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2018 (2) TMI 503

d under the provisions of the Act. The mistake committed by the assessee was admitted during assessment proceedings and therefore the income of the assessee was enhanced by the amount of depreciation claimed on the land. It is also a fact that the assessee is also a private limited company and assisted by the tax consultants. Therefore such silly mistake cannot be expected by such organized company. Inadvertent mistakes committed by the assessee do not warrant the imposition of liability under section 271(1)(c) of the - Notice issued by the AO u/s 274 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 does not strike out the inappropriate words. Imposition of penalty cannot be sustained. The plea 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. - Decided against revenue - ITA No.1197/Kol/2015 - Dated:- 2-2-2018 - Shri N.V.Vasudevan, Judicial Member And Shri .....

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ded by assessee u/s. 271(1)(c) of the Act. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that it had claimed depreciation on the land inadvertently and same mistake was rectified by the auditor in writing by filing a letter before AO on 05. 08. 2013. The AO has not recorded any dissatisfaction for holding that assessee has furnished inaccurate particulars of income and necessary details for the purchase of land was duly furnished in the audited financial statement. Therefore, there was no misstatement furnished by assessee. Ld. CIT(A) after considering the submission of assessee deleted the penalty imposed by AO by observing as under:- 6. I have carefully considered the written submission of the AR of the appellant. I have also gone through the various judicial decisions relied upon by the AR. on an overall analysis of the matter and also the AR s submissions on the imposition of penalty u/s. 271(1)(c) by the AO, I find that the appellant had conceded suo motto during the course of the assessment proceeding that an inadvertent mistake had occurred on the pt of the Auditor in claiming the impugned depreciation which was sought .....

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e issue that there was lack of opportunity granted to the assessee. 2. 2 The judgement of the Hon'ble Calcutta High Court in the case Dr. Syamal Baran Mondal Vs. CIT (2011) 244 CTR 631 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. 2. 2 The Bangalore bench of Income-tax Appellate Tribunal ( ITAT ) in a recent decision in the case of Jaysons Infrastructure India Private Limited vs ITO [TS-5873-ITAT-2017(BANGALORE)-0] held that since the assessment order clearly mentioned the reason for initiation of penalty proceedings, not mentioning the reason In the penalty notice should not cause any prejudice to the taxpayer. Therefore, it was held that the requirements of section 271(1)(c), as discussed by the KHC, were complied with in this case. 2. 2 The Jaipur Bench of Income-tax Appellate Tribunal ( ITAT ) in a most recent decision in the case of Airen Metals Pvt. Ltd. , Jaipur vs Acit, Jaipur on 29 September, 2017 in ITA No. 820/JP/20 .....

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n Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 22. As the Hon'ble High Court held in the above case that the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The grounds for levy of penalty are thus linked to the adherence to the Principle of natural justice and it was held that such Principle of natural justice shou .....

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infirmity in the initiation of the penalty proceedings and there is clearly no violation of principle of natural justice as canvassed by the Id AR . 2.4. The facts of the instant case are identical to the assessee's case under appeal. In this case also, the assessee was given opportunity on three occasions viz; 07. 11. 2012, 02. 04. 2013 & 10. 04. 2013 but the assessee neither attended the penalty proceedings on the first two dates nor was any written submissions explanations submitted on 10. 04. 2013 when the AR appeared before the Assessing officer. The assessee was made aware of the penalty proceedings having initiated against it and was granted aforesaid opportunities by the Assessing officer to present its case / offer its explanation. But the assessee failed to do so. Hence, besides legal issue under consideration, even the facts of the case are identical to the case of Airen Metals Pvt. Ltd. , Jaipur vs Acit. Therefore, the Order of the AO & CIT(A) should be confirmed. 2. 5. The ITAT Mumbai in its order in Trishul Enterprises Vs. DCIT (ITA Nos. 384 & 385/Mum/2014 for A. Yrs. 2006-07 & 2007-08), Dt. 10-02-2017, dismissed the contention of the assessee rega .....

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ssee, when:- • An assessee has concealed particulars of his income. • An assessee has furnished inaccurate particulars of his income. Here, it will be befitting for us to discuss the meaning of (i) 'concealment of particulars of income' and (ii)'furnishing of inaccurate particulars of income': The dictionary meaning of the word conceal is to hide, withdraw, or remove from observation; cover or keep from sight; to keep secret; to avoid disclosing or divulging . Thus concealment of 'particulars of income' means non disclosure of particulars of income. On the other hand, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to 'furnishing of inaccurate particulars of income'. The key phrase used in both the above charges is Particulars of income . It is thus important to understand the meaning of this phrase: The concealment or furnishing of inaccurate is with reference to particulars of income only. The information / details about other details such as subjective areas including allowability of deduction or the interpretation of any legal provisions would not be covered by the above clause and w .....

