Being 100% Of The Minimum That Could Belevied Under The Sqid Section v. Cit [358 Itr 593] Alclaim For Voluntary Disclosure To Buy Peacewould Not Be A Reason For Not Levying Anypenalty. He Confirmed The Order

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15 DAY OF FREBRUARY 2017 PRESENT THE HON’BLE MR.JUSTICE JAYANT PATEL AND| THE HON’BLE MRS.JUSTICE S.SUJATHA| ITA NO.386/2016 BETWEEN: SHRI. S. CHANDRASHBKARAGED ABOUT 5O YEARS0/O. SRI. A. SUBBAIAHNO.9O, 3 MAIN, JHBCSLAYOUT, 1 STAGE,PADMANABHANAGARBANGALORE — 560 070 APPRLLANT IBY SMT. PRATHIBHA, ADV., FORORI. S. PARTHARASARATHI, ADV..,| AND: ASST. COMMISSIONER OFINCOME-TAXCIRCLE 2|1], BANGALOREINCOME TAX OFFICESNOW AT ROOM NO.732,.BMTC BUILDING, 80 FT. ROAD," BLOCK, KORAMANGALA.BANGALORE — 560 095RESPONDENT IBY SRI. K.V. ARAVIND, ADV.,] THIS APPEAL IS FILED UNDER SECTION 260-A OF|THE INCOME TAX ACT, 1961 ARISING OUT OF ORDER|DATED 30.11.2015 PASSED IN ITA NO.1654/BANG/2014FOR THE ASSKHSSMENT YEAR 2006-07 AND EIC. THIS APPEAL COMING ON FOR ORDERS, THIS DAY,JAYANT PATEL,J©, PASSED THE FOLLOWING: ORDER The Assessee has preferred the present appeal byraising two questions. But, in our view, the only pointthat arises for consideration is as under: ‘Whether the notice issued u/s. 274 r.wWw.s2/I1{[1/[c] of the Act in printed form withouSpecifying grounds of initiation of penalty|proceeding is valid, legal and tenable in law?” 2.We have heard Smt. Prathibha, learnedCounsel appearing for the appellant and Sri. K.V.Aravind, learned Counsel appearing for the respondent. 3.The other facts pertaining to the assessmentand for penalty imposed under section 271B of theIncome Tax Act, 1961 |hereinaiter referred to as ‘theAct’| are not the subject matter in the present appeal and therefore we do not find it appropriate to refer tothe same. The only question to be considered ispertaining to the penalty imposed and confirmed by theTribunal under Section 271{1|/c} of the Act andtherefore the facts if any will be required to beconsidered to that extent. 4We may record that the Tribunal in theimpugned order at paragraphs 4 to 6 has observedthus: “AOn 30.12.2010, notice was issued to)the assessee proposing levy of penalty u/S. 2/71[I]/[ci of the Act. Contention of thassessee was that he had cooperated with|the Department and there was no question oflevy of a penalty u/s. 271| /c] of the ActHowever, the AO was not impressed with thts|reply. According to him, income particulars to the extent of Rs.22,74,000/- was concealed|by the assessee. He levied penalty Uu/S.271[1][c] of the Act, at a sum of Rs.7,65,428/, being 100% of the minimum that could be|levied under the sqid section. 5.Aggrieved assessee appealed before theCIT [A]. Argument of the assessee was that|theamountof|Rs.22,74,000/ -whichrepresented the cash payment made for the|purpose of the property was returned by him.when he filed return pursuant to Section|153A. In other words, disclosure was|voluntary, to buy peace and hence levy of|penalty was unjustified. CIT [A] was not|impressed. According to him, by virtue of the|judgment of Hon’ble Apex Court in the case ofMak Data Put. Ltd, v. CIT [358 ITR 593] alclaim for voluntary disclosure to buy peace|would not be a reason for not levying any|penalty. He confirmed the order. 6. NowbeforeUS,Ld.AR|stronglyassailingthe|orderof|authoritybelowsubmitted that assessee had cooperated withthe Revenue authorities and had voluntarlly|returned the amount. According to him, the|penalty was not justified. Reliance was. placed on the decision of Mumbai Bench ofthe Tribunal in the case of Virendira M|ShankleshaDvDDCIT™[ITA.6431To 6433/Mum/ 2010, dt. 25.04.2012]. As perthe Ld. AR, in the said decision it was held by|the coordinate bench that when assessee had|disclosed all primary facts in the return of|income filed pursuant to notice u/s. 153A of|the Act, and when there was no discrepancy|found then there would be no case for levy ofpenalty u/s. 271][1]/c/ of the Act.” 6. NowbeforeUS,Ld.AR|stronglyassailingthe|orderof|authoritybelowsubmitted