TMI Blog2018 (4) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... ataka High Court in the case of Manjunath Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT). - Decided against revenue - I.T.A No. 196/Agra/2016, I.T.A No. 108/Agra/2018 And S.A. No. 02/Agra/2018 - - - Dated:- 20-3-2018 - SHRI A. D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER For The Assessee : Shri Anurag Sinha, AR. For The Revenue : Shri Waseem Arshad, Sr.DR. ORDER PER, BENCH: These are assessees appeals for Assessment Years 1999-00 and 2009-10. Common issues being involved therein, they are being disposed of by this composite order. Facts for convenience, are being taken from ITA No.108/Agra/2018. The following grounds have been raised therein: 1. (i) Because the learned authorities below have erred both on facts and in law in Imposing penalty under section 271(1)(c) of the Income Tax Act, 1961 of ₹ 20,00,000/- for alleged concealment of income whereas the said penalty has been initiated for furnishing inaccurate particulars of income. The penalty imposed is liable to be deleted. (ii) Because the learned CIT(A)-1, Agra has erred both on facts and in law in holding that where penalty unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in the saving bank account no.027401506700 of the assessee maintained with the ICICI Bank was reported. During the assessment proceedings, on being asked to explain these deposits, the assessee gave explanation pertaining to his trading activities. The assessee also stated that the record in respect of its trading activities was lost, for which, an FIR was also lodged with the police authorities at Mathura. When confronted by the AO that the claim of the assessee was not duly substantiated, the assessee, vide order sheet entry dated 30.07.2010 as recorded by the AO, agreed to determining of its profit u/s 44AF @ 5% of the amount in the said bank account. As the assessee had admitted the undisclosed income appearing from its trading transactions in the said bank account, the AO initiated penalty proceedings u/s 271(1)( c) of the Act and levied the penalty of ₹ 98000/- for concealment, vide order passed u/s 271(1) (c) on 25.02.2011. The CIT(A) confirmed the penalty. 3. The ld. Counsel for the assessee has contended that the penalty order dated 25.02.2011, as sustained by the ld. CIT(A), is void ab initio, as the notice issued u/s 274 r.w.s 271(1)(c) of the Act, on 11.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A No. 140/PN/2014. (x) ACIT vs. Deepesh M. Panjwani ITA No.6330/Mum/2012 5878/Mum/2012. (ITAT, Mum). (xi) CIT vs. Shri Chandrashekhran , ITA No.61/2009 (Kar). (xii) Sarita Milind Davare vs. ACIT , ITA No. 2187/Mum/2014. (xiii) Meherjee Cassinath Holdings P. Ltd. vs. ACIT , ITA No.2555/Mum/2012. (xiv) Rajeev Kumar Gupta vs. CIT , 123 ITR 907, Allahabad, (HC). (xv) Ajay Kumar vs. ITO , ITA No. 53/Agra/2015. (xvi) N.N. Subramania Iyer vs. UOI , 97 ITR 228 (Ker). 9. Per contra, the ld. DR has relied on: (a) CIT vs. S.V. Angidi Chettiar , 44 ITR 739 (SC). (b) Mak Data (P) Ltd. vs. CIT , Civil Appeal No.9772/2013 (SC). (c) Gujarat State Financial Services Ltd. vs. ACIT , in ITA No.2078/Ahd/2006 2526/Ahd/206. (d) M/s K.P. Madhusudan vs. CIT , Civil Appeal No. 6465/2000 (SC). (e) CIT vs. Zoom Communications Pvt. Ltd. , ITA No.07/2010(Del) (H.C.). (f) Shyam Biri Works , 259 ITR 625 (All. H.C.). (g) Sangam Enterprises vs. CIT , 288 ITR 396 (All). (h) Harish Hosiery Mart , ITAT, Ahmedabad. (i) Arcotech , (Del) (H.C.). (j) B.A. Balasubramanian Bros. , 20 Taxman 215 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as regards concealment of income or furnishing of any inaccurate particulars while passing the assessment order. It is submitted that in absence of such satisfaction penalty u/s 271(l)(c) cannot be levied. It is submitted that it be so held now. 14. This, again, is not the issue before us. 15. The brief facts of K.P. Madhusudan (supra) were that during the course of assessment proceedings, the Assessing Officer noted that the demand draft and a telegraphic transfer were not entered by the assessee in its cash book on the dates on which the same were purchased and made. These are nowhere the facts of the present case. 16. In Zoom Communication Pvt. Ltd. (supra), the facts of the case are that during assessment, it was noticed by the AO that in Schedule 9, relating to Administrative and other Expenses, forming part of the Profit Loss Account, a sum of ₹ 1,21,49,861/- had been debited under the head Equipment Written Off . It was stated by the assessee that due to oversight, this amount was not added back in the Computation of Income and the same ought to have been adjusted in the Block of Assets. The aforesaid amount was added bank to the income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lve the assessee of its liability, if the act of claiming deduction is not bonafide. On the other hand, in the case under consideration, the assessee has not filed any such certificate, claimed no such deduction under section 80IA and seeks no such advantage. Therefore, the case is distinguishable on facts. 