TMI Blog2017 (5) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax, Central Circle – 3, Nashik [2016 (12) TMI 1238 - ITAT PUNE ] - Decided in favour of assessee - ITA No. 1756/PUN/2014 - - - Dated:- 3-5-2017 - Ms. Sushma Chowla, JM And Shri Rajesh Kumar, AM Appellant by : None Respondent by : Ms. Ann Kapthuama ORDER Per Sushma Chowla, JM The captioned appeal filed by the Assessee is against order of CIT(A)-I, Nashik, dated 25.08.2014 relating to assessment year 2005-06 against penalty levied passed under section 271(1)(c) of the Income-tax Act, 1961 (in short the Act ). 2. Despite service of notice none appeared on behalf of the assessee and we proceed to decide the present appeal after hearing the Ld. Departmental Representative for the Revenue. 3. Briefly in the facts of the case Search action under section 132 (1) of the Act was carried out on 28-08-2008 in the Bhutada group of cases at Latur. The residential premises and business premises of the assessee group were covered during the search action. During the course of search, certain documents were seized and statement of the assessee was recorded. The Assessing Officer issued notice under section 153A of the Act and in response thereto t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer held that the assessee s case fits into default under section 271(1)(c) of the Act. The Assessing Officer further held that It is amply clear that the assessee has filed inaccurate particulars of its income. In view of facts, I am satisfied that the assessee has concealed his income and has rendered himself liable for the penalty under section 271(1)(c) of the Act. The Assessing Officer thus held the assessee to have furnished inaccurate particulars of its income and the Assessing Officer was satisfied that the assessee has concealed his income and was liable for levy of penalty under section 271(1)(c) of the Act. 5. On the perusal of the record, the mandate of section 271(1)(c) of the Act is that where the assessee has concealed its income or furnished inaccurate particulars of income, then the assessee is liable for levy of penalty for concealment under section 271(1)(c) of the Act. The levy of penalty is on either of the two limbs of section 271(1)(c) of the Act. The Assessing Officer while completing the assessment in the present case was satisfied that the assessee has furnished inaccurate particulars of income and consequently was of the view that initiation of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty the amounts as specified in sub-clause (iii) which would be in addition to tax, if any, payable by the said person. The section thus requires the concerned Officer to record satisfaction in the course of any proceedings under the Act, that the person has concealed the particulars of his income or furnished inaccurate particulars of his income. After recording the satisfaction, during the course of penalty proceedings also, the concerned Officer has come to a finding that as to whether the person has concealed the particulars of his income or furnished inaccurate particulars of such income and thereafter, levy the penalty accordingly. The word used between the two acts i.e. concealment of particulars of income and furnishing of inaccurate particulars of such income is or . So the penalty levied by the concerned Officer is on satisfaction of any of the limbs and not the satisfaction of both the limbs. Where the assessee had concealed the particulars of income in particular circumstances, then the Assessing Officer may record satisfaction to that effect and initiate penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Explanation-1 or in Explanation-1(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 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 [2007] 292 ITR 11 (SC) 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 Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 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 Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings were held to be vitiated. 18. The Mumbai Bench of Tribunal in Sanghavi Savla Commodity Brokers P. Ltd. Vs. ACIT in ITA No.1746/Mum/2011, relating to assessment year 2007-08, order dated 22.12.2015 while deciding similar issue, wherein the Assessing Officer had initiated penalty proceedings for concealment of particulars of income without striking inappropriate words or any parts of notice and proceeded to levy penalty for concealment, then following the ratio laid down by the Hon ble Karnataka High Court, the Tribunal held that notice issued for initiating penalty proceedings were invalid and consequently penalty proceedings were invalid. 19. Similar proposition has been laid down by Kolkata Bench of Tribunal in Shri Deepak Kumar Patwari Vs. ACIT in ITA Nos.616 to 618/Kol/2013, relating to assessment years 2007-08 to 2009-10, order dated 03.02.2016 and it has been further held that the provisions of section 292B of the Act cannot cure the basic defect in assumption of jurisdiction and could only cure the mistake, defect or omission in the return of income, assessment, notice or the proceedings. The Tribunal further held that show cause notice and the reasons men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of word or between the group of cases but there was use of word deliberately also. The Hon ble High Court held that notice clearly demonstrated non-application of mind on the part of Assessing Officer. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity to the assessee since he did not know of exact charges he had to face. In this background, quashing of penalty proceedings for assessment year 1967-68 was held to be justified. Applying the said principle laid down by the Jurisdictional High Court, application of mind before issuing the notice under section 274 of the Act has to be considered. The Hon ble High Court clearly held that where there is vagueness and ambiguity in the notice issued which could demonstrate non-application of mind by the authority which in turn, would ultimately prejudice the right of opportunity of hearing of the assessee as contemplated under section 274 of the Act, then such notice is invalid. 22. Now, coming to the facts of the case before us, wherein search and seizure operations were carried out on Chhoriya group of concerns on 22.08.2008 and declaration of ₹ 11.44 crores was made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it in the plea of assessee that the satisfaction recorded in the present case to initiate penalty proceedings both for concealment of income and furnishing of particulars of income against additional income offered by the assessee is incorrect. Further, where the assessee is not aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. It is a clear-cut case of concealment since the assessee had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the satisfaction accordingly and issued the notice accordingly. 24. We find no merit on the partial reliance placed upon by the learned Departmental Representative for the Revenue on the decision of Jurisdictional High Court in CIT Vs. Smt. Kaushalya (supra). The Hon ble High Court has clearly laid down the proposition that the Assessing Officer has to make the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablish the case of Revenue against the assessee that it is liable for levy of penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty notice issued in the present case suffers from infirmities i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact charge against him, hence the same is quashed. The penalty proceedings completed pursuant to such notice are vitiated and the same are held to be invalid. 27. Now, coming to the merits of case, the assessee had offered additional income on account of on-money on sale of plots. The Assessing Officer had accepted the same and had initiated penalty proceedings under section 271(1)(c) of the Act. The CIT(A) during the course of appellate proceedings relating to section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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