TMI Blog2019 (6) TMI 1283X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 held by the apex court in Dilip N. Shroff [ 2007 (5) TMI 198 - SUPREME COURT] is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Meadows as relied on by the learned authorised representative was a special leave petition filed by the Revenue which had been dismissed and such dismissal of the special leave petition does not lay down a law. The hon'ble Judicial Member has further held that a Larger Bench of the hon'ble Supreme Court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) has held that the Explanation to section 271(1)(c) is part of section 271 and when the Income-tax 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 thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Manjunatha Cotton and Ginning Factory and has held that the case law of K. P. Madhusudhanan has no application to the Karnataka High Court decision in the case of Manjunatha Cotton and Ginning Factory. The relevant findings of the hon'ble court are reproduced below (page 93 of 398 ITR) : 11. It would be apposite at this stage to consider the judgment of the Karnataka High Court in Manjunatha Cotton and Ginning Factory (supra). Therein, a Division Bench of the Karnataka High Court observed that section 271 of the Act of 1961 is a 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 mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer, while issuing a notice under section 271(1)(c), to expressly invoke Explanation 1(B) appended to the provision. It is however relevant to note that Explanation 1(B) merely adverts to a case of failure of an assessee to substantiate the explanation offered whereby the amount added or disallowed while computing the total income of such person for the purposes of the penalty provision shall be deemed to represent the income in respect of which particulars had been concealed. The Supreme Court observed that the statutory provision included the 'Explanation' and 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 natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend the principles of natural justice and cannot be sustained. Thus, once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb, i. e., for furnishing inaccurate particulars of income while imposition of penalty on the other limb, i.e., concealment of income. Further, the Tribunal also noted that notice issued under section 274 of the Act is in a standard pro forma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. 4. The impugned order relied upon the following extract of the Karnataka High Court's decision in CIT v. Manjunatha Cotton and Ginning Factory [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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee by the decision of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra). 10. In view of the above judicial precedents, I find merit in the arguments of the learned authorised representative that the penalty orders are not sustainable, as the Assessing Officer had initiated penally on one limb of section 271(1)(c) and had imposed penalty on another limb of section 271(1)(c) and therefore in my opinion the legal issue is decided in favour of the assessee. Since I have decided the appeal on legal grounds in favour of the assessee, there 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as as per the actual books of account which could not be produced by the assessee as the same were not traceable. The plea taken by the learned counsel for the assessee is not acceptable. If trading results are of the assessee are not backed by any record maintained during the regular course of business conducted by him the same cannot be relied upon. Accord ingly in view of these facts, the trading results are not relied upon and hence rejected. In order to verify the sales of the assessee, information was called from the Commercial Tax Officer, Circle-H, Jammu where the asses see is assessed to commercial tax. As per the order under section 7(9) of the Jammu and Kashmir General Sales tax Act, 1962, the sales of the assessee for this year have been assessed at taxable turnover (TTO) of ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has shown the total turnover as per the return filed in response to the notice under section 148 on November 30, 2010 at ₹ 79,56,865. As per copy of assessment order passed by the assess ing authority, Sales Tax, Circle-H, Jammu dated March 25, 2010 the taxable turnover of the assessee has been assessed at ₹ 93,32,486 with the following observations by the above authority. '. . . . Since the dealer has filed three trading accounts, out of which two audited by the concerned chartered accountant and has also filed two purchase statements, two brand-wise sale statements which clearly indicate that dealer has not maintained any books of account. Dealer has furnished the belowmentioned audited-unau dited trading account which shows the following sale position : Unaudited Audited Audited Opening stock 6,85,468 6,85,468 6,85,468 Purchase 77,07,047 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 154 were filed on April 12, 2012 vide receipt No. 47312041200087/86/85. It is requested that before taking any decision, the application under section 154 may kindly be considered and requisite orders passed. The case for final opportunity has been fixed on June 18, 2012. I pray that since I am not available become of some family matter will be out of Jammu, the case may please be taken today, if convenient.' 