9911796707
TMI Blog2025 (5) TMI 512X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 274 r.w.s 271(1)(c) of the Act, is quite vague and did not at all specify which limb of S.271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment particulars of income or furnishing of inaccurate particulars of income. The impugned penalty based on such a notice being contrary to the provisions of law & facts kindly be quashed. 3. Rs. 1,71,452/-: The ld. CIT(A)/NFAC erred in law as well as on the facts of the case in confirming the order imposing penalty u/s 271(1)(c) of the Act of Rs. 1,71,452/-. The penalty so imposed by the AO & confirmed by the ld. CIT(A)/NFAC being totally contrary to the provisions of law and facts kindly be deleted in full. 4. The appellant prays your honor indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing. 3. Succinctly, the fact as culled out from the records is that in this case return of income declaring an income of Rs. 3,47,613/- was filed by the assessee on 23.11.2010. Later on, it has come to notice that the assessee had purchased and sold certain lands which were not found declared in the filed return of income. Further. after getting approval fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 917/- in total Income of the assessee on a/c of boundary wall expenses. 4. Aggrieved from that order of the ld. AO levying the penalty the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: "5. After examination of the material on record, the appeal order is passed as herein under. 6. In the case, appeal order on AO's order u/s 143(3) rws 254 has been passed on 23.11.2023. The same reads as under:- "Coming to the facts of the case, it is to be seen that assessee has not refuted the fact that in the photographs printed on transfer deed, there was no boundary wall surrounding the plot and in the transfer deed also there was no mention of existing boundary wall. Against these facts, assessee has filed the hand written letter from person who has claimed that he constructed the boundary wall and received payments on various dated. But all the payments were below Rs. 20,000/- and there was no evidence of any payment through banking channel. Therefore, the CIT(A) had correctly confirmed the addition. Since the so called letter from Kamal Raniwal was filed first time before CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Since there was clarity in the assessment order, the mistake in the penalty notice, which was issued through standardized proforma, in no way caused prejudice to the assessee and prevented him from filing an effective reply on the facts of his case. This issue stands settled by Hon'ble Supreme Court which had confirmed the judgment of Hon'ble High Court of Madras in the case of Gangotri Textiles Ltd. (order dated 25.08.2020). In that judgment, it has been observed that all violations will not result in nullifying the order passed by statutory authorities. If assessee fails to establish that he had been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply due to the defect in the notice, there is no case for treating the proceedings invalid. In view of above facts, assessee's contention regarding defective notice is rejected and Ground No.1 is dismissed. 6.4 Regarding Ground No.2, the fact remains that there was no evidence of incurring of expenses of Rs. 2,03,925/- and Rs. 3,75,917/- on two plots of land. As mentioned above, the addition of Rs. 2,03,925/- stands confirmed by ITAT and the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) of the Act, the assessee preferred an appeal before CIT(A), but did not find his favour. The ld. CIT(A), partly allowed the appeal of the assessee vide order dated 30.07.2021 and the AO revised the penalty amounting to Rs. 1,17,452/- u/s 275(1A)/154 of the Act. Hence this appeal. Submission: 1. Legal arguments: 1.1 Assessment and penalty - separate proceedings: It is pertinent to note that the AO has levied the penalty for concealment of income only & only on the basis of findings recorded by the AO in the assessment order. It is a settled principle of law that assessment and penalty proceedings are separate and distinct from each other. Kindly refer Durga Kamal Rice Mills v/s CIT (2004) 265 ITR 25 (Cal.), CIT & Anr. v/s Anwar Ali (1970) 76 ITR 696 (SC), CIT v/s Ishtiaq Hussain (1998) 232 ITR 673 (All). The AO after reproducing the relevant portion of CIT(A) order for quantum and discussing the provisions u/s 271(1)(c), merely alleged but failed to bring any material whatsoever by making independent inquires to support the finding of concealment of income & furnishing of inaccurate particulars. The ld. AO simply stated that the assessee was unable to fully sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, thus, the AO is required to bring positive material showing intentional concealment. 