TMI Blog2017 (4) TMI 445X X X X Extracts X X X X X X X X Extracts X X X X ..... ied by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961 (in short 'the Act'). 2. The facts of the case, briefly stated are as under: - 2.1 The assessee, Prop. M/s. C.C. Pharma, engaged in the business of distributing goods of M/s. Champion Photochemistry, filed its return of income for A.Y. 2009-10 on 31.07.2009 declaring income of ₹ 9,97,113/- from business, other sources and house property. The return was processed under section 143(1) of the Act and the case was then taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 20.12.2011 wherein the income of the assessee was determined at ₹ 34,14,200/-. Notice under section 274 r.w.s. 271 of the Act was issued simultaneously on 31.12.2011 for initiating penalty proceedings under section 271(1)(c) of the Act. The AO vide order dated 27.09.2013 levied penalty of ₹ 9,29,562/- on four additions/disallowances aggregating to ₹ 25,31,284/- which are listed hereunder: - (i) Income from House Property on Mehar-Dad Property ₹ 10,29,364/- (ii) Difference on Income from House Property of Hari Niwas property ₹ 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 27.09.2013 passed u/s 271(1)(c) is invalid and bad in law. 3.2.2 We have heard both parties on the issue of admission of the additional grounds sought to be raised by the assessee in this appeal (supra). According to the learned A.R. of the assessee, these grounds were inadvertently omitted to be taken earlier and being purely legal grounds, prayed that the same be admitted in view of the decision of the Hon'ble Apex Court in the case of NTPC Ltd. vs. CIT (229 ITR 383) (SC). After due consideration of the assessee s submissions and the facts of the case, we are of the view that the additional grounds raised are to be admitted being legal grounds that would go to the very root of the matter and accordingly admit the same for consideration and adjudication in this appeal following the ratio of the decision of the Hon'ble Apex Court in the case of NTPC Ltd. vs. CIT (supra). 4. Additional grounds of appeal 1 2 Validity of penalty proceedings initiated under section 271(1)(c) vide notice dated 30.12.2011 and consequent penalty order dated 27.09.2013 4.1.1 At the outset, the Bench heard both parties on the additional grounds raised. In these grounds, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Samson Perinchery (ITA No. 114 of 2014 and others dated 05.01.2017) of the Hon'ble Bombay High Court (ii) Manjunatha Cotton and Ginning Factory (359 ITR 565) (Hon'ble Karnataka High Court) (iii) Precision Containeurs Ltd. in ITA No.s. 3448 3449/Mum/2011 dated 04.01.2017 4.2 Per contra, the learned D.R. for Revenue supported the orders of the learned CIT(A). 4.3.1 We have heard the rival contentions on the issues raised in these additional grounds and perused and carefully considered the material on record; including the judicial pronouncements cited. The issue for consideration is to examine whether or not penalty under section 271(1)(c) of the Act is exigible in the facts and circumstances of the case, as laid out above. In our considered view, proceedings for levy of penalty under section 271(1)(c) of the Act can be initiated only if the AO is satisfied that any person has concealed particulars of income or has furnished inaccurate particulars of income ; only then can he hold that such person shall pay by way of penalty the sum mentioned in section 271(1)(c)(iii) of the Act. 4.3.2 We find that the Coordinate Bench of this Tribunal in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the same postulates that inappropriate words and paras were to be deleted, but the same had not been done. Thus, the AO himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [See Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 2 SCC 718]. We have, however, noticed hereinbefore that the ITO had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; On a perusal of the notices issued under section 274 r.w.s. 271 of the Act for initiation of penalty proceedings under section 271(1)(c) of the Act for both assessment years 1996-97 and 1997-98 in the case on hand, we find that in the standard proforma (ITNS-29) used by the AO for issuing the said notices, the AO himself is not certain as to whether he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff Vs. Joint CIT was upset. In Union of India Vs. Dharamendra Textile Processors, after quoting from section 271 extensively and also considering section 271(1)(c), the court came to the conclusion that since section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The court went on to hold that the objective behind the enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid and liable to be cancelled. In this view of the matter, the additional grounds 1 and 2 raised by the assessee for both assessment years 1996-97 and 1998-99 are allowed. 4.3.3 This legal position has been reiterated by the Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton Ginning Factory (2013) 359 ITR 565 (Kar) and which has not been interfered with by the Hon'ble Apex Court in the appeal preferred against it by Revenue. This proposition has been affirmed and upheld by the Hon'ble Bombay High Court in the case of CIT vs. Samson Perinchery (supra). Before us, no contrary judgement of the Hon'ble High Courts or of Hon'ble Apex Court, referred to and followed by the Coordinate Bench in its order in Precisions Containeurs Ltd. (supra) has been brought to our notice or cited or referred to. Therefore, taking into consideration the facts and circumstances of the case on hand and applying the ratio and deriving support from the decision of the Hon'ble Apex Court relied on by the Coordinate Bench in its order (supra), we hold that the notice dated 30.12.2011 issued for initiation of penalty proceedings under section 271(1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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