TMI Blog2019 (8) TMI 989X X X X Extracts X X X X X X X X Extracts X X X X ..... st opportunity as soon as it came to the notice of the assessee. Assessee has committed this mistake for furnishing of inaccurate particulars in the return due to the inadvertent bonafide error in the claim due to one entry by the accounts staff posted at wrong date due to huge voluminous transactions and dividend coupons for dividend from same security punched at one voucher i.e. entry of two dividend received on same security (₹ 1,98,51,874/- received on 28.1.2015 and ₹ 3,38,62,717/- received on 25.3.2015 made cumulatively on 26.3.2015 i.e. date of sale of investments (26.3.2015) and receipt date of second dividend. AO has completed the assessment on the basis of details furnished by the assessee, hence, under the circumstances assessee has not furnished inaccurate particulars of income. Assessee has paid voluntary taxes on disallowance u/s. 94(7) and not filed the appeal against the assessment order passed by the AO. It is an admitted fact that assessee has not filed any false claim. We further note that the assessee fully disclosed all the information asked for and has nowhere furnished any inaccurate particulars. We find that there is no conclusive proof t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax (Appellate Tribunal) Rules, 1963 in the present appeal and raised the ground no. 4 as additional ground of appeal and stated that the issue raised by the assessee in the said additional ground of appeal involved the question of law and hence, the same may be admitted in view of the judgment of the Hon ble Supreme Court of India in the case of NTPC Ltd. 229 ITR 383 (SC). For the sake of convenience, the legal ground raised by the assessee as ground no. 4 is reproduced as under:- Ground No. 4 That the Ld. CIT(A) ought to have held that the Notice, Proceedings and Order imposing penalty u/s. 271(1)(c) are bad in law being contrary to facts, principles of natural justice, provisions of law and judgments of courts in India. 4. The brief facts relating to the issue in dispute are that the assessee filed its return of income declaring net taxable income at ₹ 35,29,470/- on 17.9.2015 for the assessment year 2015-16 which was processed on 29.7.2016 u/s. 143(1) of the Income Tax Act, 1961 (in short Act ). The case of the assessee was selected for limited scrutiny through CASS with identified issues of Long Ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 7.12.2017 the AR of the assessee appeared and furnished all the details as filed in the original return of income and claimed Long Term Capital Gain. Again the AO asked to furnish the detail of dividend /bonus in the requisite format and in response to the same the AR of the assessee attended the hearing on 15.12.2017 and furnished the details vide letter dated 15.12.2017 which the AO has reproduced in para no. 4.2 at page no. 2 3 of the assessment order. On examination of the details filed by the assessee in the prescribed format given by the AO with the notice u/s. 142(1) of the Act dated 7.12.2017, the AO was of the view that the share were accrued within the period of three months prior to record date and sold the securities within 3 months of the record date. Thus the loss of ₹ 1,98,51,874/- is liable to be ignored according to the provisions of section 94(7) of the I.T. Act. However, the AR of the assessee in his reply vide letter dated 15.12.2015 has himself acknowledged the mistake and offered for taxation duly filing the revised computation of income. Keeping in view of the admission by the assessee and filing the revised computation of income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income, an assessee fails to offer an explanation or is unable to substantiate an explanation offered by him or offers an explanation which is found to be false, the amount added or disallowed in computing the total income of such person as a result thereof will be treated as his concealed income . He further stated that Circular No. 204 dated 24.6.1976 is legally binding on the revenue and this legal binding character attaches to the circular even if they are found not accordance with the correct interpretation of the section. In support of this contention he cited the decision in the case of UCO Bank 104 Taxmann 547 (SC). He further stated that in view of the judgment of the Hon ble Supreme Court of India in the case of T Ashok Pai 292 ITR 11 (SC) it has been observed that concealment of income and furnishing inaccurate particulars of income carry different connotation . He further stated that as per the ratio of Nepa Limited 58 Taxmann.com 137 (Indore) it has been observed that in case of furnishing of inaccurate particulars of income, the onus is on the revenue to prove that assessee