that assessee had cooperated withthe Revenue authorities and had voluntarlly|returned the amount. According to him, the|penalty was not justified. Reliance was. placed on the decision of Mumbai Bench ofthe Tribunal in the case of Virendira M|ShankleshaDvDDCIT™[ITA.6431To 6433/Mum/ 2010, dt. 25.04.2012]. As perthe Ld. AR, in the said decision it was held by|the coordinate bench that when assessee had|disclosed all primary facts in the return of|income filed pursuant to notice u/s. 153A of|the Act, and when there was no discrepancy|found then there would be no case for levy ofpenalty u/s. 271][1]/c/ of the Act.” 5.The aforesaid shows that the Tribunal|maintained the penalty under section 271[1]||c] of theAct after considering the notice dated 30.12.2010proposing to levy penalty. The copy of the notice dated30.12.2010 is also produced by the appellant forconsideration ot the same at Annexure-C and the basis mentioned in the notice is as under: “have concealed the particulars of your|income or furntshed inaccurate particulars of|such income.” It is thereafter the penalty imposed has not beeninterfered with by the Tribunal. 6.Learned Counsel appearing for the Appellantmainly relied upon the decision of this Court in the case oT|“COMMISSIONEROFINCOMETAXDS,MANJUNATHACOTTONasGINNINGFACTORYreported at|[2013] 359 ITR O565-and the subsequent,decision of this Court in the case otf‘SCOMMISIONER OF INCOME TAX vs. SHRI MUNINAGA REDDY’dated21.9.2016 rendered in ITA No.5/2014 following theearlier.decision oT|thisCourt1n theCaSE€oT|MANJUNATHA COTTON & GINNING FACTORY|Supra|].It is submitted that the notice is non specific aboutconcealment of income nor is specific for furnishing ofinaccurate particulars of the income and therefore theTribunal could not maintain the penalty under section271|1}|c}] of the Act. T.We may record that this Court in the later decision in the case of.MUNINAGA REDDY|SUpra| 1n| ITA No.5/2014 had observed thus: “The appellants - revenue has preferredthe present appeal by raising the following|substantial question of law. “Whether on the facts and in thecircumstances of the case, the Tribunalis right in setting aside the penaltyorder even though the ingredients ofsection 271(1) (c) are satisfied in thecase of assessee and assessee hadpaid tax after unearthing of the incomeby Revenue in the survey conductedunder Section 133A of the I.T.Act.P ~ aDWe have heard Mr.K.V.Aravind,|learned counsel appearing for the appellants|— revenue and Mr.Dinesh, learned counselappearing for the assessee. 3The learned counsel appearing for|both the sides do not dispute the fact that, in|view of the subsequent decision of this Court in the case ofM/s.Manjunatha Cotton and|Ginning Factory| reported i(2013) 359)ITR S65 (Kar}. the contention raised in the|present appeal would no more survive. 4.We may also record that based on|the decision in the case ofM/s.ManjunathaCotton and Ginning Factory| (supra), todayin ITA No.251/2016, we have passed theorder which reads as under: Appellant — assessee has preferred thepresentappeal. However,learnedcounsel appearing for the appellantafter some arguments did not pressquestion Nos.l1 and 2 and hence, onlyquestion No.3 is pressed, which readsas under: | “Whether in law, the ITAT is justified inconfirming the levy of penalty when,admittedly the notice of the Respondentu/s.271(1)}(c)of|theActdated29.06.2009 was clearly contrary to thedecision of this Hon’ble Court reportedin CIT vs. Manjunatha Cotton and Ginning Factory — (2013) 359 ITR 565(Kar.)P?~ D2 We have heard Mr. P. Dinesha,|learnedcounselappearing|fortheappellantaSsSSCS SLS|wellasMr.kK.V.Aravind,learned|counselappearing for the respondent — revenuefor final disposal of the appeal. Hence,appeal is admitted and finally heard. Appellant — assessee has preferred thepresentappeal. However,learnedcounsel appearing for the appellantafter some arguments did not pressquestion Nos.l1 and 2 and hence, onlyquestion No.3 is pressed, which readsas under: | “Whether in law, the ITAT is justified inconfirming the levy of penalty when,admittedly the notice of the Respondentu/s.271(1)}(c)of|theActdated29.06.2009 was clearly contrary to thedecision of this Hon’ble Court reportedin CIT vs. Manjunatha Cotton and Ginning Factory — (2013) 359 ITR 565(Kar.)P?