TaxTMI 
TaxTMI 
2019 (6) TMI 1283
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....n the Karnataka High Court judgment in the case of CIT v. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Karn). The said case law were relied on by the learned authorised representative for the proposition that penalty initiated on one limb of section 271(1)(c) and imposed on another limb of section 271(1)(c) is not sustainable. 2. The hon'ble Judicial Member while rejecting this ground of the appeals has held that simply by initiating proceedings for one limb of section 271(1)(c) and passing penalty order on another limb of section 271(1)(c) does not make the order illegal. The hon'ble Judicial Member has held that the case law of the hon'ble Supreme Court in the case of SSA's Emerald Meadows as relied on by the learned authorised representative was a special leave petition filed by the Revenue which had been dismissed and such dismissal of the special leave petition does not lay down a law. The hon'ble Judicial Member has further held that a Larger Bench of the hon'ble Supreme Court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) has held that the Explanation to section 271(1)(c) is part of section 271 and when the Income-tax O....
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....had decided the issue as to whether notice under section 271 is necessary if the Assessing Officer finds that the assessee had not substantiated any explanation or failed to prove that such explanation was bona fide. Then in these circumstances the hon'ble court had held that further notice under section 271 was not necessary. 5. The hon'ble Andhra Pradesh High Court in I. T. A. No. 684 vide its recent judgment dated July 13, 2017 (Principal CIT v. Smt. Baisetty Revathi [2017] 398 ITR 88 (T&AP) has examined the applicability of the case law of K. P. Madhusudhanan in the context of the hon'ble Karnataka High Court judgment in the case of Manjunatha Cotton and Ginning Factory and has held that the case law of K. P. Madhusudhanan has no application to the Karnataka High Court decision in the case of Manjunatha Cotton and Ginning Factory. The relevant findings of the hon'ble court are reproduced below (page 93 of 398 ITR) : "11. It would be apposite at this stage to consider the judgment of the Karnataka High Court in Manjunatha Cotton and Ginning Factory (supra). Therein, a Division Bench of the Karnataka High Court observed that section 271 of the Act of 1961 is a ....
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.... Court observed that the Assessing Officer must give a positive finding as to whether there is conceal ment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the event there was no such clear-cut finding, the penalty order was held liable to be struck down. 13. Smt. Kiranmayee, the learned counsel, placed reliance on the judgment of the Supreme Court in K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) ; [2001] 6 SCC 665 ; AIR 2001 SC 2704 ; [2001] Law Suit (SC) 1093. Therein, the Supreme Court held that it is not necessary for the Assessing Officer, while issuing a notice under section 271(1)(c), to expressly invoke Explanation 1(B) appended to the provision. It is however relevant to note that Explanation 1(B) merely adverts to a case of failure of an assessee to substantiate the explanation offered whereby the amount added or disallowed while computing the total income of such person for the purposes of the penalty provision shall be deemed to represent the income in respect of which particulars had been concealed. The Supreme Court observed that the statutory provision included the 'Explanation' and o....
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....dings, 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 oppor tunity to meet those grounds. After, he places his 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 open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what the 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 the 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 imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further dis....
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....ent-assessee. This by holding that the initiation of penalty under section 271(1)(c) of the Act by the Assess ing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. There fore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb, i. e., for furnishing inaccurate particulars of income while imposition of penalty on the other limb, i.e., concealment of income. Further, the Tribunal also noted that notice issued under section 274 of the Act is in a standard pro forma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. 4. The impugned order relied upon the following extract of the Karnataka High Court's decision in CIT v. Manjunatha Cotton and Ginning Factory....
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....her breach. This is more so, as an assessee would respond to the ground on which the penalty has been initi ated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice. 7. Therefore, the issue herein stands concluded in favour of the respondent-assessee by the decision of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra)." 10. In view of the above judicial precedents, I find merit in the arguments of the learned authorised representative that the penalty orders are not sustainable, as the Assessing Officer had initiated penally on one limb of section 271(1)(c) and had imposed penalty on another limb of section 271(1)(c) and therefore in my opinion the legal issue is decided in favour of the assessee. Since I have decided the appeal on legal grounds in favour of the assessee, there ....