has furnished inaccurate particular. Ld. Counsel for the assessee finally argued that w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of dividend / bonus income and found that there is an inadvertent clerical error committed by the Chartered Accountant and on the advice of Senior Chartered Accountant, the assessee filed voluntary revised computation of income wherein a Long Term Capital Gain (LTCG) of ₹ 14353921 has been increased to ₹ 34205795 due to the disallowance of ₹ 19851974 u/s. 94(7) of the Act at the first opportunity as soon as it came to the notice of the assesee. Assessee has committed this mistake of furnishing of inaccurate particulars in the return due to the inadvertent bonafide offer cited in the claim due to the one entry by the accounts staff posted at wrong date due to huge voluminous transactions and dividend coupons for dividend from same security punched at one voucher i.e. entry of two dividend received on same security (₹ 1,98,51,874/- received on 28.1.2015 and ₹ 3,38,62,717/- received on 25.3.2015 made cumulatively on 26.3.2015 i.e. date of sale of investments (26.3.2015) and receipt date of second dividend. AO has completed the assessment on the basis of details furnished by the assessee. He further stated that under the circumstances assessee has not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Madras) Where Hon'ble Madras High Court held that where notice did not show nature of default, it was a question of fact. The assessee had understood purport and import of notice, and hence, no prejudice was caused to the assessee. It considered decision of Karnataka High Court in CIT v. Manjunatha Cotton Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 (Kar.). Relevant part of the order is reproduced below : 15. Before us, the assessee seeks to contend that the notices issued under Section 274 r/w. Section 271 of the Act are vitiated since it did not specifically state the grounds mentioned in Section 271(l)(c) of the Act. 16 . We have perused the notices and we find that the relevant columns have been marked, more particularly, when the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee's case, as it is purely a question of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hearing because three show-cause notices were ambiguous and defeated very purpose of giving reasonable opportunity of hearing as contemplated under section 274 and two orders of ITO were without jurisdiction. It was held that mere mistake in language used or mere non-striking off of inaccurate portion cannot by itself invalidate notice under section 274. Penalty orders passed by ITO for assessment years 1968-69 to 1969-70 were perfectly valid and there was no justification for quashing same on ground of absence of jurisdiction. 4. Trimurti Engineering Works Vs ITO [2012] 25 taxmann.com 363 (Delhi)/[2012] 138 ITD 189 (Delhi)/[2012] 150 TTJ 195 (Delhi) where Hon'ble IT AT Delhi held that it was apparent from combined reading of notice and assessment order that impugned notice had been issued in respect of concealment of particulars of income. Relevant part of the order is reproduced below: 5.2 It is also submitted that the notice is vague. We have already seen that in the notice one of the alternatives, i.e., concealment of particulars of income or furnishing of inaccurate particulars of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been recorded in respect of both the additions that the amount is treated as income from undisclosed sources. All these observations made by the AO show that it was his case that particulars of income have been concealed. It is not a case where any disallowance has been made but a case where the assessee was found in possession of certain unaccounted money which was utilized in the course of business without paying tax thereon. Therefore, when we see the notice and the contents of assessment order, it is clear that the notice was issued for concealing particulars of income. The notice is not a stand alone document. It is based on the assessment order. Without finding regarding one or the other charge, the notice cannot be issued. However, if two are read together, it is clear that the notice has been issued in respect of concealment of particulars of income. In view of these observations, it is held that the notice is not vague. 