TMI Blog2018 (7) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of the CIT(A)-10, Mumbai dated 19-02-2016 and it pertains to AY 2011-12. The assessee has raised the following grounds of appeal:- 1. The Ld. CIT(A) erred in law and in facts in passing the order u/s. 250 of the Act and dismissing the appeal of the Appellant. 2. The Ld. CIT(A) and erred in law and in facts not appreciating that the provisions of Explanation 1 to u/s. 271{l)(c) of the Act can be invoked only in respect of concealment of particulars of income. 3. The Ld. CIT(A) erred in law and in facts in not appreciating that the initiation of penalty proceedings by the Assessing Officer was not in accordance with provisions of the Act. 4. The Ld. CIT(A) erred in law and in facts confirming the penalty levied by the Assessing Officer u/s. 271(l)(c) of the Act amounting to ₹ 79,05,625/-. 2. The brief facts of the case are that the assessee company is engaged in the business of hiring and renting of helicopters and aeroplanes, filed its return of income for AY 2011-12 on 30-09-2011 declaring loss of ₹ 39,84,49,162. The assessment has been co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he particulars have been concealed. As per the provisions of the Explanation 1, the onus to establish that the explanation offered was bona fide and all facts relating to the same, and material to the computation of his income, have been disclosed by him, will be on the person charged with'.'Concealment. In this connection, further reliance is placed on the case of Western Automobiles (India) Vs CIT (112 ITR 1048) wherein the Bombay High Court has held that where the assessee agree to inclusion of amount, onus shifts on assessee in penalty proceedings to show that the amount was not the concealed income. Hon'ble Delhi High Court in the case of Durga Timber Works Vs CIT (79 ITR 63) has held that it would amount to laying an impossible burden1 of proof on Department and making provisions for imposition'; of penalty wholly unworkable, if even after admission by assessee that certain amount could be treated as its income, the Department has still to prove by independent evidence that the assessee had concealed its income. Further, the Hon bie MP High Court in the case of Additional Commissioner of Income Bhartiya Bhandar (122 ITR 622) has held that the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee that it was advised that the amount of income-tax paid by it could be claimed as a revenue,. expenditure. It is also not the case of the assessee that deduction of income-tax paid by it was debatable issue. In fact, in view of the specific provisions contained in s. 40(a)(ii), no such advice could be given by an auditor or other tax expert. No such advice has been claimed by the assessee even with respect to the amount claimed as deduction on account of certain equipment having become useless and having been, written off. The Tribunal was entirely wrong in saying that s. 32(l)(iii) applies to such a deduction. Thus it was the Tribunal which took the view that s. 32(1)(ii) could be attracted to the deduction claimed by the assessee. It is also not the case of the assessee that it was under a bona fide belief that these two amounts could be: claimed as revenue expenditure. The assessee, in fact, outrightly conceded before the AO that these amounts could not have been claimed as revenue deductions. The only plea.taken by the dssessee before fhe IT. authorities was that it was due to oversight that the amount of income-tax paid by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is vague in nature. The assessee further submitted that the AO has not deleted or struck off inapplicable portion in the notice which is a clear case of non application of mind by the AO before initiation of penalty proceedings u/s 271(1)(c). The assessee further submitted that the AO has levied penalty for furnishing inaccurate particulars of income by invoking provisions of Explanation 1 which relates to case of concealment of particulars of income, therefore, levying of penalty on the basis of furnishing of inaccurate particulars of income is incorrect. Even on merits, assessee submitted that it has filed necessary materials required for computation of income in the return of income, therefore, the AO was incorrect in holding that the assessee has furnished inaccurate particulars of income in respect of excessive claim of loss on account of provision for bad and doubtful debts and loss on sale of fixed assets without appreciating the fact that those items are part of regular return filed by the assessee, though the claim made by the assessee is not substantiated under law. The Ld.CIT(A), after considering relevant submissions of the assessee held that if the assessee has furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1 to section 271(1)(c). Therefore, there is no merit in the argument of the assessee that the whole penalty proceedings is vitiated merely for the reason that the initial notice issued by the AO is not struck off all inappropriate portion in the said notice. In this regard he relied upon the decision of Hon ble Bombay High Court in the case of CIT vs Smt Kaysalya Others (1995) 216 ITR 650 (Bom) and also the decision of Bombay High Court in the case of Maharaj Garage Company vs CIT in Income Tax Reference No.21 of 2008 dated 22.08.17. 6. We have heard both the parties and perused the material available on record. The issue of invalid notice issued u/s 274 r.w.s. 271(1)(c) and consequent penalty proceedings is liable to be quashed is no longer an issue res integra. The Hon ble Karnataka High Court in the case of CIT vs Manjunatha Cotton Ginning Factory (supra) has clearly held that issue of penalty notice under one limb and levying penalty on another limb is a clear case of non application of mind by the AO. The Hon ble Supreme Court in the case of CIT vs SSA s Emerald Meadows (supra) has dismissed SLP filed by the department in the light of ratio laid down by Hon ble Karna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, perused the material available on record and also gone through the orders of authorities below. The AO has levied penalty u/s 271(l)(c) in respect of disallowance of reimbursement of selling and distribution expenses on the ground that the assessee has concealed particulars of income and also furnished inaccurate particulars of income. The AO has initiated penalty by issuing notice u/s 274 r.w.s. 271(l)(c) in a printed form without striking off of irrelevant portion which were not applicable to the facts of assessee's case. The AO has issued notice which states that penalty has been initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. In the assessment order, the AO has initiated penalty proceedings on both charges, i.e. for concealing the particulars of income and furnishing inaccurate particulars of income. The AO levied the penalty on both the charges, i.e. for concealing the particulars of income and furnishing inaccurate particulars of income. Right from the assessment stages to levy of penalty, the AO has initiated penalty on both charges which is not the case as per the provisions of section 271(l){c) as the two charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 particulars of income would definitely vitiate the entire penalty proceedings. 12. In this case, on perusal of the facts available on record it is abundantly clear that the AO has initiated penalty proceedings in the assessment order on both the grounds, i.e. concealment of particulars of income and also furnishing of inaccurate particulars of income. The AO also levied penalty on both the grounds of concealment of particulars of income and also furnishing of inaccurate particulars of income which is quite contrary to the provisions of section 271(lj(c) where it was categorically stated that both the charges are standing in a different footing and the AO has to initiate penalty proceedings for concealment of particulars of income or furnishing of inaccurate particulars of income. Initiation of penalty by injecting and in place of or would definitely go against the basic provisions of the Act. In this case, the AO has initiated penalty on both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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 extracted below:- 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 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 as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported (2007) 292 ITR 11 (SC) at page 19 has held that concealnment 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 sustainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) 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 274 r.w.s. 271(l)(c) was bad in law as it did not specify under which limb of section 271(lHc), penalty proceedings had been initiated. 16. Coming to the case laws relied upon by the Ld. DR. The Ld. DR relied upon the decision of Hon'ble Bombay High Court in the case of CIJ_vs Smt.Kaushalya (supra). We have gone through the case law relied upon by the Ld. DR in the light of the facts of the present case and find that the ITAT, Mumbai in the case of DCIT vs Dr. Sarita Milind Davare in ITA No.l789/Mum/2014 dated 21-12-2016 has considered the decision rendered by Hon'ble Bombay High Court in the light of Supreme Court judgement in the case of Dilip N Shroff 291 ITR 519 (SC) and observed that there should be application of mind on the part of the AO at the time of issuing notice. Since the co-ordinate bench has already considered the judgement of Hon'ble Bombay High Court, we are of the view that case law relied upon by the Ld.DR is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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