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TMI Blog2017 (12) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... under oath during search and that the assessee was not maintaining any record for such sum and therefore has clearly concealed the particulars of income." 3. The brief facts of the case are that a search and seizure operation was carried under section 132 of the Income Tax Act on 08.05.2007 at the residence and office premises of the Bindra-Rohira Group. The assessee was also covered in the search operation. The assessee is an individual and having income from business, rental and other sources. In response to the notice issued under section 153A, the assessee filed return of income declaring income of Rs. 11,44,380/- being income from business, rental income and income from other sources. The assessment was completed under section 143(3) r.w.s. 153A. The AO made an addition of Rs. 1,82,50,000/- assuming a daily income of Rs. 50,000/- )assessee's share being 50%) from Shri Ram Social Club, the other 50% share of equal amount being added as income in the hands of Mr. Laxmichand Rohira, also covered in the said search on Bindra-Rohira Group. The AO thus taxed this amount of Rs. 1,82,50,000/- under the head 'Income from Business' there by finally assessing the total income at Rs. 1,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of this order in which the Tribunal has observed as under: - In the case laws cited by the assessee in the case of Dr. Sarita Milind Davare v. ACIT (supra), the notice issued u/s 271(1)(c) of the Act was primarily meant to ask the tax-payer to furnish a return of income and merely AO modified the last paragraph by show causing the taxpayer to explain as to why an order imposing a penalty should not be made u/s 271(1)(c) of the Act . In the case of Chandra Prakash Bubna(supra) relied upon by the assessee , it was the case where penalty notice simply stated as under: "I am satisfied that this is a fit case where provisions of Section 271(1)(c) of the Income Tax Act are clearly attract". While in the instant appeal the AO has issued notice u/s. 274 read with Section 271(1)(c) of the Act dated 20-02-2014 wherein the AO recorded as under: "Whereas in the course of proceedings before me for the assessment year 2011-12, it appears that you have concealed the particulars of your income or furnished inaccurate particulars of such income." In the instant appeal, the AO has recorded satisfaction in detail in the assessment order dated 20-02-2014 before invoking penalty provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he I T Act, 1961 is initiated separately on this point." Merely because AO has mentioned alternate charges at the stage of issue of notice u/s 274 r.w.s. 271(1)(c) of the Act which is a preliminary stage of initiating penalty proceedings, the proceedings cannot be held to be vitiated, as in the instant case, the AO has clearly recorded detailed satisfaction after application of mind in the assessment order dated 20-02-2014 as in the instant appeal the assessee was confronted and cornered by the Revenue to have not disclosed the income earned by way of Director Sitting Fee of Rs. 4,00,000/- and short term capital gains on redemption of HDFC Mutual Funds to the tune of Rs. 12,23,642/- in the return of income filed by the assessee with the Revenue, to which the assessee admitted and immediately after being confronted by Revenue filed revised computation of income and paid due taxes to the Revenue. By no stretch of imagination it can be held that the assessee was not aware of the charge as framed by the AO in the assessment order dated 20-02-2014 framed u/s 143(3) of the Act with which he was burdened for initiating penalty proceedings u/s 271(1)(c) of the Act. We have also observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of some cases may attract both the offences and in some cases there is overlapping of two offences but in such cases the initiation of penalty proceedings also must be for both the offences. The learned D.R. also relied on the order of the "B" Bench of this Tribunal in the case of Chempure vs. ITO dated 7th May, 2010 in which this Tribunal, while interpreting Explanation 1 under para 13 observed as under: - "13. A conspectus of the explanation makes it clear that the statue visualised the assessment proceedings and penalty proceedings to be wholly distinct and independent of each other. In essence, the explanation is a rule of evidence. Presumptions which are rebuttable in nature are available to be drawn. The initial burden of discharging the onus of rebuttal is on the assessee. The rationale behind this view is that the basic facts are within the special knowledge of the assessee. Sec. 106 of the Indian Evidence Act, 1872, gives statutory recognition to this universally accepted rule of evidence. There is no discretion conferred on the AO as to whether he can invoke the explanation or not." On that basis it was contended that the CIT(A) was not correct in deleting the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income in pursuant to notice under Section 133A was filed by the assessee on 15.10.2008 disclosing following income: - A.Y. Income (Rs. ) 2002-03 2,40,638/- 2003-04 17,83,423/- 2004-05 9,25,135/- 2005-06 7,09,592/- 2006-07 8,65,115/- 2007-08 16,63,833/- 2008-09 77,91,704/- Against these incomes the AO computed the addition at Rs. 1,82,50,000/- assuming a daily income Rs. 50,000/- from Shri Ram Social Club, 50% share of which was added in the case of Mr. Laxmichand Rohira and balance in the hands of the assessee but in A.Y. 2008-09 the addition was made 50% of Rs. 19,43,050/- . When the