19. In the case of Shyam Biri (supra), the Hon ble High Court has observed that though the AO must have satisfaction as required under section 273, it is not necessary for him to record that satisfaction in writing before initiating penalty proceedings under section 273 of the Act. The case of the assessee before us, however, is not on the ground of non recording of satisfaction, but is on the ground of absence of clear charge/default mentioned in the penalty notice. The assessee s case is that on account of absence of a clear charge having been spelt out in the penalty notice, the notice is rendered void ab initio in view of section 274 of the Act. 20. In Sangam Enterprises (supra) pertains to the applicability of Explanation 1 to section 271(1)(c). The Hon ble High Court has held that the judgment of CIT vs. Anwar Ali , 76 ITR 696 (S.C.) is no longer applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specific charge and soon thereafter, in the accompanying Notice issued at the same time on the same day, assessee is called upon to furnish his explanation in respect of both the charges goes to advance the submission of the assessee that the Notice suffers from nonapplication of mind in as much the AO, while passing assessment order was alive that assessee has committed the default liable for penalty on the ground of a particular charge, however immediately thereafter he issues a show cause Notice mentioning both the charges. This certainly is a case of non-application of mind. 26. Similar situation was dealt with by the Mumbai Bench in the case of Mehrjee Cassinath Holding (P) Limited (supra) wherein the revenue on the face of the Judgement in the case of Manjunatha Cotton (supra) after placing reliance upon the Judgment of Hon ble Bombay High Court in the case of Smt. Kaushlaya Ors. 216 ITR 660 countered the assessee submission of non application of mind by submitting before the Bench that in the assessment order the Assessing Officer has recorded that penalty was initiated for furnishing of inaccurate particulars of income. It was therefore, contended that Penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai Bench in the case of Dr. Sarita Milind Davare Vs ACIT in ITA No. 2187/Mum/2014 wherein in Para-7 of the order this plea was taken by the revenue before the ITAT to counter the ratio of Manjunatha referring to the order passed by the Bangalore Bench in the case of Shri K. Prakash Shetty wherein it was held that section 292BB would not come to the rescue of the revenue when the Notice was not in substance and in conformity with or according to the intent of the Act. Therefore, it cannot be said that section 292BB can validly be pressed into service in respect of such a jurisdictional mistake. 30. Now coming to the question as to whether such a notice can be held to be accordance with the Act. In the case of CIT Vs Manjunath Cotton Ginning Factory (supra) (APB 8 to 33). Notice under section 274 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. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. 31. In the case of Rajeev Kumar Gupta Vs CIT (1980) 123 ITR 907 (All). (Para-4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. (Para 22). 38. In CIT vs. Reliance Petroproducts (P) Ltd. , 322 ITR 158 (SC). 8. .. It was only on the point of mens rea that the judgment in Dilip N. Shroff v. Joint CIT was upset. In Union of India v. Dharmendra Textile Processors after quoting from section 271 extensively and also considering section 271(1) (c), the Court came to the conclusion that since section 271(1) (c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was not necessity of mens rea. . The basic reason why decision in Dilip N Shroff v. Joint CIT was overruled by this Court in Union of India v. Dharmendra Textile Processors was that according to this Court the effect and difference between section 271(1) (c) and section 276C of the Act was lost sight of in the case of Dilip N Shroff v. Joint CIT . However, it must be pointed out that in Union of India v. Dharmendra Textile processors , no fault was found with the reasoning in the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Notice issued on the basis of both the charges vide Order dated 18.03.2016 placing reliance to the Judgments in the cases of Manjunath Cotton Ginning Factory (supra) held penalty to be unsustainable in law. Xerox copy of the ITAT order is enclosed. (APB-128-137). 