TaxTMI 
TaxTMI 
2016 (12) TMI 1077
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....sessment year 2002-03, however, the assessment in the said year was completed under section 143(3) r.w.s. 147 of the Act. 4. The assessee in ITA No.2175/PN/2014 has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law the Learned CIT (A) is not justified in confirming the penalty. The penalty may please be cancelled. 2. On the facts and in the circumstances of the case and in law the Learned CIT (A) is not justified in confirming the penalty. When section 153A starts with non obstante clause excluding section 139 and 147, the return filed under section 153A is the first return under section 153A. The income returned is accepted by the Learned AO. There is no addition to income hence the penalty may please be cancelled. 3. On the facts and in the circumstances of the case and in law the Learned CIT (A) is not justified in confirming the penalty when the amount declared was included in the return of income filed by the appellant under section 153A and there was no retraction. The penalty may please be cancelled. 4. On the facts and in the circumstances of the case and in law the Learned CIT (A) is not justified in con....
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....J (Pune)(UO) The penalty may please be cancelled. 10. Without prejudice to the above Additional Ground of appeal: On the facts and in the circumstances of the case and in law, on verification of penalty order, it is seen that the Learned Assessing Officer has levied the penalty without considering the reduction granted by CIT(A) in quantum appeal as such the penalty order is ab initio invalid and may please be cancelled. 5. Briefly, in the facts of the case, search and seizure operations were carried out at the residential premises of assessee under section 132(1) of the Act on 16.01.2009 and certain books of account and documents were seized from the premises. Simultaneously, Survey under section 133A of the Act was carried out at the hospital premises i.e. Surya Nursing Home, Nashik and certain books of account and papers were impounded. During the course of search, incriminating documents marked as A-3, A-1/1 to A-1/4 & A-8 were seized. Further, during the course of Survey at the hospital premises, incriminating documents marked as A- 36, A-38 & A-39 were impounded. None of these documents related to assessment year 2003-04 i.e. instant assessment year but when the a....
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....any immunity from levy of penalty. In view thereof, the Assessing Officer held that the assessee has concealed particulars of his income by furnishing of inaccurate particulars of the same and hence, penalty was levied at Rs. 1,17,479/-. 7. Before the CIT(A), the assessee made elaborate submissions which are reproduced in the order of CIT(A). The CIT(A) vide para 6 noted that search under section 132 of the Act was conducted at the assessee's residential / business premises on 16.09.2010. The assessee was running Hospital / Nursing Home at Nashik Road, Nashik. The CIT(A) further states that search under section 132 of the Act lead to seizure of number of incriminating documents in the form of rough pages, note books, diaries, receipt books, etc. which contained details of suppressed receipts on account of OPD / IPD and endoscopy charges received from the patients. During investigation, the assessee admitted the fact of suppression of receipts from the OPD patients. The total suppressed receipts on account of OPD patients for assessment years 2003-04 to 2008-09 were estimated at Rs. 15.40 crores. The assessee had disclosed this amount as undisclosed income for the respective year....
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....ce of which investments was out of income generated from hospital. With regard to assessment years 2003-04, 2004-05 and 2005-06, the learned Authorized Representative for the assessee pointed out that no specific inventory was prepared and the assessee declared the value of assets as such. He stressed that there is no merit in levy of penalty for concealment since the satisfaction recorded by the Assessing Officer does not specify the charge, except to say that Explanation 5A to section 271(1)(c) of the Act is attracted. He stressed that first proposition raised in the present appeal is challenging the applicability of Explanation 5A. He pointed out that since the income has been offered in the hands of assessee on account of Survey, then Explanation 5A to section 271(1)(c) of the Act is not applicable. He stressed that search was at the residence of assessee, wherein only certain investments were found and the source of said investments was out of income from the hospital and hence, part of the income declared pursuant to Survey and consequently not declared because of search. The next plea raised by the learned Authorized Representative for the assessee was that the perusal of as....
