TMI Blog2017 (7) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act . 2. Brief facts of the case are that the assessee filed return of income for relevant AY on 31.10.2007 declaring total income of ₹ 1,42.170/-. The assessee has shown to have earned Income from Business Profession and from Income from Other Sources . The assessee claimed Long Term Capital Gain (LTCG) of ₹ 44,68,390/- and claimed exemption u/s 54 of the Act. The assessment was completed on 17.11.2009 u/s 143(3) of the Act accepting the return of income. Subsequently, a search u/s 132 of the Act was conducted on 31.05.2008 in the premises of Shri Vinod Faria and Milan Dalal. On the basis of incriminating material found in the search, the assessment was reopened on 24.11.2010. No revised return was filed in response to the notice u/s 148 of the Act. The assessment was completed u/s 143(3) r.w.s. 147 of the Act on 28.12.2011. In the re-opening assessment the Assessing Officer (AO) disallowed the exemption claimed u/s 54F of the Act. Thus, the Capital Gain of ₹ 44,68,390/- was brought to tax. No further appeal was filed by assessee against the quantum assessment. The AO thereafter initiated the penalty proceeding u/s 271(1)(c) of the Act. The notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted within three years. The ld AR prayed that the assessee prayed that no penalty lie against the assessee as the claim of the assessee was not found to be false. It was further argued that the similar penalty order was passed against one of the co-owner Smt. Veena Milan Dalal on disallowance of claim u/s 54. The said co-owner also invested the LTCG in the same building which was under construction. The AO levied the penalty on similar facts against Smt. Veena Milan Dalal. On appeal before the ld. CIT(A), the penalty was completed by ld. CIT(A)- 40 vide order dated 07.11.2014. However, the similar order was sustained against the assessee. In the alternative argument the ld. AR of the assessee argued that while issuing notice u/s 274 r.ws. 271(1)(c) of the Act. The AO not specified the specific charge whether the penalty is initiated for concealment of income or filing inaccurate particulars. The ld. AR of the assessee argued that non-striking of relevant clause shows a non-application of mind by AO. The ld. AR of the assessee further relied upon the decision of Hon ble Bombay High Court in CIT v/s Hiralal Doshi (383 ITR 19(Bom.), CIT v/s Bennett Coleman Co. Ltd. [2013] 33 tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use. Thus, the notice refers to both the limbs of section 271(1)(c) of the Act for concealment of particular of income as well as furnishing inaccurate particulars of income, the non-striking of the irrelevant limb of the said notice does not convey to the assessee as to which of the two charges, it has to respond. The ld. AR of the assessee had demonstrated that non-striking of relevant clause shows a non-application of mind by AO. 5. We have further seen that in assessee s group case, a similar penalty was levied in case of Smt. Veena Milan Dalal (PAN: ACBPD4089R). However, the same was deleted by ld. CIT(A) vide order dated 07.11.2014 vide Appeal CIT(A)- 40/DCIT(OSD-II)/390/2013-14 (As per Paper Book page No. 18 to 31). 6. The ld. AR of the assessee besides the other decision relied upon the decision of co-ordinate bench in case of Meherjee Cassinath holdings Pvt. Ltd. v/s ACIT (supra) wherein the co-ordinate bench after considering the various decision and considering the similar argument as argued by ld. DR for the Revenue passed the following order: 8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- 83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer 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. 84. 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. v. CIT [2000] 2 SCC 718] 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under :- 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 was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s 271(1)(c), which has to be met by him. As noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. 14. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non- application of mind having regard to the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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