TMI Blog2023 (9) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... as per the settled position of law the two defaults, viz. concealment of income and furnishing of inaccurate particulars of income are separate and distinct defaults, therefore, it was incumbent on the part of the A.O to have clearly specified his said intention in the Show cause notice which we find he had failed to do in the case before us. The aforesaid failure of the A.O cannot be merely dubbed as a technical default as the same had clearly divested the assessee of her statutory right of an opportunity of being heard and defend her case. Ashok Sahahakari Sakhar Karkhana Ltd. [ 2017 (11) TMI 1048 - ITAT PUNE] had held that where in a notice issued u/s 274 of the Act the AO had used conjunction or to mention both limbs, i.e, concealment of income or furnishing inaccurate particulars of income and charge for levy of penalty was not explicitly clear from notice, then, the same was to be held as bad in law and penalty was liable to be set aside. Decided in favour of assessee. - Shri Ravish Sood, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : Shri G.S. Agrawal, CA For the Revenue : Shri Satya Prakash Sharma, Sr. DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total income of the assessee at Rs. 11,06,830/-. The A.O, while culminating the assessment proceedings is stated to have initiated penalty proceedings for furnishing of inaccurate particulars of income u/s. 271(1)(c) of the Act. Accordingly, a Show Cause Notice (SCN) u/s. 274 r.w.s 271(1)(c) of the Act dated 30.10.2017 was issued by the A.O, Page 1 of APB. 4. Considering the facts mentioned above, the A.O. vide his order passed u/s. 271(1)(c) dated 30.10.2017 imposed a penalty of Rs. 1,90,000/- for furnishing of inaccurate particulars of income. 5. Aggrieved the assessee assailed the order passed by the A.O u/s. 271(1)(c) of the Act dated 30.10.2017 before the CIT(Appeals) but without success. 6. The assessee, being aggrieved with the order of the CIT(Appeals), has carried the matter in appeal before us. 7. At the very threshold of the hearing of the appeal, Shri G.S. Agrawal, Ld. Authorized Representative (for short AR ) for the assessee assailed the validity of the jurisdiction assumed by the A.O for imposing penalty u/s. 271(1)(c) of the Act. Elaborating on his aforesaid contention, it was averred by the Ld. AR that as the A.O in his Show Cause Notice (SCN) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s revealed that the Assessing Officer had failed to strikeoff the irrelevant default while calling upon the assessee to explain why she may not be subjected to penalty u/s 271(1)(c) of the Act. For the sake of clarity, the SCN dated 30.10.2017, Page 1 of APB is culled out as under: At this stage, we may herein observe that though the A.O, while framing the assessment vide his order passed u/s. 143(3), dated 30.10.2017, is stated to have initiated the penalty proceedings u/s. 271(1)(c) for furnishing in accurate particulars of income , but the usage of the term OR as a conjunction between the two defaults, i.e. concealed the particulars of income or furnished inaccurate particulars of such income in the SCN, dated 30.10.2017 mentioned above in no clear terms conveyed to the assessee the specific default for which the penalty proceedings were sought to be proceeded with in her hands. In sum and substance, the A.O vide the aforesaid SCN dated 30.10.2017 (supra) had failed to validly put the assessee to notice as regards the default for which she was called upon to put forth an explanation as to why penalty u/s. 271(1)(c) may not be imposed on her. As the A.O in the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d with penalty for which default; and, thus, had divested her from putting forth her defense that as to why no such penalty was called for in her case. We are of a firm conviction that the very purpose of affording a reasonable opportunity of being heard to an assessee as per the mandate of Sec. 274(1) of the Act would not only be frustrated but would be rendered redundant if he is not conveyed in clear terms the specific default for which penalty under the said statutory provision was sought to be imposed. In our considered view, the indispensable requirement on the part of the A.O to put the assessee to notice as regards the specific charge contemplated under the aforesaid statutory provision, viz. concealment of income or furnishing of inaccurate particulars of income or both of the said defaults is not merely an idle formality but is a statutory obligation cast upon him, which we find had not been discharged in the present case as per the mandate of law. 12. We would now test the validity of the aforesaid Show Cause notice dated 30.10.2017 and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trial Co. Ltd. Vs. CIT (2000) 2 SCC 718]. We are of the considered view that now when as per the settled position of law the two defaults, viz. concealment of income and furnishing of inaccurate particulars of income are separate and distinct defaults, therefore, it was incumbent on the part of the A.O to have clearly specified his said intention in the Show cause notice dated 30.10.2017 (supra), which we find he had failed to do in the case before us. The aforesaid failure of the A.O cannot be merely dubbed as a technical default as the same had clearly divested the assessee of her statutory right of an opportunity of being heard and defend her case. 13. We find the Hon ble High Court of Karnataka in the case of CIT Vs. SSA s Emerald Meadows (73 taxmann.com 241)(Kar) following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings were initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars , then, the same has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any well as in New Era Soya Mine (supra) has held that the notice which is inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such satisfaction, the two authorities have quite correctly ordered the dropping of penalty proceedings against the assessee. 6. Besides, we note that the Division Bench of this Court in Samson (supra) as applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Soya furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate clarity the nature of satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck off the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. It wants the assessee to make up for the Revenue's lapses. Ex Post and Ex Ante Approaches of Adjudication: 174. In ex-post adjudication, the Court looks back at a disaster or other event after it has occurred and decides what to do about it or how to remedy it. In an ex-ante adjudication, the Court looks forward, after an event or incident, and asks what effects the decision about this case will have in the future on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 72]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee to look back and gather answers from wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order is only prima facie. Even if the assessment order gives no reason, a mere direction for penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udice. 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 to why it should not be done . 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... napani Dei[ 75]. 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 an event, 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 omnibus show cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication. Also, the Hon ble High Court of Bombay, in the case of Pr. CIT (Central) Bengaluru Vs. Goa Coastal Resorts and Recreation Pvt. Ltd. (2020) 113 taxmann.com 574 (Bombay) had observed that where there was no recording of satisfaction by the AO in relation to any concealment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, are of a firm conviction, that as the A.O had failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default for which she was being proceeded against, therefore, the penalty under Sec. 271(1)(c) of Rs. 1,90,000/- imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the reasons above not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set aside the order of the CIT(A) who had upheld the same. The penalty of Rs. 1,90,000/- imposed by the A.O under Sec.271(1)(c) is quashed in terms of our observations above. The Ground of appeal Nos. 2 raised by the assessee is allowed in terms of our aforesaid observations. 15. As the penalty imposed on the assessee under Sec. 271(1)(c) of the Act had been quashed by us for want of valid assumption of jurisdiction by the A.O; therefore, we refrain from adverting to and adjudicating the other grounds of appeal raised by the assessee, wherein she has assailed the penalty sustained by the CIT(Appeals) qua the merits of the case, which, thus, are left open. 16. In the result, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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