TaxTMI 
TaxTMI 
2017 (1) TMI 394
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....b of penalty. It is contended that the jurisdictional and legal mistake is not curable u/s 292B of the I.T. Act. 2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the imposition of penalty of Rs. 99,000/- u/s 271(1)(c) of I.T. Act, 1961 on account of addition of Rs. 4 lakhs made u/s 69B of I.T. Act,1961.'' 2.1 Apropos Ground No. 1 and 2 of the assessee, the facts of the case as emerges from the order of the ld. CIT(A) is as under:- ''3.1.2 I have duly considered assessee's submission and carefully gone through penalty order passed by the AO. I have also taken a note of the factual matrix of the case as well as applicable case laws relied upon. In this case, AO had initiated the penalty proceeding u/s 271(1)(c) of the Act in the assessment order passed on 31.08.2010 on the addition made in assessment order and pursuant to appellate order passed by Ld. CIT(A) wherein the addition of Rs. 4,00,000/- was sustained by the Ld CIT(A) in ITA No.212/10-11 dt. 04/10/2013, penalty of Rs. 99,000/- has been imposed under explanation 1 to the provision of section 271 (1)(c) of the Act. Briefly, facts of the case are as under: ....
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.... these liabilities and assets was found during the course of search nor admitted to during the search proceedings by the appellant. Therefore, these statements of affairs filed by the appellant do not have any evidentiary value. ii) The AR has also filed a copy of the accounts of assessee in the books of M/s Suresh Medical Agency and Mittal Enterprises, and his bank accounts. All the three accounts further reiterate the fact that he was a person of very limited financial means. No direct evidence has been filed regarding the source of investment of Rs. 4 lakh in these debtors. In absence of any direct evidence to explain the source of Rs. 4 lakh and advance to debtors or farmers as claimed, the advances remain unexplained in the hands of the appellant given his lack of financial worth. iii) Furthermore, at no stage were the details by way of the names, addresses or affidavits of the alleged debtors filed at any stage of the proceedings to substantiate his submissions. ivi) Furthermore, the Ld. CIT(A) in the case of Murari Lal Mittal A.Y. 200708 ITA No.445/10-111 dated 01.03.2012 has deleted this addition of Rs. 4 lakh in the hands of the Murari Lal Mittal....
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....jections that Section 292-B has been introduced. Following case laws have been cited by the ld. CIT(A). (i) CIT vs. R Girdhar, 145 ITR 246 (Kar.) (ii) CIT vs. Saraswathi Ammal, 146 ITR 486 (Mad.) (iii) Swaran Kanta vs. CIT , 176 ITR 291 (Pune) (iv) Assam Carbon Products Ltd. vs. CIT 224 ITR 57 (Gau.) (v) Sardar Harbinder Singh Sehgal vs. CIT, 27 ITR 512 (Gau.) (vi) Vanaja Textiles Ltd. vs. CIT, 249 ITR 374 (Ker.) However, in the following cases, Section 292B of the Act was held to be inapplicable:- (i) where no notice had been served on the proper person, it is a fundamental infirmity and not a technical irregularity. (a) CIT vs. Phoolmati Devi (144 ITR 954 All) -notice sent to mother who was not guardian of the minor assessee. (b) Gajendra Kumar Banthia vs. UOI (222 ITR 632 Cal) - notice (ii) Where penalty notice u/s 271(1)(c) was not signed [Umashankar Mishra vs. CIT (136 ITR 330 M.P)] (iii) unsigned return - under section 140 it is a mandatory to sign a return (Khilaldas and Sons vs. CIT , 225 ITR 960 (MP)] Therefore, it is clear from the above decisions that it i....
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....tiated on the concealed income detected but in the notice issued failed to strike off the portion "for furnishing inaccurate particulars", which is otherwise in substance and effect in conformity with or according to the intent and purpose of this Act, then any technical defect in it would not render it to be invalid. In such a situation the provisions of section 292-B of the Act would not come to the rescue of the assessee and thus will not make such notice to be invalid. The instant case falls under this category. It is clear from the language of the provision, that its aim is to prevent any return of income, assessment, notice or other proceedings being treated as invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, other proceedings which are in substance and effect in conformity with or according to the intent and purpose of this Act. The question of application of Section 292-B cannot be prejudged by finding that return, notice etc. is not as per the requirement of the statute and is/are invalid. This way the very purpose of the section to prevent declaration of return, notice etc. as invalid is defeated. The findi....
