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P.K. Joshua Versus Income Tax Officer-26 (2) (3) Mumbai

Penalty u/s 271(1)(c) - non specification of charge - defective notice - Held that:- The perusal of the assessment order reveals that the AO has only stated that the penalty proceedings under section 271(1)(c) of the Act are initiated separately without specifying or mentioning any specific charge under which the assessee is being proposed to be penalized i.e. whether the assessee has concealed a particulars of income or furnished inaccurate particulars of income. We also find from the show caus .....

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to delete the penalty levied u/s 271(1)(c) of the Act. - Decided in favour of assessee. - ITA Nos. 4487 to 4491/Mum/2014 - Dated:- 7-6-2017 - Shri Mahavir Singh, JM And Shri Rajesh Kumar, AM Assessee by : Shri Rajesh Shah Revenue by : Shri Rajat Mittal ORDER Per Bench These are five appeals filed by the assessee against the common order dated 26.5.2014 passed by the ld.CIT(A)-28, Mumbai for the assessment years 2001-2002 to 2005-06 arising out of penalty order passed u/s 271(1)(c) of the Income .....

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nst order of the Commissioner of Income Tax (Appeals)- 28, Mumbai, this appeal petition is being filed to consider the following grounds of appeal, which are independent and without prejudice to each other: 1. On the facts and circumstances of the case and in law, learned CIT(A) erred in confirming the penalty on addition of ₹ 5,66,608/-(Rs.7,35,728/-RS.1,69,1201-) levied under section 271 (1 )(c) of the act. 2. On the facts and circumstances of the case and in law, the Commissioner of Inc .....

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currency and the confirmations in respect of major donors have been filed. The CIT(A) ought to have accepted the submission made and should not have levied the penalty on the same. 3. At the time of hearing, the assessee filed an additional ground of appeal wherein the grievance of the assessee is that the order passed by the AO u/s 271(1)(c) of the Act and its further confirmation by the ld.CIT(A) was bad in law as the AO has not stated in the notice issued u/s 271(1)(c) r.w.s 274 of the Act a .....

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nor in the assessment order as to the whether the penalty was for concealment of income or furnishing of inaccurate particulars of income. Therefore the penalty imposed was void ab-initio 4. After hearing both the sides on the admission of additional ground, we find that the issues raised by means of additional ground are arising or emanating from the assessment records before the authorities below and purely of legal in nature and therefore we are inclined to admit the same for adjudication. T .....

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filed return of income on 30.2.2006 declaring total income of ₹ 89,400/-. Notice under section 148 was issued after recording the reasons for reopening the assessment on 11.7.2006 after the AO received information from DIT(Inv) Unit-I, Mumbai that the assessee was not assessed to tax as he was not filing the return of income. On further inquiry it was found that he owned two residential properties in Navi Mumbai and the source of investments were out of foreign gifts. The gifts were recei .....

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urces and assessed the total income under section 144 read with section 143(3) of the Act at ₹ 8,25,130/- vide order dated 28.12.2007 and the penalty proceedings were also initiated in the said order without recording any satisfaction and simply stating that the penalty was being initiated. The quantum appeal by the assessee was also dismissed by the ld CIT(A) vide order dated 26.5.2014 as made by the AO vide order dated 28.12.2007. Thereafter the AO issued show cause notice dated 28.12.20 .....

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d before us that the AO, while passing the assessment order did not record any satisfaction and initiated penalty proceedings under section 271(1)(c) of the Act by simply stating in the assessment order that the penalty proceedings were being initiated separately without recording any satisfaction. The ld.AR while taking us through the notice issued under section 274 R.W.S.271(1)(c) dated 28.12.2007 drew our attention to the standard language/proforma for issuing notice without specifying the ch .....

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t is mandatory for the AO to record satisfaction with specific charge under which the penalty proceedings is being initiated and failing which, it would be construed that the notice was issued by the AO is without application of mind which is bad in law and so is the consequential order passed u/s 271(1)(c) of the Act which is bad in law. In support of his contention, the ld. AR relied upon the number of decision as under : i) CIT vs. Manjunath Cotton & Ginning Factory (359 ITR 565) (Kar HC) .....