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....ounsel for the assessee was confronted with the above details and was asked to state as to why the trading results may not be rejected. In response, the learned counsel relied upon the gross profit shown in the balance-sheet. He stated that the trading account was as per the actual books of account which could not be produced by the assessee as the same were not traceable. The plea taken by the learned counsel for the assessee is not acceptable. If trading results are of the assessee are not backed by any record maintained during the regular course of business conducted by him the same cannot be relied upon. Accord ingly in view of these facts, the trading results are not relied upon and hence rejected. In order to verify the sales of the assessee, information was called from the Commercial Tax Officer, Circle-H, Jammu where the asses see is assessed to commercial tax. As per the order under section 7(9) of the Jammu and Kashmir General Sales tax Act, 1962, the sales of the assessee for this year have been assessed at taxable turnover (TTO) of Rs. 93,32,486. The assessee in the return filed under section 148 of the Income-tax Act, 1961 has disclosed turnover of Rs. 79,56,865 only....
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....ess ing authority, Sales Tax, Circle-H, Jammu dated March 25, 2010 the taxable turnover of the assessee has been assessed at Rs. 93,32,486 with the following observations by the above authority. '. . . . Since the dealer has filed three trading accounts, out of which two audited by the concerned chartered accountant and has also filed two purchase statements, two brand-wise sale statements which clearly indicate that dealer has not maintained any books of account. Dealer has furnished the belowmentioned audited-unau dited trading account which shows the following sale position : Unaudited Audited Audited Opening stock 6,85,468 6,85,468 6,85,468 Purchase 77,07,047 77,07,047 85,34,039 Sales 82,14,132 79,56,865 92,89,233.92 Closing stock 10,50,593 12,68,120 86,96,94 Hence, the returns and trading account filed by the dealer which are unsupported with any books of account, are hereby rejected with out disturbing the closing stock of Rs. 12,68,120 till some evidence comes to notice, the taxable turnover is determined at Rs. 93,32,486 (on the basis of TTO notice issued) and the same is taxed accord ingly.' Accordingly, by taking....
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....Act, 1961. Accordingly, a penalty of Rs. 4,57,300 under section 271(1)(c) at 100 per cent. of tax evaded is hereby imposed which is worked out as under : Tax on income returned at Rs. 1,79,630 Rs. 12,260 Tax on income assessed at Rs. 15,61,641 Rs. 4,69,548 Tax sought to be evades on income of Rs. 13,82,011 Rs. 4,57,288 Therefore, penalty imposed at 100 per cent. of tax sought to be evaded Rs. 4,57,300. Thus penalty of Rs. 4,57,300 (rupees four lakhs fifty-seven thou sands and seven hundreds only) is imposed in this case" 14. Feeling aggrieved against the penalty order, the assessee preferred the first appeal before the Commissioner of Income-tax (Appeals) and the learned Commissioner of Income-tax (Appeals) while confirming the penalty order observed that merely by writing furnishing of inaccurate particulars of income instead of concealing the particulars of income shall not vitiate the order. 15. Relevant part of the impugned order passed by the learned Commissioner of Income-tax (Appeals) is reproduced herein for the sake of brevity and convenience : 4. Determination : Grounds of appeal 1 and 2 : Since the penalty orders for all the three assessment years....
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....ing approval to the penalty orders and approval on the same date of proposal shows that it was mechanical and without application of mind. I have considered the rival arguments. The appellant is taking shelters under technicalities rather than placing its case on the merits. If the Assessing Officer has drawn satisfaction for concealing partic ulars of income and justifies its case in the body of order, then merely by writing furnishing of inaccurate particulars of income instead of concealing the particulars of income shall not vitiate the order. It is true that the Assessing Officer has found differences in the turnover declared before him in the returns in response to the notice under section 148 vis-a-vis what was furnished before the Commercial Tax Officer. The quantum of turnover for various years were shown less before the Income-tax Department and therefore the Assessing Officer has validly made the additions and initiated penalty proceed ings, The appellant though claimed in rectification application that sales declared before the Income-tax authorities were higher than what was declared before the Commercial Tax Officer, but could not justify the same before the Assessi....
