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TMI Blog2016 (12) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act to the assessee. In response to the notice, the assessee filed her return of income for the year under consideration declaring a total income of Rs. 2,64,52,643/-. 4. During the course of search action, the search team found cash balance of Rs. 7.95 crores at the residence of assessee's sister named Ms. Sangeeta Koyal. In the statement taken u/s 132(4) of the Act, Ms. Sangeeta Koyal stated that the above said cash balance belongs to the assessee herein. In the statement taken from the assessee, she also admitted that the above said cash balance belongs to her and the source there of was her professional receipts. The assessee also agreed to offer the above said amount as her income in the Assessment years 2009-10 and 2010- 11 at Rs. 1.95 crores and Rs. 6.00 crores respectively. Accordingly the assessee offered the sum of Rs. 1.95 crores in the return of income filed for AY 2009-10. The assessee also admitted a sum of Rs. 30.00 lakhs towards the additional amount paid on purchase of a property at Shivanand CHS Ltd. The assessing officer assessed the aggregate amount of Rs. 2.25 crores (1.95 + 0.30) on which penalty u/s 271(1)(c) of the Act was levied for concealment of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 271(1)(c) of the Act for concealing the income. He placed reliance on the decision rendered by Hon'ble jurisdictional Bombay High Court in the case of CIT Vs. Smt. Kaushalya and others (216 ITR 660) and submitted that the Hon'ble Bombay High Court has held that mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. 8. In the rejoinder, the ld A.R submitted that the AO, in the instant case, did not issue proper notice and he did not apprise the assessee about the charge for which the penalty proceedings were initiated. He submitted that this matter goes to the root of the matter and the same cannot be cured by the provisions of sec. 292B/292BB of the Act. In this regard, he placed reliance on the decision rendered by the co-ordinate bench in the case of Shri K Prakash Shetty Vs. ACIT (ITA Nos.265 to 267/Bang/2014 dated 05-06-2014), where in it was held as under:- "16. It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. The show cause notice is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to explain as to why an order imposing a penalty should not be made u/s 271(1)(c) of the Act. There should not be any doubt that the provisions of section 271(1)(c) prescribes two types of charge viz., (a) concealment of particulars of income and (b) furnishing of inaccurate particulars of income. However, in the above said notice the AO did not specify the type of charge for which the penalty proceedings have been initiated. 10. In this regard, it is pertinent to refer to the following observations made by Hon'ble Supreme Court in the case of Dilip N Shroff (291 ITR 519)(SC). "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing heard. A mistake in the notice would not invalidate penalty proceedings." The Hon'ble Bombay High Court, thereafter, considered various decisions relied upon by the parties and came to the conclusion that there should be application of mind on the part of assessing officer. For the sake of convenience, we extract below the relevant observations made by Hon'ble Bombay High Court. "11. The case of CIT v. Lakhdhir Lalji [1972] 85 ITR 77 (Guj) is the other decision upon which the Tribunal has placed reliance. In that case a notice under section 274 was issued on the footing of concealment of income by suppression of sales whereas the penalty was levied on the footing that there was furnishing of inaccurate particulars of income since the stock at the closing of the year was undervalued. The penalty was quashed upon a view that the very basis for the penalty proceedings had disappeared when it was held that there was no suppression of income by the assessee. Thus, it would be seen that the ratio of that decision cannot be applied to this case. 12. The last decision relied upon is the case of N. N. Subramania Iyer v. Union of India [1974] 97 ITR 228 (Ker). The following passag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year" The Ld A.R submitted that the penal provisions should be construed strictly. He submitted that the expression "such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year" should be given proper meaning. The A.R submitted that "Cash" cannot be acquired by utilizing income of the assessee" and accordingly contended that the provisions of Explanation 5A would fail in the cases where "cash" is found during the course of search. The Ld A.R also placed reliance on the decision rendered by Hon'ble Bombay High Court in the case of Sheraton Apparels Vs. ACIT (2002)(256 ITR 20), wherein the Hon'ble High Court has explained the intention of introducing Explanation 5 (identical to Explanation 5A) under the head "Legislative intention". He submitted that the Explanation 5/5A has been introduced to curb the practice of explaining the sources of undisclosed assets as income of earlier years. He submitted that Explanation5/5A introduces legal fiction and hence they should be interpreted strictly. On the contrary, the ..... 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