TaxTMI 
TaxTMI 
2017 (1) TMI 1048
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....Rs. 3,39,22,460/- due to restriction of the assessee's claim for exemption under section 45EC of the Act to the extent of Rs. 50 lakhs out of the claim of Rs. 1 crore, by disallowing the exemption claimed for the balance Rs. 50 lakhs, the investment being made after the expiry of six months from the date of transfer of the property as prescribed under section 54EC of the Act. Penalty proceedings under section 274 r.w.s. 271(1)(c) of the Act was initiated simultaneously. 2.2 In response to the show cause notice issued by the Assessing Officer (AO) in penalty proceedings the assessee submitted that it had a bona fide belief that the time period for making the claim for exemption under section 54EC is in order and since none of the details of investment furnished were found to be false, it was requested that the penalty proceedings be dropped. The AO, however, rejected the assessee's contentions, as he was of the view that the assessee had made an excessive claim of exemption under section 54EC of the Act to the extent of Rs. 50 lakhs and therefore levied penalty of Rs. 16.20 lakhs under section 271(1)(c) of the Act vide order dated 23.09.2015. On appeal, the learned CIT(A) dismiss....
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.... amend, or withdraw to the aforesaid ground of appeal." 4.1 In the course of appellate proceedings before us, the assessee filed the following additional ground of appeal: - "That the penalty initiated, levied and confirmed is without mandatory satisfaction on its charge as to concealment of income or filing of inaccurate particulars of income makes the penalty order without authority of the law and hence, this order may be held as bad in law being void ab initio." 4.1.1 Alongwith this additional ground (supra), the assessee has also pleaded that the Bench consider admission of this ground for adjudication since it is a legal ground of jurisdiction which goes to the root of the proceedings, facts of which are already available on record. Reliance in this regard was placed on the decision of the Hon'ble Apex Court in the case of NTPC Ltd. vs. CIT (229 ITR 383 (SC). Learned D.R. for Revenue opposed admission of this additional ground. 4.1.2 We have heard the rival contentions on the issue of admission of the additional ground (supra). We find that since the issue raised therein is a legal one pertaining to the issue of jurisdiction which goes to the very root of the m....
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.....s. 271 of the Act, the limb under which the penalty is to be levied, the assessee has not been appraised of any charge for which the penalty proceedings has been initiated and therefore the said notice dated 11.03.2015 issued under section 274 r.w.s. 271 of the Act of initiating penalty proceedings under section 271(1)(c) of the Act is invalid and bad in law. 4.3 Per contra, the learned D.R. submitted that the provisions of section 274 of the Act stipulate that the assessee should be afforded an opportunity of being heard before penalty is imposed. According to the learned D.R., in the case on hand, the assessee has been provided with an opportunity of being heard and had also participated in the penalty proceedings and therefore the deficiencies, if any, in the penalty proceedings is automatically cured by the provisions of section 292B/292BB of the Act. Reliance was placed on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya and Others (216 ITR 660) submitting that the Hon'ble Court has held that mere mistake in the language used or mere non-striking of the inappropriate portion cannot by itself invalidate the notice. 4.4 In rejoinder, the....
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....failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice. * have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act, 1961. * have concealed the particulars of your income or _____________ furnished inaccurate particulars of such income. You are hereby requested to appear before me with in SEVEN DAYS from the receipt of this order and how cause why an order imposing a penalty on you should not be made under section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said PEN/32/PG.31 2014-05 date which will be considered before any such order is made under section 271(1)(c). Seal Sd/- (ALOK SINGH) Dy. Commissioner of Income Tax-13(1)(2) Mumbai" A careful perusal of the said notice dated 11.03.2015 (supra) would show that it could have been issued for either failure to furnish return of income under section 139(1)/139(2)/148 of ....
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....2007) 291 ITR 519 and UOI vs. Dharmendra Textile Processors (2008) 306 ITR 277, in para 9 of its order has observed and clarified that the basic reason why the decision in Dilip N. Shroff (supra) was overruled by Dharmendra Textile Procesors (supra) was only to the effect that mens rea was not to be considered an essential ingredient for levy of penalty under section 271(1)(c) of the Act. No fault, however, was found with the reasoning in the decision of Dilip Shroff. At para 9 of the order in Reliance Petroproducts P. Ltd. (supra), their Lordships held/clarified the position as under: - "Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff Vs. Joint CIT [2007) 6 SCC 329, this court explained the terms "concealment of income" and "furnishing inaccurate particulars". The court went on to hold therein that in order to attract the penalty u....
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....However, it must be pointed out that in Union of India Vs. Dharamendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff Vs. Joint CIT, where the court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff Vs. Joint CIT to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff Vs. Joint CIT was overruled." 4.5.5 In the above view of the matter, the finding rendered by the Hon'ble Apex Court in the case of Dilip N. Shroff (supra); in respect of holding that 'inappropriate words' and 'paragraphs' in the standard proforma of the notice issued under section 274 r.w.s. 271 of the Act as used by the AO were required to be deleted and the same not having been done, the impugned notice issued on 11.03.2015 for assessment year 2012-13; then the fact the impugned notice/order suffers from non-application of mind, still holds good and is intact. This legal position has also been reiterated by the Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (K....
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.... heard. A mistake in the notice would not invalidate penalty proceedings." The Hon'ble Bombay High Court, thereafter, considered various decisions relied upon by the parties and came to the conclusion that there should be application of mind on the part of assessing officer. For the sake of convenience, we extract below the relevant observations made by Hon'ble Bombay High Court. "11. The case of CIT v. Lakhdhir Lalji [1972] 85 ITR 77 (Guj) is the other decision upon which the Tribunal has placed reliance. In that case a notice under section 274 was issued on the footing of concealment of income by suppression of sales whereas the penalty was levied on the footing that there was furnishing of inaccurate particulars of income since the stock at the closing of the year was undervalued. The penalty was quashed upon a view that the very basis for the penalty proceedings had disappeared when it was held that there was no suppression of income by the assessee. Thus, it would be seen that the ratio of that decision cannot be applied to this case. 12. The last decision relied upon is the case of N. N. Subramania Iyer v. Union of India [1974] 97 ITR 228 (Ker). The follo....
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....e part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice....