TaxTMI 
TaxTMI 
2017 (12) TMI 1051
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....pective orders passed by CIT(A) under section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act'). 2. Both the bunch of appeals filed by the assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. First we shall take up the bunch of appeals in ITA Nos. 968 to 971 & 973 to 974/PUN/2015 where similar issue was raised. However, for the sake of reference to facts and issues, we refer to facts in ITA No.968/PUN/2015. The assessee has raised the following grounds of appeal : "The following grounds are taken without prejudice to each other- On facts and in law, 1] The learned CIT(A) erred in confirming the levy of penalty u/s 271(1)(c) of Rs. 2,84,73,372/-. 2] The assessee submits that the reopening u/s 148 is bad in law and accordingly, the reasst. order and the penalty order passed u/s 271 (1)(c) be declared null and void. 3] The learned CIT(A) erred in holding that the assessee trust had violated the provisions of Section 13 (1)( c) resulting in denial of exemption u/s 11/10(23C)(vi) and hence, the levy of penalty on account of disallowance of exemption u/s 11/1O(23C)(vi)....
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....71(1)(c) be declared null and void since no concrete finding has been given by the learned A.O. in the penalty order as to whether the penalty is being levied for concealment of income or for filing inaccurate particulars of income and hence, the penalty order passed u/s 271(1)(c) is bad in law and the penalty levied may kindly be deleted. The assessee submits that the additional ground raised is legal in nature and as all the facts are on record, the assessee requests for admission of the above ground." 5. The Ld. Authorised Representative for the assessee pointed out that the additional ground of appeal being purely legal in nature merits to be admitted. He further stated that the additional ground of appeal goes to the jurisdiction of the issue of levy of penalty under section 271(1)(c) of the Act and hence the same needs to be adjudicated first. 6. The issue raised vide additional ground of appeal is as to whether in the absence of any concrete finding of the Assessing Officer in the penalty order as to whether the penalty is being levied for concealment of income or for furnishing of inaccurate particulars of income and hence the penalty order passed under secti....
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.... denial of deduction under section 10 (23C)(vi), 11 and 12 of the Act. However, the Tribunal has allowed the said deduction to the assessee except on certain facilities which were provided to the Trustee and on expenditure of Foreign tours of trustees and also further concessional educational expenses incurred on relatives of the trustees. The Ld. Authorised Representative for the assessee referring to the order of the Assessing Officer pointed out that the Assessing Officer had initiated the penalty only on the issue of denial of exemption under section 10(23C)(vi) of the Act though various additions were made in the hands of the assessee. He further referred to the said directions of the Assessing Officer where the Assessing Officer has failed to record a satisfaction as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee. 10. Our attention was further drawn to the penalty order passed by the Assessing Officer where he has failed to come to a finding again as to which limb of section 271(1)(c) of the Act has not been fulfilled. He levied penalty for concealment of income or furnishing inaccurate particulars of income. The Ld. Authorised Represe....
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....nt has not come to a finding as to whether the assessee has concealed his income or furnished inaccurate particulars of income. In the absence of the same, the penalty order has been challenged being invalid and bad in law. 13. Penalty for concealment under section 271(1)(c) of the Act is attracted where the assessee has either concealed his income or furnished inaccurate particulars of income. The Assessing Officer in this regard has to record a satisfaction and to that extent show cause the assessee. Further, while levying the penalty under section 271(1)(c) of the Act, AO has to come to a finding as to the limb for which show cause notice was issued to the assessee, stands fulfilled and thus work out the penalty for concealment on non-fulfilment of such limb of section 271(1)(c) of the Act. The two limbs of section 271(1)(c) of the Act are distinct and the AO in this regard has to come to a finding and record a satisfaction for non-fulfilment of either of the limbs of section 271(1)(c) of the Act. In some cases where more than one additions is made, it can be a case where for one addition one limb is satisfied and for another addition the second limb of section 271(1)(c) is s....
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....f such income and thereafter, levy the penalty accordingly. The word used between the two acts i.e. concealment of particulars of income and furnishing of inaccurate particulars of such income is 'or'. So the penalty levied by the concerned Officer is on satisfaction of any of the limbs and not the satisfaction of both the limbs. Where the assessee had concealed the particulars of income in particular circumstances, then the Assessing Officer may record satisfaction to that effect and initiate penalty proceedings and thereafter on fixation of charge, levy the penalty for such act of concealing the particulars of income. Similarly, in cases where the assessee concerned had furnished inaccurate particulars of such income, then similar exercise has to be carried out by the concerned Officer. 14. The first stage of invocation of provisions of section 271(1)(c) of the Act is the satisfaction to be recorded by the Assessing Officer, which admittedly, has to be during the course of assessment proceedings. So, where the assessment proceedings are pending, then the Assessing Officer has to apply his mind and on being satisfied, he has to give a finding that the assessee bef....
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....epartment and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the ITA Nos.1201 to 1205/PN/2014 Kanhaiyalal D. Jain Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said 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, 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. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the 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 drawi....
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....se of Manu Engineering Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 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." . . . . . . . . . . . . . . . . . . . . 22. Now, coming to the facts of the case before us, wherein search and seizure operations were carried out on Chhoriya group of concerns on 22.08.2008 and declaration of Rs. 11.44 crores was made in the hands of whole group for various years. Consequent to the notices issued under section 153A of the Act for various years, different entities filed the return of income for the respective years and cumulatively for Rs. 13.99 crores as additional income. The income was declared on accoun....
