TMI Blog2021 (3) TMI 608X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. Goa Dourado Promotions [ 2020 (1) TMI 140 - BOMBAY HIGH COURT] and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya [ 1995 (1) TMI 25 - BOMBAY HIGH COURT] does not lay down the correct proposition of law. Has Kaushalya [ 1995 (1) TMI 25 - BOMBAY HIGH COURT] failed to discuss the aspect of 'prejudice'? - HELD THAT:- 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 Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Perinchery[TXA No.1154/2014 Ors. dtd. 05.01.2017]; (2) The Principal Commissioner of Income-Tax (Central) Bengaluru v. Goa Coastal Resorts and Recreation Pvt. Ltd.[TXA No.24/2019 dtd. 11.11.2019]; (3) The Principal Commissioner of Income-Tax, Panaji v. New Era Sova Mind (TXA Nos.70/2019 Ors, dated 18.6.2019); and (4) The Principal Commissioner of Income-Tax, Panaji v. Goa Dourado Promotions Pvt. Ltd.[ TXA No.18/2019 dtd. 26.11.2019]. 3. On the other hand, an earlier decision by another co-equal bench, according to the referring Division Bench, has taken a contrary view: Commissioner of Income-Tax v. Smt. Kaushalya[216 ITR 660 (Bombay)]. 4. In the end, the Division Bench has found a direct conflict between Goa Dourado Promotions and Kaushalya. So, through an order dated 28 February 2020, it has placed the matter before the Hon ble the Chief Justice under Chapter 1, Rule 8 of the Bombay High Court Appellate Side Rules, 1960. 5. While placing the matter before the Hon ble the Chief Justice for issue-resolution by a larger Bench, the learned Division Bench has framed this question for reference: [In] the assessment order or the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Act. 10. As a result, the amount of ₹ 50 lakhs was treated as undisclosed income, and penalty proceedings under section 271(1)(c) were initiated. In response to the show-cause notice issued, the appellant contended that FY 2005-06 was the second year of his business. As he was inexperienced, he was unaware of the accounting and taxation formalities. Besides that, he has taken various other pleas. But, unimpressed by the reply, the AO imposed the penalty. On appeal, the Id. CIT(A) deleted the penalty. On further appeal, the Income Tax Appellate Tribunal has restored the AO s order of penalty. Aggrieved, the appellant-assessee has filed the Tax Appeal No.51 of 2012. The other Tax Appeal No.57 of 2012, too, has reached this Court with the same factual backdrop. The Appellants: 11. After taking us through the record and what seem to be conflicting judgments, Shri Rivankar, the learned Senior Counsel for the appellants, has submitted that Kaushalya is the only decision from this Court that has taken a contrary view. All other decisions, according to him, have taken a consistent view that a vague notice under section 274 r/w 271(1)(c) of the IT Act, in a print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andates that the assessee must have a reasonable opportunity of hearing before the authority s passing an order imposing penalty. In other words, the notice cannot be treated as a mere formality; it, in fact, requires strict compliance. 17. In his arguments, Shri Rivankar has relied on these decisions: (1) Ashok Pai v. CIT[(2007 292 ITR (SC) (Para 19)]; (2) CCIT v. Manjunath Cotton[(2013) 359 ITR 565 (Kant) (para 34,59,60,63)]; (3) Muninga Reddy v. ACIT[(2017) 396 ITR 398 (Kant) (para 7-11)]; (4) CIT v. SSA Emerald Meadows[(2013) 386 ITR (ST) 13]; (5) PCIT v. Smt. Baisetty[2017 (0) SUPREME (AP) 274, para 7,8,10,15,17]; (6) CIT v. Samson Pericherry[ITA/1154/2014 (Bom)]; (7) PCIT v. Goa Coastal Resorts[TXA/24/2019 (Bom)]; (8) PCIT v. Goa Dorado[TXA/18/2019 (Bom)]; (9) PCIT v. New Era Sova Mine[TXA/70/2019 (Bom)]; (10) NN Subramanium Iyer v. UOl[(1974) 97 ITR 228(Ker) (Para 1,5,6)]; (11) Kishori Mohan Bora v. St. Of W.B.[AIR 1972 SC 1749 (para 5-8, 10)]; (12) UOI v. Dharmendra Textile[(2008) 13 SCC 369 (SC), (para 15,16,20)]; (13) CIT v. Reliance Petro Products[(2010) 322 ITR 158 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... And merely because a particular clause has not been ticked off or struck out, it does not, and should not, result in any prejudice, offending the principles of natural justice. Relying on a plethora precedents, Ms. Razaq submits that unless prejudice or injustice is pointed out, mere technical infraction of law would not vitiate an enquiry or any order or result of any proceedings. And in judging the question of prejudice, according to Ms. Razaq, the Court must act with a broad vision. 22. To support her contentions, after her painstaking presentation, Ms. Razaq, too, has relied on a plethora of precedents. Among these decisions, majority have been commonly relied on by both the parties, and they have already been listed above. We will, now, refer to the other ones: (1) Commissioner of Income-tax, Bangalore v. SSA S Emerlad Meadows[(2016) 73 taxmann.com 241 (Karnataka)]; (2) State Bank of Patiala v. S.K. Sharma[(1996) 3 SCC 364]; (3) Union of India v. Dharamendra Textile Processors[(2008) 306 ITR 277 (SC)]; (4) Ventura Textiles Ltd. v. Commissioner of Income Tax, Mumbai City-II[(2020)117 Taxmann.com 182 (Bombay)]; (5) Gangotri Textiles Ltd. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny proceedings under this Act, is satisfied that any person- (a) Omitted (b) has failed to comply with a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty- (i) Omitted (ii) in the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for each such failure; (iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income. Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) such person fails to offer an explanation or offers an exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessing, and exporting iron ore, filed its return of income for the AY 2003-04. The Revenue processed the return and completed the assessment under section 143(1) of the IT Act. Later, it conducted a survey under section 133A of the Act and collected information under section 133(6) of the Act. 30. Based on the information collected, the Revenue notified the assessee under section 148 of the Act to reopen the assessment. It then completed the assessment under section 143(3) read with section 147 of the Act. Simultaneously, the Revenue initiated proceedings under section 274 read with section 271(1)(c) of the Act. When the assessee appealed against the assessment order, it was partly successful. The assessee did not challenge the appellate order further. Then, the assessing authority went ahead with the penalty proceedings and imposed penalty. Aggrieved, the assessee appealed but without success. Further aggrieved, it appealed to the Tribunal. 31. The Tribunal perused the notice issued under section 274 of the Act and noted that the assessing authority used a standard proforma. Before issuing the notice, the AO neither struck off nor deleted the inappropriate words and paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose the order of, say, the assessment officer does not divulge those grounds. In that case, the notice may get its justification from the deeming provision in Explanation 1 or in Explanation 1(B) of section 271. 36. In either event, the assessee must be notified of the grounds on which the Revenue intends to impose a penalty. For section 274 clarifies that the assessee has a right to contest the penalty proceedings and, therefore, should have full opportunity to meet the Revenue s case. The assessee may show that the conditions stipulated in section 271(1)(c) do not exist, and so he is not liable to pay the penalty. 37. Pertinently, Manjunatha refers to the Revenue s practice of sending a printed form where all the grounds mentioned in section 271 are mentioned. According to it, such an omnibus notice does not satisfy the statutory requirement. It is more particularly so because the assessee has the initial burden, and his failure to discharge that burden has serious consequences: He may end up paying a penalty from 100% to 300% of the tax liability. In other words, as section 271 needs to be strictly construed, the notice under section 274 should satisfy the grounds which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 148, the assessee filed revised returns of income disclosing income also from some other business for both AYs. The Income-tax Officer reassessed the income and, by order under section 143(1), indicated that the penalty proceedings under section 271(1)(c) would be initiated. The penalty imposed, the assessee appealed but could not succeed. In a further appeal, the Tribunal ruled in the assessee s favour. 44. The Tribunal, in fact, held that the assessee had not been given a reasonable opportunity of hearing because the show-cause notices were ambiguous. The material portion of the show-cause notice informed the assessee that he concealed the particulars of [his] income or deliberately furnished inaccurate particulars of such income . The notice for the second AY, too, contained the same allegation: you have concealed the particulars of your income or furnished inaccurate particulars of such income. 45. On the Revenue s appeal, this Court has noted that the Tribunal has focussed only on the use of the word or between the two groups of words concealed the particulars of your income and furnished inaccurate particulars of such income . This has led the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal s stand that the notice under section 274 was vague. According to New Era Sova Mine, the Tribunal was correct in holding 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 this context, it has relied on the Karnataka High Court s decision in CIT v. SSA's Emerald Meadows[ITA No. 380 of 2015, dated 23.11.2015, Karnataka High Court.] to hold thus: No notice could be issued under Section 274, read with Section 271(1)(c), of the IT Act without indicating which particular limb of Section 271(1)(c) was invoked for initiating the penalty proceedings . Samson Perinchery: 51. In this case, on appeal, the Tribunal deleted the penalty imposed upon the respondent-assessee. To do so, it has held that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of the income, while the order imposing penalty was for concealment of income. When taken in further appeal, this Court has observed that while initiating penalty proceedings, the Assessing Officer should be clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Muninaga Reddy: 58. In Muninaga Reddy, a Division Bench of Karnataka High Court has noted that the notice under section 274, read with section 271(1)(c), was in printed form with no specific ground mentioned for imposing penalty. So it has followed Manjunatha. Bassett Revathi: 59. In Baisetty Revathi, a Division Bench of the High Court of Telangana and Andhra Pradesh has found from the notice that the irrelevant contents therein, which had no application to the assessee, were struck out, leaving only one clause . That clause informs the assessee she has concealed the particulars of [her] income or furnished inaccurate particulars of such income . 