TMI Blog2017 (1) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... d as to under which limb, the penalty is leviable and consequent thereto, issue notice in this regard. However, in the facts of the present case and as pointed out hereinabove, the Assessing Officer has failed to record satisfaction correctly and consequently, we hold that initiation of penalty proceedings against the assessee are not valid for non-recording of satisfaction by the Assessing Officer while completing assessment proceedings. Assessing Officer has failed to strike off either of the limbs of section 271(1)(c) of the Act, which are not satisfied by the assessee and consequently, notice issued under section 274 r.w.s. 271(1)(c) of the Act is bad in law and order levying penalty for concealment thereafter, is infructuous. Accordingly, we hold so. The Statute has provided distinction between concealment of income and furnishing of inaccurate particulars of income, which may be thin line of distinction, but the same has to be kept in mind while recording satisfaction by the Assessing Officer. - Decided in favour of assessee. - ITA Nos.1176 to 1180/PUN/2014, ITA Nos.1181 to 1185/PUN/2014, ITA Nos.1186 & 1187/PUN/2014, ITA Nos.1188 to 1192/PUN/2014, ITA Nos.1193 to 1195/P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see but only on reasonable net profit percentage to be adopted on the on money received by the assessee. 7] The learned CIT(A) erred in holding that the assessee had misrepresented the facts without appreciating that if his contention is accepted, no income is taxable in the hands 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. 3. The issue arising in the present bunch of appeals is against levy of penalty under section 271(1)(c) of the Act for lack of satisfaction by the Assessing Officer while passing the assessment order. 4. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was carried out on Chhoriya Group of cases on 22.08.2008. During the course of search, some incriminating documents were found and seized in which there were transactions of purchase and sale of plots and shops at various sites. The receipts on account of sales were much more than what was disclosed by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of appeal raised by the assessee is purely legal in nature and hence, the same is admitted for adjudication. 7. The learned Authorized Representative for the assessee stressed that where the Assessing Officer has failed to record satisfaction while initiating penalty proceedings for concealment of income under section 271(1)(c) of the Act, as to whether the assessee has concealed the income or furnished inaccurate particulars of income, the said satisfaction recorded by the Assessing Officer was not correct and the consequent notice issued under section 274 r.w.s. 271(1)(c) of the Act was invalid for not striking of either of portions. The learned Authorized Representative for the assessee stressed that pursuant thereto, order passed under section 271(1)(c) of the Act is invalid as he has not given a finding as to whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income. He referred to the order passed by the Assessing Officer in this regard. Further, he stated that even the CIT(A) has confirmed the levy of penalty observing appellant not only concealed its particulars of income but also tried to defend its concealment of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eizure operations, otherwise, the same would have remained concealed with the assessee. Thus, the assessee was found to have concealed particulars of income and furnished inaccurate particulars of such income within meaning of Explanation 5A to section 271(1)(c) of the Act. Accordingly, penalty proceedings under section 271(1)(c) of the Act were separately initiated. Thereafter, the Assessing Officer issu ed notice under section 274 r.w.s. 271(1)(c) of the Act and the case of assessee before us is that either of the limbs as to whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income, has not been struck off. The Assessing Officer in each of the cases had levied penalty under section 271(1)(c) of the Act which was confirmed by the CIT(A), against which the assessee is in appeal. 11. We find that similar issue of recording of satisfaction by the Assessing Officer before issue of notice under section 274 r.w.s. 271(1)(c) of the Act arose before the Tribunal in Kanhaiyalal D. Jain Vs. ACIT (supra), wherein it was held as under:- 13. We have heard the rival contentions and perused the record. The issue arising in the present bun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e should be issued to such person by the concerned Officer, wherein it should be clear that the assessee has to justify its case either 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 concealment of income or furnishing of inaccurate particulars of income. The question which further arises where the satisfaction recorded by the Assessing Officer and the notice issued thereafter is without application of mind, then can the subsequent order passed levying penalty be held to be valid?. The Hon ble Karnataka High Court in CIT Anr. Vs. Manjunatha Cotton and Ginning Factory (supra) had dealt upon the issue of notice under section 274 of the Act for the purpose of levying penalty for concealment and observed as under:- 59. As the provision stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 Court would lead to inference as to non-application of mind. 16. Further, the Hon ble Karnataka High Court in CIT Vs. SSA S Emerald Meadows (supra) has dismissed the appeal of Revenue, where the Tribunal had allowed the appeal of assessee holding that the notice issued by the Assessing Officer under section 274 r.w.s. 271(1)(c) of the Act to be bad in law as it does not satisfy which limb of section 271(1)(c) of the Act under which it has been initiated The Hon ble High Court had relied on decision 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued under section 274 of the Act. It was further held that the assessment orders were also made and reasons for issuing notice under section 274 r.w.s. 271(1)(c) of the Act were recorded by the Assessing Officer and since the assessee fully knew in detail the exact charge of Department against him, it could not be said that either there was non-application of mind 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 factual background would fall for consideration in the matter and no one aspect would be decisive. 21. In respect of assessment year 1967-68, the Hon ble High Court in CIT Vs. Smt. Kaushalya (supra) acknowledged that there could exist a case where vagueness and ambiguity in the notice could demonstrate non- application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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 satisfaction as to the assessee has furnished inaccurate particulars of income and has also concealed the income. The only source of addition in the hands of assessee is additional income offered by the assessee pursuant to search operations. In such circumstances, it is categorically a case of concealment. However, the Assessing Officer refers to both the limbs of section 271(1)(c) of the Act and the satisfaction recorded in this case suffers from infirmity. Further, even in the notice issued under 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t invalidate the proceedings. Where there is default in the first stage of making the assessee aware of exact charge of the Department, then initiation of penalty proceedings are vitiated and the 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 evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985. 24. Concealment of income and furnishing of inaccurate particulars carry different connotations. Concealment refers to a deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression very or suggestion falsi. 26. Where concealment of income and furnishing of inaccurate particulars of income are two di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the same? 13. The Hon ble High Court had allowed the claim of assessee where the 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. 14. The learned Departmental Representative for the Revenue has stressed that in view of the provisions of section 271(1)(1B) of the Act, where the order contains directions for initiation of penalty proceedings, such an order of assessment or re-assessment shall be deemed to constitute satisfaction of the Assessing Officer for initiating penalty proceedings under clause (c). Admittedly, the satisfaction has to be recorded in the order of assessment or re-assessment by the Assessing Officer while finalizing the assessment order. However, the Assessing Officer has to at initial stage itself come to a finding as to whether the additions made in the hands of assessee justify the levy of penalty proceedings under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 271(1)(c) of the Act. The CIT(A) during the course of appellate proceedings relating to section 271(1)(c) of the Act issued enhancement notice to the assessee. Thereafter, he had gone through the seized documents and elaborately referred to them and even reproduced the scanned copies of such documents and comes to conclusion that loans were received from Ratanlal Bafna, but still upholds the penalty levied under section 271(1)(c) of the Act. Once the finding of CIT(A) is that these are loans received from Bafna and are not on-money received on 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 grounds of appeal raised by the assessee and additional ground of appeal raised by the assessee are allowed. 16. Following the same pari ..... X X X X Extracts X X X X X X X X Extracts X X X X
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