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....ot aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. It is a clear-cut case of concealment since the assessee had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the satisfaction accordingly and issued the notice accordingly." 16. Further, the Pune Bench of the Tribunal in the case of Kanhaiyalal D. Jain Vs. ACIT (supra), at Para No.24, had further deliberated on the issue of non striking of the inapplicable portion in the notice issued under section 271(1)(c) of the Act and had applied the proposition laid down by the Hon'ble High Court in the case of CIT Vs. Smt. Kaushalya (1994) 75 Taxmann 549 (Bom.). The Hon'ble Bombay High Court held that mere mistake in the language used or mere non- striking of inappropriate limb could not itself invalidate the notice. However, the Hon'ble High Court further ....
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....alment has held the assessee to have concealed its income or furnished inaccurate particulars of income. In other words, the Assessing Officer has failed to come to a finding as to which limb of section 271(1)(c) of the Act has not been fulfilled by the assessee. In the absence of the same, we find no merit in the order levying penalty under section 271(1)(c) of the Act. First, the satisfaction recorded by the Assessing Officer while completing the assessment is incomplete and further even the order passed for levying the penalty for concealment is both in valid and bad in law. Accordingly, we hold so and direct the Assessing Officer to delete the penalty levied under section 271(1)(c) of the Act for assessment years 2001-02 to 2004-05 and 2006-07 to 2007-08. 20. Before parting with this issue, it may also be mentioned that the penalty was levied by the Assessing Officer on denial of exemption under section 10(23C)(vi) of the Act and/or exemption under section 11 of the Act. However, the Tribunal in the assessee's own case vide its orders dated 10.02.2017 and 16.05.2017 has allowed the said exemption under section 11 and 12 of the Act except for certain items for violation of th....
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.... of the assessee is that the said concession was given to the children of employees and trustees and where the trustees were not given any specific benefit, there was no merit in disallowing the same and levying the penalty for concealment on such disallowance. 25. The Ld. Authorised Representative for the assessee submitted that the issue was whether such disallowances made by the CIT(A) and upheld by the Tribunal, merits levy of penalty under section 271(1)(c) of the Act. It was stressed by him that originally the Assessing Officer made certain additions on account of various heads of disallowances and the amount was enhanced by the CIT(A). In respect of the additions made by the Assessing Officer and the penalty levied under section 271(1)(c) of the Act, has been claimed to be not leviable on the jurisdictional issue, which is argued in the first bunch of appeals. In the second bunch of appeals, the amount which has been enhanced by the CIT(A) and confirmed by the Tribunal, i.e. disallowance of certain expenditure is challenged and such disallowances does not merit the levy of penalty for concealment. 26. The Ld. Departmental Representative for the Revenue on the other han....
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....epreciation on car (0% disallowed) - 171,388 - Credit Card Expenses (50% disallowed) - 242,566 121,283 Honorarium paid (50% disallowed) - - - 2. Expenditure on Foreign Tours of trustees - 24,700 24,700 3. Concessional Education to relative of trustees - 88,680 88,680 4. Other Income assessed in view of denial of exemption u/s.11 & 12 but deleted by ITAT 19,862,618 Assessed Income 19,862,618 671,227 306,610 Penalty levied on income 28,473,372 6,077,960 201,368 2006-07 1. Facilities to Shri B.E. Avhad Vehicle Maintenance (50% disallowed - 236,191 118,096 Depreciation on car (50% disallowed) - 280,057 140,029 Credit Card Expenses (50% disallowed) - 210,636 105,318 Honorarium paid (50% ....
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....of the trust and the same were brought to tax by Tribunal (supra) vide Para No. 156 at page 113 of the order. The Tribunal further considered the claim of the assessee, vis-a-vis concessional education given to employees of Trust wherein it was held that the same was not covered by the provisions of section 13(1)(c) of the Act and hence the same were allowed in the hands of the assessee. However, in respect of the relatives of the trustees, as defined in Explanation to section 13, the Tribunal (supra) held that the same cannot be allowed as an expenditure in the hands of the assessee. 29. In the assessment year 2002-03, further disallowance was made in addition on the facilities provided to Mr. B.E. Avhad, who was a Senior Advocate. The Tribunal (supra) vide Para No.158 of the order observed that in the absence of full particulars given on account of each and every expenditure incurred by Mr. B.E. Avhad through his credit card, 50% of the expenditure was for the objects of the trust and the balance 50% was towards his personal expenditure which was disallowed. Further, the Tribunal while allowing the exemption u/s.11 of the Act, held that there could not be wholesale denial of t....
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....the disallowance has been upheld in the hands of the assessee trust on account of non-fulfilment of the provisions of the Act, the said disallowances may be concessional educational expenses or loan given to relatives of trustees and foreign travel expenses of trustees cannot be said to be mere adhoc disallowance of expenses in the hands of the assessee trust. Accordingly, we hold that there is no merit in the plea of the assessee in this regard. The assessee is liable to levy of penalty for concealment under section 271(1)(c) of the Act in respect of the enhancement of disallowance made by the CIT(A) in this regard. 32. Various Courts have time and again held that where the assessee has failed to comply with the provisions of the Act, then penalty for concealment is leviable under section 271(1)(c) of the Act. As pointed out in the paras above, the disallowance which was made on account of travelling, where the assessee has failed to explain the necessity of the expenditure and its relation to the objects of the trust; the disallowance made on account of the concession in education or loan given to the relatives of the employees was for the violation of the provisions under sec....