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2021 (3) TMI 608
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....1154/2014 & Ors. dtd. 05.01.2017]; (2) The Principal Commissioner of Income-Tax (Central) Bengaluru v. Goa Coastal Resorts and Recreation Pvt. Ltd.[TXA No.24/2019 dtd. 11.11.2019]; (3) The Principal Commissioner of Income-Tax, Panaji v. New Era Sova Mind (TXA Nos.70/2019 & Ors, dated 18.6.2019); and (4) The Principal Commissioner of Income-Tax, Panaji v. Goa Dourado Promotions Pvt. Ltd.[ TXA No.18/2019 dtd. 26.11.2019]. 3. On the other hand, an earlier decision by another co-equal bench, according to the referring Division Bench, has taken a contrary view: Commissioner of Income-Tax v. Smt. Kaushalya[216 ITR 660 (Bombay)]. 4. In the end, the Division Bench has found a direct conflict between Goa Dourado Promotions and Kaushalya. So, through an order dated 28 February 2020, it has placed the matter before the Hon'ble the Chief Justice under Chapter 1, Rule 8 of the Bombay High Court Appellate Side Rules, 1960. 5. While placing the matter before the Hon'ble the Chief Justice for issue-resolution by a larger Bench, the learned Division Bench has framed this question for reference: "[In] the assessment order or the order made under Sections 143(3) and 153C of the IT Act, ....
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....isclosed income, and penalty proceedings under section 271(1)(c) were initiated. In response to the show-cause notice issued, the appellant contended that FY 2005-06 was the second year of his business. As he was inexperienced, he was unaware of the accounting and taxation formalities. Besides that, he has taken various other pleas. But, unimpressed by the reply, the AO imposed the penalty. On appeal, the Id. CIT(A) deleted the penalty. On further appeal, the Income Tax Appellate Tribunal has restored the AO's order of penalty. Aggrieved, the appellant-assessee has filed the Tax Appeal No.51 of 2012. The other Tax Appeal No.57 of 2012, too, has reached this Court with the same factual backdrop. The Appellants: 11. After taking us through the record and what seem to be conflicting judgments, Shri Rivankar, the learned Senior Counsel for the appellants, has submitted that Kaushalya is the only decision from this Court that has taken a contrary view. All other decisions, according to him, have taken a consistent view that a vague notice under section 274 r/w 271(1)(c) of the IT Act, in a printed form without a tick mark to the relevant ground, would vitiate the penalty proceedings. ....
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....ng an order imposing penalty. In other words, the notice cannot be treated as a mere formality; it, in fact, requires strict compliance. 17. In his arguments, Shri Rivankar has relied on these decisions: (1) Ashok Pai v. CIT[(2007 292 ITR (SC) (Para 19)]; (2) CCIT v. Manjunath Cotton[(2013) 359 ITR 565 (Kant) (para 34,59,60,63)]; (3) Muninga Reddy v. ACIT[(2017) 396 ITR 398 (Kant) (para 7-11)]; (4) CIT v. SSA Emerald Meadows[(2013) 386 ITR (ST) 13]; (5) PCIT v. Smt. Baisetty[2017 (0) SUPREME (AP) 274, para 7,8,10,15,17]; (6) CIT v. Samson Pericherry[ITA/1154/2014 (Bom)]; (7) PCIT v. Goa Coastal Resorts[TXA/24/2019 (Bom)]; (8) PCIT v. Goa Dorado[TXA/18/2019 (Bom)]; (9) PCIT v. New Era Sova Mine[TXA/70/2019 (Bom)]; (10) NN Subramanium Iyer v. UOl[(1974) 97 ITR 228(Ker) (Para 1,5,6)]; (11) Kishori Mohan Bora v. St. Of W.B.[AIR 1972 SC 1749 (para 5-8, 10)]; (12) UOI v. Dharmendra Textile[(2008) 13 SCC 369 (SC), (para 15,16,20)]; (13) CIT v. Reliance Petro Products[(2010) 322 ITR 158 (SC) (para 9)]; (14) CIT v. Kaushalya[(1994) 75 Taxman 549 (Bom), (p-2,4,5,6,7,8,10)]. Respondent: 18. Ms. Amira Razaq, the learned Standing Counsel for the Revenue....
