TMI Blog2017 (10) TMI 1453X X X X Extracts X X X X X X X X Extracts X X X X ..... laining the non disclosure of income per her original return, based her case in the penalty proceedings on the deposit of tax even prior to the issue of reassessment notice and of the survey that led to the detection of undisclosed income, being not at her premises, both of which aspects have been found by us as irrelevant. As explained by the Hon'ble Courts, it is the entire factual background that falls for consideration, and the rules of the natural justice cannot be imprisoned in any strait-jacket formula. The due procedure of law has been observed in the present case. Rather, as explained, where no prejudice is caused, even a defect in notice which is an administrative devise to put the assessee to notice, i.e., of the proposed penalty and, further, provide an opportunity to state its case, shall not invalidate proceedings (also refer s. 292B). The legal argument raised is de hors the facts of the case, and in view of the law as explained, is without merit. CIT(A) has found the AO to have not found the assessee s explanation as not bona fide or false. The same is inconsequential as he, enjoying co-terminus powers, found the assessee s explanation and conduct as b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per profit and loss account), in earthmoving and engineering business. The return for the following year (AY 2010-11), in respect of which again penalty stands similarly levied, was furnished on 16.9.2010 at an income of Rs .3,09,606/-. The return was processed u/s. 143(1). Subsequently, the Assessing Officer (AO) received a communication dated 03.9.2012 from ITO, Ward-1(2), Puducherry, informing of the assessee having invested in immovable property during the relevant year, as under: Sl. No. Date of Purchase Description Amount paid (in Rs.) 1 11.12.2008 Land and Building 1 5,00,000 2 26.03.2009 Vacant Plot 21,00,000 Total 36,00,000 Add: Stamp duty and registration charges 1,80,000 Total investment 37,80,000 As no such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry, v) the assessee had co-operated in the assessment proceedings and paid the taxes and demand, vi) explanation and conduct of the assessee being bona fide, vii) AO has not carried out any independent enquiry, viii) no fraud or wilful neglect on the part of assessee established by AO, and ix) she was not well at the time of assessment as well as penalty proceedings, I consider this is a fit case for cancelling the penalty following the decisions cited above including that of jurisdictional Tribunal, the Madras High Court and the Apex Court. Aggrieved, the Revenue is in appeal, which, on account of low demand, is only for AY 2009-10; the unexplained investment for the following year being at ₹ 3.78 lacs. The assessee has also filed a CO, which, though, is only supportive, emphasizing that the assessee had paid ₹ 11.03 lacs, amounting to about 90% of the tax demand raised in pursuance to the assessment, even before the assessment dated 31.12.2013. This is supported by a challan details report dated 20.1.16 in the assessee s (identified by PAN) case for AY 2009-10. 4. We have heard the parties, and perused the material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile Processors [2008] 306 ITR 277 (SC); K.P. Madhusudhanan vs. CIT [2001] 251 ITR 99 (SC); B.A. Balasubramaniam and Bros v. CIT [1999] 236 ITR 977 (SC); Addl.CIT vs. Jeevan Lal Shah [1994] 205 ITR 244 (SC); CIT vs. K. R. Sada yappan [1990] 185 ITR 49 (SC); CIT vs. Mussadilal Ram Bharose [1987] 165 ITR 14 (SC); and Sharma Alloys (India) Ltd. v. ITO [2013] 357 ITR 379 (Mad). We may, next, examine the facts of the case to see if the assessee satisfies the mandate of law. It may be here clarified that the explanation as well as the assessee s conduct; the contours of which are spelled out in Explanation 1 to s. 271(1)(c) supra, is with reference to the assessee s original return, i.e., as furnished on 03.9.2009 in the present case (refer: CIT v. Onkar Saran Sons [1992] 195 ITR 1 (SC)). The subsequent returning of undisclosed income could be considered as a mitigating factor only where the same is voluntary, and not upon detection of the undisclosed income by the Revenue, which cannot, therefore, be regarded as voluntary, but only as motivated, and therefore of little consequence. The law in the matter is well-settled, viz. Ravi Co. v. Asst. CIT [2004] 271 ITR 286 (Mad); S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome u/s. 69/69A was upheld. As explained in Chuharmal (supra), the deeming provisions are only salutary principles of common law jurisprudence, embodied in the Act. There are in fact several cases of levy and sustenance of penalty u/s. 271(1)(c) on deemed incomes, viz. investment (s. 69); cash credit u/s. 68 or even trade credits (s. 41(1)), i.e., on the inability on the part of the assessee to satisfactorily explain the same, so that the same came to be deemed as income. We