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2017 (11) TMI 1153
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....ssessee has filed the return of income at loss of Rs. 1,41,74,329/- in assessment year 1997-98 which was subjected to scrutiny under section 143(3) of the Act and vide order dated 26.03.02 the final income was at Rs. 2,75,48,670/-. The relevant issue for our purpose is the disallowance on account of foreign travelling expenses of Rs. 7,29,580/-, Interest payment of Rs. 1,25,155/-, Cash credits of Rs. 21 lakhs and interest on investments with Autoriders Finance Rs. 1,06,81,976/-. Thus, the total disallowance of Rs. 1,36,36,711/- made in original order under section 143(3) dated 29.03.2000 was within the meaning of section 271(1)(c) of the Act read with explanation 1. By virtue of disallowance of Rs. 5,53,58,771/- which is disallowed is deemed to represent the income in respect of which the particulars have been concealed. The minimum penalty 100% of the tax evaded on account of concealed income of Rs. 5,53,58,771/- was worked out to Rs. 2,38,04,246/- and penalty of Rs. 2,38,04,246/- was levied. Similarly penalty of Rs. 2,20,85,000/- and Rs. 4,08,34,150/- was worked out for A.Y. 1999-2000 and for A.Y. 2004-05 respectively. 3. Matter carried to Ld. CIT(A) and Ld. CIT(A) has dismiss....
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....e Ld. Representative of the assessee pointed out that assessee has not gone into the Tribunal against the quantum order passed by the Ld. CIT(A). The Ld. A.R. submitted that during the course of assessment proceeding, the assessee has submitted all the evidences. The another pertinent point raised by the assessee was that penalty notice under section 274 read with section 271(1)(c) of the Act dated 29.03.2000, a copy of which has been placed on record, reveals non-application of mind by AO 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 said proposition, the reliance is placed on following decisions: 1. M/s. SSA's Emerald Meadows, ITA No.380/2015 dated 23.11.2015 (Hon'ble Karnataka High Court) 2. Manjunatha Cotton and Ginning Factory & Ors., 359 ITR 565 (Kar.) 3. Dilip N. Shroff 161 Taxman 218 (SC) 4. Dr. Sarita Milind Davare, ITA No.2187 & 1789/Mum/2014 dated 21.12.2016. 5. Shri Samson Perinchery, ITA No.4625 to 4630/Mum/2013 dated 11.10.2013. 6. CIT v. Reliance Petroproducts (P.) Ltd. [2010] 32....
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....f penalty Penalty initiated in assessment order passed Penalty levied by Assessing Officer u/s 143(3) u/s 143(3) r.w.s. 147 1. Interest on amount borrowed for purpose of acquisition of land 1,79,40,460 - Furnishing of inaccurate particulars of income Concealme nt of income 2. Transactions with Autoriders Finance Ltd. 45,93,250 Furnishing of inaccurate particulars of income - Concealme nt of income 3. Cash credit 9,03,000 no specific charge - Concealme nt of income 4. Foreign travelling expenses 3,13,719 no specific charge - Concealme nt of income 5. Interest (Note 2) payment 53,817 no specific charge - Concealme nt of income Note 1: In printed show cause notice issued u/s 271(1)(c) of the Act on 29.03.2000 along with assessment order u/s 143(3) of the Act, no particular limb has been struck off. Note 2: Penalty has been initiated on Rs. 39,959/- out o the total disallowance of interest of Rs. 1,25,155/-. A.Y. 1999-2000 Note: In printed show cause notice issued u/s 271(1)(c) of the Act on 23.03.2002 along wit....
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....e of New Sorathia Engg. Co. Vs. CIT 282 ITR 614 (Guj.) and submitted that AO was not certain as to what was the finding on the stand of which he imposed the penalty. He further submitted that in CIT, Gujarat-III vs. Manu Engineering Works, a Division Bench of the Gujarat High Court observed that the AO must give a positive finding as to whether there is concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the event there was no such clear-cut finding, the penalty order was held liable to be struck down. The Ld. A.R. submitted that in this case assessee has furnished all the details of expenditure before AO. The Ld. A.R. submitted that when all the evidences have been submitted relating to the expenditure claimed but assessee could not substantiate his claim does not lead to imposition of penalty. The learned A.R. of the assessee at the outset raised the issue in the additional ground (supra) challenging the validity of the notice issued under section 274 r.w.s. 271 of the Act dated 11.03.2015. According to the learned A.R., the AO has issued this notice without specifying the default committed by the as....
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....evidence regarding the expenditure incurred on foreign travel was for the business which is well settled principle that whatever expense is debited to P & L account assessee has to corroborate them with supporting evidence that it was incurred for business purpose. The Ld. DR appearing for the Revenue has defended the action of the income-tax authorities and pointed out that the loss was disallowed by the Assessing Officer noticing that the shares were purchased at a premium whereas the redemption price was agreed at a discount. The ld. CIT-DR contended that the basis for arriving at the redemption price has not been justified by the assessee and, therefore, the genuineness of the transaction was rejected by the income-tax authorities. It was, therefore, contended that under these circumstances the levy of penalty u/s 271(1)(c) of the Act is quite justified. With regard to the plea of assessee that notice issued u/s 274 r.w.s 271(1)(c) of the Act was legally untenable, the ld. CIT-DR pointed out that in the assessment order itself the Assessing Officer in para 4 has recorded that the penalty u/s 271(1)(c) of the Act was initiated for furnishing of inaccurate particulars of income. ....
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....Act is exigible in the facts and circumstances of the case on hand. In our considered view, penalty proceedings under section 271(1)(c) of the Act can be initiated only if the AO in the course of proceedings under the Act is satisfied that any person has 'concealed particulars of income' or has 'furnished inaccurate particulars' of income. 11. In this regard, for the sake of convenience, the said notice dated 11.03.2015 issued under section 274 r.w.s. 271 of the Act is extracted below: - "NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT, 1961. Penalty u/s. 271(1)(c) PEN/32/PG.31 2014-05 Dy.Commissioner of Income Tax- i 3(1)(2) Room No.218, 2'' floor, Aayakar Bhavan, Mumbai - 20. PAN: AAFCP8573K Date: 11-03-2015 To, The Principal Officer, M/S PRINCE CONSULTANCY PVT. LTD., 1203, EMP 48, EVERSHINE HALLEY, THAKUR VILLAGE, KANDIVALI (EAST), MUMBAI - 400 101. Whereas in the course of proceeding before me for the assessment year 2012-13 it appears to me that you: - * have without reasonable cause failed to fu....
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....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 penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee, which is based on the manner in which the notice u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 has been issued to the assessee company. A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of....
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....tion upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the Assessing Officer must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff v. Joint CIT* was upset. In Union of India v. Dharamendra Textile Processors**, after quoting from section 271 extensively and also considering section 271(1)(c), the court cam....
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....ance, 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 observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by the Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, 953, 1097 & 1126 of 2014 dated 5.1.2017 (supra) and the decision of the Tribunal holding levy of penalty in such circumstances being bad, has been approved. 16. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt.....
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....nd 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 assessee." 17. The aforesaid discussion clearly brings out as to the reasons why the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) is to prevail. Following the decision of our coordinate Bench in the case of Dr. Sarita Milind Davare (supra), we hereby reject the aforesaid argument of the ld. CIT-DR. 18. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of nonstriking off of ....