5. Hybrid Rice International Pvt.Ltd. Vs elT (ITA no. 285/De1/2007) where Hon'ble ITAT Delhi held that it was apparent from combined reading of notice and assessment order that impugned notice had been issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74 of the Act can be issued both during or after the completion of assessment proceedings, however, the satisfaction of the Assessing Officer that there has been an infraction of clause (c) of subsection (1) of Section 271 should precede conclusion of the proceedings pending before the Assessing Officer. (iv) The order imposing penalty can be passed only after assessment proceedings are completed. The time frame for passing the order is contained in Section 275 of the Act. To summarize: the Supreme Court held that the satisfaction which the Assessing Officer was required to arrive at during the course of assessment proceedings for initiation of penalty proceedings was prima facie in nature as against a final conclusion that the assessee had committed an act of omission or commission which would bring him within the ambit of the provisions of clause (c) of subsection (1) of Section 271. The notice under Section 274 was to follow. What was important was that satisfaction had to be arrived at during the course of assessment proceedings and not issuance of notice under Section 274 of the Act. (See D.M. Manasvi (1972) 86 ITR 557 and and S. V. Angidi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for. (v) However, this would not debar an assessee from furnishing evidence to rebut the prima facie satisfaction of the Assessing Officer,' since penalty proceeding are not a continuation of assessment proceedings. [See Jain Brothers v. Union of India (1970) 77 ITR 107(SC)] (vi) Due compliance would be required to be made in respect of the provisions of Section 274 and 275 of the Act. (vii) the proceedings for initiation of penalty proceeding cannot be set aside only on the ground that the assessment order states penalty proceedings are initiated separately' if otherwise, it conforms to the parameters set out hereinabove are met. 6.8 . Applying the propositions laid down to the facts of the case, we are of the considered opinion that the penalty proceedings were rightly initiated in this case and that the penalty was rightly confirmed by the Ld.ClT(A). 6. Earthmoving Equipment Service Corporation Vs DCIT [2017] 84 taxmann.com 51 (Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inning Factory (supra), we find that the assessee's appeal was allowed by Hon'ble High court after considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore, we are of the opinion that the penalty could not be deleted merely on the basis of defect pointed by the Ld. AR in the notice and therefore, the legal grounds raised are rejected. 7. DCIT Vs Shah Rukh Khan [2018] 93 taxmann.com 320 (Mumbai - Trib.) where Hon'ble ITAT Mumbai held as follows: 13. The Id. A.R further to support his contention that because of the failure on the part of the A.O to strike off the irrelevant default in the body of the 'SCN', the assessee had remained divested of any opportunity of putting forth its case before the A.O that no penalty under the aforesaid statutory provision was liable to be imposed in his hands, relied upon the following judicial pronouncements:- (I) CIT v. Manjunatha Cotton Ginning Factory (2013) 359 ITR 565 (Kar.) (ii) Dilip N. Shroffv. JCIT (2007) 291 ITR 519 (SC) (iil) Commissioner of Income-tax v. Samson Pernchery (2017) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity of the penalty imposed by the A.a under See. 271(1)(c). The Ld. D.R. in support of his said contention relied on the following judicial pronouncements:- (I) M/s. Maharaj Garage Company v. The Commissioner of Inc Nagpur (Income tax reference No. 21 of 2008, dated 22.08.2017. (il) Commissioner of Income tax v. Smt. Kaushalya Others (1995) 211 (Bom.). (iil) Earthmoving Equipment Service Corporation v. DCIT 22(2), Mur No.6617/Mum/2014, dated 02.05.2017). (iv) Dhevel K. Jain v. ITa. Ward 16(3)(1), Mumbai (ITA No. 996/N dated 30.09.2016). 19 ... We are of the considered view that in the backdrop of the aforesaid judgment of the Hon'ble High Court of Jurisdiction, allowing the assessee respondent to proceed with his objection which was for the very first time orally raised during the course of hearing of the appeal before us, undoubtedly would be nothing short of proceeding with the hearing of the appeal, without affording an opportunity of being heard to the appellant revenue in context of the issue under consideration. 8. Dhanraj Mills Pvt. ltd. Vs ACIT ITA NOs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceeding emanate from proceeding of assessment, they are independent and separate aspect of proceeding. All the other decisions relied by the Ld counsel for the assessee is based on the decision of ClT Vs Manjunatha Cotton Ginning Factory (supra), wherein the decision of ClT Vs Kaushlya (supra) was not brought in the notice of coordinate bench of Mumbai Tribunal. 