TMI Blog2019 (1) TMI 1797X X X X Extracts X X X X X X X X Extracts X X X X ..... e the jurisdictional notice is vague, similar to the one in the present case, the consequent levy cannot be sustained. The Hon ble jurisdictional High Court in the case of CIT v. Samson Perinchery [ 2017 (1) TMI 1292 - BOMBAY HIGH COURT] had also occasion to consider a similar issue. In this case, though proceedings u/s. 271(1)(c) of the Act were initiated for furnishing of inaccurate particulars of income, in the notice issued u/s. 274 r.w.s. 271 of the Act in the standard form, the charge for which it was issued was also not identified, as in the present case. We hold that the notice issued u/s 274 r.w.s 271 and incorporated 271AAB (in hand) was not valid. Consequently, the penalty proceedings are also invalid. Since the very basis of levy of penalty has been held to be invalid, we are of the view that the other grounds of appeal raised by the assessee against the merits of the levy of penalty requires no adjudication at this stage - Decided in favour of assessee. - I.T.A. No. 3363/Mum/2017 - - - Dated:- 10-1-2019 - Hon ble Sh. Shamim Yahya, AM And Hon ble Sh. Sandeep Gosain, JM Appellant by: Shri Vijay Mehta, AR Respondentby: Shri Aungshi Gimson, DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff, which inadvertently remained to be included in the return of income filed and hence, the penalty levied in respect of such addition ought to be deleted more particularly when the appellant has disclosed the entire unaccounted excess cash found in the course of search action. 6. The appellant craves leave to add, amend, alter or delete all or any of the aforesaid grounds of appeal. 2. At the very outset, Ld. AR appearing on behalf of the assessee drawn our attention to letter dated 14th Sept 2018 filed for seeking admission of additional ground, which are reproduced below:- 1. The learned CIT (A) has erred in law and on facts in not holding that the penalty order passed by the Assessing Officer u/s 271AAB of the Act is bad in law. The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal. Ld. AR submitted before us that before Ld. CIT(A), it was specifically contended that penalty order passed by the AO was bad in law as the notice issued u/s 274 of the Act was vague. However, the said plea was inadvertently omitted to be raised in the present appeal. It was further submitted that the additional ground is purely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rieved by the order of AO, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A) after considering the case of both the parties, dismissed the appeal of the assessee and also enhanced the penalty @ 30% of the undisclosed income and quantum of penalty u/s 271AAB. Now before us, the assessee has preferred the present appeal on the grounds mentioned above. Since the assessee has raised main grounds thereby challenging the levy and enhancement of penalty u/s 271AAB and also raised legal grounds with regard to the notice issued u/s 274 of the Act and stated that the show cause notice for penalty did not specify the ground in which the penalty is initiated and thus was vague. Ld. AR apart from addressing the arguments on the merits had also challenged the legality of the notice issued u/s 274 r.w.s 271 of the I.T. Act (copy placed on record). It was submitted that the reasons for initiating the penalty proceeding was not clear from such notice as the AO had not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee, i.e. whether it is u/s 271 or u/s 271AAB. It was also submitted that the AO has not delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 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. This judgment has no application to the case on hand as what we are concerned with presently is whether the assessee is required to be put on notice as to whether she is to be penalized for concealment of particulars of income or for furnishing inaccurate particulars of income. These are two different acts. Concealment of income is an act of omission while furnishing of inaccurate particulars of income is an act of commission. The consequences of such acts, being penal in nature, an assessee has to be informed as to what exactly is the charge against him so that he may respond thereto. 8. In case of Mrs Indrani Pillai before the Hon'ble Mumbai Bench of the Income Tax Appellate Tribunal, the judgment of Hon'ble Bombay High Court in case of Maharaj Garage was relied on by the department and the same was distinguished. The copy of the judgment is at page 57-70 of the paper book and the relevant part is at page 68. It reads as follows: The ratio laid down in the aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative, by virtue of judgments of Hon ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory, 359 ITR 565 and that of CIT vs. SSA s Emerald Meadows (ITA No.380/2015, dated 23.11.2015. proceedings based on a vague penalty notice were void. Ld. Authorised Representative, pointed out that the judgment of Hon ble Karnataka High Court in the case of SSA s Emerald Meadows (supra) stood affirmed by the Hon ble Apex Court in CC No.11485 of 2017 dated 05.08.2016. Ld. Authorised Representative submitted that assessee had raised a ground before the ld. Commissioner of Income Tax (Appeals)questioning the validity of the notice. As per the ld. Authorised Representative, though ld. Commissioner of Income Tax (Appeals) reduced the levy of penalty under section 271 AAB from 30% to 10%, he had not disposed off the ground assailing the validity of the notice issued to the assessee. Contention of the ld. Authorised Representative was that the notice being bad in law, levy of penalty had to be quashed. 