TMI Blog2018 (4) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 10,78,306/- imposed by the AO u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). 2. In this appeal the assessee has challenged the order of CIT(A) in confirming the penalty u/s. 271(1)(c) of the Act. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was imposed on the assessee by the AO are that in this case the assessment u/s. 143(3) of the Act was made on 24.03.2014 determining total income at ₹ 40,81,020/- including STCG ₹ 7,33,910/- against assessee s returned income of Nil. In the said order an amount of ₹ 33,47,112/- was added under the head salary income and the same was treated as concealed income of the assessee and initiated penalty proceedings u/s. 271(1)(c) of the Act. During the course of assessment proceedings the AO found that the assessee had a short term capital gain of ₹ 7,33,910/-. On being asked, the Ld. AR could not offer any cogent explanation apart from saying that it was a clerical mistake. Hence, the AO added back the same to the total income of the assessee and initiated penalty proceedings u/s. 271(1)(c) of the Act. The said amount was added back to the income of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2015 dated 23.11.2015 wherein the Hon ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. The ld. Counsel also brought to our notice the decision of the Hon ble Bombay High Court in the case of CIT vs Shri Samson Perinchery in ITA No.1154 of 2014 dated 05.01.2017 wherein the Hon ble Bombay High Court following the decision of the Hon ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning factory (supra) came to the conclusion that imposition of penalty on defective show cause notice without specifyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature. Section 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the Principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The ITAT Mumbai Bench in the case of Dhanraj Mills Pvt.Ltd. (supra) followed the decision rendered by the Jurisdictional Hon ble Bombay High court in the case of Kaushalya (supra) and chose not to follow decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (supra). Reliance was also placed by the ITAT Mumbai in this decision on the decision of Hon ble Patna High court in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Authority as well as the Assessing Authority was set-aside by its order dated 9th April, 2009. Aggrieved by the said order, the revenue filed appeal before High Court. The Hon ble High Court framed the following question of law in the said appeal viz., 1. Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 2. Whether the proceedings initiated by the Assessing Authority was legal and valid? The Hon ble Karnataka High Court held in the negative and against the revenue on both the questions. Therefore the decision rendered by the ITAT Mumbai in the case of Earthmoving Equipment Service Corporation (supra) is of no assistance to the plea of the revenue before us. 11. In the case of M/S.Maharaj Garage Co. Vs. CIT dated 22.8.2017 referred to in the written note given by the learned DR, which is an unreported decision and a copy of the same was not furnished, the same proposition as was laid down by the Hon ble Bombay High Court in the case of Smt.Kaushalya (supra) appears to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other jurisdictions are concerned, there are two views on the issue, one in favour of the Assessee rendered by the Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning (supra) and other of the Hon ble Bombay High Court in the case of Smt.Kaushalya. It is settled legal position that where two views are available on an issue, the view favourable to the Assessee has to be followed. We therefore prefer to follow the view expressed by the Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning (supra). 15. We have already observed that the show cause notice issued in the present case 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 sust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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