TMI Blog2019 (12) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 to 2010- 11 respectively. 2. The grounds of appeal raised in all the aforesaid 05 appeals are similar and identical, except the difference in figure, hence, the appeals were heard together and are being disposed by this common order by only dealing with ITA No. 2639/Del/2017 (AY 2005-06) and reproducing the grounds thereof as under:- 1. Under the facts and the circumstances of the case, penalty order passed u/s. 271(1) of the Act by the AO and confirmed by the Ld. CIT(A) is invalid and bad in law as from the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act it is not discernable as to whether the penalty proceedings were initiated for furnishing of inaccurate particulars of income or concealment of income and therefore, the impugned penalty order passed deserves to be quashed. 2. Under the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in passing the appellate order without affording adequate opportunity of being heard to the appellant. 3. Under the facts and circumstances of the case, the Ld. First Appellate Authority has grossly upholding the action of Assessing Authority impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of her income (Para 3 of Assessment order) w.r.t. the addition of unexplained income. Further, in the Penalty Order, penalty has been imposed as Assessing Officer held assessee in default for concealing her income by furnishing inaccurate particular at her income (Para 10 of Penalty order). Thus, there is no inconsistency in the stand taken by Assessing Officer in the assessment proceedings and penalty proceedings ; that the penalty is initiated as well as imposed for concealment of income. Thus, there was application of mind by the Assessing Officer and hence mere non-striking of correct limb in the notice cannot be taken as fatal error. On facts, it can be safely concluded that even assuming that there was a defect in the notice, it has caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice were followed. In the assessment order penalty has specifically been initiated for concealment of income therefore there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culars 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 fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tax in the year of receipt. But, it does not follow that penalty for concealment must be imposed as the quantum appeal is decided against the assessee. the findings in the assessment proceedings cannot be considered as conclusive and final for the purpose of imposition of penalty under section 271(1)(c). In assessment proceedings, one is primarily concerned with the assessment of income, i.e., quantification and computation of total income as per the provisions a whereas in penalty proceedings the Court is concerned with the conduct of the assessee. Penalty is imposed not because addition is made but because there is concealment or furnishing of inaccurate particulars by the assessee. This is apparent from language of section 271(1)(c) and Explanation 1. [Para 25] The word 'conceal' inherently and pre se refers to an element of mens rea, albeit the expression 'furnishing of inaccurate particulars' is much wider in scope. The word 'conceal' implies intention to hide an item of income or a portion thereof. It amounts to suppression of truth or a factum so as to cause injury to the other. The word 'conceal' means ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty on that ground cannot fructify. The CIT (Appeals), however, upheld the disallowance on a totally different ground. In such a situation, the penalty could have been initiated by the CIT (Appeals) but that will not give jurisdiction to the AO to levy the penalty. We have given serious consideration to this issue also. This decision may have some implication on the levy of penalty in respect of first addition regarding the cash shortage. At the same time, it is also true that the assessee must be appraised of the charge in the notice for which he is sought to be penalized. The whole issue has to be decided on the basis of the facts of each case. When we go through the assessment order, it is seen that the AO has examined the cash book in a great detail and various entries therein between 01.07.2004 to 31.3.2005 have been reproduced on page nos. 14 to 27. Similarly, the receipts by way of advances from Trimurti Engineering Works, having implication on the second addition, have been reproduced in the assessment order on page nos. 27 to 29. The finding of the AO in respect of the first addition is that cash flow statement filed by the assessee is nothing but an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) [***] (b) has failed to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, or (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or (d) has concealed the particulars of the fringe benefits or furnished inaccurate particulars of such fringe benefits, (emphasis supplied) From a perusal of the above, it is apparent that the A.O. assumes jurisdiction to initiate the penalty proceedings the moment he is satisfied that the necessary conditions have been satisfied for initiation of the proceedings. Hence, the source of jurisdiction is the satisfaction recorded in the assessment order and not in issuance of notice u/s 274. This principle has been laid down by the Hon ble Supreme Court in the case of Commissioner of Income Tax vs. S. V. Angidi Chettiar 1962 44 ITR 739 SC as under:- The power to impose penalty under section 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l necessity. If section 274 is not a jurisdictional necessity, any defect or irregularity in its implementation cannot make the proceedings void-ab-initio. 3. A distinction has to be made between a case of no notice and a case of improper notice. In this regard, we may refer to the decision of the Hon'ble Supreme Court in the case of State Bank of Patiala Ors vs. S.K. Sharma 1996 AIR 1669 . Specifically we may quote the following portion of this decision In our respectful opinion, the principles emerging from the decided cases can be stated in the following terms in relation to the disciplinary orders and enquiries: a distinction ought to be made between violation of the principle of natural justice, audi alteram partem, as such and violation of a facet of the said principle. In other words, distinction is between no notice / no hearing and no adequate hearing or to put it in different words, no opportunity and no adequate opportunity . To illustrate - take a case where the person is dismissed from service without hearing him altogether [as in Ridge v. Baldwin]. It would be a case falling u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the above, it is clear that a distinction has to be made between no notice/no opportunity/no hearing and improper notice. In the former case, the proceedings would be void and in case of the latter, the proceedings would merely be irregular. In case of such irregular proceedings the test of prejudice has to be employed. In the present case, if the AO did not strike out the irrelevant charge in the notice, we can, at the worst, presume that there was some irregularity. However, it is not the assessee's case that such an irregularity has caused some prejudice. 