TMI Blog2016 (12) TMI 1077X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of the same, notice issued in such circumstances, which also is not clear as to which limb of section 271(1)(c) of the Act is attracted, stands vitiated and the penalty order passed consequent to such notice is invalid in law. Accordingly, we delete the penalty levied under section 271(1)(c) of the Act in the case of assessee. - Decided in favour of assessee - ITA No s.2174 to 2180/PN/2014 - - - Dated:- 14-12-2016 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Appellant : Shri Pramod Shingte For The Respondent : Shri Hitendra Ninawe ORDER PER SUSHMA CHOWLA, JM: This bunch of appeals filed by the assessee are against consolidated order of CIT(A)-I, Nashik, dated 30.10.2014 relating to assessment years 2002-03 to 2008-09 against levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. The only issue raised in this bunch of appeals is against levy of penalty under section 271(1)(c) of the Act. 3. The issue arising in all the appeals is similar and hence, all the appeals are being disposed of by way of this consolidated order for the sake of convenience. However, reference is being made to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) is not justified in confirming the penalty, when the Learned Assessing Officer brings no corroborative evidence on records. The penalty may please be cancelled. 8. On the facts and in the circumstances of the case and in law the Learned CIT (A) is not justified in confirming the penalty, when no proper satisfaction is recorded in the assessment order or penalty order by the Learned Assessing Officer. Penalty is not leviable on the basis of the opinion of the Learned Assessing Officer. The penalty may please be cancelled. 9. On the facts and in the circumstances of the case and in law the Learned CIT (A) is not justified in confirming the penalty ignoring the number of decisions applicable to the facts of the appellant's case. The same may please be considered in its proper perspective. For example Prem Arora (2012) 149 TTJ (Del) 590, the return filed u/s 153A is treated as first return and penalty cannot be levied with reference to return filed under section 139. ACIT vs. V.N.Devdoss (2013) 157 TTJ 168 (Chen) where in it is held that Return under Section 153A is first return. Devidas Sukhani vs. DCIT (2013) 158 TTJ (Jodh) 42 it is held that where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nventory of assets was prepared by the search party. During the course of search or during post search enquiry, the assessee never brought to the notice of authorized officers any such assets. Under the circumstances, the Assessing Officer disallowed additional depreciation on assets of ₹ 37,947/-. Further, the Assessing Officer noted that though the assessee had declared additional income of ₹ 3,72,947/- in the return of income filed under section 153A of the Act, but the same was not shown in the return of income filed under section 139(1) of the Act. The said assets were detected consequent to search and seizure operations and hence, the assessee was held to have concealed the particulars of income within meaning of Explanation 5A to section 271(1)(c) of the Act. The penalty proceedings were initiated separately for such addition. The Assessing Officer while passing the order levying penalty under section 271(1)(c) of the Act noted that the additional income was offered in the returns of income filed under section 153A of the Act which was on the basis of incriminating evidences found during the course of search. The plea of assessee that the additional income was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search, then if the return of income was accepted under section 143(3) r.w.s. 153A of the Act, the assessee was liable to levy of penalty, in view of Explanation 5A to section 271(1)(c) of the Act. The order of Assessing Officer in this regard was upheld. The contention of assessee that it had voluntarily made disclosure for peace of mind and to avoid litigation, was not accepted, in view of seizure of various papers / documents giving details of unaccounted receipts / investment / expenditure. Reliance was placed on the ratio laid down by the Hon ble Supreme Court in MAK Data P. Ltd. Vs. CIT in Civil Appeal No.9772 of 2013, judgment dated 30.10.2013 and the appeal of assessee was dismissed by the CIT(A). 8. The assessee is in appeal against the order of CIT(A). 9. The learned Authorized Representative for the assessee pointed out that both during the course of search under section 132 of the Act at the residence of assessee and Survey on the hospital of assessee, certain discrepancies were found. However, the source of discrepancies or mismatch in investment was the income generated from hospital, wherein the assessee declared unrecorded suppressed receipts of the hospital. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the ratio laid down by the Pune Bench of Tribunal on similar issue in Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08. He further referred to the notice issued under section 271(1)(c) of the Act and pointed out that even the said notice was not clear as to which limb has been struck off. The charge made by the Assessing Officer during the course of penalty proceedings was held to be vague and hence, no merit in the penalty order passed pursuant to such vague satisfaction. He further pointed out that the assessment proceedings for assessment year 2002-03 were completed under section 143(3) r.w.s. 147 of the Act, wherein also satisfaction to initiate penalty proceedings was vague. In respect of assessment years 2007-08 and 2008-09, the learned Authorized Representative for the assessee fairly pointed out that Explanation 5A to section 271(1)(c) of the Act is attracted. 