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2016 (4) TMI 950 - ITAT PUNE

2016 (4) TMI 950 - ITAT PUNE - TMI - Penalty u/s.271(1)(c) - Held that:- Since it is not clear from the notice u/s.274 the reasons for levying of penalty as to whether it is for concealment of income or for furnishing of inaccurate particulars of income, therefore, the notice itself is bad in law and invalid. Therefore, the penalty order passed subsequently on the basis of such invalid notice also has to be held as bad in law. We accordingly cancel the penalty levied by the AO. - Decided in favo .....

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2. The Ld. AO erred in disregarding the explanation submitted by the assessee for non levy of penalty. 3. The appellant craves its right to add to or alter the grounds of appeal at any time before or during the course of hearing of the case. 3. The assessee has also taken the following additional ground : There is no clear satisfaction by the AO whether he is satisfied for concealment or income or whether for submission of inaccurate particulars and hence the levy of penalty is invalid. 4. The .....

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raised by the assessee should be admitted. 5. After hearing both the sides and considering the additional ground raised by the assessee being purely legal in nature, the additional ground raised by the assessee is admitted for adjudication. 6. Facts of the case, in brief, are that the assessee is engaged in the activities of Builders and Promoters. A search and seizure action u/s.132 of the Act was conducted in the cases of Ladkat group. During the said search page No.8 of Bundle No.16 was seize .....

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ent was stated to belonging to the asssessee firm which is engaged in the business of promoters and builders. Shri Gautam Ladkat, a partner of the assessee firm, explained its writings on said documents. In view of the above, notice u/s.153C was issued to the assessee. During the course of assessment proceedings the AO confronted the assessee about such notings. According to the AO the said document reflected investment in a project being undertaken by SLK Properties (assessee firm) which was no .....

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er appeal the Tribunal also upheld the order of the CIT(A). In the meantime, the AO had initiated penalty proceedings u/s.271(1)(c) of the I.T Act. Rejecting the various explanations given by the assessee the AO levied penalty of ₹ 23,77,742/- being 100% of tax sought to be evaded. In appeal the Ld.CIT(A) upheld the penalty so levied by the AO. 10. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 11. The Ld. Counsel for the assessee at the outset submitted that .....

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assessment order he submitted that the AO has again mentioned to issue notice u/s.274 r.w.s. 271(1)(c) of the I.T. Act for concealment of income as discussed in the body of order. Referring to the notice issued u/s.274 r.w.s. 271(1)(c) vide letter dated 22-03-2012 he submitted that here also there is no mention as to whether the penalty has been levied for concealment of income or for furnishing of inaccurate particulars of income. 13. Referring to the decision of the Pune Bench of the Tribunal .....

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stainable. Since in the instant case admittedly it is not clear from the notice issued u/s.274 regarding the reasons for levy of penalty, therefore, the notice itself has to be held as bad in law and invalid and consequently the penalty order passed on the basis of such invalid notice is not sustainable. 14. So far as the merit of the case is concerned the Ld. Counsel for the assessee drew the attention of the Bench to para 9 of the assessment order which reads as under : Merely because the inve .....

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he assessee. Therefore, an amount of ₹ 70,64,000/- represents the unexplained investment by M/s. SLK Properties. The firm M/s. SLK Properties came into existence during the F.Y. 2005-06 and most of the narrations in the above paper appear to be those related to property and initial investment related transactions and further, as no date is mentioned on this page, the same are treated as the unexplained investment for the Asstt. Year 2006-07. 15. He submitted that the AO has not given a def .....

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o any of the landlords. He accordingly submitted that penalty cannot be levied u/s.271(1)(c) of the I.T. Act. 16. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that the quantum addition has been upheld by the Tribunal. The assessee has not disclosed the amount of investment in cash in its books of account for which addition was made by the AO which has been upheld by the CIT(A) and further by the Tribunal. Therefore under these circ .....

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tted that the Hon ble Supreme Court in the said decision has held that the AO has to satisfy whether the penalty proceedings be initiated or not during the course of assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing. The Hon ble Supreme Court while deciding the issue has followed the decision of Hon ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors reported in 13 SCC 369 and CIT Vs. Atul M .....

