TMI Blog2018 (2) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... had claimed the expenditure incurred on Linkside building as a capital expenditure in its original return of income, therefore, there was no basis for characterising the same as the concealed income of the assessee - as the assessee had duly disclosed the expenditure incurred on Linkside building in its return of income, therefore, merely for the reason that the said expenditure was claimed as a revenue expenditure would not justify imposition of penalty under Sec. 271(1)(c), for the reason that the same was held by the A.O to be in the nature as that of a capital expenditure. - Decided in favour of assessee - ITA No. 7525/Mum/2016 - - - Dated:- 7-2-2018 - SHRI RAJENDRA, AM AND SHRI RAVISH SOOD, JM For The Revenue : Shri V. Vidyadhar, D.R For The Assessee : Shri Rakesh Kumar Agarwal, A.R ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeal filed by the revenue is directed against the order passed by the CIT(A)-21, Mumbai, dated 03.10.2016, which in itself arises from the order passed by the A.O under Sec. 143(3) r.w.s 147 of the Income Tax Act, 1961 (for short Act ), dated 19.03.2015. The revenue assailing the order of the CIT(A) had raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration, viz. A.Y 2009-10, therefore, initiated assessment proceedings under Sec. 147 of the Act. The assessee in compliance to the notice issued under Sec. 148 e-filed its return of income, disclosing a depreciation loss of ₹ 17,422/-. The A.O during the course of the assessment proceedings inter alia observed that the assessee had wrongly debited expenses of ₹ 107,94,853/- in its profit and loss account in respect of the expenses incurred on Linkside building, which were shown under the head Linkside Project (work-in- progress) in its books of accounts. The A.O being of the view that the aforesaid expenses which were in the nature of a capital expenditure and were required to be added to the cost of the fixed assets had wrongly been claimed by the assessee as a revenue expenditure, therefore, disallowed the said amount and added back the same to the block of fixed assets of the assessee. The A.O while framing the assessment initiated penalty proceedings under Sec. 271(1)(c) in the hands of the assessee for furnishing of inaccurate particulars of income by claiming the aforesaid amount of ₹ 107,94,855/- as a revenue expenditure. The assessee did not carry the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/-, therefore, no penalty under Sec. 271(1)(c) could have been levied in its hands. The assessee further assailing the validity of the penalty imposed under Sec. 271(1)(c) on merits, submitted that as the issue of capital or revenue expenditure was in itself a vexed issue, therefore, a mere rejection of the claim of the same by the assessee as a revenue expenditure would not justify levy of penalty under Sec. 271(1)(c). The assessee fairly submitted before the CIT(A) that as the chartered accountant who had appeared before the A.O was oblivious of the return of income filed by the staff on 31.03.2011, therefore, for the said bonafide reason he had failed to bring the said fact to the notice of the A.O. The CIT(A) in the backdrop of the aforesaid submissions of the assessee, directed the A.O to verify the veracity of the claim of the assessee with respect to filing of the original return of income on 31.03.2011. The A.O in his report filed with the CIT(A) submitted that the claim of the assessee that it had filed its return of income on 31.03.2011 prior to issuance of any notice under Sec. 142(1) or under Sec. 148, was found to be in order. However, the A.O rebutting the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income to the notice of the A.O during the course of the assessment proceedings, however observed that the same was a bonafide mistake on the part of the assessee. The CIT(A) on the basis of his aforesaid observations concluded that in the backdrop of the facts of the case the assessee was not liable to be visited with penalty under Sec. 271(1)(c). 5. The revenue being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The ld. Departmental Representative (for short D.R ) taking us through the facts of the case, submitted that as the assessee by claiming the capital expenditure incurred in respect of Linkside building as a revenue expenditure, had suppressed its income, therefore, the A.O had rightly imposed penalty under Sec. 271(1)(c). It was submitted by the ld. D.R that the assessee in the present case had not voluntarily filed its return of income under Sec. 139 of the Act. Per Contra, the ld. Authorized Representative (for short A.R ) for the assessee relied on the order of the CIT(A). The ld. A.R further assailing the validity of the penalty imposed by the A.O, submitted that as the penalty proceedings were initiated by the A.O for f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of a strong conviction that as penalty proceedings are in the nature of quasi criminal proceedings, therefore, the assessee as a matter of statutory right is supposed to know the exact charge he had to face. The non striking off the irrelevant charge in the show cause notice not only reflects the non application of mind by the A.O, but rather, the same would seriously defeat the very purpose of giving an opportunity of hearing to the assessee as contemplated under Sec. 274. We find that the distinction between the said two defaults had been appreciated at length by the Hon ble Supreme Court in its judgments passed in the case of Dilip Shroff Vs. Jt. CIT (2007) 210 CTR (SC) 228 and T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC), wherein the Hon ble Apex Court had concluded that the two expressions namely concealment of particulars of income and furnishing of inaccurate of particulars of income have different connotation. The Hon ble Apex Court being of the view that the non-striking off the irrelevant limb in the notice clearly reveals a non-application of mind by the A.O, held as under:- 83. It is of some significance that in the standard proforma used by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p of the said jurisdictional defect would be rendered as invalid and void ab initio. The Tribunal in its aforesaid order in the case of Meherjee Cassinath Holdings Pvt. Ltd. (supra) had observed as under:- 8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industrial Co. Ltd. v. CIT [2000] 2 SCC 718] 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of non-application of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the 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 Id. 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/s271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erala High Court has struck down the penalty imposed in the case of N.N.Subramania lyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer 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 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. 14. 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 10.12.2010 is untenable as it suffers from the vice of non- application of mind having regard to the ratio of the judgment of the Hon ble Supreme Court in the case of Dilip N. Shroff (supra) as well as the 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 . We being of the considered view that as the issue involved in the present case is squarely covered by the aforesaid order of the coordinate bench of the Tribunal in the case of Meherjee Cassinath Pvt. Ltd.(supra) and is no more res integra in light of the aforesaid judicial pronouncements, therefore, respectfully follow the same. We thus in the backdrop of our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under s. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by AO for any reason, the assessee will invite penalty under s. 271(1)(c). That is clearly not the intendment of the legislature. We thus finding ourselves to be in agreement with the view taken by the CIT(A), thus are of the considered view that in the backdrop of the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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