TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1238
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....cealed its income and also misrepresented the facts of the case. 2] The learned CIT(A) erred in enhancing the penalty levied from 100% to 150% without appreciating that on the facts of the case and in law, he had no power to enhance the penalty levied by the A.O. and accordingly, the enhancement made by the learned CIT(A) is not justified at all. 3] The learned CIT(A) erred in holding that the additional income declared by the assessee group in the course of search in respect of on money on sale of plots was not correct and the seized papers indicated unaccounted loans received by the assessee and accordingly, the assessee had misrepresented the facts and therefore, the levy of penalty was justified in law. 4] The learned CIT(A) failed to appreciate that the additional income declared by the group of Rs. 13.99 Crs. was to buy peace and to cooperate with the dept. and there was no evidence that the assessee had actually earned that income and accordingly, the penalty levied by the A.O. was not justified at all. 5] The learned CIT(A) ought to have appreciated that if its contention is accepted and the notings on the seize papers indicate unaccounted loans received by the ass....
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....r. However, in the return of income filed in response to notice under section 153A of the Act, the assessee offered Rs. 39,75,780/- as additional income. The Assessing Officer while completing assessment proceedings in the case of assessee noted that if there was no search and seizure operations, the assessee would not have disclosed the additional income of Rs. 39,75,780/and the same would have remained concealed with the assessee. Thus, the assessee had concealed particulars of income of Rs. 39,75,780/- and furnished inaccurate particulars of such income within meaning of Explanation 5A to section 271(1)(c) of the Act, was the order passed by the Assessing Officer. The assessment in the case of assessee was completed under section 143(3) r.w.s. 153A of the Act at the returned income of Rs. 45,70,765/-. Thereafter, the Assessing Officer passed penalty order under section 271(1)(c) of the Act after considering the reply of assessee that the additional income offered does not represented the true income as the same was gross sale receipts, on account of sale of plots, etc. The Assessing Officer vide para 4.3 held that the penalty was initiated under section 271(1)(c) of the Act with....
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....ney lending. He has scanned some of the seized documents and at page 19 of the appellate order has given a finding that the amount received was cash loan on the left hand side and payment of interest on the right hand side. Similar observations were made in respect of other scanned pages. The CIT(A) thereafter, drew a chart of money lending transactions entered into by the assessee with various persons of Chhoriya Group & others and was of the view that with regard to levy of penalty under section 271(1)(c) of the Act for concealment of income and furnishing of inaccurate particulars of income, there was no doubt. The CIT(A) upheld the order of Assessing Officer in quantification of income for the purpose of levy of penalty, however, the CIT(A) enhanced the penalty to be levied at the higher rate of 150%. 9. The assessee is in appeal against the order of CIT(A) in levying the penalty at 150% and has challenged his power of enhancement. The assessee is also in appeal against levy of penalty under section 271(1)(c) of the Act perse. The jurisdictional issue raised by the assessee by way of additional ground of appeal is that there is no merit in passing the order under section 271(1....
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....sessee liable for penalty for concealment or for furnishing inaccurate particulars of income. Our attention was further drawn to the order levying penalty under section 271(1)(c) of the Act, wherein in para 4.3, the Assessing Officer had referred to both the limbs, however, in para 6 only one limb was applied to hold the assessee to have concealed the particulars of income. The CIT(A) in the first round had deleted the penalty which was set aside by the Tribunal by holding that Explanation 5A to section 271(1)(c) of the Act was applicable. However, the matter was sent back to the file of CIT(A) to decide other pleas. The learned Authorized Representative for the assessee in this regard points out that the CIT(A) does not decide the jurisdictional issue but enlarges the scope on merits, hence, the additional ground of appeal. The learned Authorized Representative for the assessee pointed out that the ratio decided by the Hon'ble Karnataka High Court in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) is squarely applicable to the facts of the present case. He further relied on decisions of Pune Bench of Tribunal in M/s. Sai Venkata Construction Vs. Addl.....
