TMI Blog2017 (12) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 2002-03 to 2007-08. Both the parties agreed that these appeals be disposed off on the facts for A.Y. 2002-03 2. In all the assessment years the Revenue has taken the following common grounds of appeal: - 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty without appreciating that the penalty proceedings where correctly intiated as per section 271(l)(c) of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty without appreciating the fact the receipt of money outside the recorded the book was admitted in the statement 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty on technical ground and in this regard he relied on the decision of the Hon'ble Allahabad High Court in the case of Sushil Kumar Sharad Kumar vs. CIT 232 ITR 588 for the proposition of law that the assessee having shown low household expenses whereas there is evidence of higher expenditure. This proves that initial burden to prove concealment has been discharged by the Department as the assessee has not laid any fresh evidence in penalty proceedings. Reliance was also placed on the decision of the I Bench of this Tribunal in the case of Shri Mahesh M. Gandhi vs. ACIT, ITA No. 2976/Mum/2016 in which the Tribunal has confirmed the order of the CIT(A) levying penalty. Our attention was drawn to para 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 Bub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee did not pointed out voluntarily after receipt of statutory notice u/s 143(2) which was issued after one year of filing of return of income. Even after that when the case was under hearing, the assessee did not offer the income of ₹ 12,23,642/- being redemption of HDFC Mutual Fund unless he was specifically asked to explain the same. It is, therefore evident from the conduct of the assessee that he was trying to evade the income to the extent of ₹ 12,23,642/- . Considering these facts, income of ₹ 12,23,642/- is assessed under the head income from capital gain. In view of the above facts, I am satisfied that the assessee has concealed his income by furnishing inaccurate particulars of income to the extent of ₹ 12,23,642/- and thus penalty proceedings u/s 271(1)(c) if the 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s concealed income by furnishing inaccurate particulars of income. Thus, the assessee has committed default u/s. 271(1)(c) of the I.T. Act and the case of the assessee is a fit case for levy of penalty. Under these circumstances and as per detailed reasoning as set out above by us , we do not find any infirmity in the order of the A.O. as was confirmed by learned CIT(A), we confirm/uphold the appellate order of learned CIT(A) by confirming/sustaining the penalty of ₹ 3,13,000/- u/s 271(1)(c) of the Act. 6. The learned D.R. has also referred to pages 11 13 as well as page 19 of the said order and on that basis he submitted that no doubt clause (c) of Section 271(1)(c) deals with two specific offences, i.e. concealment of particulars of income and furnishing of inaccurate particulars of income. The facts 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 Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 11 13. Referring to page 11 it was contended that from the so called show cause notice it was apparent that the show cause notice was specifically issued by the AO. Even from page 13 of the order it is apparent that the AO has mentioned that he has satisfied that the assessee has concealed income by furnishing inaccurate particulars of income. The learned Counsel for the assessee stated that the issue is squarely covered in favour of assessee and against Revenue by the decision of Hon ble Bombay High Court in the case of CIT v. Samson Perinchery [2017] 392 ITR 4 (Bom.). 9. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. The facts involved in all these appeals are undisputed. In all these cases this is a fact that in each of the assessment years, the return of 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/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22(4) / 23(2) of the Indian Income-tax Act, 1922 or under Section 142(1) / 143(2) of the Income-Tax Act, 1961. No .................. dated ................................... * have Concealed the particulars of your income or ......... Furnished inaccurate particulars of such income. You are hereby requested to appear before me within 7 days from receipt of this notice and Show cause why an order imposing a penalty on you should not be made under Section 271 of the Income - tax Act, 1961 . If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under Section 271(1)(C). Sd/- (PRASOON KABRA) ACIT CC 24 26 11. After considering the reply of the assessee the AO levied penalty under Section 271(1)(c) of the Act by observing as under: - 8. In view of the fact and circumstances mention here-in-above, it is being concluded that assessee has knowingly furnished inaccurate particulars and concealed its income within the meaning of Sec.271(1)(c) of the I.T. Act to the tune of ₹ 50,18,750/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two circumstances; one the AO finds that the assessee has concealed particulars of income or the other circumstance is that the AO finds that the assessee has furnished inaccurate particulars of such income. The word under Section 271(1)(c) between concealed the particulars of his income and furnished inaccurate particulars of such income is or not and . This denotes if the assessee has committed any of these two defaults penalty under Section 271(1)(c) has to be imposed by the AO. Both these defaults, as the provision of 271(1)(c) denotes, are different from each other although the consequence of both the defaults may be that the assessee has concealed income. However, we noted that there is Explanation 1 given under Section 271(1)(c) which is applicable in the case of concealment of particulars of income. If the contentions stipulated under Explanation 1 are satisfied it is deemed that particulars of income have been concealed by the assessee. Explanation 1, no doubt, is rebuttable and the assessee can always adduce the evidence or put the explanation to come out of the applicability of Explanation 1. In view of this deeming provision the onus is on the assessee to prove that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng penalty proceedings u/s 271(1)(c) of the Act. 