TMI Blog2023 (11) TMI 852X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars of income whereas in the impugned penalty order penalty under Section 271(1)(c) of the Act has been levied for furnishing inaccurate particulars of income. Thus, the Appellant has not been informed about the charge/grounds on which penalty under Section 271(1)(c) of the Act is sought to be levied through statutory notice issued under Section 274 of the Act and therefore, the test laid down by the Hon ble Bombay High Court in the case of Mohd. Farhan A Shaikh [ 2021 (3) TMI 608 - BOMBAY HIGH COURT] is not satisfied. Since, in the present case the penalty proceedings were initiated under one limb of Section 271(1)(c) for furnishing inaccurate particulars of income whereas the penalty has been levied after finding the Appellant guilty under the other limb of Section 271(1)(c) for furnishing inaccurate particulars of income, the penalty order levying penalty u/s 271(1)(c) of the Act cannot be sustained - Decided in favour of assessee. - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER Appearance For the Assessee : Shri Sunil Talati For the Respondent: Shri Ankush Kapoor ORDER PER RAHUL CHAUDHARY, JUDICIAL MEMB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been debited to the Profit Loss Account. Since according to the Assessing Officer it prima facie appeared that the aforesaid expenses were not incurred for the purpose of business during the relevant previous year, approval was obtained for conversion of limited scrutiny to complete scrutiny and notice was issued under Section 143(2) and 142(1) of the Act to the Appellant. In response, the Appellant filed letter dated 23/11/2017 furnishing copy of revised computation of income wherein the Appellant suo moto disallowed following expenses under Section 37 of the Act claiming that deduction for the same was claimed on account of inadvertent mistake by the Chartered Accountant of the Appellant while filing original return of income on 29/09/2015: S.No. Particulars Amount (INR) 1 Prior period expenses 89,30,00,281 2 Provisions for diminution in the value of investment 43,00,05,953 3 Sundry balances written off 25,72,68,331 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, not tenable. In addition, it was also contended on behalf of the Appellant that penalty could not have, even otherwise, been levied under Section 271(1)(c) of the Act since the Appellant has voluntarily offered income to tax. In response, it was contended by the Ld. Departmental Representative that there was no infirmity in the order of penalty passed by the Assessing Officer. He submitted that in the assessment order the Assessing Officer had recorded that the Appellant has furnished inaccurate particulars of income leading to concealment of income. Further, while levying penalty also the Assessing Officer has clearly stated that penalty has been levied for furnishing inaccurate particulars of income leading to concealment of income. Since there was concealment of income the notice issued under Section 274 of the Act cannot be flouted. As regards merits of levy of penalty, the Ld. Departmental Representative contended that the revised income statement was filed by the Appellant only after limited scrutiny was converted into complete scrutiny, therefore, it cannot be said that there was voluntary disclosure. In rejoinder, the Ld. Authorised Representative for the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has levied penalty on the Appellant for furnishing inaccurate particulars of income. 13. From the above, it is clear that while the Assessment Order records satisfaction of the Assessing Officer that the Appellant has furnished inaccurate particulars of income, the notice issued under Section 274 of the Act state that the Appellant has been charged with concealment of particulars of income. However, while passing the penalty order, penalty has been levied on the Appellant for furnishing inaccurate particulars of income. 14. We note that in the case of Commissioner of Income Tax Vs. Manjunatha Cotton Ginning Factory : [2013] 359 ITR 565 (Karnataka) the Hon ble Karnataka High Court has made following observations regarding issuance of notice under Section 274 of the Act: Notice under section 274 59. As the provision stands, the penalty proceedings can be initiated on various grounds set out therein. If the order passed by the authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under section 274, they could conveniently refer to the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what the assessee was called upon to meet. Otherwise, though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend the principles of natural justice and cannot be sustained. Thus, once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. xx xx 62. xx xx CONCLUSION 63. In the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of concealment of particulars of income whereas in the impugned penalty order penalty under Section 271(1)(c) of the Act has been levied for furnishing inaccurate particulars of income. Thus, the Appellant has not been informed about the charge/grounds on which penalty under Section 271(1)(c) of the Act is sought to be levied through statutory notice issued under Section 274 of the Act and therefore, the test laid down by the Hon ble Bombay High Court in the case of Mohd. Farhan A Shaikh (supra) is not satisfied. Since, in the present case the penalty proceedings were initiated under one limb of Section 271(1)(c) of the Act for furnishing inaccurate particulars of income whereas the penalty has been levied after finding the Appellant guilty under the other limb of Section 271(1)(c) of the Act for furnishing inaccurate particulars of income, the penalty order, dated 29/06/2018, levying penalty of INR 55,34,03,602/- under Section 271(1)(c) of the Act cannot be sustained in view of the judgment of the full Bench of the Hon ble Bombay High Court in the case of Mohd. Farhan A Shaikh (supra). Accordingly, the penalty order, dated 29/06/2018, levying penalty under Section 271(1)(c) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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