M/s Jay Polychem (India) Ltd.,, New Delhi v. ACIT, New Delhi

ITA 6465/DEL/2016 | 2008-2009
Pronouncement Date: 20-11-2019 | Result: Allowed

Appeal Details

RSA Number 646520114 RSA 2016
Assessee PAN AAACJ0657M
Bench Delhi
Appeal Number ITA 6465/DEL/2016
Duration Of Justice 2 year(s) 11 month(s) 1 day(s)
Appellant M/s Jay Polychem (India) Ltd.,, New Delhi
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 20-11-2019
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 20-11-2019
Assessment Year 2008-2009
Appeal Filed On 19-12-2016
Judgment Text
PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI ACCOUNTANT MEMBER AND SHRI K.N.CHARY JUDICIAL MEMBER ITA NO. 6465 6466 & 6467/DEL/2016 (ASSESSMENT YEAR: 2008-09 2011-12 & 2012-13) M/S. JAY POLYCHEM (INDIA) LTD B-115 OKHLA INDUSTRIAL AREA NEW DELHI PAN: AAACJ0657M VS. ACIT CENTRAL CIRCLE-3 NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY: SMT NAINA SOIN KAPIL SR. DR DATE OF HEARING 28/08/2019 DATE OF PRONOUNCEMENT 20/11/2019 O R D E R PER PRASHANT MAHARISHI A. M. 1. THESE ARE THE 3 APPEALS FILED BY THE ASSESSEE FOR THREE ASSESSMENT YEARS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 25 NEW DELHI [ THE LD CIT (A)] DATED 30/9/2016 CONFIRMING THE LEVY OF THE PENALTY U/S 271 (1) ( C ) OF THE INCOME TAX ACT OF A. FOR ASSESSMENT YEAR 2008-09 OF INR 7 897044/ B. FOR ASSESSMENT YEAR 2011 12 OF INR 9369112/ AN D C. FOR ASSESSMENT YEAR 2012 13 OF INR 9 377883/. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL IN ITA NO. 6465/DEL/2016 FOR THE ASSESSMENT YEAR 2008-09:- 1. THAT THE ID. CIT(A] HAS ERRED IN SUSTAINING THE PENALTY ALLEGING THAT HE APPELLANT DID NOT COMPLY DELIBERATELY EVEN THOUGH T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SPECIFICALLY REQUEST ED THE ID. CIT(A] THAT THE QUANTUM HAS BEEN HEARD AND TIME BE GIVEN. 2. THAT THE ID. CIT(A) HAS ERRED IN NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE BY NOT ALLOWING THE APPELLANT A REASONABLE OPPORTUNITY OF BEING HEARD WHEN IT WAS SPECIFICALLY REQUESTED. 3. THAT THE ID. CIT(A) HAS ERRED IN SUSTAINING THE PENALTY OF RS. 78 97 044/-IMPOSED U/S 271(L)(C) OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE AND DETAILED SUBMISSIONS MADE BY THE APPELLANT. PAGE | 2 4. THAT THE ID. CIT(A) HAS ERRED IN NOT ADJUDICATI NG GROUND NOS. 2 & 3 RAISED BEFORE HIM. 5. THAT THE ORDER IMPOSING PENALTY IS BAD IN LAW A ND VOID AB INITIO SINCE IN THE SHOW CAUSE NOTICE ISSUED U/S 274 READ WITH SECT ION 271 THE ID. AO HAS NOT STRUCK OFF THE IRRELEVANT CLAUSE OF THE NOT ICE MEANING THEREBY THE AO HAS NOT APPRISE THE ASSESSEE ABOUT THE SPECI FIC CHARGE UNDER WHICH ASSESSEE HAS BEEN HELD GUILTY OF PENAL ACTION . 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL IN ITA NO. 6466/DEL/2016 FOR THE ASSESSMENT YEAR 2011-12:- 1. THAT THE ID. CIT(A] HAS ERRED IN SUSTAINING THE PENALTY ALLEGING THAT HE APPELLANT DID NOT COMPLY DELIBERATELY EVEN THOUGH T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SPECIFICALLY REQUEST ED THE ID. CIT(A] THAT THE QUANTUM HAS BEEN HEARD AND TIME BE GIVEN. 2. THAT THE ID. CIT(A) HAS ERRED IN NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE BY NOT ALLOWING THE APPELLANT A REASONABLE OPPORTUNITY OF BEING HEARD WHEN IT WAS SPECIFICALLY REQUESTED. 