TMI Blog2018 (2) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... enue : Shri. Rahul Raman ORDER PER: SANDEEP GOSAIN, JUDICIAL MEMBER. This appeal filed by the revenue is directed against the order of the Ld. CIT(A)-16, Mumbai, dated 27. 03. 2015 for AY 2010-11 on the grounds mentioned herein below:- i) Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the penalty levied by AO by placing reliance on the case of CIT vis. Aleo Manali Hydro Power P. Ltd 38 Taxmann. Com 288 since in the judgement relied upon by CIT(A), the addition was made under normal provisions of the Act and penalty levied on the same which did not have a tax effect as the company was paying tax under MAT whereas in the present case, the addition has been made on the book profits of the assessee company which has made the assessee liable to pay tax under MAT thereby raising a tax demand of ₹ 12,05,73,210/- on which the assessee did not prefer any appeal and paid due taxes and penalty was levied on the addition made which actually resulted in evasion of taxes. ii) Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the penalty levied by the AO thereby ignorin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f book profit under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB of the Act. Accordingly, the book profit was recomputed denying the claim made by the assessee under the above provisions. It the time of passing the assessment order, proceedings u/s. 271(1)(C) of the I. T. Act, 1961, were also initiating on the assessee claims of reduction of ₹ 80,53,63,722/- from its book profit under clause (vii) below Explanation (1) to sub-section (2) Section 115JB of the Act. After serving notices and seeking reply, penalty of ₹ 13,68,71,560/- was levied by the AO holding that the assessee has furnished inaccurate particulars of income thereby, suppressing its real income vide order dated 31. 07. 2013. 3. Aggrieved by the order of levy of penalty passed by the DCIT, the assessee preferred an appeal before Ld. CIT(A). The CIT(A) after considering the case of both the parties had allowed the appeal filed by the assessee and deleted the penalty u/s. 271(1)(C) of the Act. 4. Aggrieved by the order of Ld. CIT(A), revenue has preferred the present appeal before us on the grounds mentioned here in above. 5. At the very outset our attention was drawn towar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the penalty of levied on the addition made which actually resulted in evasion of taxes. It was also argued by Ld. D. R that Ld. CIT(A), had ignored the fact that the assessee company adopted a dubious method of avoidance of taxation of its book profit by making a patiently in eligible and inaccurate claim under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB of the Act. It was further submitted by Ld. D. R that the return of income was e-filed on 14. 10. 2010, declaring total income at Rs. Nil, after claiming of set off of brought forward business losses to the extent of business income available of ₹ 80,64,65,096/-, and claiming carry forward of net short term capital loss to the tune of ₹ 48,83,884/-. The Ld. DR, relied upon the orders passed by A. O while dealing with the claim of reduction of ₹ 80,53,63,722/- from book profit under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB(2) of the Act. Our attention was drawn by Ld. D. R, towards the order of A. O dated 31. 07. 2013, passed by the u/s. 143(3) of the I. T. Act, 1961. 10. On the other hand, the Ld. A. R appearing on behalf of the assessee relied upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought forward business losses to the extent of business income available of ₹ 80,64,65,098/ - and claiming carry forward of net short term capital loss to the tune of ₹ 48,83,884/ -. In its return of income, the assessee had declared book profit u/ s. 115JB of the Act at Rs Nil. In the course of scrutiny proceedings, it was noted that the assessee had declared Book Profit at Rs. NIL after claiming reduction of ₹ 80,53,63,722/ - under clause (vii) below Explanation [I] to Section 115JB(2) of the Income Tax Act, 1961. AO has made addition/ disallowance under section 115 JB and there was no any additions/ disallowance to the normal income. The AO has imposed penalty u/s 271(1)(c) as the appellant company has filed inaccurate particulars of its income. But the case of the appellant company is covered by the order of the Allahabad High Court in the case of CIT vs. Aleo Manali Hydro Power (P) Ltd. (2013) 38 Taxmann. com 288 wherein the enalt u s 2711 c has been deleted while dealing with identical facts. The relevant part of the order in the case is reproduced here as under:- 8. The Delhi High Court held that in respect of company in question on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of SICA, as it had earned profits and consequently its accumulated losses did not exceed its net worth at the end of the year was brought out in the Director's report as placed at page 2 of the Paper Book and Notes to accounts forming part of the Annual Accounts as placed at page 23 of the Paper Book. The Balance Sheet placed at page 12 of the Paper Book also disclosed this position. It's claim under the said clause was reflected in the Computation of income placed at page 34 of the Paper Book, in the Audit Report in Form No. 29B under section 115JB of the Act at page 37 of the Paper Book and in the 1 Income-tax Return Form in ITR-6 at page 63 of the Paper Book. The aforesaid documents were again filed by the Assessee with the AO in the course of assessment proceedings vide its letter dated 31. 01. 2011. 