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....g on a plethora precedents, Ms. Razaq submits that unless prejudice or injustice is pointed out, mere technical infraction of law would not vitiate an enquiry or any order or result of any proceedings. And in judging the question of prejudice, according to Ms. Razaq, the Court must act with a broad vision. 22. To support her contentions, after her painstaking presentation, Ms. Razaq, too, has relied on a plethora of precedents. Among these decisions, majority have been commonly relied on by both the parties, and they have already been listed above. We will, now, refer to the other ones: (1) Commissioner of Income-tax, Bangalore v. SSA'S Emerlad Meadows[(2016) 73 taxmann.com 241 (Karnataka)]; (2) State Bank of Patiala v. S.K. Sharma[(1996) 3 SCC 364]; (3) Union of India v. Dharamendra Textile Processors[(2008) 306 ITR 277 (SC)]; (4) Ventura Textiles Ltd. v. Commissioner of Income Tax, Mumbai City-II[(2020)117 Taxmann.com 182 (Bombay)]; (5) Gangotri Textiles Ltd. v. Deputy Commissioner of Income Tax, Corporate Circle 2, Coimbatore[(2020) 212 taxmann.com 171 (Madras)]; (6) Sundaram Finance Ltd. v. Assistant Commissioner of Income-Tax[(2018) 93 taxmann. Com 250 (Madras)....
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....c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty- (i) Omitted (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for each such failure; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation o....
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....nue notified the assessee under section 148 of the Act to reopen the assessment. It then completed the assessment under section 143(3) read with section 147 of the Act. Simultaneously, the Revenue initiated proceedings under section 274 read with section 271(1)(c) of the Act. When the assessee appealed against the assessment order, it was partly successful. The assessee did not challenge the appellate order further. Then, the assessing authority went ahead with the penalty proceedings and imposed penalty. Aggrieved, the assessee appealed but without success. Further aggrieved, it appealed to the Tribunal. 31. The Tribunal perused the notice issued under section 274 of the Act and noted that the assessing authority used a standard proforma. Before issuing the notice, the AO neither struck off nor deleted the "inappropriate words and paragraphs". That is, the AO was not sure whether she had "proceeded on the basis that the assessee has either concealed its income or has furnished inaccurate details". According to the Tribunal, the notice did not comply with the statutory mandate and, therefore, was vague. This vagueness betrayed the AO's non-application of mind. The other facets of ....
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....at the assessee has a right to contest the penalty proceedings and, therefore, should have full opportunity to meet the Revenue's case. The assessee may show that the conditions stipulated in section 271(1)(c) do not exist, and so he is not liable to pay the penalty. 37. Pertinently, Manjunatha refers to the Revenue's practice of sending a printed form where all the grounds mentioned in section 271 are mentioned. According to it, such an omnibus notice does not satisfy the statutory requirement. It is more particularly so because the assessee has the initial burden, and his failure to discharge that burden has serious consequences: He may end up paying a penalty from 100% to 300% of the tax liability. In other words, as section 271 needs to be strictly construed, the notice under section 274 should satisfy the grounds which the assessee has to meet specifically. Otherwise, the principles of natural justice are offended on the grounds of vagueness. As a corollary, no penalty could be imposed based on a defective or vague notice. 38. Manjunatha goes onto explain that Clause (c) of section 271 deals with two specific offences: concealing particulars of income or furnishing inaccurat....
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....bunal ruled in the assessee's favour. 44. The Tribunal, in fact, held that the assessee had not been given a reasonable opportunity of hearing because the show-cause notices were ambiguous. The "material portion of the show-cause notice" informed the assessee that he "concealed the particulars of [his] income or deliberately furnished inaccurate particulars of such income". The notice for the second AY, too, contained the same allegation: "you have concealed the particulars of your income or furnished inaccurate particulars of such income." 45. On the Revenue's appeal, this Court has noted that the Tribunal has focussed only on the use of the word "or" between the two groups of words "concealed the particulars of your income" and "furnished inaccurate particulars of such income". This has led the Tribunal to conclude that the penalties were founded upon ambiguous and vague show-cause notices. 46. This Court in Kaushalya has found a difference between the notice for AY 1967-68 and that for AY 1968-69. According to it, the Tribunal was right in holding that the notice for AY 1967-68 was vague, but it was wrong in holding so for the AY 1968- 69. Kaushalya has held that the assess....