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....r by mentioning that "Penalty proceedings u/s 271(1)(c) of the Act are initiated for furnishing inaccurate particulars of income". Further in the penalty notice u/s 274 read with section 271of I. Tax Act dated 31.08.2010 (copy enclosed herewith), annexed with assessment order the ld. AO mentioned that "Whereas in the course of assessment proceedings before me for the A. Y. 2003-04 it appears to me that as per sections 274 read with section 271(1)(c) of the I.T. Act you are liable for penalty for concealment of income/furnishing inaccurate particulars of income". Thus the penalty proceedings were initiated without specifying the limb for reasons in the penalty notice to impose the penalty i.e. whether the penalty was initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. Therefore the initiation and imposing of penalty proceedings is wrong, bad in law, in valid and void ab initio. 2. The notice U/s 271 should be specific on imposing of penalty u/s 271(1)(c) of Income Tax Act, 1961 i.e. concealed particulars of income or furnishing inaccurate particulars of income. Reliance is placed on the decision in the case of H. L....
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....ble jurisdictional ITAT is as under:- 6. We have heard the rival contentions of both the parties and perused the material available on the record. In this case, the ld Assessing Officer initiated penalty proceedings for concealing of particulars of income and for furnishing inaccurate particulars of income vide order dated 31/12/2009. Notice U/s 274 read with Section 271-272 of the Act was issued on 30/12/2009 by ticking of the notice as under:- "U/s 271(1)(c):- Concealed particulars of income or furnished inaccurate particulars of income". The ld Assessing Officer again gave notice during the course of penalty proceedings on 23/1/2012 wherein he gave show cause notice U/s 271(1)(c) for imposing of penalty without specifying the limb for reasons to impose the penalty, whether it is for concealed particulars of income or furnished inaccurate particulars of income. The ld CIT(A) has considered all the aspect and held that Explanation 5A to Section 271(1)(c) is applicable as in this case, a search was carried out after 01/6/2007 and the assessee has furnished return for A.Y. 2007-08 before search and additional income has been disclosed U/s 153A.Therefore, d....
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....on of penalty proceedings, which was tantamount to satisfaction have recorded to the fact on the basis of addition made by the Assessing Officer for concealed income in assessment order. The Hon'ble Court has confirmed the penalty even penalty proceedings initiated by the Assessing Officer by mentioning penalty proceeding for concealing/furnishing of inaccurate particulars of income. The Hon'ble Punjab & Haryana High Court has expressed different view on initiation of penalty proceedings even notice U/s 274 issued by putting oblique between concealing and furnishing of inaccurate particulars of income whereas the Hon'ble Karnataka High Court has held that the Assessing Officer has to satisfy at the time of initiation of penalty proceeding and issuing notice U/s 274 of the Act that whether penalty is for concealed particulars of income or furnishing of inaccurate particulars of income. There were two opinions of the Hon'ble Courts. The Hon'ble Supreme Court has held that in case of two views of the court, favourable view of the assessee would be taken as held in the case of CIT Vs Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and a recent decision in the case of CIT Vs. Vatika ....
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....pecific reason the penalty proceedings has been initiated whether it is for concealment of income or for furnishing inaccurate particulars of income. Ultimately, the AO levied the penalty for concealment of income. The Hon'ble Karnataka High Court in the case of CIT & Anr vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 held as under:- ''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 section 274 makes it clear that the 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 form where all the grounds mentioned in section 271 are mentioned would not satisfy the 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 per cent. to 300 ....
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....d the particulars of income and furnished inaccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting either limb of penalty even he has not put and in the notice itself between two limbs. The amended provisions of Subsection (1B) of Section 271 has been considered by the Hon'ble Delhi High Court in the case of Madhu Shree Gupta vs. UOl, 317 ITR 107 wherein it has been held that at the stage of initiation of penalty proceedings, the order passed by the Assessing Officer need not reflect satisfaction vis a vis each and every item of addition or disallowance if the overall sense gathered from the order is that a further prognosis is called for. It would be sufficient compliance with the law that there is a prima facie evidence for concealment of particulars of income or furnishing inaccurate particulars of income. Even after this section, the Assessing Officer has to satisfy the particular limb of initiation of penalty imposable U/s 271(1)(c) of the Act at the time of assessment proceedings. The Hon'ble Karnataka High Court in the case ....
