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TMI Blog2018 (5) TMI 1575X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal was filed on 20.02.2017, i.e., within two months of the date of receipt of the CIT(A)'s order by the assessee on 24.12.2016. Accordingly, the delay in filing the appeal is condoned. 3. The following grounds have been raised: "1. Because the Ld. CIT(A) has wrongly and illegally confirmed the penalty imposed by the Assessing Officer u/s 271(l)(c) of the I. T. Act. 2. Because the assessee duly discharged her onus of proving the cash credits to be genuine. The addition on account of negative cash balance was duly explained. In the quantum proceedings the Ld. CIT(A) has erred both on facts and in law in confirming the same. 3. Because considering the facts of the case and the legal position, the Ld. CIT(A) should have deleted the penalty imposed u/s 271(l)(c) instead of confirming the same. 4. Because Ld. CIT(A) while confirming the penalty has erred on facts in treating the quantum appeal to have been confirmed by Hon'ble ITAT Delhi whereas the quantum appeal is pending as on date before Hon'ble ITAT, Agra Bench. On this ground also the penalty confirmed by Ld. CIT(A) is wrong and bad in law. 5. Because the penalty imposed by the Assessing Officer is after applyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the ld. CIT(A), is void-ab-initio, as the notices issued u/s 247 r.w.s. 271(1)(c) of the Act, dated 21.12.2009 (APB-7), 25.03.2011 (APB-8) and 30.05.2011 (APB-9), are not in conformity with the law. 8. As per the ld. DR, however, the notices are entirely in accordance with law. 9. The notice dated 21.12.2009 (APB-7) reads as follows: "When translated in English; In the hearing for A.Y. 2007-08, it appears to me that you have: x-1 concealed your income to quite an extent and you have furnished inaccurate particulars of your income. -2. You have not complied with the notices issued under sections 142(1)/143(2) of the Act, Therefore, kindly state the reason as to why penalty under sections 271(1)(B) and 271(1)(c) of the Act be not imposed on you.............................." 10. The notice dated 25.03.2011 (APB-8) is as under: "Whereas in the course of the assessment proceedings before me for the Asstt. Year 2007-08, it was found that you have concealed the particulars of your income/furnished inaccurate particulars of such income. Therefore, you are hereby required to show cause as to why an order imposing a penalty on you should not be passed under section 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 19.12.2017, passed by the Division Bench, in 'Sachin Arora vs. ITO', and other connected cases, in ITA No.118/Agra/2015, for A.Y. 2008-09, and other connected cases. 15. In 'Sachin Arora' (supra), the Bench has observed as follows: "8. According to the ld. Counsel for the assessee, the notice, not being specific about the charge against the assessee, is void. The Counsel have, in their respective cases, relied on the following decisions: (i) "CIT vs. Manjunath Cotton and Ginning Factory", 359 ITR 565 (Kar). (ii) "CIT vs. M/s Veerabhadrappa Sangappa & Co", ITA No. 5020/2009 (Kar). (iii) "CIT vs. SSA Emerald Meadows", ITA No. 380/2015 (Kar). (iv) "Dilip N. Shroff Vs. JCIT", 291 ITR 519 (SC). (v) "Ashok Pai vs. CIT", 292 ITR 11 (SC). (vi) "CIT vs. Reliance Petroproducts (P) Ltd.", 322 ITR 158 (SC). (vii) "Uma Shankar Agarwal vs. DCIT", ITA No. 1831 to 1835/Kol/2015. (viii) "Suvaprasanan Bhatacharya vs. ACIT", ITA No. 1303/Kol/2010. (Kol). (ix) "SLK Properties vs. ITO", ITA 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 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a notice does not spell out the precise charge against the assessee, the very initiation of the penalty proceedings would not be liable to be struck down as null and void ab initio. 11. Let us consider the numerous case laws relied on respectively by the parties. 12. The case of "S.V. Angidi Chettiar" (supra) is not applicable. In the referred case, the issue under consideration pertained to a firm which had got dissolved. The contention of the assessee was that the ITO could not, in exercise of the power under section 28(1) of the IT Act, 1922, impose penalty. The Hon'ble High Court accepted the plea of the assessee. However, the Hon'ble Supreme Court reversed the judgment of the Hon'ble High Court by holding that assessment proceedings are liable to be continued against the firm as if it has not been dissolved. The Hon'ble Supreme Court concluded by holding that "in our view, the High Court was in error in holding that penalty could not be imposed under section 28 (1) (c) upon the firm M/s S.V. Veerappan Chettiar & Co. after its dissolution". In the present case, however, the assessee is an individual and has raised no such plea as was raised therein. 13. Regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsent. It was further noticed that another sum of Rs. 1 Lakh had been paid under the head "Income Tax Paid", in the aforesaid Schedule relating to Administrative and other Expenses. The assessee claimed that due to oversight, this amount was not added back in the Computation of Income. Hence, the Assessing Officer added this amount also to the income of the assessee. Penalty Proceedings were also initiated against the assessee. In appeal, it was held by the Hon'ble High Court that the assessee did not explain, either to the Income Tax Authorities, or to the Tribunal, as to in what circumstances and on account of whose mistake, the amounts claimed as deductions were not added while computing the income of the assessee company. The Hon'ble High Court further held that it could not lose sight of the fact that the assessee was a Company, which must be having professional assistance for computation of its income, and its accounts were compulsorily subjected to audit. It was observed that in the absence of any details from the assessee, such deductions could not have been left out while computing the income of the assessee Company and it could also not have escaped the attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... troversy under question herein. 22. In the case of "Harish Hosiery Mart Vs ITO", in ITA No. 3009 (Ahd) 2007, the Bench concluded the appeal by holding that the assessee did not place any material before the authorities to show that the explanation of low G.P. during post survey period was bonafide. 23. The ITAT found that assessee did not discharge its onus and failed to prove its bonafideness and therefore, penalty was justified . No issue of Notice U/s 274 was subject matter of consideration before the ITAT and therefore, reliance placed is misplaced. 24. In the case of "Arco tech Ltd." (supra), the Hon'ble Delhi High Court has held that imposition of penalty was not justified and proper on the wrong claim of depreciation of Plant & Machinery, as the claim was debatable. No issue of notice u/s 274 was before the Hon'ble High Court for its consideration. The case of 'Manjunatha' (supra) was not even referred before the Hon'ble High Court. 25. In the case of "B.A. Balasubramaniam" (supra), no issue of validity of penalty notice was under consideration. 26. In the case of "Earthmoving Equipment Service Corporation" (supra), the penalty order was sustained by the ITAT on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen a valid notice is issued, that the question of considering the assessee's explanation/reply in the light of Explanation -1 would arise. The role of Explanation-1 is to put the initial burden on the assessee, which is rebuttable and once rebutted, the burden shifts to the Revenue to establish that the assessee has concealed his income. 28. In 'ACIT vs. Dr. Prakash Kanhaiyalal Kankariya' (supra), has been relied on for the proposition that if there is satisfaction of the AO in the assessment order, notice u/s 274 is immaterial. Here, it is seen that this decision has been rendered by the Pune Bench of the Tribunal, by following 'CIT vs. Smt. Kaushalya Devi', 216 ITR 660 (Bom) (supra), as against 'Manjunatha' (supra), which is a judgment of the Karnataka High Court. This is entirely in keeping with the judicial discipline which requires a Bench of the Tribunal to follow a decision handed down by its jurisdictional High Court. And so far as regards the Pune Bench of the ITAT, it is the Hon'ble Bombay High Court which is the jurisdictional High Court. It is trite that where coordinate Benches of two High Courts, neither being a jurisdictional High Court, qua the assessee, hold dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'CIT Vs Kaushlaya Devi' (supra), the Bench held that a combined reading of 'Smt B. Kaushlaya & Ors' (supra) and the decision rendered by the Hon'ble Supreme Court in the case of 'Dilip N. Shroff' (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing the notice. 