TaxTMI 
TaxTMI 
2017 (1) TMI 313
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....iled to appreciate that the income declared by the appellant in the return of income filed as per statement u/s 132(4) of the IT Act and therefore the penalty levied by the learned Assessing Officer u/s 271[1] [c] of the I.T. Act 1961 by the learned Assessing Officer and as confirmed by the learned C.I.T.[A] being bad in law the same may please be deleted. 2. The appellant craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of appeal, if deemed necessary at the time of hearing of the appeal. 4. The present appeals were filed after delay of three days. The learned Authorized Representative for the assessee pointed out that in fact the delay was of one day since two days were Saturday and Sunday and the appeal was filed after the next working day. Because of smallness of the delay, we condone the delay in filing the appeals late and proceed to decide the appeals on the issues raised. 5. The issue arising in the present bunch of appeals is against levy of penalty under section 271(1)(c) of the Act. 6. The learned Authorized Representative for the assessee in this regard pointed out that the assessee had declared additional inco....
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....of income offered by the assessee from year to year is available under para 3 at page 2 of the assessment order. The Assessing Officer accepted the additional income offered by the assessee in the returns of income and was of the view that since the additional income was offered only as a result of search action in his case, penalty proceedings under section 271(1)(c) of the Act were being separately initiated. Thereafter, he directs that notice under section 274 r.w.s. 271(1)(c) of the Act was initiated. Such was the order passed by the Assessing Officer under section 143(3) of the Act in assessment year 2005- 06. In assessment year 2007-08, the Assessing Officer after accepting the additional income offered by the assessee was of the view that where the additional income was offered for taxation only as a result of search action in his case, penalty proceedings under section 271(1)(c) of the Act were separately being initiated in the case of concealment of income and furnishing of inaccurate particulars of income. Similar observations have been made by the Assessing Officer in assessment years 2008-09 to 2010-11. The case of the assessee before us is in the absence of satisfactio....
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....is 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 proceedings are pending, then the Assessing Officer has to apply his mind and on being satisfied, he has to giv....
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....ty 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 of the penalty proceedings also must be for both the offences. But drawing up penalty proceed....
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....g 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 nonapplication 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 notice has to come to conclusion that whether it is case of concealment of income or ....
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....e 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, relati ng 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 assessment year 1967-68 as the same was imposed without affording reasonable opp....
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....n'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 proceedings had to be satisfied that the assessee had either concealed the income or....
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....h 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 account of vagueness and ambiguity in the notice issued. But the Hon'ble High Co....
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....ng 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 gone through the seized documents and elaborately referred to them and even reproduced the scanned copies of such documents and comes to conclusion that loans were received from Ratanlal Bafna, but still upholds the penalty levied under section 271(1)(c) of the Act. Once the finding of CIT(A) is that these are loans received from Bafna and are not on-money received on sale of plots, then in cases where penalty proceedings have been initiated on a different footing and the CIT(A) reverses the same and holds the same to be loans received by the assessee, there is change in opinion and basis ....
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....ittedly, the satisfaction has to be recorded in the order of assessment or re-assessment by the Assessing Officer while finalizing the assessment order. However, the Assessing Officer has to at initial stage itself come to a finding as to whether the additions made in the hands of assessee justify the levy of penalty proceedings under section 271(1)(c) of the Act on account of concealment of income or furnishing of inaccurate particulars of income. We find that in the present set of facts, the Assessing Officer in the first year i.e. assessment year 2005-06 has only given a direction and has not even mentioned as to which link of section 271(1)(c) of the Act is applicable in the facts of the case. In respect of other assessment years, the Assessing Officer has recorded satisfaction for initiating penalty proceedings on account of concealment of income and furnishing of inaccurate particulars of income. Under the provisions of section 271(1)(c) of the Act, penalty for concealment is leviable where the assessee has fulfilled either conditions i.e. concealment of income or furnishing of inaccurate particulars of income. The Assessing Officer while initiating penalty proceedings has to....