TMI Blog2017 (8) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... clubbed, heard together and a consolidated order is being passed for the sake of convenience and brevity. 2. In both these appeals the single common issue is with respect to imposition of penalty under section 271(1)(c) of the Act. First, we may take up the appeal for assessment year 2007-08, which is directed against order passed by the CIT(A)-37, Mumbai dated 03/12/2010, which in turn, arises out of order passed by the Assessing Officer under section 271(1)(c) r.w.s. 274 of the Income Tax Act, 1961 (in short the Act ) dated 30/06/2010. The Grounds of appeal raised by the assessee in this appeal read as under:- 1) On the facts and circumstances of the case, the learned CIT (Appeals) legally erred in confirming the order of the AO levying the penalty u/s.271(1)(c) of the Act of ₹ 28,57,054/-. 2) On the facts and circumstances of the case, the learned CIT (Appeals) erred in rejecting the claim of the appellant, that the order passed u/s 271(l)(c) is bad in law, void ab-initio inasmuch as the assessment order itself is bad in law, for the reason that it is passed pursuant to the search and seizure and there is no addition to the income qua search, hence the or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law as the notice issued under section 274 read with section 271 of the Act is not discernable as to whether the penalty proceedings is initiated for furnishing of inaccurate particulars of income or concealment of income under the facts and in the circumstances of the appellant's case and therefore, the impugned order passed deserves to be cancelled. 5. In support of the admission of the said Additional Ground, the Ld. Representative for the assessee pointed out that it raises a question of law and the relevant facts are already on record and, therefore, the same be admitted following the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. vs. CIT, 229 ITR 383(SC)and Hon'ble Bombay High Court in the case of Ahmedabad Electricity Co. Ltd.,199 ITR 351(Bom) It has also been asserted the point sought to be raised by the assessee is based on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. Shri Samson Perinchery in ITA Nos.1154,953, 1097 1226 of 2014 dated 05/01/2017 and, therefore, it was canvassed that in view of the later judgment of the Hon'ble Bombay High Court, the assessee was justified in rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 84,87,981/-. 7.2 In the background of the aforesaid facts, it was sought to be pointed out that firstly, there was no application of mind by the Assessing Officer at the time of issuance of notice under section 274 r.w.s.271 of the Act and that it was not clear that under which limb of section 271(1)(c) of the Act the penalty has been initiated against the assessee. It has been emphasized by referring on the judgment of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory Ors., 359 ITR 565 (Kar) that the Assessing Officer has to be clear as to the limb on which the penalty is sought to be levied and in case the position is unclear, the penalty is unsustainable. In this context, the Ld.Representative for the assessee placed reliance on the decision of the Tribunal in the case of Shri Samson Perinchery, in ITA No. 4625 to 4630/Mum/2013 dated 11/10/2013, which has since been upheld by the Hon'ble Bombay High Court vide its order in ITA Nos. 1154,953, 1097 1226 of 2014 dated 5/01/2017. Apart therefrom, reliance has also been placed on the recent decision of the Mumbai Tribunal in the case of Meherjee Cassinath Holdings Private Limited v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rike off either of the two limbs. Thus, the notice contain both the situations i.e. concealment of income as well as furnishing of inaccurate particulars of income ; and, ostensibly the connotation of the two limbs are quite different, as noted by our Co-ordinate Bench in the case of Meherjee Cassinath Holdings Private Limited (supra). Therefore, factually, it is clear that assessee was not made clear as to which of the two limbs of section 271(1)(c) of the Act he was supposed to meet with, consequent to the notice issued under section 274 r.w.s. 271 of the Act dated 30/12/2009 (supra). Before going on to the applicable legal position on the said facts, it would also be appropriate to note the manner in which the penalty has been ultimately imposed by the Assessing Officer in his order dated 30/06/2010 (supra). In the penalty order, the Assessing Officer holds as under:- that the assessee has concealed/furnishing of inaccurate particulars of income to the extent of ₹ 84,87,981/- and thus committed default under section. 271(1)(c) of the I T Act, 1961. The aforesaid inference of the Assessing Officer clearly reflects confusion in his mind as to under which of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. It is also a well accepted proposition that concealment of the particulars of income and furnishing of inaccurate particulars of income referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T.Ashok Pai, 292 ITR 11 (SC). Therefore, if the two expressions, namely concealment of the particulars of income and furnishing of inaccurate particulars of income have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee, which is based on the manner in which the notice u/s 274 r.w.s. 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt of the ld. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by the Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya (supra) and observed as under:- .... 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 charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified. In the instant case also, we are of the view that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the assessee. 12. The aforesaid discussion clearly brings out as to the reasons why the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) is to prevail. Following the decision of o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d so. Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with. 7.7 In view of the aforesaid precedent, in our view, the notice issued by the Assessing Officer under section 274 r.w.s. 271 of the Act dated 30/12/2009 is untenable since it reflects non-application of the mind by the Assessing Officer, having regard to the ratio of the Hon ble Supreme Court in the case of Dilip N. Shroff (supra) as well as Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this preliminary point itself the penalty imposed under section 271(1)(c) of the Act is liable to be deleted. We hold so. 8. In view of our aforesaid decision, the issues raised by the assessee on merits of the penalty become academic and are not being adjudicated for the present. As a consequence, we set-aside the order of the CIT(A) and direct the Assessing Officer to delete the penalty of ₹ 28,57,054/- imposed u/s 271(1)(c) of the Act for assessment year 2007-08. 9. In so far as the appeal for assessment year 2008-09 is concerned, it was a common point between the parties that the facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X
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