~ D2 We have heard Mr. P. Dinesha,|learnedcounselappearing|fortheappellantaSsSSCS SLS|wellasMr.kK.V.Aravind,learned|counselappearing for the respondent — revenuefor final disposal of the appeal. Hence,appeal is admitted and finally heard. 3The only aspect to be considered|in the present appeal is the order forimposition of penalty under Section 271(1)(c) of the Act and whether suchpenalty could survive in view of thedecision of this Court in case ofCOMMISSIONEROFINCOME-T AXAND ANOTHER vs. MANJUNATHA|COTTON AND GINNING FACTORYreported in|[2013] 359 ITR 565 (KAR)27inspite of the fact that said decisionwas brought to the notice of the lowerauthority including Tribunal. — 4The facts of the case appear to be|that in the assessment proceedings theassessment order came to be passed bythe assessing authority and ultimatelythe penalty ofU1,78,35,511/- was)imposed under Section 271 (1)(c) of theIncome Tax Act, 1961 (for short the‘Act’?) vide order dated 29.06.2009. 5.The matter was carried in appeal|before the Commissioner of Income-Tax(Appeals) (for short ‘CIT’). In the saidappeal, theCommissioneraldnot.interfere with the order of imposition ofpenalty. The matter was further carriedbefore the Appellate Tribunal. AppellateTribunal by the impugned order dated13.01.2015 on the aspects of penaltymade the following observations atparagraph 6.4.1. to 6.4.7 as under: |“6.4. ]We have heard the rivalcontentions and perused and carefullyconsidered the material on_ record;including the judicial decisions cited. Itis not in dispute and clearly evident that the assessee has not been able to’furnishanyevidenceatallTo substantiate the claim of expenditureincurred on cost of improvement. ASpoint out by the authorities below, theassessee was even unable to furnishany details like the parties to whom thepayments were made; even if he wasunable to give the full and correctdetails. In the absence of any evidence,we are unable to accept the contentionsof the assessee on the claim of incurringcost of improvement. The onus on theassessee to establish the claim ofexpenditure incurred, has not beendischarged. 6.4.2.On the issue of whether the failure|to discharge the onus of proving theclaim of expenditure being incurredwould entail levy of penalty Uu/s.271(1)(c) of the Act, it is settled principlethat an addition or / disallowanceresulting in increase to the income of theassessee, raises a presumption of concealmentof|income.It|1S (Orebuttable|presumption,whichthe|aSsSSCSSCCEaYrebut|by|furnishingmaterial evidence to establish its claim. —Explanation -1 to section 271(1)(c) of theAct provides that, if a person fails tooffer an explanation or the explanationoffered by such person is found to befalse or the explanation put forth by himis not substantiated and he fails toprove that such explanation ts bona fideand that all the facts relating to thesame and material to the computation ofhis total income have not been disclosedby him, for the purposes of section271(l1)(c) of the Act, the amount soadded or disallowed in computing theassessee’s total income is deemed to'represent the concealed income. It is forthe assessee to furnish material toestablish that the assessee has not'concealed income or has not furnishedinaccurate particulars of income. In theabsence of any such evidence, thepresumption of concealment of income orfurnishing of inaccurate particulars ofincome gets sustained. The decision inthe case of Manjunatha Cotton &Ginning Factory (supra) of the Hon’bleKarnataka High Court, cited by theassessee, also upholds this view. orfurnishing of inaccurate particulars ofincome gets sustained. The decision inthe case of Manjunatha Cotton &Ginning Factory (supra) of the Hon’bleKarnataka