TaxTMI 
TaxTMI 
2017 (5) TMI 904
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....t and vide order dated 10.12.2010 the final income has been assessed at Rs. 1,11,84,640/-. The relevant issue for our purpose is Long Term Capital Loss of Rs. 18,19,34,011/- reported by the assessee in its return of income. The said loss was incurred by the assessee on account of redemption of Preference shares of a concern, namely Shri Santram Finance Ltd. In the assessment finalized u/s 143(3) of the Act, the Assessing Officer disallowed the entire Long Term Capital Loss on the ground that the transaction of redemption of Preference shares was a bogus transaction and further the Assessing Officer also denied the carry forward of said loss. Subsequently, the Assessing Officer vide order passed u/s 271(1)(c) of the Act dated 29.6.2011 held the assessee guilty of furnishing of inaccurate particulars of income qua the aforesaid issue within the meaning of Sec. 271(1)(c) of the Act. The Assessing Officer levied penalty u/s 271(1)(c) of the Act @ 100% of the tax sought to be evaded, which was computed at Rs. 5,45,80,203/-. The CIT(A) has sustained the levy of penalty, but has allowed partial relief by correcting the computation of penalty and accordingly, the CIT(A) has scaled down the....
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....ee was a Director in both the concerns, i.e., assessee as well as the investee company and, therefore, it was a transaction between associate concerns. Secondly, as per the Assessing Officer, the basis of valuation of shares was not submitted by the assessee. Thirdly, the Assessing Officer observed that assessee has not been able to produce the details of the bank account through which the payment is effected. In the assessment order, the Assessing Officer further notes that mere reflection of the said investment in the Balance sheets at the time of purchase and sale is not sufficient proof of the genuineness of the transaction. In this background, the Assessing Officer disallowed the entire Long Term Capital Loss and also denied its carry forward. 5. At the time of hearing, the learned representative for the assessee pointed out that the quantum assessment proceedings have become final inasmuch as assessee has not gone in appeal against the action of the Assessing Officer. So however, it is sought to be pointed out that there is no justification for the levy of penalty u/s 271(1)(c) of the Act in the facts and circumstances of the case. The learned representative emphasised tha....
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....x liability. Another pertinent point raised by the assessee was that the penalty notice issued u/s 274 r.w.s. 271 of the Act dated 10.12.2010, a copy of which has been placed on record, reveals non-application of mind by the Assessing Officer inasmuch as the irrelevant portion of the notice has not been struck off. It was, therefore, contended that the levy of penalty is illegal and deserves to be set-aside. In support of the aforesaid proposition, reliance has been placed on the following decisions :- i) M/s. SSA's Emerald Meadows, ITA No. 380/2015 dated 23.11.2015 (Hon'ble Karnataka High Court); ii) Manjunatha Cotton and Ginning Factory & Ors., 359 ITR 565 (Kar.); iii) Dilip N. Shroff, 161 Taxman 218 (SC); iv) Dr. Sarita Milind Davare, ITA No. 2187 & 1789/Mum/2014 dated 21.12.2016; v) Shri Samson Perinchery, ITA No. 4625 to 4630/Mum/2013 dated 11.10.2013 6. The learned representative also pointed out that there was no furnishing of inaccurate particulars of income inasmuch as none of the particulars of the transaction or the loss have been found to be incorrect or false and that it was only a difference of opinion with regard to....
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....lars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. It is also a well accepted proposition that 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' referred to in Sec. 271(1)(c) of the Act denote different connotations. In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N. Shroff (supra) but also in the case of T.Ashok Pai, 292 ITR 11 (SC). Therefore, if the two expressions, namely 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of pen....
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....Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u/s 271(1)(c) of the Act for furnishing of inaccurate particulars of income. In our considered opinion, the attempt of the ld. CIT-DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non-striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the o....
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....stant 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 was issued. The Hon'ble Bombay High Court has discussed about non-application of mind in the case of Kaushalya (supra) and observed as under:- "....The notice clearly demonstrated non-application of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face. In this back ground, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified." In the instant case also, we are of the view that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the ass....