matter went before the CIT(A), the CIT(A) has reduced the daily income from Rs. 50,000/- to Rs. 13,750/- in A.Y. 2002-03 and in the subsequent assessment year also and ultimately gave partial relief in each of the assessment year. When the matter travelled to the Tribunal, the Tribunal further deleted the additions: - A.Y. Addition deleted (Rs. ) 2002-03 26,93,350/- 2003-04 24,35,050/- 2004-05 21,48,050/- 2005-06 18,29,200/- 2006-07 14,75,000/- 2007-08 10,81,250/- 2008-09 1,94,300/- 10. Thus it is not denied that ultimately the addition sustained in the hands of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to be evaded Rs.15,37,173/- Minimum penalty leviable u/s. 271(1)(c) of the I T Act @ 100% of the tax sought to be evaded comes to Rs.5,37,173/- Maximum penalty leviable u/s. 271(1)(c) of the I T Act @ 300% of the tax sought to be evaded comes to Rs.46,11,519/- 9. Taking a balanced view on a well settled principle, I levy minimum penalty @100% which works out to Rs. 15,37,173/- u/s.271(1)(c) of the Income Tax Act, 1961." 12. Similarly penalty has been levied in each of the assessment years. When the matter went before the CIT(A), the CIT(A) deleted the penalty in each of the assessment years on the basis that the AO has not brought out any specific charge while levying penalty. 13. The learned D.R. before us vehemently contended by referring to various case laws which we will discuss why the order of the CIT(A) should be reversed. Firstly he relied on the order of the Hon'ble Allahabad High Court in the case of Sushil Kumar Sharad Kumar vs. CIT 232 ITR 588. In that case we noted that the penalty has been levied for concealment of particulars of income. The Hon'ble High Court confirmed the levy of penalty as there is evidence of higher expenditure incurred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ule of natural justice is not violated. Since both the defaults are different, therefore, the Legislature, in our opinion, has used the word between both the defaults 'or' instead of 'and'. We cannot take the view that the assessee has committed both the defaults together although the nature of consequence of both the defaults is one, i.e. concealment of income. The only common attribute between both the defaults is the particulars. 15. We have also gone through the decision of the "I" Bench of this Tribunal in the case of Shri Mahesh M. Gandhi vs. ACIT, ITA No. 2976/Mum/2016. We noted that in this decision the Tribunal has 'confirmed the penalty as notice has not been issued in standard printed format, rather the same has been specifically been drafted by the AO before sending notice to the assessee and therefore the Tribunal was of the view that before initiating the penalty the AO has applied his mind. The Tribunal was also aware that in the case where the AO has framed charge under one limb of section 271(1)(c) but levied penalty under the other limb of section 271(1)(c). This fact is clear from the findings of the Tribunal which are reproduced as under: - "We do not find an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Section 271(1B) is Direction, it is imperative that the assessment order contains a direction. Use of the phrases like (a) penalty proceedings are being initiated separately and (b) penalty proceedings under Section 271(l)(c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. The word 'direction' has been interpreted by the decision of the Apex Court in the case of Rajendranath 120 ITR pg.14, where it has been held that in any event whatever else it may amount to, on its very terms the observation that the ITO is free to take action, to assess the excess in the hand of the co-owners cannot be described as a direction. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the ITO whether or not take action, it cannot be described as a direction. 51. Therefore, it is settled law that in the absence of the existence of these conditions in the assessment order penalty proceedings could not be proceeded with. The proceedings which are initiated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty notice. 4 The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v/s. Manjunath Cotton and Ginning Factory 359 ITR 565 to delete the penalty: "The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P. Ltd., reported in 171 Taxmn 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of mind on the part of the AO while issuing penalty notice has not been disturbed. 18. We noted that Hon'ble "C" Bench in ITA Nos. 1597 & 1597/Mum/ 2014 in the case of M/s. Orbit Enterprises vs. Income Tax Officer 15(2)(2), Mumbai had a chance to decide whether penalty can be levied when penalty has not been initiated for a specific charge. The Coordinate Bench vide its order dated 01.09.2017 in this regard held as under: - 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 expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efers 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 Shri Dhanvinder Bindra 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. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 quasicriminal 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection or some mistake in the charge framed against the assessee" which does not prejudice the assessee. Secondly, non-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in nature, as noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the same are necessarily 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." 19. The said decision of the "C" Bench as well as the judgement of the Hon'ble Bombay Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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