10. The learned Departmental Representative for the Revenue on the other hand, placing reliance on the orders of authorities below pointed out that the Assessing Officer vide para 7 has clearly held that the default is of concealment of income and he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. The details of original return of income filed and the returns of income filed under section 148 of the Act for assessment year 2002-03 and under section 153A of the Act for assessment years 2003-04 to 2008-09 and also the income assessed thereafter and the penalties imposed from year to year is tabulated hereunder:- A.Y. Income as per Original return of income (Rs.) Date of original return of income Income as per return u/s 148/153A (Rs.) Income assessed u/s 148/153A (Rs.) Income concealed (Rs.) Penalty imposed u/s 271(1)(c) (Rs.) 2002-03 3,42,664 06/08/2002 9,47,960 9,47,960 6,05,291 1,80,052 2003-04 2,36,714 08/01/2004 5,71,710 6,09,657 3,72,947 1,17,479 2004-05 2,38,950 30/10/2004 6,05,710 7,56,152 5,60,437 1,55,713 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strictly construed. Unless the case falls within the four corners of the said provision, penalty cannot be imposed. Sub-s. (1) of s. 271 stipulates certain contingencies on the happening whereof the AO or the CIT(A) may direct payment of penalty by the assessee. We are concerned herewith the fundamentality provided in cl. (c) of s. 271(1) of the Act, which authorizes imposition of penalty when the AO is satisfied that the assessee has either : a) concealed the particulars of his income; or (b) furnished inaccurate particulars of such income. 13. It is not the case of furnishing inaccurate particulars of income, as in the IT return, particulars of income have been duly furnished and the surrendered amount of income was duly reflected in the IT return. The question is whether the particulars of income were concealed by the assessee or not. It would depend upon the issue as to whether this concealment has reference to the IT return filed by the assessee, viz., whether concealment is to be found in the IT return. 14. We may, first of all, reject the contention of the learned counsel for the Revenue relying upon the expression in the course of any proceedings un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually a concealment or non-disclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non-disclosure as the assessee had made a complete disclosure in the IT return and offered the surrendered amount for the purposes of tax. 17. We, thus, answer the questions as formulated above, in favour of the assessee and against the Revenue finding no fault with the decisions of the CIT(A) as well as the Tribunal. As a result, this appeal is dismissed. 14. Another facet which has to be considered is that the additional income was offered during the course of Survey, which was conducted at the premises of assessee. However, it was the Assessing Officer who initiated penalty proceedings against the assessee and levied the same. The Hon ble Delhi High Court has categorically laid down that where the Assessing Officer had not recorded any satisfaction during the course of Survey, the decision to initiate penalty proceedings being taken while making the assessment order, then it was held Thus, the expression in the course of any proceedings under this Act could not have the reference to survey proceedings, in this case . Since the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Appeals or the Principal Commissioner or Commissioner, in the course of any proceedings under the Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty the amounts as specified in sub-clause (iii) which would be in addition to tax, if any, payable by the said person. The section thus requires the concerned Officer to record satisfaction in the course of any proceedings under the Act, that the person has concealed the particulars of his income or furnished inaccurate particulars of his income. After recording the satisfaction, during the course of penalty proceedings also, the concerned Officer has come to a finding that as to whether the person has concealed the particulars of his income or furnished inaccurate particulars of such income and thereafter, levy the penalty accordingly. The word used between the two acts i.e. concealment of particulars of income and furnishing of inaccurate particulars of such income is or . So the penalty levied by the concerned Officer is on satisfaction of any of the limbs and not the satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xistence 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 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lidate 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 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 Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 171 Taxman 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 lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Karnataka High Court (supra) and held that where there is no striking off of either of limbs, then notice issued under section 274 r.w.s. 271(1)(c) of the Act was invalid and subsequent penalty proceedings were held to be vitiated. 