TMI Blog2019 (3) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... ME COURT] as relied upon by ld. DR for the Revenue is not applicable to the facts and circumstances of the case. Decision rendered in CIT vs. SSA’s Emerala Meadows [2016 (8) TMI 1145 - SUPREME COURT] and CIT vs. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] are squarely applicable to the facts and circumstances of the case as the AO has miserably failed to specify in the notice issued under section 274 read with 271(l)(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 CIT (A) is not sustainable in the eyes of law. Consequently, the appeal filed by the assessee is allowed. - ITA No.1232/Del./2016 - - - Dated:- 28-2-2019 - Shri Kuldip Singh, Judicial Member And Dr. M.L. Meena, Accountant Member For the ASSESSEE : Shri R.S. Singhvi, CA, Shri Satyajeet Goel, C For the REVENUE : Ms. Rinku Singh, Senior DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : The Appellant, M/s. Lodhi Property Company Ltd. (hereinafter referred to as the assessee ) by filing the present appeal sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rders passed by the revenue authorities below in the light of the facts and circumstances of the case. 5. Undisputedly, AO has initially made disallowance of ₹ 1,34,56,177/- claimed as expenditure by the assessee under the head legal, professional and consultancy charges , which amount has been restricted by ld. CIT (A) in appeal to ₹ 71,59,700/-. It is also not in dispute that AO made disallowance by treating the same as capital expenditure held to have been incurred for acquisition of new source of income, an advantage of enduring nature and towards acquisition of Lodhi Hotel. It is also not in dispute that it is a case of loss making company throughout. 6. In the backdrop of the aforesaid undisputed facts circumstances of the case, order passed by the lower revenue authorities and arguments addressed by the Ld. Authorized Representatives of the parties to the appeal, the sole question arises for determination in this case is:- As to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of such income during assessment proceedings? 7. Ld. AR for the assessee challenging the impugned order contended inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Bare perusal of the notice issued u/s 274 read with section 271(1)(c) of the Act in order to initiate penalty proceedings against the assessee goes to prove that the AO himself was not aware as to whether he is issuing notice to initiate the penalty proceedings either for concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee rather issued vague and ambiguous notice by incorporating both the limbs of section 271(1)(c). 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. 11. Hon ble High Court of Karnataka in case of CIT vs. Manjunatha Cotton and Ginning Factory (supra) while deciding the identical issue held 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(l)(c), penalty levied is not sustainable. The operative part of the judgment is reproduced as under:- 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or furnishing of inaccurate particulars of income - High Court held that matter was covered by aforesaid decision of Division Bench and, therefore, there was no substantial question of law arising for determination - Whether since there was no merit in SLP filed by revenue, same was liable to be dismissed - Held, yes [Para 2] [In favour of assessee] 13. Ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the assessee contended that assessee has never raised any such question of invalid notice during penalty proceedings nor before the ld. CIT (A) which has caused no prejudice to the assessee as the assessee has understood the purport and import of the notice under section 274 read with section 271 of the Act and relied upon the decision rendered by the Hon ble Madras High Court in Sundaram Finance Ltd. vs. CIT (2018) 403 ITR 407 (Madras), in which SLP has also been dismissed by Hon ble Supreme Court in the case cited as Sundaram Finance Ltd. vs. CIT (2018) 99 taxmann.com 152 (SC) and also relied upon the judgment of CIT vs. Smt. Kaushalya 216 ITR 660 (Bombay) Trimurti Engineering Works vs. ITO (2012) 138 ITD 189 (Del.) . 14. Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. However, we are of the considered view that in the instant case, not only the notice issued to the assessee under section 274 read with section 271(1)(c) is defective but AO has not even made himself satisfied at the time of making disallowance / addition in assessment order if the assessee has furnished inaccurate particulars of income or has concealed particulars of his income rather to be on the safer side he has invoked both the limbs of section 271(1) of the Act. Not only this, even at the time of passing the penalty order, AO was not clear enough if he was levying the penalty on account of furnishing of inaccurate particulars of income or for concealment of income as is apparent from para 8 of the penalty order. So, we are of the considered view that this is not merely a case of serving a defective notice under section 274 read with section 271(1) on the assessee rather it is a case of non-application of mind on the part of the AO to make himself satisfied as to under which limb of section 271(1)(c) of the Act, he is going to initiate/levy the penalty on the assessee. 16. Furthermore, when all these facts are examined in the light of fact that it is categoric case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(l)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. 18. Even otherwise, when there is two views if the expenditure claimed are capital or revenue in nature, again there is no question of attracting provisions contained under section 271(1)(c) of the Act. 19. So, in these circumstances, when AO himself is not satisfied since the time of framing assessment as to under which limb of section 271(1)(c) of the Act, penalty is to be levied, he cannot be permitted under law to wash of his hands by taking recourse to Explanation 1 to section 271(1)(c) of the Act by placing the entire onus on the assessee to prove that there is no concealment of income/furnishing of inaccurate particulars of income. Para 6 8 of penalty order further make it clear that at no point of time right from the passing of the assessment order till passing the penalty order, AO has not made him ..... X X X X Extracts X X X X X X X X Extracts X X X X
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