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2016 (3) TMI 537 - ITAT MUMBAI

2016 (3) TMI 537 - ITAT MUMBAI - TMI - Penalty u/s 271(1)(c) - non communication of charge - Held that:- On perusal of the said notice we have observed that the said notice did not contain any specific charge as to whether the penalty proceeding was initiated for concealment of particulars of income or for furnishing of such income and even in the body of the assessment order, what has been stated is, “penalty proceedings u/s 271(1)(c) r.w. Explanation thereto are initiated separately”. In these .....

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icate the charge “Specifically” so that assessee can explain his reasons and superior authority can test the application of mind. In this regard we found support from the judgment rendered by Hon’ble Bombay High Court in case of CIT vs. Kaushalaya [ 1995 (1) TMI 25 - BOMBAY High Court ]. - Decided in favour of assessee

Disallowance made consequent to change of heads of income - Held that:- While passing of the penalty order there is no recording of the fact that the Explanation offere .....

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2010 (3) TMI 80 - SUPREME COURT ] wherein it has been categorically mentioned that in order to expose the assessee to the penalty, the case should be strictly covered by the provisions and the penalty provisions cannot be invoked in the routine manner. A mere making of a claim which is not sustainable in law by itself will not amount to furnish inaccurate particulars regarding the income of the assessee and as such claim made in the return cannot amount to the inaccurate particulars, therefore, .....

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dated 25.03.2011 passed by Assessing Officer (AO) u/s 271(1)(c) of the Income-tax Act (for short the Act ) 1961. Grounds of appeal are extracted as under: 01. The penalty order passed/upheld by the learned lower authorities are bad in law and bad in facts. 02. The penalty order passed u/s 271(1)(c) of the I. T. Act, 1961 , levying penalty at ₹ 1,88,712/- is ab-initio void, inasmuch as, the explanation of the appellant was not found false by the learned lower authorities which is condition .....

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eme Court in the case of Dharmendra Textile Processors 306 ITR 277, even though the said decision has been overruled in the subsequent decisions. 05. Having regard to the facts of the case, provisions of law and judicial prepositions, the penalty order in question is wholly untenable. 06 The appellant may please be permitted to raise any additional or alternative ground on or before the hearing of appeal. 2. The brief facts of the case are that assessee-firm filed return of income on 29.08.2005 .....

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rental income out of subletting. However, the AO, while passing order u/s.143(3) held that the interest income as well as rent income is chargeable to tax under the head income from other sources . This view has also been upheld by the learned CIT(Appeals) vide order dated 17/2/2010. The assessee's claim of expenses under various heads which are not covered by provisions of section 57 of the I.T. Act. Therefore, they are not allowed by the Revenue Authorities. The penalty proceedings u/s. 2 .....

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manner, has concealed the particulars of income or furnished inaccurate particulars of such income. Thus invocation of penal provisions for the year under consideration is wholly unwarranted. The assessee firm, in the return of income & accompanying financial statements has very clearly disclosed the basis of computation of income, which has been altered and the basis whereof is highly debatable and subject matter of appeal. There is no finding in the assessment order for the year under con .....

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g that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount of furnishing inaccurate particulars". The case of the assessee under consideration is squarely covered by the a .....

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e CIT(A) dismissed the appeal filed by the assessee and upheld the order of penalty levied by the AO. 6. Aggrieved by the order of CIT(A), the assessee filed the present appeal on the grounds reproduced here in above. 7. Before us, the ld. Authorised Representative (AR) representing the assessee has relied upon the detailed written submissions made before the CIT(A). Further, Ld. AR filed a copy of the judgment dated 12.03.13 of Hon ble jurisdictional High Court in the assessee s own case in ITA .....

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of the revised return of income and not from the date of filing of the original return of income? (ii) Whether on the facts and circumstances of the case and in law, the income of ₹ 11,85,504 received as rent from sub- lease of the factory premises is assessable as income under the head "Business"? (iii) Whether on the facts and circumstances of the case and in law the interest income of ₹ 8,73,493/- has been correctly assessed as income under the head "Other sources&q .....

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ssee has already been admitted on the substantial question of law before the Hon ble High Court, therefore, the additions are not free from debate. Therefore, penalty proceedings may be dropped/dismissed. For this preposition, the Ld. AR for assessee relied upon the case of CIT vs. M/s. Nayan Builders & Developers Private Limited. (ITA No. 415/Del/12 and 2379/Mum/2014) Bombay High Court (2014) 89 CCH 0187, Mumbai High Court. On the other hand, DR representing the revenue relied upon the orde .....

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mp; Developers Private(Supra) held that the penalty u/s 271(1)(c) of the Act is leviable. Relevant para from the said judgment is extracted as follows: Penalty u/s 271(l)(c)-Concealment of income-Admission of appeal by High Court against quantum addition-AO made addition in hands of assessee on account of income from Spectrum Corporate Services Ltd., disallowance of brokerage and disallowance of legal fees- Tribunal upheld additions in quantum proceedings-Assessee had filed appeal against quantu .....

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e to bona fides of the assessee in claiming deduction- Once it was held that claim of assessee could have been considered for deduction as per a person. properly instructed in law and is not completely debarred at all, mere fact of confirmation of disallowance would not per se lead to the imposition of penalty-Since additions, in respect of which penalty has been upheld, have been held by High Court to be involving a substantial question of law, penalty is not exigible under section 271(1)(c) an .....

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e did not contain any specific charge as to whether the penalty proceeding was initiated for concealment of particulars of income or for furnishing of such income and even in the body of the assessment order, what has been stated is, penalty proceedings u/s 271(1)(c) r.w. Explanation thereto are initiated separately . In these situation it is clear that by not specifying the specific charge in the show cause notice, the assessee has infact been denied is reasonable and sufficient opportunity of .....

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gment rendered by Hon ble Bombay High Court in case of CIT vs. Kaushalaya 216 ITR 660. Considering the aforementioned facts and circumstances, we accept/allowed both the grounds as mentioned above. Ground Nos. 3 & 4 11. After hearing the arguments of both the parties on the aforementioned grounds, we have also noticed that while passing of the penalty order there is no recording of the fact that the Explanation offered by assessee was found false and unless falsity of the Explanation is esta .....

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