TaxTMI 
TaxTMI 
2017 (1) TMI 181
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....ments were found and seized relating to transaction of purchase and sale of plots, shops etc. In response to notice u/s.153A the assessee offered additional income for the assessment years under appeal as under : Assessment Year Additional income offered 2003-04 37,67,093/- 2004-05 63,51,819/- 2005-06 13,98,765/- 2006-07 22,83,871/- 3.1 The Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the Act read with Explanation 5A for concealing particulars of income and furnishing inaccurate particulars of income. Thereafter, the Assessing Officer levied penalty u/s.271(1)(c) for impugned assessment years vide separate orders of even date 24-06-2011 for concealing the particulars of income. The penalty levied for the different assessment years is as under : Assessment Year Additional income offered 2003-04 11,97,660/- 2004-05 21,04,100/- 2005-06 4,92,620/- 2006-07 7,68,950/- 3.2 Aggrieved by the orders levying penalty for the respective assessment years, the assessee filed appeals before the CIT(A). The CIT(A) vide impugned order common for all the assessment years not only confirmed the levy of penalty u/s.271(1)(c) of the Act but also ....
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....amend or delete any of the above grounds of appeal." The assessee has also challenged the impugned order by raising an additional ground of appeal, the same reads as under : 1] The assessee submits that the penalty order passed u/s. 271(1)(c) was null and void since the notice issued by the ld. A.O. was bad in law. Similar, grounds of appeal/additional ground of appeal have been raised by the assessee in other assessment years challenging the levy of penalty on merits, as well as challenging validity of notice. 5. Shri Sunil Pathak appearing on behalf of the assessee submitted at the outset that the coordinate Bench of the Tribunal in the case of Kanhaiyalal D. Jain Vs. ACIT in ITA Nos. 1201 to 1205/PN/2014 for A.Yrs. 2003-04 to 2007-08 decided on 30-11- 2016 has deleted the levy of penalty on account of invalid notice issued u/s.274 r.w.s. 271(1)(c) of the Act, as also on merits. The Ld. Authorised Representative placed on record copy of the order of Coordinate Bench in the case of Kanhaiyalal D. Jain (Supra). The Ld. Authorised Representative submitted that penalty proceedings in the case of present assessee and Kanhaiyalal D. Jain are outcome of assessment proceedings result....
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....anhaiyalal D. Jain and the assessee are part of same Chhoriya group and the penalty proceedings have been initiated on same set of facts in case of both the assessees. The grounds of appeal and the additional ground of appeal raised in the case of Shri Kanhaiyalal D. Jain (Supra) are identical to the grounds raised by the assessee in the present set of appeals assailing the order of CIT(A). The Coordinate Bench of the Tribunal in the case of Shri Kanhaiyalal D. Jain Vs. ACIT (Supra) has deleted the levy of penalty by observing 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 Appeals or the Principal Commissioner or Commissioner, in the course of any proceedings under the Act, is satisfied that any person has concealed the particulars of his income 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 ....
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....ssing 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 grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains 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 provisio....
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....alty 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 of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any 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....
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.... 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 (supra) and held that where there is no striking off of either of limbs, then notice issued under section 274 r.w.s. 271(1)(c) of the Act was invalid and subsequent penalty proceedings were held 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 assessment year 2007-08, order dated 22.12.2015 while deciding....
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....74 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 even before the assessment order was made and where the assessee had no knowledge of exact charge of Department against him as in the notice not only there was use of word 'or' between the group of 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 ....
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.... 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 CIT & Anr. Vs. Manjunath Cotton and Ginning Factory (supra) and CIT Vs. SSA'S Emerald Meadows (supra) and in view of SLP being dismissed, we find merit in the plea of assessee that the satisfaction recorded 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, whe....
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....e 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. In the present set of facts, the satisfaction as recorded by the Assessing Officer which is evident from the assessment order itself does not establish the case of Revenue against the assessee that it is liable for levy of 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 Office....