TMI Blog2023 (9) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... y putting the assessee to notice as regards the defaults for which it was being proceeded against, therefore, the penalty under Sec. 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained - Decided in favour of assessee. - SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER For the Assessee : Shri Sakshi Gopal Aggarwal, CA For the Revenue : Shri Satya Prakash Sharma, Sr. DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 21.07.2022, which in turn arises from the order passed by the A.O. u/s.271(1)(c) of the Income-tax Act, 1961 (for short Act ), dated 23.06.2017 for A.Y. 2014-15. The assessee has assailed the impugned order on the following grounds of appeal before us: 1. That on the fact and circumstances of the case, CIT(A), NFAC and learned Assessing Officer, Ward-4(1), Raipur (C.G.) has been erred for levying penalty of Rs.5,19,400/- u/s.271(1)(c) of income tax act on sale of shares of Rs.20,50,910/- which has already been voluntar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddled with the same, therefore, the penalty thereafter imposed by him u/s 271(1)(c) of the I.T. Act cannot be sustained and is liable to be vacated. The ld. AR in order to drive home his aforesaid claim had drawn our attention to both of the aforesaid SCN s, i.e dated 08.12.2016 and 07.06.2017. Referring to the aforesaid discrepancy in the SCN s, dated 08.12.2016 and 07.06.2017, it was submitted by the ld. AR that as the AO had failed to validly put the assessee to notice as regards the specific default for which the impugned penalty under Sec. 274 r.w.s 271(1)(c) was sought to be imposed on it, therefore, the assessee had remained divested of an opportunity to put forth in its defense a clear explanation that no such penalty u/s 271(1)(c) was called for in its case. The ld. AR in support of its aforesaid contention had relied on a host of judicial pronouncements, as under: (i) Navneet Agarwal Vs. ITO, Ward-35(3), Kolkata, ITA No.2281/Kol/2017 dated 20.07.2018 (ii) CIT Vs. M/s. SSA S Emerald Meadows (SC) [2016] 73 taxmann.com 248 (iii) Shri Jignesh Desai Vs. ITO, Ward-35(2), ITA No.1263/Kol/2018 dated 26.09.2018 (iv) Mohan Exports India Pvt. Ltd. Vs. DCIT, ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the assessment vide his order passed u/s.143(3), dated 08.12.2016 had initiated the penalty proceedings u/s.271(1)(c) for furnishing of inaccurate particulars of income w.r.t the addition of Rs.20,50,910/- (supra), but the usage of the term OR as a conjunction between the two defaults, i.e. concealed the particulars of your income or furnished inaccurate particulars of such income in the aforesaid SCN s dated 08.12.2016 and 07.06.2017 in no clear terms conveyed to the assessee the specific defaults for which the penalty proceedings were sought to be proceeded with in its hands. In sum and substance, the A.O in neither of the aforesaid SCN s dated 08.12.2016 and 07.06.2017 (supra) had validly put the assessee to notice as regards the default for which it was called upon to put forth an explanation that as to why penalty u/s.271(1)(c) may not be imposed on it. As the A.O in the aforesaid SCN s had mentioned both the defaults, i.e. concealment of income or furnishing of inaccurate particulars of income w.r.t. the aforesaid addition of Rs.20.50 lacs (supra), therefore, by using OR as a conjunction between both the aforesaid defaults he had not only failed to validly conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... why no such penalty was called for in its case. We are of a strong 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 as redundant if it 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. 11. We would now test the validity of the aforesaid Show Cause notice(s) dated 08.12.2016 and 07.06.2017, and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers to levy penalty under Sec. 271(1)(c) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0) 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 notices dated 08.12.2016 (supra) and 07.06.2017 (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 its statutory right of an opportunity of being heard and defend its case. 12. We find that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically held that 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 sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessee and assumes expertise on his part. 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 ask ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer s satisfaction as to be spelt out in the assessment 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. CIT[ 74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th an explanation before the A.O that no such penalty was called for in its case. We, thus, in the backdrop of our aforesaid observations are of a strong conviction that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the defaults for which it was being proceeded against, therefore, the penalty under Sec. 271(1)(c) of Rs.5,19,400/- imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons 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.5,19,400/- imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. The Ground of appeal No.2 raised by the assessee is allowed in terms of our aforesaid observations. 14. 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 on the part of the A.O, therefore, we refrain from adverting to and adjudicating the other grounds of appeal raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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