4. The arguments of the assessee have been considered and appli cation under section 154 of the Income-tax Act, 1961 have been rejected by order passed on June 18, 2012. With regard to the last argument it is stated that the above consolidated reply was received in this office under receipt No. 473180612004147 dated June 18, 2012 and nobody appeared before the undersigned prior to that date for arguments on the above issue. This clearly shows that the assessee has no arguments in support of his case. This fact is again confirmed from the records as the assessee has not preferred by appeal against the order passed. 5. In view of the above facts the assessee has deliberately furnished inaccurate particulars of its inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,31,395 for the assessment year 2008-09 instead of the above declared turnover before the Assessing Officer. When asked to explain the differences the appel lants stated that he has declared more sales in Income-tax return than declared before the Commercial Tax Officer (CTO) and requested for rectification under section 154 for the correction of sales figures. The Assessing Officer has rejected the application under section 154 in the absence of evidence and passed orders on June 22, 2012 for the above three years. The appellant did not prefer appeals against the said orders. Thereafter the Assessing Officer proceeded to levy penalty for furnishing inaccurate particulars of income for ₹ 4,57,300 for the assessment year 2006-07, ₹ 3,85,700 for the assessment year 2007-08 and ₹ 3,81,700 for the assessment year 2008-09 after taking prior approval of the Joint Commissioner of Income-tax. The appellant before me submitted that the penalty orders were bad in law because the satisfaction recorded in the assessment orders were for imposition of penalty for concealing the particulars of income whereas penalties under section 271(1)(c) were levied for delib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income but while passing the penalty order under section 271(1)(c), the Assessing Officer imposed the penalty for furnishing the inaccurate particulars of income under section 271(1)(c). Further, the learned authorised representative emphasized that this matter is squarely covered by the following case law on legal issue. (i) CIT v. SSA's Emerald Meadows [2016] 386 ITR (St.) 13 (SC) (ii) CIT v. SSA's Emerald Meadows Karnataka High Court (iii) CIT v. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Karn) The learned authorised representative further stated that the contro versy of invalid notice has already been settled by the apex court in the case of SSA's Emerald Meadows (supra) therefore on the legal ground itself the penalty order is liable to be set aside. 17. On the other hand, the learned Departmental representative submitted that according to the Larger Bench of the apex court in the case of K. P. Madhusudhanan v. CIT [2001] 251 ITR 99 (SC) and submitted that there is no express invocation of the Explanation to section 271 in the notice under section 271 is necessary for applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view, since the matter is covered by the judgment of the Division Bench of this court, we are of the opinion, no substantial question of law arises in this appeal for determination by this court. The appeal is accordingly dismissed. 21. The judgment followed by the Karnataka High Court in the said case CIT v. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 565 (Karn) dealt with the notice under section 274 in para No. 59 of the order which reproduced as under (page 599 of 359 ITR) : 59. As the provision stands, the penalty proceedings can be initiated on various grounds set out therein. If the order passed by the authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1(B), then though penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 274, the notice issued was rendered invalid. Relevant part of the judgment is reproduced herein below (page 242 of 152 ITR) 8. 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 inva lid. In the first place, it has to be borne in mind that the notice issued under section 274 is not prescribed under the rules It is a notice administratively devised for the purpose of putting the assessee in the knowledge of the fact that the Income-tax Officer initiated proceed ings for levy of penalty in order to enable him to show cause why penalty should not be levied. So long as the object of putting the assessee in the awareness and knowledge of the initiation of the penalty proceedings is accomplished by the issuance of a notice, the question of invalidity does not arise on account of either inappropri ate language in the notice or on account of any inappropriate portions of the notice not being struck off. There was no offence to any of the rules prescribed inasmuch as the notice is given to secure the asses see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are flexible and cannot be put on any rigid formula. In order to sustain a complaint of violation of principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice has been caused to the party concerned by the procedure followed. We have already mentioned above that the assessee has not shown that any such prejudice has been caused to him. Attention may be invited in this connection to the decision of the Supreme Court in K. L. Tripathi v. State Bank of India, AIR 1984 SC 273. We have perused the judgment of the Kerala High Court in Subramania Iyer v. Union of India [1974] 97 ITR 228 (Ker), on which the assessee has relied. With great respect, we are unable to agree that the mere non-striking off of the inap propriate portions in a notice renders the notice automatically invalid unless in a further enquiry in the matter it is shown that by reason of the notice not properly conveying the gist of the offence to the assessee, prejudice is caused to him. We cannot ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 which leave to appeal has been sought for, continues to be final, effective and binding as