TMI Blog2017 (4) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Dhirandra M. Shah Respondent by: Shri Rajat Mittal ORDER Per Jason P. Boaz, A.M. This appeal by the assessee is directed against the order of the CIT(A)- 32, Mumbai dated 25.02.2016 for A.Y. 2008-09. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, a firm having income from the business of trading in shares and securities filed its return of income for A.Y. 2008-09 on 03.09.2008 declaring loss of ₹ 44,86,620/- on account of trading loss as well as speculation loss (jobbing) in shares and securities. In the courses of assessment proceedings, the Assessing Officer (AO) noticed that the assessee was having profits in delivery based transactions against which it set off the loss of non-delivery based transactions, i.e. speculative transactions. On being queried in this regard, the assessee submitted that in scrips where no delivery has taken place during the year, the same are separately shown as speculation (jobbing). However, where even one share of a scrip is delivered, then all transactions in that scrip in the year are reported under trading in the Profit Loss account. This explanation/ position put forth by the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order dated 25.02.2016 dismissed the assessee s appeal and further enhanced the penalty to be levied under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income of ₹ 1,02,83,292/- as against income of ₹ 52,29,550/- adopted by the AO. 3. Aggrieved by the order of the CIT(A)-32, Mumbai dated 25.02.2016, the assessee has preferred this appeal raising the following grounds: - 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the penalty and enhancing the penalty to ₹ 31,77,536/-. The appellant prays that, the penalty levied be deleted. 2. The learned assessing officer erred in stating that, the appellant had concealed the income and furnished inaccurate particulars of income and CIT(A) erred in confirming the same, the appellant prays that, there is no concealment of income and submission of inaccurate particulars. 3. On the facts and in the circumstances of the case, the learned assessing officer erred in levying penalty without issuing correct and proper notice uls.274 and without recording any reasons for levy of penalty the penalty order being bad in law it be cancelled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he proposition that the said notice dated 27.12.2010 issued under section 274 r.w.s. 271 of the Act for initiating penalty proceedings under section 271(1)(c) of the Act was invalid and bad in law, as per the contentions raised above. The learned A.R. of the assessee placed reliance, inter alia, on the following judicial pronouncements: - (i) CIT vs. Samson Perinchery (ITA No. 1154 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) Dr. Sarita Milin Davare (ITA Nos. 2187 1789/Mum/2014 dated 21.12.2016 4.2 Per contra, the learned D.R. for Revenue supported the orders of the learned CIT(A)/AO. 4.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. The issue for consideration before us 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, penalty proceedings for levy of penalty under section 271(1)(c) of the Act can be initiated only if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come tax Act. 1922 or under Section 142(1)/143(2) of the Indian Income-tax Act,1961.No.__________dated _____________. You are hereby requested to appear before me at 11.30 A.M. on 10.01.2012 and show cause why an order imposing a penalty on you should not be made under Section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under Section 271(1)(c ). A careful perusal of the notice would show that the contents of the notice are primarily meant to ask the assessee to furnish a return of income. However, the assessing officer appears to have modified the last paragraph by show causing the assessee to explain as to why an order imposing a penalty should not be made u/s 271(1)(c) of the Act. There should not be any doubt that the provisions of section 271(1)(c) prescribes two types of charge viz., (a) concealment of particulars of income and (b) furnishing of inaccurate particulars of income. However, in the above said notice the AO did not specify the type of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nistrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking inaccurate portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter and non one aspect would be decisive. In this context, useful reference may be made to the following observation in the case of CIT Vs. Mithila Motors (P) Ltd (1984)(149 ITR 751)(Patna) (head note): Under section 274 of the Income tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings. The Hon ble Bombay High Court, thereafter, considered various decisions relied upon by the parties and came to the conclusion that there should be application of mind on the part of assessing officer. For the sake of convenience, we extract below the relevant observation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. It is worthwhile recalling that the said word was omitted by the Finance Act, 1964, with effect from April 1, 1964, and the Explanation was added. The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charges he had to face. In this background, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified. 12. A combined reading of the decision rendered by Hon ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and effect in conformity with or according to the intent and purpose of the Act, since the AO did not specify the charge for which penalty proceedings were initiated and further there was non-application of mind on the part of the AO. 14. In view of the foregoing discussions, we are of the view that assessee should succeed on this legal issue. Accordingly the penalty proceedings initiated by the AO without application of mind is liable to be set aside and we order accordingly. 4.3.3 This legal proposition 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. The same position has also been affirmed 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 Apex Court or Hon'ble High Courts referred to and followed by the Coordinate Bench in its order in Dr. Sarita Milind Devare (supra) has been brought to our notice or was cited or referred to. Therefore, taking into consideration the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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