AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (4) TMI 15
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...., Agra has erred both on facts and in law in holding that where penalty under section 271(1)(c) of the Income Tax Act, 1961 has been initiated on charge of furnishing inaccurate particulars of income and imposed on concealment of income, the provisions of section 292B are applicable. 2. (i) Because the learned authorities below have erred both on facts and in law in imposing penalty on disallowance of long term capital loss of Rs. 59,12,322/- without appreciating that same was on account of incorrect working of the cost inflation index on the cost of acquisition and duly corrected by the assessee in the course of assessment proceedings by furnishing Revised Return of Income. (ii) Because the learned CIT(A)-1, Agra has erred both on facts and in law in not appreciating that no penalty in respect of disallowance on account of long term capital loss should have been imposed as the same was barred by limitation under section 275(1 )(c) of the Income Tax Act, 1961. 3. Because the learned authorities below have erred both on facts and in law in not appreciating that disallowance under section 94(7) and working of speculation loss was only on the basis of the co....
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....void ab initio, as the notice issued u/s 274 r.w.s 271(1)(c) of the Act, on 11.08.2010 was not in conformity with the law. His arguments in this regard shall be presently discussed. 4. As per the ld. DR, however, the notice is entirely as per law. His arguments will also be considered in due course. 5. The aforesaid notice (APB page 7) reads as follows: "Sub: Penalty notice u/s 274 read with section 271(1)(c) of the I.T. Act, 1961 - A.Y. 2008 -09 - Reg:- Whereas in the course of the proceedings before me for the assessment year 2008-09 it appears to me that you;- ** have concealed the particulars of your income or have furnished inaccurate particulars of such income. You are hereby requested to appear before me at 11.00 AM on 14.09.2010 and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through an authorized representative, you may show cause in writing on or before the said date which will be considered before any such order Is made under section 271(l)(c). Sd/-....
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....) "Sangam Enterprises vs. CIT", 288 ITR 396 (All). (h) "Harish Hosiery Mart", ITAT, Ahmedabad. (i) "Arcotech", (Del) (H.C.). (j) "B.A. Balasubramanian & Bros.", 20 Taxman 215 (Mad). (k) "Earthmoving Equipment Service Corporation vs. DCIT" ITA No.6617/Mum/2014. 10. The case of "S.V. Angidi Chettiar" (supra) is not applicable to the facts of the case. In the referred case, the issue under consideration pertained to a firm which had got dissolved. The contention of the assessee was that the ITO could not, in exercise of the power under section 28(1), impose penalty. The Hon'ble High Court accepted the plea of the assessee. However, the Hon'ble Supreme Court reversed the Judgment of the Hon'ble High Court by holding that assessment proceedings are liable to be continued against the firm as if it has not been dissolved. The Hon'ble Supreme Court found error in the High Court Judgment and concluded by holding that "in our view, the High Court was in error in holding that penalty could not be imposed under section 28 (1) (c) upon the firm M/s S.V. Veerappan Chettiar & Co. after its dissolution". In the present case, however, the ass....
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....as stated by the assessee that due to oversight, this amount was not added back in the Computation of Income and the same ought to have been adjusted in the Block of Assets. The aforesaid amount was added bank to the income of the assessee, with its consent. It was further noticed that another sum of Rs. 1 Lakh had been paid under the head "Income Tax Paid", in the above referred Schedule relating to Administrative and other Expenses. The assessee claimed that due to oversight, this amount was not added back in the Computation of Income. Hence, the Assessing Officer added this amount also to the Income of the assessee. Penalty Proceedings were also initiated against the assessee. In appeal, it was held by the Hon'ble High Court that the assessee did not explain, either to the Income Tax Authorities, or to the Income Tax Appellate Tribunal, as to in what circumstances and on account of whose mistake, the amounts claimed as deductions in this case were not added, while computing the income of the assessee company. The Hon'ble High Court further held that it could not lose sight of the fact that the assessee was a Company, which must be having professional assistance in comput....
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....Act. 20. In "Sangam Enterprises" (supra) pertains to the applicability of Explanation 1 to section 271(1)(c). The Hon'ble High Court has held that the judgment of "CIT vs. Anwar Ali", 76 ITR 696 (S.C.) is no longer applicable. It has further been observed that after the insertion of Explanation 1 to section 271(1)(c) by the Taxation law amendment Act 1975, if the explanation offered by the assessee regarding the additions is either found to be false and remained unsubstantiated, the additions so made are deemed to be concealed income, and therefore, the penalty provisions are attracted. The case has no application to the points and controversy under question. 21. In the case of "Balasubramaniam" (supra), no issue of validity of penalty notice was under consideration. 22. In the case of Earthmoving Equipment Service Corporation (supra) penalty order was sustained by the ITAT on the ground that the AO therein has levied penalty after due application of mind, in as much as in the assessment order it was mentioned that penalty proceedings are initiated for furnishing of inaccurate particular of income and the penalty was finally levied on the same ground. ....
