RETURN. SUBSEQUENTLY, NOTICE U/S 148 DT.19/7/2010 ALONG WITH NOTICES U/S 142(1) AND 143(2) WERE ISSUE D TO THE APPELLANT. IN RESPONSE TO THE NOTICES THE APPELLAN T FILED A LETTER DTD. 20/07/2010 REQUESTING TO THE AO TO REGULARIZE THE R EVISED RETURNS ALREADY FILED ON 2.7.2010. THE AO AFTER VERIFICATI ON OF THE ORIGINAL AND REVISED RETURN OF INCOME, ASKED THE APPELLANT W HY SB ACCOUNT INTEREST OF RS.17,207/-, RS.29,955/-, RS.92,083/- R S.85,094/- AND RS.71.289/- FOR THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-05, 2005-06, 2006-07, 2007-08, AND 2008-09 RES PECTIVELY WAS NOT DECLARED IN EITHER OF THE RETURNS. THE AR OF THE APPELLANT SUBMITTED THAT BY OVERSIGHT THE INCOME HAD NOT ADMI TTED TO THE ITA NOS.997 TO10 01/B/14 3 TOTAL INCOME AND THEREFORE HAD NO OBJECTION FOR THE ADDITION OF THE SAME. SIMULTANEOUSLY, NOTICES U/S 271(1)(C) OF THE ACT DATED 21/7/2010 WAS ISSUED AND SERVED ON THE APPELLANT. IN RESPONSE TO THE NOTICE THE APPELLANT FILED DETAILED REPLY DATED 28/7/2010 REQUESTING THE AO TO DROP THE PENALTY PROCEEDINGS. THE AO WITHOUT CONSIDERING THE SUBMISSIONS OF THE APPELLAN T LEVIED A PENALTY U/S 271(1)(C) OF THE ACT AS MENTIONED ABOVE . AGGRIEVED BY THE SAME, THE APPELLANT IS IN APPEAL. 3. INFORMATION WAS COLLECTED FROM THE NATIONAL CO-O P BANK LTD., AND FROM IT TRANSPIRES THAT THE APPELLANT DEP OSITING AMOUNT FROM 29/7/2003 ONWARD UNDER CUMULATIVE TIME DEPOSIT SCHEME. THE AFORESAID DEPOSITS AS WELL AS ACCRUED INTEREST FROM THE ASSESSMENT YEAR 2004-05 HAS NOT BEEN DISCLOSED IN H IS RETURN OF INCOME FOR RESPECTIVE ASSESSMENT YEARS. THE APPELL ANT ALSO DEPOSITED WITH STATE BANK OF INDIA AND VIJAYA BANK, HOWEVER INTEREST ACCRUED THEREFORE NOT ADMITTED IN THE RETU RN OF INCOME FOR THE RESPECTIVE ASSESSMENT YEARS. THE AO HAS GIVEN BREAK-UP YEAR- WISE OF UNDISCLOSED DEPOSITS AND ACCRUED INTEREST T HEREON FROM THE ASST. YEARS 204-05 TO 2008-09. ITA NOS.997 TO10 01/B/14 4 4. SUBSEQUENTLY, THE APPELLANT HAS FILED A REVISED RETURN OF INCOME FOR THE ASSESSMENT YEARS UNDER CONSIDERATION ON 02/07/201, OFFERED FURTHER INCOME AS MENTIONED ABOVE IN TABULA R CHART. 5. THE AO HAS ISSUED NOTICE U/S 148 ON 19/7/2010 WI TH PRIOR APPROVAL OF THE ADDL. CIT, RANGE-2, BANGALORE. IN COMPLIANCE TO THE SAID NOTICE THE AR OF THE APPELLANT SUBMITTED T HAT THE REVISED RETURN FILED ON 2/7/2010 MAY BE CONSIDERED IN RESPO NSE TO THE NOTICE ISSUED U/S 148 OF THE ACT. IN THE COURSE OF ASST. PROCEEDINGS THE APPELLANTS AR PLEADED THAT THE AFORESAID INVES TMENT/INCOME AS OFFERED IN THE REVISED RETURN OF INCOME MAY BE CONS IDERED AS TAXABLE INCOME FOR THE ASST. YEAR 2004-05 TO 2008-0 9 AND THE AO HAS FINALIZED THE ASSESSMENT ACCORDINGLY. SIMULTAN EOUSLY, THE PENALTY PROCEEDINGS U/S 271(1)(C) ALSO INITIATED. 