TaxTMI 
TaxTMI 
2017 (1) TMI 396
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....t deleting either limb 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. 1,22,400/- u/s 271(1)(c) 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 considered assessee's submission and carefully gone through penalty order passed by the AO. I have carefully gone through the reassessment order passed on 25-03-2014 against which assessee did not prefer appeal. I have also taken a note that of the factual matrix of the case as well as applicable case laws. Here in this case, assessee has raised technical objection with regard to initiation of penalty proceedings. 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 or other proceedings being treated as invali....
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.... has not been controverted by the assessee which fully supports AO's contention. In view of these findings, it is not required on the part of the AO to accord necessary opportunity to cross examine Shri Sanjay D Sonwani Director of M/s. Washington Software Ltd. Assessee has also not controverted AO's finding given in para 4 of the assessment order. AO has also incorporated assessee's submission made in this regard in pg 4 of the assessment order. Further, post search operation, all concerns except the assessee of ''the Career Point Gr'' approached Hon'ble Settlement Commission, New Delhi. AO has in para 9 pg 6 of the assessment order has mentioned inter alia as under:- ''................9. Further it is also worthwhile to mention here that in the Career Point Group of Kota in which assessee belongs, during the proceeding before the Income Tax Settlement Commission, New Delhi (ISTC) admitted that they had obtained bogus bills against purchase of software from M/s. Washington Software Ltd. Mumbai. In this group cases, the Hon'ble ISTC has passed the order on 31-03-2013.'' This fact has also not been controverted by the assessee even at this appellate....
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....g 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. Lakshminarayana Vs. ITO, ITAT Banglore Tribunal ITA Nos. 992 to 996/Ban/2014 order dated 3rd July, 2015 wherein the decision of Hon'ble Karnataka High Court in the case of CIT & Anr. Vs Manjunatha Cotton and Ginning Factory has been considered wherein it has been held that penalty proceeding is a 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 to 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. It is not open to the authority, at the time of imposing penalty to impose penal....
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....articulars 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, deeming provisions are applicable. It is undisputed fact that the assessee has disclosed additional income in return filed U/s 153A on the basis of incriminating document found during the course of search. We have considered view that Explanation 5A is not required to be mentioned by the Assessing Officer specifically at the time of initiation or even in the show cause notice issued by the Assessing Officer, but basic defect we found that the ld Assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed 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 ....
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....ulars 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 Township P Ltd. (2014) 367 ITR 466 (SC). Therefore, we are of the considered view that initiation of penalty proceedings is not as per law and Assessing Officer did not have any jurisdiction to impose penalty U/s 271(1)(c) of the Act. As the matter has been decided on technical issue, we are not expressing any view on merit of the case. Accordingly, we delete the penalty confirmed by the ld CIT(A). 7. In the result, the appeal of the assessee is allowed." 4. Hon'ble ITAT in its recent judgment in case of Shri Murari Lal Mittal ITA No. 334/JP/2015 order dated 09/11/16 has canceled the penalty on the same grounds following the decision of Shri Shanker Khandelwal. The findings of Hon'ble ITAT are as under:- 2.5 I have heard the rival contentions and perused the materials available on record. It is noted from the record that the assessee....
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....d 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, the 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.'' It is also noted that similar type of issue was decided in favour of the assessee by ITAT Coordinate Bench in the case of Shankar Lal Khandelwal vs. DCIT, Central Circle- 1, Jaipur vide its order dated 11-03-2016 in ITA No. 878/JP/2013 for the assessment year 2007-08 by observing 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 notic....
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....inning Factory & Ors.(2013) 359 ITR 565 (Karn) held that sending printed form where all the grounds mentioned in section 271 would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be imposed to the assessee.The Hon'ble Punjab & Haryana High Court in the case of Tej Bhan Cotton Ginning & Pressing Factory Vs. CIT, Rohtak (supra) has held that the Assessing Officer in assessment order has satisfied himself regarding initiation 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....
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....ot strike out as to whether the penalty is sought to be levied on the for "furnishing inaccurate particulars of income " or concealing particulars of such income". On this aspect we find that in the show cause notice u/s. 274 of the Act the AO has not struck out the irrelevant part. It is therefore not spell out as to whether the penalty proceedings are sought to be levied for "furnishing inaccurate particulars of income "or "concealing particulars of such income". The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and a....
