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TMI Blog2019 (6) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... tions in the notice does not vitiate the u/s 271(1)(c) as invalid. Further, simply by issuing a proceedings 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. He relied on KP MADHUSUDANAN VERSUS CIT [ 2001 (8) TMI 8 - SUPREME COURT] , CIT VERSUS CHANDULAL [ 1984 (7) TMI 58 - ANDHRA PRADESH HIGH COURT]. THIRD MEMBER HELD THAT :- In the light of the accepted facts considering the specific questions referred to by the learned Members I am of the considered view that in terms of the judicial precedent available(supra relied by AM) I find that there is no scope of ambiguity. Amongst all these decisions available on the legal issue in favour of the assessee, the sole contrary view referred to by the Revenue is the decision of the hon ble Andhra Pradesh High Court in the case of CIT v. Chandulal (supra) in favour of the Revenue. I concur with the view expressed by the learned Accountant Member. When the position of law as he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Officer issues a notice under section 271, he makes the assessee aware that the provisions thereof are to be applied against him and therefore the hon'ble court had held that no express invocation of Explanation to section 271 in the notice under section 271 is necessary and therefore he has rejected the legal grounds of appeals. 3. Though I agree to the proposition of the hon'ble Judicial Member that dismissal of the special leave petition does not lay down a law but I do not agree with the hon'ble Judicial Member for his reliance placed on the judgment of the hon'ble Supreme Court in the case of K. P. Madhusudhanan which in my opinion was entirely on different grounds. On going through the judgment of the hon'ble Supreme Court in the case of K. P. Madhusudhanan v. CIT, it is observed in that case the hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tton 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 specific provision providing for imposition of penalties and is a complete code in itself regulating the procedure for such imposition. The Bench therefore held that penalty proceedings have to be conducted in accordance therewith, subject always to the rules of natural justice. It was pointed out that section 271 makes appropriate provision for levying penalties on an assessee in different eventualities and one such eventuality is for concealment of income or furnishing of inaccurate particulars of such income. It was held that for starting the penalty proceedings, the condition precedent is that the Assessing Officer must be satisfied that a person has either concealed particulars of his income or furnished inaccurate particulars of such income. The person who is accused of the conditions mentioned in section 271 sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 once the assessee was put on notice, no express invocation of the 'Explanation' is necessary. 14. This judgment has no application to the case on hand as what we are concerned with presently is whether the assessee is required to be put on notice as to whether she is to be penalised for conceal ment of particulars of income or for furnishing inaccurate particulars of income. These are two different acts. Concealment of income is an act of omission while furnishing of inaccurate particulars of income is an act of commission. The consequences of such acts, being penal in nature, an assessee has to be informed as to what exactly is the charge against him so that he may respond thereto." 6. The above judgment of the hon'ble Andhra Pradesh High Court has clearly held that the judgment of the hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round. 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 discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The apex court in the case of T. Ashok Pai v. CIT reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 [2013] 359 ITR 565 (Karn) to delete the penalty (page 601) : 'The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether it is a case of concealment of income or it is as case of furnishing of inaccurate particulars. The apex court in the case of T. Ashok Pai v. CIT reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents 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 is no need to go into the merits of the case. 11. In nutshell, the appeals filed by assessee are allowed. 12. N. K. Choudhry (Judicial Member).-The instant three appeals have been directed against the order dated January 22, 2015, passed in Appeal Nos. 111 to 113-12-13, rendered by the learned Commissioner of Income-tax (Appeals), Jammu. In all these appeals the grounds are common, there-fore, for the sake of brevity and convenience, grounds and facts of Appeal No. 165(Asr)/2015 have been taken for consideration for adjudicating the issue under consideration. (i) That the order under appeal is against law and facts of the case. (ii) That on the facts and in the circumstances of the case the learned Commissioner of Income-tax (Appeals) has erred in law in confirming the imposition of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ₹ 93,32,486. The assessee in the return filed under section 148 of the Income-tax Act, 1961 has disclosed turnover of ₹ 79,56,865 only. Again the learned counsel was confronted on this issue and asked to reconcile the figures. He was also asked to explain as to why the same figure may not be adopted to assess the income of the assessee. In response, it was submitted by him that the order passed by the Commercial Tax Authorises was ex parte and hence could not be relied upon. He stated that the turnover in the trading account is as per the books of account of the assessee and hence the same turnover should be adopted. The explanation of the learned counsel has been considered. It is observed that the explanation is not based correct appreciation of the facts of the case. The order of the Commercial tax Authorities is not ex parte. The accountant of the assessee could not produce any records/books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 ₹ 12,68,120 till some evidence comes to notice, the taxable turnover is determined at ₹ 93,32,486 (on the basis of TTO notice issued) and the same is taxed accord ingly.' Accordingly, by taking the above turnover, as determined by the Sales Tax Authorities, a trading account was re-casted and an addi tion of ₹ 13,82,011 was made to the income of the assessee and penalty proceedings for furnishing inaccurate particulars of income were initiated under section 271(1)(c) of the Income-tax Act, 1961. 