6. NOTICE U/S 271(1)(C) OF THE INCOME-TAX ACT, 1961 DATED 21.07.2010 WAS ISSUED AND SERVED. IN RESPONSE TO T HE SAME, THE ASSESSEE FILED HER REPLY ON 28.7.2010 GIVING DETAIL ED EXPLANATION TO THE PENALTY NOTICE AND REQUESTING FOR DROPPING THE PENALTY PROCEEDINGS INITIATED ON THE FOLLOWING GROUNDS: ITA NOS.997 TO10 01/B/14 5 RETURN OF INCOME IS FURNISHED ON 30.10.2005 WITH PRESCRIBED PARTICULARS. THEREAFTER REVISED RETURN IS FURNISHED WITH ADDITIONAL INCOME UNDER THE HEAD IN COME FROM OTHER SOURCES WHICH WAS OMITTED IN THE ORIGINA L RETURN. TO THIS, NOTICE U/S 148 WAS ISSUED ALONG W ITH NOTICES U/S 142(1)/143(2). A REQUEST LETTER WAS FI LED TO REGULARIZE THE REVISED RETURN MADE ALREADY. ASSESS MENT IS MADE DETERMINING THE TOTAL INCOME AND TAX PAYABL E ACCEPTING THE REVISED RETURN. HOWEVER, ADDITION OF INTEREST CREDIT IN THE SAVINGS BANK ACCOUNT. THE S AID SAVINGS BANK ACCOUNT IS DISCLOSED IN THE RETURN. T O THIS, NOTICE U/S 274 R.W.S 271 OF THE INCOME-TAX ACT 1961 IS ISSUED TO SHOW CAUSE WHY ORDER IMPOSING PENALTY SHO ULD NOT BE MADE U/S 271(1)(C). IT IS HUMBLY SUBMITTED THAT, AS PER THE PROVISO TO S.271(1)(C) WHEN ASSESSMENT IS MADE WITH ADDITIONS/DISALLOWANCES TO THE RETURNED INCOME, AND BASICALLY WHEN THE EXPLANATION OFFERED BY THE ASSES SEE IN RESPECT OF THE FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME-TAX. C) IS FOUND TO BE FALSE OR D) IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THE EXPLANATION OFFERED IS BONAFIDE. ONLY THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTI NG THE TOTAL INCOME SHALL BE DEEMED TO HAVE BEEN CONCE ALED. THAT APART, THE DIFFERENCE BETWEEN THE TAX ON ASSES SED INCOME AND THE INCOME RETURNED WILL BE THE TAX SOUG HT TO ITA NOS.997 TO10 01/B/14 6 BE EVADE ONLY, IF ASSESSEES EXPLANATION IS FALSE O R IF THE BONAFIDES ARE NOT PROVED. ACCORDINGLY, AS PER S. 271(1)(C), AFTER BEING SATISFIED THAT, THE ASSESSEE HAS CONCEALED THE PARTICULARS OF HIS INCOME OR HAS FURN ISHED INACCURATE PARTICULARS OF SUCH INCOME ONLY THEN, A PENALTY SHALL BE LEVIED WHICH IS EQUAL TO THE TAX A MOUNT SOUGHT TO BE EVADED BY CONCEALMENT OR BY FURNISHING INACCURATE PARTICULARS OF INCOME BUT, SUCH PENALTY SHALL NOT EXCEED THREE TIMES THE AMOUNT OF TAX SOUGHT TO BE EVADED. IN THE PRESENT CASE, THE DIFFERENCE IN THE INCOME RETURNED IN THE ORIGINAL AND REVISED RETURN IS MADE VOLUNTARILY WITH FULL CO-OPERATION WITH THE REVENUE . THE DIFFERENCE OF INCOME RETURNED IS ON ACCOUNT OF THE BANK DEPOSITS IN FD & FD ACCRUED INTEREST. THE DEPOSITS ARE MADE OUT OF THE ACCUMULATED DAILY DEPOSIT AMOUNT. HOWEVER, THE SAME HAS BEEN RETURNED AS ADDITIONAL INCOME IN THE CURRENT YEAR ONLY TO BUY PEACE. THAT APART, THE DIFFERENCE IN THE ASSESSED INCOME AND TH E INCOME RETURNED IN THE REVISED RETURN IS THE INTERE ST CREDITED TO THE SAVINGS BANK ACCOUNT WHICH WAS NOT RETURNED BY OVERSIGHT AND THE