TMI Blog2017 (2) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... has Kulkarni ORDER PER SUSHMA CHOWLA, JM: The cross appeals filed by the assessee and the Revenue are against order of CIT(A)-2, Nashik, dated 12.12.2014 relating to assessment year 2009-10 against penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. The cross appeals filed by the assessee and Revenue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee in ITA No. 172/PUN/2015 has raised the following grounds of appeal :- 1. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer has erred in passing order u/s 271 (1)(c) of the Income Tax Act, 1961 by rejecting appellants contention that the appeal against the quantum proceedings is pending before the Hon'ble ITAT, and penalty proceedings may be kept in abeyance and thereby construing that the assessee does not have any explanation regarding the addition made in the quantum order. 2. On the facts and in the circumstances of the case and in law, the Learned Assessing Officer has erred in levying a penalty of ₹ 18,81,903/- u/s 271 (1)(c) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld become academic and the appeal filed by the Revenue would also be infructuous. 7. Briefly, in the facts of the case, the assessee for the year under consideration had furnished return of income at ₹ 62,19,170/-. The case of the assessee was picked up for scrutiny. During the course of assessment proceedings, various information was sought by the Assessing Officer from different parties and addition was made in the hands of assessee on the following accounts. 1. Disallowance of Transport expenses, depreciation and interest over truck - Rs.7,03,747/- 2. Disallowance out of salary - Rs.4,83,120/- 3. Disallowance out of interest over cash withdrawn - Rs.2,05,461/- 4. Disallowance of interest over SOP - Rs.1,50,000/- 5. Disallowance of interest claimed pertaining to house loan - Rs.11,94,186/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, against which both the assessee and the Revenue are in appeal. 10. The first issue which has arisen for adjudication is ground of appeal No.3 raised by the assessee i.e. non-recording of proper satisfaction by the Assessing Officer while completing assessment. The perusal of assessment order reflects though the Assessing Officer mentions that penalty proceedings needs to be initiated and eventually directs issuance of notice under section 274 r.w.s. 271(1)(c) of the Act, but no satisfaction has been recorded by the Assessing Officer as to which limb of said section is attracted justifying levy of penalty for concealment under section 271(1)(c) of the Act. The plea of the assessee before us is that in the absence of any proper satisfaction recorded by the Assessing Officer, the issue arising in the present appeal is squarely covered by the ratio laid down by the Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08, order dated 30.11.2016 and in Nandkishor Tulsidas Katore Vs. ACIT in ITA Nos.2174 to 2180/PN/2014, relating to assessment year 2002-03 to 2008-09, order dated 14.12.2016. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. 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 during the course of assessment proceedings. So, where the assessment proceedings are pending, then the Assessing Officer has to apply his mind and on being satisfied, he has to give a finding that the assessee before him has either concealed the particulars of income or furnished inaccurate particulars of income in respect of the issue before him. Thereafter, the notice 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 ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffended 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 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 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 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 of income under clause (c) to section 271(1) of the Act. It has been categorically held that concealment of income and furnishing of inaccurate particulars of income are different. The Hon ble High Court has thus, laid down that the Assessing Officer while issuing notice has to come to conclusion that whether it is case of concealment of income or case of furnishing of inaccurate particulars of income. The reliance in this regard was placed on the ratio laid down by the Hon ble Supreme Court in T. 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 Court would lead to inferen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlooked. Similar proposition has further been laid down in other decisions of various Benches 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 years where there was nonstriking of inaccurate portion, the Hon ble High Court held that the same would not invalidate the notice 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, different entities filed the return of income for the respective years and cumulatively for ₹ 13.99 crores as additional income. The income was declared on account of on-money on sale of plots, which was detected from the documents seized during the course of search. Admittedly, Explanation 5A to section 271(1)(c) of the Act is attracted in such cases. However, the case of assessee before us is that the Assessing Officer while completing the assessment proceedings had to be satisfied that the assessee 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proceedings for assessment year 1967-68 to be justified on account of vagueness and ambiguity in the notice issued. But the Hon ble High Court further held that where the assessee was fully aware of exact charge of the Department against him, then technical non-striking of certain terms in the notice would not 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. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12. Similar proposition has been laid down by the Pune Bench of Tribunal in Nandkishor Tulsidas Katore Vs. ACIT (supra). 13. In the facts of the present case as against the facts before Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT (supra), where ..... 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