TMI Blog2017 (12) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 271(1)(c) of the Income Tax Act, 1961. 2. The assessee in the present case is an individual, who is engaged in the business of trading of Mobile accessories. The return of income for the year under consideration was filed by him on 12.10.2010 declaring total income of ₹ 7,10,630/-. In the assessment completed under section 143(3) vide an order dated 05.03.2013, the total income of the assessee was determined by the Assessing Officer at ₹ 37,76,659/- after making additions, inter alia, on account of undisclosed common income amounting to ₹ 1,73,270/-, loss on theft amounting to ₹ 26,758/-, loss on sale amounting to ₹ 1,47,152/-, disallowance of office rent amounting to ₹ 37,500/- and disallowance of deduction under section 80D amounting to ₹ 1,054/-. Penalty proceedings under section 271(1)(c) were also initiated by the Assessing Officer and since the explanation offered by the assessee in response to the show-cause notice issued during the course of the said proceedings, was not found acceptable by him, the Assessing Officer proceeded to impose penalty of ₹ 1,19,191/- under section 271(1)(c) being 100% of the tax sought to be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e without specifying the charge against the assessee cannot be sustained. 5. The ld. D.R., on the other hand, relied on the certain decisions of the Tribunal as well as the Hon ble High Courts in support of the Revenue s case on the issue under consideration and filed a written submission giving the gist of the said decisions as under:- 2. The judgement of the Hon 'ble Calcutta High Court in the case Dr. Syamal Baran Mondal Vs. CIT (2011) 244 CTR631 states that section 271 no where mandates that recording of satisfaction about concealment of assessee's income must be in specific terms and words, satisfaction of AO must reflect from the order either with expressed words recorded by the Assessing Officer himself or by his overt act and action. 3. The Ld. ITAT Mumbai in its order the case of Trishul Enterprises Vs. DCIT (ITA Nos.384 385/Mum/2014 for A.Yrs.2006-07 2007-08), Dt.10-02-20 17 dismissed the contention of the assessee regarding failure of the AO to strike off the relevant part of the notice u/s.274 for initiating proceedings u/s.271(I)(c). The ITAT relied upon the judgement of the Hon'ble Bombay High Court in the case of CIT Vs. Smt. Kaushalya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the reason for penalty was not mentioned. The taxpayer filed an appeal before the CIT(A) which ruled in favour of the revenue. The CIT(A) placed reliance on the decision of the KHC in the case of CIT vs Manjunatha Cotton and Ginning Factory (supra), the CIT(A) ruled in favour of the revenue. Aggrieved the taxpayer preferred an appeal before the ITAT. The ITAT after observing the facts of the case held that the tax officer had recorded satisfaction in the assessment order in relation to invoking penalty provisions. The tax officer had applied his mind while detailing the reasons for initiation of penalty proceedings in the assessment order. Accordingly, not mentioning the reasons in the penalty notice cannot invalidate the penalty proceedings. 7. Hon'ble Mumbai ITAT in the case of Dhanraj Mills (P) Ltd vs ACIT(OSD) Central Range-z, Mumbai on 21 March 2017 has stated As there is no declaration of law which may be governed by Article 141 of the Constitution of India in the case of CIT- Versus - SSA'S Emerald Meadows dismissed by Hon'ble Apex Court, vide SLP (CC No. 11485/2016) on 05/08/2016. The judgment of Hon'ble Jurisdictional High Court in CIT Vs Kaushaly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced for the purpose of ready reference: Have concealed the particulars of your income or furnished inaccurate particulars of such income. 6. The ld. Counsel for the assessee drew our attention to the decision of the Hon ble Karnataka High Court in the case of CIT vs. SSA s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. The ld. Counsel also brought to our notice the decision of the Hon ble Bombay High Court in the case of CIT vs Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the Principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The ITAT Mumbai Bench in the case of Dhanraj Mills Pvt.Ltd. (supra) followed the decision rendered by the Jurisdictional Hon ble Bombay High court in the case of Kaushalya (supra) and chose not to follow decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (supra). Reliance was also placed by the ITAT Mumbai in this decision on the decision of Hon ble Patna High court in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) wherein it was held that under section 274 of the Income-tax Act, 1961, all that is requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, 2009. Aggrieved by the said order, the revenue filed appeal before High Court. The Hon ble High Court framed the following qustion of law in the said appeal viz., 1. Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 2. Whether the proceedings initiated by the Assessing Authority was legal and valid? The Hon ble Karnataka High Court held in the negative and against the revenue on both the questions. Therefore the decision rendered by the ITAT Mumbai in the case of Earthmoving Equipment Service Corporation (supra) is of no assistance to the plea of the revenue before us. 11. In the case of M/S.Maharaj Garage Co. Vs. CIT dated 22.8.2017 referred to in the written note given by the learned DR, which is an unreported decision and a copy of the same was not furnished, the same proposition as was laid down by the Hon ble Bombay High Court in the case of Smt.Kaushalya (supra) appears to have been reiterated, as is evident from the extracts furnished in the written note furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee rendered by the Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning (supra) and other of the Hon ble Bombay High Court in the case of Smt.Kaushalya. It is settled legal position that where two views are available on an issue, the view favourable to the Assessee has to be followed. We therefore prefer to follow the view expressed by the Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning (supra). 15. We have already observed that the show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled . 7. As the issue involved in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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