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....s Emerald Meadows[ITA No. 380 of 2015, dated 23.11.2015, Karnataka High Court.] to hold thus: "No notice could be issued under Section 274, read with Section 271(1)(c), of the IT Act without indicating which particular limb of Section 271(1)(c) was invoked for initiating the penalty proceedings". Samson Perinchery: 51. In this case, on appeal, the Tribunal deleted the penalty imposed upon the respondent-assessee. To do so, it has held that "the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of the income, while the order imposing penalty was for concealment of income." When taken in further appeal, this Court has observed that while initiating penalty proceedings, the Assessing Officer should be clear about which of the two limbs has been contravened or indicate that both have been contravened. Samson Perinchery has further approved the Tribunal's view that the notice issued under Section 274 of the Act should strike off irrelevant clauses. Lest the notice should betray non-application of mind on the Assessing Officer's part. Goa Dourado Promotions: 52. In this appeal, one of the questions was whether t....
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....n, which had no application to the assessee, were struck out, leaving only one clause". That clause informs the assessee she has "concealed the particulars of [her] income or furnished inaccurate particulars of such income". 60. But when the respondent-assessee submitted her explanation, she did not object to any element of ambiguity in the notice. She contested it on the merits. Only before the Tribunal, for the first time, did she raise an objection. In that context, Baisetty Revathi has agreed that the respondent has submitted her explanation on merits without raising a doubt as to what was the precise allegation levelled against her. But, according to Baisetty Revathi, what matters is the principle involved and not just the isolated case of its application against the respondent. According to it, the penalty order demonstrates that the Assessing Officer was not even certain as to what was the finding on the strength of which he imposed the penalty. This is clear from the Assessing Officer recording that he was satisfied that the assessee had concealed/furnished inaccurate particulars of income. So Baisetty Revathi has held that "in the absence of a clear finding by the Assessi....
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....he detaining authority was satisfied that it was necessary to detain the petitioner to prevent him from acting in a manner prejudicial to "the maintenance of public order or the security of the State." That satisfaction "was on the disjunctive and not conjunctive grounds". It means the District Magistrate was not certain whether he had reached his subjective satisfaction about the necessity of exercising his power of detention on the ground of danger to the public order or danger to the security of the State. 66. In the above context, the Supreme Court has treated it as a well- settled position that "an extraneous ground vitiates the order since it is impossible to predicate whether without it the requisite satisfaction could have been reached, the impugned order cannot be upheld". T. Ashok Pai: 67. In T. Ashok Pai, the Supreme Court has observed that an order imposing penalty is quasi-criminal. So the burden lies on the Revenue to establish that the assessee has concealed income. Since the burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is an income cannot automatically be adop....
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....errent which will put a stop to practices which the Parliament considers to be against the public interest". So, it was for the Revenue "to establish that the assessee shall be guilty of the particulars of income". Dharmendra Textiles: 73. In Dharamendra, the apex court was dealing with the penalty provisions in the Central Excise Act, 1944. The question was whether section 11 AC, inserted by the Finance Act, 1996, should be read to contain mens rea as an essential ingredient. And the next question was about the levying of penalty below the prescribed minimum. 74. In fact, the matter was placed before a three-Judge Bench on a reference. The reference was occasioned because of the decisional cleavage perceived between Dilip N. Shroff and Chairman, SEBI v. Shriram Mutual Fund[[(2006) 5 S.C.C. 361]]. During arguments, the assessee referred to Section 271(1)(c) of the IT Act and took a stand that Section 11AC of the Act is identically worded and, in a given case, it was open to the assessing officer not to impose any penalty. 75. So, in that context, Dharmendra Textile has taken note of section 271(1)( c) and section 271C of the IT Act. While analysing these provisions, Dharamendra....
