TMI Blog2017 (2) TMI 1091X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice placed on record do indicate that it is a printed proforma, without striking-off the relevant columns and simply signed by the AO which was served on assessee. On similar facts, the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the practice of the department sending a printed form where all the grounds mentioned in 271 are mentioned would not satisfy the requirement of law when the consequence of assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 10% to 300% of tax liability. As the said provisions have to be held to be strictly construed, notice u/s. 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended, if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on assessee. - Decided in favour of assessee - I.T.A. No. 889/HYD/2016 - - - Dated:- 17-2-2017 - SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Shri K.A. Sai Prasad, AR For The Revenue : Smt Suman Malik, DR ORDER This is an appeal by ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance on estimate basis and there is no finding of concealment or furnishing of inaccurate particulars. The assessee did agree for the proposed disallowance to purchase peace and avoid any litigation in the circumstances of the case . 4.1. Assessee relied on the following case law: i. Dilip Kedia Vs. ACIT [40 taxman.com 102] (Hyderabad-Trib.); ii. CIT Vs. Manjunatha Cotton Ginning Factory [35 taxmann.com 250] (Karnataka High Court); iii. CIT Vs. Electrolux Kelvinator Ltd., [44 taxmann.com 369] (Delhi High Court); iv. CIT Vs. Vatika Constructions (P) Ltd., [45 taxmann.com 471] (Delhi High Court); 5. Ld.CIT(A) however, has not answered the first contention at all and rejected the other contentions as under: 5.7 In this case the assessee claimed huge expenditure and did not produce any evidence in support of the claim of expenditure. He did not offer any cogent and reliable explanation before the AO to the notice issued u/s. 271(1)(c) of the I.T Act. He merely stated that he was eager to complete the assessment and to have peace with the department he agreed for the addition. In this case, the assessee accepted the addition before the Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure cannot be sustained. AO has not made out a case of concealment or furnishing of inaccurate particulars in the order. The order of the AO is as under: Unverifiable expenditure: The assessee has not produced any books of accounts. It is stated that they are not available due to the virus in the computer. On account of the unverifiable expenditure, a total roundsum addition of ₹ 10,00,000/- is made to the income returned which is accepted by the assessee due to non availability of books of accounts. 7.1. Just because assessee has not produced the books of account and expenditure claim is unverifiable, it cannot be stated that assessee has concealed particulars of income or furnished inaccurate particulars. As seen from the order, AO has not disallowed any specific expenditure, but made a roundsum disallowance of ₹ 10 Lakhs. He did not even bother to name the nature of expenditure disallowed. In these circumstances, the mere disallowance of expenditure does not attract levy of penalty. 7.2. Assessee claimed before the AO that the notice does not specify the nature of offence calling for penalty. Assessee has raised an additional ground contesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visional Authority. (f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. (g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(1)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). (h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. (i) The imposition of penalty is not automatic. (j) Imposition of penalty even if the tax liability is admitted is not automatic. (k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings . Respectfully following the same, I quash the penalty levied u/s 271(1)(c) as bad in law . 7.4. Similarly in the case of Lalitkumar M Sakhala Vs. DCIT in ITA No. 938/Mum/2015 (AY. 2009-10) dt.10-08-2016, the Co-ordinate Bench of Mumbai (SMC) has held as under: 4. Before me, the ld. counsel for the assessee stated that he has filed the explanation before the AO and the CIT(A) and also argued that in this case the AO has levied penalty for concealment u/s 271 (1) (c) of the Act, but without any specific charge i.e. the penalty for concealment of income or furnishing of inaccurate particulars of income. According to Ld. Counsel the AO himself is not convinced about the charge. The ld. counsel for the assessee drew my attention to the pages 2-3 of the assessee's paper book, wherein penalty notice u/s. 271(1)( c) r.w.s 274 of the Act dated 17- 11-2011 was issued by the AO to the assessee. The ld. counsel for the assessee stated before me that this issue is covered in favour of the assessee by the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessee accepted addition or deletion and did not challenge the assessment order by way of appeal, it cannot be concluded that such addition or deletion amounts to concealment of income or furnishing of inaccurate particulars. When a plea is taken that in order to avoid litigation and purchase peace, the tax levied is paid with interest, if the assessee is able to demonstrate his bona fides and if the authority is satisfied about his bonafides, then the question of imposing penalty would not arise. Similarly, in cases where though the tax was not actually due but still the assessee pays tax with a hope of claiming deductions in the subsequent years, if the assessee is able to demonstrate there was no liability to pay tax at all, merely if assessee pays tax and he does not challenge order, that would not constitute concealment of income so as to enable the authorities to impose penalty. Similarly, in cases, where the legal position is not well settled, when few High Courts and Tribunals have taken a view in favour of the assessee and some High Courts and Tribunals have taken a view in favour of the Revenue and on legal advice if an assessee relies on the said legal position f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso 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 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 ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will equally apply to the facts of the case. 7.6. Recently Hon'ble High Court of Bombay in the case of CIT vs. Samson Perinchery (Bombay High Court) has held as under: S. 271(1)(c): Failure by the AO to specify in the s. 274 notice whether the penalty is being initiated for 'furnishing of inaccurate particulars of income' or for 'concealment of income' is fatal. It reflects nonapplication of mind and renders the levy of penalty invalid (Manjunatha Cotton 359 ITR 565 (Kar) followed) 7.7. Even otherwise on merits also there is no scope for levy of penalty as considered above. Hence, both on principles of law and also on the facts, there is no scope for levy of penalty u/s 271(1)(c) on assessee. Considering the above, I have no hesitation in cancelling the penalty, allowing the grounds raised by assessee. 8. Ld.CIT(A) has passed a big order running to 10 pages. What is interesting to note is the para 5.2 which is as under: 5.2 The submissions of the assessee have been considered. Before the Assessing Officer, the assessee submitted that the books of account could not be produced as the computer got infected with virus and data was lost and agr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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