TMI Blog2017 (11) TMI 1415X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance of the write–off. The aforesaid facts clearly demonstrate that the assessee has furnished full particulars of write–off of 25 lakh. Therefore, it cannot be alleged that the assessee has furnished inaccurate particulars of income for which the Assessing Officer had ultimately imposed penalty under section 271(1)(c). Rather, it is a bonafide claim of deduction made by the assessee considering the fact that it was unable to recover the amount of ₹ 25 lakh - Decided in favour of assessee. - ITA no.5148/Mum./2015 - - - Dated:- 23-11-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Nitesh Joshi a/w Shri Hitesh Trivedi For The Revenue : Shri Rajat Mittal ORDER PER SAKTIJIT DEY, J.M. Aforesaid appeal by the assessee is against the order dated 3rd August 2015, passed by the learned Commissioner (Appeals) 2, Mumbai, partly confirming penalty imposed under section 271(1)(c) Income-tax Act, 1961 (for short the Act ) for the assessment year 2005 06. 2. Brief facts are, the assessee a company is engaged in the business of manufacture and marketing of chemicals. For the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer has not recorded any satisfaction with regard to the exact nature of offence committed by the assessee in terms of section 271(1)(c). He submitted, the Assessing Officer has not mentioned whether the assessee has furnished inaccurate particulars of income or has concealed particulars of income. He submitted, even in the show cause notice issued under section 274 which is in a standard printed format, the Assessing Officer has not indicated the specific charge for which he intends to impose penalty under section 271(1)(c) by striking off the inappropriate words. He submitted, while imposing penalty under section 271(1)(c) Assessing Officer has alleged furnishing of inaccurate particulars by the assessee and learned Commissioner (Appeals) has sustained imposition of penalty alleging furnishing of inaccurate particulars of income as well as concealing particulars of income. He submitted, while initiating penalty proceedings the Assessing Officer has not recorded his satisfaction as he was unsure whether the assessee has furnished inaccurate particulars of income or concealed particulars of income. He submitted, this has resulted in violation of rules of natural justice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, he relied upon the decision of the Hon'ble Jurisdictional High Court in CIT v/s Nalin P. Shah (HUF), ITA no.49/2013 dated 4th March 2013. He also relied upon the decision of the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd., [2010] 322 ITR 158 (SC). 8. Learned Departmental Representative relied upon the observations of the learned Commissioner (Appeals). 9. We have heard rival contentions and perused the material available on record. We have also applied our mind to the decisions relied upon. At the outset, we propose to deal with the legal issue concerning the validity of the penalty proceedings initiated under section 271(1)(c) of the Act due to non recording of satisfaction and failure to comply to the rules of natural justice while issuing the show cause notice. Undisputedly, out of the additions made by the Assessing Officer on the basis of which the Assessing Officer imposed penalty of ₹ 1.55 crore under section 271(1)(c), addition only to the extent of ₹ 25 lakh survived after the appeal proceedings. Thus, the major part of the addition was deleted. Be that as it may, in the present appeal, we are concerned with the penalty u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any concealment of income by the assessee. Thus, from the aforesaid facts, it is clear that the Department was unsure about the nature of offence committed by the assessee. 10. While dealing with the issue relating to directions of the Assessing Officer for initiation of penalty proceedings and recording of satisfaction the Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton and Ginning Factory, [2013] 359 ITR 565 (Kar.) has held as under: 50. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous. It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly. They have to be interpreted only for the said issue for which it has deemed and the manner in which the deeming has been contemplated to be restricted in the manner sought to be deemed. As the words used in the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurate particulars of such income and even in the absence of those express words or finding recorded in the assessment proceedings, if a direction as aforesaid is mentioned, it constitute satisfaction of the Assessing Officer. 12. The Hon ble Court after dealing with all the aspects ultimately concluded as under: 63. In the light of what is stated above, what emerges is as under: a) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) (B) it should be discernible from the said order which would by a legal ficti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. 13. In case of Dilip N. Shroff v/s JCIT, [2007] 291 ITR 519 (SC), the Hon'ble Supreme Court observed, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Even otherwise also, in our considered opinion, the assessee has a strong case on merits as well. As could be seen from the facts on record, out of the advance given of ₹ 30 lakh towards purchase of factory building, the assessee could recover the amount of ₹ 5 lakh only and the balance amount of ₹ 25 lakh could not be recovered in spite of best efforts. Therefore, in the return of income filed for the impugned assessment year, the assessee claimed deduction on account of write off of the amount of ₹ 25 lakh. From the Profit Loss account and its schedule, it is apparent that the assessee had furnished full particulars of the claim of write off. Even, in the computation of income filed along with the return of income the assessee has appended a note, wherein he has disclosed full particulars about the facts relating to write off of ₹ 25 lakh. The assessment order itself reveals that relying upon the note appended to the computation of income as well as Profit Loss account the Assessing Officer has made disallowance of the write off. The aforesaid facts clearly demonstrate that the assessee has furnished full particulars of write off of 25 lakh. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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