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....he 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 proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty 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 ....
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.... d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not....
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....ssment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." (emphasis supplied) It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We, therefore, cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. 11. In the present case, as we n....
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....assessee. Except to statement of above named person which was recorded behind the back of the assessee and opportunity of cross examination was not provided to assessee there is no other positive material with department to prove that the assessee escaped the income. In the reasons recorded for reopening of assessment proceedings and in the statements of Shri Sanjay D. Sonawani it was alleged that the bogus bills were issued by this company in order to help the parties to inflating their expenses. But in the case of the assessee the software was purchased for the school naming "Global Public School" being run by the assessee and the income of the school is exempted u/s 10(23C)(iiiad) of Income Tax Act, 1961, therefore there is no motive with the assessee to inflate the expenses. Further the software expense was capitalized as fixed assets on which the assessee only claimed the depreciation. d) The assessee had duly purchased the software on 03.06.2006 for Rs. 4,00,000/- from above named company and made the payment through a/c payee cheque. Without making necessary inquiries the reliance of statement of above named party is being made which can be given by him for his own ....
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....ependent material to prove the facts to be correct and without proving the motive behind taking the bogus bill more so when the expenses was an capital expenditure which was not recorded in P&L a/c and the entire income of the assessee was exempt from tax. 7. However to avoid the prolonged litigation the assessee has not filed the appeal against the assessment order which does not mean that the assessee accepted to the action of the ld. AO. 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 do 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 which was not proved in the case of the assessee. 8. The ld. AO not brought any positive material/finding/evidence on record to prove that the assessee was having some undisclosed income The ld. AO has not brought on record any ....
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....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. 12. 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 the penalty u/s 271(1)(c) of Income Tax Act, 1961 the ld. AO has to brought on record any positive material to show that the assessee concealed his income. There must be independent finding as held a) Hon'ble Calcutta High Court in the case of....
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....e 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 a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the auth....
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....chase bill of Rs. 4,00,000/- against purchase of software. It was held that assessee has not purchased the software from M/s Washington Software Ltd and money shown to have been paid for software was returned back to the assessee. It was further held that the software was purchased from somewhere else from the undisclosed money which was added to the total income of the assessee. Thus the AO had no other alternative but to treat the amount used for purchase of software as undisclosed income of the assessee and added this amount of Rs. 4,00,000/- to the total income of the assessee. This would result in an addition of Rs. 4.00 lacs. According to the AO, this undisclosed income is not eligible for expenditure u/s 10(23C)(iiiad) as the same is not earned solely from imparting of educational activities. According to the AO, it is clear that the assessee has willfully concealed its income and has given inaccurate particulars of income by taking bogus bills. Thus the AO vide his order assessment order dated 25-03-2014 initiated the penalty proceedings separately u/s 271(1)(c) of the Act for concealment of income and furnishing inaccurate particulars of income. Further the A.O. imposed a ....
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....r of M/s. Mittal Enterprises. The return u/s 139(1) of the Act was filed on 25-10-2004 by the assessee declaring total income of Rs. 1,51,100/-. Search and seizure operations were carried out on 27-08-2008 on residential and business premises of the assessee. The return u/s 153 of the I.T. Act was filed on 31-03-2009 declaring total income of Rs. 5,85,090/- which included additional income surrender of Rs. 4,53,819/-. The assessment was made by the AO u/s 153A/143(3) of I.T. Act on total income of Rs. 6,18,980/- which included the addition of Rs. 33,892/- made by the AO on account of disallowance made from various expenses. In penalty proceedings, the AO imposed the penalty of Rs. 1,36,145/- being 100% of tax payable on additional income of Rs. 4,53,819/- declared by the assessee. The ld. CIT(A) had confirmed the action of the AO. It is noted from the record that the AO had initiated penalty proceedings for concealment of income or for furnishing inaccurate particulars of income. In the notice also, the AO has not specified for which specific reason the penalty proceedings has been initiated whether it is for concealment of income or for furnishing inaccurate particulars of income.....
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....or 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, deeming provisions are applicable. It is undisputed fact that the assessee has disclosed additional income in return filed U/s 153A on the basis of incriminating document found during the course of search. We have considered view that Explanation 5A is not required to be mentioned by the Assessing Officer specifically at the time of initiation or even in the show cause notice issued by the Assessing Officer, but basic defect we found that the ld Assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed 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 con....