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....ld have no discretion in quantifying the amount". And penalty must be imposed equal to the duty determined under Sub-section (2) of Section 11A. That is what Dharamendra Textile needs to be confined to. Reliance Petro Products Pvt. Ltd.: 79. Here, the assessee furnished all the details of its expenditure as well as income in its Return. The details, in themselves, were not found to be inaccurate, nor did they conceal any income. The assessee, in fact, claimed expenditure under certain heads, but the Revenue did not accept that claim. In that context, the Supreme Court has held that "it was up to the authorities to accept [the assessee's] claim in the return". According to it, merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that itself would not attract the penalty under Section 271(1)(c). 80. If the contention of the Revenue is accepted, further notes Reliance Petro Products, then whenever a claim made in a return is not accepted, the assessee will invite penalty under Section 271(1)(c). That is clearly not the legislative intent. Thus, the mere making of the claim, which is not sustainable in law, by it....
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.... this being a pure question of law touching upon the jurisdiction, it can be raised at any stage. 86. A Division Bench of this Court has held that any court can consider a question of jurisdiction even if it has not been raised before the lower fora. According to it, the question relating to omitting the inapplicable portion in a show-cause notice in printed format would go to the root of the lis. So, it would be a jurisdictional issue. 87. Then, Ventura Textiles notes that though the Karnataka High Court's decision in SSA's Emerald Meadows was not interfered with by the Supreme Court, the fact remains that dismissal of an SLP would not lead to a merger of the High Court's order with the Supreme Court's. In this process, it also refers to Samson Pernchery, Goa Coastal Resorts & Recreation, and New Era Sova Mine. 88. On facts, Ventura Textiles holds that in the assessment order, dated 28.02.2006, the Assessing Officer ordered that since the assessee had furnished inaccurate particulars of income, penalty proceedings under Section 271(1)(c) were also initiated separately. Therefore, it was apparent that penalty proceedings were initiated for furnishing inaccurate particula....
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....ion. We reckon this case helps neither party. Sundaram Finance Ltd.: 94. In Sundaram Finance, the question is whether we can term a notice under section 27(1)(c) of the Act valid if it does not show the default, which the assessee must explain. The assessee has brought to the Madras High Court's notice the Karnataka High Court decision in Manjunatha. But, in the end, Sundaram Finance has held that the existence of the condition mentioned under section 27(1)(c) of the Act was writ large on the face of the order of the Assessing Officer as well as the first appellate authority. So it has refused to declare the notice invalid. Though this case was taken in appeal, the Supreme Court dismissed the SLP in limini. D. M. Manasvi: 95. In D. M. Manasvi v. C.I.T., Gujarat[[1972] 86 ITR 557 (SC)], these are the substantial questions of law: (1) Have the proceedings for imposing penalty been properly commenced as required by section 271 of the IT Act? (2) Has there been any material or evidence before the Tribunal to hold that the assessee deliberately concealed particulars of his income or deliberately furnished inaccurate particulars of such income as required by section 271(1)(c) of ....
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....Angidi Chettiar has held that old section 28, as it was originally enacted, was somewhat obscure. The penalty which could be imposed in cases referred to in clauses (b) and (c) was to be a sum not exceeding one and a half times the tax, which would have been avoided if the income as returned by such a person had been accepted as the correct income. But the Legislature gave no indication whether the penalty was related to the tax avoided by the partners of the firm or by the firm on the footing that it was to be regarded as an unregistered firm. 100. Then, S. V. Angidi Chettiar quoted with approval the Calcutta High Court judgment in Khushiram Murarilal v. Commissioner of Income- tax, Central, Calcutta[1954-25 ITR 572 (Cal)]. According to it, even when construed by its own language, the concluding paragraph of S. 28(1) cannot be said to make it a condition precedent that a person must be liable to pay some income-tax or it may also be super-tax if he were to be made liable for a penalty. Clause (b) of the proviso emphasises that the meaning of the concluding paragraph of S. 28(1) assumes that under that provision, a person may be chargeable to penalty although he may not be chargea....
