TMI Blog2023 (5) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 292BB. This position has been settled in numerous binding judicial precedents. Considering the same, we would have no hesitation in holding that these two charges are quite different charges and carry different connotation / meaning. The non-framing of specific charge would make the notice defective. It did not specify the ground under which the penalty is proposed. The notice does not delete the appropriate words and in the assessment order as well as in the penalty order, both limbs have been pressed against the assessee. Therefore, we would hold that the notice was issued in a mechanical manner and hence, not sustainable in the eye of law. We would hold that there was failure on the part of Ld. AO to frame specific charge against the assessee and accordingly, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal. - ITA No.1209/Chny/2017 - - - Dated:- 19-5-2023 - Hon ble Shri V. Durga Rao, JM And Hon ble Shri Manoj Kumar Aggarwal, AM For the Appellant : Shri S. Sridhar (Advocate ) Ld.AR For the Respondent : Shri P. Sajit Kumar (JCIT) Ld. Sr. DR ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed by Ld. Sr. DR read as under: - During the course of hearing, the assessee's counsel raised a fresh ground stating that the show cause notice issued on 08.03.2014 is vague and hence the consequential penalty order passed on 26.09.2014 would get vitiated in the absence of precise charge. In the first instance, the raising of fresh ground at the stage of hearing which was not a part of original Grounds of Appeal before the Tribunal nor before the CIT(A) cannot be entertained and should not be entertained, as it amounts to change in opinion and an afterthought reaction. The assessee has not made any ground, how it is legal in nature. Even if the Tribunal thinks the same can be entertained at any stage of the appellate proceedings, then the same need to be referred back to the CIT(A) for adjudication of the matter in line with the principles of natural justice. The reason that the ITAT being the last fact-finding authority and if it sits on adjudicating on this ground, which was never in appeal before the lower authority, it will cause irreparable damage the revenue by denial of right to be adjudicated by at-least two authorities before finalization of a disputed matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these case decisions uniformly across that nobody had brought to the notice of these Honourable Judiciary on the change of language used by the legislature with respect to 274 of the Act, which is distinct from the requirement of other provisions of the act such as 143(2), 148, etc., wherein also proceeding are initiated against an assessee under the Act. The language use of Section 274(1) is reproduced as under: No order imposing penalty under this chapter shall be made unless the assessee has been heard or has been given a reasonable opportunity of being heard .. This language use, when in comparison with Section 143(2), which is also is reproduced as under: Where a return has been furnished under Section 139, or in response to a notice under subsection (1) of Section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the asessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein either to attend the office of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law itself. The only requirement under the law is the Department has to demonstrate that the assessee been heard and reasonable opportunity of being heard has been provided. Such demonstration could be through order sheet noting, or through other circumstantial evidences or could even be through issuance of letter/notice in a pre-printed format. Thus, even if the Assessing Officers had issued some notice in a pre-printed format, such notice cannot be under any stretch be treated as a statutory notice mandated to be issued under the Law. Wherever the law has mandated issuance of notice, even there, in many instances, the law itself has given liberty for the officers of the Department to frame the language of such notices in whatsoever manner in which they may deem fit. The examples for these are when notices are mentioned to be issued u/s 142(1) or u/s 143(2) or u/s. 148 etc. However, the same law has been stringent when it comes to some other provisions where law mandates issuance of notice. It had specifically mandated issuance of only a Statutory prescribed notices to be issued. All such statutory prescribed notices are prescribed under the Income tax Rules, 1962 and pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of penalty proceedings. The very reason the assessee did not seek such clarification, clearly demonstrates that he was never in doubt on the reasons why the penalty proceeding was initiated. Further, he never raised this issue of defective communication and the confusion in mind created on account of such defective communication either in his appeal before CIT(A) or in the initial Grounds of Appeal filed before the ITAT. Assessee now, just to salvage payment of Penalty on his concealed income, as an afterthought has resorted in taking shelter as a lame excuse under the defective notice. The assessee through his counsel has not submitted even an iota of evidence to prove that how such a notice claimed to be defective had created a confusion in his minds on the reasons for initiation of penalty and how such confusion had prevented him from the submission of correct response, as correctly held by the Jurisdictional High Court of Madras in the case of M/s. Sundaram Finance Ltd Vs. Assistant Commissioner of Income tax dated 23.04.2018 in T.C. (Appeal) no. 876 and 877 of 2008 (a copy of which is enclosed for your ready reference). Even if it is admitted that for hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the assessment order passed vide order dated 08.03.2014 which was translated into the SCN should be reckoned as nullity in law as well vitiate the consequential penalty order completely. The Assessing Officer was not sure even at the point of completing the assessment order and he records in the assessment order as 'the assessee has concealed / filed inaccurate particulars of income and therefore penalty proceedings u/s 271 (1)(c) is initiated.' The issue of the SCN whether it is statutory or non-statutory