TMI Blog2017 (11) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Assessment Year 2005-06, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 29.03.2012 under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ) is taken as the lead case. 3. In both the appeals, the common issue arises from the penalty imposed by the Assessing Officer u/s 271(1)(c) of the Act. 4. Insofar as Assessment Year 2005-06 is concerned, the relevant facts can be summarised as follows. In an assessment finalised u/s 143(3) r.w.s. 147 of the Act dated 22.12.2008, the Assessing Officer made an addition of ₹ 68,20,000/- representing unaccounted amounts received by the assessee for sale of flats to one M/s. Unimark Remedies Ltd. The relevant discussion in the assessment order shows that the addition was based on documents and information found in the course of a search action u/s 132(1) of the Act in the premises of M/s. Unimark Remedies Ltd. Be that as it may, subsequently the Assessing Officer passed an order u/s 271(1)(c) of the Act dated 29.03.2012 holding the assessee guilty u/s 271(1)(c) of the Act whereby he levied a penalty of ₹ 23,87,000/- being 100% of the amount of tax sought to be evaded on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or adjudication inasmuch as the same involve points of law and does not require any further or fresh investigation of facts. It is also clear that the issues raised in the additional Grounds of appeal go to the root of the jurisdiction of the Assessing Officer to impose penalty u/s 271(1)(c) of the Act and, therefore, the same are relevant to determine the liability of the assessee for penalty u/s 271(1)(c) of the Act. Accordingly, the additional Grounds were admitted for adjudication and accordingly, the rival counsels were also heard on merits. 9. In the context of Additional Ground of Appeal no. II, a pertinent point that is sought to be raised by the assessee is to the effect that the penalty notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 22.12.2008, a copy of which has been placed on record, shows non-application of mind by the Assessing Officer inasmuch as the same has been issued in a standard proforma and the irrelevant portion of the notice has not been struck off. It has been canvassed that similar point has been dealt with in the following judgments :- i) Meherjee Cassinath Holdings Pvt. Ltd., ITA No. 2555/Mum/2012 dated 28.04.2017; ii) Jehangir HC J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned representative has specifically pointed out the judgments of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory Ors., 359 ITR 565 (Karn.) and M/s. SSA s Emerald Meadows (supra) wherein even the SLP filed before the Hon'ble Supreme Court has also been dismissed. 12. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act postulates that penalty prescribed therein can be levied on existence of any of the two situations, namely for concealment of particulars of income or for furnishing inaccurate particulars of such income. It has been judicially well understood by now that concealment of particulars of income and furnishing of inaccurate particulars of income referred to in Sec. 271(1)(c) of the Act denote two different connotations. As a ready reference for the aforesaid proposition, we may look upon the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff, 161 Taxman 218 (SC) and also T. Ashok Pai, 292 ITR 11 (SC) to appreciate that the aforesaid two expressions convey different connotations. Having understood that the two expressions have different connotations, the Mumbai B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, 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 prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... validate the imposition of penalty u/s 271(1)(c) of the Act. We have carefully considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (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 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings u/s 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struck-off. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant 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 princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-striking off of the irrelevant clause in the notice u/s 274 r.w.s. 271(1)(c) of the Act has been completely differently understood by the various High Courts, including that by the Hon'ble Jurisdictional High Court of Bombay. In the case of Shri Samson Perinchery (supra), the Hon ble Bombay High Court noted that the order imposing penalty u/s 271(1)(c) of the Act has to be made only on the ground on which the penalty proceedings have been initiated. In the case of Shri Samson Perinchery (supra), the Revenue had put up an argument to the effect that there is no difference between furnishing of inaccurate particulars of income and concealment of income. The aforesaid argument has been specifically rejected by the Hon'ble High Court by referring to the judgment of the Hon'ble Supreme Court in the case of T. Ashok Pai, 292 ITR 11 (SC). It was further noted that the judgment in the case of T. Ashok Pai (supra) has been relied upon by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory Ors., 359 ITR 565 (Karn.). The Hon'ble High Court approved the proposition that once the two limbs contained in the notice u/s 274 r.w.s. 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arily required to be in compliance with the principles of natural justice. In this view of the matter, in our view, the ld. CIT-DR is not correct in contending that non-striking off of the irrelevant clause in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act is not material, and that the assessee had understood that the proceedings were initiated for concealment of income based on the observations in the assessment order itself. Before parting, we may also refer to a recent judgment of the Hon'ble Karnataka High Court in the case of S. Chandrashekar, 396 ITR 538 (Karn.) wherein a notice issued u/s 274 r.w.s. 271(1)(c) of the Act in printed form without specifying the grounds of initiation of penalty proceedings was held to be invalid and untenable in law. As per the Hon'ble High Court, in the absence of any specific ground in the notice so issued, there is a breach of principles of natural justice and accordingly, the order imposing penalty cannot be sustained. 15. Before parting, we may also deal with the argument set-up by the ld. CIT-DR based on the provision of Sec. 292BB of the Act. Notably, Sec. 292BB of the Act has been inserted w.e.f. 01.04.2008 and is under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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