3. THAT THE ID. CIT(A) HAS ERRED IN SUSTAINING THE PENALTY OF RS. 93 69 112/-IMPOSED U/S 271(L)(C) OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE AND DETAILED SUBMISSIONS MADE BY THE APPELLANT. 4. THAT THE ID. CIT(A) HAS ERRED IN NOT ADJUDICATI NG GROUND NOS. 2 & 3 RAISED BEFORE HIM. 5. THAT THE ORDER IMPOSING PENALTY IS BAD IN LAW A ND VOID AB INITIO SINCE IN THE SHOW CAUSE NOTICE ISSUED U/S 274 READ WITH SECT ION 271 THE ID. AO HAS NOT STRUCK OFF THE IRRELEVANT CLAUSE OF THE NOT ICE MEANING THEREBY THE AO HAS NOT APPRISE THE ASSESSEE ABOUT THE SPECI FIC CHARGE UNDER WHICH ASSESSEE HAS BEEN HELD GUILTY OF PENAL ACTION . 4. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL IN ITA NO. 6467/DEL/2016 FOR THE ASSESSMENT YEAR 2012-13:- 1. THAT THE ID. CIT(A] HAS ERRED IN SUSTAINING THE PENALTY ALLEGING THAT HE APPELLANT DID NOT COMPLY DELIBERATELY EVEN THOUGH T HE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SPECIFICALLY REQUEST ED THE ID. CIT(A] THAT THE QUANTUM HAS BEEN HEARD AND TIME BE GIVEN. 2. THAT THE ID. CIT(A) HAS ERRED IN NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE BY NOT ALLOWING THE APPELLANT A REASONABLE OPPORTUNITY OF BEING HEARD WHEN IT WAS SPECIFICALLY REQUESTED. 3. THAT THE ID. CIT(A) HAS ERRED IN SUSTAINING THE PENALTY OF RS. 93 77 883/-IMPOSED U/S 271(L)(C) OF THE ACT WITHOUT APPRECIATING THE FACTS OF THE CASE AND DETAILED SUBMISSIONS MADE BY THE APPELLANT. 4. THAT THE ID. CIT(A) HAS ERRED IN NOT ADJUDICATI NG GROUND NOS. 2 & 3 RAISED BEFORE HIM. 5. THAT THE ORDER IMPOSING PENALTY IS BAD IN LAW A ND VOID AB INITIO SINCE IN THE SHOW CAUSE NOTICE ISSUED U/S 274 READ WITH SECT ION 271 THE ID. AO PAGE | 3 HAS NOT STRUCK OFF THE IRRELEVANT CLAUSE OF THE NOT ICE MEANING THEREBY THE AO HAS NOT APPRISE THE ASSESSEE ABOUT THE SPECI FIC CHARGE UNDER WHICH ASSESSEE HAS BEEN HELD GUILTY OF PENAL ACTION . 5. THE FACT SHOWS THAT ASSESSEE COMPANY JAY POLYCHEM ( INDIA) LTD IS ENGAGED IN THE TRADING OF BULK PETROCHEMICALS CHEMICALS P OLYMERS ENGINEERING PLASTICS BULLION BEGOTTEN POLISHED DIAMOND ET CET ERA. CERTAIN SEIZURE ACTION U/S 132 OF THE INCOME TAX ACT WAS INITIATED IN CASE OF THE APPELLANT COMPANY ON 14/3/2012. DURING THE COURSE OF SEARCH AND SEIZURE OPERATION SEVERAL CREDIT CARD STATEMENT OF VARIOUS FAMILY MEM BERS OF THE DIRECTORS OF THE COMPANY WERE FOUND AND SEIZED. IT WAS DETECTED BY THE REVENUE THAT ASSESSEE HAD CONCEALED THE INCOME FOR THE YEAR UNDE R CONSIDERATION. FROM PERUSAL OF THE CREDIT CARD STATEMENT IT WAS NOTED T HAT THE EXPENDITURE INCURRED AND RECORDED IN THE SEIZED CREDIT CARD STA TEMENT PER TOWARDS IN VARIOUS NON-BUSINESS EXPENDITURE WHICH WERE MOSTLY TOWARDS LUXURIOUS EXPENSES. SUCH EXPENSES WERE INCURRED BY THE ASSES SEE COMPANY THROUGH CREDIT CARDS INCLUDED ACCOMMODATION AND USAGE OF HO TEL SERVICES IN THE FIVE- STAR AND 7 STAR HOTELS IN INDIA AND ABROAD PAYMENT S TOWARDS BY TAX LADIES GARMENTS COSMETICS PERFUMES ET CETERA PARTICULARLY FOR INTERNATIONAL HIGH- END LUXURY BRAND PAYMENTS TO RENOWNED AND HIGH-END FASHION GARMENT DESIGNER BILLS OF HIGH-END EATING JOINTS RESTAURAN T IN FIVE-STAR HOTELS ET CETERA. THE ASSESSEE COMPANY COULD NOT GIVE PROPER EXPLANATION REGARDING THE PAYMENTS ENTIRE ADDITIONS WERE MADE BY THE LEAR NED ASSESSING OFFICER. ON APPEAL BEFORE THE LEARNED CIT A ABOVE ADDITION S WERE CONFIRMED SUBSTANTIALLY. THEREFORE THE LEARNED ASSESSING OFF ICER IMPOSED PENALTY U/S 271 (1) (C) AMOUNTING TO INR 7 897044/ AT THE RATE OF HUNDRED PERCENT OF THE TAX SHORT OF EVADED. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT A WHO CONFIRMED THE PENALTY AND THEREFORE ASS ESSEE IS IN APPEAL BEFORE US. 6. AS PER GROUND NUMBER 5 OF THE APPEAL OF THE ASSESSE E IT HAS CHALLENGED THE ORDER IMPOSING PENALTY AS BAD IN LAW AND VOID AB IN ITIO SINCE IN THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 274 READ WITH SEC TION 271 THE LEARNED ASSESSING OFFICER HAS NOT STRUCK OF THE RELEVANT CL AUSE OF THE NOTICE MEANING THEREBY THAT THE AO HAS NOT APPRISED THE ISSUE ABOU T THE SPECIFIC CHARGE UNDER WHICH ASSESSEE HAS BEEN HELD GUILTY OF AN ELE CTION. IDENTICAL GROUND HAS BEEN RAISED FOR ALL THESE 3 YEARS. THE LEARNED DEPARTMENTAL PAGE | 4 REPRESENTATIVE WAS ASKED TO LOOK AT THE ASSESSMENT ORDER AS WELL AS THE NOTICE U/S 274 READ WITH SECTION 271 OF THE INCOME TAX ACT DATED 31/3/2014 ATTACHED IN THE APPEAL SET. 7. DESPITE NOTICE NONE APPEARED BEFORE US AND THEREFO RE THE ISSUE IS DECIDED ON THE MERITS OF THE CASE AS PER INFORMATION AVAILA BLE ON RECORD. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. WITH RESPECT TO THE NOTICE ISSUED UND ER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT 1961 THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF T HE LOWER AUTHORITIES. IT WAS FURTHER STATED THAT IT IS A NON-STATUTORY NOTIC E WHICH CANNOT BE TAKEN COGNIZANCE OF FOR DECIDING THE ISSUE ON MERIT. IT WAS FURTHER STATED THAT HUGE ADDITION HAS BEEN MADE BY THE LEARNED ASSESSIN G OFFICER IN PASSING OF 127 PAGES DETAILED ORDER WHICH CLEARLY SHOWS THAT ASSESSEE HAS CONCEALED THE PARTICULARS OF THE INCOME. IT CAN BE INFERRED FROM THE ASSESSMENT ORDER ITSELF THAT THERE IS A CLEAR-CUT CONCEALMENT OF THE INCOME. IN SUCH CIRCUMSTANCES IT WAS SUBMITTED THAT IT COULD NOT B E TAKEN COGNIZANCE OF THAT WHETHER THE LEARNED ASSESSING OFFICER HAS STRU CK OF ANY OF THE TWIN CHARGES OR NOT. 9. SHE RELIED UP ON FOLLOWING JUDICIAL PRECEDENTS ON I DENTICAL ISSUE OF CANCELLATION OF PENALTY ON NON STRIKING OFF ONE OF THE TWIN CHARGES:- I. ITAT 'D' BENCH KOLKATA IN THE COURSE OF HEARING OF APPEAL OF SMT. ASHOK KUMAR MONDAL FOR A.Y 2010-11 AT THE RE QUEST OF THE DR ALLOWED THE DEPARTMENT TO MAKE A WRITTEN SU BMISSION ON THE ISSUE OF WHETHER NON MARKING UPON CONCERNED DETAIL IN THE NOTICE U/S. 274 OUTLINING THE TYPE OF DEFAULT WOULD CONSTITUTE GROUNDS FOR REJECTION OF SATISFACTION AN D LEVY OF PENALTY U/S.271(1)(C) OF THE IT. ACT. II. JUDGMENT OF THE HON'BLE CALCUTTA HIGH COURT IN THE CASE DR.SYAMAL BARAN MONDAL VS. CIT (2011) 244 CTR 631 S TATES THAT 'SECTION 271 NOWHERE MANDATES THAT RECORDING O F SATISFACTION ABOUT CONCEALMENT OF ASSESSEE'S INCOME MUST BE IN SPECIFIC TERMS AND WORDS SATISFACTION OF AO MUST R EFLECT FROM THE ORDER EITHER WITH EXPRESSED WORDS RECORDED BY T HE ASSESSING OFFICER HIMSELF OR BY HIS OVERT ACT AND ACTION.'