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....e concluded. It is true that mere absence of the words "I am satisfied" may not be fatal, but such satisfaction must be spelt out from the assessing authority's order as to the concealing of income or furnishing of inaccurate particulars. Absent a clear finding to that effect, the initiation of penalty proceedings will be without jurisdiction. It has concluded that the first Division Bench's decision needed no interference as it had laid down the correct proposition of law. Madhushree Gupta: 107. A Division Bench of Delhi High Court has considered the position of law regarding section 271(1)(c) post-amendment by Finance Act, 2008. According to it, the position of law, both pre- and post- amendment, remained the same. It is because the Assessing Officer must arrive at a prima facie satisfaction during the proceedings about the assessee's concealing the particulars of income or furnishing inaccurate particulars before he initiates penalty proceedings. 108. According to Madhushree Gupta, a bare reading of section 271(1)(c) would show that to initiate penalty proceedings following pre- requisites should be followed: (i) The Assessing Officer should be 'satisfied' that: (a)....
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....gh Court, through another judgment, upheld the amendment. But, then, the Court felt that the provisions are to be read down. According to it, even after the amendment, if the satisfaction is not discernible from the assessment order, the penalty cannot be imposed. The proceedings for initiation of penalty proceeding cannot be set aside only because the assessment order states 'penalty proceedings are initiated separately' if otherwise, they conform to the statutory parameters. 113. Accordingly, ECS Ltd. has concluded that even when the assessing officer has not recorded his satisfaction in explicit terms, the assessment orders should indicate that the assessing officer had arrived at such a satisfaction. Though the assessment order need not reflect every item, such as addition or disallowance, "yet we have to find out that the order is couched in such a manner", revealing the assessing officer's opinion that the assessee had concealed the particulars of income or furnished inaccurate particulars. In other words, this has to be discerned from the reading of the assessment order. 114. On the facts, ECS Ltd. has found from the assessment order that the assessing officer ....
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.... 119. Where procedural or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant. But that criterion does not apply to cases with mandatory provisions of law. And those mandatory provisions must have been conceived not only in individual interest but also in the public interest. No prejudice is caused to the person complaining of the breach of natural justice, according to Sudhir Kumar Singh, where such person does not dispute the case against him or it. This can happen from estoppel, acquiescence, waiver, and by way of non-challenge or non-denial or admission of facts, where the Court finds on facts that no real prejudice can therefore be said to have been caused to the person complaining of the breach of natural justice. 120. Sudhir Kumar Singh further elaborates on the issue and holds that in cases where facts are stated to have been admitted or not disputed -and only one conclusion is possible-the Court does not pass futile orders of setting aside or remand when there is, in fact, no prejudice caused. This conclusion must be drawn by ....
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....r degree, which is called upon to consider the precedent, to determine what the true ratio decidendi was." 126. Oft-quoted are the views of Holt C.J. and Lord Mansfield. In Cage v. Acton[12 Mod. 288, 294 (1796)], the former has held that "the reason of a resolution is more to be considered than the resolution itself." Then, the latter has held in Fisher v. Prince[3 Burr. 1363, 1364 (1762)] that "the reason and spirit of cases make law; not the letter of particular precedents." But in contrast is the now-widely- accepted principle that the ratio decidendi of a case must not be sought in the reasons on which the judge has based his decision. 127. Professor Morgan of the Harvard Law School[Morgan, The Study of Law, (1926) 109, as quoted by Prof. Goodhart.] has given these propositions: (a) The Court must have applied a rule of law; (b) Its application is a must for determining the issues presented; (c) Only that rule of law as applied to the facts of the case is treated as the ratio. 128. If we consider the recent jurisprudential rumblings on the never-ending debate of which part of judgment will have precedential force, what comes to mind is the articulation advanced by Ga....
