TMI Blog2017 (3) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty under section 271(1)(c) vide notice 274 of the Act is not inconformity with the requirement of the law. Thus, the Penalty order can not be sustained in the eyes of the law. Same deserves to be quashed. We find merit into the contention of the ld. Counsel for the assessee that out of two additions one addition of ₹ 61,09,482/- was wrongly made and the assessee has furnished all material facts before the Assessing Officer under these facts the assessing officer ought not to have levied the penalty. We find force into the contention of Ld. Counsel for the assessee that in the penalty proceeding the AO should consider the facts in right perspective. He should come to a specific finding with regard to concealment of income. In the considered view, the explanation as given by the assessee ought to have been considered by the AO, The AO should not to have passed penalty order in a mechanical way merely on the assumption that the assessee has accepted the charge of concealment of income. - Decided in favour of assessee - ITA No. 1033/JP/2016 - - - Dated:- 20-2-2017 - Shri Bhagchand, AM And Shri Kul Bharat, JM Assessee by : Vijay Goyal (CA) Revenue by: Shri R.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission as made are reproduced as under:- Submission of the assessee. 1. Initiation of penalty in Assessment Order:- The ld. AO initiated the penalty proceeding u/s 271(1)(c) of Income Tax Act in the assessment order dated 25.03.2015 (PB pg 10). The ld AO initiated penalty by mentioning that:- As the assessee has concealed/furnished the inaccurate particulars of income therefore, penalty u/s 271(1)(c) is also initiated . Notice u/s 274 Further in the penalty notice u/s 274 read with section 271 of I.Tax Act dated 25.03.2015 (copy at PB pg 16), AO mentioned that:- 271(1)(c) Concealed particulars of income or furnished inaccurate particulars of income Penalty order:- The penalty order was passed on 30/09/15 by holding that the assessee has concealed income. The relevant findings of ld AO (PB pg 23) is as under:- Therefore, I impose a penalty of equal to 100% o tax sought to be evaded on account of the above facts of the assessee of ₹ 34,05,436/- i.e. 100% tax evaded. Therefore, penalty u/s 271(1)(c) is imposed on the concealed income as per working given below. CIT(A) on penalty In Para (ix) at page 13 of CIT(A) s order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. Therefore, in notice U/s 274 is to be marked appropriate on the basis of levy of penalty. The standard proforma without striking of the relevant item will lead to an inference as non-application of mind. 3. Hon ble ITAT Jaipur Bench, Jaipur in its judgment in ITA 878/JP/2013 dated 11.03.2016 in the case of Shankar Lal Khandelwal Vs DCIT held that when assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed the particulars of income and furnished inaccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting either limb of penalty even he has not put and in the notice itself between two limbs than the initiation of penalty proceedings cannot be considered as per law and Assessing Officer did not have any jurisdiction to impose penalty U/s 271(1)(c) of the Act. The findings of Hon ble jurisdictional ITAT is as under:- 6. We have heard the rival content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overall sense gathered from the order is that a further prognosis is called for. It would be sufficient compliance with the law that there is a prima facie evidence for concealment of particulars of income or furnishing inaccurate particulars of income. Even after this section, the Assessing Officer has to satisfy the particular limb of initiation of penalty imposable U/s 271(1)(c) of the Act at the time of assessment proceedings. The Hon ble Karnataka High Court in the case of CIT vs. M/s Manjunatha Cotton Ginning Factory Ors.(2013) 359 ITR 565 (Karn) held that sending printed form where all the grounds mentioned in section 271 would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be imposed to the assessee. The Hon ble Punjab Haryana High Court in the case of Tej Bhan Cotton Ginning Pressing Factory Vs. CIT, Rohtak (supra) has held that the Assessing Officer in assessment order has satisfied himself regarding initiation of penalty proceedings, which was tantamount to satisfaction have recorded to the fact on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declaring total income of ₹ 5,85,090/- which included additional income surrender of ₹ 4,53,819/-. The assessment was made by the AO u/s 153A/143(3) of I.T. Act on total income of ₹ 6,18,980/- which included the addition of ₹ 33,892/- made by the AO on account of disallowance made from various expenses. In penalty proceedings, the AO imposed the penalty of ₹ 1,36,145/- being 100% of tax payable on additional income of ₹ 4,53,819/- declared by the assessee. The ld. CIT(A) has confirmed the action of the AO. It is noted from the record that the AO had initiated penalty proceedings for concealment of income or for furnishing inaccurate particulars of income. In the notice also, the AO has not specified for which specific reason the penalty proceedings has been initiated whether it is for concealment of income or for furnishing inaccurate particulars of income. Ultimately, the AO levied the penalty for concealment of income. The Hon'ble Karnataka High Court in the case of CIT Anr vs. Manjunatha Cotton Ginning Factory, 359 ITR 565 held as under:- though penalty proceedings are in the nature of civil liability, in fact, it is penal in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was carried out after 01/6/2007 and the assessee has furnished return for A.Y. 2007-08 before search and additional income has been disclosed U/s 153A. Therefore, deeming provisions are applicable. It is undisputed fact that the assessee has disclosed additional income in return filed U/s 153A on the basis of incriminating document found during the course of search. We have considered view that Explanation 5A is not required to be mentioned by