TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 188
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....pellant had concealed 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 co operate 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 rec....
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....assessment years were completed under section 143(3) r.w.s. 153A of the Act and the additional income offered by the assessee was added as income of the assessee. The Assessing Officer while completing assessment proceedings observed that the additional income was disclosed pursuant to search and seizure operations, otherwise, the same would have remained concealed with the assessee. Thus, the assessee was found to have concealed particulars of income and furnished inaccurate particulars of such income within meaning of Explanation 5A to section 271(1)(c) of the Act. Accordingly, penalty proceedings under section 271(1)(c) of the Act were separately initiated. Thereafter, the Assessing Officer issued notice under section 274 r.w.s. 271(1)(c) of the Act and the case of assessee before us is that either of the limbs as to whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income, has not been struck off. The Assessing Officer in each of the cases had levied penalty under section 271(1)(c) of the Act which was confirmed by the CIT(A), against which the assessee is in appeal. 5. The assessee has raised additional ground of appeal which ....
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....n under section 132 of the Act was carried out on Chhoriya Group of cases on 22.08.2008. During the course of search, some incriminating documents were found and seized in which there were transactions of purchase and sale of plots and shops at various sites. The receipts on account of sales were much more than what disclosed by the assessee in the returns of income filed under section 139(1) of the Act. In the statement recorded on oath on 16.10.2008, Shri K.D. Jain (Chhoriya), partner of the firm had admitted that the assessee had received on-money on sale of plots and shops which were not disclosed in the returns of income. He offered sum of Rs. 11,44,93,507/- as additional income. Thereafter, notice under section 153A of the Act was issued to the respective assessee for different assessment years. In response thereto, the group of assessee furnished their returns of income and the total income offered for tax over and above the income returned under section 139(1) of the Act was Rs. 13,99,87,648/-. The respective assessee furnished the returns of income in response to the notice issued under section 153A of the Act. The assessments in the hands of each of the assessee for diffe....
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....he 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 initiate penalty proceedings and thereafter on fixation of charge, levy the penalty for such act of concealing the particulars of income. Similarly, in cases where the assessee concerned had furnished inaccurate particulars of such income, then similar exercise has to be carried out by the concerned Officer. 14. The first stage of invocation of provisions of section 271(1)(c) of the Act is the satisfaction to be recorded by the Assessing Officer, which admittedly, has to be during the course of assessment proceedings. So, where the assessment proce....
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....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 Section 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. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation o....
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....e 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 will lead to an inference as to non-application of mind." 15. The Hon'ble Karnataka High Court has laid down the proposition that the Assessing Officer is to be satisfied in the course of proceedings that there is either concealment of income or furnishing of inaccurate particulars of income under clause (c) to section 271(1) of the Act. It has been categorically held that concealment of income and furnishing of inaccurate particulars of income are different. The Hon'ble High Court has thus, laid down that the Assessing Officer while issuing ....
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....nitiating 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 notice were part of process of natural justice and the defect in such notice could not be overlooked. Similar proposition has further been laid down in other decisions of various Benches of Tribunal which have been relied upon by the assessee before us. 20. The learned Departmental Representative for the Revenue placed heavy reliance on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Smt. Kaushalya (supra). In the facts of the case before the Hon'ble Bombay High Court, the Hon'ble High Court quashed the penalty levied for ....
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....fore 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 non- application 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. Consequent to the notices issued under section 153A of the Act for various years, different entities filed the return of income for the respective years and cumulatively for Rs. 13.99 crores as additional income. The income was declared on account of on-money on sale of plots, which was detected from the documents seized during the course of search. Admittedly, Explanation 5A to section 271(1)(c) of the Act is attracted in such cases. However, the case of assessee before us is that the Assessing Officer while completing the assessment pro....
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....f 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 him. As pointed out, in present case, in the assessment order itself while recording satisfaction for initiating proceedings under section 271(1)(c) of the Act, exact charge of the Department against the assessee is not clear. The Assessing Officer records the satisfaction for initiating penalty proceedings on both the counts i.e. concealment of income and furnishing of inaccurate particulars of income. The Hon'ble Bombay High Court had also upheld the quashing of penalty proceedings for assessment year 1967-68 to be justified on a....
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....m 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". 12. Further, in bunch of cases i.e. in Nandkishor Tulsidas Katore Vs. ACIT in ITA Nos.2174 to 2180/PN/2014, relating to assessment years 2002 -03 to 2008-09, order dated 14.12.2016, reference was made to the judgment of Hon'ble High Court of Karnataka in CIT Vs. SSA'S Emerald Meadows (2016) 73 taxmann.com 241 (Kar), wherein the issue No.1 raised before the Hon'ble High Court and its reply was 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....
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....g of satisfaction by the Assessing Officer while completing assessment proceedings. Further, the Assessing Officer has failed to strike off either of the limbs of section 271(1)(c) of the Act, which are not satisfied by the assessee and consequently, notice issued under section 274 r.w.s. 271(1)(c) of the Act is bad in law and order levying penalty for concealment thereafter, is infructuous. Accordingly, we hold so. The Statute has provided distinction between concealment of income and furnishing of inaccurate particulars of income, which may be thin line of distinction, but the same has to be kept in mind while recording satisfaction by the Assessing Officer. Following the same parity of reasoning as laid down by the Hon'ble High Court of Karnataka in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), CIT Vs. SSA'S Emerald Meadows (supra) and the Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT (supra), we set aside the order passed under section 271(1)(c) of the Act levying penalty for concealment in the respective years. 15. Now, coming to the merits of case also, the issue was same as in Kanhaiyalal D. Jain Vs. ACIT (supra), wherein it was hel....