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TMI Blog2022 (4) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... addition may please be deleted as learned members of the tribunal may deem it proper." 3. Additional grounds of appeal raised by the assessee is as follows:- "On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in levying penalty u/s 271(1)(c) of the Income Tax Act, 1961, which is time-barred. 4. The relevant material facts, as culled out from the material on record, are as follows. The assessee, before us is an individual and filed his return of income on 03.03.2006, declaring total income at Rs. 1,01,670/-. Thereafter the case was reopened u/s 147 of the Act after recording reasons and Assessing Officer issued notice u/s 148 of the Act on 20.08.2010. The assessment was completed u/s 143(3) r.w.s. 147 of the Act on 26.12.2011, determining total income of Rs. 31,01,670/- after making addition of Rs. 30,00,000/-, on account of unaccounted investment. The penalty proceedings also initiated u/s 274 r.w.s 271(1)(c) of the Act on account of concealment of income (Vide assessment order para 6). On the basis of inquiry conducted by the ADIT(Inv.), Surat, the statement of Shri Suresh K. Pethari was recorded. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred and it is the order which is not existed in the eyes of law, therefore, penalty imposed by the assessing officer may be quashed. 7. Without prejudice, Shri Jagasheth, also contends that notice issued by the assessing officer under section 274 read with section 271(1) (c ) of the Act, is defective, as there is no definite charge specified in the notice, hence penalty imposed under section 271(1) (c ) of the Act, may be quashed. 8.On the other hand, Ld. Sr. Departmental Representative (Sr.DR) for the Revenue submits that assessing officer has passed the penalty order within time limit prescribed under the Act, therefore, penalty order should not be quashed merely because the Tribunal has recalled its order, which was dismissed on account of non-prosecution, as the original assessment order and penalty order are living orders and existed/active in the eye of law. Apart from this, ld DR relied on the findings of assessing officer. 9. We have heard the rival parties and have gone through the material placed on record. We find substance in the alternative arguments advanced by the ld Counsel to the effect that notice issued by the assessing officer under section 274 read with sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose a penalty when there is a mere technical or venial breach of the provisions of the Act. Again in Mansukhlal & Bros v. CIT [73 ITR 546], the Hon`ble supreme court had observed that the penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities and is imposed as a part of the machinery for assessment of tax liability. The words may direct that such person shall pay by way of penalty in section 271(1) (c) leave a certain amount of discretion in imposition of penalty which need not be imposed when there is a minor breach of the law and when having regard do the facts ends of justice require that the assessee should not be penalized. So also where the circumstances of a case establish that the mistake is accidental and inadvertent and there is no material at all to justify any want of bona fide or any gross neglect, imposition of penalty is not justified. [Mahadeshwara Movies 144 ITR 127 (kar)]. 13. We note that Hon`ble Bombay High Court in the case of Mohd. Farhan A. Shaikh,[2021] 125 taxmann.com 253 (Bombay) held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued no direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the assessing authority. (n) Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. [We must, however, admit that it is a contested conclusion.] (o) Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. [This, too, eludes unanimity] (p) The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. Based on such proceedings, no penalty could be imposed to the assessee. (q) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (r) The penalty proceedings are distinct from the assessment proceedings. (s) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e counsel for the assessee advanced no argument that "the assessing officer and other authorities under the IT Act could not go behind the registration of the co-operative society in order to discover as to whether it was conducting business in accordance with its bye-laws". That sets Citizen Cooperative apart, according to Mavilayi. 166. In this context, Mavilayi case (supra) holds that only the ratio decidendi of a judgment binds as a precedent. To elaborate on this proposition, Mavilayi service co-operative case (supra) refers to State of Orissa v. Sudhanshu Sekhar Misra [1968] 2 SCR 154, which holds that a decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein, nor what logically follows from the various observations made in it. Then, it quotes Dalbir Singh v. State of Punjab [1979] 3 SCR 1059. Though it was from the dissenting judgment, Mavilayi Case (supra) points out, it remained uncontradicted by the majority: [A]ccording to the well-settled theory of precedents every decision contains three basic ingredients: "(i) findings of material facts, direct and inferential. An infer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine and therefore, warrant no interference. 170. Samson Perinchery, case (supra) too, has held that the notice issued under section 274 of the Act should strike off irrelevant clauses. And New Era Sova Mine has endorsed the Tribunal's view that "the penalty notices in these cases were not issued for any specific charge, that is to say, for concealment of particulars of income or furnishing of inaccurate particulars". In fact, Samson Perincherry relies on Karnataka High Court's SSA's Emerald Meadows, Case (supra) which, as we have already seen, has followed Manjunatha. So, in a sense, it is a conflict between Kaushalya and Manjunatha if we take comity, rather than stare decisis, as the reckoning 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 Resor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, the Court looks back at a disaster or other event after it has occurred and decides what to do about it or how to remedy it. In an ex-ante adjudication, the Court looks forward, after an event or incident, and asks what effects the decision about this case will have in the future-on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[17]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Smt. Kaushalya case (supra) closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Smt. Kaushalya case (supra) .In fact, for one assessment year, it set aside the penalty proceedings on the grounds of nonapplication of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insisten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff Case (supra) treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice." 14.Thus, we note that notice under section 271(1)(c) of the Act, issued by the assessing officer, does not speak about any specific charge for which the penalty on the assessee is to be levied. It is not clear as to whether the assessee is being penalized for the concealment of income or for the furnishing of inaccurate particulars of income. The Assessing Officer did not strike off the irrelevant portion in the not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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