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.... submission of non application of mind by submitting before the Bench that in the assessment order the Assessing Officer has recorded that penalty was initiated for furnishing of inaccurate particulars of income. It was therefore, contended that Penalty Notice cannot be solely examined to see whether the AO has applied his mind or not. The Bench vide Para-10, addressing to this argument of the revenue has held that this argument in the light of Hon'ble Supreme Court Judgment in the case of Dilip N. Shroff approving that factum of non striking off of the irrelevant clause in the notice as reflective of non-application of mind by the Assessing Officer. The Bench further held that such proposition has been considered by the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). In Para-13 of the Judgment the Hon'ble Bench again dealt with this argument of the DR has held that the observation of the AO in the assessment order and non-striking off the irrelevant clause in the notice clearly brings out the diffidence on part of the AO and there is no clear and crystallized charge being conveyed to the assessee u/s 271(1)(c) which has to be met by him. Therefore, conside....
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....or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. 31. In the case of 'Rajeev Kumar Gupta Vs CIT' (1980) 123 ITR 907 (All). (Para-4) (APB-191-195) "A notice which does not intimate the assessee of the particular facts on the basis of which the order is proposed to be passed would not comply with the requirements of s. 274." 32. In this regard, it is submitted that such an argument, on the face of the Judgment of the Hon'ble Karnataka High Court and Jurisdictional High Court cannot be sustained. 33. In "CIT vs. Manjunath Cotton and Ginning Factory", 359 ITR 565 (Kar). "Notice under section 274 should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, principle of natural justice is offended. On the basis of such proceeding....
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....s that according to this Court the effect and difference between section 271(1) (c) and section 276C of the Act was lost sight of in the case of 'Dilip N Shroff v. Joint CIT'. However, it must be pointed out that in 'Union of India v. Dharmendra Textile processors', no fault was found with the reasoning in the decision in 'Dilip N. Shroff v. Joint CIT', where the court explained the meaning of the terms conceal and inaccurate. It was only the ultimate inference in 'Dilip N. Shroff v. Joint CIT' to the effect that mens rea was an essential ingredient for the penalty under section 271(1) (c) that the decision in 'Dilip N. Shroff v. Joint CIT' was overruled." (emphasis nine) 39. In "Uma Shankar Agarwal vs. DCIT", ITA No. 1831 to 1835/Kol/2015. wherein assessee therein challenged the legality of Penalty Order on the ground of "No satisfaction" and "Show cause Notice without specific charge", the Bench vide Order dated 20.01.2016 and after due consideration of MAK Data (P) Ltd which was relied upon by the Departmental Representative as discussed in Para-7, held penalty unsustainable in law for the reasons as elaborately discussed in Para-9 to 10 of the said Order. Xerox copy of....
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....(b) penalty proceedings under section 271(1) (c) are initiated separately, do not comply with the meaning of the word "direction" as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the Income tax Officer whether or not take action, it cannot be described as a direction. It is settled law that in the absence of the existence of these conditions in the assessment order penalty proceedings could not be proceeded with. The proceedings which are initiated contrary to the said legal position are liable to be set aside. Therefore, the appellate Authority was justified in setting aside the order imposing penalty. Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue. We do not find any merit in this appeal. Accordingly, the appeal is dismissed. 44. In "Sarita Milind Davare vs. ACIT", ITA No. 2187/Mum/2014 the Bench had the occasion to deal with identical objection of the Revenue as noted in Para-7 of the Hon'ble ITAT order tha....
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....sed herewith. (APB-196- 203). 49. In "N.N. Subramania Iyer vs. UOI", 97 ITR 228 (Ker). "The penalty notice, Exhibit P-2, is illegal on the face of it. It is in a printed form, which comprehends all possible grounds on which a penalty can be imposed under section 18(1) of the Wealth-tax Act. The notice has not struck off any one of those grounds, and there is no indication for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. Even in the counter-affidavit filed by the second respondent, he has not stated for what specific violation he issued it. It is not that it would have saved his action. Apparently, Exhibit P-2 is a whimsical notice issued to an assessee without intending anything" 50. Therefore, in view of the above, particularly following 'Manjunatha' (supra), we hold that the notice under challenge is not in confirmity with the law and it is void ab initio. Accordingly, the said notice and all proceedings based thereon, culminating in impugned order, are quashed." 4. As evident, the above case is squarely covered by the Division Bench decision of the ITAT, Agra, in 'Sachin Arora vs. ITO' in ITA No. 118/Ag....
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....dicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma. without having striked out irrelevant clauses therein. This indicates non-applicaiion of mind on the part of the Assessing Officer while issuing the penalty notice. The Hon'ble High Court has held as under- 7. Therefore, the issue herein stands concluded in favour of the Respondent-Assessee by the decision of the Kamataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton and Ginning Gactory (supra). Further, the order of the Hon'ble ITAT, Mumbai Bench in respect of the above decision of Samson Perinchery in ITA Nos. 4625 to 2630/M/2013 is also enclosed along with these submissions and the facts are compar....
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....rce in the argument of the ld. DR that 'Sachin Arora' (supra), be not followed. This argument and the case laws supporting it are found to be of no help to the Revenue. 7. Further, before the ld. CIT(A), the assessee, inter alia, relied on the decision of the Bombay High Court in the case of 'CIT vs. Shri Samson Perinchery', passed on 05.01.2017 in ITA Nos. 1154/2014, 953/2014, 1097/2014 and 1226/2014. The relevant portion thereof, squarely applicable to the case at hand, stands reproduced at pages 7 & 8 of the impugned order, as under: "3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-Assessee. This by holding that the initiation of penalty under section 271(l)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating pe....