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....law. Neil Duxury in his book The Nature and Authority of Precedent[Cambridge University Press, UK, 2008], deals with the "the complexity of case-law". The learned author poses unto himself a question: Why has the concept of the ratio decidendi left legal thinkers so confounded? There seem to be six principal answers to this question[Ibid, p.68]. 133. First, the ratio decidendi and obiter dicta often blur into one another. Obiter dicta, Cardozo remarked, 'are not always ticketed as such, and one does not recognise them always at a glance'[Benjamin N. Cardozo, The Nature of the Judicial Process, 1921 Ed., p.30]. Much the same could be said about the ratio decidendi[Cambridge University Press, UK, 2008, p.69]. The second difficulty with the ratio decidendi is that in some decisions, it will be impossible to locate, let alone separate from obiter dicta. Illustratively, Duxbury cites Central Asbestos Ltd. V. Dodd[[1973] AC 518]. A Bench of Five Judges decided that case: two concurred and two dissented. The fifth judge, however, joined the dissenting judges in reasoning but approved the concurring judges' conclusion. So it was by a majority of three to two. When Dodd was cited a....
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.... is created through the judge's words or through interpreting the judge's words perhaps need not exercise us all that much. The only significant points to emerge from this puzzle, according to Duxbury, seem to be that the ratio can be determined as much by the interpreter as by the speaker and that when judges excavate rationes from past decisions, they are likely to influence if not determine how that precedent is conceived as an authority in the future. Certainly, this retrospective determination of rationes gives room for manoeuvre [Ibid, p.75]. 139. The final two difficulties posed by the concept of the ratio decidendi go hand in hand. First, there is a definitional problem. So far, this issue has been skirted because 'ratio decidendi' has been taken simply to mean 'reason for the decision' or 'reason for deciding'. But that is by no means the only definition of the ratio decidendi, and that to rely on this definition alone is to risk oversimplifying the concept. Second, there is the problem of determining the ratio decidendi. By defining the ratio, we settle on what to look for. But this still leaves unaddressed the task of settling on a method by which to look[Ibid, p.75]. ....
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.... to plaintiff 's relation to vehicle of harm may be a purchaser from retailer, or the purchaser from anyone, or any person related to such purchaser. What Binds? 142. Then, we can adopt Arthur L. Goodhart's assertion[Determining the Ratio Decidendi of a Case, Yale Law Journal, Dec., 1930] that it is not the rule of law "set forth" by the court, or the rule "enunciated", which necessarily constitutes the principle of the case. There may be no rule of law set forth in the opinion, or the rule when stated may be too wide or too narrow. Goodhart quotes from Oliphant's A Return to Stare Decisis (1927) that the predictable element in a case is "what courts have done in response to the stimuli of the facts of the concrete cases before them. Not the judges' opinions." 143. A proposition of law may be false or suspect. But if it gets ensconced in any case as its ratio, it remains precedentially protected. Sometimes courts decide cases, but they avoid stating any general principle of law. They qualify their judgments with the phrases like these: "in the special circumstances of the case", "on the facts," and so on. Sometimes, the principle of a case may have been correctly stated, but....
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....'s statement of the facts even though it is patent that he has misstated them, for it is on the facts as he, perhaps incorrectly, has seen them that he has based his judgment. In fact, it is not uncommon that sometimes the court considers a fact but disregards it as immaterial, or it may miss out on a fact as it was not called to its attention by counsel or was for some other reason overlooked. So what matters is what has been stated, not what could have been stated, not what has been in the record but missed out on. Then, a precedent gets its binding force based on only the facts stated. An issue raised not addressed or an issue that has altogether gone sub silentio cannot support a precedent. 149. To sum up, we may note that if a fact, however material it is, was not considered by the court, then the case is not a precedent in future cases where a similar fact appears. 150. Let us take the celebrated case of Rylands v. Fletcher[L. R. 3 H. L. 330 (1868)] to demonstrate this point. In that case, the defendant employed an independent contractor to make a reservoir on his land. Negligently, the contractor did not fill up some disused mining shafts. So the water escaped and floo....
