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TMI Blog2023 (9) TMI 779X X X X Extracts X X X X X X X X Extracts X X X X ..... urther erred in confirming the Penalty levied at Rs. 1,90,000/- u/s 271(1)(c) by the learned AO who did not allow opportunity to explain Appellant in the Notice issued u/s 271(1)(c) by not specifying for which default penalty Notice was issued viz., for concealing the particulars of income or for furnishing inaccurate particulars of income, therefore, prayed to cancel the penalty levied at Rs. 1,90,000/-. 3. That under the facts & the law, the Ld. CIT (A), NFAC, Delhi further erred in confirming the Penalty levied by the learned AO u/s 271(1)(c) at Rs. 1,90,000/- on presumption and surmises and without rebutting the evidences filed viz., Purchase Bill, Sale Bill of Share Broker, Demat Account, Bank Statement etc. Prayed to cancel the penalty levied at Rs. 1,90,000/-. 4. That under the facts & the law, the Ld. CIT (A) further erred in confirming the Order of learned AO levying penalty u/s 271(1)(c) at Rs. 1,90,000/- though the Appellant on her own, to avoid litigation, offered the exempted long term capital gain on sale of shares u/s 10(38) of Rs. 6,06,137/- and paid tax of Rs. 2,40,000/- on 30/09/2017 on above income before the Assessment Order was passed. Prayed to cancel the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned penalty under Sec. 274 r.w.s 271(1)(c) was sought to be imposed on her; therefore, the assessee had remained divested of an opportunity to put forth in her defense a clear explanation that no such penalty u/s 271(1)(c) was called for in her case. The ld. AR, in support of his contention above had relied on the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff Vs. Joint Commissioner of Income Tax, Special Range, Mumbai (2007) 161 Taxman 218 (SC). 8. Per contra, the Ld. Departmental Representative (for short 'D.R') relied upon the orders of the lower authorities. The Ld. D.R submitted that as the assessee was afforded sufficient opportunity in the course of penalty proceedings, thus, it was incorrect on her part to claim that no opportunity of being heard was afforded to her. The Ld. D.R submitted that now when the assessee had in the course of the penalty proceedings submitted that no penalty u/s 271(1)(c) of the Act was called for in her hands; therefore, it was beyond comprehension that as to on what basis she could after that claim that she was not validly put to notice about the default for which penalty u/s. 271(1)(c) of the Act was sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the assessee was not validly put to notice as regards the default/defaults for which she was called upon to explain that as to why penalty may not be imposed on her under Sec. 271(1)(c) of the I.T Act. 11. We have given thoughtful consideration to the facts of the case and are persuaded to subscribe to the claim of the Ld. AR that the A.O. in the aforesaid SCN dated 30.10.2017 had failed to point out the specific default for which penalty was sought to be imposed on the assessee. In our considered view, as both of the two defaults envisaged in Sec. 271(1)(c), i.e., 'concealment of income' and 'furnishing of inaccurate particulars of income' are separate and distinct defaults that operate in their respective independent and exclusive fields; therefore, the A.O needed to have put the assessee to notice as regards the specific default for which she was being called upon to explain that as to why penalty under Sec. 271(1)(c) may not be imposed on her. As observed hereinabove, a perusal of the 'Show cause' notice issued in the present case by the A.O under Sec. 274 r.w. Sec. 271(1)(c), dated 30.10.2017, clearly reveals that there was no application of mind by the A.O. while i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 274(1) of the I.T. Act. We find that the fine distinction between the said two defaults contemplated in Sec. 271(1)(c), viz. 'concealment of income' and 'furnishing of inaccurate particulars of income' had been appreciated at length by the Hon'ble Supreme Court in its judgments passed in the case of Dilip & Shroff Vs. Jt. CIT (2007) 210 CTR (SC) 228 and T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC). The Hon'ble Apex Court in its aforesaid judgments had observed that the two expressions, viz. 