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2017 (1) TMI 181 - ITAT PUNE

2017 (1) TMI 181 - ITAT PUNE - TMI - Levy of penalty u/s.271(1)(c) - Returns filed u/s.153A - as result of search and seizure operation, some incriminating documents were found and seized relating to transaction of purchase and sale of plots, shops etc. - on-money offered by the assessee - Held that:- The satisfaction as recorded by AO 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 concealmen .....

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m 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. - The assessee had offered additional income on account of on-money on sale of plots. The Assessing Officer had accepted the same and had initiated penalty proceedings under section 271(1)(c) of the Act. The CIT(A) during the cours .....

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sale of plots, then in cases where penalty proceedings have been initiated on a different footing and the CIT(A) reverses the same and holds the same to be loans received by the assessee, there is change in opinion and basis for levy of penalty for concealment varies. In such circumstances, there is no merit in levy of penalty under section 271(1)(c) of the Act and there is no merit at all in levying the penalty @ 150%. Accordingly, we allow the claim of assessee even on merits. Thus, the groun .....

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come-Tax (Appeals)-I, Nashik dated 16-04-2014 common for A.Yrs. 2003-04 to 2006-07. 2. In appeals the assessee has assailed the levy of penalty u/s.271(1)(c), as well as enhancing of penalty by CIT(A). Since penalty proceedings in the impugned assessment years originate from same set of facts, these appeals are takenup together for adjudication and are decided by this single order. 3. The brief facts of the case as emanating from the records are : A search and seizure action u/s.132 of the Incom .....

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06-07 22,83,871/- 3.1 The Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Act read with Explanation 5A for concealing particulars of income and furnishing inaccurate particulars of income. Thereafter, the Assessing Officer levied penalty u/s.271(1)(c) for impugned assessment years vide separate orders of even date 24-06-2011 for concealing the particulars of income. The penalty levied for the different assessment years is as under : Assessment Year Additional income offered .....

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llowing grounds of appeal in A.Y. 2003-04 : 1] The learned CIT(A) erred in directing levy of penalty u/s 271(1)(c) @ 150% of the tax sought to be evaded on the ground that the appellant had concealed its income and also misrepresented the facts of the case. 2] The learned CIT(A) erred in enhancing the penalty levied from 100% to 150% without appreciating that on the facts of the case and in law, he had no power to enhance the penalty levied by the A.O. and accordingly, the enhancement made by th .....

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p of ₹ 13.99 Crs. was to buy peace and to cooperate with the dept. and there was no evidence that the assessee had actually earned that income and accordingly, the penalty levied by the A.O. was not justified at all. 5] The learned CIT(A) ought to have appreciated that if its contention is accepted and the notings on the seize papers indicate unaccounted loans received by the assessee, in that event, there is no question of taxing such amounts in the hands of the assessee and consequently, .....

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ds of the assessee and therefore, the question of levy of penalty simply does not arise. 8] The learned CIT(A) has erred in passing the order without considering the correct facts of the case. 9] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. The assessee has also challenged the impugned order by raising an additional ground of appeal, the same reads as under : 1] The assessee submits that the penalty order passed u/s. 271(1)(c) was null and void si .....

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- 2016 has deleted the levy of penalty on account of invalid notice issued u/s.274 r.w.s. 271(1)(c) of the Act, as also on merits. The Ld. Authorised Representative placed on record copy of the order of Coordinate Bench in the case of Kanhaiyalal D. Jain (Supra). The Ld. Authorised Representative submitted that penalty proceedings in the case of present assessee and Kanhaiyalal D. Jain are outcome of assessment proceedings resulting from search and seizure action in the case of Chhoriya group. 6 .....

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the assessment order has mentioned that penalty proceedings are initiated u/s.271(1)(c) read with Explanation 5A for concealing of particulars of income and furnishing of inaccurate particulars of income. However, while passing the penalty order, the penalty has been levied only for concealing particulars of income. The Assessing Officer was not clear at the time of initiating penalty as to under what charge penalty is to be levied. The Ld. Authorised Representative submitted that the facts of .....

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150%. However, the Ld. Departmental Representative fairly admitted that the facts in the case of assessee are similar to the case of Kanhaiyalal D. Jain. 8. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. Penalty u/s.271(1)(c) read with Explanation 5A is levied in the case of assessee in pursuance to the returns filed u/s.153A of the Act. A survey and seizure action was carried out in the case of Chhoriya group on 22- .....

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e grounds of appeal and the additional ground of appeal raised in the case of Shri Kanhaiyalal D. Jain (Supra) are identical to the grounds raised by the assessee in the present set of appeals assailing the order of CIT(A). The Coordinate Bench of the Tribunal in the case of Shri Kanhaiyalal D. Jain Vs. ACIT (Supra) has deleted the levy of penalty by observing as under : 13. We have heard the rival contentions and perused the record. The issue arising in the present bunch of appeals is jurisdict .....

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d 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 furnish .....