notice has no relevance in the light of indecisiveness of the Assessing Officer in commencing the proceedings of penalty in either of the limbs. Even in the context of the SCN being a non-statutory notice to provide an opportunity to the Assessee, the said non statutory notice should be precise and also reflect the satisfaction recorded in the assessment order. In the absence of specific charge by recording Assessing Officer's satisfaction in the assessment order, the consequential penalty order passed should fall to the ground. The Larger Bench of the Bombay High Court reported in 125 Taxmann.com 253 has covered all the facets of the issue on han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /34 of the Indian Income-tax Act, 1922 or which your were required to furnish under section 139(1) or by a notice given under Section 139(2)/148 of the Income-tax Act, 1961, No .Dated .or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said Section 139(1) or by such notice. *have without reasonable cause failed to comply with notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under section 142(1)/143(2) of the Income-tax Act, 1961. have concealed the particulars of your income or furnished inaccurate particulars of such income. You are hereby required to appear before me at 11.00 A.M on 07-04-2014 and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the Income Tax Act, 1961. 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 above date which will be duly considered before any such order is made under section 271(1) Upon perusal of the notice, it could be seen that Ld. AO has failed to specify the exact limb whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by Ld. AR duly supports the case of the assessee. Therefore, we see no reason to restore this legal ground to the file of lower authorities and accordingly, proceed to adjudicate the same in the light of rival arguments made before us. 7. The provisions of Sec.274 postulate that no order imposing penalty shall be made unless the assessee has been heard or has been given reasonable opportunity of being heard. The aforesaid requirement is not mere formality. Despite the fact that no statutory notice has been prescribed in this regard to afford opportunity of hearing to the assessee, it is imperative that the show-cause notice is given in writing and it specifies, in clear terms, charge against the assessee since the accused must know the grounds which he is expected to address. A vague notice, in our considered opinion, would clearly not fulfill the requirement of the statutory provisions. The argument of Ld. Sr. DR that the notice could be given orally, telephonically or through order sheet entries could not be accepted, at all since the opportunity of hearing has to be given only through a written notice only show-causing the assessee so as to enable him to meet the proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted decision of M/s PVP Ventures Ltd. vs. DCIT (supra) as under: - 6. However, the said observations, in our considered opinion, are in contradiction to settled legal position. In our considered opinion, concealment of income and furnishing of inaccurate particulars of income are two different charges. These two expressions, in terms of ratio of various binding judicial precedents, carry different connotation / charges and non-framing of specific charge against the assessee would vitiate the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas concealment of particulars of income would mean that the assessee has concealed the income and has not reflected certain income in its return of income. Therefore, for each of the addition, Ld. AO has to specify as to which limb was applicable to the facts of the case and it could not be left to mere presumption or guess work of the assessee. Framing of specific charges is sinequa- non for levy of penalty since the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 271(1)(c) of the Act, as it will vitiate the entire proceedings. 26. Since we have heard the learned counsel on the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal on the merits of the matter, we proceed to discuss the other issues as well. 27. The CIT(A), while confirming the order of penalty, took note of the order passed by the Assessing Officer wherein the Assessing Officer rejected the explanation offered by the assessee, which ultimately resulted in an addition and the assessment was completed vide order dated 30.3.2016. The question would be as to whether rejection of the explanation and the consequential addition would automatically result in an order of penalty. 28. Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the Revenue seeks to substantiate her case by relying upon the decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd. Vs. CIT, II [reported in (2013) 38 Taxmann.com 448] wherein it was held that voluntary disclosure does not release the assessee from mischief of penalty proceedings under Section 271(1)(c) of the Act and in terms of the said provision, the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation to be cogent because all deposits were made through banking channels and out of two properties sold, the Assessing Officer accepted the assessee's stand that one of the properties was an agricultural land. Hence, we find that the burden cast upon the assessee to offer an explanation stands fulfilled. Consequently, the burden now shifts to the Revenue to establish the concealment of income or furnishing of inaccurate particulars of income or both. If the Revenue does not agree with the explanation offered by the assessee as in the instant case, then the onus is on the Revenue to prove that there was concealment of particulars of income or furnishing of inaccurate particulars of income. We find this aspect to be completely absent in the instant case. Therefore, we also find the imposition of penalty to be unjustified. 