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TMI Blog2022 (8) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the Act?" 3. The appellant prays that the order of the Ld.CIT(A) on the above ground be set aside and that of the AO be restored. 4. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 2. The brief fact is that the assessment u/s 143(3) of the Act was completed on 29.03.2015 determining total loss at Rs.29,50,39,290/-. The A.O has made disallowance of Rs.9,67,00,000/- as provision for diminution in value of investment Rs.16,00,000/- debited as prior period expenditure, Rs.5,89,12,582/- disallowed u/s 40(a)(ia) of the Act. During the course of penalty proceedings the A.O stated that assessee had debited Rs. 9,67,00,000/- as provision for diminution in value of investment. However, the same was not added in the computation of total income. The A.O has further stated that assessee had debited Rs.16,00,000/- on account of electricity expenses pertaining to prior period. These expenses were disallowed stating that same were not related to the year under consideration. In response to the notice issued the assessee explained that it had adequately disclosed of necessary details in the return of income, tax audit report and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has placed copy of the notice issue u/s 274 r.w.s 271(1)(c) of the Act dated 29.03.2015 as annexure in the paper book submitted on 06.04.2022. We have perused the copy of notice placed in the paper book the relevant part of the same reproduced as under: On perusal of the aforesaid notice it is clear that A.O has not specified whether the penalty is levied on account of concealment of particular of income or furnishing of inaccurate particulars of income. In this regard we have gone through the case of jurisdictional High Court referred by ld. Counsel in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bom), wherein the relevant part of head note is reproduced as under: "Section 271(1)(c), read with section 274 of the Income-tax Act, 1961 Penalty For concealment of income (Recording of satisfaction) Whether where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice-not striking off irrelevant matter would vitiate penalty proceedings-Held, yes- Whether since penalty proceedings culminate under a different statutory scheme that remains distinct from assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? 184. Indeed, Smt. Kaushalya case (supra) did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the socalled ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve no room for ambiguity. Therefore, Dilip N. Shroff Case (supra) disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2007] 27 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei AIR 1967 SC 1269. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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