. PAGE | 5 III. THE LD. ITAT MUMBAI IN ITS ORDER THE CASE OF TRISH UL ENTERPRISES VS. DCIT (ITA NOS.384 & 385/MUM/2014 FO R A.YRS.2006-07 & 2007-08) DT.10-02-2017 DISMISSED T HE CONTENTION OF THE ASSESSEE REGARDING FAILURE OF THE AO TO STRIKE OFF THE RELEVANT PART OF THE NOTICE U/S.274 FOR INI TIATING PROCEEDINGS U/S.271(1)(C). THE ITAT RELIED UPON THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . SMT.KAUSHALYA (1992) WHEREIN IT WAS HELD THAT 'MERE NOT STRIKING OFF SPECIFIC LIMB CANNOT BY ITSELF INVALID ATE NOTICE ISSUED U/ S.274 OF THE ACT. THE LANGUAGE OF THE SECTION DO ES NOT SPEAK ABOUT THE ISSUANCE OF NOTICE. ALL THAT IS REQUIRED THAT THE ASSESSEE BE GIVEN AN OPPORTUNITY OF SHOW CAUSE.... ' IV. THE HON'BLE BOMBAY HIGH COURT (NAGPUR BENCH) IN THE CASE OF M/S. MAHARAJ GARAGE & COMPANY VS. CIT IN ITS JUDGME NT DT.22-08-2017 HAS ALSO HELD THAT '15. THE REQUIREMENT OF SECTION 274 OF THE INCOME T AX ACT FOR GRANTING REASONABLE OPPORTUNITY OF BEING HE ARD IN THE MATTER CANNOT BE STRETCHED TO THE EXTENT OF FRA MING A SPECIFIC CHARGE OR ASKING THE ASSESSEE AN EXPLANATI ON IN RESPECT OF THE QUANTUM OF PENALTY PROPOSED TO BE IMPOSED AS HAS BEEN URGED ' IT FURTHER OBSERVED THAT: '16. IT IS NOT IN DISPUTE THAT A REASONABLE OPPORTU NITY OF BEING HEARD IN THE MATTER AS REQUIRED BY SECTION 2 74 OF THE SAID ACT WAS GIVEN TO THE ASSESSEE BEFORE IMPOS ING THE PENALTY BY THE INCOME TAX OFFICER.' V. MUMBAI E BENCH IN THE CASE OF EARTHMOVING EQUIPMEN T SERVICE CORPORATION VS DCIT 22(2) MUMBAI (2017) 84 TAXMANN.COM 51 LOOKED INTO THE ISSUE VERY CLOSELY A ND OPINED THAT AFTER PERUSING THE RATIO OF THE JUDGMENT RENDE RED IN MANJUNATHA COTTON AND GINNING FACTORY WE FIND THAT THE ASSESSES APPEAL WAS ALLOWED BY THE HONBLE HIGH COUR T AFTER CONSIDERING THE MULTIPLE FACTORS AND NOT SOLELY ON THE BASIS OF DEFECT IN NOTICE U/S 274. THEREFORE WE ARE OF THE OPINION THAT PAGE | 6 THE PENALTY COULD NOT BE DELETED MERELY BASED ON DE FECT POINTED BY THE LD AR IN THE NOTICE AND THEREFORE THE LEGAL GROUNDS RAISED ARE REJECTED. VI. THE MUMBAI BENCH OF !TAT IN A RECENT DECISION IN TH E CASE OF MAHESH M GANDHI VS ACIT [TS-5465-ITAT- 2017(MUMBAI) -OL ALSO DEALT WITH THIS ASPECT. THE TAXPAYER HAD NOT O FFERED DIRECTOR'S FEES AND INCOME FROM SHORT-TERM CAPITAL GAINS TO TAX IN THE RETURN OF INCOME. DURING THE COURSE OF ASSES SMENT PROCEEDINGS WHEN THESE INCOMES WERE PICKED UP BY TH E TAX OFFICER THE TAXPAYER ADMITTED EARNING OF THE INCOM ES AND FILED A REVISED COMPUTATION OF INCOME. BASED ON THIS FINDIN G THE TAX OFFICER MENTIONED IN THE ASSESSMENT ORDER THAT PENA LTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WILL BE INITIATED FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. SUBSEQUENTLY THE TAX OFFICER ISSUED A NOTICE UNDER SECTION 274 R EAD WITH SECTION 271(1)(C) OF THE ACT WHEREIN THE REASO N FOR PENALTY WAS NOT MENTIONED. THE TAXPAYER FILED AN APPEAL BEF ORE THE CIT(A) WHICH RULED IN FAVOUR OF THE REVENUE. THE C IT(A) PLACED RELIANCE ON THE DECISION OF THE HONOURABLE KARNATAK A HIGH COURT IN THE CASE OF CIT VS MANJUNATHA COTTON AND G INNING FACTORY (SUPRA) THE CIT(A) RULED IN FAVOUR OF THE REVENUE. AGGRIEVED THE TAXPAYER PREFERRED AN APPEAL BEFORE T HE ITAT. THE ITAT AFTER OBSERVING THE FACTS OF THE CASE HELD THA T THE TAX OFFICER HAD RECORDED SATISFACTION IN THE ASSESSMENT ORDER IN RELATION TO INVOKING PENALTY PROVISIONS. THE TAX OF FICER HAD APPLIED HIS MIND WHILE DETAILING THE REASONS FOR IN ITIATION OF PENALTY PROCEEDINGS IN THE ASSESSMENT ORDER. ACCORD INGLY NOT MENTIONING THE REASONS IN THE PENALTY NOTICE CANNOT INVALIDATE THE PENALTY PROCEEDINGS. VII. HON'BLE MUMBAI HIGH COURT IN THE CASE OF