31. The assessee filed an appeal before the Tribunal, which confirmed the order passed by the CIT(A) that the assessee raised a new stand before the CIT(A). No such new stand has been raised. The stand taken by the assessee after receipt of the notice under Section 143(2) of the Act dated 02.9.2014 has been consistent i.e. before the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with the assessee in not challenging the assessment order and for having accepted the same. However, this cannot be a ground to enable the Assessing Officer to automatically levy penalty. In this regard, it is beneficial to refer to the decision of the Hon'ble Division Bench of this Court in the case of CIT Vs. Smt.Anitha Kumaran [reported in (2017) 79 Taxmann.com304] wherein the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Limited [reported in (2010) 322 ITR 158] was followed wherein the Hon'ble Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression 'concealment of particulars of income and/or furnishing of inaccurate particulars of income' and after applying the decision in the case of Reliance Petro Products (P) Ltd., the Hon'ble Division Bench of this Court dismissed the appeal filed by the Revenue in the following terms : 13.3. The Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression concealment of particulars of income and/or furnishing inaccurate particulars of income and went on to observe as fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word particulars in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case,there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, which had been set out in an enclosure filed along with the return. While testing the correctness of the order, the Tribunal held that the levy of penalty under Section 271(1)(c) of the Act was wholly unwarranted as there had been no fraud or wilful neglect and that the assessee had only, with a view to cooperate with the Department, agreed to the addition. We observe that the above position will help the assessee, as there is not even a remote allegation that there was any fraudulent act by the assessee or the assessee was guilty of wilfully or negligently concealing the income and that his agreement to the addition of the amount, by itself, will not establish fraud or wilful neglect without something more. 39. For the above reasons, the assessee has to succeed on all grounds and consequently, it has to be held that the notice initiating the penalty proceedings is defective and invalid and the other findings rendered by the Assessing Officer, the CIT(A) and the Tribunal do not warrant imposition of penalty on the assessee. 40. In the result, the above tax case appeal is allowed, the impugned order passed by the Tribunal is set aside and the substantial questions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars. 9. For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed. The revenue s SLP against this decision has already been dismissed by Hon ble Supreme Court on 31.08.2021 (130 Taxmann.com 379) by observing as under: - 1. Delay condoned. 2. We are not inclined to interfere with the impugned order. 3. The special leave petition is, accordingly, dismissed. 4. Pending application stands disposed of. 10. Similar is the decision of Hon ble Bombay High Court rendered in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein Hon ble Court has confirmed the ratio laid down by Hon ble Karnataka High Court in CIT V/s Manjunatha Cotton Ginning Factory (359 ITR 565). This decision of Hon ble Karnataka High Court was subsequently followed by the same court in the case of CIT V/s SSA s Emerald Meadows (2016 73 Taxmann.com 241) which was agitated by the revenue before Hon ble Supreme Court. However, Special Leave Petition, against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, Kaushalya 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 so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard . It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed . Kaushalya closes the discussion by observing that the notice issuing is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 2 SCC 181], in which the Apex Court has quoted with approval its earlier judgment in State ofOrissav. Dr. Binapani Dei [AIR 1967 SC 1269]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such anevent, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited by Ld. Sr. DR could not be applied in the present case since the issue of validity of notice was well taken up by the assessee during penalty proceedings as well as during appellate proceedings. 14. In the light of aforesaid legal position, since no specific charge was framed either in the show cause notice or in the body of penalty order, and there was failure on the part of Ld. AO to frame specific charge against the assessee, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal. Consequently, going into the merits of the penalty has been rendered academic in nature. This decision has considered all the aspects of the matter as well as all the judicial decisions as relied upon by both the sides. This decision also consider the decision of Hon ble High Court of Madras in Sundaram Finance Ltd. Vs ACIT (93 Taxmann.com 250) as cited by Ld. DR. In the decision of this Tribunal in M/s TVS Supply Chain Solutions vs. ACIT (ITA No.585/Chny/2019 dated 31-08-2021) , the bench has refused to admit the ground raised by the assessee and no adjudication has been done on the legal grounds raised by the assessee. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice to be issued under section 274 of the IT Act. Only by way of abundant caution, does the Revenue circulate the format. And merely because a particular clause has not been ticked off or struck out, it does not, and should not, result in any prejudice, offending the principles of natural justice. Relying on a plethora precedents, Ms. Razaq submits that unless prejudice or injustice is pointed out, mere technical infraction of law would not vitiate an enquiry or any order or result of any proceedings. And in judging the question of prejudice, according to Ms. Razaq, the Court must act with a broad vision. In our considered opinion, all the aspects as well as the other conflicting decisions have duly been considered by the Hon ble Court while rendering the decision and we are bound to follow it. 11. Considering the entirety of facts and circumstances of the case, we would hold that there was failure on the part of Ld. AO to frame specific charge against the assessee and accordingly, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal. Consequently, going into the merits of the penalty has been rendered academic i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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