17. Furthermore the said fact finds a reference in the Director's Report as placed at page 1 of the Paper Book, in the Profit and Loss Account along with the Schedule of other income as placed at pages 13 and 18 of the Paper Book and in the Notes to accounts at page 24 of the Paper Book. This fact was also brought to the notice of the AO in the course of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dd here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c) of the Act. A mere making of the claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form a part of the total income under the Act. It was further pointed out that the dividends from the shares did not from the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deduction knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; ft) an item of receipt may be su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of inaccurate particulars of income by the assessee. 21. It is an undisputed position that, in the previous year relevant to assessment year 2009-10, the assessee had become a sick industrial company as per section 3(l)(o) of SICA, because its accumulated loss stood at ₹ 98,17,61,467 which exceeded its net worth being ₹ 81,19,13,400 (as on 31. 03. 2009. We found that the assessee had filed an application before the BIFR on 30. 03. 2010 which was mandatory in accordance with section 15(1) of the Act. In the course of hearing before the Tribunal, the Revenue has urged that reference to the BIFR is not as per section 15(1) of the Act as it was not made within 60 days from the date of finalisation of the Audited Accounts for the financial year 2008-09. As per our considered view, this is not the reason given by the BIFR for dismissing its reference. Furthermore, if any default is committed under SICA, it is not open to the Income-tax department to penalise the assessee for the same. 22. Further, clause (vii) of Explanation-1 below section 115JB(2) of the Act becomes applicable from the assessment year commencing on and from the assessment year relevant to the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this respect, our attention was drawn towards notice issued under section 274 r. w. s. 271 of the Act dated 31. 01. 13 for initiating of the penalty proceedings under section 271(1)(c) of the Act for A. Y. 2010-11. A perusal of the notice issued under section 274 r. w. s. 271 of the Act dated 31. 01. 13 (copy placed at paper book-96) reveals that the AO has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee, i. e. whether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. In this regard, we find that the Hon'ble High Court of Karnataka in its order in the case of M/s Manjunatah Cotton Ginning Factory in ITA No. 2546 of 2005 dated 13. 12. 2012, relied on by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The relevant portion of their Lordships judgement at paras 59 to 62 thereof are extracted hereunder for reference: - 59. As the provision stands, the penalty procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re can be no doubt that penalty u/s. 271(1)(c) of the Act is levied for concealing particulars of income or for furnishing inaccurate particulars of such Income, which are the two limbs of this provision. In other words, it is only when the authority invested with the requisite power is satisfied that either of the two events existed in a particular case that proceedings u/s. 271(1)(c) of the Act are initiated. This pre-requisite should invariably be evident from the notice issued u/s. 274 r. w. s. 271 of the Act, which is the jurisdictional notice, for visiting an assessee with the penal provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out as to whether the notice u/s. 274 r. w. S. 271 of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. There are a catena of judgments highlighting the necessity for identifying the charge for whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act should specifically state the grounds mentioned in section 271(1)(c) i. e. whether it is for concealment of income or for furnishing of incorrect particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. 28. Thereafter, in so far as the manner in which the statutory notice was required to be issued, the Hon'ble Court concluded thus: (p) Notice u/s 274 of the Act should be specifically state the grounds mentioned in section 271(1)(c), i. e. whether it is for concealment of income or for furnishing of incorrect particulars of income. 29. Finally, in concurring with the findings recorded in the order of the Tribunal, it was held thus: 66. In view of the aforesaid law, we are of the view that the Tribunal was justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law and accordingly justified in interfering with the order passed by the appellate authority as well as the assessing authority and in setting aside the same. Hence, we answer the substantial questions of law framed in this case in favour of the assessee and ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, though proceedings u/s. 271(1)(c) of the Act were initiated for furnishing of inaccurate particulars of income, in the notice issued u/s. 274 r. w. s. 271 of the Act in the standard form, the charge for which it was issued was also not identified, as in the present case. In deleting the levy, so far as non-specification of the default in the jurisdictional notice, the following findings were recorded by the Hon'ble Bombay High Court: 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 Karnataka High Court in the case of Menjuneth Cotton and Ginning Factory (supra). 8. In view of the above, the question as framed do not give rise to any substantial question of law Thus, not entertained 34. The Hon'ble Supreme Court in Dilip N. Shroff v/s JCIT, [2007] 291 ITR 519 (SC), has observed that while issuing the notice under section 274 r/w section 271, in the standard format, the Assessing Officer should delete the inapp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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