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(295 ITR 244) (SC) ix) CIT V/s Reliance Petrophoducts (P) Ltd (322 ITR 159) (SC) Finally, the ld.AR prayed before the Bench that in view of the defective notice which was incurable in view of the ratio laid down by the various decisions of the Hon ble High Courts and the decisions of the Tribunal, the penalty proceedings initiated by the AO was void abinitio and therefore the appeal of the assessee should be allowed on legal issue by quashing the penalty proceedings and consequential order. 7. .....

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stake in the notice would not invalidate the penalty proceedings. The ld.DR specifically contended that the AO has applied his mind while initiating penalty proceedings as various additions have been made after discussing the same in length with reasoning for making such additions and also clearly mentioned in the assessment order penalty proceedings will be initiated separately u/s 271(1)(c) of the Act. Under these circumstances, the arguments of the ld.AR that the limb of the penalty notice un .....

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nce statutory notices have been prescribed in the Income Tax Act. The ld. DR submitted that for issuing notice under section 274 read with section 271(1)(c) the reasons were recorded in the assessment order and the assessee was fully aware of the details and charges levelled by the AO against him and therefore, it would be wrong and contrary to the facts on record to allege that the AO did not apply his mind while issuing show cause notice u/s 274 r.w.s.271(1)(c). The ld. DR also argued that iss .....

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passed after considering the decision of jurisdictional High Court in the case of Smt. Kaushalya And others(supra) the Karnataka High Court in the case of Manjunath Cotton & Ginning Factory(supra). The ld.DR finally prayed that in view of the ratio laid down in the afore said decisions, the order of the AO levying the penalty and confirmation by the ld.FAA passed under section 274 r.w.s271(1)(c) should be upheld by dismissing the appeal of the assessee. 8. We have carefully considered the ri .....

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articulars of income. We also find from the show cause notice dated 28.12.2007 issued under section 271(1) (c) r.w.s.274 of the Act extracted hereinbelow, the AO did not mention or struck off the one of the two limbs under which the penalty was being proposed to be imposed. The show notice issued u.s 271(1)© of the Act is extracted below for the sake of ready reference and convenience:- NOTICE U/S 274 R.W.S.271 OFTHE INCOME TAX ACT, 1961. Office of the Income Tax, 28(2)(3), Mumbai Date: 28. .....

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e without reasonable cause failed to furnish it within the time allowed and the manner required to by the said section 139(1) or by such notice. *have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income Tax Act, 1922 or under section 142(1 )/143(2) of the Income Tax Act, 1961. *have concealed the particulars of your Income- or -furnished inaccurate particulars of such income. You are hereby requested to appear before me at A.M./P.M. on *****20__ .....

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enalty after rejecting the contentions and submissions as raised by the assessee at the rate of 100% of the tax sought to be evaded on 7,35,728/- which is ₹ 2,45,472/- without pointing out the specific limb under which the penalty was levied as is apparent from the highlighted portion of notice issued u/s 274 r.w.s. 271 of the Act. In the appellate proceeding challenging the penalty , the FAA partly allowed the appeal of the assessee. Now, the assessee is in appeal before us. Now first we .....

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ssessment and also while issuing the notice initiating penalty proceedings u/s 274 r.w.s 271(1)(c) of the Act which would go to the root of the order and is not curable. In the case of Manjunath Cotton & Ginning Factory(supra), the Hon ble Karnataka High Court has held as under : Notice under section 274 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. Sending printed form .....

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e Karnatka High Court has also decided the identical issue in favour of the assessee by holding that no substantial question of law arose for determination in this appeal which was filed against the order of the tribunal wherein the tribunal allowed the appeal of the assessee by quashing the penalty proceedings and consequent order where the AO did not specify the under which limb the penalty had been initiated by following and relying on the decision in the case of CIT Vs Manjunatha Cotton and .....

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n Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an A .....

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