60. But when the respondent-assessee submitted her explanation, she did not object to any element of ambiguity in the notice. She contested it on the merits. Only before the Tribunal, for the first time, did she raise an objection. In that context, Baisetty Revathi has agreed that the respondent has submitted her explanation on merits without raising a doubt as to what was the precise allegation levelled against her. But, according to Baisetty Revathi, what matters is the principle involved and not just the isolated case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hooghly, under sub-section (1) read with sub-section (2) of section 3 of the Maintenance of Internal Security Act, 1971, passed an order directing the petitioner's detention. It was with a view to preventing him from acting in a manner prejudicial to the maintenance of the public order or security of the State . Then, the petitioner was arrested on that very day and detained in Hooghly Jail. 65. In the above factual backdrop, the Supreme Court finds that the detaining authority was satisfied that it was necessary to detain the petitioner to prevent him from acting in a manner prejudicial to the maintenance of public order or the security of the State. That satisfaction was on the disjunctive and not conjunctive grounds . It means the District Magistrate was not certain whether he had reached his subjective satisfaction about the necessity of exercising his power of detention on the ground of danger to the public order or danger to the security of the State. 66. In the above context, the Supreme Court has treated it as a well- settled position that an extraneous ground vitiates the order since it is impossible to predicate whether without it the requisite satisfactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . And this onus is to be discharged by the Revenue. While considering whether the assessee has discharged his burden, the Assessing Officer should not begin with the presumption that he is guilty. 72. Once the Revenue discharges its primary burden of proof, the secondary burden of proof, Dilip N. Shroff points out, would shift on to the assessee. It is because the proceeding under Section 271(1)(c) is of penal nature in the sense that its consequences are intended to be an effective deterrent which will put a stop to practices which the Parliament considers to be against the public interest . So, it was for the Revenue to establish that the assessee shall be guilty of the particulars of income . Dharmendra Textiles: 73. In Dharamendra, the apex court was dealing with the penalty provisions in the Central Excise Act, 1944. The question was whether section 11 AC, inserted by the Finance Act, 1996, should be read to contain mens rea as an essential ingredient. And the next question was about the levying of penalty below the prescribed minimum. 74. In fact, the matter was placed before a three-Judge Bench on a reference. The reference was occasioned because of the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omatically get attracted and that the authority had no discretion in the matter. But Rajasthan Spinning and Weaving Mills saw no reason to understand or read Dharamendra Textile in that manner. 78. Finally, Rajasthan Spinning and Weaving Mills has held that Dharamendra Textile must be understood to mean that though the application of section 11AC would depend upon the existence or otherwise of the conditions expressly stated in that section, once the section is applicable in a case, the concerned authority would have no discretion in quantifying the amount . And penalty must be imposed equal to the duty determined under Sub-section (2) of Section 11A. That is what Dharamendra Textile needs to be confined to. Reliance Petro Products Pvt. Ltd.: 79. Here, the assessee furnished all the details of its expenditure as well as income in its Return. The details, in themselves, were not found to be inaccurate, nor did they conceal any income. The assessee, in fact, claimed expenditure under certain heads, but the Revenue did not accept that claim. In that context, the Supreme Court has held that it was up to the authorities to accept [the assessee s] claim in the return . Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 271 of the Act proposing to impose penalty was in a printed format. But the inapplicable portion was not struck off. So, whether a penalty was sought to be imposed on the assessee s concealing particulars of income or on its furnishing inaccurate particulars of income was not indicated in the notice. This is contended to be a fundamental error that goes to the root of the matter and has vitiated the impugned order of penalty. Though this point has been raised for the first time before the High Court, the appellant maintained that this being a pure question of law touching upon the jurisdiction, it can be raised at any stage. 86. A Division Bench of this Court has held that any court can consider a question of jurisdiction even if it has not been raised before the lower fora. According to it, the question relating to omitting the inapplicable portion in a show-cause notice in printed format would go to the root of the lis. So, it would be a jurisdictional issue. 