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....arried out at the residence of assessee on 16.01.2009. Simultaneously, Survey was carried out at the hospital of assessee on 16.01.2009. During the course of Survey, evidence of certain unaccounted receipts, rough pages, note books, diaries, receipt books, etc. were found. The assessee admitted the fact of suppression of receipts from OPD, IPD, endoscopy charges, etc. The assessee has declared suppressed receipts for assessment years 2003-04 to 2008-09 on estimate basis as under:- "Receipts from OPD for A.Y. 2003 -04 to 2008-09 - Rs.15,40,000/- Receipts IPD patients for A.Y. 2003 -04 to 2008-09 - Rs.22,12,750/- Endoscopy charges for A.Y. 2005 -06 - Rs.4,50,000/-" 12. Further, from the residence of assessee, certain receipts of investments / expenditure were found during the course of search. The case of assessee before us is that the source of said investment was also out of receipts from the hospital and though the evidence was found from the residence of assessee during the course of search but it related back to the Survey conducted at the hospital premises of assessee. The assessee had declared additional income of Rs. 15,51,235/- f....
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....Survey, then the same is not covered under Explanation 5A to section 271(1)(c) of the Act. We find merit in the stand of assessee in this regard, wherein Explanation 5A to section 271(1)(c) of the Act categorically provides that the same is applicable in case of searches. However, the Statute is silent about the additional income offered by the persons in the revised return of income filed pursuant to Survey proceedings. The additional income was declared during the Survey and if offered by the person in the revised return of income filed thereafter, then the same does not partake the nature of additional income taken note in Explanation 5A to section 271(1)(c) of the Act. In this regard, we find support from the ratio laid down by the Hon'ble Delhi High Court in CIT Vs. SAS Pharmaceuticals reported in 335 ITR 259 (Del), wherein it has been held as under:- "12. After considering the respective submissions of the learned counsel for the parties, we are of the view that the argument of the learned counsel for the assessee has to prevail as it carried substantial weight. It is to be kept in mind that s. 271(1)(c) of the Act is a penal provision and such a provision has to be strict....
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....TR (Del) 361 : (1983) 141 ITR 203 (Del) and in Reliance Petroproducts (P) Ltd. (supra), the Supreme Court has clinched this aspect, viz., the assessee can furnish the particulars of income in his return and everything would depend upon the IT return filed by the assessee. This view gets supported by Explns. 4 as well as 5 and 5A of s. 271 of the Act as contended by the learned counsel for the respondent. 16. No doubt, the discrepancies were found during the survey. This has yielded income from the assessee in the form of amount surrendered by the assessee. Presently, we are not concerned with the assessment of income, but the moot question is as to whether this would attract penalty upon the assessee under the provisions of s. 271(1)(c) of the Act. Obviously, no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Since the assessee was exposed during survey, may be, it would have not disclosed the income but for the said survey. However, there cannot be any penalty only on surmises, conjectures and possibilities. Sec. 271(1)(c) of the Act has to be construed strictly. Unless it is found that there is actually a con....
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....does not discernable as to under which limb of section the satisfaction is so recorded. Even the notice issued levying penalty is not clear as to which limb has to be satisfied by the assessee and consequently, the assessee is deprived from proper show cause notice in this regard. Further, even the order levying penalty is not clear as to under which limb the penalty under section 271(1)(c) of the Act has been levied. The Assessing Officer says that the assessee has concealed particulars of his income by furnishing of inaccurate particulars of the same. We find that this issue of recording of satisfaction before initiating penalty proceedings issue of notice and the levy of penalty has been considered by the Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003 -04 to 2007-08, order dated 30.11.2016 and it has been held as under:- "13. We have heard the rival contentions and perused the record. The issue arising in the present bunch of appeals is jurisdictional issue of levy of penalty under section 271(1)(c) of the Act. The requirement of section is that where the Assessing Officer or the Commissioner of Appeal....
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....e particulars of income. There may be cases where there is issue of both concealment of income and furnishing of inaccurate particulars of income, based on the nature of additions, then in such cases, satisfaction and notice thereon should specify exact charge against the assessee. The charge has to be further specified while completing penalty proceedings and the Assessing Officer has to come to a conclusion as to whether it is case of concealment of income or furnishing of inaccurate particulars of income. The question which further arises where the satisfaction recorded by the Assessing Officer and the notice issued thereafter is without application of mind, then can the subsequent order passed levying penalty be held to be valid?. The Hon'ble Karnataka High Court in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra) had dealt upon the issue of notice under section 274 of the Act for the purpose of levying penalty for concealment and observed as under:- "59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said....
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.... and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, 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 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 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 ....
