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TMI Blog2018 (4) TMI 1786X X X X Extracts X X X X X X X X Extracts X X X X ..... e following additional grounds of appeal : a) Additional Ground No. 1 (raised vide letter dated 03.10.2016) On the facts and in the circumstances of the case, and in law, the penalty proceedings initiated in terms of notice u/s 274 read with section 271(1)(c) of the Income-tax Act, 1961 dated 30.12.2010 and 4.12.2013 is bad in law inasmuch as neither of these two notices specify for which limb of section 271(1)(c) penalty proceedings had been initiated, and consequently, the impugned penalty order is also bad in law. The appellant, therefore, prays that the impugned penalty order be quashed. b) Additional Ground No.2 (raised vide letter dated 31.10.2016) On the facts and in the circumstances of the case, and in law, the impugned penalty order is bad in law inasmuch as the Ld. Assessing Officer finally imposed penalty for furnishing of inaccurate particulars of income whereas the charge stated in the assessment order as well as in the body of the impugned penalty order was concealment of income. The appellant, therefore, prays that the impugned penalty order be quashed." The ld. Departmental representative (for short "D.R‟) strongly objected to the admission of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence which could substantiate the capacity of the donor to the satisfaction of the A.O, therefore, the A.O once again added the amount of Rs. 45,15,884/- as the income of the assessee under Sec. 68 vide his order dated 30.12.2010 passed under Sec. 143(3) r.w.s. 254 of the act. The A.O while framing the set aside assessment also initiated penalty proceedings under Sec. 271(1)(c) for furnishing of inaccurate particulars of income, thereby concealing the income. The assessee carried the matter in further appeal before the CIT(A), who vide his order dated 26.08.2011 confirmed the addition made by the A.O. 3. The A.O after the order of the CIT(A) confirming the quantum addition made under Sec. 143(3) r.w.s. 254, issued a "Show cause‟ notice (for short "SCN‟) under Sec. 274 r.w.s 271(1)(c) to the assessee. After the change in incumbent A.O another SCN was issued on 04.02.2013 to the assessee. The explanation of the assessee that no penalty was called for in its case did not find favour with the A.O, who holding a conviction that the assessee had furnished inaccurate particulars of income imposed a penalty of Rs. 14,90,241/- under Sec. 271(1)(c). The appeal filed by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence called for by the A.O could have justified an addition of the same in the hands of the assessee, but however, as long as the claim of the assessee was not disproved and dislodged to the hilt by the revenue, no penalty under Sec. 271(1)(c) could have been validly imposed in its hands. The Ld. A.R. in support of his contention that where the explanation of the assessee that the amount was received as a gift is not found to be false by the revenue, no penalty under Sec. 271(1)(c) could justifiably be imposed, placed reliance on the following judicial pronouncements :- (i) CIT Vs. Kokila Ben A. Shah (Tax Appeal No. 496/2010, dated 22.06.2011) (Guj) (ii) National Textiles Vs. CIT (249 ITR 125) (iii) Shri Chandrakant J. Shah Vs. The Income Tax Officer, 18(2)(4), Mumbai (ITA No. 1236/ Mum/ 2006, dated 16.03.2012) (iv) Addl. CIT Vs. Rawalpindi Flour Mills (125 ITR 243) (v) CIT Vs. Bhimji Bhanjee & Co. (146 ITR 145) (vi) CIT Vs. Balbir Singh (214 CTR 147)(P&H) (vii) Satish Babladi Vs. DCIT, Central Circle-36 (ITA No. 345 and 346/Mum/2015). The Ld. A.R. further averred that though it remained as a matter of fact that the quantum addition of Rs. 45,15,884 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that as the penalty had been imposed in the hands of the assessee for furnishing of inaccurate particulars of income, without clearly putting it to notice as regards the default for which it was called upon to put forth an explanation in its defence, therefore, the penalty could not be sustained and was liable to be vacated. The ld. A.R in support of his aforesaid contention relied on the judgment of the Hon‟ble Supreme Court in the case of CIT Vs. S.S.A. Emerald Meadows (2016) 242 Taxman 180 (SC). The ld. A.R further took support of the judgments of the Hon‟ble High Court of Bombay in the case of (i) CIT Vs. Mrs. Piedade Perincherry (ITA No. 1310 of 2014; dt. 10.01.2017) and Commissioner of Income-tax-II Vs. Shri Samson Perinchery (ITA No. 1154 of 2014; dt. 05.01.2017). The ld. A.R further took support of the recent order of the coordinate bench of the Tribunal, viz. ITAT, Agra in the case of Sachin Arora Vs. ITO, (ITA No. 118/Agr/2015). The Ld. A.R. also placed reliance on the order passed by the coordinate bench of the Tribunal, viz. ITAT "G" Bench, Mumbai, in the case of ITO Vs. M/s Shangrila Sales Pvt. Ltd. (ITA No. 7525/Mum/2016, dated 07.02.2018). Per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 30.12.2010 and 04.02.2013 issued by the A.O under Sec. 274 r.w.s. 271(1)(c). We find substantial force in the contention of the ld. A.R that as the aforesaid "Show cause‟ notices were issued by the A.O in the standard proforma, viz. "Form I.T.N.S-29‟ without clearly and specifically pointing out in either of the said notices the default for which the assessee was being called upon to explain as to why penalty under Sec. 271(1)(c) may not be imposed on it, therefore, it can safely be concluded that the assessee was never informed of the default as regards which it was called upon to show cause as to why penalty under Sec. 271(1)(c) may not be imposed on it. We are of the considered view that as both of the two defaults contemplated in Sec. 271(1)(c), viz. "concealment of income‟ and "furnishing of inaccurate particulars of income‟ are separate and distinct defaults which operate in their independent and exclusive fields and are neither overlapping in nature nor interchangeable, therefore, if the A.O sought to impose penalty on the assessee as regards either of the said defaults, he remained under a statutory obligation to have clearly intimated the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, but however, by pointing out in the "Show cause‟ notice that the assessee appears to have concealed the particulars of his income or furnished inaccurate particulars of such income, had thus failed to come forth with a clear and a specific charge for which the assessee was being called upon to explain as to why penalty may not be imposed on it under Sec. 271(1)(c). We are of the considered view that the blatant failure on the part of the A.O to specifically and clearly put the assessee to notice as regards the default for which penalty was sought to be imposed clearly militates against the mandate of affording of a reasonable opportunity of being heard to the assessee as contemplated under Sec. 274(1) of the Act. We may herein observe that as held by the Hon‟ble Supreme Court in its landmark judgment in the case of Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, therefore, not loosing sight of the said material observation of the Hon‟ble Apex Court, it becomes all the more obligatory on the part of the A.O to fairly di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that the assessee had concealed his income or he has furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing reliance on the order of assessment laid emphasis that 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. Vs. CIT (2000) 2 SCC 718]. We are of the considered view that now when as per the settled position of law as observed by us hereinabove, the two defaults, viz. "concealment of income‟ and "furnishing of inaccurate particulars of income‟ are separate and distinct defaults, therefore, in case the A.O sought to have proceeded against the assessee for either of the said defaults, then it was obligatory on his part to have clearly specified his said intention in the "Show cause‟ notice, which we find he had failed to do in the case before us. The aforesaid failure on the part of the assessee cannot be characterised as merely a technical default as the same clearly divesting the assessee of the statutory right of an opportunity of being heard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist, It is also a well accepted proposition that 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T. Ashok Pal, 292 ITR 11 (SC). Therefore, if the two expressions namely 'concealment of the particulars of income and furnishing of inaccurate particulars of income' have different connotations, it is imperative for the assessee to be made aw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the Id. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s27)4(c) of the Act for furnishing of inaccurate particulars of income in our considered opinion, the attempt of the Id. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AG, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon'ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya (supra) and observed as under:- "The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified." In the instant case also, we are of the view that the AG has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AG has failed to apply his mind at the time of is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Dilip N. Shroff (supra) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted. We hold so. Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with". We have given a thoughtful consideration to the issue before us and after deliberating on the facts are of the considered view that now when the A.O after putting the assessee to notice and calling upon it to explain as to why penalty may not be imposed on it under Sec. 271(1)(c) for concealment of income or furnishing of inaccurate particulars of income, had thereafter imposed penalty under Sec. 271(1)(c) in its hands for "furnishing of inaccurate particulars of income‟, the same can in no way be construed as having fairly put the assessee to notice as regards the default for which penalty was sought to be imposed in its hands. We are of the considered view that the A.O by not striking off the irrelevant default in the "Show cause‟ notice, had thus failed to clearly put the assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red view that as the assessee had failed to prove the creditworthiness of the donor, viz. Sh. Arun Jatia to the satisfaction of the A.O by failing to produce the specific documents which were called for by him during the course of set aside assessment proceedings, viz. (i) bank statement of the donor from which the funds were transferred to the assessee; and (ii) the proof of the source of income of the donor, viz. Sh. Arun Jatia, therefore, the A.O rejected the claim of the assessee and added the aforesaid amount as an unexplained cash credit in the hands of the assessee. We are of the considered view that the failure on the part of the assessee to adduce necessary documentary evidence as was called for by the A.O to prove the creditworthiness of the donor to his satisfaction, would though in the backdrop of such unproved claim of the assessee justify addition of the same as an unexplained cash credit under Sec. 68, but however, in the absence of any material having been placed on record by the A.O on the basis of which the aforesaid claim of the assessee could be disproved, no penalty under Sec. 271(1)(c) could have been validly imposed in the hands of the assessee. We find that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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