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TMI Blog2017 (5) TMI 1799X X X X Extracts X X X X X X X X Extracts X X X X ..... on Loss" instead of "Business Loss" by applying Explanation to Section 73 of the Income Tax Act. Subsequently, AO levied penalty u/s. 271(1)(c) of the Income Tax Act of Rs.2,26,34,044/- for furnishing 'inadequate particulars of income' by relying upon the judgment of Hon'ble Bombay High Court in case of Prasad Agents Pvt. Ltd., vs. ITO (2009) 180 Taxman 178, wherein the assessee trading loss incurred by a company engaged in the business of purchase and sale of shares was treated as deemed speculation loss. 2. It was argued by learned AR that the issue involved in the present case is purely covered by the decision of Bombay High Court in the case of CIT vs. HSBC Securities and Capital Markets India Pvt. Ltd., (2012) 208 Taxman 439 which is held as under:- Section 73 of the Income-tax Act, 1961 - Losses - In speculation business-Assessment Year 1997-98 - whether Explanation to Section 73 does not operate in respect of a company whose gross total income consists mainly of income which is chargeable under heads of interest on securities', income from house property, capital gains and income from other sources'.- Held, yes - In return of income filed, assessee-company sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, it is necessary to evaluate the provisions of section 271(1)(c) of the I.T. Act. The relevant portion of the same is reproduced below: 1) If the [Assessing Officer] or the [Commissioner (Appeals)] for the Commissioner] in the course of any proceedings under this Act, is satisfied that any person (a) ... ... ... ... ... ... (b) .................. (c) has concealed the particulars of his income or furnished inaccurate particulars of such [income, or], he may direct that such person shall pay by way of penalty, - [(d) ... ... .... Explanation-1: where in respect of any facts material to the computation of the total income of any person under this act. (a) Such person fails to offer an explanation or offers an explanation which is found by the AO or CIT(A) or the Commissioner to be false or (b) Such person offers an explantation which he is not able to substantiate and fails to prove that such explanation is bonafide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the applicability of Explanation to Section 73 of the Income Tax Act in the case of assessee in view of the above judgments passed by the Hon'ble Bombay High Court in the case of CIT vs. HSBC Securities and Capital Markets India Pvt. Ltd., (2012) 208 Taxman 439 is a debatable question and even otherwise treatment of business loss as speculation loss by the AO can neither be treated as the particular of income being concealed nor can it be called as furnishing inaccurate particulars of income. The assessee during the assessment or appellate proceedings had not furnished wrong or incorrect particulars of income. Merely based on change of head, the AO cannot adduce the concealment or furnishing inaccurate particulars of income by the assessee. 12. Another aspect of the present case is that the Ld. AR drawn our attention to the notice dated 26.12.11 and 11.08.14 issued by DCIT-4(2) Mumbai to the assessee u/s 274 read with section 271(1)(c) of the Income Tax Act, 1961. It was argued that the said show cause was issued in a form without deleting there from 'inappropriate words' or paragraph and it showed total non application of mind on the part of AO. On the contrary, it was ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." 14. The conclusion drawn therein by their Lordships at para 63 thereof and particularly at p) to s) thereof are as under: - "63 ..................................... a) ..................................... p) Notice under section 274 of the Act should specifically state the ground mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on the limb and finding the assessee guilty of another limb is bad in law." 15. It may be mentioned that in this regard, no contrary decision of the Hon'ble Apex Court or the Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X
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