DHANRAJ MI LLS (P) LTD VS ACIT{OSD) CENTRAL RANGE-R MUMBAI ON 21 MARCH 20 17 HAS STATED AS THERE IS NO DECLARATION OF LAW WHICH MAY BE GOVERNED BY ARTICLE 1A1 OF THE CONSTITUTION OF INDIA IN THE CASE OF CIT VERSUS SSA'S EMERALD MEADOWS DISMISSED BY HON'BLE A PEX PAGE | 7 COURT VIDE SLP (CC NO. 11485/2016) ON 05/08/2016. THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT IN CI T VS KAUSHALYA (SUPRA) IS STILL HAVING A BINDING FORCE O N US. THUS WITH UTMOST REGARDS TO THE JUDGMENT OF KARNATAKA HI GH COURT IN CIT VS MANJUNATHA COTTON & GINNING FACTORY (SUPR A) WE ARE BOUND TO FOLLOW THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN CIT VS KAUSHALYA (SUPRA). OUR VIEW ALSO FIND SUPPORT FR OM A DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DHAWAL K. JAIN VS INCOME TAX OFFICER (ITA NO.996/MUM/2014) ORDER DATED 30/09/2016. WITH THESE OBSERVATIONS THE ARGUMENT OF ID. COUNSEL OF THE AS SESSEE ON THE LEGAL/TECHNICAL GROUND IS REJECTED. THUS ALL THESE FOUR APPEALS ARE THEREFORE DISMISSED AND THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS AFFIRMED. 10. SHE FURTHER SUBMITTED THAT THAT ISSUANCE OF NOTICE IS AN ADMINISTRATIVE DEVICE FOR INFORMING THE ASSESSEE ABOUT THE PROPOSA L TO LEVY PENALTY IN ORDER TO ENABLE HIM TO EXPLAIN AS TO WHY IT SHOULD NOT BE DONE. MERE MISTAKE IN THE LANGUAGE USED OR MERE NON-STRIKING OF THE INACC URATE PORTION CANNOT BY ITSELF INVALIDATE THE NOTICE. SHE SUBMITTED THAT O N FACTS IT COULD BE SAFELY CONCLUDED THAT EVEN ASSUMING THAT THERE WAS DEFECT IN THE NOTICE IT HAD CAUSED NO PREJUDICE TO THE ASSESSEE AND THE ASSESSE E CLEARLY UNDERSTOOD WHAT WAS THE PURPORT AND IMPORT OF NOTICE ISSUED UN DER SECTION 274 R/W. SECTION 271 OF THE ACT. THEREFORE PRINCIPLES OF NA TURAL JUSTICE CANNOT BE READ IN ABSTRACT AND THE ASSESSEE BEING A LIMITED COMPANY HAVING HUGE BUSINESS SHOULD DEFINITELY BE PRECLUDED FROM RAISI NG SUCH A PLEA AT THIS BELATED STAGE. THEREFORE IT WAS SUBMITTED THAT SER VICE OF NOTICE U/S.274 FOR INITIATING PENALTY PROCEEDINGS U/S.271(1)(C) OF THE LT. ACT WOULD CONSTITUTE VALID INITIATION OF PENALTY PROCEEDINGS AND THE CAS E MAY BE HEARD ON MERITS. 11. ON CAREFUL PERUSAL OF THE ASSESSMENT ORDER PASSED B Y THE LEARNED ASSESSING OFFICER ON 31/3/2014 UNDER SECTION 153A READ WITH S ECTION 144 OF THE INCOME TAX ACT 1961 THE LEARNED ASSESSING OFFICER H AS MADE THE ADDITION HOWEVER IT WAS MENTIONED THAT PENALTY PROCEEDINGS U /S 271 (1) (C ) OF THE INCOME TAX ACT ARE INITIATED SEPARATELY. ALONG WIT H THE APPEAL SAID THE NOTICE ISSUED UNDER SECTION 274 READ WITH SECTION 2 71 OF THE INCOME TAX ACT PAGE | 8 DATED 31/3/2014 IS ALSO ATTACHED WHERE IT IS APPARE NT THAT THE LEARNED ASSESSING OFFICER HAS NOT STRIKE OF ANY OF THE TWIN CHARGES I.E. CONCEALED THE PARTICULARS OF INCOME OR FURNISHING INACCURATE PART ICULARS OF SUCH INCOME . WE FIND THAT THE NOTICE DATED 31/3/2014 ISSUED U/ S 274 R.W.S 271 OF THE ACT COPY OF THE SAME IS ON RECORD DOES NOT SPECIF Y THE CHARGE OF OFFENCE COMMITTED BY THE ASSESSEE VIZ WHETHER HAD CONCEALED THE PARTICULARS OF INCOME OR HAD FURNISHED INACCURATE PARTICULARS OF I NCOME. HENCE THE SAID NOTICE IS TO BE HELD AS DEFECTIVE. IN THE PRESENT C ASE THERE IS NO MURMUR IN THE ORDER OF ASSESSMENT ON THIS ASPECT. FURTHER I N THE CASE OF MAHESH M.GANDHI (SUPRA) THE MUMBAI ITAT THE ITAT