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TMI Blog2024 (11) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT was justified in deleting the penalty under Section 271(1) (c) of the Income Tax Act, 1961 ["Act"] by ignoring the fact that the Assessee had claimed inaccurate expenses imposed by the Assessing Officer ["AO"] on the Assessing Company for the reason that in the notice under Section 274 read with Section 271(1) (c), the AO has not marked the specified limb for which the penalty notice is issued, although, penalty was also imposed for furnishing inaccurate income as per the penalty order by the AO. 4. For the sake of convenience, it will be apposite to refer to the facts of ITA No. 90/2020. Shorn of all necessary details, the facts are that assessee filed return on 01.10.2015, declaring loss of Rs. 476,35,92,302/-. 5. On 19.03.2016, a notice under Section 143 (2) of the Act was issued and served upon the assessee company. 6. On 28.03.2017, the original return was revised and the assessee declared a loss of Rs. 354,34,84,148/-, which included loss from Business or Profession amounting to Rs. 5,00,14,046/-. The income from short term capital gain Rs. 97,02,942/- and long term capital loss Rs. 350,31,73,044/- was claimed as exempt. 7. During the assessment proceedings, it was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 142(1)/143(2) of the Income Tax Act,1961 dated *have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1,2,3,4 and 5. You are requested to appear before me at 11:30 AM/PM on 23.06.2017" *" 8. From the above, it is evident that the notice was absolutely vague. There is no specific charge for initiation of penalty proceedings which the assessee could explain. The penalty notice mentions the failure of the assessee to comply with the notice under Section 142(1)/143(2). It also mentions about the concealment of particulars of income or furnishing of inaccurate particulars of income in terms of Explanation 1,2,3,4 and 5. The subsequent notice dated 3rd November, 2017 is only a reminder with reference to the first notice. In the assessment order, the Assessing Officer has discussed the addition in paragraph 4 of the order, which reads as under:- "4. The contention of the assessee has been examined. From perusal of the profit and loss account of the assessee company, it was noticed that the assessee company has only dividend income which has been received from the investment made in equity shares and mutual f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 27l(l)(c}. A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars." 12. In the case of the assessee, though the Assessing Officer has levied the penalty for furnishing inaccurate particulars of income but he has not specified which particular furnished by the assessee was incorrect, erroneous or false. In fact, in the assessment order, when the Assessing Officer has discussed the addition, there is no mention about furnishing of inaccurate particulars. He simply disallowed the claim made by the assessee. Hon'ble Apex Court in the above case has clearly mentioned that merely because a claim made in the return of income is not accepted cannot amount to furnishing of inaccurate particulars." 14. Learned counsel for the Revenue submits that the ITAT has misdirected itself by taking a hyper technical view that there is no specific charge in the notice for which pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a factum so as to cause injury to the other (See CIT vs. A. Subramania Pillai [1997] 226 ITR 403 (Mad). The word "conceal" means to hide or to keep secret. As held in Law Lexicon, the said word is derived from the latin word "concelare" which implies "con" & "celare" to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent discovery of; to withhold knowledge of. The word "inaccurate" in Webster's Dictionary has been defined as "not accurate; not exact or correct; not according to truth; erroneous; as inaccurate statement, copy or transcript". The word "particular" means detail or details of a claim or separate items of an account (see CIT v. Reliance Petroproducts P. Ltd. [2010] 322 ITR 158(SC). Thus, the words "furnished inaccurate particulars" is broader and would refer to inaccuracy which would cause underdeclaration or escapement of income. It may refer to particulars which should have been furnished or were required to be furnished or recorded in the books of account etc. (See CIT v. Raj Trading Co. [1996] 217 ITR 208 (Raj.)). Inaccuracy or wrong furnishing of income would be covered by the said expression, though there are decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was accepted by the ITAT. It followed the decision of the Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Kar) and observed that the notice issued by the AO would be bad in law if it did not specify which limb of Section 271(1) (c) the penalty proceedings had been initiated under i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. The Karnataka High Court had followed the above judgment in the subsequent order in Commissioner of Income Tax v. SSA's Emerald Meadows (2016) 73 Taxman.com 241 (Kar), the appeal against which was dismissed by the Supreme Court of India in SLP No. 11485 of 2016 by order date 5th August, 2016." 22. An identical issue came up for consideration before the Bombay High Court (Full Bench at Goa) in Mr. Mohd. Farhan A. Shaikh v. 2021 SCC OnLine Bom 345, wherein, the Court while dealing with the aspect of prejudice ruled as under:- "Question No. l: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off? 187. In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that ina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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