9911796707
TMI Blog2024 (6) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals) erred in law and on facts in confirming the action of learned assessing officer in levying penalty under section 271(l)(c). 2. The learned Commissioner Of Income (Appeals)-20 ought to have seen that the appellant has neither furnished inaccurate particulars of income nor has concealed the particulars of income warranting levy of penalty under section 271(1)(C). 3. The learned CIT(A)-20 ought to have seen that the penalty proceedings is deemed to have been initiated only with the issue of notice under section 274 r.w.s 271(1)(C) and that the said notice should specifically state the reasons for levy of penalty. Failure on the part of the AO to specifically state the reasons under which limb the penalty is levied would tantamount to failure to record satisfaction as well as non-application of mind thereby making the said levy illegal and opposed to law. In the instant case the penalty notice suffers from aforesaid infirmity. 4. The learned CIT(A) ought to have seen that the discretion to impose penalty must be exercised judicially. The learned CIT(A) failed to see that addition made in the assessment order is on ad hoc basis, based on estimated disallowances of portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l and thus render justice. 3. The brief facts of the case are that the assessee, M/s. Enrica Enterprises Pvt. Ltd., is engaged in the business of manufacture and sale of Indian Made Foreign Liquor (IMFL) and it is one of the prime suppliers to M/s.Tamilnadu State Marketing Corporation Ltd (TASMAC). A search and seizure operation u/s. 132 of the Income Tax Act, 1961 (in short "the Act"), was conducted at the premise of the assessee on 06.12.2018. During the course of search, a sum of Rs. 55,27,70,000/- of unaccounted cash was found and seized from the residential premise of Shri M.Kothandarami Reddy as well as six individuals who identified themselves as associates of the assessee and claimed that they have held the cash for and on behalf of the assessee. The amount of cash seized during the course of search and seizure on 06.12.20128 in the residential premise of Shri. M.Kothandarmi Reddy and others was tabulated in Page No. 2 of the assessment order. In the course of search, a sworn statement u/s.132(4) of the Act, was recorded from Shri S.D.Rami Reddy, working Director of the assessee company and in response to Q. Nos. 17 & 18, he has explained the modus operandi of generation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the return of income filed for AYs 2015-16 & 2016-17, the assessee company has offered additional income of Rs. 16.39 Crs. & Rs. 23.62 Crs. respectively towards additional income offered during the course of search on account of inflated expenditure under the head marketing expenses being purchase of 'gift articles'. During the course of assessment proceedings, on enquiry with the suppliers of gift articles, replies were received from the suppliers of gift articles along with account copy as reflected in the books of the assessee, where, all of them stated to have supplied gift articles to the assessee, but some of them also stated that the assessee took back some cash at times. The AO completed the assessment u/s.143(3) r.w.s. 153A of the Act on 26.07.2021, accepting the additional income voluntarily offered by the assessee towards inflated expenditure under the head 'gift articles'. While completing the assessment, the AO observed that after considering relevant submissions of the assessee, the income offered by the assessee, including estimated disallowance of portion of marketing expenses, is found to be in order and accepted. The relevant submissions of the assessee and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined that admission of additional income and payment of taxes does not absorb the assessee from penalty proceedings. Therefore, rejected arguments of the assessee and levied penalty u/s.271(1)(c) of the Act, amounting to Rs.5,67,22,512/- which is equivalent to 100% tax sought to be adopted. The relevant findings of the AO are as under: 7. Being aggrieved by the penalty order, the assessee preferred an appeal before the Ld.CIT (A). Before the Ld.CIT (A), the assessee challenged the penalty order passed by the AO u/s.271(1)(c) of the Act, in light of show cause notice issued u/s.274 r.w.s.271(1)(C) of the Act, dated 26/11/2021 and argued that, in absence of proper satisfaction recorded by the AO and also show cause 'as to why' penalty proceedings are initiated, the AO cannot levy penalty u/s.271(1)(c) of the Act. The assessee has also challenged penalty levied on estimated addition towards additional income offered by the assessee for inflated expenditure under the head 'marketing expenses' on the ground that allocation of additional income for both assessment years was only on ad hoc basis and there was no evidence with the AO as regards 'concealment of particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Counsel for the assessee, Shri D. Anand, Advocate, referring to show cause notice issued u/s.274 r.w.s.271(1)(c) of the Act dated 26.07.2021 submitted that, the AO has issued a printed form of show cause notice without specifying under which limb the assessee is charged to levy penalty u/s.271(1)(c) of the Act, which shows non- application of mind by the AO. The Ld. Counsel for the assessee further submitted that the AO should arrive at a clear satisfaction and such satisfaction should be discernable from the assessment order itself. Further, show-cause notice issued by the AO should clearly spelt out the charge, on which, he proposed to initiate penalty proceedings. Issuing printed form of notice without specifying the charge, i.e. whether penalty proceedings has been initiated for 'concealment of particulars of income or furnishing of inaccurate particulars of income' vitiates the entire proceedings, including consequent order passed by the AO imposing penalty u/s.271(1)(C) of the Act. The Ld.Counsel for the assessee referring to the plethora of judicial precedents, including the decision of the Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows reported in [2016] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h warrants levy of penalty u/s.271(1)(C) of the Act. The Ld.Counsel for the assessee further referring to the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd., v. State of Orissa [1972] 83 ITR 26 and also the decision of the Hon'ble Delhi High Court in the case of CIT vs. Escorts Finance Ltd. [2009] 226 CTR 105 (Del) submitted that penalty cannot be levied merely because amount taxed as income. In the instant case, quantum assessment is completed based on ad-hoc disallowance on estimating portion of marketing expenses and based on surrender of income by the assessee, but not backed by any incriminating material which would neither mean that the assessee has neither concealed the particulars of income nor furnished inaccurate particulars of income. Therefore, he submitted that penalty levied by the AO and sustained by the Ld.CIT(A) should be deleted. 11. The Ld.DR, Shri. R. Clement Ramesh Kumar CIT, on the other hand, supporting the order of the Ld.CIT(A), submitted that it is an admitted fact that during the course of search huge amount of unaccounted cash was found and seized from the residential premise of the assessee Director and their associates. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, before deciding the issue of penalty levied u/s.271(1)(c) of the Act, in light of show cause notice issued by the AO u/s.274 r.w.s.271(1)(c) of the Act dated 26.07.2021, one has to examine the assessment order passed by the AO and show cause notice issued by the AO u/s.274 r.w.s.271(1)(c) of the Act and consequent penalty order passed by the AO. 13. It is an admitted legal position that before initiating penalty, the assessee must be apprised of the precise charge brought against the assessee. The assessee must be told distinctly whether he has held guilty of having concealed the particulars of income or furnished inaccurate particulars of income. Section 274(1) provides for reasonable opportunity to be given to the assessee so that he can meet the charge. Therefore, from the above, it is very clear that the satisfaction arrived at by the AO before charging the assessee on particular limb of u/s.271(1)(c) of the Act, the AO must clearly record his satisfaction and such satisfaction should discernable from the assessment order itself. This is because, if penalty proceedings are commenced against the assessee on a particular footing which is concealment of particulars of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecific finding regarding the existence of the conditions u/s.271(1)(c) of the Act, at least the facts set out in Explanation-1A & 1B should be discernable from the order which is by legal fiction constitutes concealment because of deeming provision. Even if these conditions do not exist in the assessment order, at least a direction to initiate proceedings u/s.271(1)(c) of the Act, is a sine qua non for the AO to initiate the proceedings, because of deeming provision contained in sec.1B. The Hon'ble High Court further held that notice u/s.274 of the Act should specifically stated the ground mentioned in s.271(1)(c) of the Act i.e. whether it is for 'concealment of particulars of income or furnishing of inaccurate particulars of income'., Sending a printed form of notice with grounds mentioned in Sec.271(1)(c) of the Act would not specific requirement of law. This legal position is re-affirmed by the Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows 73 Taxmann.com 248 (SC), where the Hon'ble Supreme Court dismissed the SLP against the order of the Hon'ble High Court which in turn upheld the decision rendered by the Karnataka High Court in the case of CIT v. Manjunath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after considering its earlier decision in the case of Sudaram Finance Ltd. v. ACIT reported in [2018] 93 taxmann.com 250, has held that penalty levied u/s.271(1)(c) of the Act, consequent to vague/defect notice issued u/s.274 r.w.s.271(1)(c) of the Act, cannot be sustained under the law. The relevant findings of the Hon'ble High Court are as under: 18. The first aspect is as to whether there is any concealment of particulars of the assessee's income. At the first instance i.e. during the scrutiny assessment, the assessee sent a letter dated 15.3.2016 explaining the entire transaction wherein he had stated that while filing the return of income, he was under the impression that both the properties were agricultural lands and that there was no tax liability. Consequently, since one of the properties namely the property at Egattur Village was treated to be a capital asset, the long term capital gains were computed and the assessee requested for deduction under Section 54F of the Act, as the sale consideration received was utilized for purchase of a new flat, in which, the name of the assessee's wife was also included as a purchaser. The assessee further stated about the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee submitted a reply dated 11.4.2016 wherein the assessee reiterated the stand taken in his letter dated 15.3.2016. However, the same was not accepted by the Assessing Officer while completing the assessment under Section 143(3) of the Act. The assessee further stated that he had produced all the facts of the transactions namely sale documents, materials, etc., before the Assessing Officer and therefore, it cannot be construed as furnishing of inaccurate particulars. The assessee also pointed out that while allowing exemption under Section 54F of the Act, the Assessing Officer considered 50% of the investments whereas 100% investments were done through banking channels. Therefore, the assessee stated that it cannot be said that correct particulars of income were not furnished. The assessee further pointed out that he was in need of funds for purchase of a new flat, that he sold trees with roots, coconut seedling and other miscellaneous items, that the farming sector was an unorganized sector, that all were sold to agriculturists and that he cannot be compelled to furnish details in this regard. The assessee furthermore pointed out that full particulars such as bank statements, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme 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 has to satisfy as to whether the penalty proceedings have to be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduce it into writing. 29. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan Vs. CIT [reported in (2001) 118 Taxman 324]. The decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd., was taken note of by the Division Bench of this Court, to which, one of us (TSSJ) was a party, in the case of CIT, Chennai-IV Vs. Gem Granites (Karnataka) [reported in (2014) 42 Taxmann.com 493] and the aspect as to how onus/burden of proof shifts from the assessee to the Revenue when penalty proceedings are initiated, is held in the following terms : "11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 while submitting the reply to the penalty notice, in the appeal before the CIT(A) and before the Tribunal. This is evident on a reading of the grounds of appeal filed before the CIT(A) as well as the notes of arguments filed by the assessee before the CIT(A) dated 30.6.2017. Therefore, to that extent, the CIT(A) and the Tribunal have committed an error. 32. The decision of this Court in the case of Sundaram Finance Ltd., was couched on a different factual position wherein the Court rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time before the High Court and considering the administrative set up of the said assessee and the fact that the assessee was never prejudiced on account of the alleged defect, the Court rejected the argument of the assessee. 33. In the case on hand, we find that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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 follows: ".....A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture 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 that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 law are answered in favour of the assessee. No costs. 16. The assessee is also relied upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra), wherein, the Hon'ble Karnataka High Court has considered an identical issue in light of show cause notice issued u/s.274 r.w.s.271(1)(c) of the Act and after considering relevant facts held that notice u/s.274 of the Act should specifically refer the grounds mentioned u/s.271(1)(c) of the Act i.e. whether it is for 'concealment of particulars of income or furnishing of inaccurate particulars of income'. Sending printed form of notice where all the grounds mentioned in u/s.271(1)(c) of the Act, would not specify the requirement of law. The relevant findings of the Hon'ble Karnataka High Court are as under: * Penalty under section 271(l)(c) is a civil liability. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear and without any ambiguity. If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings in appeal, but the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. * Notice under section 274 should specifically state the grounds mentioned in section 271(T)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. [Para 63] * The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty, though emanate from proceedings of assessment, are independent and separate aspect of the proceedings. The find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Authority. Instead, he sustained additions under new grounds of under valuation of the closing stock. However, the Assessing Authority, in the penalty proceedings, took note of the Appellate order and suitably amended the penalty proceedings and proceeded further in the matter and then imposed penalty. Therefore, it is clear, that the subject matter of the penalty proceedings was the order of the Appellate Authority and not the order passed by the Assessing Authority. If the Appellate Authority was satisfied that the addition had to be made on the ground of under valuation of the closing stock, which was not the finding recorded by the Assessing Authority, on which penalty proceedings had been initiated by the Assessing Authority, then, it was the Appellate Authority who should have initiated penalty proceedings and issued notice to the assessee to show cause why penalty should not be imposed. The said procedure was not followed, and therefore, though for different reasons, the first Appellate Authority set aside the order levying penalty, the Tribunal correctly appreciated the facts in a proper perspective and was justified in not interfering with the order passed by the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as another decision in Sundaram Finance Ltd. Vs ACIT (93 Taxmann.com 250) against which the assessee's SLP has already been dismissed by Hon'ble Supreme Court which is reported at 99 Taxmann.com 152. 8. Upon perusal of notice issued u/s 274 r.w.s. 271(1)(c) as extracted above, we find that though the applicable clause has been ticked by Ld. AO, however, the applicable limb i.e., whether the penalty was being initiated for furnishing of inaccurate particulars of income or for concealment of income has not been specified. Even in the body of penalty order, penalty has mechanically been levied without framing specific charge against the assessee. As per settled legal position, the failure to frame specific charge against the assessee would vitiate the penalty proceedings and the penalty would be bad in law. The two limbs of Sec.271(1)(c) are concealment of income and furnishing of inaccurate particulars of income which carry different connotation / meaning. Nonframing of specific charge against the assessee would vitiate the penalty proceedings since the penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income means, when the assessee has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricultural operations for 27 years and that his income was based upon the interest received from bank deposits and offered that a sum of Rs.50 lakhs may be treated as revenue in nature and taxed as income though there was no positive fact or finding had been found so as to avoid protracted litigation. 