32. That the illegality in the Notice cannot be saved by recourse to section 292BB of the Act, was held by the ITAT, Mumbai Bench in the case of 'Dr. Sarita Milind Davare Vs ACIT' (supra) wherein this plea was taken by the revenue before the ITAT to counter the ratio of 'Manjunatha' (supra), 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. 33. In the case of 'Rajeev Kumar Gupta Vs CIT', (supra), it has been held by the Hon'ble jurisdictional High Court that a notice which does not intimate the assessee of the particular facts, on the basis of which notice the order is proposed to be passed, would not comply with the requirements of s. 274 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ..................................... 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 decision in 'Dilip N. Shroff v. Joint CIT', where the court explained the meaning of the terms conceal and inaccurate. It was only the ultimate inference in 'Dilip N. Shroff v. Joint CIT' to the effect that mens rea was an essential ingredient for the penalty under section 271(1) (c) that the decision in 'Dilip N. Shroff v. Joint CIT' was overruled." 40. In "Uma Shankar Agarwal vs. DCIT" (supra), where the assessee therein challenged the legality of the penalty order on the ground of "No satisfaction" and "Show cause Notice without specific charge", the Tribunal, vide Order dated 20.01.2016, after due consideration of 'MAK Data (P) Ltd', which was relied on by the Department, held the penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of law is answered in favour of the assessee and against the revenue. We do not find any merit in this appeal. Accordingly, the appeal is dismissed." 45. In "Ajay Kumar vs. ITO" (supra), vide order dated 19.05.2017, this Bench deleted penalty under similar circumstances. 46. In "N.N. Subramania Iyer vs. UOI" (supra), it was held as under: "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 there is no indication for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. Even in the counter-affidavit filed by the second respondent, he has not stated for what specific violation he issued it. It is not that it would have saved his action. Apparently, Exhibit P-2 is a whimsical notice issued to an assessee without intending anything." 47. In 'Uttam Value Steels Ltd. vs. ACIT' (supra), vide order dated 22.05.2017, as relied on by the assessee, the Mumbai Tribunal has held, inter alia, as under: " In the penalty notices so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two limbs of this provision. In other words, it is only when the authority invested with the requisite power is satisfied that either of the two events existed in a particular case that proceedings u/s. 271(l)(c) of the Act are initiated. This pre-requisite should invariably be evident from the notice issued u/s. 274 r.w.s. 271 of the Act, which is the jurisdictional notice, for visiting an assessee with the penal provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out as to whether the notice u/s. 274 r.w.s. 271 of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. There are a atena of judgments highlighting the necessity for identifying the charge for which the assessee is being visited and in all those decisions, Hon'ble Courts have repeatedly held that where the jurisdictional notice is vague, similar to the one in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in 'Muninaga Reddy' (supra), the Hon'ble High Court first framed a question of law for its consideration and passed judgment holding the appeal of the Revenue to be meritless and refused to the answer the question of law, holding that the issue is already covered by the decision of the same Court in the case of 'Manjunatha', (supra). Further, in Para-5 of the judgment, it is also mentioned as to what was considered to be a fact, which included notice. As such, there is no force in this argument of the Department. 52. Therefore, where in the assessment order, penalty proceedings have been initiated mentioning a specific charge and in the accompanying notice, the assessee is called upon to furnish his explanation in respect of both the charges, the notice obviously suffers from either non-application of mind or diffidence on the part of the AO. 53. From all the above, it is quite clear, that 'suppressio vari', or 'suppression of truth', which has, in section 271(1)(c) of the IT Act, as its equivalent, 'concealment of income', and 'suggestio falsi', literally, 'suggesting or stating a falsehood', which manifests itself as 'furnishing of inaccurate particulars thereof', ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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