TMI Blog2022 (1) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... off irrelevant matter would vitiate penalty proceedings. In the preset case notices two limbs are mentioned viz (i) concealed the particulars of income and (ii) furnished inaccurate particulars of income. The assessing officer has not ticked any of the limbs in the notice issued u/s 271(1)(c) of the Act therefore penalty proceedings are bad in law. On the identical facts our view is fortified by the judgment of the Hon`ble Gujarat High Court in the case of Jyoti Ltd, [ 2013 (7) TMI 173 - GUJARAT HIGH COURT] , wherein it was held where Assessing Officer in order of penalty did not come to a clear finding regarding penalty being imposed on concealment of income or on furnishing inaccurate particulars of income, Tribunal was justified in setting aside impugned penalty order. Thus, respectfully following the judgment of the Hon`ble Bombay High Court and Hon`ble Gujarat High Court, we delete the penalty. - Decided in favour of assessee. - ITA No.618/SRT/2018 And ITA No.623/SRT/2018 - - - Dated:- 30-11-2021 - Shri Pawan Singh, JM And Dr. A.L.Saini, AM For the Assessee : Shri A. Gopalakrishnan,C.A For the Respondent : Mrs. AnupamaSingla Sr.DR ORDER PER DR. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en selected for scrutiny assessment u/s 143(3) of the Act. Accordingly, notice u/s 143(2) of the Act was issued upon assessee on 17.09.2012.The assessment u/s 143(3) of the Act was completed on 14.03.2014, determining total income of ₹ 1,59,98,170/- and made the following additions. Sr.No. Issue of addition Addition in Rs. 1 Addition on account of disallowance of purchase 1,34,64,592/- 2 Addition on account of sundry creditors 15,91,100/- 3 Addition on account of non-deduction of TDS 47,025/- The Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act on above additions / disallowances for concealment of income and issued notices u/s 271(1)(c) r.w.s. 274 of the Act on 13.02.2017. 5. During the penalty proceedings, the assessing officer held that neither at the time of assessment proceedings nor at the time of penalty proceedings, the assessee could prove that there was no concealment. The Ld. CIT(A),Val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited for payment after such long time. The AO also noted that the purchase is being made in cash from rag pickers. There could not be any situation of sundry creditors balance pertaining to rag pickers. (3) The assessee did not produce for verification any books of account, purchase bills sales bills, supporting evidences of expenditure despite several opportunities given during assessment stage. Based on the above facts, the AO held that the sundry creditors shown in the balance sheet was nothing but bogus liabilities. Even in the penalty proceedings, the assessee could not controvert the findings in the assessment order regarding bogus liability to the tune of ₹ 15,91,100/-. At least, the assessee could have furnished the list of Sr. creditors and purchase from them, payments made to them and balance amount pending either in assessment or in penalty proceedings. No submissions of any details at all, certainly lead to the conclusion that the Sr. creditors shown in the balance sheet are bogus liabilities existing merely on paper. Thus, it is a case where no explanation is filed at all by the assessee to justify the figure of Sr. credit of ₹ 15,91,100/-. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y should not be levied. 9. On the other hand, Mrs. Anupama Singla, Learned Senior DR for the Revenue reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity. 10.We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessee has challenged the levy of penalty u/s 271(1)(c) of the Act amounting to ₹ 5,36,030/- in respect of following two additions, viz: (i) ₹ 1,43,622/- being estimated addition on account of 2% of the profit in respect of total turnover of the business of trading in Waste paper, and (ii) ₹ 15,91,100/- being the addition of unexplained sundry creditors. We note that ld CIT(A) deleted the addition in respect of ₹ 1,43,622/- being estimated addition on account of 2% of the profit in respect of total turnover of the business of trading in Waste paper. The assessee is in appeal before us in respect of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.Thus, it is clear that where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice, not striking off irrelevant matter would vitiate penalty proceedings. 13. Therefore, in this background, first of all, we shall examine the notice issued by the assessing officer under section 271 (1) (c ) of the Act, which is reproduced below: 14. We have gone through the above mentioned notice issued by the assessing officer under section 271(1) (c ) of the Act and observed that there are two limbs in the notice, viz: 1) Inaccurate particulars of income, and 2) Concealment of income. We note that none of the limb has been ticked by the assessing officer. It is important to inform the assessee that on what account the penalty proceedings are initiating against him. In the impugned notice under section 271(1) (c ), the assessing officer did not tick any of the limb mentioned in the notice, therefore notice issued by the assessing officer is defective. We note that Hon`ble Bomb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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 not operate as res judicata in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Co-operative 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 cooperative 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 inferential f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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, 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 Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udication: 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)[ 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment 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 uncertainty. 180. One course of action before us is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejudice. According to it, the socalled 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 . 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State 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. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication. 15. We have examined notice u/s 271(1)(c) dated 14.03.2014, attached in the assessee`s paper book page no.7 in c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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