TaxTMI 
TaxTMI 
2016 (5) TMI 1439
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....he Lower Authorities have erred in confirming the penalty u/s 271(1)(c) to the extent of amount of sum of Rs. 10,665/- being alleged unexplained jewelry, by disregarding appellant's contention. 2. On the facts and in the circumstances of the case and in law, the Lower Authorities have erred in confirming the penalty u/s 271(1)(c) on Additional Income declared in the return of sum of Rs. 7,81,610/- by disregarding appellant's contention. 3. On the facts and in the circumstances of the case and in law, the Lower Authorities have erred in confirming the penalty u/s 271(1)(c) on alleged on unproved loan of Rs. 4,50,000/- by disregarding appellants contention. 4. The issue raised in the present appeal is against levy of penalty under section 271(1)(c) of the Act. 5. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was conducted in Chaudhari Group of cases, Nashik on 21.03.2012. The residential premises of assessee was searched under section 132 of the Act and survey operation under section 133A of the Act was carried out at the business premises of the assessee. During the course of search, certain documents were seized and the stat....
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..../- in assessment year 2006-07, Rs. 13,298/- in assessment year 2008-09, Rs. 4,38,888/- in assessment year 2010-11 and Rs. 3,18,182/- in assessment year 2011-12. Another addition which has been made in assessment years 2010-11 and 2011-12 is on account of on-money received of Rs. 12,33,000/- in assessment year 2010-11 and Rs. 7,09,118/- in assessment year 2011-12. The Assessing Officer in assessment year 2010-11 and 2011-12 after making additions on account of on-money had initiated penalty proceedings under section 271(1)(c) of the Act without mentioning the limb which has been not complied with. While levying penalty under section 271(1)(c) of the Act, the Assessing Officer holds that the additional income was offered consequent to search and hence, provisions of Explanation 5A to section 271(1)(c) of the Act were attracted. However, in para 10, the Assessing Officer holds the assessee to have furnished inaccurate particulars of income and thereby concealed his income to the extent of Rs. 1,21,51,218/-, which comprised addition on account of unexplained jewellery, on-money received and admittance of additional income and he therefore, imposed penalty ....
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....ee pointed out that additional grounds of appeal raised in the present appeal involves jurisdictional issue and do not require any investigation of facts and hence, the same may be admitted. 8. We find merit in the plea of assessee as by way of additional grounds of appeal the assessee has challenged levy of penalty for not recording proper satisfaction and also for initiating and levying penalty for both the limbs of section 271(1)(c) of the Act, which is not warranted. The learned Authorized Representative for the assessee before us has placed reliance on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Shri Samson Perinchery in Income Tax Appeal No.1154 of 2014 with other Income Tax Appeals Nos.953 of 2014, 1097 of 2014 and 1226 of 2014, judgment dated 05.01.2017 and the Pune Bench of Tribunal in Satish Dondulal Parakh Vs. ACIT in ITA Nos.1200 & 1201/PUN/2016, relating to assessment years 2006-07 & 2011-12, order dated 06.04.2018 and Praj Industries Ltd. Vs. DCIT in ITA No.1490/PUN/2015 relating to assessment year 2006-07, order dated 05.04.2018. The learned Authorized Representative for the assessee after taking us through the basis for initiation of penalty pro....
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....ed. In cases, where during the course of assessment proceedings, satisfaction has been recorded on one of the limbs and penalty has been levied on the other limb or on both the limbs, such order levying penalty cannot be sustained. In this regard, we find support from the ratio laid down by the the Hon'ble Bombay High Court in CIT Vs. Shri Samson Perinchery (supra) and also the orders of Pune Bench of Tribunal. 11. First, we shall refer to the findings of the Tribunal in Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08, dated 30.11.2016, wherein reference was also made to the ratio laid down by the Hon'ble Karnataka High Court in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra) and CIT Vs. SSA'S Emerald Meadows (2016) 73 taxmann.com 241 (Kar), wherein SLP has been dismissed by the Hon'ble Supreme Court and it was held as under:- "13. We have heard the rival contentions and perused the record. The issue arising in the present bunch of appeals is jurisdictional issue of levy of penalty under section 271(1)(c) of the Act. The requirement of section is that where the Assessing Officer or the Commissioner of....
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....ccurate particulars of income. There may be cases where there is issue of both concealment of income and furnishing of inaccurate particulars of income, based on the nature of additions, then in such cases, satisfaction and notice thereon should specify exact charge against the assessee. The charge has to be further specified while completing penalty proceedings and the Assessing Officer has to come to a conclusion as to whether it is case of concealment of income or furnishing of inaccurate particulars of income. The question which further arises where the satisfaction recorded by the Assessing Officer and the notice issued thereafter is without application of mind, then can the subsequent order passed levying penalty be held to be valid?. The Hon"ble Karnataka High Court in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra) had dealt upon the issue of notice under section 274 of the Act for the purpose of levying penalty for concealment and observed as under:- "59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said ....