High Court, cited by theassessee, also upholds this view. 6.4.3 —The judicial decisions citedby the assessee do not support the factsof the assessee’s case and do not cometo its rescue. In the case of CareersEducation & Infotech (supra), cited bythe assessee, the penalty levied wasdeleted on the ground that the Tribunalhad recorded a categorical finding thatthereLUaSnomaterialtoinferconcealment of income or furnishing ofinaccurate particulars of income andtherefore penalty could not be leviedmerelybecausethe|aSsSSCS SSurrenderedadditionalincome|consequent to survey action. In thecase on hand, however, the penalty hasbeen levied becquse the assessee could|not furnish any evidence in support of the claim of expenditure incurred madein the return of income/ financialstatements and the presumption hasnot been rebutted. The facts of he citedcased vis-a-vis the case on hand are'quite different. 6.4.4. In|theCASEof|SASPharmaceuticals (supra), it was heldthat there cannot be any penalty leviedonly on surmises, conjectures andpossibilities and since 271(1})(c) of theAct has to be construed strictly, unlessthere is actually concealment of incomeor non-disclosure of the particulars ofincome, penalty cannot be levied as theaASSCSSCChas|made|(Ocompletedisclosure in the return of income. Inthe case on hand, however, the penaltyhas been levied because the assessee.could not furnish any evidence for theclaim in the return of income ofexpenditure having been incurred andtherefore the disclosure made in thereturnof|incomeremains unsubstantiated. In our view, there isno surmise or conjecture involved in thelevy of penalty in the assessee’s case.Therefore, the facts of the cited case aredifferent and the cited decision wouldbe of no help to the assessee. 6.4.5 —In the case of ManjunathaCotton & Ginning Factory (supra) of theHon’ble Karnataka High Court, it washeld that merely because assesseeagreedforthe|additionandtheassessment order passed on the basis|of this addition, in the absence of anymaterial on record to show concealment|of income, it cannot be referred that theSaid|addition1S|OTLaccountof|concealment of income. In the case onhand, the penalty has not been leviedbecause the addition was an agreedaddition but becquse the assessee|could not furnish any evidence tosubstantiate its claim of having incurredthe expenditure. Hence, we find that thefacts of the cited case are different from that of the case on hand and would notbe applicable. 6.4.6 We find on perusal of the citedcase of K.P.Sampath Reddy (supra) ofthe Hon’ble Karnataka High Court, thatthe decision in fact goes against theassessee. In that case the Hon’ble HighCourt upheld the levy of penalty u/s.271(1)(c) of the Act observing at para 6thereof that, “6.We are constrained to reject the|assessee’s contention. We are pained tonotethattheTribunal completelyignored the assessment order whichwas not based on any concession fromthe assessee. Concealment of income inthe return filed by the assessee 1S Qaglaring fact in the instant case. It is notpossible to infer any agreement by theRevenue, either in clear terms or bynecessary implication, to act on thebasis of the assessee’s letter. Assessee has to thank himself that the ITOOlevied the minimum penalty only.” In the case on hand also, the levy ofpenalty has its origin in the return ofincome filed by the assessee and theinability of the assessee to furnishevidence to support the claim made in.the return of income and which has norelation whatsoever to any agreementbetween revenue and the assessee on!this point. has to thank himself that the ITOOlevied the minimum penalty only.” In the case on hand also, the levy ofpenalty has its origin in the return ofincome filed by the assessee and theinability of the assessee to furnishevidence to support the claim made in.the return of income and which has norelation whatsoever to any agreementbetween revenue and the assessee on!this point. 