16. In that case, we noted, the Tribunal also found that the AO before initiating penalty proceedings during the course of assessment recorded his satisfaction in detail and that was not the case where no satisfaction has been recorded with reference to the charge to be levied on the assessee. Even we noted that the Tribunal in that decision did not appreciate the notice issued by the AO even though it was specifically been drafted by the AO. The AO has not brought out any specific charge but confirmed the penalty levied on the assessee. We noted that in that case the Tribunal mainly referred to the decision of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory 359 ITR 565. In that decision, we noted, the Hon'ble High Court under para 50 has clearly mentioned 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 proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection for initiation of penalty proceedings. Not only this, we noted, in the decision the Hon'ble Member has not appreciated the findings given by the Hon'ble Bombay High Court in the case of CIT vs. Samson Perinchery (supra) . In that case the question before the Hon'ble High Court was Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the penalty levied under section 271(1)(c) of the Income Tax Act, 1961? While deciding this issue the Hon'ble High Court observed as under: - 3 The impugned order of the Tribunal deleted the penalty imposed upon the Respondent Assessee. This by holding that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he face of the decision of the Supreme Court in Ashok Pai v/s. CIT 292 ITR 11 [relied upon in Manjunath Cotton Ginning Factory (supra)] wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice. 7 Therefore, the issue herein stands concluded in favour of the Respondent Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppropriately. It is in this manner one has to appreciate the point being canvassed by the assessee before us, which is based on the tone and tenor of the 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. Notably, the relevant discussion made by the Mumbai Bench of the Tribunal in the case of Meherjee Cassinath Holdings Pvt. Ltd. (supra) is as under :- 8. .............. It is also a well accepted proposition that concealment of the particulars of income and furnishing of inaccurate particulars of income referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T.Ashok Pai, 292 ITR 11 (SC). Therefore, if the two expressions, namely concealment of the particulars of income and furnishing of inaccurate particulars of income have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt of the ld. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of nonapplication of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the observations of the Assessing Officer in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon ble Bombay High Court has discussed about nonapplication of mind in the case of Kaushalya (supra) and observed as under:- .... The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified. In the instant case also, we are of the view that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the assessee. 12. The aforesaid di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted. We hold so. Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 22.12.2008 is untenable and suffers from the infirmity of nonapplication of mind by the Assessing Officer. On this count itself, in our view, the penalty imposed u/s 271(1)(c) of the Act deserves to be deleted. 13. At this point, we may also make a reference to the judgment of the Hon'ble Patna High Court relied by the ld. CIT-DR before us. The issue before the Hon'ble Patna High Court was relating to levy of penalty for shortfall in the payment of advance tax paid as compared with the tax finally assessed as payable, but in the notice issued u/s 274 r.w.s. 273(b) of the Act it was incorrectly mentioned that assessee had failed to file its estimate of advance tax. The Hon'ble Patna Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the irrelevant clause in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act cannot be said to be a mere wrong labelling of the section or some mistake of the nature that was before the Hon'ble Patna High Court in the case of Mithila Motors (P.) Limited (supra). Therefore, the judgment of the Hon'ble Patna High Court does not help the case of the Revenue before us. 14. The other plea of the ld. CIT-DR before us was that there was no ambiguity inasmuch as the Assessing Officer had made aware the assessee about the charge being made against him, namely concealment of income, by referring to the assessment order and also the reply of the assessee filed at the time of penalty proceedings. In our considered opinion, if one were to examine the entire conspectus of fact-situation starting from the assessment order upto the passing of penalty order, the error in the argument set-up by the ld. CIT-DR would be clear. In the assessment order dated 22.12.2008, the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are initiated for concealment of income while in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f vs. JCIT 291 ITR 519 and T. Ashok Pai 292 ITR 11 has also appreciated that these two expressions convey two different connotations. When the Hon'ble Supreme Court has categorically stated in these decisions that both the connotations has different meanings. Perhaps the I Bench in the case of Mahesh M. Gandhi vs. ACIT while confirming the penalty, on which the learned D.R. has vehemently relied, has not appreciated these decisions of the Hon'ble Supreme Court. Even we noted that in the case of Manjunatha Cotton and Ginning Factory (supra) the Hon'ble Karnataka High Court has also refereed to both these decisions of the Hon'ble Supreme Court under para 61 as well as the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Manu Engineers (supra) and that of the Hon'ble Delhi High Court in the case of vs. Virgo Marketing Pvt. Ltd. 171 Taxman 156 has clearly held that levy of penalty has to be clear as to the limb for which it is levied and if the position is unclear the penalty cannot be sustained. In view of the decisions of various High Courts and of the Hon'ble Supreme Court in our view the decision of the I Bench in the case of Mahesh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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