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2016 (5) TMI 1439

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..... all the years under appeal. - Decided in favour of assessee. - ITA Nos.737 to 740/PUN/2016, ITA Nos.742 to 747/PUN/2016 - - - Dated:- 15-5-2016 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM Assessee by : Shri Kishore Phadke Revenue by : Smt. Shailaja Rai ORDER Per Sushma Chowla, JM This bunch of appeals filed by related assessee are against respective consolidated orders of CIT(A)-12, Pune, both dated 18.01.2016 relating to assessment years 2006-07 to 2011-12 against levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 (in short the Act ). 2. This bunch of appeals relating to connected assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. In order to adjudicate the issues, reference is being made to the facts in ITA No.737/PUN/2016, relating to assessment year 2006- 07. 3. The assessee in ITA No.737/PUN/2016, relating to assessment year 2006-07 has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the Lower Authorities have erred in confirming the penalty u/s 271(1)(c) to the extent of amount of s .....

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..... cultural income and unexplained jewellery and unaccounted income. The Assessing Officer levied penalty under section 271(1)(c) of the Act at Rs. 48,850/-. 6. The CIT(A) has deleted additions made on account of estimation of agricultural income and unexplained jewellery has been confirmed in the hands of assessee in all the years. The issue which is raised in the present appeal is in respect of additional income offered by the assessee in response to notice issued under section 153A of the Act and addition on account of unexplained jewellery. In assessment year 2006-07, the additional income offered was only Rs. 75/-. However, in assessment year 2008-09, additional income offered after claiming short term loss was Rs. 7,976/-, hence there was decline in income returned under section 153A of the Act. In assessment year 2010-11, the additional income was to the extent of Rs. 1,02,68,417/- and Rs. 32,77,864/- in assessment year 2011-12. Further, unexplained investment in jewellery was added in the hands of assessee by Assessing Officer at Rs. 21,073/- in assessment year 2006-07, Rs. 13,298/- in assessment year 2008-09, ₹ 4,38,888/- in assessment year 2010-11 and Rs. 3, .....

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..... penalty for furnishing of inaccurate particular of income (i.e. limb-2). Appellant contends, there was confusion and ambiguity in the entire process of levy of concealment penalty. 5. Appellant contents that, as regards the additions of ₹ 4,60,665/- made by the learned AO while framing the 153A order, learned AO a. did not record any conspicuous satisfaction for concealment of particulars of income or for furnishing of inaccurate particulars (i.e. either of the limbs) b. initiated penalty proceedings for concealment of particulars of income and for furnishing of inaccurate particulars (i.e. limb-1 and limb-2); c. and finally, levied penalty for furnishing of inaccurate particulars of income (i.e. limb-2). Appellant contends, there was confusion and ambiguity in the entire process of levy of concealment penalty. 6. The learned CIT(A), Pune erred law and on facts by confirming levy of penalty despite the confusion and ambiguity crept into the process of penalty proceedings. 7. The learned Authorized Representative for the assessee pointed out that additional grounds of appeal raised in the present appeal involves jurisdictional issue and d .....

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..... lty for concealment sustainable. The answer to both the issues raised in the present appeal is No . Penalty under section 271(1)(c) of the Act is leviable where the assessee has concealed its income or furnished inaccurate particulars of income. Both the limbs of section 271(1)(c) of the Act are independent of each other and do not overlap each other. The Assessing Officer while recording satisfaction during the course of assessment proceedings has to come to finding as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee and initiate penalty proceedings accordingly. In case of failure of Assessing Officer so to initiate under particular limb of section 271(1)(c) of the Act, there is no merit in levying penalty for concealment on any of the limbs of section 271(1)(c) of the Act. Further, where the Assessing Officer in the penalty order levies penalty on both the limbs of section 271(1)(c) of the Act, without coming to a finding in respect of one of the limbs, such an order of concealment penalty also suffers from infirmity and cannot be sustained. In cases, where during the course of assessment proceedings, satisfaction has been recorded on one of t .....

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..... Assessing Officer may record satisfaction to that effect and initiate penalty proceedings and thereafter on fixation of charge, levy the penalty for such act of concealing the particulars of income. Similarly, in cases where the assessee concerned had furnished inaccurate particulars of such income, then similar exercise has to be carried out by the concerned Officer. 14. The first stage of invocation of provisions of section 271(1)(c) of the Act is the satisfaction to be recorded by the Assessing Officer, which admittedly, has to be during the course of assessment proceedings. So, where the assessment proceedings are pending, then the Assessing Officer has to apply his mind and on being satisfied, he has to give a finding that the assessee before him has either concealed the particulars of income or furnished inaccurate particulars of income in respect of the issue before him. Thereafter, the notice should be issued to such person by the concerned Officer, wherein it should be clear that the assessee has to justify its case either for concealment of income or furnishing of inaccurate particulars of income. There may be cases where there is issue of both concealment of income .....

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..... d provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity t .....

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..... ulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. 15. The Hon ble Karnataka High Court has laid down the proposition that the Assessing Officer is to be satisfied in the course of proceedings that there is either concealment of income or furnishing of inaccurate particulars of income under clause (c) to section 271(1) of the Act. It has been categorically held that concealment of income and furnishing of inaccurate particulars of income are different. The Hon ble High Court has thus, laid down that the Assessing Officer while issuing notice has to come to conclusion that whether it is case of concealment of income or case of furnishing of inaccurate particulars of income. The reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC), wherein at page 19 it was held that concealment of income and furnishing inaccurate particulars of income carry different connotation. Applying the said proposition, it was held that where the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to .....