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s.274 is invalid in a situation where it is not clear from such notice reasons for levying of penalty and the notice has been held to be invalid, therefore this being a covered matter the additional ground raised by the assessee should be allowed and the penalty be deleted. 18. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We .....

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s been upheld by the CIT(A). Even the further appeal filed by the assessee was also dismissed by the Tribunal. Thus, the issue of quantum addition has been decided against the assessee. We find the AO in view of the addition of ₹ 70,64,000/- on account of undisclosed investment initiated penalty proceedings u/s.271(1)(c) of the I.T. Act and levied penalty of ₹ 23,77,742/- being 100% of tax sought to be evaded which has been upheld by the CIT(A). 19. The first plank of argument of the .....

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discussed in the body of the assessment order. Further the notice dated 22-03-2012 for penalty proceedings u/s. 271(1)(c) does not speak clearly as to whether such penalty is being levied for concealment of income or furnishing of inaccurate particulars of income. Therefore, according to him, in view of the decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (Supra) which has been followed by the Coordinate Bench of the Tribunal in the case of Sanjog Tar .....

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income by the assessee. At the end of the assessment order the AO mentions issue notice u/s.274 r.w.s.271(1)(c) for concealment of income as discussed in the body of the order. The relevant para 10 and last part of the assessment order read as under : 10. The penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income and furnishing inaccurate particulars of such income are separately initiated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .....

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t, 1961. 22. We find identical issue had come up before the Pune Bench of the Tribunal in the case of Sanjog Tarachand Lodha Vs. ITO vide ITA Nos. 688 and 689/PN/2014 order dated 31-08- 2014 for A.Yrs. 2007-08 and 2008-09. We find the Tribunal under identical circumstances had held the notice issued u/s.271(1)(c) r.w.s. 274 as invalid and cancelled the penalty levied on the basis of such invalid notice by observing as under: 5. We have heard the submissions made by the ld. DR and have thoroughly .....

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income returned by the assessee. Thus, no further addition was made during the course of assessment proceedings. Penalty u/s. 271(1)(c) was initiated against the assessee on the additional income admitted during search and returned u/s. 153A proceedings. The assessee has placed on record notices issued u/s. 271(1)(c) r.w.s. 274 of the Act for levy of penalty in the assessment years 2007-08 and 2008-09. The said notices are at pages 15 and 16 of the paper book. A perusal of notices show that they .....

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sions, reliance has been placed on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory reported as 359 ITR 565 (Karan). 6. A perusal of the order passed u/s. 271(1)(c) dated 28-06- 2012 levying penalty shows, that in para 2 the Assessing Officer has specifically mentioned that penal proceedings u/s. 271(1)(c) are initiated for concealing the income. The relevant extract of para 2 of the order levying penalty reads as under: 2. …& .....

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7 of the order reads as under: 7. I am satisfied that the assessee has without any reasonable cause, furnished an inaccurate particulars of income and thereby concealed his income to the extent of ………………………. Furnishing of inaccurate particulars of income and concealing of income are two different expressions having different connotations. For initiating penalty proceedings, the Assessing Officer has to be very specific for the reason .....

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y is levied for concealment of income or furnishing of inaccurate particulars of income or both. 8. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (supra) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable. The relevant extract of the order of Hon'ble High Court reads as under: NOTICE UNDE .....

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ditions 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 the nature of civil liability, in fact, 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 suc .....

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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 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 fac .....

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t 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 to meet those 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 pena .....

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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 time the order was passed and further 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 procee .....

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naccurate 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 the case of VIRGO MARKETING reported in 171 Taxmn 156, has held 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. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately mar .....

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23. So far as reliance on the decision of Mak Data Pvt. Ltd. by the Ld. Departmental Representative is concerned the same in our opinion is not applicable to the facts of the present case. The decision in the case of Mak Data Pvt. Ltd. has to be understood in the context of the facts of the said case. Therefore, before relying on a particular sentence or paragraph of the said decision one has to read the preceding paragraph of the said decision which read as under: 9. We are of the view that the .....

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and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later .....

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