TMI Blog2019 (4) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment is made on the inference flowing from the inability of the assessee to establish the case pleaded by him, will not be sufficient for the purpose of imposition of penalty. The degree of proof required for the imposition of penalty is quite different from and is of a much higher order than that required for the purpose of making addition on an estimated basis. Besides, addition on the basis of estimate does not ipso facto supply evidence of concealment so as to justify penalty. Finding of concealment cannot be based on estimation alone. In the facts of the instant case, the factum of concealment was not proved beyond the shadow of doubt. No justification for imposition of penalty U/s 271(1)(c) of the Act in all the years under consideration - Decided in favour of assessee - ITA Nos. 63 to 68/JP/2019 - - - Dated:- 26-3-2019 - Shri Ramesh C Sharma, Accountant Member For the Assessee : Shri Vijay Goyal (FCA) For the Revenue : Ms. Anuradha (JCIT) ORDER PER: R.C. SHARMA, A.M. These are the appeals filed by the assessee against the different orders of the ld.CIT(A)-1, Jaipur dated 02/11/2018 for the A.Y. 2005-06 to 2010-11 in the matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of CIT Vs SSA s Emerald Meadows And CIT vs Manjunatha Cotton Ginning Factory other [2013] 359 ITR 565. Hon ble Karnataka High Court has passed detailed order on this issue in the case of CIT vs Manjunatha Cotton Ginning Factory other [2013] 359 ITR 565. The concluding para of the order is as under:- CONCLUSION 63. In the light of what is stated above, what emerges is as under: a) Penalty under Section 271(1)(c) is a civil liability. b) Mensrea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) (B) it should be discernible from the said order which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. ii) Recently Hon ble ITAT in the case Neha Sharma v/s ITO, Ward 2(3), Jaipur in ITA No. 781/JP/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a 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 case, the consequent levy cannot be sustained. 17. In this connection, reliance is first placed upon the judgment of the Hon'ble Karnataka High Court In the case of CIT v. Manjunatha Cotton and Ginning Factory Ors. and Veerabhadrappa Sangappaand Co.(359 ITR 565, 577, 601, 603-604) in which the facts are similar. In those bunch of tax appeals, several assessee and several issues were involved. In so far as I.T.A. No. 5020 of 2009 was concerned, one of the substantial questions on which the appeal was filed by the revenue was: 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? 18. While answering the above in favour of the assessee, the following findings were recorded by the Hon'ble Court: 61. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstantial questions of law framed in this case in favour of the assessee and against the Revenue. 21. The aforesaid judgment was unsuccessfully challenged by the revenue before the Supreme Court, as it was rejected vide Petition for Special Leave to Appeal (C) No. 13898/2014 dated 11.07.2016. Reliance was next placed upon another judgment of the Hon'ble Karnataka High Court in the case CIT v. SSA'S Emerald Meadows (Income Tax Appeal No. 380 of 2015 decided on 23.11.2016). In this case also similar situation arose in as much as the Hon ble Court was required to adjudicate on the following substantialquestion: (1) Whether, omission of assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? 22. The aforesaid question was dealt with by the Hon ble Court in favour of the assessee in the followingwords: 3. The Tribunal has allowed the appeal filed by the assessee holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andard format, the Assessing Officer should delete the inappropriate words or paragraphs, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. This, according to the Hon'ble Supreme Court, deprives the assessee of a fair opportunity to explain its stand, thereby, violates the principles of natural justice. As held by the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), the aforesaid principle laid in Dilip N. Shroff (supra) still holds good in spite of the decision of the Hon'ble Supreme Court in UOI v/s Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v/s Smt. Kaushalya Ors., [1995] 216ITR660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unawar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order . v) Hon ble ITAT Jaipur Bench, Jaipur in its judgment in ITA 878/JP/2013 dated 11.03.2016 in the case of Shankar Lal Khandelwal Vs DCIT held that when assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed the particulars of income and furnished inaccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting either limb of penalty even