TaxTMI 
TaxTMI 
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2018 (2) TMI 963
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....the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied u/s 271(1)(c), despite the fact that the assessee had based its entire argument on the data submitted by it in its second revised return e-filed on 15.11.2013, wherein project expenses of Rs. 1,07,94,855/- was debited to the P&L account without corresponding increase in the closing stock. 3. Whether, on facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the penalty levied u/s 271(1)(c) without appreciating the fact that the assessee has itself rendered the original return and the first revised return irrelevant by basing its contention, before the AO, on the accounting data submitted in its second revised return that was filed on 15.11.2013. 4. Whether, on facts and in the circumstances of the case and in law, the Ld. CIT (A) was right in holding that the issue was not of Revenue expenditure vs. Capital expenditure. In fact, there is a deliberate attempt by the assessee to manipulate the accounts by booking the project expenses and by not correspondingly increasing the closing stock. 5. Whether on facts and in the circumstances of the case and in la....
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....ourse of the appellate proceedings it was for the very first time submitted by the assessee that an original return of income for the year under consideration, viz. A.Y 2009-10 was filed as on 31.03.2011, disclosing an income of Rs. 37,80,790/-. It was further submitted that as the assessee which was being assessed with the ITO Ward-9(3)(1) had wrongly mentioned "New Case" in its return of income, therefore, corrected the said mistake by filing a revised return of income on the same date at the same income of Rs. 37,80,790/-. However, as the assessee had in its revised return of income continued with the mistake of making an incorrect computation of TDS, therefore, to undo the same it filed a second revised return of income on 15.11.2013, disclosing a depreciation loss of Rs. 17,422/-. The assessee in the backdrop of the aforesaid facts submitted before the CIT(A) that as it had filed the original return of income under Sec. 139(4) on 31.03.2011, therefore, the provisions of Explanation 3 of Sec. 271(1)(c) were wrongly invoked by the A.O. The assessee fortifying its aforesaid contention, submitted before the CIT(A) that the penalty contemplated in Explanation 3 of Sec. 271(1)(c) wa....
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....rate the reasons recorded for reopening of the assessment. It was observed by the CIT(A) that though the A.O had taken cognizance of the return of income filed by the assessee on 15.11.2013 wherein a depreciation loss of Rs. 17,422/- was disclosed, but however, there was no mention of the return of income which was filed by the assessee as on 31.03.2011. The CIT(A) observed that the return of income filed by the assessee on 15.11.2013 was an invalid return which had no existence in the eyes of law. That in the backdrop of the aforesaid facts, the CIT(A) observed that now when the only valid return of income was filed by the assessee as on 31.03.2011, therefore, the A.O could have imposed penalty only on the basis of the income assessed vide order dated 19.03.2015, as in comparison to the income returned by the assessee in its return of income filed on 31.03.2011. The CIT(A) further observed that as the assessee had claimed the expenditure incurred on Linkside building as a capital expenditure in its original return of income, therefore, there was no basis for characterising the same as the concealed income of the assessee. The CIT(A) was further persuaded to be in agreement with th....
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....ld. A.R in order to drive home his aforesaid contention took us through the notice issued by the A.O under Sec. 274 r.w.s 271(1)(c) of the Act, dated 19.03.2015, which revealed that the A.O had failed to strike off the irrelevant default in the show cause notice. The ld. A.R taking support of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC) submitted that as the assumption of jurisdiction by the A.O suffered from a material defect, therefore, the penalty imposed by the A.O under Sec. 271(1)(c) on the said count itself could not be sustained. 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present case had been sought to adjudicate the validity of the penalty imposed in the hands of the assessee under Sec. 271(1)(c). We have given a thoughtful consideration to the issue before us and find that it remains as a matter of fact that in the notice issued under Sec. 274 r.w.s. 271, dated 19.03.2015, the A.O had failed to strike off the irrelevant default. We would now test the validi....
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....ind. It was also bound to comply with the principles of natural justice [See Malabar Industrial Co. Ltd. Vs. CIT (2000) 2 SCC 718]. 7. We have given a thoughtful consideration to the contentions of the authorized representatives before us and find that a similar issue had came up before the Hon'ble High Court of Karnataka in the case of CIT Vs. SSA's Emerald Meadows (73 taxmann.com 241)(Kar), wherein the Hon'ble High Court following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar) had concluded that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings had been initiated, viz. 'concealment of particulars of income' or 'furnishing of inaccurate particulars', the same had to held as bad in law. The 'Special Leave Petition' (SLP) filed by the revenue against the aforesaid order of the Hon'ble Karnataka High Court had thereafter been dismissed by the Hon'ble Supreme Court in CIT Vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC). We further find that a similar view had also been taken by the Hon'ble High Court of Bombay in the case ....
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....nd 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 Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact....
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....en 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 circumstance being bad, has been approved. 11. Apart from the aforesaid, the Id. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Others, 216 ITR 660 (Born.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s 271(1)(c) of the Act. We have carefully considered the said argument set-up by the Id. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Honble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under:- "12 A combined reading of the decision rendered by Hon'ble Bombay High Court in the case of Smt. B....
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....urt 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 Id. CIT-DR. 13. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struckoff. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s 271(1)(c), which has to be met by him. As not....
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....see in its return of income filed on 31.03.2011. We find that as observed by the CIT(A), that as the assessee had claimed the expenditure incurred on Linkside building as a capital expenditure in its original return of income, therefore, there was no basis for characterising the same as the concealed income of the assessee. We are further of the considered view that as the assessee had duly disclosed the expenditure incurred on Linkside building in its return of income, therefore, merely for the reason that the said expenditure was claimed as a revenue expenditure would not justify imposition of penalty under Sec. 271(1)(c), for the reason that the same was held by the A.O to be in the nature as that of a capital expenditure. We find ourselves to be in agreement with the view taken by the CIT(A) that the issue as to whether an expenditure incurred by the assessee on the Linkside building was a revenue expenditure or in the nature as that of a capital expenditure was in itself a debatable issue, therefore, merely for the reason that the view taken by the assessee did not find favour with the A.O would not justify imposition of penalty under Sec. 271(1)(c) in the hands of the assesse....