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..... ings. The Tribunal further held that show cause notice and the reasons mentioned in the show cause notice were part of process of natural justice and the defect in such notice could not be overlooked. Similar proposition has further been laid down in other decisions of various Benches of Tribunal which have been relied upon by the assessee before us. 20. The learned Departmental Representative for the Revenue placed heavy reliance on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Smt. Kaushalya (supra). In the facts of the case before the Hon ble Bombay High Court, the Hon ble High Court quashed the penalty levied for assessment year 1967-68 as the same was imposed without affording reasonable opportunity of hearing to the assessee. In respect of other two years where there was non-striking of inaccurate portion, the Hon ble High Court held that the same would not invalidate the notice issued under section 274 of the Act. It was further held that the assessment orders were also made and reasons for issuing notice under section 274 r.w.s. 271(1)(c) of the Act were recorded by the Assessing Officer and since the assessee fully knew in detail the exact charge of .....

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..... s on 22.08.2008 and declaration of ₹ 11.44 crores was made in the hands of whole group for various years. Consequent to the notices issued under section 153A of the Act for various years, different entities filed the return of income for the respective years and cumulatively for ₹ 13.99 crores as additional income. The income was declared on account of on-money on sale of plots, which was detected from the documents seized during the course of search. Admittedly, Explanation 5A to section 271(1)(c) of the Act is attracted in such cases. However, the case of assessee before us is that the Assessing Officer while completing the assessment proceedings had to be satisfied that the assessee had either concealed the income or furnished inaccurate particulars of income and is liable to levy of penalty under section 271(1)(c) r.w.s. Explanation 5A of the Act. The notice is to be issued to the assessee under section 274 of the Act. Before issuing such notice, satisfaction has to come out from the proceedings going on before the Assessing Officer. The perusal of assessment order passed in the present case reflects that the Assessing Officer while initiating proceedings has record .....

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..... d down the proposition that the Assessing Officer has to make the assessee fully aware of exact charge of the Department against him. As pointed out, in present case, in the assessment order itself while recording satisfaction for initiating proceedings under section 271(1)(c) of the Act, exact charge of the Department against the assessee is not clear. The Assessing Officer records the satisfaction for initiating penalty proceedings on both the counts i.e. concealment of income and furnishing of inaccurate particulars of income. The Hon ble Bombay High Court had also upheld the quashing of penalty proceedings for assessment year 1967-68 to be justified on account of vagueness and ambiguity in the notice issued. But the Hon ble High Court further held that where the assessee was fully aware of exact charge of the Department against him, then technical non-striking of certain terms in the notice would not invalidate the proceedings. Where there is default in the first stage of making the assessee aware of exact charge of the Department, then initiation of penalty proceedings are vitiated and the same are to be quashed. The issue of notice under section 274 of the Act on such vaguene .....

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..... during the course of appellate proceedings relating to section 271(1)(c) of the Act issued enhancement notice to the assessee. Thereafter, he had gone through the seized documents and elaborately referred to them and even reproduced the scanned copies of such documents and comes to conclusion that loans were received from Ratanlal Bafna, but still upholds the penalty levied under section 271(1)(c) of the Act. Once the finding of CIT(A) is that these are loans received from Bafna and are not on-money received on sale of plots, then in cases where penalty proceedings have been initiated on a different footing and the CIT(A) reverses the same and holds the same to be loans received by the assessee, there is change in opinion and basis for levy of penalty for concealment varies. In such circumstances, there is no merit in levy of penalty under section 271(1)(c) of the Act and there is no merit at all in levying the penalty @ 150%. Accordingly, we allow the claim of assessee even on merits. Thus, the grounds of appeal raised by the assessee and additional ground of appeal raised by the assessee are allowed. 12. We find that the issue has been decided by the Tribunal in the case of .....

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..... the CIT(A) is unsustainable on technical grounds. Further, this view of ours get strength by the judgment of Hon ble jurisdictional High Court in the case of CIT Vs. Shri Samson Perinchery as well as the judgment of Hon ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra). Accordingly, the grounds raised by the assessee are allowed. 13. Similar is the proposition laid down in Praj Industries Ltd. Vs. DCIT (supra). In the facts of the case before the Tribunal in Praj Industries Ltd. Vs. DCIT (supra), penalty proceedings were initiated for concealing particulars of income and was levied for furnishing inaccurate particulars of income and the Tribunal in such case held as under:- 9. We heard both the parties on this legal issue and perused the orders of the Revenue on the issue of initiation and levy of penalty u/s.271(1)(c) of the I.T. Act, 1961. We have considered the submissions made by the Ld. Counsel for the assessee on the additional grounds (legal in nature). relating to recording of satisfaction by the AO. In this connection, we proceed to extract the relevant lines from Para 3 of the assessment order and Para No.5 of the pen .....

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..... ctional High Court in the case of CIT Vs. Shri Samson Perinchery as well as the judgment of Hon ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra). Accordingly, the additional ground No.1 raised by the assessee is allowed. Considering the same, we find adjudication of other grounds raised by the assessee becomes an academic exercise. Therefore, the said grounds are dismissed as such. 14. Now, coming to the facts of present case, first penalty proceedings have been initiated in respect of additional income offered. The Assessing Officer had recorded satisfaction that the assessee has concealed its income but had levied penalty on account of concealment of income by furnishing inaccurate particulars of income. Such an order imposing concealment penalty is not sustainable for not coming to the conclusion as to the proper limb, which has not been satisfied. In respect of second set of penalty i.e. unexplained investment in jewellery and on account of on-money received, penalty proceedings were initiated without mentioning the limb which has not been satisfied by the assessee and penalty has been levied for violation of both the limbs .....

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