87. Then, Ventura Textiles notes that though the Karnataka High Court s decision in SSA's Emerald Meadows was not interfered with by the Supreme Court, the fact remains that dismissal of an SLP would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om furnishing inaccurate particulars of income as contemplated under Section 271(1)(c) of the Act. Gangotri Textiles Ltd.: 93. One of the questions in Gangotri Textiles is whether the penalty imposed under section 271(1)(c) of the Act sustains itself despite the defective notice. The Madras High Court dismissed the assessee s appeal. Later, the assessee filed a review application. Then, much of the discussion turns on what grounds must be available for the Court to review its judgment. The High Court has, in fact, found none and dismissed the review petition. We reckon this case helps neither party. Sundaram Finance Ltd.: 94. In Sundaram Finance, the question is whether we can term a notice under section 27(1)(c) of the Act valid if it does not show the default, which the assessee must explain. The assessee has brought to the Madras High Court s notice the Karnataka High Court decision in Manjunatha. But, in the end, Sundaram Finance has held that the existence of the condition mentioned under section 27(1)(c) of the Act was writ large on the face of the order of the Assessing Officer as well as the first appellate authority. So it has refused to declare the notice inval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer s satisfaction on the point that the assessee had concealed the particulars of his income or had furnished inaccurate particulars thereof. S. V. Angidi Chettiar: 98. This is a case under the Income Tax Act, 1922, decided by a Constitution Bench of the Supreme Court. In the course of assessment proceedings, the Revenue imposed a penalty on the respondent-assessee. Against that penalty order, one partner moved the Commissioner of Income-tax, Madras, in revision but without success. Before the High Court, the assessee succeeded. So the Revenue went to the Supreme Court. 99. S. V. Angidi Chettiar has held that old section 28, as it was originally enacted, was somewhat obscure. The penalty which could be imposed in cases referred to in clauses (b) and (c) was to be a sum not exceeding one and a half times the tax, which would have been avoided if the income as returned by such a person had been accepted as the correct income. But the Legislature gave no indication whether the penalty was related to the tax avoided by the partners of the firm or by the firm on the footing that it was to be regarded as an unregistered firm. 100. Then, S. V. Angidi Chettiar quoted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued during the assessment proceedings. That is, it would be incorrect to equate the officer's satisfaction with the actual issue of notice; the issue of notice is a consequence of that satisfaction. 106. In the end, Rampur Engg. Co. has relied on the Supreme Court s S.V. Angidi Chettiar, and D.M. Manasvi. Then, it has held that the power to impose a penalty under section 271 of the Act depends upon the officer's satisfaction. It cannot be exercised if he is not satisfied and has not recorded his satisfaction about the existence of the conditions specified in clauses (a), (b) and (c) before the proceedings are concluded. It is true that mere absence of the words I am satisfied may not be fatal, but such satisfaction must be spelt out from the assessing authority's order as to the concealing of income or furnishing of inaccurate particulars. Absent a clear finding to that effect, the initiation of penalty proceedings will be without jurisdiction. It has concluded that the first Division Bench's decision needed no interference as it had laid down the correct proposition of law. Madhushree Gupta: 107. A Division Bench of Delhi High Court has considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders passed by the Income-tax Appellate Tribunal. One of the questions before the Delhi High Court is about whether no satisfaction has been recorded in the assessment order. If so, what is its effect? 112. To resolve the above issue, ECS Ltd. has held that section 271(1)(c) of the Act has been amended retrospectively with effect from 1 April 1989. Through that amendment, clause (IB) in Explanation to section 271(1)(c) has been inserted. As per this clause, it is unnecessary for the Assessing Officer to record his satisfaction while initiating penalty proceedings. ECS Ltd. has noted that when the vires of this provision were challenged, the Delhi High Court, through another judgment, upheld the amendment. But, then, the Court felt that the provisions are to be read down. According to it, even after the amendment, if the satisfaction is not discernible from the assessment order, the penalty cannot be imposed. The proceedings for initiation of penalty proceeding cannot be set aside only because the assessment order states 'penalty proceedings are initiated separately' if otherwise, they conform to the statutory parameters. 113. Accordingly, ECS Ltd. has concluded that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on are applied. Sudhir Kumar Singh: 117. This case concerns the cancellation of the tender. Entire proceedings leading to the cancellation of the tender were said to have been done behind the tenderer s back. So, the Supreme Court has found that the rule of audi alteram partem breached in its entirety, and prejudice has been caused to the appellant. 