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....tice not being struck off or on account of in appropriate income. 19. The learned Departmental representative further relied upon the judgment passed by the Gujarat High Court in the case of DIT (Exemptions) v. Shia Dawoodi Bohra Jamat [2012] 344 ITR 653 (Guj) and emphasised that the decision of the courts are not to be applied in the extract but are to be applied to the facts of the case and each case is an individual and distinguish and having its own unique features, therefore, no straitjacket formula can be applied while applying the judgments of the Higher Courts. 20. Let us first deal with contentions raised by the assessee as the assessee has heavily relied upon the judgment by the apex court in the case of CIT v. SSA's Emerald Meadows [2016] 386 ITR (St.) 13 (SC) while confirming the judgment passed by the Karnataka High Court in I. T. A. No. 380 of 2015 in the case of CIT v. SSA's Emerald Meadows. In the said case, the hon'ble High Court simply relied upon the judgment passed by the hon'ble co-ordinate Division Bench of the Karnataka High Court and conclusion drawn is reproduced herein below : "The Tribunal has allowed the appeal filed by the assessee b....
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....are mentioned would not satisfy the 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 100 per cent. to 300 per cent. of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under section 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice is offended if the show-cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee." 22. On the contrary, the Larger Bench of the apex court in K. P. Madhusudhanan v. CIT (supra) had clearly held that no express invocation of notice is required. The relevant determination of the apex court is reproduced hereinbelow (page 103 of 251 ITR) : "We find it difficult to accept as correct the two judgments afore mentioned. The Explanation to section 271(1)(c) is a part of section 271. When the Income-tax Officer or Appellate Assistant Commis sioner issues to an assessee a notice under section 271, he makes the assessee aware that the provisions thereof are to be used against him. This provision included Explanatio....
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....ice did not convey the nature of offence committed by him. No objection was also taken regarding the validity of the notice on that ground. It is, therefore, clear that the assessee was not under any misapprehension about the offence alleged against him. There was proper understanding and indeed, in the explanation filed, the assessee dealt with the reasons for contending that no penalty could be levied under section 271(1)(c). It was not shown to us that any prejudice was caused to the assessee on account of the assessee not being put in the knowledge of the nature of offence committed by him. The contention regarding the validity of the notice was urged only during the course of the appeal before the Tribunal and it seems to us that the explanation was only an after-thought. The assessee certainly understood the offence alleged against him and showed cause to the Income-tax Officer by pointing out the circumstances and urged that no penalty could be levied. This apart, we also agree with the learned counsel for the Revenue that the provisions of section 274 would apply not only to concealment of income but also for furnishing inaccurate particulars of such income and where the of....
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....atio. As it was clarified in the case of Kunhayammed v. State of Kerala on July 19, 2000- [2000] 245 ITR 360 (SC) by the hon'ble apex court that an order refusing special leave to appeal does not stand substituted in place of the order under challenge. 25. The relevant part of the judgment is reproduced hereinbelow for the sake of brevity and convenience (page 369 of 245 ITR) : "Thus, a petition seeking grant of special leave to appeal and the appeal itself, though both are dealt with by article 136 of the Constitution, are two clearly distinct stages. In our opinion, the legal position which emerges is as under : 1.While hearing the petition for special leave to appeal, the court is called upon to see whether the petitioner should be granted such leave or not. While hearing such petition, the court is not exercising its appellate jurisdiction; it is merely exercising its discretionary juris diction to grant or not to grant leave to appeal. The petitioner is still outside the gate of entry though aspiring to enter the appellate arena of the Supreme Court. Whether he enters or not would depend on the fate of his petition for special leave; 2.If the petition seeking grant ....
