TMI Blog2018 (6) TMI 961X X X X Extracts X X X X X X X X Extracts X X X X ..... When the charge is to be framed against any person so as to move the penal provisions against him, he/she should be specifically made aware of the charges to be leveled against him/her - reliance is placed on decision in case of CIT vs. Manjunath Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] where it is said that when the AO has failed to issue a specific show-cause notice to the assessee as required u/s 274 read with section 271(1)(c), penalty levied is not sustainable - thus in the present case AO has miserably failed to specify in the notice issued u/s 274 r.w.s. 271(1)(c) “as to whether the assessee has concealed the particulars of his income or has furnished inaccurate particulars of such income”, so in these circumstances, penalty levied by the AO and confirmed by ld. CIT (A) is not sustainable - Decided in favor of assessee. - ITA No. 2559/Del./2018 Stay No. 353/Del/2018 - - - Dated:- 14-6-2018 - HON BLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER Assessee By : Shri Rohit Jain, Advocate Ms. Tejasvi Jain, CA Revenue By : Shri B.R. Mishra, Senior DR ORDER Per Kuldip Singh, Judicial Member The appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciating that penalty under section 271(1)(c) of the Act was not leviable, since the appellant had neither concealed nor furnished inaccurate particulars of income, which is sine qua non for imposing penalty. 4. That the CIT(A) erred on facts and in law in not admitting the additional evidences filed by the appellant, by cryptically relying upon the remand report of the assessing officer. 5. That the CIT(A) erred in confirming penalty in respect of disallowance of long-term capital loss of ₹ 9,53,97,219/- on account of extinguishment in the value of shares of Spice Net Ltd. 5.1 That the CIT(A) erred on facts and in law in not appreciating that no penalty was leviable in respect of the said issue since the appellant: (a) did not claim the aforesaid loss in the revised computation of income; and / or (b) had neither concealed nor furnished inaccurate particulars of income, which is sine qua non for imposing penalty under that section. 5.2 Without prejudice, the CIT(A) erred on facts and in law in not appreciating that penalty qua aforesaid issue was, in any case, barred by limitation inasmuch as the same could have, if at all, been levied pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of disallowance of business expenses who has confirmed the remaining additions vide order dated 26.10.2012. It is also not in dispute that the assessee challenged before the Tribunal only claim of exclusion of AED credit of ₹ 2547 lakhs but the appeal filed by the assessee was dismissed and the further appeal filed by the assessee challenging the order of the Tribunal is pending before Hon ble Delhi High Court. Primarily, assessee has challenged the penalty order on legal grounds inter alia that AO had no jurisdiction to levy the penalty; that no proper notice has been issued to the assessee u/s 274 of the Act and no specific satisfaction has been recorded by the AO to initiate the penalty proceedings. 6. First of all, we would examine jurisdictional issue raised by the assessee in the light of the provisions contained u/s 275 of the Act. 7. For facility of reference, proviso to clause (a) of section 275 (1) of the Act are reproduced as under :- 275. (1) No order imposing a penalty under this Chapter shall be passed- (a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs failed to prima facie satisfy himself that either the assessee has, concealed income or furnished inaccurate particulars of income , in order to issue show-cause notice under section 271(1)(c) / 274 of the Act and relied upon the decision of Hon ble Karnataka High Court in case of CIT vs. Manjunath Cotton and Ginning Factory 359 ITR 565 and CIT vs. SSA s Emerala Meadows 73 tamann.com 241 (Kar.) (Revenue s SLP dismissed in 242 taxman 180). 11. However, ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the assessee company contended inter alia that the notice issued by the AO u/s 274 of the Act is not standalone document which is based on assessment order; that the notice has been issued in respect of furnishing inaccurate particulars of income and relied upon the case of Trimurti Engineering Works 25 taxmann.com 363. 12. In order to proceed further, we would like to peruse the notice issued by AO u/s 274 read with section 271(1)(c) of the Act to initiate the penalty proceedings which is extracted as under for ready perusal :- NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT, 1961 Income Tax Office Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1 (B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271 (1)( c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of T Ashok Poi v. CIT [2007] 292 ITR 11 / 161 Taxman 340 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 CIT v. Manu Engg. [1980] 122 ITR 306 and the Delhi High Court in the case of CIT v. Virgo Marketing (P) Ltd. [2008] 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO has made written observations without applying his mind to initiate penalty proceedings under section 271(1)(c) by recording following findings :- I am satisfied that this is a fit case for imposition of penalty u/s 271(1)(c) for failure on the part of the assessee to disclose true particulars of its income on all these issues on which additions/disallowances have been made as discussed in the order. Thus penalty proceedings u/s 271(1)(c) are initiated by issuing penalty show cause notice. 18. In the light of the aforesaid observations, when we examine the assessment order it is prima facie not discernible to make AO prima facie satisfy if the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. AO has merely recorded findings at the fag end of his order in mechanical manner that it is a fit case for imposition of penalty under section 271(1)(c) on all the issue on which addition/disallowances have been made, as discussed in the order. The factum of nonapplication of mind on the part of the AO get further corroborated from the vague and ambiguous notice issued u/s 274 read with section 271(1)(c) discussed in the prece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim by moving additional evidence before the Tribunal and has disclosed each and every fact to the Revenue authorities, the penalty levied is not sustainable on the ground that the claim of the assessee has not been accepted by the authorities. 23. Furthermore, the ld. AR for the assessee contended that when the assessee has made a bonafide claim no penalty can be levied. When it is not the case of the Revenue that the assessee has concealed particulars of income or has furnished in accurate particulars of income rather declined the bonafide claim set out by the assessee, penalty cannot be levied. Reliance in this regard may be placed on judgment cited as CIT Vs Reliance Petro products Pvt. Ltd. 322 ITR 158 (S.C.). Operative part of which is reproduced for ready reference as under :- A glance at the provisions of section 271(1)(c) of the I.T. Act, 1961 suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word particulars used in section 271(1)(c) would embrace the detail of the claim made. Where no info ..... X X X X Extracts X X X X X X X X Extracts X X X X
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