HELD THAT THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE CASE MANJUNATHA COTTON & GINNING (SUPRA) WILL NOT BE APPLICABLE TO THE FACTS OF THAT CASE BECAUSE THE AO IN THE ASSESSMENT ORDER WHILE INITIATING PENALTY PROCEEDIN GS HAS HELD THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCOME AND ME RELY BECAUSE IN THE SHOW CAUSE NOTICE U/S.274 OF THE ACT THERE IS NO M ENTION WHETHER THE PROCEEDINGS ARE FOR FURNISHING INACCURATE PARTICULA RS OR CONCEALING PARTICULARS OF INCOME THAT WILL NOT VITIATE THE PE NALTY PROCEEDINGS. IN THE PRESENT CASE THERE IS NO MURMUR IN THE ORDER OF A SSESSMENT ON THIS ASPECT. WE HAVE POINTED OUT THIS ASPECT IN THE EARLIER PART OF THIS ORDER. HENCE THIS DECISION WILL NOT BE OF ANY ASSISTANCE TO THE PLEA OF THE REVENUE BEFORE US. N THE CASE OF SUNDARAM FINANCE LIMITED V ACIT IT WAS HELD THAT THIS ISSUE CAN NEVER BE A QUESTION OF LAW IN THE AS SESSEES CASE AS IT IS PURELY A QUESTION OF FACT. APART FROM THAT THE ASS ESSEE HAD AT NO EARLIER POINT OF TIME RAISED THE PLEA THAT ON ACCOUNT OF A DEFECT IN THE NOTICE THEY WERE PUT TO PREJUDICE. NOT ALL VIOLATIONS WILL RESULT IN NULLIFYING THE ORDERS PASSED BY STATUTORY AUTHORITIES. IF THE CASE OF THE ASSESSEE IS THAT THEY HAVE BEEN PUT TO PREJUDICE AND PRINCIPLES OF N ATURAL JUSTICE WERE VIOLATED ON ACCOUNT OF NOT BEING ABLE TO SUBMIT AN EFFECTIVE REPLY IT WOULD BE A DIFFERENT MATTER. 12. IN PRESENT CASE THE ISSUE IS RAISED BEFORE THE C IT A) AS WELL AS BEFORE ITAT. MAIN PLAN OF THE ASSESSEE IS THAT THERE WAS NO O CCASION FOR IT TO RESPOND TO THE SPECIFIC CHARGE AS IT WAS ABSENT IN NOTICE A S WELL AS IN THE ASSESSMENT ORDER. FURTHER IN CASE OF SUNDARAM FINANCE LIMITE D LD AO HIMSELF WAS CONVINCED THAT BOTH OF THE TWIN CHARGES ARE SAT ISFIED THEREIN WHICH IS PAGE | 9 MENTIONED IN PARA NO 12 OF THE ORDER OF THE HONOURA BLE HIGH COURT. FURTHER NONE OF THE DECISION RELIED UP ON BY REVENUE LAY D OWN A PROPOSITION THAT THE DEFECT IN THE SHOW CAUSE NOTICE WILL STAND CURE D IF THE INTENTION OF THE CHARGE U/S.271(1) (C ) IS DISCERNIBLE FROM A READIN G OF THE ASSESSMENT ORDER IN WHICH THE PENALTY WAS INITIATED. 13. BARE PERUSAL OF THE NOTICE ISSUED U/S 274 READ WITH SECTION 271(1)(C) OF THE ACT EXTRACTED ABOVE IN ORDER TO INITIATE THE PENA LTY PROCEEDINGS AGAINST THE ASSESSEE GOES TO PROVE THAT THE AO HIMSELF WAS NOT AWARE / SURE AS TO WHETHER HE IS ISSUING NOTICE TO INITIATE THE PENALT Y PROCEEDINGS EITHER FOR 'CONCEALMENT OF PARTICULARS OF INCOME' OR 'FURNISHI NG OF INACCURATE PARTICULARS OF SUCH INCOME' BY THE ASSESSEE RATHER ISSUED VAGUE AND AMBIGUOUS NOTICE BY INCORPORATING BOTH THE LIMBS OF SECTION 271(1)(C) . WHEN THE CHARGE IS TO BE FRAMED AGAINST ANY PERSON TO MO VE THE PENAL PROVISIONS AGAINST HIM/HER HE/SHE IS REQUIRED TO BE SPECIFICA LLY MADE AWARE OF THE CHARGES TO BE LEVELED AGAINST HIM/HER. HON'BLE HIG H COURT OF KARNATAKA IN CASE OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY (SUPRA) WHILE DECIDING THE IDENTICAL ISSUE HELD THAT WHEN THE AO HAS FAILED TO ISSUE A SPECIFIC SHOW-CAUSE NOTICE TO THE ASSESSEE AS REQUI RED U/S 274 READ WITH SECTION 271(L)(C) PENALTY LEVIED IS NOT SUSTAINABLE. THE OPERATIVE PART OF THE JUDGMENT IS REPRODUCED AS UNDER:- '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 REC ORDS A FINDING REGARDING THE EXISTENCE OF