43. In CIT vs. Shri Chandrashekhran , ITA No.61/2009 (Kar) held that Infact, the order imposing penalty is contrary to law, declared by this court in the case of Commissioner of Income- Tax and Another v. Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Karn), in as much as, it is clear from the order that there is no direction to initiate penalty proceedings. In the aforesaid judgment, it was held that it is imperative that the assessment order contains a direction. The use of phrases like (a) penalty proceedings are being initiated separately, and (b) penalty proceedings under section 271(1) (c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. A direction by a statutory authority is in the nature of an order requiring positive compliance. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particular facts on the basis of which the order is proposed to be passed would not comply with the requirements of s. 274. The Tribunal has upheld the Department's plea that the penalty order was not vitiated on account of the fact that the assessee knew that the penalty was being imposed on the basis of the rectified assessment. We are, however, of the view that, as s. 274 requires a reasonable opportunity to be given to the assessee of being heard which can be done only in case a proper notice is issued, mere knowledge on the part of the assessee of the basis on which the penalty was proposed to be imposed would not meet the requirements of s. 274. 48. In Ajay Kumar vs. ITO , ITA No. 53/Agra/2015. vide order dated 19.05.2017deleted penalty under identical circumstances. Copy of the Order passed by the Bench is enclosed herewith. (APB-196- 203). 49. In N.N. Subramania Iyer vs. UOI , 97 ITR 228 (Ker). The penalty notice, Exhibit P-2, is illegal on the face of it. It is in a printed form, which comprehends all possible grounds on which a penalty can be imposed under section 18(1) of the Wealth-tax Act. The notice has not struck off any one of those grounds, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is fully covered by the decision of the Hon'ble Bombay High Court in the case of CIT vs. Samson Perinchery, (Income Tax Appeal Nos. 1154, 953, 1097 and 1226 of 2014) as evident from Para 3, reproduced as under - 3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent - Assessee. This by holding that the initiation of penalty under Section 27l(1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma. with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alment of income . However, the AO is under obligation to specify the same and should not leave the scope for imaginations and surmises . At the end, we find that the penalty was actually levied 'for concealment of ( particulars ) of income1 which is evident from para 4 of the assessment order which reads as under : 4 . From the above . I am satisfied that the assessee has concealed the particulars of income so as to evade tax and as such penalty u / s 271 ( 1 )( c ) of the Act is leviable . The tax on the undisclosed income of Rs . 31 . 00 . 790 /- ( including foreign travel ) works out to Rs . 9 . 30 . 200 /-. Accordingly, I hereby levy a minimum penalty at 100 % of tax i . e .. Rs . 9,30,200 /-. ( Page 22 - appeal set ) In view of the above facts it is held that the assessee has concealed his income and is therefore, liable for imposition of penalty U / s 271 ( 1 )( c ) of the Income Tax Act, 1961 . In view of the above facts and circumstances of the case, the penalty imposed under section 271(1)(c) is liable to be deleted. 6. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lment of income or is it a case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported In (2007) 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P. Ltd., reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind 5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between Tweedledum and Tweedledee. In the above view, the deletion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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