6.4.7The cited decision of GemGranites (supra) of the Hon’ble HighCourt of Madras also, in a way goesagainst the assessee. In that case, thepenalty was cancelled because theaSsSSCSSChadgivenFTcogentexplanation and therefore dischargedthe onus upon it. In the case on hand,however, the assessee has not givenany explanation supported by materialevidence to substantiate the claim made|in the return of income and as such, the decision in the cited case 1s notapplicable to the facts of the case onhand. In view of the above discussion of thefacts and circumstances of the case, weare of the considered view that thedecision of the learned CIT (A) inconfirmingthe|levyof|penaltyu/s.271(1})(c) of the Act on this pointdoes not call for any interference by us.Consequently, Ground Nos.3 and 4 ofthe assessee’s appeal are dismissed.” Undercircumstances,thepresentappeals are before this Court. 6. A perusal of above observations|made by the Tribunal would indicatethat during the course of hearing theattention of Tribunal was brought to thedecision of this Court in the case ofCOMMISSIONEROFINCOME-T AXAND ANOTHER vs. MANJUNATHA|COTTON AND GINNING FACTORY reported in[2013] 359 ITR S65 (KAR)(supra). However, Tribunal did notaccept the contention of the assessee byexamining the facts to the extent thatthe penalty has not been levied becausethe addition was an agreed addition butbecause the assessee could not furnishany evidence to substantiate its claimfor having incurred the expenditure, theTribunal held that decision of this Courtin the case of' COMMISSIONER OFINCOME-TAXANDANOTHERDS,MANJUNATHACOTTONANDGINNING FACTORY’ reported in[2013]359 ITR 565 (KAR)! (supra) would notbe applicable to the case on hand. 7.We may record that during the|course of hearing the learned counselfor the appellant has tendered the copyof notice issued to the assessee underSection 271(I1)(c) of the Act dated15.12.2008 for imposition of penalty,which as per the learned counsel forappellant was a part of record in the proceedingsbeforethe|Tribunal.Learned counsel for the respondent —revenue is unable to dispute that noticedated 15.12.2008 was issued by theDepartment for imposition of penaltyunder Section 2/71(1})(c) of the Act.Hence, said notice for the purpose ofconsideration is taken on record. Said'§notice disclose that it is a printed noticeand further no_ specific ground ismentioned, which may show that thepenalty could be imposed on _ thparticular ground for which said noticewas issued. If the decision of this Courtin|CaASEof|OMMVMTSOFINCOME-TAXANDANOTHERDS,MANJUNATHACOTTONANDGINNING FACTORY’ reported in[2013]359|ITR565.(KAR)(Supra) 1Sconsidered, this Court in the saiddecision had observed at paragraph 63as under: | “63. In the light of what is_ statedabove, what emerges is as under: (a) Penalty under Section 271(1)(c) is acivil liability. (b) Mens rea is not an essential elementfor imposing penalty for breach of civilobligations or liabilities. (c)Willfulconcealment1S|not|anessential ingredient for attracting civilliability. (d) Existence of conditions stipulated in.section 271(1})(c) is a sine qua non forinitiation of penalty proceedings underSection 271. (e) The existence of such conditionsshouldbediscerniblefrom)the|Assessment Order or order of theAppellateAuthorityOT.RevisionalAuthority. (jf) Ever uf there is no specific findingregarding the existence of the conditionsmentioned in Section 271(1)(c), at leastthe facts set out in Explanation 1(A) & 1(B) tt should be discernible from thesaid order which would by a legalfiction constitute concealment becauseof deeming provision. (a) Penalty under Section 271(1)(c) is acivil liability. (b) Mens rea is not an essential elementfor imposing penalty for breach of civilobligations or liabilities. (c)Willfulconcealment1S|not|anessential ingredient for attracting civilliability. (d) Existence of conditions stipulated in.section 271(1})(c) is a sine qua non forinitiation of penalty proceedings underSection 271. (e) The existence of such conditionsshouldbediscerniblefrom)the|Assessment Order or order of