ANY SAID GROUN DS MENTIONED THEREIN AND THEN PENALTY PROCEEDINGS IS INITIATED IN THE NOTICE TO BE ISSUED UNDER SECTION 274 THEY COULD CONVENIENTLY REFER TO THE SAID ORDER WH ICH CONTAINS THE SATISFACTION OF THE AUTHORITY WHICH H AS PASSED THE ORDER. HOWEVER IF THE EXISTENCE OF THE CONDITIONS COULD NOT BE DISCERNED FROM THE SAID ORD ER AND IF IT IS A CASE OF RELYING ON DEEMING PROVISION CONTAINED IN EXPLANATION 1 OR IN EXPLANATION 1 (B) THEN THOUGH PENALTY PROCEEDINGS ARE IN THE NATURE O F CIVIL LIABILITY IN FACT IT IS PENAL IN NATURE. IN EITHER PAGE | 10 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 PROCEEDINGS AN D SHOULD HAVE FULL OPPORTUNITY TO MEET THE CASE OF TH E DEPARTMENT AND SHOW THAT THE CONDITIONS STIPULATED IN SECTION 271 (1)( C) DO NOT EXIST AS SUCH HE IS NOT LIABLE TO PAY PENALTY. THE PRACTICE OF THE DEPARTME NT SENDING A PRINTED FORM 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 INITIAL PRESUMPTION IS SERIOUS IN NATURE AND HE HAD TO PAY PENALTY FROM 10 0% TO 300% OF THE TAX LIABILITY. AS SAID PROVISIONS HA VE 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 NOTIC E 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 PROCEED INGS ALSO MUST BE FOR BOTH THE OFFENCES. 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 TH E EXISTENCE OF THE GROUNDS MENTIONED IN SECTION 271(1)(C) WHEN IT IS A SINE QUA NON FOR INITIATION OR PAGE | 11 PROCEEDINGS THE PENALTY PROCEEDINGS SHOULD BE CONFINED 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 VERSION AND TRIES TO SUBSTANTI ATE HIS CLAIM IF AT ALL PENALTY IS TO BE IMPOSED IT SHOULD BE IMPOSED ONLY ON THE GROUNDS ON WHICH HE IS CALLE D UPON TO ANSWER. IT IS NOT OPEN TO THE AUTHORITY AT THE TIME OF IMPOSING PENALTY TO IMPOSE 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 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 SATISFIE D IN THE COURSE OF ANY PROCEEDINGS THAT THERE IS CONCEAL MENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS O F TOTAL INCOME UNDER CLAUSE (C). CONCEALMENT FURNISH ING 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 CONCEAL MENT PAGE | 12 OF INCOME OR IS IT A CASE OF FURNISHING OF INACCURA TE PARTICULARS. THE APEX COURT IN THE CASE OF T ASHOK POI V. CIT [2007] 292 ITR 11 /161 TAXMAN 340 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 CIT V. MANU ENGG. [1980] 122 ITR 306 AND THE DELHI HIGH COURT IN THE CASE OF CIT V. VIRGO MARKETING (P) LTD . [2008] 171 TAXMAN 156 HAS HELD THAT LEVY OF PENALT Y HAS TO BE CLEAR AS TO THE LIMB FOR WHICH IT IS LEVI ED AND THE POSITION BEING UNCLEAR PENALTY IS NOT SUSTAINAB LE. THEREFORE WHEN THE ASSESSING OFFICER PROPOSES TO INVOKE THE FIRST LIMB BEING CONCEALMENT THEN THE N OTICE HAS TO BE APPROPRIATELY MARKED. SIMILAR IS THE CASE FOR FURNISHING INACCURATE PARTICULARS OF INCOME. THE STANDARD PROFORMA WITHOUT STRIKING OF THE RELEVANT CLAUSES WILL LEAD TO AN INFERENCE AS TO NON-APPLICA TION OF MIND. ' 14. HON'BLE APEX COURT IN CASE OF CIT VS. SSA 'S EMERALD MEADOWS - (2016) 73 TAXMANN.COM 248 (SC) WHILE DISMISSING THE SLP FILED BY THE REVENUE QUASHING THE PENALTY BY THE TRIBUNAL AS WELL AS HON 'BLE HIGH COURT ON GROUND OF UNSPECIFIED NOTICE HAS HELD AS UNDER:- ' SECTION 274 READ WITH SECTION 271(1)(C) OF THE INCOME-TAX ACT 1961 - PENALTY - PROCEDURE FOR IMPOSITION OF (CONDI TIONS