TMI Blog2017 (11) TMI 1153X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Decided against revenue. - ITA No.2803/M/2012, ITA No.2804/M/2012 And ITA No.2805/M/2012 - - - Dated:- 17-11-2017 - MR. D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Assessee : Shri Vijay Mehta, A.R. For The Revenue : Shri R.P. Meena, D.R. Shri Rajesh Kumar Yadav, D.R. ORDER Per D.T. GARASIA, Judicial Member: The above titled appeals have been preferred by the assessee against the order dated 13.02.2012 of the Commissioner of Income Tax (Appeals), [hereinafter referred to as the CIT(A)] relevant to assessment year 1997-98, 1999-2000 2004-05 which have been arisen out of the order passed by Assessing Officer (hereinafter referred to as the AO) under section 271(1)(c) of the Act. 2. In these appeals, solitar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The appellant prays that the penalty levied u/s 271(1)(c) of the Act be deleted. 5. Further, the assessee has also taken the additional ground which is reproduced as under: The penalty order is bad in law as the Ld. AO had not struck-off the irrelevant clause in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act and assessee was not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act was to be responded to. Along with this additional ground (supra), the assessee has also pleaded that the Bench consider admission of this ground for adjudication since it is a legal ground of jurisdiction which goes to the root of the proceedings, facts of which are already available on record. Reliance in this regard was placed on the decision of the Hon'ble Apex Court in the case of NTPC Ltd. vs. CIT (229 ITR 383 (SC). Learned D.R. for Revenue opposed admission of this additional ground. 6. We have heard the rival contentions on the issue of admission of the additional ground (supra). We find that since the issue raised therein is a legal one pertaining to the issue of jurisdiction which goes to the very root of the matter and all the relevant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpired suddenly on 15.06.2002. It was explained during the assessment proceedings that foreign trips were undertaken as the assessee company had incurred huge losses and they were exploring for arising finance so that they can continue their business. Mrs. Jayshree Patel and Mrs. Ketki Patel s visit was for business. In respect of interest payment the Ld. A.R. submitted that assessee company has accounted interest on TDS certificate and reconciliation chart has been submitted. In respect of cash credit it was explained that amount received from Shirpur Education Society which is a charitable trust under Bombay Public Trust Act and is assessed to tax and letter of confirmation was submitted. The accounts of the said society are audited and amount appeared as a loan to the assessee. In respect of interest on advance to Autoriders Finance it was explained that the transaction with the Autoriders Finance which was a group company was a business transaction and does not amount for charging of interest, therefore, no penalty can be levied. The Ld. A.R. also pointed out that in assessment year 1999-2000 the penalty was initiated under section 143(3) read with section 147 of the Act for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purpose of acquisition of land 2,20,85,000 Furnishing of inaccurate particulars of income Concealment of income Order u/s 143(3) of the Act, no particular limb has been struck off (copy enclosed) A.Y. 2004-05 Sr. No. Particulars Amount Penalty initiated in assessment order passed u/s 143(3) of the Act Penalty levied by Assessing Officer 1. Loss on dimunition in value of investments 3,69,09,480 Furnishing inaccurate particulars of income Concealment of income and furnishing inaccurate particulars of income 2. Other expenses 39,24,670 Furnishing inaccurate particulars of income Concealment of income and furnishing inaccurate particulars of income Note: In printed show cause notice issued u/s 271(1)(c) of the Act on 25.08.2006 along with assessment order u/s 143(3) of the Act, no partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .w.s. 271 of the Act dated 11.03.2015. According to the learned A.R., the AO has issued this notice without specifying the default committed by the assessee for which penalty proceedings under section 271(1)(c) of the Act are initiated (copy of notice dated 11.03.2015 is placed on record); i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. It is submitted that a perusal of the said notice would evidence total non-application of mind on the part of the AO, since he has neither deleted the inappropriate words/portions of the notice, whereby it is not clear whether penalty is sought to be levied under section 271(1)(c) of the Act; for concealment of particulars of income or furnishing of inaccurate particulars of income. It is contended that the said penalty proceedings seem to have been initiated and levied on all possible grounds. He submitted that various courts have held that non specification of the specific charge will vitiate the penalty proceedings, i.e. the assessee should be appraised of the specific reason/ charge for which penalty under section 271(1)(c) of the Act is to be levied. In this regard, the learned A.R. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer in para 4 has recorded that the penalty u/s 271(1)(c) of the Act was initiated for furnishing of inaccurate particulars of income. It was, therefore, contended that the assessment order itself shows due application of mind by the Assessing Officer for initiation of proceedings u/s 271(1)(c) of the Act and that the notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 cannot be solely examined to see whether the Assessing Officer has duly applied his mind to the initiation of proceedings u/s 271(1)(c) of the Act. The ld. CIT-DR has also referred to the observations of the CIT(A) in para 2.12 of his order wherein the tenability and the bona fide of the explanation rendered by the assessee have been rejected. It was, therefore, contended that the penalty has been rightly levied u/s 271(1)(c) of the Act in the present case. The learned D.R. submitted that the provisions of section 274 of the Act stipulate that the assessee should be afforded an opportunity of being heard before penalty is imposed. According to the learned D.R., in the case on hand, the assessee has been provided with an opportunity of being heard and had also participated in the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DIVALI (EAST), MUMBAI - 400 101. Whereas in the course of proceeding before me for the assessment year 2012-13 it appears to me that you: - have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2) 34 of the Indian Income-tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148 of the Income Tax Act, 1961, No 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 with in SEVEN DAYS from the made under section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of order is made under section 271(1)(c) . Seal Sd/- ( ALOK SINGH) Dy. Commissioner of Income Tax-13(1)(2) Mumbai 12. A careful perusal of the said notice would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f v. Joint CIT* was upset. In Union of India v. Dharamendra Textile Processors**, after quoting from section 271 extensively and also considering section 271(1)(c), the court came to the conclusion that since section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The court went on to hold that the objective behind the enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff v. Joint CIT was overruled by this court in Union of India v. Dharamendra Textile Processors2, was that according to this court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Shroff v. Joint CIT1. However, it must be pointed out that in Union of India v. Dharamendra Textile P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances being bad, has been approved. 16. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate 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 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 18. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of nonstriking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the 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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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