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TMI Blog2019 (4) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law as show cause notice issued by the Ld. AO is general in nature with mentioning specific charge of imposition of penalty. 3. That the issue in question now squarely covered by the decisions of the co-ordinate Benches of the ITAT, Delhi Benches in case of Sanjay Mitra Vs. DCIT, ITA no. 5206/Del/2016 and Ashwini Mongia Vs. ITO, ITA no. 6044/Del/2015. The penalty of Rs. 15,50,224/- needs to be deleted. 4. That even on merits the Ld. CIT(A) has erred on facts and in law as the material placed on record was not considered in its proper perspective leading to erroneous conclusion. 5. That the order of the Ld. CIT(A) confirming the erroneous order of the AO is bad in law and against the facts of the case." 2. Briefly stated that facts necessary for adjudication of the controversy at hand are : on the basis of completed assessment u/s. 143(3) of the Income Tax Act, 1961 (for short the 'Act') at the income of Rs. 11,35,52,137/- by making addition of Rs. 45,60,824/-, 54,725/- and 88,53,764/- on account of disallowance of Sales Promotion , expenses, disallowance of excess depreciation on disallowance of FBT, PF & ESI respectively, out of which addition of Rs. 88,53,764/- has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment proceedings?" 8. Ld. AR for the assessee challenging the impugned order contended inter alia that AO in order to initiate the penalty proceedings has prima facie failed to satisfy himself that as to whether the assessee has concealed the particulars of income or have furnished inaccurate particulars of income in the assessment order as well as in the show cause notice issued 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. Manjunatha Cotton and Ginning Factory-359ITR 565 and CIT vs. SSA's Emerala Meadows -73 taxmann.com 241 (kar.) (Revenue's SLP dismissed in 242 taxman 180). 9. Ld. AR for the assessee further contended that since issue as to the disallowance of 50% of the expenditure claimed by the assessee under the head "Sales Promotion Expenses" is pending before the Hon'ble High Court the penalty cannot be levied. 10. However, on the other hand 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use why an order imposing a penalty on yu should not be made under section 271 of the Income tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or though authorized representative you may show cause in writing or before said date which will be considered before any such order is made under section 271. Sd/- Asstt. Commissioner of Income Tax, Circle 13(1), New Delhi Delete the appropriate words and paragraph." 12. 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. 13. Hon'ble High Court of Karnataka in case of CIT vs. Manjun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Karnataka High Court rendered in case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 1TR 565/218 Taxman 423/35 taxmann.com 250, allowed appeal of assessee holding that notice issued by Assessing Officer under section 274 read with section 271 (1 )(c) was bad in law, as it did not specify under which limb of section 271 (1 )(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income 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]" 15. Hon'ble Madras High Court in Sundaram Finance Ltd. (Supra) relied upon by the Ld. DR for the revenue upheld the order passed by the Tribunal confirming the penalty levied on the basis of notice issued under section 274 read with section 271(1)(c) of the Act in which specific charge was not pointed out by returning the following findings :- "16. We have perused the notices and we find that the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome rather to be on the safer side he has invoked both the limbs of section 271(1) of the Act. 17. So, ultimately there was no application of mind on the part of AO even at the time of framing assessment, rather initiated the penalty proceedings in a mechanical manner. 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. AO has levied the penalty without specifying as to under which limb of the Section 271(1)(c) of the penalties is being levied. Operative part of the penalty order is extracted for ready perusal :- "As stated above, the addition in respect of sales promotion expenses has been made by the AO for the reasons that the assessee could not conclusively prove with supporting evidence. This finding of Assessing Officer has been confirmed by the ld. CIT(A) in clear terms. Accoridngly, I hold that the case of the assessee clearly falls within the explanation to section 271(1)(c) of the Income Tax Act and therefore, is liable to penalty u/s 271(1)(c) of I.T.Act. I therefore, imposed a penalty of Rs. 15,50,224/-." 18. So, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 271(l) (c) would suggest that in order to be covered, 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 instant case was not the case of concealment of the income. That was not the case of the revenue either. It was an admitted position in the instant case that no information given in the return was found to be incorrect or inaccurate. It was not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee could not be held guilty of furnishing inaccurate particulars. The revenue argued that submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income. Such cannot be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. [Para 7]" Similarly, in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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