PRECEDENT) - ASSESSMENT YEAR 2009-10 - TRIBUNAL RE LYING ON DECISION OF DIVISION BENCH OF KARNATAKA HIGH COURT RENDERED IN CASE OF CIT V. MANJUNATHA COTTON & GINNING FACTORY [2013] 359 1TR 565/218 TAXMAN 423/35 TAXMANN.COM 250 ALLOWED APPEAL OF ASSESSEE HOLDING THAT NOTICE ISSUED BY AS SESSING OFFICER UNDER SECTION 274 READ WITH SECTION 271 (1 )(C) WAS BAD IN LAW AS IT DID NOT SPECIFY UNDER WHICH LIMB OF SECTION 271 (1 )(C) PENALTY PROCEEDINGS HAD BEEN INITIATED I.E. WHETHER FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME - HIGH COURT HELD THAT MATTER WAS COVERED PAGE | 13 BY AFORESAID DECISION OF DIVISION BENCH AND THEREF ORE THERE WAS NO SUBSTANTIAL QUESTION OF LAW ARISING FOR DETE RMINATION - WHETHER SINCE THERE WAS NO MERIT IN SLP FILED BY RE VENUE SAME WAS LIABLE TO BE DISMISSED - HELD YES [PARA 2] [IN FAVOUR OF ASSESSEE]' 15. HON'BLE DELHI HIGH COURT IN CASE OF PR. CIT VS. SAHARA INDIA LIFE INSURANCE COMPANY LTD . (SUPRA) WHILE DECIDING THE IDENTICAL ISSUE HELD A S UNDER :- '21. THE RESPONDENT HAD CHALLENGED THE UPHOLDING OF THE PENALTY IMPOSED UNDER SECTION 271 (1) (C) OF THE ACT WHICH WAS ACCEPTED BY THE ITAT. IT FOLLOWED THE DECISION OF THE KARNATAKA HIGH COURT IN CIT V. MANJUNATHA COTTON & GINNING FACTORY 359 ITR 565 (KAR) AND OBSERVED THAT THE NOTICE ISS UED BY THE AO WOULD BE BAD IN LAW IF IT DID NOT SPECIFY WHICH LIMB OF SECTION 271(1) (C) THE PENALTY PROCEEDINGS HAD BEEN INITIATED UNDER I.E. WHETHER FOR CONCEALMENT OF PAR TICULARS OF INCOME OR FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE KARNATAKA HIGH COURT HAD FOLLOWED THE ABOVE JUD GMENT IN THE SUBSEQUENT ORDER IN COMMISSIONER OF INCOME TAX V. SSA 'S EMERALD MEADOWS (2016) 73 TAXMAN.COM 241 (KAR) TH E APPEAL AGAINST WHICH WAS DISMISSED BY THE SUPREME C OURT OF INDIA IN SLP NO. 11485 OF 2016 BY ORDER DATED 5TH AUGUST 2016.' 16. FOLLOWING THE DECISIONS RENDERED IN THE CASES OF CIT VS. MANJUNATHA COTTON AND GINNING FACTORY CIT VS. SSA 'S EMERALD MEADOWS AND PR. CIT VS. SAHARA INDIA LIFE INSURANCE COMPANY LTD. (SUPRA ) WE ARE OF THE CONSIDERED VIEW THAT WHEN THE NOTICE ISSUED BY THE AO IS BAD IN LAW BEING VAGUE AND AMBIGUOUS HAVING NOT SPECIFIED UNDER WHIC H LIMB OF SECTION 271(1)(C) OF THE ACT THE PENALTY PROCEEDINGS INITIATED U/S 271(1)(C) ARE NOT SUSTAINABLE. THEREFORE INITIATING PENALTY PROCEEDI NGS BASED ON VAGUE AND AMBIGUOUS NOTICE IS BAD IN LAW AND AS SUCH NOT S USTAINABLE. HENCE ON THIS ISSUE ONLY WITHOUT GOING IN TO THE MERITS OF THE PENALTY WE CANCEL THE PENALTY LEVIED U/S 271 (1) OF THE ACT. 17. FACTS FOR ALL THESE THREE YEARS ARE IDENTICAL SO FA R AS THE NON STRIKING OFF THE TWIN CHARGES IN PENALTY NOTICE ISSUED U/S 274 RW S 271 OF THE ACT IS PAGE | 14 CONCERNED. THEREFORE FOR THE REASON GIVEN HEREIN ABOVE WE CANCEL THE PENALTY-LEVIED U/S 271 (1) (C) OF THE ACT FOR ALL T HE THREE YEARS. CONSEQUENTLY PENALTY LEVIED BY THE AO AND CONFIRME D BY THE LD. CIT (A) IS DELETED AND ALL THE THREE APPEAL FILED BY THE ASSES SEE ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/11/2019. -SD SD/- SD/- (K.N.CHARY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20/11/2019 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT NEW DELHI PAGE | 15 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/ PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER