TMI Blog2020 (6) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... For breach of the second limb of Section 271 (1)(c) of the Act i.e., for furnishing inaccurate particulars of income that the penalty proceedings were initiated. The purpose of a notice is to make the noticee aware of the ground(s) of notice. In the present case, it would be too technical and pedantic to take the view that because in the printed notice the inapplicable portion was not struck off, the order of penalty should be set aside even though in the assessment order it was clearly mentioned that penalty proceedings under Section 271(1)(c) of the Act had been initiated separately for furnishing inaccurate particulars of income. Therefore, this contention urged by the appellant / assessee does not appeal to us and on this ground we are not inclined to interfere with the imposition of penalty. Coming to the facts of the present case, we have already noticed that in the assessment order dated 28.02.2006, Assessing Officer had ordered that since the assessee had furnished inaccurate particulars of income, penalty proceedings under Section 271(1)(c) were also initiated separately. Therefore, it was apparent that penalty proceedings were initiated for furnishing inaccurate par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he levy of penalty u/s.271(1)(c) of the Act of ₹ 22,08,860/- (Rupees Twenty-Two Lakhs Eight Thousand Eight Hundred and Sixty only) on account of disallowance of ₹ 62,47,460/- (Rupees Sixty Two Lakhs Forty Seven Thousand Four Hundred and Sixty only) which was allowable as a deduction under the provisions of Section 37 of the Act? B. Whether on the facts and in the circumstances of the case and in law the Tribunal erred in not applying the ratio laid down by the Apex Court in the case of CIT Vs. Reliance Petroproducts Private Limited reported in 322 ITR 158(SC), which was squarely applicable to the facts of the present case? C. Whether on the facts and in the circumstances of the case and in law the Tribunal grossly erred in upholding the levy of penalty under Section 271(1)(c) of the Act without appreciating / considering that: (i) the appellant had not been found to have concealed particulars or furnished inaccurate particulars of its claims; (ii) the aforesaid claim could be allowed under Section 37 of the Act as incurred wholly and exclusively for the purposes of business; (iii) no income has been concealed / avoided as inter alia the settl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck to the total income of the assessee. In the assessment order dated 28.02.2006 passed under Section 143(3) of the Act the total loss figure furnished by the assessee was lessened by the aforesaid amount and by two other amounts, rounding it off to ₹ 3,53,48,680.00. Taking the view that assessee had furnished inaccurate particulars of income, Assessing Officer ordered that penalty proceedings under Section 271(1)(c) of the Act be initiated separately. 7. Following the same the Assessing Officer issued notice under Section 274 read with Section 271 of the Act on the same day i.e., on 28.02.2006 to the assessee to show cause as to why an order imposing penalty should not be made under Section 271 of the Act. It may however be mentioned that in the pertinent portion of the notice the Assessing Officer did not strike off the inapplicable portion. The pertinent portion reads as under:- Whereas in the course of proceeding before me for the assessment year 2003-04 it appears to me that you:- * * * * * * * * * * * * * * * * * * have concealed the particulars of your income or ..... furnished inaccurate particulars of such income. * * * * * * 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. According to the Tribunal, it was rightly held by the CIT (A) that the assessee had made a wrong claim by submitting inaccurate particulars of income by claiming a bad debt which was not actually a debt and also not an expenditure allowable under Section 37(1) of the Act. Therefore, the finding recorded by the CIT (A) that the assessee had wilfully submitted inaccurate particulars of income which had resulted into concealment was affirmed. 12. Hence this appeal by the assessee. 13. Ms Sathe, learned counsel for the appellant submits at the outset that the notice issued to the petitioner under Section 274 read with Section 271 of the Act proposing to impose penalty was in printed format but the inapplicable portion therein was not struck off. Consequently, whether penalty was sought to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of such income was not indicated in the notice. This is a fundamental error which goes to the root of the matter and has vitiated the impugned order of penalty. However she admits that this point was neither pleaded nor argued before any of the lower authorities including the Tribunal. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sathe, learned counsel for the appellant answers in the affirmative. She contends that penalty proceeding is initiated by the show cause notice. Therefore in the show cause notice it must be clearly mentioned as to why the penalty is sought to be imposed; the charge against the assessee must be already indicated. Failure to do so would reflect non-application of mind, thus vitiating the penalty proceedings and the consequential order of penalty. 13.3. In addition to the above, learned counsel for the appellant submits that assessee had made a bona-fide claim of deduction and had furnished all the necessary particulars. In the assessment proceedings, the Assessing Officer may not have agreed to such a claim and may have disallowed the same. Mere disallowance of a claim made bonafidely would not amount to concealment of particulars of income or furnishing inaccurate particulars of such income to warrant imposition of penalty under Section 271(1)(c) of the Act. To support such a contention, she has placed reliance on CIT Vs. Reliance Petroproducts Pvt. Ltd., 322 ITR 158 (SC) and on a few other cases. 13.4. Summing up, learned counsel for the appellant submits that the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Vs. CIT, 171 Taxmann 156 held that levy of penalty has to be clear as to the limb for which penalty is levied. If the Assessing Officer proposes to invoke the first limb, then the notice has to be appropriately marked. Similarly, if the Assessing Officer wants to invoke the second limb then the notice has also to be appropriately marked. If there is no striking off of the inapplicable portion in the notice which is in printed format, it would lead to an inference as to nonapplication of mind. In such a case, penalty would not be sustainable. 18. Supreme Court in Ashok Pai Vs. CIT, 292 ITR 11 observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act carry different connotations. 19. Having discussed the above, let us address the submissions advanced by learned counsel for the parties. 20. In so far the first contention of learned counsel for the appellant is concerned i.e., raising a question of law for the first time before the High Court though not raised before the lower authorities, our attention is drawn to a decision of the Supreme Court in Jhabua Power Limited (supra) relied upon by learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot be raised before the High Court in an appeal under Section 260-A of the Act. However, in Jhabua Power Limited (supra), Supreme Court had remanded the questions raised before it for the first time back to the Tribunal for deciding the questions in accordance with law. Again, in Ashish Estates Properties (P) Ltd. (supra), this Court has taken the view that an appeal under Section 260-A of the Act can be entertained by the High Court on the issue of jurisdiction even if the same was not raised before the Tribunal. 21. Let us now advert to the fourth question i.e. Question number D framed / proposed by the appellant. Through this question, appellant is contending that the Tribunal ought to have held that the order of penalty passed under Section 271(1) (c) of the Act was bad in law in view of the fact that at the time of initiation of penalty proceedings as well as at the time of imposition of penalty, Assessing Officer was not clear as to which limb of Section 271 (1)(c) of the Act was attracted. At the time of hearing, learned counsel for the appellant had argued that in the show-cause notice the inapplicable portion was not struck off; thus it was not indicated in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 271(1)(c) of the Act the penalty proceeding was initiated i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. While allowing the appeal, Tribunal had relied upon Manjunath Cotton Ginning Factory (supra). In the circumstances, Karnataka High Court dismissed the appeal of the Revenue. 21.4. Revenue preferred Special Leave Petition (SLP) before the Supreme Court against the decision of the Karnataka High Court in SSA's Emerald Meadows (supra). In (2016) 242 Taxmann 180, Supreme Court dismissed the SLP. 21.5. Though the decision of the Karnataka High Court in SSA's Emerald Meadows (supra) which relied upon Manjunath Cotton Ginning Factory (supra) was not interfered with by the Supreme Court by dismissing the SLP, the fact remains that dismissal of SLP would not lead to merger of the High Court's order with the order of the Supreme Court. 21.6. This Court in Samson Pernchery (supra) was examining the question as to justification of the Tribunal in deleting the penalty levied under Section 271(1)(c) of the Act. In that case, Tribunal had deleted the penalty imposed by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed inaccurate particulars of income, penalty proceedings under Section 271(1)(c) were also initiated separately. Therefore, it was apparent that penalty proceedings were initiated for furnishing inaccurate particulars of income. 23. The statutory show-cause notice under Section 274 read with Section 271 of the Act proposing to impose penalty was issued on the same day when the assessment order was passed i.e., on 28.02.2006. The said notice was in printed form. Though at the bottom of the notice it was mentioned 'delete inappropriate words and paragraphs', unfortunately, the Assessing Officer omitted to strike off the inapplicable portion in the notice i.e., whether the penalty was sought to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of such income. Such omission certainly reflects a mechanical approach and non-application of mind on the part of the Assessing Officer. 24. However, the moot question is whether the assessee had notice as to why penalty was sought to be imposed on it? 25. This brings us to the basic question as to what is a notice or what do we mean by notice. Concise Oxford English Dictionary, India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, this contention urged by the appellant / assessee does not appeal to us and on this ground we are not inclined to interfere with the imposition of penalty. 27. Having held so, let us now examine whether in the return of income the assessee had furnished inaccurate particulars of income. As already discussed above, for imposition of penalty under Section 271(1)(c) of the Act, either concealment of particulars of income or furnishing inaccurate particulars of such income are the sine qua non. In the instant case, as we have seen, penalty proceedings under Section 271(1)(c) of the Act were initiated on the ground that assessee had furnished inaccurate particulars of income. 28. In the assessment proceeding, assessee filed its return of income on 28.11.2003 declaring total loss at ₹ 4,66,68,740.00. Assessee disclosed that it had debited ₹ 62,47,460.00 under the head 'selling and distribution expenses' and claimed it as bad debt in the books of account. As per the explanation given by the assessee it was exporting fabrics through M/s. JCT Ltd., a recognized export house for which assessee had an ongoing account with M/s. JCT Ltd. M/s. JCT Ltd. raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act while penalty proceedings were initiated for breach of the other limb of Section 271(1)(c). This has certainly vitiated the order of penalty. In appeal, CIT (A) took a curious view that submission of inaccurate particulars of income resulted into concealment, thus upholding the order of penalty. This obfuscated view of the CIT (A) was affirmed by the Tribunal. 32. On the ground that while the charge against the assessee was of furnishing inaccurate particulars of income whereas the penalty was imposed additionally for concealment of income, the order of penalty as upheld by the lower appellate authorities could be justifiably interfered with, still we would like to examine whether there was furnishing of inaccurate particulars of income by the assessee in the first place because that was the core charge against the assessee. 33. In Reliance Petroproducts Pvt. Ltd. (supra), Supreme Court examined meaning of the words 'particulars' and 'inaccurate'. As per Law Lexicon, the word 'particulars' means 'detail or details; the details of a claim or the separate items of an account'. Therefore, it was held that the word 'particulars' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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