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Sanghavi Savla Commodity Brokers Pvt. Ltd. Versus ACIT, Circle-46, Mumbai

Penalty under section 271(1)(c) - Held that:- Respectfully following the decision of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory reported in (2013 (7) TMI 620 - KARNATAKA HIGH COURT) we hold that the notice issued under section 274 r.w.s. 271 of the Act dated 30.12.2009 for A.Y. 2007-08 for initiating penalty proceedings under section 271(1)(c) of the Act in the case on hand is invalid and consequently, the penalty proceedings are also invalid. - Decided i .....

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company engaged in the business of trading and brokerage in commodity futures market with MCX, filed its return of income for A.Y. 2007-08 on 29.10.2007 declaring income of Rs.,14,32,310/-. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 30.12.2009 wherein the income of the assessee was determined at ₹ 59,32,310/-, in view of an addition of ₹ 45,00,000/- to the returned income in view of a disclosure made by the as .....

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appeal, the learned CIT(A)-38, Mumbai, vide order dated 30.11.2010, dismissed the assessee's appeal and confirmed the levy of penalty under section 271(1)(c) of the Act. 3. Aggrieved by the order of the CIT(A)-38, Mumbai dated 30.11.2010 confirming the levy of penalty of ₹ 16,00,000/- under section 271(1)(c) of the Act for A.Y. 2007-08, the assessee is now in appeal before us, raising the following grounds: - "1.1 The Assistant commissioner of Income Tax, Central circle- 46, Mumb .....

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ransaction made on MCX", without any supporting evidence and only on the basis of conjecture and surmises. 1.3 The appellant submits that it has fully co-operated with the department and as per the advice of the appellant department only, appellant has declared additional income of ₹ 45,00,000/- in order to buy peace and avoid penalty for modification of code carried out by its sub brokers. 1.4 The appellant further submits that the additional income declared by the appellant is neith .....

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The appellant craves leave to add, amend or modify all or any of the above grounds of appeal." 4. In the course of hearing on 16.12.2015, the learned A.R. for the assessee brought to the notice of the Bench that the assessee, vide letter dated 09.12.2015, had filed additional grounds of appeal. The additional ground raised reads as under: - "The order of penalty passed under section 271(1)(c) of the Act is bad in law as the notice issued under section 274 read with section 271 of the .....

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of the assessee for which penalty proceedings are initiated (copy of the notice dated 30.12.209 is placed in assessee's paper book-2). The learned A.R. for the assessee also placed before us a copy of the decision of the Bangalore Bench of the Tribunal in the case of Roadlinks India Pvt. Ltd. vs. ACIT in ITA No. 1485/Bang/2013 dated 27.02.2015, wherein the Bench in similar circumstances has admitted the additional ground and disposed off the assessee's appeal on the legal grounds so rais .....

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on of additional grounds, the assessee has also filed a copy of the notice issued under section 274 r.w.s. 271 of the Act dated 30.12.2009 for initiating of the penalty proceedings under section 271(1)(c) of the Act for A.Y. 2007- 08. The learned A.R. for the assessee also placed before the Bench, for our perusal, the original notice issued by the AO. A perusal of the notice issued under section 274 r.w.s. 271 of the Act dated 20.12.2009 (copy placed at paper book-2) reveals that the AO has not .....

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by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The relevant portion of their Lordships judgement at paras 59 to 62 thereof are extracted hereunder for reference: - "59. As the provision stands, the penalty proceedings can be initiated on various ground set therein. If the order passed by the Authority categorically records a finding regarding the existence of any said ground .....

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t, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department se .....

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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 p .....

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grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and ca .....

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discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing n .....

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eld that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Thom, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." The conclusion drawn therein by t .....

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