TaxTMI 
TaxTMI 
2018 (1) TMI 236
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....espect of reimbursement of expenses to be incurred by your appellant towards sales promotion which clearly establishes that there was a receipt towards expenses and hence this receipt was deductible from expenses incurred and the learned CIT (A) differed by coming to the conclusion that this is a receipt to be reflected on income side of the Profit & Loss A/c but the main fact was ignored that any of the treatment to this receipt did not have any impact on the profit for the year as it makes no difference whether there is increase in receipt or deduction from payment made on the profit for the year. 3. The learned CIT (A) further erred in coming to the conclusion that deduction in respect of Rs. 4,77,58,412/- claimed by your appellant has not been fully established and hence there was concealment though your appellant had claimed deduction of net amount spent amounting to Rs. 1,80,86,421/- (made up of expenditure Rs. 9,53,2 1,476/- less reimbursement Rs. 7,72,35,055/- ) only and hence it cannot be said that there was concealment of Rs. 4,77,58,412/within the meaning of Section 271 (1) (C) as denial of deduction of expenditure does not amount to concealment. 4. On the facts an....
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.... of additional ground raised by the assessee. Therefore, we are of the considered view that the additional ground raised by the assessee is required to be admitted and hence, admit the additional ground raised by the assessee and dispose of the same, on merits. 5. The brief facts of the case are that the assessee company engaged in the business of manufacturing of watches and calculators, filed its return of income for the assessment year 2006-07 on 30-11-2006 declaring total income at Nil by claiming deduction u/s 80IC of Rs. 1,65,30,520 and book profit u/s 115JB at Rs. 1,61,27,608. The assessment was completed u/s 143(3) on 31-12-2008, interalia making addition towards disallowance of reimbursement of selling and distribution expenses of Rs. 4,77,58,412. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A), vide order dated 17- 01-2012 has confirmed disallowance of selling and distribution expenses. The assessee preferred further appeal before the ITAT. The ITAT, vide its order dated 12-06-2013 in ITA No.1811/Mum/2012 has upheld the orders of the AO and confirmed disallowance of selling and distribution expenses. 6. In the meantime, the AO ....
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....s of Rs. 4,77,58,412 the assessee was trying to conceal the amount of Rs. 4,77,58,412. Therefore, the AO is justified in levying penalty on this amount. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 8. The Ld.AR for the assessee referring to the additional grounds of appeal submitted that penalty proceedings initiated by the AO u/s 271(1)(c) is bad in law and liable to be quashed as the AO has issued vague notice in a printed form without striking off irrelevant portion, which is a clear case of non application of mind by the AO before initiation of penalty which vitiates penalty proceedings. The Ld.AR further submitted that the AO has not framed any specific charge on which he intended to impose penalty which is clear from notice issued u/s 274 r.w.s. 271(1)(c) where he has mentioned both the charges which cannot be the case because both the charges in penalty proceedings operate in two different fields. The Ld.AR further submitted that in the notice issued u/s 274, the AO has not satisfied himself about the clear charge, under which the penalty is leviable, whether it is for concealment of particulars of income or for furnishing inaccurate particulars of....
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....validate the notice issued u/s 274. The AO has brought out clear facts of concealment of particulars of income in respect of disallowance of reimbursement of selling an distribution expenses which warrants levy of penalty and accordingly levied penalty u/s 271(1)(c). Therefore, the order of the lower authorities should be upheld. 10. We have heard the rival submissions, perused the material available on record and also gone through the orders of authorities below. The AO has levied penalty u/s 271(1)(c) in respect of disallowance of reimbursement of selling and distribution expenses on the ground that the assessee has concealed particulars of income and also furnished inaccurate particulars of income. The AO has initiated penalty by issuing notice u/s 274 r.w.s. 271(1)(c) in a printed form without striking off of irrelevant portion which were not applicable to the facts of assessee's case. The AO has issued notice which states that penalty has been initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. In the assessment order, the AO has initiated penalty proceedings on both charges, i.e. for concealing the particulars of income and f....
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....t to initiated penalty for concealment of particulars of income or furnishing of inaccurate particulars of income. If the proceedings are initiated on a specific charge, then, the assessee can justify its case by advancing arguments on the charge framed by the AO. Thus, once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. If penalty proceedings are initiated on one ground and levied penalty on different ground or penalty proceedings are initiated on two grounds, i.e. concealment of particulars of income and also furnishing of inaccurate particulars of income would definitely vitiate the entire penalty proceedings. 12. In this case, on perusal of the facts available on record it is abundantly clear that the AO has initiated penalty proceedings in the assessment order on both the grounds, i.e. concealment of particulars of income and also furnishing of inaccurate particulars of income. The AO also levied penalty on both the grounds of concealment of particulars of income and also furnishing of inaccurate particulars of income which is quite contrary to the provisions of section 271(1)(c) where it was categorically stated that both ....
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....all the grounds mentioned in section 271(1)(c) are mentioned would not satisfy requirement of law. Notice issued u/s 274 of the Act should specifically state the ground mentioned in section 271(1)(c), i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. Initiating the penalty proceedings on one limb and holding the assessee guilty of another limb is bad in law. The relevant portion of the order is extracted below:- " The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income are different. Thus, the Assessing Officer while issuing notice has 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 (2007) 292 ITR 11 (SC) at page 19 has held that concealnment of income and furnishing inaccurate particulars of income carry ....
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....order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated and it cannot be on a fresh ground of which assessee has no notice." 15. The assessee has also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs SSA's Emerald Meadows (supra) wherein the Hon'ble Supreme Court dismissed SLP filed by the revenue by following the decision of the Karnataka High Court in the case of CIT vs Manjunatha Cotton & Ginning Factory (supra) by observing that notice issued u/s 274 r.w.s. 271(1)(c) was bad in law as it did not specify under which limb of section 271(1)(c), penalty proceedings had been initiated. 16. Coming to the case laws relied upon by the Ld.DR. The Ld.DR relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Smt.Kaushalya (supra). We have gone through the case law relied upon by the Ld.DR in the light of the facts of the present case and find that the ITAT, Mumbai in the case of DCIT vs Dr. Sarita Milind Davare in ITA No.1789/Mum/2014 dated 21-12-2016 has considered the decision rendered by Hon'ble Bombay High Court in the light of Supreme Court judgement in the case of Dilip N Shroff 291 IT....