he has not put and in the notice itself between two limbs than the initiation of penalty proceedings cannot be considered as per law and Assessing Officer did not have any jurisdiction to impose penalty U/s 271(1)(c) of the Act. vi) Hon ble ITAT in its judgment in case of Narayana Heights Towers, Vs. ITO Ward-2-4 Jaipur ITA No 1033/JP/2016 has canceled the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has concealed the income of particulars or furnished the inaccurate particulars of income. The Hon ble Karnataka High Court in the case of CIT and Another Vs. Manjunatha Cotton and Ginning Factory,359 ITR 565(Kar.) has held that the notice u/s 274 of the Act should specifically state as to whether penalty is being proposed for concealment of particulars of income or inaccurate particulars of income. In the present case notice under section 274 dated 25/3/2015 enclosed at paper book page 16 reads as under: Penalty Notice Under Section 274, Read with Section 271 of the IT Act. 1961 15 ITA No. 1033/JP/2016 Narayana Heights Tower. Whereas in the course of proceedings before me for the Assessment Year 2012-13. It appears to me that you have:- Read With Section 271(1)(c) concealed particulars of income or furnished inaccurate particulars of income. Therefore, there is no specific charge by the Assessing Officer. Further, it is noted that the Assessing Officer in penalty order (as noted hereinabove) has proceeded on the basis of the assumption that the assessee is satisfied with the assessment order. Therefore, it appears that the assessee has nothing to say and has no objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Income as well as furnishing of inaccurate particulars of income and therefore the assessing officer rightly initiated the penalty proceedings for both the offences. In penalty notice also both the offence were mentioned. But in the assessee s case, in the assessment order as well as in notice issued u/s 274 of Income Tax Act as noted above the assessing officer has stated that the assessee has concealed/or furnished the inaccurate particulars of income. Therefore, from this it cannot be inferred that the penalty was initiated for both the offences and since there is no specific charge of concealing the particulars of income or furnished the inaccurate particulars of such income, the initiation of penalty u/s 271(1)(c) is bad in law. Law is well settled that the assessing officer has to come to a definite satisfaction whether the assessee has concealed the income of particulars or furnished the inaccurate particulars of income. Further decision of Hon'ble Jurisdictional High Court in the case of Shevata Construction Co Pvt. Ltd (supra) will prevail over the third member judgment wherein it has been held that the AO, has to give a notice as to whether he propos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old decisions. Therefore, the concealment of income and furnishing inaccurate particulars of income, two are different defaults and they cannot be intermixed. Therefore, the order of Assessing Officer deserves to be set aside and penalty levied by Assessing Officer deserves to be cancelled. 4. On merits it was alleged that addition has been made only on estimation basis, therefore, no penalty is imposable while making any addition on estimate basis. For this purpose, reliance was placed on the decision of Hon ble Rajasthan High Court in the case of Shiv Lal Tak Vs CIT (2002) 121 Taxman 99. 5. Reliance was also placed on the decision of the ITAT Jodhpur Bench in the case of ITO vs Gurunanak Oil Agency [2013] 35 taxmann.com 562 (Jodhpur - Trib.). The finding of Tribunal is as under: 4. We have heard rival submissions and have carefully treaded through the entire record. We have found that the impugned penalty is based only on estimated additions. Besides that all additions have been deleted except for a small one of ₹ 1,62,240 which has been sustained. However, this addition is not the basis of imposition of penalty. Otherwise, also the sustained addition is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,10,47,533) ₹ 13,22,402 ₹ 10,70,855/- (14.22% of75,30,620). ₹ 6,25,652 2007-08 ₹ 38,43,639/- (25% of 1,53,74,556) ₹ 33,96,837/- (Rs. 38,43,6394,46,802) ₹ 26,45,497/- (16% of ₹ 1,65,34,355) ₹ 21,98,695 ₹ 12,98,334/- (14.22% of 91,30,339). ₹ 8,51,532 2008-09 ₹ 41,56,251/- (25% of 1,66,25,006) ₹ 36,58,369/- (Rs. 41,56,2514,97,882) ₹ 22,82,560/- (16% of ₹ 1,42,66,001) ₹ 17,84,678 ₹ 7,88,610/- (14.22% of 55,45,779). ₹ 2,90,728 2009-10 ₹ 23,07,943/- (25% of 92,31,773) ₹ 19,00787/- (Rs. 23,07,943- 4,07,156) ₹ 16,62,834/- (16% of ₹ 1,03,92,716) ₹ 12,55,678 ₹ 8,48,453/- (15.33% of 55,34,598). ₹ 4,41,297 2010-11 ₹ 29,80,549/- (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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