SAME WAS AGREED FOR ADDITION. THE DIFFERENCE ON ACCOUNT OF LOW DRAWING S WAS ALSO ACCEPTED AND OFFERED TO TAX TO BUY PEACE AND A VOID HAZARDOUS LITIGATION. THEREFORE, AS SUCH IN THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE AMOUNT ADDED OR DISALLOWED IN DETERMINING THE INCOME IS NOT (DEEMED TO ITA NOS.997 TO10 01/B/14 7 HAVE BEEN) CONCEALED. SO ALSO THE DIFFERENCE BETWE EN THE TAX ON ASSESSED INCOME AND THE INCOME RETURNED IS N OT SOUGHT TO BE EVADED. THERE IS NO SUCH FINDING. 7. THE ASSESSEE IN SUPPORT OF THE ABOVE CLAIM HAS A LSO RELIED ON THE FOLLOWING DECISIONS: A) BANGALORE STEEL DISTRIBUTORS VS. ITO (1995) 51 TTJ (BANG) 125; B) ITO VS. SMT. JENABAIMOHD. (1976) 2 TTJ (BANG) 777; C) RAM SARAN GUPTA VS. ACIT (1997) 58 TTJ (JP) 702; D) CIT VS. SURESH CHANDRA MITTAL (2001) 251 ITR 9 (SC) ; E) KP MADHUSUDHAN VS. CIT (2001) 251 ITR 99 (SC); F) BHARAT RICE MILL VS. CIT (2005) 278 ITR 299 (ALL). 8. AT THE TIME OF APPEAL HEARING BEFORE THE CIT(A) THE APPELLANT REITERATED THAT IN THE PRESENT CASE, DIFF ERENCE IN INCOME RETURNED IN THE ORIGINAL AND REVISED RETURN WAS MAD E VOLUNTARILY WITH FULL CO-OPERATION WITH THE DEPARTMENT. THE DI FFERENCE OF INCOME RETURNED IS ON ACCOUNT OF THE BANK DEPOSIT I N FDS AND ACCRUED INTEREST OF FDS. THE DEPOSITS WERE MADE OU T OF THE ACCUMULATED DAILY DEPOSIT AMOUNT. HOWEVER, THE SAM E HAS BEEN RETURNED AS ADDITIONAL INCOME IN THE ASST. YEARS UN DER CONSIDERATION ONLY TO BUY PEACE. THAT PART THE DIFFERENCE IN THE ASSESSED INCOME AND THE RETUNED INCOME IN THE REVISED RETURN IS THE INTEREST CREDITED TO THE SAVINGS BANK ACCOUNT WHICH WAS NOT RETURNED BY OVERSIGHT ITA NOS.997 TO10 01/B/14 8 AND THE SAME WAS AGREED FOR ADDITION. THEREFORE AS SUCH IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE AMOUNT ADDE D OR DISALLOWED IN DETERMINING THE INCOME IS NOT DEEMED TO HAVE BEE N CONCEALED. 9. THE AO MADE AN ADDITION OVER AND ABOVE THE RETUR NED INCOME IN ASSESSMENT YEAR-WISE AS BELOW:- ASSESSMENT YEAR ADDITIONAL INCOME 2004-05 RS. 13,92,280 2005-06 RS. 3,13,743 2006-07 RS. 14,71,266 2007-08 RS. 4,32,003 2008-09 RS. 7,83,288 10. THESE ADDITIONS WERE MADE AS A RESULT OF ENQUIR IES MADE THROUGH THE NATIONAL CO-OPERATIVE BANK LTD. WHEREIN THE APPELLANT DEPOSITED AMOUNT UNDER CUMULATIVE TIME DEPOSIT SCHE ME AND THE SAME WERE NOT DISCLOSED IN THE RETURNS OF INCOME IN THE RELEVANT ASSESSMENT YEARS. SUBSEQUENTLY, THE APPELLANT FILE D BELATED REVISED RETURN OF INCOME FOR THE ASSESSMENT YEARS 2004-05 T O 2008-09 OFFERING ADDITIONAL INCOME AS MENTIONED ABOVE. THE AO HAS REGULARIZED SAID RETURNS BY ISSUE OF NOTICE U/S 148 OF THE ACT, FOLLOWED BY ISSUE OF NOTICE U/S 143(2) AND 142(1) O F THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APP ELLANTS AR PLEADED THAT INCOME SO OFFERED IN REVISED RETURNS O F INCOME