may refer to some of these cases as follows: Kamal Basha v. Dy. CIT [2009] 316 ITR 58 (Mad); CIT v. Rattan Singh Grewal [2008] 304 ITR 75 (P H); CIT v. Jamnadas Co. [1994] 210 ITR 218 (Guj); Loknath Chowdhury v. CIT [1985] 155 ITR 291 (Cal); Western Automobiles (India) v. CIT [1978] 112 ITR 1048 (Bom); CIT v. Ganpatrai Gajanand [1977] 108 ITR 403 (Ori). The decision in S.V.Kalanam (supra) turned on the facts of that case. It is then said that the investment in land and building, as well as the vacant land, was sourced by way of gifts from relatives from both the assessee s and her husband s side. The explanation is completely unsubstantiated. Who are these anonymous relatives; what is their capacity; when and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Next, we may consider the assessee s objection that the show cause notice dated 31.12.2013, initiating penalty proceedings (copy on record), does not specify if the penalty proceedings are being initiated in respect of the concealment of particulars of income or for furnishing inaccurate particulars of income, i.e., by striking off the portion that is not applicable. Reliance is placed on the decision in CIT v. Manjunatha Cotton Ginning Factory [2013] 359 ITR 565 (Kar). Though assumed for the first time, being a legal issue, with the facts relevant for the purpose being on record, we admit the revised CO. The whole premise of the decision in Manjunatha Cotton Ginning Factory (supra), which stands carefully perused, is that the assessee must be made known the charge against it, so as to be able to respond thereto, i.e., the process of levy of penalty should accord with the principles of natural justice, eschewing any prejudice being caused to the assessee. How could the same hold in the facts and circumstances of the present case, when the assessee, even before the issue of notice u/s.148, initiating reassessment proceedings to bring the escaped income to tax, has deposited &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings. A similar issue came up before the Hon'ble jurisdictional High Court in the case of Smt. Kaushalya Others (supra) [CIT v. Smt. Kaushalya [1995] 216 ITR 660 (Bom)]. Relying on the decision in the case of Mithila Motors (supra), it was held as under: (pg. 665(e-g)) Sec. 274 of the Income-tax Act, 1961 contains a principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inapplicable portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing further, in CIT v. Manu Engineering Works [1980] 122 ITR 306 (Guj), another decision on which the assessee places reliance, it was explained that the AO at the time of initiation of penalty u/s. 271(1)(c) is only to be prima facie satisfied that the assessee has either concealed, or furnished inaccurate, particulars of income, attracting the levy there-under, and it was further open for him to issue a notice without specifying any one limb of the composite charge. It is only while finalizing the penalty that he has to issue a definite finding, and could not remain ambivalent. It is only, it needs to be appreciated, upon considering the assessee s explanation that it would be finally determined if the penalty is at all leviable. Why, the AO may, for all we know, find the assessee s explanation plausible/valid and drop the proceedings, and which could, on that footing, stand deleted in appeal as well. Finalizing the charge requires an intimate know of the facts, at least some which may not be known to the AO at the time of issuing the notice, and come to surface only in the penalty proceedings, which are separate and distinct proceedings from that qua quantum, as where the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposition by and on behalf of the assessee, could be? The decision in Manu Engineering Works (supra), which is premised on the penalty proceedings being quasi criminal proceedings, while the same stand clarified in Dharmendra Textile Processors (supra) to be only civil proceedings, stands explained and followed in Snita Transport Pvt. Ltd. v. Asst. CIT [2014] 42 taxmann.com 54 (Guj). Reference in this context may also be made to the decision by the tribunal in Nexus Software Ltd. v. Dy. CIT [2017] 59 ITR (Trib.) 177 (Ahbd). The assessee appears to have relied on the decision in Manu Engineering Works (supra) without reading it. Coming to the facts of the case, what prejudice, ensuring absence of which is the whole concern, as explained by the Hon'ble High Courts, is caused to the assessee? The argument, therefore, to hold, must be accompanied by a showing of the prejudice it has caused or led to, while there is in fact no claim thereof, much less exhibiting it, in the present case. On the contrary, the assessee, rather than explaining the non disclosure of income per her original return, based her case in the penalty proceedings on the deposit of tax even prior to the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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