2. On merits: Firstly, we strongly rely upon the detailed submissions dated 22.04.2024 filed before Hon'ble ITAT during the hearing of the quantum appeal and hence, may kindly be considered as regards the merits of the claim made. The Apex Court in CIT vs. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 0158 (SC) has held that: "Merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty under s. 271(1)(c) is not attracted; mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee." The Hon'ble ITAT at Pg. 12 Para 6, of the order passed by the Hon'ble ITAT in quantum appeal dated 23.04.2024, has held the ld. CIT(A) justified in not admitting the additional evidences. Thus, the Hon'ble ITAT upheld the disallowance without considering some crucial evidences filed before the CIT(A) u/r 46A of the ITAT Rules, during the quantum appellate proceedings. However, since all those evidences were thereafter made available before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, was not even in existence. "Thus, the expenses incurred on the boundary wall construction, were not properly supported with the documentary evidences, hence, the same were disallowed and added back to the income of the assessee during the assessment proceedings u/s 147/143(3) of the Act. As discussed above, on verification of the facts as per directions given by the Hon'ble ITAT, it has been established that the expenses incurred on the boundary wall construction, are not properly supported with the documentary evidences and the same are not allowable and hereby added to the total income of the assessee for the A.Y. 2010-11." Furthermore, ld. CIT(A) erred in drawing wrong conclusion without appreciating the independent evidences and additional evidences, at pg.4 pr. 9 of order concluded the appeal proceedings as under: "9. Coming to the facts of the case, it is to be seen that assessee has not refuted the fact that in the photographs printed on transfer deed, there was no boundary wall surrounding the plot and in the transfer deed also there was no mention of existing boundary wall. Against these facts, assessee has filed the hand written letter from person who has cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections, reproduced here in above. It was also requested before the Hon'ble ITAT that the authorities below may kindly be directed have a physical verification at the site to ascertain the facts. The Hon'ble ITAT directed the directed the AO, to consider the evidences placed in support of construction cost, or else the AO may have a site inspection. The AO rejected the construction bill raised by the contractor, but chose to have a site verification. Pertinently, the Inspector duly visited and gave a factual report that a boundary wall was constructed at all side of the plot and is still available there. 2.2 Crucial Independent Evidence ignored: At the outset it is submitted that in compliance to the Hon'ble ITAT order, the ld. AO directed Ward Inspector to submit report w.r.t. boundary wall. On 14.06.2021. The Inspector submitted factual report (PB11-15) reproduced hereunder: "2. In pursuance to the above referred order, I personally visited the said site on 14.06.2021. The factual status report in this regard is submitted as under:- (i) The boundary wall claimed to have been constructed by the above assessee, is still found present on the plot. (ii) boundary wall is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or's bill. Thus, the contractor bill together with the clarification through the duly sworn affidavit, both of which, remaining completely uncontroverted, were the evidences binding upon the authority's bellow. There was no reason why not to accept these evidences in absence of any contrary evidence brought on record. Further, fact of construction of the boundary wall, the availability and existence thereof found by the Inspector in his factual report cannot be denied and has to be accepted. Kindly refer Mehta Parikh & Co. v. CIT (1956) 30 ITR 181(SC). 2.3.3 There apart, it is a matter of common knowledge and prevailing practice also that whenever a buyer an immovable property like a plot, a boundary wall is usually get constructed thereon. By the efflux of time, the boundary wall gets damaged, part thereof remains standing and part collapse. Thus this small item of expenditure should not have been given much a hype. May be thus, probable that in the photograph pasted in the sale deed it is not clearly visible. It is also a matter of common knowledge that photocopy quality at the office of the Registrar is very poor, cannot be conclusive with regard to construction of such a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of additional evidence u/r 46A being two affidavits in related to issue under consideration. However, ld. CIT (A) at Pg.3 Pr.8 held as under: "7. As mentioned above, assessee has filed two affidavits. They are discussed as under: (i) Shri Kamal Raniwal son of Ramesh Raniwal, Ajmer. The affidavit is dated 15.07.2021 and claims that Kamal Raniwal had received Rs. 2,43,160/- on various dates from 18.08.2009 