118. In the above backdrop, a three-Judge Bench of the Supreme Court has noted that natural justice is a flexible tool in the judiciary s hands to reach out in fit cases and remedy injustice. The breach of the audi alteram partem rule cannot by itself, without more, lead to the conclusion that prejudice is thereby caused. 119. Where procedural or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant. But that criterion does not apply to cases with mandatory provisions of law. And those mandatory provisions must have been conceived not only in individual interest but also in the public interest. No prejudice is caused to the person complaining of the breach of natural justice, ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to him, it is the abstract ratio decidendi which alone has the force of law as regards the world at large. Professor John Chipman Gray, in his The Nature and Sources of the Law[(2d ed. 1921) 261] stresses that it must be an opinion the formation of which is necessary for the decision of a particular case; in other words, it must not be obiter dictum. 125. Putting both the above views in perspective, Allen in his Law in the Making[(2d ed. 1930) 155], observes that any judgment of any Court is authoritative only as to that part of it, called the ratio decidendi, which is considered to have been necessary to the decision of the actual issue between the litigants. It is for the Court, of whatever degree, which is called upon to consider the precedent, to determine what the true ratio decidendi was. 126. Oft-quoted are the views of Holt C.J. and Lord Mansfield. In Cage v. Acton[12 Mod. 288, 294 (1796)], the former has held that the reason of a resolution is more to be considered than the resolution itself. Then, the latter has held in Fisher v. Prince[3 Burr. 1363, 1364 (1762)] that the reason and spirit of cases make law; not the letter of particular precedents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same way as previous ones. Equality and reliance are commonly cited reasons. The second model is the rule model . Under this model, the precedent court has authority not only to decide the case before it but also to promulgate a general rule binding on courts of subordinate and equal rank . The third model is the result model . According to this model, the result reached in the precedent case, rather than any rule explicitly or simply endorsed by the precedent court, is what binds. Precedent : 132. Here, we have been buried under an avalanche of case-law. Much of it is beside the point. That said, we cannot brush aside the lawyers labour; at the same time, we ought to acknowledge the complexity and the confusion of case law. Neil Duxury in his book The Nature and Authority of Precedent[Cambridge University Press, UK, 2008], deals with the the complexity of case-law . The learned author poses unto himself a question: Why has the concept of the ratio decidendi left legal thinkers so confounded? There seem to be six principal answers to this question[Ibid, p.68]. 133. First, the ratio decidendi and obiter dicta often blur into one another. Obiter dicta, Cardozo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rns its coming into being. Is the ratio of a case the court s own version of the rule of the case or what the case will be made to stand for by another later court ? Nevertheless, there clearly are instances where the matter of what constitutes the ratio of a case is up for grabs and will not be settled until another court has addressed it. (74) In this context, Duxbury makes an interesting proposition about whose word amounts the precedent. Is it that of the judge that has decided the case, or is it that of the judge who interpreted that judgment in a later case? We may quote Jerome Frank[Courts on Trial, p.279], who said that for precedential purposes, a case means only what a judge in a later case says it means. 138. The question of whether the ratio is created through the judge s words or through interpreting the judge s words perhaps need not exercise us all that much. The only significant points to emerge from this puzzle, according to Duxbury, seem to be that the ratio can be determined as much by the interpreter as by the speaker and that when judges excavate rationes from past decisions, they are likely to influence if not determine how that precedent is conceived as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, to all food and drink which is packaged so as to prevent inspection. Then, let us see how we can extend the scope of the facts: (a) Fact as to the agent of harm can be a dead snails, or any noxious element; (b) fact as to vehicle of harm may be an opaque bottle of ginger beer, or any container of commodities for human consumption; (c) fact as to defendant s Identity can be a manufacturer of goods or anyone dealing with the object; (d) fact as to potential danger from vehicle of harm may be object likely to become dangerous by negligence; (e) fact as to injury to plaintiff may be physical personal injury, or nervous or physical personal injury, or any injury; (f) fact as to plaintiff s identity may be a Scots widow, or any human being, or any legal person; (g) fact as to plaintiff s relation to vehicle of harm may be a purchaser from retailer, or the purchaser from anyone, or any person related to such purchaser. What Binds? 