2.18. The Hon'ble Karnataka High Court in CIT Versus SSA'S Emerald Meadows in ITA No. 380 of 2015 order dated 23/11/2015, while dismissing the appeal of Revenuefollowed the decision of ClT Versus Manjunatha Cotton Ginning Factory (supra). Against the judgment of Karnataka High Court the Revenue filed Special Leave Petition before the Hon'ble Apex Court and the same was dismissed vide SLP (CC No. 11485/2016) on 05/08/2016. There is no dispute to the settled proposition of law that dismissal of the Special Leave Petition in limineby Hon'ble Apex Court does not mean that the reasoning of the judgment of the High Court against which the Special Leave Petition has been filed before this Court stands affirmed or the judgment and order impugned merges with such order of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal. (iii) Doctrine of merger is not a doctrine of universal or unlimited application. It will depend on the nature of jurisdiction exercised by the superior forum and the content or subject-matter of challenge laid or capable of being laid shall be determinative of the applicability of merger. The superior jurisdiction should be capable of reversing, modifying or affirming the order put in issue before it. Under Article 136 of the Constitution the Supreme Court may reverse, modify or affirm the judgment-decree or order appealed against while exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is rejected. Thus, all these four appeals are, therefore, dismissed and the stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed. 9. ITO Internatinal Taxation 2(1) Chennai. Vs RajanKalimuthu ITA No.2900/CHNY /2018 (copy enclosed) Wherein the Hon'ble ITAT held that the Ld.ClT(A) ought not have deleted the penalty based on e decision of Manjunatha Cotton and Ginning Factory, and hence, remanded the matter back to the CIT(A) for fresh adjudication on merits. Sub: Written Submission in the above case- reg. In the above case, it is humbly submitted that the following decisions may kindly be considered with regard to levy of penalty u/s 271 (1 )(c) of I.T.Act: 1. Union of India v. Dharamendra Textile Processors [(2007) 295 ITR 244] (CopyEnclosed) Where Hon'ble Supreme Court held that Penalty under section 271 (1 )(c) is a civil liability for which willful concealment is not an essential ingredient for attracting the civil liability as is the case in the matter of proceedings under section 276C 2. CIT Vs Zoom Communication (P.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. 4. Khandelwal Steel And Tube Traders Vs ITO[2018] 95 taxmann.com 15 (Madras) where Hon'ble Madras High Court held that explanation as to why there was an omission or wrong statement in original return must be due to bona fide inadvertence or bona fide mistake on part of assessee and even if assessee agreed to addition with a condition that penalty could not be imposed, department is not precluded from initiating penalty proceedings. 5. B.A. Balasubramaniam Bros. Co Vs CIT[116 Taxman 842, 236 ITR 977, 157 CTR 556] where Hon'ble Supreme Court held that difference between income assessed and income returned being more than 20 per cent, Explanation to section 271 (1 )(c) became applicable and assessee having failed to discharge onus being cast on assessee by virtue of said Explanation, Assessing Officer was justified in imposing penalty. 6. CIT vs Gates Foam Rubber Co [91 ITR 467] CIT vs India Seafood [105 ITR 708] where Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illment of criteria as laid down in/touchstone of the provisions of section 94(7) of the IT Act, the assessee was issued notice u/s 142(1) on 7.12.2017 to furnish the details of all dividend/bonus income earned by the assessee in a specified format as provided by the Assessing Officer. In response to the same, the AR of the assessee appeared on 13.12.2017 and furnished all the details except the details of dividend/bonus as had been asked in notice u/s 142(1 ). Vide order sheet dated 13.12.2017, the AR was again asked to furnish the details of dividend/bonus in the required format. Thereafter, the AR, on 15.12.2017, furnished a reply stating that while filing return, the assessee had not considered dividend income for the purposes of section 94(7) of the Act, and accordingly had decided to revise the return of income by increasing the LTCG disallowance. The reasoning for furnishing the inaccurate particulars by the assessee was attributed to the claim that the assessee had himself filed the IT Return and he had committed the bonafide mistake inadvertently. The AO, in para 4.7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the satisfaction recorded in this regard in the assessment order as discussed above, the undersigned gives fresh opportunity to the assessee to show cause as to why penalty uls 271(1)(c) of the IT Act, 1961 may not be imposed upon the assessee for furnishing inaccurate particulars of income . Subsequently the penalty was imposed vide order dated 23.02.2018 for furnishing of inaccurate particulars of income within the meaning of provisions of clause (c) of sub- section (I) of section 271 of the Act. With regard to this additional ground, the following submissions are made for the kind consideration of the Hon'ble Bench: The ground raised by the appellant itself deserves not to be admitted for the following reasons: I) The said ground has not been raised by the appellant either at the stage of penalty proceedings or subsequently at any time during the appellate proceedings before the Ld. CIT(A). 