to 31.10.2009 and on 01.11.2009, he had given one confirmation (the hand written letter already mentioned above in this appeal order) and in that confirmation he had made a mistake that one payment of Rs. 17,000/- which was actually received by him on 21.09.2009 was wrongly written in the confirmation letter as 21.09.2010 (i.e. after the transfer of property). (ii) Other affidavit is of Ms. Neeta Garg, wife of Pradeep Garg (the assessee himself). The affidavit is dated 15.07.2021. In the affidavit, it is claimed that when she purchased the plot on 20.11.2009, boundary wall was already constructed on it. 8. The above two affidavits are claimed by the assessee as additional evidence and assessee has requested for their admission as per Rule 46A of the Income-tax Rules. Firstl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause there were contradictory claims on facts were made by both the parties. The ld. CIT(A) instead of understanding the evidential value and applying the same on the facts of the present case while deciding the issue before him, merely rejected the same by saying that they don't constitute any independent evidence, but has not explained how it is so. In fact, it cannot be denied that in the peculiar factual circumstances, these affidavits went to the root of the matter and were essential to decide the appeal. Powers of the first appellate authority are very wide and co-terminus with those of the AO. The Hon'ble ITAT in the first round also as held so and accepted the contractor's bill." 3. Penalty not valid based on deficient SCN: 3.1. A perusal of the show cause notice issued u/s 274 r/w 271(1)(c) (PB 14), it is not at all clear as to for what precise charge, the appellant was asked to show cause viz. whether the charge is that the assessee has furnished inaccurate particulars of income or it was for concealing particulars of such income in as much as a bare perusal of the said show cause notice clearly reveal that the inappropriate words/unwanted charge has not been s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made known about the grounds on which they intend imposing penalty on him as the S. 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in S. 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in S. 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under S. 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee." The Hon'ble court also held that initiating penalty proceedings on one limb and find the assessee guilty on another limb is bad in law. It was held that "Thus once the proceedings are initiated on one ground, the penalty should als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since we have deleted the penalty on legal Ground No. 4, therefore, the other legal ground being academic is not adjudicated upon. 4.0. In the result, the appeals of the assessee are allowed." 3.5. It is submitted that in the above decisions the only stress was upon the SCN wherein only, the occasion arise for the first time for the assessee to reply towards the Show Cause as to why penalty be not imposed w.r.t one or w.r.t both the offences. But by not becoming specific in inviting a reply from the assessee, it is a gross violation of the principles of natural justice and therefore the Hon'ble Courts have treated such a notice to be vague and nullity and consequently the impugned penalty based thereon, has also been held to be without jurisdiction. On the other hand, however, the time of the completion of the assessment, it is only the initiation by the AO in the assessment order, when the assessee is not called upon to show cause against the very initiation hence, whether the penalty was initiated on one limb or the other or both the limbs, is irrelevant. Otherwise also, no appeal lay against the very initiation. Therefore, the law which is now well settled, is only and onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re CIT(A) 23-30 8. Hearing notice dt. 26.12.2023 u/s 250 31-34 9. Submission dt.02.01.2024 and 03.01.2024 filed before CIT(A) 35-36 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee notice issued by the ld. AO dated 28.01.2016 did not specify the limb upon which he intend to levy the penalty. Even otherwise the disallowance of claim cannot be subjected to penalty as held by the apex court in the case of Reliance Petro Product(Supra). The ld. AR of the assessee so far as merits of the case is concerned filed an affidavit clarifying the payment details and the penalty proceeding being separate from the assessment the same is required to be considered that there is no means rea. 8. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). He vehemently argued that the addition were confirmed and that it was clear that the assessee could not support the claim and therefore, lower authority rightly confirmed the levy of penalty. 9. We have heard the rival contentions and perused the material placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