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....where the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similarly, for furnishing inaccurate particulars of income, the standard proforma without striking of relevant clauses, as per the Hon'ble High Court would lead to inference as to non-application of mind. 16. Further, the Hon'ble Karnataka High Court in CIT Vs. SSA'S Emerald Meadows (supra) has dismissed the appeal of Revenue, where the Tribunal had allowed the appeal of assessee holding that the notice issued by the Assessing Officer under section 274 r.w.s. 271(1)(c) of the Act to be bad in law as it does not satisfy which limb of section 271(1)(c) of the Act under which it has been initiated The Hon'ble High Court had relied on decision of Division Bench of the Court rendered in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra). The Hon'ble Supreme Court in CIT Vs. SSA'S Emerald Meadows (supra) has dismissed the Special Leave Petition. 17. The Pune Bench of Tribunal in M/s. Sai Venkata Construction Vs. Addl. CIT (supra) and in Sanjog Tarachand Lodha Vs. ITO (supra) have applied the ratio laid down by the Hon'ble Karnataka High Court (s....
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....ded by the Assessing Officer and since the assessee fully knew in detail the exact charge of Department against him, it could not be said that either there was non-application of mind by the ITO or so-called ambiguity wording in the notice impaired or prejudiced the right of assessee of reasonable opportunity of being heard. The jurisdictional High Court deliberated upon the provisions of section 274 of the Act which contained principle of natural justice of the assessee being heard before levying penalty. It also held that mere mistake in the language used or mere non-striking of inappropriate portion could not itself be invalidated the notice. It was held that the entire factual background would fall for consideration in the matter and no one aspect would be decisive. 21. In respect of assessment year 1967-68, the Hon'ble High Court in CIT Vs. Smt. Kaushalya (supra) acknowledged that there could exist a case where vagueness and ambiguity in the notice could demonstrate non-application of mind by the authority and / or ultimate prejudice to the right of opportunity of hearing contemplated under section 274 of the Act. The show cause notice for assessment year 1967-68 was issued....
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....case reflects that the Assessing Officer while initiating proceedings has recorded satisfaction as to the assessee has furnished inaccurate particulars of income and has also concealed the income. The only source of addition in the hands of assessee is additional income offered by the assessee pursuant to search operations. In such circumstances, it is categorically a case of concealment. However, the Assessing Officer refers to both the limbs of section 271(1)(c) of the Act and the satisfaction recorded in this case suffers from infirmity. Further, even in the notice issued under section 274 of the Act, irrelevant part has not been struck off. While completing penalty proceedings also, the Assessing Officer makes reference to both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income and in the final, levies penalty for concealment of income. 23. However, the question which is raised before us by way of additional ground of appeal is root of start of the proceedings i.e. recording of satisfaction and the issue of notice, which has been challenged by the assessee to be invalid. Applying the ratio laid down by the Hon'ble Karnataka High Court in ....
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....e quashed. The issue of notice under section 274 of the Act on such vagueness and ambiguity makes such notice invalid and proceedings thereafter are to be quashed. 25. The Hon'ble Supreme Court in T. Ashok Pai Vs. CIT (supra) had held as under:- "23. Section 271(1)(c) remains a penal statute. The rule of strict construction shall apply thereto. The ingredients for imposing penalty remain the same. The purpose of the Legislature that it is meant to be a deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985. 24. "Concealment of income" and "furnishing of inaccurate particulars" carry different connotations. Concealment refers to a deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression very or suggestion falsi." 26. Where concealment of income and furnishing of inaccurate particulars of income are two different connotations, then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings as to under which limb the case of assessee falls....
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.... 16. Another aspect raised by the learned Authorized Representative for the assessee before us was in respect of decision of Hon'ble High Court of Karnataka in CIT Vs. SSA'S Emerald Meadows (supra). The substantial questions which were raised before the Hon'ble High Court are as under:- "(1) Whether, omission if Assessing Officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under section 274 r.w.s. 271(1)(c) is bad in law and invalid despite the amendment of Section 271(1B) with retrospective effect and by virtue of the amendment, the Assessing Officer has initiated the penalty by properly recording the satisfaction for the same?" 17. The Hon'ble High Court had allowed the claim of assessee where the Assessing Officer had not explicitly mentioned that as to whether....