2.) The ground impugns the order of the Id. CIT(A) claiming that the Ld CIT(A) ought to have held that the notice, proceedings and order imposing penalty u/s 271 (J)(c) are bad in law being contrary to facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned notice had been issued in respect of concealment of income. Similar view has been taken by the Hon'ble Delhi ITAT in Hybrid Rice International Pvt Ltd vs. CIT (ITA No. 285/Del/2007). The Mumbai Bench of ITA T has very deftly dealt with the issue in Earthmoving Equipment Service Corporation vs. DCIT 166 ITD 113 (Mumbai) holding that 'so far as the legal grounds are concerned a perusal of the quantum order reveals that the penalty was initiated for furnishing of inaccurate particulars and finally the same was levied on the same ground .... However, in the quantum order Ld AO, after due deliberations, clearly initiated the penalty proceedings for furnishing of inaccurate particulars which shows due application of mind qua penalty proceedings ... Even the decisions of Manjunatha Cotton and others are based on one fundamental determination that whether the assessee has been prevented from clearly understanding the charge against it and thereby prejudiced against availing adequate defence for the charge. Hence, any decision of an quasi judicial or judicial authority has to be seen in light o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits. It is only when the assessee lost the case even at the stage of CIT(A), and having already filed the appeal before the Hon 'ble ITA T on merits, that it came up with a belated plea of the charge not being clear on account of discrepancy in the notices. Any discrepancy has been set right by the AO within reasonable time before the assessee filed its reply, the assessment order is unambiguously clear regarding nature of charge, the reply of the assessee before the AO also clearly shows that the assessee has understood the charge against it and replied only regarding that particular charge- which is furnishing of inaccurate particulars of income. It may also be mentioned that section 292B also provides clarity in this regard. A detailed discussion on its applicability in such situations has been dealt with by the Chennai Bench of the Hon'ble ITAT in the recent decision of ITO International Taxation 2(1) Chennai. Vs RajanKalimuthu ITA No.2900/CHNY /2018 (copy enclosed) In this judgment, the Hon'ble Bench has, inter alia, given a finding on the following aspects: i) How section 292B is applicable to situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein a Long Term Capital Gain (LTCG) of ₹ 1,43,53,921/- has been increased to ₹ 3,42,05,795/- due to the disallowance of ₹ 1,98,51,874/- u/s. 94(7) of the Act at the first opportunity as soon as it came to the notice of the assesee. We note that Assessee has committed this mistake for furnishing of inaccurate particulars in the return due to the inadvertent bonafide error in the claim due to one entry by the accounts staff posted at wrong date due to huge voluminous transactions and dividend coupons for dividend from same security punched at one voucher i.e. entry of two dividend received on same security (₹ 1,98,51,874/- received on 28.1.2015 and ₹ 3,38,62,717/- received on 25.3.2015 made cumulatively on 26.3.2015 i.e. date of sale of investments (26.3.2015) and receipt date of second dividend. We further note that AO has completed the assessment on the basis of details furnished by the assessee, hence, under the circumstances assessee has not furnished inaccurate particulars of income. It is noted that Assessee has paid voluntary taxes on disallowance u/s. 94(7) of the Act and not filed the appeal against the assessment order passed by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute. 7.4 We further note that the case laws cited by the Ld. DR are on distinguished facts, hence, does not support the case of the Revenue. 8. In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we find that the levy of penalty in this case is not justified. Accordingly, we set aside the orders of the authorities below and delete the levy of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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