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that effect and initiate penalty proceedings and thereafter on fixation of charge, levy the penalty for such act of concealing the particulars of income. Similarly, in cases where the assessee concerned had furnished inaccurate particulars of such income, then similar exercise has to be carried out by the concerned Officer. 14. The first stage of invocation of provisions of section 271(1)(c) of the Act is the satisfaction to be recorded by the Assessing Officer, which admittedly, has to be durin .....

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er for concealment of income or furnishing of inaccurate particulars of income. There may be cases where there is issue of both concealment of income and furnishing of inaccurate particulars of income, based on the nature of additions, then in such cases, satisfaction and notice thereon should specify exact charge against the assessee. The charge has to be further specified while completing penalty proceedings and the Assessing Officer has to come to a conclusion as to whether it is case of conc .....

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for concealment and observed as under:- 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding 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, i .....

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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 initial presumption is serious in nature and he had to pay penalty fro .....

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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 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 .....

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ng 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 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 i .....

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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 c .....

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ke 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. 15. The Hon ble Karnataka High Court has laid down the proposition that the Assessing Officer is to be satisfied in the course of proceedings that there is either concealment of income or furnishing of inaccurate particulars o .....

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. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC), wherein at page 19 it was held that concealment of income and furnishing inaccurate particulars of income carry different connotation. Applying the said proposition, it was held that where the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similarly, for furnishing inaccurate particulars of income, the standard proforma without striking of relevant clauses, as per the Hon ble High .....

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ion of Division Bench of the Court rendered in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra). The Hon ble Supreme Court in CIT Vs. SSA S Emerald Meadows (supra) has dismissed the Special Leave Petition. 17. The Pune Bench of Tribunal in M/s. Sai Venkata Construction Vs. Addl. CIT (supra) and in Sanjog Tarachand Lodha Vs. ITO (supra) have applied the ratio laid down by the Hon ble Karnataka High Court (supra) and held that where there is no striking off of either of limbs, then .....

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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 th .....

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of Tribunal which have been relied upon by the assessee before us. 20. The learned Departmental Representative for the Revenue placed heavy reliance on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Smt. Kaushalya (supra). In the facts of the case before the Hon ble Bombay High Court, the Hon ble High Court quashed the penalty levied for assessment year 1967-68 as the same was imposed without affording reasonable opportunity of hearing to the assessee. In respect of other two ye .....

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by the ITO or so-called ambiguity wording in the notice impaired or prejudiced the right of assessee of reasonable opportunity of being heard. The jurisdictional High Court deliberated upon the provisions of section 274 of the Act which contained principle of natural justice of the assessee being heard before levying penalty. It also held that mere mistake in the language used or mere non-striking of inappropriate portion could not itself be invalidated the notice. It was held that the entire fa .....

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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 .....

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urn, 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, coming to the facts of the case before us, wherein search and seizure operations were carried out on Chhoriya group of concerns on 22.08.2008 and declaration of ₹ 11.44 crores was made in the hands of whole group for various years. Consequent to the notices issued under section 153A of the Act for various years, different en .....

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had either concealed the income or furnished inaccurate particulars of income and is liable to levy of penalty under section 271(1)(c) r.w.s. Explanation 5A of the Act. The notice is to be issued to the assessee under section 274 of the Act. Before issuing such notice, satisfaction has to come out from the proceedings going on before the Assessing Officer. The perusal of assessment order passed in the present case reflects that the Assessing Officer while initiating proceedings has recorded sat .....

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r section 274 of the Act, irrelevant part has not been struck off. While completing penalty proceedings also, the Assessing Officer makes reference to both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income and in the final, levies penalty for concealment of income. 23. However, the question which is raised before us by way of additional ground of appeal is root of start of the proceedings i.e. recording of satisfaction and the issue of notice, which has been .....

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correct. 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 clear-cut 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 .....

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partment against him. As pointed out, in present case, in the assessment order itself while recording satisfaction for initiating proceedings under section 271(1)(c) of the Act, exact charge of the Department against the assessee is not clear. The Assessing Officer records the satisfaction for initiating penalty proceedings on both the counts i.e. concealment of income and furnishing of inaccurate particulars of income. The Hon ble Bombay High Court had also upheld the quashing of penalty procee .....

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same are to be quashed. The issue of notice under section 274 of the Act on such vagueness and ambiguity makes such notice invalid and proceedings thereafter are to be quashed. 25. The Hon ble Supreme Court in T. Ashok Pai Vs. CIT (supra) had held as under:- 23. Section 271(1)(c) remains a penal statute. The rule of strict construction shall apply thereto. The ingredients for imposing penalty remain the same. The purpose of the Legislature that it is meant to be a deterrent to tax evasion is evi .....

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then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings 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 .....

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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 plots. The Assessing Officer had accepted the same and had initiated penalty proceedings under section 271(1)(c) of the Act. The CIT(A) during the course of appellate proceedings .....

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