theAppellateAuthorityOT.RevisionalAuthority. (jf) Ever uf there is no specific findingregarding the existence of the conditionsmentioned in Section 271(1)(c), at leastthe facts set out in Explanation 1(A) & 1(B) tt should be discernible from thesaid order which would by a legalfiction constitute concealment becauseof deeming provision. (g) Even uf these conditions do not existin the assessment order passed, atleast, a direction to initiate proceedingsunder Section 27 1(I)(c) is a sine qua nonfor the Assessment Officer to initiate theproceedings because of the deemingprovision contained in Section 1(B). (h) The said deeming provisions are notapplicable to the orders passed by theCommissionerof|AppealsandtheCommissioner. () The imposition of penalty is notautomatic. (j) Imposition of penalty even if the taxliability is admitted is not automatic. (k) Even yf the assessee has notchallenged the order of assessment levying tax and interest and has paidtax and interest that by itself would notbe sufficient for the authorities either toinitiate penalty proceedings or imposepenalty, unless it is discernible from theassessment order that, it is on accountof such unearthing or enquiry concludedby|authoritiesIt hasresultedin.payment of such tax or such tax liabilitycame to be admitted and if not it wouldhave escaped from tax net and asopined by the assessing officer in theassessment order. (l) Only when no explanation is offeredor the explanation offered is found to befalse or when the assessee fails toprove that the explanation offered is notbonafide, an order imposing penaltycould be passed. — (m) If the explanation offered, eventhoughnot.substantiatedby|theassessee, but is found to be bonafideand all facts relating to the same and material to the computation of his totalincome have been disclosed by him, nopenalty could be imposed. — (n)ThedirectionreferredTo in.Explanation IB to Section 271 of the ActShould be clear and without anyambiguity. (o) If the Assessing Officer has notrecorded any satisfaction or has notissued any direction to initiate penaltyproceedings, in appeal, if the appellateauthority records satisfaction, then thepenalty proceedings have to be initiatedby the appellate authority and not theAssessing Authority. (p) Notice under Section 274 of the ActShould specifically state the groundsmentioned in Section 271(1}(c), te.,whether it is for concealment of incomeor for furnishing of incorrect particularsof income. (q) Sending printed form where all theground mentioned in Section 271 arementionedwouldnot|Satisfy|requirement of — law. | (r) The assessee should know thegroundswhichhehastomeetspecifically. Otherwise, principles ofnatural justice is offended. On the basisof such proceedings, no penalty couldbe imposed to the assessee. (s) Taking up of penalty proceedings onone limb and finding the assessee guiltyof another limb 1s bad in law. | (t) The penalty proceedings are distinctfrom the assessment proceedings. Theproceedings for imposition of penaltythough emanate from proceedings ofassessment, it is independent andseparate aspect of the proceedings. — (u)Thefindingsrecordedin|the|assessment proceedings in so far as "concealment of income" and “furnishingof|incorrect|particulars"wouldnot.operate as res judicata in the penaltyproceedings. It is open to the assesseeto contest the said proceedings onmerits. However, the validity of theassessmentOrreassessmentIn|pursuance of which penalty is levied,cannot be the subject matter of penaltyproceedings. (s) Taking up of penalty proceedings onone limb and finding the assessee guiltyof another limb 1s bad in law. | (t) The penalty proceedings are distinctfrom the assessment proceedings. Theproceedings for imposition of penaltythough emanate from proceedings ofassessment, it is independent andseparate aspect of the proceedings. — (u)Thefindingsrecordedin|the|assessment proceedings in so far as "concealment of income" and “furnishingof|incorrect|particulars"wouldnot.operate as res judicata in the penaltyproceedings. It is open to the assesseeto contest the said proceedings onmerits. However, the validity of theassessmentOrreassessmentIn|pursuance of which penalty is levied,cannot be the subject matter of penaltyproceedings. TheassessmentOYreassessmentcannot be declared as invalid in thepenalty proceedings.” 