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ere it was held that mens rea was an essential requirement for penalty u/s 271 (1 )(e). 9.1. An analysis of the said decision clearly brings out that making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars of income. 9.2. In light of the same, if the facts of the case of the assessee is perused, it can be clearly seen that the assessee had purchased land as shall be evident from Schedule - E of the audited accounts enclosed at pages 3-21 of the paper book. Purchase deed of the land was duly furnished in the course of assessment proceedings. The auditor of the assessee had mistakenly claimed depreciation on said land to the tune of Rs. 78,59,954/- in the A. Y. under consideration while finalizing the final accounts and preparing the return. The same was accepted by the auditor and vide its letter dated 05. 08. 2013 at para 7, the auditor wrote that it was an unintentional mistake which is offered for taxation (as shall be evident from the challan and evidences enclosed at pages 46-47 of the paper book) sand the requested the Ld. A. O. to kindly consider the same as there was unintentional mistake. The Ld disallowed the claim of the impugned depreciati .....

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The . first part is that an explanation has been offered and the assessee is not able to substantiate it. The second part is that the assessee has failed to prove that such explanation offered by him is bona fide and the third part is that the assessee has failed to prove that all the facts relating to the same and material to the computation of his total income have been disclosed by him. In order to attract section 271(1)(c) read with clause (B) of Explanation 1, there must be a positive . finding that in the explanation offered, the three elements have been established. The words furnishing inaccurate particulars of income refer to the particulars of his income which have been furnished by the assessee and the requirement of concealment of income is that income has not been declared at all or is not even recorded in the books of account or in a particular case, the concealment of the particulars of income may be from the books of account as well as from the return furnished. Merely because the assessee has made certain claims, which were not accepted or was not acceptable to the Revenue, that itself would not attract the penalty under section 271 (1)(c) . The assessee had claim .....

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RTY INDIA v. CIT [2009] 317 ITR 218(which held against the assessee) was rendered on August 31, 2009 but was published for the first time only on September 17, 2009. It had been categorically recorded by the Tribunal that there was very little gap between the publication of the decision of the Supreme Court in LIBERTY INDIA'S case and the filing of the return by the assessee. At the time of filing the return the issue was debatable and penalty could not have been levied. Further the Tribunal had found that the assessee had disclosed all the particulars of the income and had not concealed anything. Once proper disclosure was made penalty was not attracted. The return was . filed on the basis of the certificate issued by the chartered accountant though under mistake, and the assessee could take the benefit on the basis of bona . fide belief The view adopted by the Appellate Tribunal was a plausible view based on appreciation of material on record and, therefore the order did not warrant any interference by the court. The Department was unable to show any perversity or illegality in the order. No substantial question of law arose for consideration. Thus from the above judicial pro .....

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dvertent error. That the Assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the Assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Given the peculiar facts of this case, that the imposition of penalty on the Assessee is not justified. We are satisfied that the Assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. 6. Thus as per the decision of the Hon'ble Supreme Court inadvertent error made by the assessee does not mean furnishing of inaccurate particulars of income or attempting to conceal its income and thus penalty provisions u/s 271(1)(c) cannot be Imposed on the assessee. 7. The above contention of the assessee also finds its strength from the following judicial pronouncements: •The Jurisdictional Kolkata ITAT in the case of DCIT, CC-VIII vs. Ram Chandra Agarwal ITA No. 1700/Ko/2012 held that We find that the assessee was under bona fide belief that on off market share transaction of trading in listed company share, no capital gains wou .....

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on in upholding the impugned order of the Id. C1T(A) in cancelling the penalty levied u/s. 271 (1) (c) of the Act. The ground raised by the revenue is dismissed. • The Jurisdictional ITAT Kolkata also in the case of B. D. Khaitan & Company Limited Vs. Assistant Commissioner of Income Tax, Circle-5 in 1. T. A. No. 310/Ko1/2012 has held that We have heard the rival submissions and perused the material available 0. 11 record. What we find is that the Assessing Officer had himself accepted that non-addition of loss on sale of fixed assets of Rs. 1,42,7291-, suo motu by the assessee, was only a mistake. There is no dispute that it was the first year of E- filing of return. Therefore it was very possible for such a mistake to happen. Once it is accepted as a simple mistake of the assessee and not made with any intention of concealing any income, we cannot say that there is any element of concealment or furnishing of inaccurate particulars of income. None of the lower authorities has pointed out as to what inaccurate particulars were filed by the assessee with regard to the loss on sale of fixed assets. Obviously loss on sale of fixed assets was mentioned by the assessee itself i .....

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ision of the Hon'ble Karnataka High Court in the case of CIT vs. M/s SSA's Emerald Meadows in ITA No. 380 of 2015 wherein it is held that notice issued by the A. O under section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 to be bad in law as it did not specify which limb of section of the Act, the penalty proceedings had been initiated i. e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal while allowing the appeal of the assessee has relied on the decision of the Division bench of this court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory [2013 359 ITR 565. The said decision of the Karnataka High Court has been affirmed by the Honb'le Supreme Court in SLA CC. No. 11485/2016. The said order is enclosed at pages 50-54 of the paper book 15.1. Applying the aforesaid ratio to the facts of the case of the assessee company, it can be seen that notice dated 28. 08. 2013 under section 274 read with sec 271(1)(c) of the Act issued in the case of the assessee, does not specifically mention whether the same was issued for concealment of income or for inaccurate particulars of income (enclo .....

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should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars. Besides the above we also find that notice issued by the AO 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 dire .....

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