TMI Blog2018 (2) TMI 1638X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in law and liable to be quashed. - Decided in favour of assessee. - ITA No.3108/M/2016 - - - Dated:- 21-2-2018 - SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Assessee : Shri Ketan Ved, A.R. Ms. Urvi Hemta, A.R. For The Revenue : Shri M.C Omi Ningshen, D.R. ORDER Per G. Manjunatha, Accountant Member: This appeal filed by the assessee is directed against order of the Commissioner of Income Tax (Appeals)-14, Mumbai dated 23.02.2016 and it pertains to assessment year 2010-11. The assessee has raised the following grounds of appeal: Being aggrieved by the order dated 23 February, 2016 passed under section 250 of the Income- tax Act, 1961 (hereinaf ter referred to as the Act) , by the Hon'ble Commissioner of Income Tax (Appeals) -14, Mumbai , [hereinaf ter referred to as the Hon'ble CIT(A) ] , the Appel lant submi ts the fol lowing Grounds of Appeal for your sympathetic considerat ion which are independent of and wi thout prejudice to one another : On the facts and circumstances of the case and in law, the Hon'ble CIT (A) has erred in: 1. dismissing the ground of appeal without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Commissioner of Income-tax (Appeals) ought to have held as such. 1 : 3 The Appellant submits that the impugned Order levying penalty u/s.271(1)(c) of the Income-tax Act, 1961 be struck down. 2: 0 Re : General: 2 : 1 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of appeal at or before the hearing of the appeal. 3. The brief facts of the case are that in this case return of income was filed declaring total income of ₹ 7,55,19,904/-. The assessment was completed under section 143(3) on 04.03.14 determining the total income at ₹ 8,21,77,620/- inter-alia making additions towards disallowance of corporate revenue on which exemption under section 10A/10AA was claimed amounting to ₹ 66,57,721/-. Subsequently, penalty proceedings under section 271(1)(c) has been initiated for furnishing of inaccurate particulars of income. Accordingly, notice under section 274 r.w.s. 271(1)(c) was issued on 12.03.14. The assessee neither appeared before the AO nor filed any explanation. Therefore, the AO held that the assessee has no explanation to offer and also has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty levied by the AO. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 5. The Ld. A.R. for the assessee, at the outset, submitted that the issue is squarely covered in favour of the assessee by the decision of Hon ble Bombay High Court in the case of Shri Samson Perinchery vs. ACIT, (2017) ACIT 392 ITR 4 and also the decision of Mumbai ITAT in the case of M/s. Cenzar Industries Ltd. vs. ITO in ITA No.1970/M/2015 dated 29.12.17 wherein the issue of vague notice has been discussed in the light of various case laws including the decision of Hon ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton Ginning Factory 359 ITR 565 (Karn.) wherein it was categorically held that satisfaction of the existence of the grounds mentioned in section 271(1)(c) when it is a sine qua non initiation of proceedings, the penalty proceedings should be confined only to those grounds and the said grounds should be specifically stated so that the assessee would have the opportunity to have made those grounds. The Ld. A.R. further referred to the copy of notice issued by the AO under section 274 r.w.s. 271(1)(c), submitted that the AO has issued printed form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alt by this Tribunal in various cases including in the case of M/s. Cenzar Industries Ltd. vs. ITO in ITA No.1970/M/2015 dated 29.12.17 wherein after considering the relevant facts and also relied upon various judicial precedents including the decision of Hon ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton Ginning Factory (supra) and also the decision of Hon ble Bombay High Court in the case of Shri Samson Perinchery vs. ACIT (supra), has held that penalty proceedings initiated under section 271(1)(c) is void ab initio and liable to be quashed, if the AO issued vague notice under section 274 r.w.s 271(1)(c) without striking off irrelevant portion of notice and also if the AO has not made a specific charge whether penalty proceeding is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. The relevant portion of order is extracted below: 10. We have heard the rival submissions, perused the material available on record and also gone through the orders of authorities below. The AO has levied penalty u/s 271(1)(c) in respect of disallowance of reimbursement of selling and distribution expenses on the ground that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Manjunatha Cotton Ginning Factory Ltd (supra) wherein it was categorically held that satisfaction of the existence of the grounds mentioned in section 271(1)(c) when it is a sine qua non initiation of proceedings, the penalty proceedings should be confined only to those grounds and the said ground should be specifically stated so that the assessee would have the opportunity to meet those grounds. Initiation of penalty on one ground and levying penalty on another ground would cause injustice to the assessee as the assessee was kept in blank to justify his case whether the AO sought to initiated penalty for concealment of particulars of income or furnishing of inaccurate particulars of income. If the proceedings are initiated on a specific charge, then, the assessee can justify its case by advancing arguments on the charge framed by the AO. Thus, once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. If penalty proceedings are initiated on one ground and levied penalty on different ground or penalty proceedings are initiated on two grounds, i.e. concealment of particulars of income and also furnishing of inaccurate p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrive at a correct satisfaction as to whether penalty is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. If the AO fails to initiate penalty proceedings by issuance of proper notice, then the whole penalty proceedings becomes vitiated and void ab initio. 13. Coming to the case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory vs CIT (supra), wherein the Hon'ble High Court has categorically observed that sending printed form of notice where all the grounds mentioned in section 271(1)(c) are mentioned would not satisfy requirement of law. Notice issued u/s 274 of the Act should specifically state the ground mentioned in section 271(1)(c), i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. Initiating the penalty proceedings on one limb and holding the assessee guilty of another limb is bad in law. The relevant portion of the order is extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT 292 ITR [relied upon in Manjunath Cotton Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated / notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated and it cannot be on a fresh ground of which assessee has no notice. 15. The assessee has also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs SSA's Emerald Meadows (supra) wherein the Hon'ble Supreme Court dismissed SLP filed by the revenue by following the decision of the Karnataka High Court in the case of CIT vs Manjunatha Cotton Ginning Factory (supra) by observing that notice issued u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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