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TMI Blog2020 (1) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriate words in the show cause notice. Since additional ground raised by the assessee is purely a legal ground, it is submitted that the same be admitted and adjudicated. 3. Reliance is placed on the following decisions: (a). National Thermal Power Co. Ltd [229 ITR 383 (SC)] (b). Dilip N. Shroff v. Joint CIT [291 ITR 519 (SC)] (c). SSA's Emerald Meadows [2016] 73 taxmann.com (Kar) confirmed by the Supreme Court in [2016] 73 taxmann.com 248 (SC) / [2016] 242 Taxman 180 (SC) (d). Samson Perinchery [2017] 88 taxmann.com 413 (Bom) On hearing both the parties, we admit the additional ground since the ground taken is only a legal ground. 4. Ld. Counsel for the assessee referring to the notice issued u/s. 274 r.w.s 271(1)(c) of the Act which are placed at Page Nos. 109 and 69 of the Paper Book, submitted that the Assessing Officer is not clear as to the charge for which the penalty is initiated i.e. either for concealment of income or for furnishing inaccurate particulars. Referring to the notice Ld. Counsel for the assessee submitted that the inappropriate limb in the notice was not strike off. Ld. Counsel for the assessee referring to the assessment order submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assessee as the assessee understood what was the purpose of notice. Ld. DR submitted that SLP filed by the assessee was also dismissed by the Hon'ble Supreme Court reported in 259 Taxman 220. 7. We have heard the rival submissions, perused the orders of the Authorities below, notice issued u/s. 274 r.w.s 271(1)(c) of the Act for initiation of penalty proceedings in both the assessment years i.e. A.Y.2013-14 and A.Y. 2014-15. We observe that Assessing Officer did not strike off and specify the charge/limb for which he is proposing to initiate the penalty proceedings. In the assessment order Assessing Officer records that the penalty proceedings are initiated for furnishing inaccurate particulars and for concealment of income. However, in the penalty order passed U/s. 271(1)(c) of the Act the Assessing Officer records that it is a fit case for levy of penalty u/s. 271(1)(c) of the Act for furnished inaccurate particulars of income leading to concealment of income. 8. An identical situation has been considered by the Coordinate Bench in Meherjee Cassinath Holdings v. ACIT in ITA.No. 2555/MUM/2012 dated 28.04.2017 as to whether the action of the Assessing Officer in initiating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasi-criminal in nature. Section 274 contains the 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 inaccurate portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter and no one aspect would be decisive. In this context, useful reference may be made to the following observation in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) (head note): 'Under section 274 of the Income-tax Act, 1961, all that is required is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 147/148 of the Act was issued at the end of the limitation period. Noticeably, Assessment Order for the assessment year 2013-2014 was passed on 31.03.20I6, one year earlier. Second lapse is also apparent. Despite correctly noting the background, notice under Section 147/148 of the Act was not addressed in the correct name and even the PAN Number mentioned was incorrect. Nevertheless, human errors and mistakes cannot and should not nullify proceedings which are otherwise valid and no prejudice had been caused. This is the effect and mandate of Section 292B of the Act." In Smt. Shantidevi Mahavir Prasad Gupta (supra), the Tribunal held as under: "10. The question before us is not whether the income is of the nature of "notional income" but the question is whether the assessee has filed inaccurate particulars or concealed the true facts. As stated hereinabove, in our humble opinion, the assessee has concealed the true facts thereby filed inaccurate particulars. Therefore, we do not find any error or infirmity in the findings of the Ld. CIT(A). The penalty u/s. 271(1)(c) is leviable on the facts of the case. The reliance on the decision of the Tribunal is clearly distinguish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [See Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, Kerala State, (2000) 2 SCC 718]" In CIT vs. Samson Perincherry (ITA No. 953, 1097, 1154 & 1226 of 2014), the Hon'ble Bombay High Court held: "Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the order breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice." Respectfully following the ratio laid down in Dilip N. Shroff (supra) and Samson Perincherry (supra), we hold that the penalty proceedings initiated by the AO is bad in law. We may herein observe that since the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard. 9. Per contra, Sri R.Raghunandan, learned senior counsel representing Sri T.Bala Mohan Reddy, learned counsel for the assessee, would rely upon the decisions of the Karnataka and Gujarat High Courts and assert that when penal proceedings are initiated under Section 271(1)(c) of the Act of 1961, an assessee must be made aware in no uncertain terms as to what is the specific allegation which forms the basis for the proposed penalty. 