AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 718
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....sdictional issue as well as on merits. Since, the legal issue questions the very levy of penalty, we take up the same first. The assessee has raised following legal grounds: - "I) The learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 is bad in law as the notice under section 274 read with section 271(1)(c) of the Income Tax Act, 1961 was issued without clarifying whether the penalty was initiated for concealment of particulars of income or for furnishing inaccurate particulars thereof. II) Without prejudice to the above ground of appeal the learned commissioner of income tax (appeals) further erred in not appreciating the fact that though the assessing officer initiated penalty proceedings for furnishing inaccurate particulars of income however he levied the penalty for concealment of income by invoking deeming provision contained in Explanation 1 to section 271(1) of the Income Tax Act, 1961" 3. The brief facts of the case are that a search and seizure action was carried out on the business and residential premises of the assessee an....
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....therefore penalty is separately initiated under section 271(1)(c)". The learned Counsel for the assessee drew attention to Para 7 to Para 12 of the penalty order passed by Ld. AO under section 271(1)(c) to contend that the Ld. AO was not clear as to the limb for which penalty was being levied on the assessee since both the limbs have been mixed up which vitiates the penalty order. The Ld. AR further contended that Ld. AO was not sure about the charge against the assessee and the assessee was not aware as to which of the two limbs of section 271(1)(c) of the Act has been invoked by the Assessing Officer. For this, the learned Counsel relied on the decision of Hon'ble Bombay High Court in the case of CIT vs. Samson Perinchery [2017] 392 ITR 004 (Bom.) who further relied on the ratio laid down by Hon'ble Karnataka High Court in the case of CIT vs. Manjunath Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka). The Ld. AR further submitted that legal issue was raised before Ld. CIT(A) also. However, Ld. CIT(A) in his order vide para 5.13 rejected the same by observing that initiation of penalty on one limb and levy on another was justified and lead to same effect even though conceal....
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.... to come to the conclusion that whether is it a case of concealment of income or is it as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) 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 P. Ltd., 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 proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." 5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between....
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....articulars of income within the meaning of section 271(1)(c) of the Act, 1961 read with Explanation I thereto." In the penalty order the A.O. has also stated that though concealment and furnishing of inaccurate particulars are two different limbs, they lead to the same effect in as much as they result in the keeping off a portion of Income Tax. Thus after reading the two versions written one in the assessment order and other in the penalty order, there is no dichotomy so far as the initiation and levy of penalty is concerned as inaccurate particulars of income furnished appears on both the orders. Hence the contention of the assessee that he is not aware that for which charge he is penalized is not maintainable considering the entire gamut of facts is very clear to him right from the beginning. The bogus billing amounting to 27,80,33,410/- claimed in the books is the inaccurate particulars of income furnished which also tantamount to concealment of income. In this light, the penalty has been levied by the A.O. in a fair manner after giving opportunities. b) The second ground which the assessee is taking that in the notice issued under section 271(1)(c) of the Act ....
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....essee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings." In nutshell, the arguments are as follows: - I) Rules of natural justice cannot be imprisoned in any straight-jacket formula. ii) The Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. iii) The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. iv) Under section 274 of the Income-tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings. The assessee has relied on the Case of another jurisdictional....
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....lternatively this should be referred to the Hon'ble President, ITAT for constitution of a Special Bench on this issue. 7. In the given facts and circumstance and discussion carried out above, we are of the view that the AO has initiated penalty proceedings for furnishing of inaccurate particulars of income, whereas, the penalty was levied for both the charges is as evident from the penalty order vide Para 7 to 12 which read as under: - "7. Coming to the merit of imposition of the penalty, it is to be said that section 271(1)(c) of the IT. Act, 1961, is attracted when the AO is satisfied that any person has concealed the particulars of his income, or has furnished inaccurate particulars of such income. The expressions 'has concealed and has furnished inaccurate particulars" have not been defined in the section or anywhere in the Act. However, notwithstanding the difference in the two circumstances, they lead to the same effect viz., keeping off a portion of the income. 8. Whenever there is a difference between return income and assessed income, A.O. has to decide during the penalty proceedings that, is it due to change of opinion or failure from the assessee....
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....ation Pvt. Ltd. reported in 191 Taxman 179 (Delhi), where it was held that whether if assessee makes a claim which is not only incorrect in law, but also wholly without any basis and explanation furnished by him for making such a claim is not found to be bona fide, explanation I to Sec. 271(1)(c) would come into play and assessee will be liable to penalty. It further stated that "The court cannot overlook the fact that only a small percentage of the Income-tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in low but is also wholly without any basis and the explanation furnished by him for making such a claim is not found to be bona fide, it would be difficult to say that he would still not be liable to penalty under section 271(1) (c) of the Act. If we take the view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bonafide while making a claim of this nature, that would give a license to unscrupulous assessees' to make wholly untenable and unsustainable claim without there being any bas....