3. Before imposition of penalty, the assessee was allowed final opportunity vide this office letter No. 334 dated June 4, 2012 fixing the case for June 18, 2012 which was sent to the assessee by speed post. In response to the above the assessee filed consolidated reply for the assessment years 2006-07 to 2008-09 as under : 'We have filed application under section 154 for all the above mentioned assessment years, wherein it has been stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are passed on similar grounds they are being disposed of by a common order. I have considered the findings of the Assessing Officer in the penalty orders and submissions made before me. The Assessing Officer in the penalty orders for the assessment years 2006-07, 2007-08 and 2008-09 has mentioned that the appellant has shown turnover in the returns of income filed in response to the notice under section 148 at ₹ 79,56,805 for the assessment year 2006-07, ₹ 67,79,556 for the assessment year 2007-08 and ₹ 83,31,448 for the assessment year 2008-09. The Assessing Officer discovered from the assessment order of the Sales Tax Authorities that the appellant had shown turn over of ₹ 93,32,486 for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Assessing Officer and it was rejected by him. The appellant accepted the order of the Assessing Officer and did not prefer any appeal showing different figure of turnover before the Income-tax authorities and sales tax authorities definitely amounts to concealment of turnover thereby concealment of partic ulars of income. I therefore, upheld the penalty under section 271(1)(c)." 16. Now feeling aggrieved against the impugned order passed by the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before us and in support of his case, initially argued mainly on ground No. 4 being legal ground and emphasized that in all the quantum orders, the Assessing Officer initiated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 by hold ing the notice issued by the Assessing Officer under section 274 read with section 271(1)(c) of the Income-tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i. e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this court rendered in the case of CIT v. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Karn). In our view, since the matter is covered by the judgment of the Division Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 Explanations." The apex court further clarified that (page 104) : "No express invocation of the Explanation to section 271 in the notice under section 271 is, in our view, necessary before the provi sions of the Explanation therein are applied." 23. Even otherwise, the High Court of Andhra Pradesh in the case of CIT v. Chandulal (supra) clearly held in para No. 8 that we are unable to subscribe to the view that by reason of the Income-tax Officer not striking out inappropriate portions of the notice issued under section 274, the notice issued was rendered invalid. Relevant part of the judgment is reproduced herein below (page 242 of 152 ITR) &quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 offence is two-fold, there is no need on the part of the Income-tax Officer to strike off any inappropriate portions. In the present case, the offence alleged against the assessee is that there is concealment of income and furnishing of inaccurate particulars of such income. It is not, therefore, necessary for the Income-tax Officer to strike out any portion of the notice issued to him. 9. The principles of natural justice contained in section 274 which requires that an assessee shall be heard before levying penalty under section 271 is to ensure that the basic requirement of fair play in action is fulfilled. The rules of natural justice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 of leave to appeal is dismissed, it is an expression of opinion by the court that a case for invoking the appellate jurisdiction of the court was not made out; 3.If leave to appeal is granted the appellate jurisdiction of the court stands invoked; the gate for entry in the appellate arena is opened. The petitioner is in and the respondent may also be called upon to face him, though in an appropriate case, in spite of having granted leave to appeal, the court may dismiss the appeal without noticing the respondent. 4.In spite of a petition for special leave to appeal having been filed, the judgment, decree or order against whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal. (iii) The doctrine of merger is not a doctrine of universal or unlim ited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under article 136 of the Constitution, the Supreme Court may reverse, modify or affirm the judgment, decree or or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 28. 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 94, 31,395 and the Assessing Officer has redrafted the trading. He just changes the figure of sales and the trading account made in quantum order, no penalty can be levied on estimation. Further it was argued by the learned authorised representative that the assessee filed the figures of the Commercial Tax Officer but the Assess ing Officer ignored the sales figure given by the assessee which shows that figure of the Commercial Tax Officer is less and the assessee figure is more than this levy also tantamount to estimation. Further it was argued that the Assessing Officer was also informed under section 154 that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 penalty. It is not in question that the Assessing Officer did not find differences in the turnover declared before him in the returns in response to the notice under section 148 as compared to furnishing of turnover 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 initiates penalty proceedings. The appellant preferred the rectification of sale declared before the income-tax authorities were higher than what was declared before the Commercial Tax Officer b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 merely an administrative device to put the assessee in the awareness and knowledge of the initiation of the penalty proceedings and so long as this purpose accomplished by the issuance of a notice, does not become invalid on account of either inappropriate portions of the notice not been struck off. (iii) Whether the hon'ble Accountant Member misplaced to the mandate of the judgment passed by the Full Bench of the apex court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC). In which it is clearly held that no express invocation of the Explanation to section 271 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 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 merely an administrative device to put the assessee in the awareness and knowledge of the initiation of the penalty proceedings and so long as this purpose accomplished by the issuance of a notice, does not become invalid on account of either inappropriate portions of the notice not been struck off. (iii) Whether the hon'ble Accountant Member misplaced to the mandate of the judgment passed by the Full Bench of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and materials necessary in computation of income." While coming to the instant case as the Assessing Officer while passing the penalty order had given reasonable opportunities to the assessee who preferred to file consolidated reply in support of his case. However, the Assessing Officer was phased to hold that the assessee had deliberately furnished inaccurate particulars of its income and is covered under the mischief of section 271(1)(c) of Income-tax Act. Further, the