the Assessing Officer specifically at the time of initiation or even in the show cause notice issued by the Assessing Officer, but basic defect we found that the ld Assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed the particulars of income and furnished inaccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting either limb of penalty even he has not put and in the notice itself between two limbs. The amended provisions of Subsection (1B) of Section 271 has been considered by the Hon'ble Delhi High Court in the case of Madh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee would be taken as held in the case of CIT Vs Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and a recent decision in the case of CIT Vs. Vatika Township P Ltd. (2014) 367 ITR 466 (SC).Therefore, we are of the considered view that initiation of penalty proceedings is not as per law and Assessing Officer did not have any jurisdiction to impose penalty U/s 271(1)(c) of the Act. As the matter has been decided on technical issue, we are not expressing any view on merit of the case. Accordingly, we delete the penalty confirmed by the ld CIT(A). 7. In the result, the appeal of the assessee is allowed. 5. Hon ble Kolkata ITAT in the case of Vaibhav Tulsyan Versus I.T.O Ward 29 (4) , Kolkata I.T.A Nos. 736 737/Kol/2013 Dated: 27May 2016 [2016 (11) TMI 1030] has cancelled the penalty on the same ground by holding that:- 10. Heard the rival submissions and perused the material available on record. The question before us is as to whether the penalty order passed by the AO and confirmed by the CIT(A) falls for our consideration in pursuance of the Judgment of the Hon ble Karnataka High Court supra. That on perusal of the said show cause notice dated 30- 12-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound 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, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation1 or in Explanation1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in 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 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld.DR on the said provision is clearly misplaced. Therefore, preliminary issue as raised by the assessee by way of additional ground for both the assessment years 2006-07 200708 are allowed, in view of the same the other grounds raised requires no adjudication, therefore, all are dismissed. 12. In the result, the appeals of assessee are allowed. Therefore, the concealment of income and furnishing inaccurate particulars of income, two are different defaults and they cannot be intermixed. Further, the CIT(A) has not confirmed the concealment of income but he took a different view by holding that the assessee has furnished inaccurate particulars of income. Therefore, the order of lower authorities deserves to be set aside and penalty levied by AO deserves to be cancelled. 3.1. On the contrary, Ld. Departmental representative opposed the submission and submitted that there is no infirmity into the order of the authorities below. Further, he submitted small procedural mistakes can not be the basis to hold the impugned order as bad in law. 3.2. We have heard the rival contention, perused the material available on record and gone through the orders of the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 359 ITR 565(Kar.) has held that the notice u/s 274 of the Act should specifically state as to whether penalty is being proposed for concealment of particulars of income or inaccurate particulars of income. In the present case notice under section 274 dated 25/3/2015 enclosed at paper book page 16 reads as under: Penalty Notice Under Section 274, Read with Section 271 of the IT Act. 1961 Whereas in the course of proceedings before me for the Assessment Year 2012-13. It appears to me that you have:- Read With Section 271(1)(c) concealed particulars of income or furnished inaccurate particulars of income. Therefore, there is no specific charge by the Assessing Officer. Further, it is noted that the Assessing Officer in penalty order (as noted hereinabove) has proceeded on the basis of the assumption that the assessee is satisfied with the assessment order. Therefore, it appears that the assessee has nothing to say and has no objection regarding the imposing of the penalty under section 271(1)(c) of the Act. In our considered view, the assessing officer was not justified in imposing the penalty on this basis, the action of the assessing officer is contrary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities it has resulted in payment of such tax or such tax liability came to be admit ted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation 1(B) to section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the assessing authority. (p) Notice under section 274 of the Act should specifically state the grounds mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that there must be an independent finding to this effect as held by the Hon ble Calcutta High Court, in the case of Durga Kamal Rice Mills Vs CIT (2004) 265 ITR 25(Cal.). 4.1. He submitted that in the assessment order the assessing officer made two additions one of ₹ 61,09,482/- applying the provisions of section 45(4) of the Income Tax Act, the other is of ₹ 49,11,349/- on account of short-term capital gain on land acquired by the NHAI these additions made represent to assessed income but not concealed income or income for which inaccurate particular were submitted. 4.2. He submitted that in respect of addition of ₹ 61,09,482/-, the assessee transfer its part of agriculture land (0.2300 hectares) to one of its partners shri Sitaram on redemption as part of capital redemption while sale deed dated 5/11/2011 for ₹ 1,81,95,000/- the cost of the land against the sale was ₹ 2,04,19,388/- the stamped authority adopted value for the purpose of stamp duty of ₹ 1,98,42,556/-. However, the assessing officer ignored the actual sale consideration at ₹ 1,81,95,000/- as well as the deemed consideration under Section 50C of the Act of ₹ ..... 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