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2016 (4) TMI 513 - ITAT PUNE

2016 (4) TMI 513 - ITAT PUNE - TMI - Penalty u/s 271(1)(c) - Held that:- In the present case the Assessing Officer has issued notice u/s. 274 r.w.s. 271(1)(c) of the Act without striking of the clauses which are not relevant. The notice is ambiguous. Further a perusal of penalty order shows that the Assessing Officer has not specified the information concealed by the assessee. Mere mentioning of the phrase that the assessee has ‘concealed income as well as furnished inaccurate particulars of inc .....

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.s 271(1)(c) in the instant case is defective and the proceedings arising therefrom are vitiated, unsustainable and are liable to be annulled. - Decided in favour of assessee - ITA No. 994 /PN/2013, ITA No. 995 /PN/2013 - Dated:- 11-3-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM For The Assessee : Shri Prayag Jha and Shri Pratik Jha For The Revenue : Shri Hitendra Ninawe ORDER PER VIKAS AWASTHY, JM : These two appeals have been filed by the assessee against the order of Commissioner of .....

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t ). 2. The brief facts of the case as emanating from the records are: The assessee firm is engaged in the business of construction and land dealings. The assessee developed a project known as Madhuban Saicity in Talegaon. The assessee is also engaged in the purchase and sale of land. The assessee filed its return of income for the assessment year 2008-09 on 13-10-2008 declaring total income of ₹ 27,61,300/-. The case of the assessee was selected for scrutiny and accordingly notice u/s. 14 .....

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by the assessee along with the building measuring 883 sq. mtrs. The same was sold without making any further addition. Plot No. D-3/P-1 in MIDC was purchased along with building measuring 2455 sq. ft. The said plot was sold along with building on as is where as basis. The expenditure claimed by the assessee for the development of the above said plots were not supported by the vouchers. The assessee vide letter dated 30-11-2010 conceded before the Assessing Officer that they are not able to subs .....

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upheld the findings of the Assessing Officer in disallowing the development expenses of ₹ 58,40,941/-. Now, the assessee is in second appeal before the Tribunal against the findings of Commissioner of Income Tax (Appeals) on this issue. Penalty proceedings u/s. 271(1)(c) were separately initiated against the assessee on account of disallowance of development expenditure. The Assessing Officer vide order dated 27-05-2011 levied the penalty of ₹ 19,85,336/- u/s. 271(1)(c) on the ground .....

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assessee filed an appeal before the Tribunal. We will first take up the appeal of assessee arising from assessment proceedings. ITA No. 995/PN/2013 (A.Y. 2008-09) 3. Shri Prayag Jha and Shri Pratik Jha appearing on behalf of the assessee submitted that the assessee has agreed for the addition on the ground that no penalty shall be levied u/s. 271(1)(c) of the Act. The assessee had offered the amount in order to avoid litigation and to buy mental peace. The ld. AR referred to letter dated 30-11- .....

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s) in confirming the disallowance. The ld. DR submitted that the assessee was not able to substantiate the expenditure claimed for the development of plots. The Assessing Officer has recorded a categoric finding that no development activity was carried out by the assessee on the plots or the buildings. Moreover, the assessee conceded before the Assessing Officer that he is not able to support the expenditure claimed for development of the plots. 5. We have heard the submissions made by the repre .....

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, we are of the view that no room is left for the assessee to assail the addition. The assessee has not brought on record any evidence whatsoever either before the lower authorities or before the Tribunal to substantiate the development expenditure claimed. We do not find any merit in the appeal of the assessee. The impugned order is upheld and the appeal of the assessee is dismissed. ITA No. 994/PN/2013 (A.Y. 2008-09) 6. In appeal against the order confirming penalty u/s. 271(1)(c) the ld. AR h .....

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icer was himself not clear, whether the penalty is to be levied for furnishing inaccurate particulars of income or concealment of income. The ld. AR contended that the Assessing Officer has not clearly mentioned in the show cause notice, the reasons for levy of penalty u/s. 271(1)(c) of the Act. The ld. AR submitted that the notice itself is defective, therefore proceedings arising from such defective notice are null and void. In support of his submissions the ld. AR placed reliance on the judgm .....

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o substantiate expenditure, but no penalty can be levied on the additions made on the basis of estimations. To strengthen his submissions, the ld. AR draws support from the following decisions: i. Hindustan Steel Ltd. Vs. State of Orissa, 83 ITR 26 (SC); ii. Commissioner of Income Tax Vs. Gem Granites, 86 CCH 160 (Mad.); iii. Ajit Kumar Surana Vs. Assistant Commissioner of Income Tax, 39 CCH 138 (Kol-Trib.); iv. Godavari Townships (P.) Ltd. Vs. Deputy Commissioner of Income Tax, 148 ITD 463 (Vis .....

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upreme Court of India in the case of Mak Data (P.) Ltd. Vs. Commissioner of Income Tax reported as 358 ITR 593 (SC) has held that voluntary disclosure does not release assessee from mischief of penal proceedings u/s. 271(1)(c) of the Act. 9. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which reliance has been placed during the course of submissions. The ld. AR of the assesse .....

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clear. It is not evident from notice, whether the penalty u/s. 271(1)(c) has been levied for furnishing inaccurate particular or concealment of income. 10. The Hon'ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Manjunatha Cotton & Ginning Factory (supra) has held that where it is not clear from the notice issued u/s. 274 of the Act the reasons for levying penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not susta .....

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rding 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 though penalty proceedings are in .....

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lty. The practice of the Department sending a printed farm 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 specifically Otherwise, principles o .....

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he 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 woul .....

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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 the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the t .....

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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 [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Co .....

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ill lead to an inference as to non-application of mind. In the present case the Assessing Officer has issued notice u/s. 274 r.w.s. 271(1)(c) of the Act without striking of the clauses which are not relevant. The notice is ambiguous. Further a perusal of penalty order shows that the Assessing Officer has not specified the information concealed by the assessee. Mere mentioning of the phrase that the assessee has concealed income as well as furnished inaccurate particulars of income is not suffici .....

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