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....he High Court had taken the view that the right to apply for leave to appeal to the Supreme Court under article 136, if it could be called a 'right' at all cannot be equated to a right to appeal and that a High Court could not refuse to entertain an application under article 226 of the Constitution on the ground that the aggrieved party could move the Supreme Court under article 136 of the Constitution. Their Lordships observed that such a broad statement of law is not quite accurate, although substantially it is correct. . . . To sum up our conclusions are : (i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before a superior forum and such superior forum modifies, reverses or affirms the deci sion put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by article 136 of the Constitution is divisible into two stages. The first stage is up to the disposal of the prayer for special leave to file an appeal. The second stage co....
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....ger; the order may be of reversal, modification or merely affirmation. (vii) On an appeal having been preferred or a petition seeking leave to appeal having been converted into an appeal before the Supreme Court the jurisdiction of the High Court to entertain a review petition is lost thereafter as provided by sub-rule (1) of rule 1 of Order 47 of the Code of Civil Procedure." 26. Even, the Gujarat High Court in the case of DIT v. Shia Dawoodi Bohra Jamat [2012] 344 ITR 653 (Guj) ; [2010-TIOL-283-HC-AHM-IT] clearly held that : "Decision of the courts are not to be applied in the extract but are to be applied to the facts of the case and each case is an individual and distinguishable and having its own unique features, therefore, no straitjacket formula can be applied while applying the judgments of the High Courts." 27. From the conjoint reading of the judgments and applying the facts to the instant case, we are of the considered view that simply not striking off of the inappropriate portions in the notice does not vitiate the notice under section 271(1)(c) of the Act as invalid. Further, simply by issuing a proceedings for one limb of section 271(1)(c), does not take away th....
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.... Assessing Officer recorded satisfaction in the assessment order and dealt with the objection of the assessee to the effect that notice under section 271(1)(c) was invalid because that was issued for concealment of income whereas the penalty order has been passed for furnishing inaccurate particulars. The learned Commissioner of Income-tax (Appeals) rightly concluded that the Assessing Officer justified its case in the body of order merely by writing furnishing of inaccurate particulars of income instead of concealing the particulars of income shall not vitiate the order. 30. Therefore we do not have any hesitation to hold that simply by writing in order furnishing of inaccurate particulars of income instead of concealment of particulars of income does not vitiate the notice invalid and proceedings cannot be quashed. 31. In our considered opinion, the appeals filed by the assessee are liable to be dismissed on the legal ground. 32. Now to consider the appeals of the assessee on the merits 33. On the merits, the learned authorised representative argued that in the quantum order of the Assessing Officer the assessee had a figure of sale to the tune of Rs. 94, 31,395 and the Asses....
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....93(Asr)/2013 dated March 4, 2016) and International Engineers v. Asst. CIT (I. T. A. No. 165(Asr)/2016 darted July 12, 2016) as relied upon by the learned authorised representative, we realize that all the cases are factually distinguishable to the instant case because in the said cases, belated revised return, revised return levy to estimation and adjust ment in sale were in question but in the instant case, the facts are totally dissimilar because it is clear cut case of showing less amount which was actually higher as had been shown to the other authorities, therefore, the assessee did not get any support from the said judgments. It is also undisputed fact that the quantum of turnover for various years were shown before the Income-tax Department and the Commercial Tax Officer were altogether different therefore, the Assessing Officer has validly made the addition and initiated penalty proceedings as the assessee was failed to justify his occasions for showing less amount and also failed to establish the same as a bona fide mistake and further failed to produce any evidence for the satisfaction of the Assessing Officer, therefore, the Assessing Officer was right to impose the p....