between the parties. Once leave to appeal has been granted, the finality of the judgment, decree or order appealed against is put in jeopardy though it continues to be binding and effective between the parties unless it is a nullity or unless the court may pass a specific order staying or suspending the operation or execution of the judg ment, decree or order under challenge. Dismissal at stage of special leave-without reasons-no res judicata, no merger. Having so analysed and defined the two stages of the jurisdiction conferred by article 136, now we proceed to deal with a number of decisions cited at the Bar during the course of hearing and dealing with the legal tenor of an order of the Supreme Court dismissing a special leave petition. In Workmen of Cochin Port Trust v. Board of Trustees of the Cochin Port Trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect 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 order appealed against while exercis ing its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of a petition for special leave to appeal. The doctrine of merger can, therefore, be applied to the former and not to the latter. (iv) An order refusing special leave to appeal may be a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the court was not inclined to exercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order, i. e., gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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. 29. While coming to the instant case as the Assessing Officer while passing the penalty order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 assessee's sale figure is more compare to the Commercial Tax Officer but ignore this argument without rebutting the same. Further the learned authorised representative also relied upon the following case law. (i) ITO v. Ashok Kumar (I. T. A. No. 571(Asr)/2011) (ii) ITO v. Age Construction Pvt. Ltd. (I. T. A. No. 293(Asr)/2013) (iii) International Engineers v. Asst. CIT (I. T. A. No. 165(Asr)/2016) And finally submitted that no penalty can be levied on the belated revised return, revised return leads to estimation and adjustment in sales. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 but could not justify the Assessing Officer which resulted into dismissal of his application and on rejection of his rectification application, the assessee accepted the same by not preferring any appeal. From the aforesaid differences of turnover before the two authorities, it can be easily inferred that the said action amounts to concealment of income. Hence in our considered opinion, the order passed by the Commissioner of Income-tax (Appeals) is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtently, 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. In the notice under section 271 it is necessary for applying the provisions, meaning thereby there is no statutory requirements to specify the clause or sub-clause or head or sub-head issue while issuing notice under section 271. (iv) Whether the hon'ble Accountant Member misplaced on the ratio decided by the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 apex court in the case of K. P. Madhusudhanan [2001] 251 ITR 99 (SC), in which it is clearly held that no express invocation of the Explanation to sec tion 271. In the notice under section 271 is necessary for applying th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 its independent mind to the facts and circum stances of the case and dealt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een 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 dissenting author relying on the decision of the hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-Departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided accord ing to the opinion of the majority of the members of the Appellate Tribunal who have heard the case, including those who first heard it. 44.2 A perusal of the same shows that the statute mandates that in case of difference of opinion amongst Members of a Bench on any point, then the statute envisages that it is that point which has to be decided by the opinion of the majority of the Members of the Appellate Tribunal. The statute mandates that the Members who differ shall state the point or points on which 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal who had differed on the point referred to the Third Member, to decide a particular point or act in a particular manner. Such a power vests only with an appellate or revisional authorities, if there are any. The power of the Third Member to whom the points of difference have been referred cannot act as if it were an appellate authority over the two members of the Tribunal and direct them to rehear and dispose of the matter afresh. No doubt, the Third Member, in this case, happened to be the Vice-President. But that will not clothe him with the power to give directions or remit the matters while functioning under section 255(4) of the Act. The learned Advocate-General appearing for the assessee would say that section 255(4) of the Act should be read 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion on the ques tion which he had to consider. Therefore, W. P. No. 905 of 1978 is allowed and the order of the first respondent therein dated January 31, 1978, will stand quashed. The result is that the original reference referring the point of dispute should be taken to be pending and that has to be disposed of as per law. In this case, we find that the Third Member (Thiru D. Rangaswamy) is no longer in service and, there fore, he is not in a position to hear the reference. In view of this peculiar situation, the President will nominate or empower any other Member of the Tribunal to hear the reference and give his opinion on the points of