142. Then, we can adopt Arthur L. Goodhart s assertion[Determining the Ratio Decidendi of a Case, Yale Law Journal, Dec., 1930] that it is not the rule of law set forth by the court, or the rule enunciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cases; they are relative. Second, the judge founds his conclusions upon a group of facts selected by him as material from among a larger mass of facts. Some of those facts might seem significant to a layman, but which, to a legal mind, are irrelevant. This, a judge's task in analysing a case, in fact, is not to state the facts and the conclusion, but to state the material facts-material as seen by him-and conclude the case based on them. It is, therefore, essential to know what the judge has said about his choice of the facts, for what he does has a meaning for us only when considered in relation to what he has said. 148. In other words, to ascertain the material facts on which the judge has based his conclusion, we cannot go behind the opinion to show that the facts appear to be different in the record. We are bound by the judge's statement of the facts even though it is patent that he has misstated them, for it is on the facts as he, perhaps incorrectly, has seen them that he has based his judgment. In fact, it is not uncommon that sometimes the court considers a fact but disregards it as immaterial, or it may miss out on a fact as it was not called to its attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material; for the second judge, fact B is material; for the third judge, fact C is material. All the judges return the same verdict, though. The principle of the case is, therefore, that on the material facts A, B and C, the defendant is liable. In future cases, anyone fact will suffice. 154. In the alternative, the first judge finds facts A, B, and C as material; the second judge finds only fact C as material; the third judge, too, finds fact C alone as material. For future cases, only fact C is material. 155. Finally, let us turn to what is real and what is hypothetical in a case. If a judge in his opinion suggests a hypothetical fact, and then states what conclusion he would reach if that fact existed, he is not creating a principle. The difficulty sometimes is that we are not sure whether the judge is treating a fact as hypothetical or real. In a case, a judge says, in this case, as the facts are so and so, I reach conclusion X. Even though the judge may be wrong on facts, but the case is a precedent for the facts stated, though wrongly, in that case. It is so because there is no assumption; on the contrary, a non-existing fact is taken as existing- erroneously may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated to be material. (2) If there is no opinion, or the opinion gives no facts, then all other facts in the record must be treated as material. (3) If there is an opinion, then the facts as stated in the opinion are conclusive and cannot be contradicted from the record. (4) If the opinion omits a fact which appears in the record, this may be due either to (a) oversight, or (b) an implied finding that the fact is immaterial. The second will be assumed to be the case in the absence of other evidence. (5) All facts which the judge specifically states are immaterial must be considered immaterial. (6) All facts which the judge impliedly treats as immaterial must be considered immaterial. (7) All facts which the judge specifically states to be material must be considered material. (8) If the opinion does not distinguish between material and immaterial facts, then all the facts set forth must be considered material. (9) If in a case there are several opinions which agree as to the result but differ as to the material facts, then the principle of the case is limited so as to fit the sum of all the facts held material by the various judges. (10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not operate as res judicata in the penalty proceedings. It is op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 holds that only the ratio decidendi of a judgment binds as a precedent. To elaborate on this proposition, Mavilayi 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 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 inferential finding of facts is the inference which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck 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, 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, 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e's lapses. Ex Post and Ex Ante Approaches of Adjudication: 174. In ex-post adjudication, 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)[The University of Chicago Press, Chicago, 2007]. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the assessment order is only prima facie. Even if the assessment order gives no reason, a mere direction for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication of mind nor any prejudice. According to it, the so-called ambiguous wording in the notice [has not] 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 . Kaushalya 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 Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application 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 assesse ..... 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