TMI Blog2017 (12) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the Learned Commissioner of Income Tax (Appeals) 32, Mumbai dated 30.08.2012 for the Assessment Years 2005-06 2006-07 in sustaining the penalty levied u/s. 271(1)(c) of the Act. 2. The Ld. Counsel for the assessee at the outset submits that assessee has raised additional grounds of appeal questioning the validity of the penalty order passed u/s. 271(1)(c) of the Act as since the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued in a mechanical manner without specifying any charge for which the penalty was proposed to levy. He submits that since the additional ground raised by the assessee is a legal ground the same may be admitted and be adjudicated upon. 3. Ld.DR submits that as this ground was not raised before the lower authorities and it was raised only for the first time before the Tribunal the same may not be admitted. 4. On hearing both the parties and on perusal of the additional grounds raised by the assessee we find that the additional grounds were raised questioning the validity of the penalty order passed u/s. 271(1)(c) of the Act is bad in law and not sustainable for the reason that the notice was issued mechanically without specifying any charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty order only show that the Income Tax Officer is satisfied that the income of the assessee falls within the purview of section 271(1)(c) of the Act. The Assessing Officer did not even mention that the assessee either concealed his income or furnished inaccurate particulars of such income. The issue of whether the penalty levied u/s. 271(1)(c) of the Act is sustainable in law in the absence of specific charge in the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act has been considered in various decisions and the Coordinate Bench of Mumbai Tribunal recently in the case of M/s Orbit Enterprises v. ITO [60 ITR (Trib.)251] held as under: Section 271(1)(c) 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. Concealment of particulars of income and furnishing of inaccurate particulars of income referred to in Section 271(1)(c) denote two different connotations. Therefore, it is imperative for the Assessing Officer to make the assessee aware in the notice issued under section 274 read with section 271(1)(c) as to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-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 ..... Smt.M.Kiranmayee, learned counsel representing Sri J.V.Prasad, learned senior standing counsel for the revenue, would argue that the assessee never raised the issue as to ambiguity in the show-cause notice before any of the lower authorities and that this indicated she was fully aware as to what was the allegation leveled against her. Learned counsel would point out that in her reply to the show-cause notice, the assessee sought to explain the lapses on her part which evidenced her awareness as to the exact allegations made against her in the said show-cause notice. Learned counsel would therefore argue that raising the issue of lack of clarity in the showcause notice for the first time before the Tribunal was an afterthought and that the Tribunal ought not to have given the assessee the benefit of doubt in this regard. Per contra, Sri R.Raghunandan, learned senior counsel representing Sri T.Bala Mohan Reddy, learned counsel for the assessee, would rely upon the decisions of the Karnataka and Gujarat High Courts and assert that when penal proceedings are initiated under Section 271(1)(c) of the Act of 1961, an assessee must be made aware in no uncertain terms as to wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly construed, the Bench mandated that the notice issued should set out the grounds which the assessee has to meet specifically, otherwise the principles of natural justice would be offended as the show-cause notice would be vague. Dealing with concealment of particulars of income or furnishing of inaccurate particulars of income, the Bench observed that some cases may attract both the offences and in some, there may be overlapping of both, but in such cases initiation of the penalty proceedings must be specifically for both the offences. Drawing up penalty proceedings for one offence and finding the assessee guilty of another or finding him guilty for either, the one or the other, was held to be unsustainable in law. In COMMISSIONER OF INCOME TAX, GUJARAT-III V/s. MANU ENGINEERING WORKS, a Division Bench of the Gujarat High Court observed that the Assessing Officer must give a positive finding as to whether there is concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the event there was no such clear-cut finding, the penalty order was held liable to be struck down. Smt. Kiranmayee, learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F INCOME TAX-II, is of no assistance as the Supreme Court merely observed therein that the Assessing Officer is not required to record his satisfaction in a particular manner while imposing the penalty or reduce it to writing. That is not the controversy in the case on hand. On principle, when penalty proceedings are sought to be initiated by the revenue under Section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefor has to be spelt out in clear terms. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an or between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X
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