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....of Manjunatha Cotton and Ginning Factory. N. K. Choudhry (Judicial Member).-In the above referred to cases, the Members constituting the Bench have taken divergent views while deciding the aforesaid appeals, therefore, I propose the following questions to be referred to the hon'ble President, Income-tax Appellate Tribunal for nominating the Third Member for adjudication of the instant cases, (i) Whether the levy of penalty under section 271(1)(c) is sustain able in the case, where the Assessing Officer while initiating the penalty proceedings written the words "concealing the particulars of income", although the subject matter of the order is well as the contents of the order reflects that the order has been passed under section 271(1)(c) of the Income-tax Act qua concealment of particu lars of income, however, while imposing the penalty, the words, i. e., "furnishing inaccurate particulars of income" have been written inad vertently, in the order. (ii) Whether the hon'ble Accountant Member misplaced on the ratio held by the Andhra Pradesh High Court in the case of CIT v. Chandulal [1985] 152 ITR 238 (AP), to the effect that initiation of notice under section 274 is m....
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....f income. (2) Whether the reliance placed by the hon'ble Judicial Member on the decision of the hon'ble Supreme Court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) is misplaced, in view of the hon'ble Andhra Pradesh High Court judgment in I. T. A. No. 684 wherein the hon'ble Andhra Pradesh High Court has held that the case law of K. P. Madhusudhanan and Co. has no application to the Karnataka High Court decision in the case of Manjunatha Cotton and Ginning Factory Questions of Judicial Member (i) Whether the levy of penalty under section 271(1)(c) is sustain able in the case, where the Assessing Officer while initiating the penalty proceedings written the words "concealing the particulars of income", although the subject matter of the order as well as the contents of the order reflects that the order has been passed under section 271(1)(c) of the Income-tax Act qua concealment of particu lars of income, however, while imposing the penalty, the words, i. e., "furnishing inaccurate particulars of income" have been written inadvertently, in the order. (ii) Whether the hon'ble Accountant Member misplaced on the ratio held by the Andhra Pra....
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....gs for one limb of section 271(1)(c), does not take away the power of the Assessing Officer to pass an order on other limb of the section, the entire provisions cannot be quashed simply on the technical lapses until and unless the same have resulted into failure of justice and denial of the principles of natural justice. Even otherwise the hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton and Ginning Factory (supra) analysed the ingredients of section 271(1)(c) and was pleased to held in para. No. 31 (page 583 of 359 ITR) : "31. After insertion of Explanation 1 to section 271(1)(c), the law on concealment and penalty has become stiffer. The Explanation as it stands now is a complete code having the following features : (1) Every difference between reported and assessed income needs an explanation. (2) If no explanation is offered, levy of penalty may justified. (3) If explanation is offered but is found to be false, penalty will be exigible. (4) If explanation is offered and it is not found to be false, penalty may not be leviable,- (a) such explanation is bona fide. (b) the assessee had made available to the Assessing Officer all the facts an....
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....en imposed for furnishing of inaccurate particulars. In the facts of the present case as is evident on a reading of the lead order, it is not an issue to be examined by the Third Member as to whether the notice issued by the Assessing Officer was for furnishing of inaccurate particulars or for concealment. It is evident from a reading of the above extract of the lead order, the assessee was put to notice by the Assessing Officer to explain why penalty under section 271(1)(c) of the Act should not be imposed for furnishing of inaccurate particulars and admittedly penalty has been imposed for concealment. There being no dispute on these admitted facts the short question which falls for consideration in the present proceedings is the view expressed in the lead order is that simply not striking off of the inappropriate portions in the notice does not vitiate the notice under section 271(1)(c) of the Act as invalid. The notice under section 274 admittedly was issued for concealment of income, penalty order has been passed for furnishing inaccurate particulars, in order to arrive at the said conclusion, the learned Judicial Member in the leading order considering the assessee's praye....