dispute. (emphasis supplied) 44.3 The said position of law has also been recently addressed by the hon'ble 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with either of the views expressed. The following specific observations of the hon'ble court leave no further scope for debate (page 305 of 398 ITR) : 13. We find that the Third Member instead of answering ques tions has looked into the correctness of decision of two differing Members and observed that they have not looked into the relevant circumstances and should re-decide ground of appeal after giving opportunity to both the sides. The Third Member, it appears, forgot his position that he was not sitting in appeal over the opinion rendered by two Members of the Tribunal since jurisdiction of Third Member was co-ordinate and it was his duty to hear the two sides and decide question referred for its opinion in one or other way and not to make comments in the manner in which two 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was created by the Third Member who appears to have forgotten its own duty and statutory obligation that it has to decide specific points referred for its opinion and not to sit in appeal over the entire matter and take its own decision independently and bereft of points formulated by different Members and referred for opinion of the Third Member. 15. We have no option but are constrained to observe that the order and approach of the Third Member is patently erroneous, illegal, impermissible and constitutionally unsustainable in law rendering the order dated December 31, 2003, passed by the Regular Bench, unsustainable. 45. The said judgment as observed earlier was specifically referred to for the benefit of the learned Commissioner of Income-tax-Departmental repre-sentative and it is in view of the above legal position and 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of CIT v. Smt. Kaushalya [1995] 216 ITR 660 (Bom) and Sundaram Finance Ltd. v. Asst. CIT [2018] 403 ITR 407 (Mad) respectively which have not been cited by the parties. 45.1.The legal position as addressed in the aforementioned decisions favouring the assessee may be better appreciated after briefly conceptual izing the specific provision under consideration. Section 271(1)(c) of the Act contemplates the levy of penalty by the Assessing Officer wherein the specific provision is attracted if the Assessing Officer is satisfied that the assessee has either concealed its income or furnished inaccurate particulars of income and there may be instances where the Assessing Officer is satisfied that both the limbs are attracted. The defaults thus, admittedly can be committed either simultaneously and cumulatively or separately and independently on these two 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis that the assessee had concealed his income or he had furnished inac curate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 96. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice (See Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); [2000] 2 SCC 718). 45.3 When the said position of law as held by the apex court is considered in the light of the decision of the hon'ble Andhra Pradesh High Court in the case of Chandulal wherein issuance of notice under section 274 has been held to be an administrative device, it is clear that the decision rendered in the case of CIT v. Chandulal dated July 27, 1984- [1985] 152 ITR 238 (AP) is no longer good law in view of the ratio of the subsequent 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds which the assessee has to meet specifically, otherwise the principles of natural justice would be offended as the show-cause notice would be vague. Dealing with concealment of particulars of income or furnishing of inaccurate particulars of income, the Bench observed that some cases may attract both the offences and in some, there may be overlapping of both, but in such cases initiation of the penalty proceedings must be specifically for both the offences. Draw ing up penalty proceedings for one offence and finding the assessee guilty of another or finding him guilty for either, the one or the other, was held to be unsustainable in law. 12. In CIT v. Manu Engineering Works [1980] 122 ITR 306 (Guj), a Division Bench of the Gujarat High Court observed that the Assessing Officer must give a positive finding as to whether there is conceal ment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue upon MAK Data P. Ltd. v. CIT [2013] 358 ITR 593 (SC) ; [2014] 1 SCC 674, is of no assistance as the Supreme Court merely observed therein that the Assessing Officer is not required to record his satisfaction in a particular manner while imposing the penalty or reduce it to writing. That is not the contro versy in the case on hand. 17. On principle, when penalty proceedings are sought to be initiated by the Revenue under section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefor has to be spelt out in clear terms. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100 per cent. to 300 per cent. of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the Revenue must specify as to which one of the two is sought to be pressed into service and 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 fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering the judicial position on the points referred, the legal position stands fully addressed and is in favour of the assessee. 47. Accordingly, for the detailed reasons given hereinabove, I concur with the view expressed by the learned Accountant Member. The questions proposed by the learned Members are, accordingly, 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 Memb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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