10. A copy of the proforma notice under Section 271 read with Section 274 of the Act of 1961 addressed to the assessee on 22.03.2013 is produced. Perusal thereof reflects that the irrelevant contents therein, which had no application to the assessee, were struck out leaving only one clause which reads as under: "Whereas in the course of proceedings before me for the Assessment Year 2010-11 it appears to me that you have concealed the particulars of your income or furnished inaccurate particulars of such income." 11. It would be apposite at this stage to consider the judgment of the Karnataka High Court in M/s. Manjunatha Cotton And Ginning Factory. Therein, a Division Bench of the Karnataka High Court observed that Section 271 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt observed that the Assessing Officer must give a positive finding as to whether there is concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the event there was no such clear-cut finding, the penalty order was held liable to be struck down. 13. Smt.Kiranmayee, learned counsel, placed reliance on the judgment of the Supreme Court in K.P.Madhusudhanan v/s. CIT [251 ITR 99 (SC)]. Therein, the Supreme Court held that it is not necessary for the Assessing Officer, while issuing a notice under Section 271(1)(c), to expressly invoke Explanation 1(B) appended to the provision. It is however relevant to note that Explanation 1(B) merely adverts to a case of failure of an assessee to substantiate the explanation offered whereby the amount added or disallowed while computing the total income of such person for the purposes of the penalty provision shall be deemed to represent the income in respect of which particulars had been concealed. The Supreme Court observed that the statutory provision included the Explanation and once the assessee was put on notice, no express invocation of the Explanation is necessary. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an or between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied that the assessee was guilty of both. 18. We are therefore of the opinion that the order under appeal does not brook interference on any ground. We find no question of law, much less a substantial one, arising for consideration warranting admission of this appeal." 11. Recently the Hon'ble Bombay High Court in the case of the PCIT v. Goa coastal Resorts and Recreation Pvt. Ltd., in Tax Appeal No.24 of 2019 order dated 11.11.2019, held as under: - "3. Ms Razaq, learned Advocate submits that in this case the revised returns filed by the respondents indicated that the disclosures were made only by piecemeal. Relying upon Mak Data (P.) Ltd v/s. Commissioner of Income Tax 1 , she submits that such disclosure does not relieve the assessee of the requirement of paying penalty. He submits that the assessment order in the present case makes reference to conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference. 8. The contention based upon MAK Data (P.) Ltd.(supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars." 12. Facts being identical, respectfully following the ratio of the above said decisions, we hold that the notice issued by the Assessing Officer U/s. 274 r.w.s 271(1)(c) of the Act is on account of non-application of mind and therefore the penalty proceedings initiated are bad in law. Thus, we direct the Assessing Officer to delete the penalty levied U/s. 271(1)(c) of the Act for both these appeals for the A.Y. 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed u/s. 143(3) of the Act for the A.Y. 2015-16 it is observed that search and seizure operation u/s. 132(1) was conducted on M/s.Geochem Laboratories Pvt. Ltd., on 11.11.2014. Consequent to this search operation the case of the assessee was also centralized with DCIT-(5)(1) for the purpose of assessments. The Assessing Officer completed the assessment u/s. 143(3) of the Act by making disallowance u/s. 14A r.w. Rule 8D and also interest on service tax. In the course of the assessment proceedings the Assessing Officer accepted the revised computation filed by the assessee reducing the WDV block of assets consequent to the adjustments made in the A.Y.2013-14 and A.Y. 2014-15. Assessing Officer also initiated penalty proceedings u/s. 271AAB of the Act and subsequently passed penalty order on 31.05.2017 levying penalty of Rs..2,83,200/- u/s. 271AAB(1)(c) of the Act. The penalty was sustained by the Ld.CIT(A). 20. The provisions of section 271AAB read as under: - "271AAB. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seizure operation was conducted u/s. 132 of the Act on 11.11.2014 on M/s. Geochem Laboratories Pvt. Ltd., based on which the assessments were framed in assessee's case and nowhere in the Assessment Orders passed for the A.Y. 2013-14 and A.Y.2014-15 u/s. 153C of the Act, it has been mentioned that search was initiated in assessee's case. We also observed that penalty proceedings were initiated u/s. 271(1)(c) of the Act for the A.Y. 2013-14 and A.Y. 2014-15 in assessee case. Therefore, we are of the view that for levy of penalty u/s.271AAB of the Act, the first and foremost condition to be satisfied is that search u/s. 132 of the Act should have been initiated on the assessee for invoking the provisions of section 271AAB of the Act and levying penalty under this provision. Similar view has been taken by various Tribunals as referred to above. In the case before us since there was no search and seizure operation initiated u/s. 132 of the Act, the penalty proceedings initiated u/s.271AAB as against the provisions of statute. Thus, we quash the penalty order passed u/s. 271AAB of the Act for the A.Y. 2015-16. 22. In the result, appeals of the assessee are allowed. Order pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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