learned Commissioner of Income-tax (Appeals) also applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate 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 prayer relying upon the proposition of law as laid down in the decision of the hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory amongst others discarded the same relying upon the proposition of law as laid down by the hon'ble apex court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC). The said conclusion was further supported by relying upon the decision of the hon'ble Andhra Pradesh High Court in the case of CIT v. Chandulal [1985] 152 ITR 238 (AP). The learned dissentin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gst 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 hon'ble Allahabad High Court in view of the Departmental stand to argue the appeal as a fresh appeal inspite of the limited mandate available to a Third Member who is competent to decide only the point on which the Members of the Bench originally hearing the appeal differed. The court re-assembled after about two hours and learned Commissioner of Income-tax-Departmental representative was first required to address whether he was ready to argue or needed time to prepare. The learned Commissioner of Income-tax-Departmental re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellate 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 they differ and the case shall be referred by the President of the Income-tax Appellate Tribunal for hearing on such point or points by one or more of the other Members and such point or points shall be decided according to the opinion of the majority of the Members of the Income-tax Appellate Tribunal. Thus, there is no debate that white sitting in appeal, while considering the order under challenge, the Income-tax Appellate Tribunal can pass any order as it thinks fit for attaining the stat utory aims and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cide 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 in conjunction with section 254(1) of the Act which deals with the powers of the Appellate Tribunal. According to him, the Third Member to whom the points of difference have been referred, should be taken to have all the powers of the Tribunal under section 254(1) and as such the Tribunal can pass such orders as it thinks fit. There fore, the Third Member has got the power to pass any order as he thinks fit. The submission of the learned Advocate-General is in direct conflict with the language and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Allahabad High Court (Lucknow Bench) in the case of CIT v. Sahara India Ltd. [2017] 398 ITR 301 (All) where the hon'ble court also had an occasion to examine the procedure to be followed in a Third Member case. The decision making process espoused by the Income-tax Appellate Tribunal in the aforesaid appeal as emanating from record did not find favour by the hon'ble court. Stringent observations were made by the hon'ble court wherein the said issue had come up for consideration in an app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 differing Members have rendered their opinion for deciding certain issues. Unfortunately, Third Member has looked into question No. 5 as if he was sitting in appeal over different opinions recorded by two Members and this approach on the part of the Third Member is clearly erroneous. Whether any purpose would be served by answer ing question No. 5 or not was not within the domain of the Third Member for the reason that it was under a statutory duty to answer questions referred for its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c 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 the Departmental stand to argue the appeal as a fresh appeal in spite of the limited mandate available to a Third Member who is competent to decide only the point on which the Members of the Bench originally hearing the case differed, that time was given as already stated, to the Revenue to go through the decisions. Thereafter, on reassembling at the cost of repetition after a gap of about two hours, the hearing was proceeded only after ascertaining whether the Revenue was ready ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 separate and distinct counts,. The existence of one of the above three situations in the eyes of the Assessing Officer is the triggering factor on the basis of which specific limb invoked in the notice is culmination of the said decision which clearly puts the assessee to notice what he is required to address. By now it is well accepted judicially that the terms "concealment of particulars of income" and furnishing of inaccurate particulars of "income" referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decision of the apex court in the case of Dilip N. Shroff rendered on May 18, 2007 and thus will have to be ignored with due respect. 45.4 It is seen that the learned Judicial Member also relies on the decision of the apex court in the case of K. P. Madhusudhanan read along with the aforesaid decision of the hon'ble Andhra Pradesh High Court. It is seen that the said decision of the apex court has been considered at considerable length and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the event there was no such clear-cut finding, the penalty order was held liable to be struck down. 13. Smt. Kiranmayee, learned counsel, placed reliance on the judg ment 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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 cannot be permitted to club both by interjecting one or between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied that the assessee was guilty of both." 46. It is also necessary to address the contrary view available. As noted, I am conscious of the fact that there are at least two contrary decisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, being decided in the following manner : 47.1 Question No. 1 proposed by the learned Accountant Member is to be answered in favour of the assessee. 47.2 Similarly, question No. (i) proposed by the learned Judicial Member is answered in favour of the assessee. 47.3 Addressing question No. 2 posed by the learned Accountant Member it is seen, has been addressed in the recent decision of the hon'b'e Telengana and Andhra Pradesh High Court in the case of Smt. Baisetty Revathi cited supra wherein the hon'b'e court had an occasion to consider the aforesaid decision of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory and also the decision of the apex court in the case of K. P. Madhusudhanan v. CIT. The said decision has also been relied upon by the learned Accountant Member in the dissenting order. Accordingly question numbers 2 posed by the Accountant Member along with question numbers (ii), (iii), (iv) and (v) posed by the learned Judicial Member are also answered in favour of the assessee for the detailed reasons given in the earlier part of this order. 48. Registry is directed to list these appeals before the Division Bench for passing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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