5.We are not required to consider|the other contingencies for examinationof legality and validity of the penaltyunder Section 271(1)(c) of the Act, butclauses (p), (q) & (r) of the abovereferred observations are required to beconsidered. orAs per the above referred decision|of this Court, the notice would have tospecifically state the ground mentioned in Section 271 (1})(c) of the Act namelyas to whether it is for the concealmentof|incomeOYfurnishingincorrect|particulars of the income said penaltyproceedings is being initiated. Secondaspect is that, as held by this Court,sending of printed form wherein thegrounds mentioned in Section 271 of theAct would not satisfy the requirement oflaw. The third aspect for which theobservations are made by this Court isthat, the assessee should know thegroundwhichhehastomeetspecifically otherwise the principles ofnatural justice would be violated andconsequently, no penalty could beimposed on the assessee tf there is nospecific ground mentioned in the notice.No specific ground is mentioned in thesubjectnoticeand.resultantly theprinciples of natural justice could besqid as violated. | 10.In our view, if the observations|made by this Court in the above referred decision and more particularlyclauses (p), (q) and (r) are considered, itwas a case wherein the decision of thisCourt would apply and it cannot be saidthat the decision of this Court in thecase ofCOMMISSIONER OF [INCOME TAXANDANOTHERDS,MANJUNATHACOTTONANDGINNING FACTORY’ reported in[2013]359 ITR 565 (KAR)| (supra) would notapply. Td].In.VICLWof|theaforesaid discussion, tf the decision of this CourtinCASEof|COMMISSIONEROFINCOME-TAXANDANOTHERUS,MANJUNATHACOTTONANDGINNING FACTORY’ reported in[2013]359|ITR565.(KAR)(Supra) 1Sconsidered, the resultant effect wouldbe that the notice in question issuedunder Section 271(1)(c) for levy ofpenalty and consequently the penaltyimposed, both would be unsustainableand cannot stand in the eye of law.| 12.In the rectification power, the|Tribunal at one point of time did observethat since a specific contention was notraised by the assessee before theAppellate Authority, it is a mixedquestion of law and fact and the samemay also be permissible. The relevantobservations of the Tribunal are referredin|theorderpassedIn|M.A. No62/BANG/ 15for rectification andthe Tribunal, has not accepted thecontention raised therein. 13.4It is hardly required to be stated|that if the question of law is raisedwhich goes to the root of the matter andfor which no undertaking of the factualexamination ts required, the same couldbe permitted by the Tribunal. Had itbeen a case where the notice for penaltywas not on record in the proceedings ofassessment, the matter might stand ona different footing. In any case, wherenotice for imposition of penalty under 13.4It is hardly required to be stated|that if the question of law is raisedwhich goes to the root of the matter andfor which no undertaking of the factualexamination ts required, the same couldbe permitted by the Tribunal. Had itbeen a case where the notice for penaltywas not on record in the proceedings ofassessment, the matter might stand ona different footing. In any case, wherenotice for imposition of penalty under section 271(1)(c) of the Act was alreadythere on record and when the Tribunalwas to examine the applicability of thisCourtdecision|inthe|CaASEof|M/s.Manjunatha Cotton and GinningFactory (supra) and the law laid down,it was a case where the contentionought to have been considered andexamined. As observed by us hereinabove, the decision in the case ofM/s.Manjunatha Cotton and GinningFactory (supra), would apply and tf thenotice is found to be illegal and is foundto be unsustainable in law and the’consequences would be that there isbreach of natural justice. Hence, theultimate order for imposition of penaltycannot be sustained. 