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.... to explain in the penalty proceedings and thus, since both the limbs of the section are attracted, the fact that notice has been issued on one count and levy of penalty has been on the other count would not have materially prejudiced the assessee as penalty very well could be levied on both, the counts. 42. The learned authorised representative took an objection lo this line of argument stating that the present appeal cannot be argued as a fresh appeal as it is before the Third Member only on the limited issue of dissent amongst the Members and the parties are to be heard only on that. The mandate of the Third Member is a limited mandate available to decide only the point on which the Members of the Bench originally hearing the appeal differed. Thus, whether the issue was to be decided on the basis of the legal ground or not is no longer open for discussion, accordingly, justifying the decision on other facts cannot be of any help. Reliance was placed upon the decision of the Allahabad High Court in the case of CIT v. Sahara India Ltd. [2017] 398 ITR 301 (All) rendered on January 24, 2017. 43. In the circumstances, time was given to the Revenue to go through the decision of the ....
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....pecific provisions by which the present proceedings are to be guided is concerned, the statutory limitations are unambiguous. For ready reference, the relevant provision is first extracted hereunder : "255.(4) If the members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided accord ing to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it." 44.2 A perusal of the same shows that the statute mandates that in case of difference of opinion amongst Members of a Bench on any point, then the statute envisages that it is that point which has to be decided by the opinion of the majority of the Members of the Appellate Tribunal. The statute mandates that the Members who differ shall state the point or points on which th....
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....the view that the Third Member should have pronounced his opinion on the point of difference as also on the additional points raised by the assessee. But without doing so, the Third Member has remitted the matter to the original two Members of the Tribunal for a fresh decision. We are of the view that the Third Member who is functioning under section 255(4) of the Act does not have such a power as to direct the two members of the Tribunal who had differed on the point referred to the Third Member, to decide a particular point or act in a particular manner. Such a power vests only with an appellate or revisional authorities, if there are any. The power of the Third Member to whom the points of difference have been referred cannot act as if it were an appellate authority over the two members of the Tribunal and direct them to rehear and dispose of the matter afresh. No doubt, the Third Member, in this case, happened to be the Vice-President. But that will not clothe him with the power to give directions or remit the matters while functioning under section 255(4) of the Act. The learned Advocate-General appearing for the assessee would say that section 255(4) of the Act should be read....
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....onstituted the Tribunal. The Third Member has no higher power or jurisdiction than the Members who originally constituted the Tribunal, and, therefore, the remit order directing them to rehear the matter will be clearly outside the jurisdiction of the Third Member. Hence, we cannot sustain legally the order of the Third Member, in this case, remitting the matter to the two members of the original Tribunal without expressing any opinion on the ques tion which he had to consider. Therefore, W. P. No. 905 of 1978 is allowed and the order of the first respondent therein dated January 31, 1978, will stand quashed. The result is that the original reference referring the point of dispute should be taken to be pending and that has to be disposed of as per law. In this case, we find that the Third Member (Thiru D. Rangaswamy) is no longer in service and, there fore, he is not in a position to hear the reference. In view of this peculiar situation, the President will nominate or empower any other Member of the Tribunal to hear the reference and give his opinion on the points of dispute." (emphasis supplied) 44.3 The said position of law has also been recently addressed by the hon'ble A....
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....r was co-ordinate, the court observed that it was the duty of the Third Member to hear the two sides and decide question referred for its opinion in one or other way and not to make comments in the manner in which two differing Members have rendered their opinion for deciding certain issues. A careful reading of the said decision makes it clear that the Third Member is necessarily required to agree with either of the views expressed. The following specific observations of the hon'ble court leave no further scope for debate (page 305 of 398 ITR) : "13. We find that the Third Member instead of answering ques tions has looked into the correctness of decision of two differing Members and observed that they have not looked into the relevant circumstances and should re-decide ground of appeal after giving opportunity to both the sides. The Third Member, it appears, forgot his position that he was not sitting in appeal over the opinion rendered by two Members of the Tribunal since jurisdiction of Third Member was co-ordinate and it was his duty to hear the two sides and decide question referred for its opinion in one or other way and not to make comments in the manner in which two d....