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.... Nos. 736 & 737/Kol/2013 Dated: 27May 2016 [2016 (11) TMI 1030] has cancelled the penalty on the same ground. "10. Heard the rival submissions and perused the material available on record. The question before us is as to whether the penalty order passed by the AO and confirmed by the CIT(A) falls for our consideration in pursuance of the Judgment of the Hon'ble Karnataka High Court supra. That on perusal of the said show cause notice dated 30-12-2010 issued u/s. 274 r.ws. 271(1)( c) of the Act purportedly issued to show cause why the penalty shall not be imposed, We find that irrelevant portion of such notice was not struck out by the AO. Therefore, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income. We find that the assessee as relied on the order dated 06-11-2015 in the case of Suvaprassanna Bhattacharya Vs. ACIT, Kolkata in ITA No. 1303/Kol/2010 for the AY 2006-07 is applicable to the case on hand. The relevant findings of the said tribunal order is reproduced herein below for better understanding:" 8. The next argument that the show cause notice u/s. 274 of the Act ....
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....ned 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 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 cas....
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....case of Ashok Pai reported in 292 ITR 11 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 reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 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 pro forma without striking of the relevant clauses will lead to an inference as to non applicationof mind." The final conclusion of the Hon'ble Court was as follows:" 63. In the light of what is stated above, what emerges is as under: a) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for att....
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....r has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The....
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....lleged unexplained investment in sundry advances and the same was confirmed by the CIT (A). 8. Regarding source of advance of Rs. 4,00,000/- to sundry advances the assessee submitted following explanation to the AO: - "2. Source of sundry advance of Rs. 4,00,000/- The opening capital of the assessee in AY 2003-04 was Rs. 15,68,087.60 which includes sundry advances of Rs. 4,00,000/-. The sundry advance represents to advance given to farmers in AY 2001-2002 for purchase of agricultural land. Later on, it was discovered that the land was under dispute. The assessee could receive back his money in AY 2007-08 and the said amount was utilized for giving the gift to his brother Shri Murari Lal Mittal. The copy of balance sheet for 31.03.2002 and 31.03.2003 has been filed in previous hearing of the case. However a copy of the same is again enclosed herewith for your ready reference. The advance was given to the following farmers (i) Kalu, Shyonath, Ramu, Chittar, Balu, Narayan, Mangilal, Harinarayan, Budha, Gopal, Bhoriya, Radheyshaym, Govind Narain, Jagdish, and Motilal, resident of Village Jaitpura (Hajyawala). The advance was given through a ....
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....assessee was having any source of concealed income. 11. The allegation in the assessment order that the sundry debtors created to generate cash which was utilized for gift to Shri Murari Lal Mittal in AY 2007-08 is purely based on suspicion, surmises and conjectures without bringing any adverse positive material. 12. In the assessment order the ld. AO has not disproved the contention of assessee which proves that the explanation of the assessee was bonafide. He merely rejected the submission of the assessee because the assessee could not submit the support evidence in support of his submission. Section 69 is presumptive section and when an assessee could not satisfactorily explain the source of Investment, such investment is presumed to be income of the assessee. However in penalty proceeding, the benefit of such presumption is not available to the department. In the case of the assessee the assessee explained the source of investment and the same was not disproved by the assessing officer, therefore this is not a case where the assessee concealed the income. 13. The additions made are not because of willful or conscious default, but only because of the r....
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....ee is false and not bonafide. In the instant case, the revenue has not brought any cogent and reliable material or evidence on record to prove the undisclosed income. Merely that the additions were made in assessment order and sustained by CIT (A) it cannot be presumed that the assessee has concealed the particulars of income or evaded the tax. It is settled law that apparent is real and to disprove the same to be unreal, the burden always lies on the revenue in view of the authoritative pronouncements reported in 131 ITR 597 (SC) and 210 ITR 250 (Raj); (2007) 111 TTJ 531 (JP) relevant at page 537 Para 9. 17. The assessment proceedings and penalty proceedings are two separate proceedings. The additions made during assessment proceedings does not lead to conclusion that the assessee was having some undisclosed income or concealed the particulars of his income. The additions in assessment order may be because of some technical reasons which always does not mean that the assessee had concealed income, therefore for imposing a penalty the assessing officer has to prove that the assessee was having concealed income. The penalty u/s. 271(1)(c) is not automatic and for imposing t....