19. Further, with regard to deposits, the assessee explained that he had received the amount of Rs. 21,56,250/- towards development cost of the agricultural land and a copy of the letter acknowledging payment made by the party was produced. This amount was received by RTGS to his bank account and the buyer had confirmed in writing that this was paid as development cost. Hence, this amount related to sale consideration of the land. 20. This explanation, which was offered by the assessee, did not find favour with the Assessing Officer, who rejected the same and completed the assessment vide order dated 30.3.2016 under Section143(3) of the Act and made additions as mentioned above. Thus, there was no allegation in the assessment under Section 143(3) of the Act that there had been concealment of particulars of income. 21. Admittedly, all the amounts were received by the assessee thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was no non disclosure, that the explanation offered was bona fide and that therefore, penalty could not be imposed. 24. The Assessing Officer, while imposing penalty vide order dated 28.9.2016, held that but for the scrutiny assessment under Section 143(3) of the Act, the cash deposits would not have come to light and therefore, rendered a finding that the assessee furnished inaccurate particulars. 25. This finding of the Assessing Officer is incorrect because while completing the assessment under Section 143(3) of the Act, there was no allegation against the assessee as to furnishing of inaccurate particulars. But, the Assessing Officer did not accept the explanation offered by the assessee and made certain additions, which will not automatically result in interpreting the same as furnishing of inaccurate particulars. Further, we find that there is no specific finding as regards the concealment against the assessee because, on facts, it has been established before the Assessing Officer while completing the assessment under Section 143(3) of the Act that all transactions were through banking channels. Hence, the argument of Mrs.R.Hemalatha, learned Senior Standing Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under Section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. Hence, the decision of this Court in the case of Sundaram Finance Ltd., cannot be applied. 34. The decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan is factually different wherein the assessee was unable to furnish evidence for loans and that he offered the amount of transaction as additional income and this explanation was not acceptable to the Assessing Officer and he applied Explanation (1B) to Section 271(1)(c) of the Act and imposed penalty. 35. In the instant case, the assessee has been able to explain the transaction even at the first instance i.e. while submitting the reply dated 15.3.2016 in response to the notice under Section 143(2) of the Act, which explanation he maintained till he filed an appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income " 9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason,the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature." 37. On this issue, a useful reference can be to the decision of the Gujarat High Court in the case of National Textiles Vs. CIT [reported in (2001) 249 ITR 125], which related to the assessment year 1974-75 wherein it was held that in order to justify the levy of penalty, two factors must co- exist namely (i) there must be some material or circumstance leading to a reasonable conclusion that the amount does not represent the assessee's income and it is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus i.e. conscious concealment or act of furnishing inaccurate particulars on the part of the assessee. 38. Further, the decision of the Hon'ble Division Bench of this Court in the case of CIT Vs. S.I.Paripushpam [reported in (2001) 118 Taxman 844] would support the case of the assessee. In the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or 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 with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference. 8. The contention based upon MAK Data (P.) Ltd.(supra) also does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the irrelevant matter-vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was couched on a different factual position wherein the Court rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time before the High Court and considering the administrative set up of the said assessee and the fact that the assessee was never prejudiced on account of the alleged defect, the Court rejected the argument of the assessee. 33. In the case on hand, we find that at the first instance, while replying to the penalty show cause notice dated 30-3-2016, the assessee raised a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. Hence, the decision of this Court in the case of Sundaram Finance Ltd., cannot be applied. Therefore, the ratio of this decision could not be applied in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd No. 5 is also rejected." It means that the assessee is vigilant from the beginning and raised this issue of defect in notice for the first time before CIT(A) and assessee being individual, the issue is squarely covered by the decision of Jurisdictional High Court in the case of Babuji Jacob, supra, and hence, we delete the penalty and allow the appeal of assessee. 19. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that show cause notice issued by the AO notice u/s.274 r.w.s.271(1)(c) of the Act is vague in nature which does not specify under which limb penalty proceedings u/s.271(1)(c) of the Act are initiated. Therefore, we are of the considered view that show cause notice issued by the AO and consequent penalty order passed u/s.271(1)(c) of the Act is void ab initio and liable to be quashed and thus, we quashed show cause notice issued notice u/s.274 r.w.s.271(1)(c) of the Act, dated 26-07-2021 and consequent penalty order passed by the AO u/s.271(1)(c) of the Act dated 31.03.2022. 20. In the result, appeal filed by the assessee in ITA No.1164/Chny/2023 for AY 2015-16 is allowed. ITA No.1165/Chny/2023 for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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