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.... the Act is passed to the effect that appeals of the assessee/ Department as well as cross-objections shall be disposed of afresh on the points of differences as observed by the Third Member. Registry is directed to fix the same in the second week of February 2004 after issuing notices to the assessee as well as to the Department.' 14. This situation was created by the Third Member who appears to have forgotten its own duty and statutory obligation that it has to decide specific points referred for its opinion and not to sit in appeal over the entire matter and take its own decision independently and bereft of points formulated by different Members and referred for opinion of the Third Member. 15. We have no option but are constrained to observe that the order and approach of the Third Member is patently erroneous, illegal, impermissible and constitutionally unsustainable in law rendering the order dated December 31, 2003, passed by the Regular Bench, unsustainable." 45. The said judgment as observed earlier was specifically referred to for the benefit of the learned Commissioner of Income-tax-Departmental repre-sentative and it is in view of the above legal position and t....
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....9;ble Andhra Pradesh High Court in the case of CIT v. Chandulal [1985] 152 ITR 238 (AP) in favour of the Revenue. The said decision has been relied upon by the learned Judicial Member. Apart from the said decision cited I am also conscious of the decision of the hon'ble Bombay High Court and the Madras High Court in the cases of CIT v. Smt. Kaushalya [1995] 216 ITR 660 (Bom) and Sundaram Finance Ltd. v. Asst. CIT [2018] 403 ITR 407 (Mad) respectively which have not been cited by the parties. 45.1.The legal position as addressed in the aforementioned decisions favouring the assessee may be better appreciated after briefly conceptual izing the specific provision under consideration. Section 271(1)(c) of the Act contemplates the levy of penalty by the Assessing Officer wherein the specific provision is attracted if the Assessing Officer is satisfied that the assessee has either concealed its income or furnished inaccurate particulars of income and there may be instances where the Assessing Officer is satisfied that both the limbs are attracted. The defaults thus, admittedly can be committed either simultaneously and cumulatively or separately and independently on these two separa....
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....ro forma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inac curate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 96. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice (See Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); [2000] 2 SCC 718)." 45.3 When the said position of law as held by the apex court is considered in the light of the decision of the hon'ble Andhra Pradesh High Court in the case of Chandulal wherein issuance of notice under section 274 has been held to be an administrative device, it is clear that the decision rendered in the case of CIT v. Chandulal dated July 27, 1984- [1985] 152 ITR 238 (AP) is no longer good law in view of the ratio of the subsequent decis....
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.... has to pay a penalty ranging from 100 per cent. to 300 per cent. of the tax liability. As the provisions of section 271(1)(c) have to be strictly construed, the Bench mandated that the notice issued should set out the grounds which the assessee has to meet specifically, otherwise the principles of natural justice would be offended as the show-cause notice would be vague. Dealing with concealment of particulars of income or furnishing of inaccurate particulars of income, the Bench observed that some cases may attract both the offences and in some, there may be overlapping of both, but in such cases initiation of the penalty proceedings must be specifically for both the offences. Draw ing up penalty proceedings for one offence and finding the assessee guilty of another or finding him guilty for either, the one or the other, was held to be unsustainable in law. 12. In CIT v. Manu Engineering Works [1980] 122 ITR 306 (Guj), a Division Bench of the Gujarat High Court observed that the Assessing Officer must give a positive finding as to whether there is conceal ment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In t....
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....doubt cannot be given to the Revenue merely because the assessee did not complain of vagueness in the show-cause notice earlier. 16. Reliance placed by the Revenue upon MAK Data P. Ltd. v. CIT [2013] 358 ITR 593 (SC) ; [2014] 1 SCC 674, is of no assistance as the Supreme Court merely observed therein that the Assessing Officer is not required to record his satisfaction in a particular manner while imposing the penalty or reduce it to writing. That is not the contro versy in the case on hand. 17. On principle, when penalty proceedings are sought to be initiated by the Revenue under section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefor has to be spelt out in clear terms. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100 per cent. to 300 per cent. of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the Revenue must specify as to which one of the two is sought to be pressed into service and....