MAY BE ITA NOS.997 TO10 01/B/14 9 CONSIDERED AS TAXABLE INCOME AND THE AO ACCORDINGLY COMPLETED THE ASSESSMENT ACCEPTING INCOME AS PER REVISED (BEL ATED) RETURNS OF INCOME AND BROUGHT TO TAX. THE AO DURING THE ASSES SMENT PROCEEDINGS INITIATED PENALTY PROCEEDINGS U/S 271(1 )(C) OF THE ACT REJECTING THE PLEA OF THE APPELLANT THAT THE ADDITI ONAL INCOME WAS OFFERED VOLUNTARILY IN ORDER TO BUY PEACE AND COULD NOT BE CONSTRUED AS CONCEALMENT OF INCOME OR INACCURATE PA RTICULARS OF INCOME. IN THIS VIEW OF THE MATTER IT COULD BE CON STRUED THAT THE APPELLANTS SURRENDER OF CONCEALED INCOME AS NOT VO LUNTARILY BUT AFTER DETECTING THE UNDISCLOSED DEPOSITS AND AFTER CONFRONTING THE EVIDENCE BY THE AO AND WHEN THE APPELLANT WAS CORNE RED. 11. THE CIT(A) CONCLUDED THAT DISCLOSURE OF ADDITIO NAL INCOME IS NOT VOLUNTARY AND THE ASSESSEE COULD NOT ESTABL ISH HER STAND WITH SUPPORTIVE EVIDENCE OR MATERIAL. THE CIT(A) HELD, RELYING ON THE DECISION OF MAK DATA (P) LTD. V. CIT (2013) 358 ITR 593 (SC) , THAT THE AO WAS JUSTIFIED IN LEVYING PENALTY U/S. 2 71(1)(C) OF THE ACT. 12. AGGRIEVED, THE ASSESSEE HAS FILED APPEAL BEFORE THE TRIBUNAL. ITA NOS.997 TO10 01/B/14 10 13. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF AP PEAL WHICH ARE AS FOLLOWS:- 1. THE ASSESSING OFFICER HAVING ISSUED THE NOTICE UNDER SECTION 274 R.W.S 271(1)(C) OF THE ACT IN A MECHANICAL MANNER, THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT IS NOT SUSTAINABLE IN THE EYE OF LAW. 2. THE APPELLANT BEGS TO SUBMIT THAT THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MANJUNATHA COTTON & GINNING FACTORY (2013) 359 ITR 565 (KARN) IS SQUARELY APPLICABLE AND, THEREFORE THE IMPUGNED ORDER OF THE AUTHORITIES BELOW IS REQUIRED TO BE SET ASIDE. 14. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATT ENTION TO THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY, 359 ITR 565 (KARN) , WHEREIN THE HONBLE HIGH COURT HAS HELD THAT NOTI CE U/S. 274 OF THE ACT SHOULD SPECIFICALLY STATE AS TO WHET HER PENALTY IS BEING PROPOSED TO BE IMPOSED FOR CONCEALMENT OF PAR TICULARS OF INCOME OR FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE HONBLE HIGH COURT HAS FURTHER LAID DOWN THAT CERTA IN PRINTED FORM WHERE ALL THE GROUNDS GIVEN IN SECTION 271 ARE GIVE N WOULD NOT SATISFY THE REQUIREMENT OF LAW. THE COURT HAS ALSO HELD THAT INITIATING PENALTY PROCEEDINGS ON ONE LIMB AND FIND THE ASSESSEE GUILTY IN ANOTHER LIMB IS BAD IN LAW. IT WAS SUBMI TTED THAT IN THE PRESENT CASE, THE AFORESAID DECISION WILL SQUARELY APPLY AND ALL THE ITA NOS.997 TO10 01/B/14 11 ORDERS IMPOSING PENALTY HAVE TO BE HELD AS BAD IN L AW AND LIABLE TO BE QUASHED. 15. THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEA LS) WHEREIN THE CIT(A) HAS EXPRESSED HIS OPINION THAT THE ASSES SEE WAS FULLY AWARE OF THE CHARGE AGAINST HIM AND HE CANNOT TAKE SHELTER ON TECHNICAL GROUNDS. 16. THE ADDITIONAL GROUND BEING A PURE QUESTION OF LAW, CAN BE DECIDED ON THE BASIS OF FACTS AVAILABLE ON RECORD AND THE SAME IS ADMITTED FOR ADJUDICATION KEEPING IN VIEW THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF NTPC, 229 ITR 383 (SC ). 17. WE FIND THAT THE COORDINATE BENCH IN THE CASE O F SHRI H. LAKSHMINARAYANA IN ITA NOS. 992 TO 996/BANG/2014 BY ORDER DATED 03.07.2015 ON AN IDENTICAL ISSUE HAS HELD AS FOLLOWS:- 14. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF CIT & ANR. 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 PROCEEDIN GS CAN BE INITIATED ON VARIOUS GROUND SET OUT THEREIN. IF THE ORDER 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 ITA NOS.997 TO10 01/B/14 12 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-1 OR IN EXPLANATION-1(B), THEN THOUGH PENALTY PROCEEDINGS A RE IN THE NATURE OF CIVIL LIABILITY, IN FACT, IT IS PENAL IN NATURE. IN EITHER EVENT, THE PERSON WHO IS ACCUSED OF THE COND ITIONS MENTIONED IN SECTION 271 SHOULD BE MADE KNOWN ABOUT THE GROUNDS ON WHICH THEY INTEND IMPOSING PENALTY ON HI M AS THE SECTION 274 MAKES IT CLEAR THAT ASSESSEE HAS A RIGHT TO CONTEST SUCH PROCEEDINGS AND SHOULD HAVE FULL OPPOR TUNITY TO MEET THE CASE OF THE DEPARTMENT AND SHOW THAT TH E CONDITIONS STIPULATED IN SECTION 271(1)(C) DO NOT E XIST 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 NATURE AND HE HAD TO PAY PENALTY FROM 100% TO 300% OF THE TAX LIABILITY. AS THE SAID PROVISIONS HAVE TO BE HELD T O BE STRICTLY CONSTRUED, NOTICE ISSUED UNDER SECTION 274 SHOULD S ATISFY 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, T HAT 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 PROCEEDINGS ALS O MUST BE FOR BOTH THE OFFENCES. BUT DRAWING UP PENALTY PROCE EDINGS FOR ONE OFFENCE AND FINDING THE ASSESSEE 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 MENTIO NED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INI TIATION OR PROCEEDINGS, THE PENALTY PROCEEDINGS SHOULD BE CONF INED ONLY TO THOSE GROUNDS 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 ITA NOS.997 TO10 01/B/14 13 VERSION AND TRIES TO SUBSTANTIATE HIS CLAIM, 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 OPE N TO THE AUTHORITY, AT THE TIME OF IMPOSING PENALTY TO IMPOS E PENALTY ON THE 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 PENALTY SHOULD ALSO BE IMPOSED ON THE SAME GROUND. WHERE THE BASIS OF THE INITIATION OF PENALTY PROCEEDINGS IS NOT 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 INFORMATIO N, FACTS AND MATERIALS IN THE HANDS OF THE AUTHORITY I MPOSING THE PENALTY AT THE TIME THE ORDER WAS PASSED AND FU RTHER DISCOVERY OF FACTS SUBSEQUENT TO THE IMPOSITION OF PENALTY CANNOT VALIDATE THE ORDER OF PENALTY WHICH, WHEN PA SSED, 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 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 MANU ENGINEERING REPORTED IN 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF VIRGO 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 UNCLE AR PENALTY IS NOT SUSTAINABLE. THEREFORE, WHEN THE ASSESSING O FFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT , THEN THE NOTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOM E. THE ITA NOS.997 TO10 01/B/14 14 STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICATION OF MIND. 16. THE FINAL CONCLUSION OF THE HONBLE COURT WAS AS 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 LIABILIT IES. 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 PROCEED INGS 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), AT LEAST THE FACTS SET OUT IN EXPLANATIO N 1(A) & (B) IT SHOULD BE DISCERNIBLE FROM THE SAID ORDER WHICH WOULD BY A LEGAL FICTION CONSTITUTE CONCEALME NT BECAUSE OF DEEMING PROVISION. G) EVEN IF THESE CONDITIONS DO NOT EXIST IN THE AS SESSMENT ORDER PASSED, AT LEAST, A DIRECTION TO INITIATE PROCEEDINGS UNDER SECTION 271(L)(C) IS A SINE QUA N ON FOR THE ASSESSMENT OFFICER TO INITIATE THE PROCEEDI NGS BECAUSE OF THE DEEMING PROVISION CONTAINED IN SECTI ON 1(B). H) THE SAID DEEMING PROVISIONS ARE NOT APPLICABLE TO THE ORDERS PASSED BY THE COMMISSIONER OF APPEALS AND TH E COMMISSIONER. ITA NOS.997 TO10 01/B/14 15 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 PENALTY, UNLESS IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT, IT IS ON ACCOUNT OF SUCH UNEARTHING OR ENQUIRY CONCLUDED BY AUTHORITIES IT H AS RESULTED IN PAYMENT OF SUCH TAX OR SUCH TAX LIABILI TY CAME TO BE ADMITTED AND IF NOT IT WOULD HAVE ESCAPE D FROM TAX NET AND AS OPINED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 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 ORDER IMPOSING PENALTY COULD BE PASSED. M) IF THE EXPLANATION OFFERED, EVEN THOUGH NOT SUBSTANTIATED BY THE ASSESSEE, BUT IS FOUND TO BE BONAFIDE AND ALL FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION 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 AMBIGUITY. O) IF THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION OR HAS NOT ISSUED ANY DIRECTION TO INI TIATE PENALTY PROCEEDINGS, IN APPEAL, IF THE APPELLATE AUTHORITY RECORDS SATISFACTION, 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 OF INCORRECT PARTICULARS OF INCOME. ITA NOS.997 TO10 01/B/14 16 Q) SENDING PRINTED FORM WHERE ALL THE GROUND MENTI ONED IN SECTION 271 ARE MENTIONED WOULD NOT SATISFY REQUIREMENT 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 PROCEEDIN GS, NO PENALTY 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 ASSESSMENT PROCEEDINGS. THE PROCEEDINGS FOR IMPOSITION OF PENALTY THOUGH EMANATE FROM PROCEEDIN GS OF ASSESSMENT, IT IS INDEPENDENT AND SEPARATE ASPEC T 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 JUDICATA IN THE 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. 17. IT IS CLEAR FROM THE AFORESAID DECISION THAT O N THE FACTS OF THE PRESENT CASE THAT THE SHOW CAUSE NOTIC E U/S. 274 OF THE ACT IS DEFECTIVE AS IT DOES NOT SPELL OUT TH E GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IMPOSED. IN OUR VIEW, THE AFORESAID DEFECT CANNOT BE SAID TO BE CURABLE U/S. 292BB OF THE ACT, AS THE DEFECT CANNOT BE SAID TO BE A NOTIC E WHICH IS IN SUBSTANCE AND EFFECT IN CONFORMITY WITH OR ACCOR DING TO THE INTENT AND PURPOSE OF THE ACT. FOLLOWING THE D ECISION OF THE HONBLE KARNATAKA HIGH COURT, WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE T O BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANC ELLED. ITA NOS.997 TO10 01/B/14 17 18. SINCE THE APPEALS ARE DECIDED ON THE TECHNICA L GROUND, THE GROUNDS RAISED ON MERITS ARE NOT BEING GONE INT O. 17. WE ALSO FIND THAT THE HONBLE KARNATAKA HIGH CO URT IN THE CASE OF CIT V. SHRI PARTHA L IN ITA NO.263/2015 BY JUDGEMENT DATED 29.09.2015 HAS HELD AS FOLLOWS:- 2. LEARNED COUNSEL FOR THE PARTIES HAVE JOINTLY STATED THAT THE QUESTION INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF THIS COURT IN THE CASE O F COMMISSIONER OF INCOME TAXVS- MANJUNATHA COTTON AND GINNING FACTORY, (2013) 359 ITR 565, WHEREIN, THE QUESTION HAS BEEN DECIDED IN FAVOUR OF ASSESSEE AND AGAINST THE APPELLANT REVENUE. 3. AS SUCH, WE ARE OF THE OPINION, NO SUBSTANTIAL QUESTION OF LAW ARISES FOR DETERMINATION BY THIS CO URT. THE APPEAL IS ACCORDINGLY DISMISSED. . 18. IN THE PRESENT CASES, WE FIND THAT THE SHOW C AUSE NOTICE ISSUED U/S. 274 R.W.S. 271 OF THE ACT IS DEFECTIVE AS IT DOES N OT SPELL OUT THE GROUNDS ON WHICH THE PENALTY IS SOUGHT TO BE IMPOSED. RES PECTFULLY FOLLOWING THE JUDGMENTS OF THE HONBLE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT & ANR. V. MANJUNATHA COTTON AND GINNING FACTORY (SU PRA) AND CIT V. SHRI PARTHA L (SUPRA) AND THE COORDINATE BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF SHRI H. LAKSHMINARAYANA (SUPRA) , WE HOLD THAT THE ORDERS IMPOSING PENALTY IN ALL THE ASSESSMENT YEARS HAVE T O BE HELD AS INVALID AND CONSEQUENTLY PENALTY IMPOSED IS CANCELLED. THE ADDITIONAL GROUNDS OF APPEAL RAISED BY THE ASSESSEE FOR ALL THE YEARS IS ALLOWED AND IN VIEW OF THE SAME, THE OTHER GROUNDS OF APPEAL ON MERITS ARE NOT TAKEN UP FOR CONSIDERATION. ITA NOS.997 TO10 01/B/14 18 19. IN THE RESULT, THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2015 . SD/- SD/- (INTURI RAMA RAO) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 18 TH NOVEMBER, 2015. VMS / DS / COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REGISTRAR, ITAT, BANGALORE .