4. Test of prejudice As laid down in the State Bank of Patiala Ors vs. S.K. Sharma (supra) violation of any and every procedural provision cannot be said to automatically vitiate the proceedings or the order. The consequences for violation of the procedural provisions would be as under:- A- In case of no notice, no opportunity or no hearing, there is obviously a violation of the principles of natural justice and hence the order would get vitiated. B- In other cases the test of prejudice has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference may be made to the following observation in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) (headnote) : Under section 274 of the Income-tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings. [Para 9] It is unfortunate that the Hon ble Karnataka High Court have not taken cognizance of the aforesaid decision of the Bombay High Court. 6. Participation by the assessee during the course of the proceedings cures the procedural irregularity if any. The proceedings are vitiated only when the procedural irregularity in question causes some prejudices to the assessee. However, if the assessee participates in the proceeding he becomes aware about the nature of charges for which the proceedings were initiated. Hence, in such a situation there can be no reason for any prejudice to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage. [Para 16] 7. If the charge is discernible from the assessment order, it is immaterial whether the notice issued u/s 274 fails to mentioned the corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated for filing inaccurate particulars of income. There is no ambiguity in the impugned order of the AO for initiating the penalty proceedings against the assessee. Moreover, if the Assessee is of the view that there is some ambiguity, the said ambiguity can be sorted out by participating in the penalty proceedings and taking objection to the fact before AO. The assessee has not taken any objection before the AO in the penalty proceedings and for the first time, the said objection has been taken before CIT(A). In our view, the purpose of issuing the notice is to inform the assessee about the charges under which the assessee is liable for imposition of penalty. Once the charges are clearly known to the assessee which are duly mentioned in the assessment order as well as in the notice, there is no error in the notice issued by the AO for imposition of penalty. In view thereof also, we do not find any merit in the appeal. As a result, penalty proceedings are confirmed. [Para 7] 8. Minor defects in the notice need to be ignored u/s 292B Under the provisions of section 292B no notice issued under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is effective compliance or compliance with intent and purpose, do not come in the way or affect the validity of the assessment proceedings. In the present case, as noticed above, the respondent took the plea before the Assessing Officer that they were never served with the notices under Section 148 of the Act...... 29. Object and purpose behind Section 292-B is to ensure that technical pleas on the ground of mistake, defect or omission should not invalidate the assessment proceedings, when no confusion or prejudice is caused due to non-observance of technical formalities. The object and purpose of this Section is to ensure that procedural irregularity(ies) do not vitiate assessments. Notice/ summons may be defective or there may be omissions but this would not make the notice/summon a nullity. Validity of a summon/ notice has to be examined from the stand point whether in substance or in effect it is in conformity and in accordance with the intent and purpose of the Act. This is the purport of Section 292B. Notice/summons are issued for compliance and informing the person concerned, i.e. the assessee. Defective notice/summon if it serves th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. [Para 59] (emphasis supplied) 10. Rules of procedure are handmaid of justice to advance the cause of justice and not to obstruct it In this regard, we may refer to the following observations recorded by Hon ble Delhi High Court in the case of The CIT vs. M/s Sudev Industries Limited (supra) It is often stated that rules of procedure are handmaid of justice for the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt helpless to meet extraordinary situations in the ends of justice. [Para 20] It may kindly be noted that the assessee's case does not fall under any of the exceptions listed above. 11. The Manjunatha Cotton case cannot be considered to be a binding precedent It is trite that obiter dicta, per incuriam, sub silentio (when a particular point of law involved in the decision is not perceived by the court or present to its mind, that is without argument, without reference to the rule and without citation of any authority) are the exceptions to the doctrine of binding precedents. Per incuriam are those decisions given in ignorance or forgetfulness of some statutory provisions or some authority binding on the court concerned. In the Manjunatha Cotton case the Hon ble High Court have decided multiple appeals having different issues. They have not laid down a specific law but written a sort of essay covering all the provisions. Unfortunately they have just given their opinion on various issues without referring to the other authorities on the same issues. The decision is kind of a monologue which does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l/2017. i) CIT Anr. Vs. M/s SSA s Emerald Meadows 2015 (11) TMI 1620 Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises decided in favour of assessee. ii) CIT Anr. Vs. M/s SSA s Emerald Meadows Hon ble Supreme Court of India reported in 2016 (8) TMI 1145 Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Division Bench of this Court, we are of the opinion no substantial question of law arises decided in favour of assessee. ii) CIT Anr. Vs. M/s SSA s Emerald Meadows Hon ble Supreme Court of India reported in 2016 (8) TMI 1145 Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income Decided in favour of assessee. 8. In the background of the aforesaid discussions and respectfully following the precedents, we delete the penalty in dispute and decide the issue in favor of the assessee and against the Revenue. iv) ITAT, D Bench, New Delhi decision dated 26.5.2017 in the case of Rajender Jain vs. ACIT passed in ITA No. 6804/Del/2013 wherein the Tribunal has observed as under:- 7. We have heard both the parties and perused the orders passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO vide his Notice dated 31.12.2007 for initiating the penalty and directed the assessee to appear before him at ---------AM/PM on ---- ----200------ and issued a Show Cause to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961. After perusing the notice dated 31.12.2007 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income/concealment of income, but in the penalty order dated 06.11.2009 he has stated that he is satisfied that the assessee has furnished the inaccurate particulars of income. In our view the penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for furnishing of inaccurate particulars of income/concealment of income, whereas the penalty in dispute has been levied by the AO on account of furnishing of inaccurate particul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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