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2016 (3) TMI 1024 - ITAT MUMBAI

2016 (3) TMI 1024 - ITAT MUMBAI - TMI - Penalty proceedings under section 271(1)(c) - Held that:- The initiation and levy of the penalty should be on a specific charge otherwise the whole proceedings is bad in law and gets vitiated. This principle has been followed by the Tribunal in several cases. Before us, no contrary decisions of any other High Court have been brought to our notice, accordingly, we are of the view that the entire proceedings of initiation and levy of penalty under section 27 .....

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ell as by the assessee against separate impugned orders of even date, 27.07.2012, passed by the CIT(A)-30 Mumbai, in relation to the penalty proceedings under section 271(1)(c) for the assessment year 2008-09. 2. At the outset, it has been admitted by both the parties that, so far as a Departmental appeals in ITAs No. 6330/Mum/2012 and 6328/Mum/2012, the tax effect is below 10 lakhs and accordingly, in view of the latest CBDT Circular No. 21 of 2015. These appeals are not maintainable. 3. After .....

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ll apply on pending appeals also which is evident from para 10 of the impugned Circular, which reads as under:- 10. This instruction will apply retrospectively to pending appeals to be filed henceforth in High Courts/Tribunals. Pending appeals below the specified tax limits in para 3 above may be withdrawn/not pressed. Appeals before the Supreme Court will be governed by the instructions on this subject, operative at the time when such appeal was filed . 4. Thus, the aforesaid appeals filed by t .....

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as under:- 1.0 On facts and circumstances of the case and in law, the penalty order u/s 271(1)(c) is bad-in-law since the notice u/s 274 r.w.s. 271(1)(c) had been issued in mechanical manner and does not specify the reason for initiation of the penalty . 7. As a lead case, we are discussing the facts and issue in the case of Shri Dipesh M Panjwani, which applies pari materia in other case also, except for the variation in figures. An AIR Information was received that, the assessee had deposited .....

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ticular bank account for taxation and accordingly, he filed a revised computation offering the income of ₹ 27,57,812/- consistently of cash deposit and cheque deposits and bank interest of ₹ 6,747/-. Thus, the addition was made on the basis of offer made by the assessee and the same was taxed by the AO under the head income from other sources . In the assessment order, the AO initiated the penalty proceedings under section 271(1)(c) in the following manner:- Penalty proceedings under .....

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sessee s contention and levied the penalty at ₹ 15 lakhs for concealing the particulars of income, which was far more than the minimum penalty which was sought to be evaded by the assessee. 8. Before us, qua the legal issue raised in the additional grounds the Ld. Counsel submitted that, firstly, in the assessment order, the AO has not framed any specific charge, on which he intends to impose penalty, he has mentioned under both the charges, which cannot be the case, because both the charg .....

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, he submitted that such a levy of penalty is not tenable in view of law laid down in catena of decisions including that of the Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning Factory, reported in [2013] 359 ITR 565. This decision, he submitted has been followed by various benches of the Tribunal and later on reiterated by the Karnataka High Court again in the case of Steel Industries, reported in [2014] 51 taxmann.com 127. The lists of all the decisions filed before us .....

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njunathan Cotton & Ginning Factor 359 ITR 565 (Kar-HC) 9. On the other hand, Ld. DR submitted that, the entire facts and circumstances leading to the levy of penalty has to be seen and simply because penalty has been initiated on one charge and levied on a different charge that does not mean that whole penalty proceedings gets vitiated. Section 271(1)(c) provides levy of penalty under both the charges and if the AO in the penalty order has levied the penalty on any one of the charge then als .....

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alment of the income and for furnishing the inaccurate particulars of income . Thus, while making addition in the assessment order, the charge framed by the AO for initiating the proceedings was on both the counts that is, he was not sure under which charges penalty is to be imposed. At the stage of issuance of notice under section 274 r.w.s. 271 also, the AO did not specify at all, under which charge he is contemplating to initiate or impose the penalty. Finally, in the penalty order, he has le .....

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whether penalty is to be initiated for either concealing the particulars of the income or for furnishing the inaccurate particulars of income . The two charges for initiating the penalty operate on two different footing and under the penal provision the charge has to be very specific and not vague. These charges are not to be reckoned as any casual remark, which can be interchanged by the AO at any stage on his whims and fancies. It is not an error which is rectifiable or to be ignored, albeit .....

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y for one charge then ambush the assessee finally by levying penalty on a different charge because the initial onus to explain and rebut the charge is upon the assessee. If charge itself is vague and not clear, then the onus cast upon the assessee under Explanation itself gets vitiated as assessee is precluded from a chance to give a specific rebuttal on that charge. It is a trite law that circumstances and facts for levy of penalty under both the grounds operate in a different fields. The court .....

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gorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then t .....

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uch he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet spec .....

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oceedings 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 .....

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der imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of order of penalty must be determined with reference to the information, facts and materials in the hands of the authority .....

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come are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in .....

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non-application of mind . P) 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 not furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis .....

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