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....tirely distinct from assessment proceedings and, howsoever relevant and good, the findings in assessment proceedings may be, they are not conclusive so far as the penalty proceedings are concerned." The Hon'ble Court relied on various judgment including ratio laid down in case of Dilip N. Shroff v. Joint CIT [2007] 291 ITR 519 (SC). Since the assessee has not acted deliberately in defiance of law or was not guilty of conduct contumacious or dishonest, or has not acted in conscious disregard of its obligation, penalty cannot be levied. In this regard your kind attention is drawn towards the Supreme Court decision in the case of Hindustan Steels Ltd. Vs. State of Orissa, 83 ITR 26 (SC). Hon'ble Apex Court has held that "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform....
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.... assessee. The assessee filed the reply before the DCIT, Central Circle-3, Jaipur (for short ''AO'') for not imposing the penalty but the reply of the assessee was not found satisfactory and he imposed the penalty of Rs. 99,000/- u/s 271(1)(c) of the Act by observing as under:- ''I have considered the reply of the A/R of the assessee and do not find satisfactory as is clear form the order of the AO wherein the AO found in the balance sheet the sundry advance of Rs. 4,00,000/- which has been created to generate cash which was utilized for gift (in cash) to Shri Murari Lal Mittal. The submission made by the assessee was not found tenable by the AO as the assessee failed to establish the source of cash available with him during the relevant period of A.Y. 2003-04 which was ultimately shown as gift to Shri Murari Lal Mittal in accounting period relevant to A.Y. 2007-08. Therefore, the AO rightly made the addition on this account. The ld. CIT(A)(Central), Jaipur in his order in appeal no.2012/10-11 dated 4-10-201 has also dismissed the appeal of the assessee. Further the case law cited by the assessee is distinguishable from the facts of the present case. Henc....
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....proceedings are two separate proceedings. The addition made during assessment proceedings does not lead to conclusion that the assessee was having some undisclosed income or concealed the particulars of income. The addition in assessment order may be because of some technical reasons which do not mean that the assessee had concealed income. Therefore, for imposing a penalty, the AO had to prove that the assessee was having concealed income. The penalty u/s 271(1)(c) of the Act is not automatic and for imposing penalty u/s 271(1)(c) of the Act, the AO had to brought on record any positive material to show that the assessee concealed his income. There must be independent finding and various Hon'ble Courts held as under:- a) Hon'ble Calcutta High Court in the case of Durga Kamal Rice Mills v/s. CIT (2004) 265 ITR 25 (Cal.). V). Held that the findings of the quantum proceedings stage are not binding in penalty proceedings. There must be independent finding b) RANI SATI COAL SUPPLIER vs. ITO 26 TW 440; Held that the addition made in quantum assessment and later on sustained is not sufficient ground for imposition of penalty u/s 271(1) (c). ....
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....gs has been initiated whether it is for concealment of income or for furnishing inaccurate particulars of income. Ultimately, the AO levied the penalty for concealment of income. The Hon'ble Karnataka High Court in the case of CIT & Anr vs. Manjunatha Cotton & Ginning Factory, 359 ITR 565 held as under:- ''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 section 274 makes it clear that the 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 form where all the grounds mentioned in section 271 are mentioned would not satisfy the 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 per cent. to 300 per cent. of the tax liability. As t....
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....naccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting either limb of penalty even he has not put and in the notice itself between two limbs. The amended provisions of Sub- section (1B) of Section 271 has been considered by the Hon'ble Delhi High Court in the case of Madhu Shree Gupta vs. UOl, 317 ITR 107 wherein it has been held that at the stage of initiation of penalty proceedings, the order passed by the Assessing Officer need not reflect satisfaction vis a vis each and every item of addition or disallowance if the overall sense gathered from the order is that a further prognosis is called for. It would be sufficient compliance with the law that there is a prima facie evidence for concealment of particulars of income or furnishing inaccurate particulars of income. Even after this section, the Assessing Officer has to satisfy the particular limb of initiation of penalty imposable U/s 271(1)(c) of the Act at the time of assessment proceedings. The Hon'ble Karnataka High Court in the case of CIT vs. M/s Manjunatha Cotton & Ginnin....