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....his case, as the facts are so and so, I reach conclusion X." Even though the judge may be wrong on facts, but the case is a precedent for the facts stated, though wrongly, in that case. It is so because there is no assumption; on the contrary, a non-existing fact is taken as existing- erroneously may be. 156. When a case presents two sets of facts, what should follow? A judge may determine the first set of facts and then conclude on them. The judge may not desire to determine the second set of facts. Any views he may express on the undetermined second set are accordingly obiter dicta. If, however, the judge does determine both sets, as he is free to do so, and concludes on both, then the case creates two principles, and neither is an obiter dictum. That said, if the first case lacks any material fact or contains any additional ones not found in the second, then it is not a direct precedent for the second case. 157. However, it is necessary for us to know what the judge has said about his choice of the facts, because what he does has a meaning for us only when we know what facts he has relied on. "A divorce of the conclusion from the material facts on which that conclusion is base....
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....sidered material. (9) If in a case there are several opinions which agree as to the result but differ as to the material facts, then the principle of the case is limited so as to fit the sum of all the facts held material by the various judges. (10) A conclusion based on a hypothetical fact is a dictum. By hypothetical fact is meant any fact the existence of which has not been determined or accepted by the judge. Summary: 160. From all the judgments we have quoted about the scope of penalty proceedings under section 271 (1)(c), read with section 274, of the IT Act, we gather the following: (a) Penalty under section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. (e) The existence of such conditions should be discernible from the assessment order or the order of the appellate authority or the revisional authority. (f) Even if there is no specific finding ....
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.... recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on the merits. (italics supplied and elaboration omitted) 161. In fact, these have been admirably summarised by Manjunatha. And we acknowledge our debt to the decision that has saved our labour. 162. As aptly pointed out by the referring Division Bench, before this Court there are two sets of cases. One set of cases is led by Kaushalya, a decision earliest in point of time. The other set does not have a lead case; they all have been cryptic but stand persuaded by Manjunatha. For that reason, we have discussed the Karnataka High Court's decision in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: (1) Shri Samson Perinchery; (2) Goa Coastal Resorts and Recreation Pvt. Ltd.; (3) New Era Sova Mind; and (4) Goa Dourado Promotions Pvt. Ltd. On the opposite plank is Kaushalya. All by co- equal Benches, though. 163. We have already discussed what constitutes the ratio decidendi or case hold....
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....ee basic ingredients: "(i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above." For the purposes of the parties themselves and their privies, ingredient (iii) is the material element in the decision for it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedents, ingredient (ii) is the vital element in the decision. This indeed is the ratio decidendi[R.J. Walker & M.G. Walker: The English Legal System. Butterworths, 1972, 3rd edn., pp. 123-24]]. 167. Then, Mavilayi applied the above principle and held that the ratio decidendi in Citizen Cooperative would not depend upon the conclusion arrived at on facts in that case. For the case is an authority for what it actually decides in law and not for what may seem to logically follow from it. D....
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....ng factor. 171. That said, as Mavilayi found distinguishing features in Citizen Cooperative; here, too, the fact situation as obtained in Kaushalya has been seen in none of these decisions: Goa Dourado Promotions, Goa Coastal Resorts and Recreation, Samson Perinchery, New Era Sova Mine-not even in Manjunatha. Granted, in both sets of cases, the proposition is this: To an assessee facing penalty proceedings, the Revenue must supply complete, unambiguous information so that he may defend himself effectually. This proposition has given rise to this question: Where should the assessee gather the required information from? 172. Goa Dourado Promotions and other cases have held that the information must be gathered from the notice under section 271(1)(c) read with section 274 of the IT Act. No other source was in the Court's contemplation. In Kaushalya, both the proposition and the question were the same. But it has one extra input: the order in assessment proceedings. So it has held that the notice alone is not the sole source of information; the assessment proceedings, too, may shed light on the issue and inform the assessee on the scope of penalty proceedings. Whether assessment ....
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.... from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not depend on the assessment proceeding for their outcome. Assessment proceedings hardly influence the penalty proceedings, for assessment does not automatically lead to a penalty. 176. Second, not always do we find the assessment proceedings revealing the grounds of penalty proceedings. Assessment order need not contain a specific, explicit finding of whether the conditions mentioned in section 271(1)(c) exist in the case. It is because Explanations 1(A) and 1(B), as the deeming provisions, create a legal fiction as to the....
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....ion. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No.1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defec....
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....or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No.3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-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". Then, Dilip N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that t....