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....ncome or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty the amounts as specified in sub-clause (iii) which would be in addition to tax, if any, payable by the said person. The section thus requires the concerned Officer to record satisfaction in the course of any proceedings under the Act, that the person has concealed the particulars of his income or furnished inaccurate particulars of his income. After recording the satisfaction, during the course of penalty proceedings also, the concerned Officer has come to a finding that as to whether the person has concealed the particulars of his income or furnished inaccurate particulars of such income and thereafter, levy the penalty accordingly. The word used between the two acts i.e. concealment of particulars of income and furnishing of inaccurate particulars of such income is 'or'. So the penalty levied by the concerned Officer is on satisfaction of any of the limbs and not the satisfaction of both the limbs. Where the assessee had concealed the particulars of income in particular circumstances, then the Assessing Officer may record satisfaction to that effect and initia....
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....tains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 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 Section 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 Section 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 ....
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....ny proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses....
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....d to be vitiated. 18. The Mumbai Bench of Tribunal in Sanghavi Savla Commodity Brokers P. Ltd. Vs. ACIT in ITA No.1746/Mum/2011, relating to asse ssment year 200708, order dated 22.12.2015 while deciding similar issue, wherein the Assessing Officer had initiated penalty proceedings for concealment of particulars of income without striking inappropriate words or any parts of notice and proceeded to levy penalty for concealment, then following the ratio laid down by the Hon'ble Karnataka High Court, the Tribunal held that notice issued for initiating penalty proceedings were invalid and consequently penalty proceedings were invalid. 19. Similar proposition has been laid down by Kolkata Bench of Tribunal in Shri Deepak Kumar Patwari Vs. ACIT in ITA Nos.616 to 618/Kol/2013, relating to assessment years 2007-08 to 2009-10, order dated 03.02.2016 and it has been further held that the provisions of section 292B of the Act cannot cure the basic defect in assumption of jurisdiction and could only cure the mistake, defect or omission in the return of income, assessment, notice or the proceedings. The Tribunal further held that show cause notice and the reasons mentioned in the show cause n....
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....cases but there was use of word 'deliberately' also. The Hon'ble High Court held that notice clearly demonstrated non-application of mind on the part of Assessing Officer. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity to the assessee since he did not know of exact charges he had to face. In this background, quashing of penalty proceedings for assessment year 1967-68 was held to be justified. Applying the said principle laid down by the Jurisdictional High Court, application of mind before issuing the notice under section 274 of the Act has to be considered. The Hon'ble High Court clearly held that where there is vagueness and ambiguity in the notice issued which could demonstrate nonapplication of mind by the authority which in turn, would ultimately prejudice the right of opportunity of hearing of the assessee as contemplated under section 274 of the Act, then such notice is invalid. 22. Now, coming to the facts of the case before us, wherein search and seizure operations were carried out on Chhoriya group of concerns on 22.08.2008 and declaration of Rs. 11.44 crores was made in the hands of whole group for various years. Conseq....
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....ed in the present case to initiate penalty proceedings both for concealment of income and furnishing of particulars of income against additional income offered by the assessee is incorrect. Further, where the assessee is not aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. It is a clear-cut case of concealment since the assessee had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the satisfaction accordingly and issued the notice accordingly. 24. We find no merit on the partial reliance placed upon by the learned Departmental Representative for the Revenue on the decision of Jurisdictional High Court in CIT Vs. Smt. Kaushalya (supra). The Hon'ble High Court has clearly laid down the proposition that the Assessing Officer has to make the assessee fully aware of exact charge of the Department against h....
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....f penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty notice issued in the present case suffers from infirmities i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact charge against him, hence the same is quashed. The penalty proceedings completed pursuant to such notice are vitiated and the same are held to be invalid. 27. Now, coming to the merits of case, the assessee had offered additional income on account of on-money on sale of plots. The Assessing Officer had accepted the same and had initiated penalty proceedings under section 271(1)(c) of the Act. The CIT(A) during the course of appellate proceedings relating to section 271(1)(c) of the Act issued enhancement notice to the assessee. Thereafter, he had g....