'concealment of particulars of income' and 'furnishing of inaccurate particulars of income' have a different connotation. The Hon'ble Apex Court was of the view that the non-striking off the irrelevant limb in the notice clearly revealed a non-application of mind by the A.O, and had observed as under:- "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he has furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lure of the AO to strike off the irrelevant default in the notice issued under Sec. 274 of the Act, which is in a standard proforma indicates a non-application of mind by the A.O. while issuing the notice. Further, we find that the Hon'ble High Court of Bombay in the case of Pr. CIT (Central), Bengaluru Vs. Golden Peace Hotels & Resorts (P) Ltd. (2021) 124 tamnn.com 249 (SC), by drawing support from its earlier order in the case of CIT Vs. Shri Samson Perinchery (2017) 392 ITR 4 (Bom) and PCIT Vs. New Era Sova Mine (2020) 420 ITR 376 (Bom), had observed that AO while issuing show-cause should clearly indicate that as per him the case of the assessee involves concealment of particulars of income; or there is furnishing of inaccurate particulars. It was further observed, that 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 with clarity the nature of the satisfaction recorded. The High Court observed that as in the case before them the AO had failed to strike-off the irrelevant default in the body of the SCN issued under Sec. 274 of the Act, therefore, the penalty imposed by the AO u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Circle-1, Bengaluru (2021) 280 Taxman 334 (Bombay), had observed that where the assessment order records a satisfaction for imposing penalty on one or other; or both grounds mentioned in Sec. 271(1)(c), but there is a defect in the SCN, wherein the AO had failed to strike-off the irrelevant default, then, the same would vitiate the penalty proceedings. The Hon'ble High Court, while concluding as hereinabove, had held as under: " 173. We, however, accept that the Revenue, often, adopts a pernicious practice of sending an omnibus, catch-all, printed notice. It contains both relevant and irrelevant information. It assumes, perhaps unjustifiably, that whoever pays tax is or must be well-versed in the nuances of tax law. So it sends a notice without specifying what the assessee, facing penalty proceedings, must meet. In justification of what it omits to do, it will ask, rather expect, the assessee to look into previous proceedings for justification of its action in the later proceedings, which are, undeniably, independent. It forgets that a stitch in time saves nine. Its one cross or tick mark clears the cloud, enables the assessee to mount an effective defence, and, in the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings. Assessment order need not contain a specific, explicit finding of whether the conditions mentioned in section 271(1)(c) exist in the case. It is because Explanations 1(A) and 1(B), as the deeming provisions, create a legal fiction as to the grounds for penalty proceedings. Indeed, the Apex Court in CIT v. Atul Mohan Bindal [ 73], has explained the scope of section 271(1)(c) thus: "[Explanation 1, appended to section 27(1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false, or the explanation offered by him is not substantiated, and he fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, for the purposes of section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income." 177. That is, even if the assessment order does not contain a specific finding that the assessee has concealed income or he is deemed to have concealed income because of the existence of facts which are set out in Explanation 1, if a mere direction to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed 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, Kaushalya did discuss the aspect of prejudice. As we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays nonapplication 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (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. On a similar footing was the view taken by the ITAT, Mumbai "B" Bench in ACIT Vs. Bhushan Kamanayan Vora (2018) 99 taxmann.com 373 (Mum). It was observed by the Tribunal that where the AO was not sure about the charge, i.e. whether it was for concealment of income or furnishing of inaccurate particulars of income, the penalty imposed by him u/s 271(1)(c) could not be sustained. 14. We have given thoughtful consideration to the issue before us. After deliberating on the facts, we are of the considered view that the failure on the part of the A.O. to put the assessee to notice as regards the default for which penalty under Sec. 271(1)(c) was sought to be imposed on her by clearly and explicitly pointing out the specific defaults in the SCN, dated 30.10.2017, for which she was called upon to explain that as to why penalty u/s. 271(1)(c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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