4. Per contra, ld. Departmental Representative submitted that notice issued to the assessee was one under Section 274 r.w.s. 271 AAB of the Act and not under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271. (A.ANANDA KUMAR, IRS) (Deputy Commissioner of Income Tax Central Circle I, Coimbatore. Ld. Assessing Officer had not scored out any one of the two limbs in such notice, viz have concealed the particulars of income or furnished inaccurate particulars of such income or have undisclosed income within the meaning of Section 271AAB of the Act. Nor did he specifically mention, on which clause assessee was answerable. No doubt the caption of the notice do mentioned that it was being issued u/s.274 r.w.s. 271AAB of the Act. Section 271AAB is reproduced hereunder:- (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, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,- (a) a sum computed at the rate of ten per cent. of the undis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear represented, either wholly or partly, by any money, bullion, jewellery or other valuable article or thing or any entry in the books of account or other documents or transactions found in the course of a search under section 132, which has (A) not been recorded on or before the date of search in the books of account or other documents maintained in the normal course relating to such previous year ; or (B) otherwise not been disclosed to the Chief Commissioner or Commissioner before the date of search ; or (ii) any income of the specified previous year represented, either wholly or partly, by any entry in respect of an expense recorded in the books of account or other documents maintained in the normal course relating to the specified previous year which is found to be false and would not have been found to be so had the search not been conducted . It is clear from the Sub Section (3) of Section 271 AAB that Sections 274 and Section 275 of the Act shall, so far as may be, apply. Sub Section (1) of Section 274 of the Act mandates that order imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 4. In our view, 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 in this appeal for determination by this Court. The appeal is accordingly dismissed . In the earlier case of Manjunatha Cotton and Ginning Factory (supra) their lordship had observed as under:- Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) , i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law ; The assessee should know the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee ; ) taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law ; penalty proceedings are distinct from the assessment proceedings : though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, you are hereby requested to appear before the undersigned at 11.00A.M. on 20.02.2014 and show cause why an order imposing a penalty on you should not be made u/s 271AAA(1) of the Income-tax Act, 1961). If you do not wish to avail yourself of this opportunity of being heard in person or though authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made u/s 271AAA(1). (Seal) Sd/- (Laganpreet Sandhu). Dy. Commissioner of Income Tax, Central Circle-II, Chandigarh 27 20. A perusal of the above notice shows that though the Assessing officer has intended to initiate penalty proceedings u/s 271AAA(1) of the Act, however, the wording written in the body of the letter does not conform to the charges of the provisions of section 271AAA of the Act, rather, the assessee has been show caused on the charge of furnishing of inaccurate particulars of income, which falls under the scope and purview of section 271(1)(c) of the Act. The assessee, therefore, is not show caused for levy of penalty under the provisions of section 271AAA, rather for doing an act inviting penalty u/s 271(1)(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the assessee for penalty u/s 271(1)(c) of the Act. Accordingly, the additional Grounds were admitted for adjudication and accordingly, the rival counsels were also heard on merits. 9. In the context of Additional Ground of Appeal no. II, a pertinent point that is sought to be raised by the assessee is to the effect that the penalty notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 22.12.2008, a copy of which has been placed on record, shows nonapplication of mind by the Assessing Officer inasmuch as the same has been issued in a standard proforma and the irrelevant portion of the notice has not been struck off. It has been canvassed that similar point has been dealt with in the following judgments :- i) Meherjee Cassinath Holdings Pvt. Ltd., ITA No. 2555/Mum/2012 dated 28.04.2017; ii) Jehangir HC Jehangir, ITA No. 1261/Mum/2011 dated 17.05.2017; iii) M/s. Wadhwa Estate Developers India Pvt. Ltd., ITA No. 2158/Mum/2016 dated 24.02.2017; iv) Shri Samson Perinchery, ITA Nos. 1154 of 2014, 953 of 2014, 1097 of 2014 1226 of 2014 dated 05.01.2017 (Hon'ble Bombay High Court); v) M/s. SSA s Emerald Meadows, CC No. 11485/2016 dated 05.08.2016 (Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t postulates that penalty prescribed therein can be levied on existence of any of the two situations, namely for concealment of particulars of income or for furnishing inaccurate particulars of such income. It has been judicially well understood by now that concealment of particulars of income and furnishing of inaccurate particulars of income referred to in Sec. 271(1)(c) of the Act denote two different connotations. As a ready reference for the aforesaid proposition, we may look upon the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff, 161 Taxman 218 (SC) and also T. Ashok Pai, 292 ITR 11 (SC) to appreciate that the aforesaid two expressions convey different connotations. Having understood that the two expressions have different connotations, the Mumbai Bench of the Tribunal in the case of Meherjee Cassinath Holdings Pvt. Ltd. (supra), wherein one of us is a party, held that it was imperative for the Assessing Officer to make the assessee aware in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act as to which of the two limbs are being put-up against him for the purposes of levy of penalty u/s 271(1)(c) of the Act. Ostensibly, unless the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- 83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from nonapplication of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718] 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of non-application of mind by the Assessing Officer. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under :- 12. A combined reading of the decision rendered by Hon ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s 271(1)(c), which has to be met by him. As noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of nonstriking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. 14. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of nonapplication of mind having rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings have been initiated. In the case of Shri Samson Perinchery (supra), the Revenue had put up an argument to the effect that there is no difference between furnishing of inaccurate particulars of income and concealment of income. The aforesaid argument has been specifically rejected by the Hon'ble High Court by referring to the judgment of the Hon'ble Supreme Court in the case of T. Ashok Pai, 292 ITR 11 (SC). It was further noted that the judgment in the case of T. Ashok Pai (supra) has been relied upon by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory Ors., 359 ITR 565 (Karn.). The Hon'ble High Court approved the proposition that once the two limbs contained in the notice u/s 274 r.w.s. 271(1)(c) of the Act, namely concealment of income and furnishing of inaccurate particulars of income are understood to be carrying different meanings/connotations, nonstriking off of the irrelevant clause or striking off one of the limbs and imposing penalty on the other limb is not as per law. Thirdly, it may be noted that the issue before the Hon'ble High Court was incorrect mentioning of charge in the show cause notice, but the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Before parting, we may also refer to a recent judgment of the Hon'ble Karnataka High Court in the case of S. Chandrashekar, 396 ITR 538 (Karn.) wherein a notice issued u/s 274 r.w.s. 271(1)(c) of the Act in printed form without specifying the grounds of initiation of penalty proceedings was held to be invalid and untenable in law. As per the Hon'ble High Court, in the absence of any specific ground in the notice so issued, there is a breach of principles of natural justice and accordingly, the order imposing penalty cannot be sustained. 15. Before parting, we may also deal with the argument set-up by the ld. CIT-DR based on the provision of Sec. 292BB of the Act. Notably, Sec. 292BB of the Act has been inserted w.e.f. 01.04.2008 and is understood basically as a rule of evidence. The implication of Sec. 292BB of the Act is that once the assessee appears in any proceedings or has cooperated in any inquiry relating to assessment or reassessment, it shall be deemed that any notice under any provisions of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and under these circumstances, assessee would be precluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal wherein penalty was deleted on the plea that in the notice issued u/s.274 r.w.s.271 (1)(C), AO has not deleted the inappropriate words. 14. We have considered rival contentions and carefully gone through the orders of the authorities below and deliberated on the judicial pronouncements cited by lower authorities during the course of hearing before us. From the record we found that the AO had issued show-cause notice u/s.274 r.w.s 271 and also incorporated 271AAB (in hand) dated 31/03/15 which is in the standard pre-printed form and both the limbs of concealment and inaccurate particulars have been retained. 15. Even on the legal issue, we found that the two charges for initiating the penalty operate on two different footing and under the penal provision the charge has to be very specific and not vague. These charges are not to be reckoned as any casual remark, which can be interchanged by the AO at any stage on his whims and fancies. It is not an error which is rectifiable or to be ignored, albeit it is a fatal error which vitiates the entire initiation itself. If charge itself is vague and not clear, then the onus cast upon the assessee under Explanation itself gets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eral assessee and several issues were involved. In so far as I.T.A. No. 5020 of 2009 was concerned, one of the substantial questions on which the appeal was filed by the revenue was: Whether the notice issued under section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 19. While answering the above in favour of the assessee, the following findings were recorded by the Hon'ble Court: 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment furnishing inaccurate particulars of income are different Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion: (1) Whether, omission of assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? 24. The aforesaid question was dealt with by the Honble Court in favour of the assessee in the following words: 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with section 271(1)(c) of the Income-tax Act 1961 (for short 'the Act; to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act the penalty proceedings had been initiated le. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunel 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 Incometax vs. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565. 4. In our view since the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill holds good in spite of the decision of the Hon'ble Supreme Court in UOI v/s Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v/s Smt. Kaushalya Ors., [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchery (supra), following the decision of Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton Ginning Factory, [2013] 359 ITR 565 (Kar.), held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. 28. In addition to the aforesaid binding judgments, there are several orders passed by co-ordinate Benches of the Tribunal on this very point. In all those orders also penalty levied u s. 271(l)(c) of the Act on the basis of similar vague notice was cancelled. Some of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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