TMI Blog2022 (5) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... fetters can be brought in to check such a power by a claim that CIT(A) cannot enhance the penalty without making enhancement in the income in the quantum appeal. Having found, in principle, that CIT(A) is empowered to enhance the penalty, now we turn to the factual panorama of the case for ascertaining if the penalty was rightly directed to be enhanced. At this stage, it is relevant to mention that the AO initiated penalty without striking out the irrelevant limb of section 271(1)(c), which we have held supra, has the consequence of vitiating the penalty order. Once the penalty order itself does not stand because of wrong issuance of notice u/s.274, the power of enhancement of penalty conferred by section 251(1)(b) automatically becomes meaningless because this provision talks of vary it so as to enhance the penalty. Varying the penalty for enhancement pre-supposes the existence of some valid penalty which is subject to variation. If the penalty ceases to exist in entirety, it cannot be varied so as to make enhancement. In view of the fact that the penalty imposed by the AO has been held above to be vitiated, there can be no question of any enhancement thereto. We, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the law. 2. Whether on the facts and circumstances of the case, the learned AO rightly levied the penalty under both the limbs in absence of a specific charge either in the notice or in the satisfaction recorded. 4. The Hon ble Supreme Court in National Thermal Power Company Ltd. Vs. CIT (1998) 229 ITR 383 (SC) has observed that the purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item . Answering the question posed before it in affirmative, their Lordships held that on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee and the Tribunal has jurisdiction to examine the same. We are, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of income . 6. Now we turn to notice issued by the AO u/s.274 of the Act, a copy of which has been placed at page 3 of the paper book. From such notice, it can be seen that the AO has initiated penalty on the ground that the assessee has concealed the particulars of your income and furnished inaccurate particulars of such income . Both the limbs of section 271(1) are present in the notice u/s.274 without striking out the irrelevant limb. This fact has also been recorded in para 4 of the penalty order to the effect that the notice u/s 271(1)(c) read with section 274 was issued: `for concealing the income/furnishing inaccurate on income . As against this, the items which led to the imposition of penalty are only in the realm of furnishing of inaccurate particulars of income . The question arises as to whether penalty u/s 271(1)(c) of the Act in such circumstances is sustainable? 7. Recently, the full Bench of Hon ble Bombay High Court in Mohd. Farhan A. Shaikh Vs. Dy.CIT (2021) 125 taxmann.com 253 (Bom) has considered this very issue. Answering the question in affirmative, the Full Bench held that a defect in notice of not striking out the irrelevant words vitiates the pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginally filed u/s.139(1) at Rs.23.15 lakh. It was, therefore, emphasised that the ld. CIT(A) went awry in taking note of wrong factual matrix. In the opposition, the ld. DR submitted that the penalty order does neither refer to such additional income nor considered such an amount of income at the time of levy of the penalty. 11. Having heard the rival submissions and gone through the relevant material on record, it is clear from the language of section 271(1) that the Commissioner (Appeals), inter alia, is also empowered to levy penalty u/s.271(1)(c) of the Act. There can be two situations, viz., one where the CIT(A) enhances the income in the quantum appeal and consequently imposes additional penalty u/s 271(1)(c) and second, where the CIT(A) enhances the penalty already imposed by the AO de hors any enhancement made by him in the quantum proceedings, of course, subject to rider that he cannot travel beyond the penalty order for making the enhancement. Section 271(1)(c) covers the former situation. We are not confronted with such a situation. Section 251(1)(b) governs the second situation, which is obtaining in the extant case. Section 251(1) provides that: `In disposing of an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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