TMI Blog2017 (10) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... his total income has been disclosed by him, then, in law, a discretion is vested with the authority not to impose penalty. In penalty proceedings, the assessee vide letter dated 21.04.2014 submitted that during the relevant period, the assessee was suffering from serious diseases of mental disturbance and wife of the assessee under such adverse circumstances without having any specific knowledge about the sale of relevant flat situated at Mumbai, filed his return of income on the basis of adhoc and incomplete information. The assessee in support of his contention submitted the affidavits of his wife and Sh. Rajesh Vijay who filed the relevant return of income. Subsequently, during the course of assessment proceedings, all relevant facts relating to the sale of flat and a revised computation of income determining long term capital gains along with details of taxes and interest deposited thereon was filed. The said explanation of the assessee along with the contents of the affidavits have not been found to be false or controverted by the Revenue authorities. Where the assessee was incapacitated to file his return of income due to his ill-health and incomplete return was filed whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration ₹ 1,50,00,000/- Less: Transfer expenses ₹ 37,500/- ₹ 1,49,62,500/- Less: Indexed cost F.Y. 2005-06 3180320 x 497- ₹ 45,49,713 Cost of improvement F.Y. 2005-06 2650000 x711/497- ₹ 37,91,046 Cost of improvement F.Y. 2009-10 1150000 x711/632- ₹ 12,93,750 ₹ 96,34,509 Long term Capital Gain ₹ 53,27,991 Further, penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 were initiated separately for furnishing inaccurate particulars of income by the assessee and concealing his income. 5. We now refer to the relevant findings of the Ld. CIT(A) which are under challenge before us. The same are reproduced as under:- 3.3 I have perused the facts of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion states, after receipt of notice u/s 143(2) the AR of the appellant examined the Bank Statement and other relevant records and it has come to his knowledge that a flat of Mumbai has been sold during the relevance previous year which has not been disclosed in the relevant return of income which means that but for the notice making a specific query regarding the immovable properties, this transaction would never have been disclosed to the department. It has been observed in the case of Deepak Construction Company vs. CIT 164 Taxmann.com 334 (Gujarat) After the notice dated 24.02.1986 was served upon the assessee, he came out of his slumber, started acting honest and submitted the revised return. It was not the case of the assessee either before the Assessing Officer or before the Tribunal that much before service of the showcause notice, honesty prevailed upon him and to the call of good conscience, he filed the revised return. The revised return in fact, was a reaction to the notice issued by the Assessing Officer on 24.02.1986. The assessee has further claimed that it has offered bonafide explanation. The fact of assessee being mentally disturbed has not been support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny vide notice dated 27.09.2012 and a query letter was issued on 03.09.2013 for furnishing of basis/general details. The assessee in response to first query letter dated 03.09.2013 filed the requisite details on 27.12.2013 and submitted that during the relevant period due to adverse business conditions the assessee was mentally disturbed and could not disclose the transaction of sale of immovable property in the return of income. The assessee on the same day along with other details filed revised computation of total income incorporating therein capital gain of ₹ 53,25,629/-. The AO after minor adjustments of ₹ 2,362/- accepted the capital gain of ₹ 53,27,991/- as disclosed by the assessee and made addition of the same to returned income. The AO simultaneously initiated penalty proceedings u/s 271(1)(c) of IT Act 1961, for furnishing inaccurate particulars of income and concealment of income and vide impugned order dated 27.08.2014 levied penalty of ₹ 10,97,566/-. 7. In penalty proceedings, it was submitted by the ld AR that the assessee vide letter dated 21.04.2014 submitted that during the relevant period, the assessee was suffering from serious disease ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of IT Act, 1961. 9. The assessee also relied on the following decisions:- Hon ble Delhi High Court in the case of CIT vs. Harnarain, I.T.A. No. 2072 of 2010. ACIT vs. Ashok Raj Nath (2013) 33 Taxmann.com 588 (Delhi- Trib.) Qudai International vs. ITO [2009] 13 MTC 622 (Luck Trib) Sharada Tukaram Bhor vs. ACIT (Mumbai tribunal ) (ITA No. 1871 and 1872 Mum/2014 dated 20.01.2017) 10. Regarding additional ground of appeal, it was submitted that the AO while issuing the notice u/s 274 r.w. section 271(1)(c) of IT Act 1961, has not specified whether the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. Therefore the notice u/s 274 r.w. section 271(1)(c) of IT Act 1961, issued for initiation of penalty proceedings is not valid. In support, reliance was placed on decision of Hon ble Karnataka High Court in case of Manjunatha Cotton (359 ITR 565), Hon ble Rajasthan High Court in case of Sheveta constructions Co. Pvt ltd (DB Appeal No. 534/2008 dated 6.12.2016), Hyderabad Bench of ITAT vide order dated 04.01.2017 in the case of Shri Nilaya A.R. Projects (ITA No. 1572/Hyd/2013) and in the case of Syed Taj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Karnataka High Court has held that the person who is accused of the offences as stated in Section 271(1)(c) 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(l)(c) do not exist as such he is not liable to pay penalty. The grounds for levy of penalty are thus linked to the adherence to the principles of natural justice and it was held that such principles of natural justice should not be offended. It was further held that the penalty u/s 271(l)(c) can be levied for two specific offences; one is concealing the particulars of income and second for furnishing of inaccurate particulars of income. The Assessing Officer cannot initiate penalty proceedings for one offence and then finally levy the penalty for another offence, because in such circumstance the assessee will not get proper opportunity to explain the charge levelled against him. The Hon ble High Court has also noticed that the facts of some cases may attract both the offences and in som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation of both the limbs of section 271(1)(c) of the Act. The initiation of penalty proceedings has happened by recording of satisfaction in the assessment order and the issuance of notice u/s 274 is thus in continuation of recording of such satisfaction and has thus to be read along with the assessment order and not disjoint of the assessment order. It is not a case where the penalty has been initiated for one limb and finally levied in respect of another limb. The AO has been consistent in his approach and his action doesn t reflect any nonapplication of mind. In light of above discussions, we therefore donot feel there is any infirmity in the initiation of penalty proceedings as contended by the ld AR. The additional ground of appeal is thus dismissed. 16. The next question that arises is once such an opportunity is given to the assessee, where the assessee fails to offer the explanation or offers explanation which is found to be false, then the penalty will follow as prescribed under Clause (iii) of clause (c) of sub-section (1) of Section 271. Where the assessee offers an explanation and substantiate the explanation, the question of imposing penalty would not arise. Even in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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