18. The Mumbai Bench of Tribunal in Sanghavi Savla Commodity Brokers P. Ltd. Vs. ACIT in ITA No.1746/Mum/2011, relating to assessment year 2007 -08, order dated 22.12.2015 while deciding similar issue, wherein the Assessing Officer had initiated penalty proceedings for concealment of particulars of income without striking inappropriate words or any parts of notice and proceeded to levy penalty for concealment, then following the ratio laid down by the Hon ble Karnataka High Court, the Tribunal held that notice issued for initiating penalty proceedings were invalid and consequently penalty proceedings were invalid. 19. Similar proposition has been laid down by Kolkata Bench of Tribunal in Shri Deepak Kumar Patwari Vs. ACIT in ITA Nos.616 to 618/Kol/2013, relating to assessment years 2007-08 to 2009-10, order dated 03.02.2016 and it has been further held that the provisions of section 292B of the Act cannot cure the basic defect in assumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessment year 1967-68 was issued even before the assessment order was made and where the assessee had no knowledge of exact charge of Department against him as in the notice not only there was use of word or between the group of cases but there was use of word deliberately also. The Hon ble High Court held that notice clearly demonstrated non-application of mind on the part of Assessing Officer. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity to the assessee since he did not know of exact charges he had to face. In this background, quashing of penalty proceedings for assessment year 1967-68 was held to be justified. Applying the said principle laid down by the Jurisdictional High Court, application of mind before issuing the notice under section 274 of the Act has to be considered. The Hon ble High Court clearly held that where there is vagueness and ambiguity in the notice issued which could demonstrate non-application of mind by the authority which in turn, would ultimately prejudice the right of opportunity of hearing of the assessee as contemplated under section 274 of the Act, then such notice is invalid. 22. Now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o laid down by the Hon ble Karnataka High Court in CIT Anr. Vs. Manjunath Cotton and Ginning Factory (supra) and CIT Vs. SSA S Emerald Meadows (supra) and in view of SLP being dismissed, we find merit in the plea of assessee that the satisfaction recorded in the present case to initiate penalty proceedings both for concealment of income and furnishing of particulars of income against additional income offered by the assessee is incorrect. Further, where the assessee is not aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. It is a clearcut case of concealment since the assessee had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the satisfaction accordingly and issued the notice accordingly. 24. We find no merit on the partial reliance placed upon by the learned Departmental Representative for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings as to under which limb the case of assessee falls. In the present set of facts, the satisfaction as recorded by the Assessing Officer which is evident from the assessment order itself does not establish the case of Revenue against the assessee that it is liable for levy of penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty notice issued in the pre sent case suffers from infirmities i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact charge against him, hence the same is quashed. The penalty proceedings completed pursuant to such notice are vitiated and the same are held to be invalid. 27. Now, coming to the merits of case, the assessee had offered additional income on account of on-money on sale of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer had not explicitly mentioned that as to whether the penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income, suffers from infirmity even if it is established that the assessee had concealed the income in the facts and circumstances of the case. The Apex court has dismissed the SLP filed by the Department. Applying the said principle, we hold that even if it is established that the additional income is on account of concealment of income but while recording satisfaction for initiating penalty proceedings, the Assessing Officer should explicitly mentions as to whether penalty is being initiated for concealment or income or for furnishing of inaccurate particulars of income. In the absence of the same, notice issued in such circumstances, which also is not clear as to which limb of section 271(1)(c) of the Act is attracted, stands vitiated and the penalty order passed consequent to such notice is invalid in law. Accordingly, we delete the penalty levied un der section 271(1)(c) of the Act in the case of assessee. The ground of appeal No.8 raised by the assessee is thus, allowed. Other grounds of appeal raised on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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