14.In.VICLDof|the|aforesaid observationsand.discussions,the|question is answered in favour of theassessee, against the revenue. It is heldthat the impugned order of the Tribunalin the main appeal as well as in the M.A.INO62/BANG/ 1msofar as it relatesto not interfering with the order forimposition of penalty is set-aside. It isfurther observed and declared that asthe question is answered in favour ofthe assessee and against the revenue,the order for imposition of penalty shallremain set-aside. Appeals are allowed to the aforesaidextent. No order as to costs. In view of disposal of the main appeal,[.A.No.2/2016 filed for stay does notsurvive and same stands disposed of.” 5.If the factsof the present case are|examined, coupled with the aspect of notice|issued under Section 274 r/w Section 271 ofthe Income Tax Act, which has been producedby the learned counsel appearing for the|revenue Show that the ground mentioned ts in|a standardized form stating that there is|concealment of particulars of the income or|furnished inaccurate particulars of such income. The said notice would be against the|decision of this Court in the case. ofM/s.ManjunathaCottonand|GinningFactory1Supra)andTYlLOparticularlyClauses (P) and (Q) referred to in the above|decision. The notice should specifically state|that whether there is concealment of income|or furnished the incorrect particulars of the|income or both. Since there is no spectific|ground stated and the grounds available inboth|SectionsDT Eand.2/1(1)}(c)arereiterated, this would show non application ofmind. In any case, as there is no spectific|ground that there would be _ breach oprinciples of natural justice, the ulttmate orderof imposing of penalty even otherwise also|cannot be sustained. 6.|In any case, if the Tribunal found|that it was a case where the penalty could|not be sustained. Tribunal in facts of the|present case found that the penalty cannot beimposed or penalty cannot be sustained in|any case such would be a question of facts|and it will not be a question of law which| may arise for consideration in the present|appeal. 7.In the circumstances, the appeal1S|meritlessand1S|herebydismissed.Whereasthe|1S SueOrlthe|questionformulated,in|OUT|VIeW,needNot|be|answered since the issues are already|covered by the decision of this Court in the|CAaASof|M/s.ManjunathaCottonandGinning Factory| (Supra) Appeal dismissed .” 8.If the facts of the present case are further|examined, since in the impugned notice, there is noclear.indicationabout|the concealmentoT the.particulars of the income, nor there is clear indicationfor furnishing of inaccurate particulars of the income onapplication of mind. In any case as there is no specificesround, hence there would be breach of principles of natural justice and ultimately the order imposingpenalty even otherwise also cannot be sustained.| QOUnder the circumstances, the question|formulated needs to be answered in the negative and infavour of the Assessee and against the Revenue. Appeal dismissed .” 8.If the facts of the present case are further|examined, since in the impugned notice, there is noclear.indicationabout|the concealmentoT the.particulars of the income, nor there is clear indicationfor furnishing of inaccurate particulars of the income onapplication of mind. In any case as there is no specificesround, hence there would be breach of principles of natural justice and ultimately the order imposingpenalty even otherwise also cannot be sustained.| QOUnder the circumstances, the question|formulated needs to be answered in the negative and infavour of the Assessee and against the Revenue. 10,Resultantly,|theOrderpassedbythe.Tribunal arising from the order passed by the lowerauthority for penalty under Section 271]1|/c| of the Act.shall stand set aside. Appeal is allowed accordingly. No order as to COSTS. AN / Sd/-.JUDGE Sd/-.JUDGE