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.... said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penal....
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....ing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similarly, for furnishing inaccurate particulars of income, the standard proforma without striking of relevant clauses, as per the Hon"ble High Court would lead to inference as to non-application of mind. 16. Further, the Hon"ble Karnataka High Court in CIT Vs. SSA"S Emerald Meadows (supra) has dismissed the appeal of Revenue, where the Tribunal had allowed the appeal of assessee holding that the notice issued by the Assessing Officer under section 274 r.w.s. 271(1)(c) of the Act to be bad in law as it does not satisfy which limb of section 271(1)(c) of the Act under which it has been initiated The Hon"ble High Court had relied on decision of Division Bench of the Court rendered in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra). The Hon"ble Supreme Court in CIT Vs. SSA"S Emerald Meadows (supra) has dismissed the Special Leave Petition. 17. The Pune Bench of Tribunal in M/s. Sai Venkata Construction Vs. Addl. CIT (supra) and in Sanjog Tarachand Lodha Vs. ITO (supra) have applied the ratio laid down by the Hon"ble Karnataka High Court (supra) and held tha....
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.... Officer and since the assessee fully knew in detail the exact charge of Department against him, it could not be said that either there was non-application of mind by the ITO or so-called ambiguity wording in the notice impaired or prejudiced the right of assessee of reasonable opportunity of being heard. The jurisdictional High Court deliberated upon the provisions of section 274 of the Act which contained principle of natural justice of the assessee being heard before levying penalty. It also held that mere mistake in the language used or mere non-striking of inappropriate portion could not itself be invalidated the notice. It was held that the entire factual background would fall for consideration in the matter and no one aspect would be decisive. 21. In respect of assessment year 1967-68, the Hon"ble High Court in CIT Vs. Smt. Kaushalya (supra) acknowledged that there could exist a case where vagueness and ambiguity in the notice could demonstrate non-application of mind by the authority and / or ultimate prejudice to the right of opportunity of hearing contemplated under section 274 of the Act. The show cause notice for assessment year 1967-68 was issued even before the asse....
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....e Assessing Officer while initiating proceedings has recorded satisfaction as to the assessee has furnished inaccurate particulars of income and has also concealed the income. The only source of addition in the hands of assessee is additional income offered by the assessee pursuant to search operations. In such circumstances, it is categorically a case of concealment. However, the Assessing Officer refers to both the limbs of section 271(1)(c) of the Act and the satisfaction recorded in this case suffers from infirmity. Further, even in the notice issued under section 274 of the Act, irrelevant part has not been struck off. While completing penalty proceedings also, the Assessing Officer makes reference to both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income and in the final, levies penalty for concealment of income. 23. However, the question which is raised before us by way of additional ground of appeal is root of start of the proceedings i.e. recording of satisfaction and the issue of notice, which has been challenged by the assessee to be invalid. Applying the ratio laid down by the Hon"ble Karnataka High Court in CIT & Anr. Vs. Manjuna....
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....f notice under section 274 of the Act on such vagueness and ambiguity makes such notice invalid and proceedings thereafter are to be quashed. 25. The Hon"ble Supreme Court in T. Ashok Pai Vs. CIT (supra) had held as under:- "23. Section 271(1)(c) remains a penal statute. The rule of strict construction shall apply thereto. The ingredients for imposing penalty remain the same. The purpose of the Legislature that it is meant to be a deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985. 24. "Concealment of income" and "furnishing of inaccurate particulars" carry different connotations. Concealment refers to a deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression very or suggestion falsi." 26. Where concealment of income and furnishing of inaccurate particulars of income are two different connotations, then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings as to under which limb the case of assessee falls. In the present set of facts, the sat....
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....ided by the Tribunal in the case of Satish Dondulal Parakh Vs. ACIT (supra). In such case also, penalty proceedings were initiated without mentioning any of the limbs of section 271(1)(c) of the Act and penalty was levied for concealing particulars of income for furnishing inaccurate particulars and the Tribunal held such a proposition was not acceptable. The relevant findings of Tribunal are in para 8 which read as under:- "8. We heard both the parties and perused the orders of the Revenue on the issue of initiation and levy of penalty u/s.271(1)(c) of the I.T. Act, 1961. We have considered the submissions made by the Ld. Counsel for the assessee on the legal issue of recording of satisfaction by the AO. In this connection, we proceed to extract the relevant lines from Para 5 of the assessment order and Para No.4 of the penalty order and the same reads as under : Para 5 of the assessment order : "5. .....................Penal proceedings under the provisions of section 271(1)(c) of the Act are initiated." Para 4 of the penalty order : "4. For the reasons recorded in the foregoing paragraphs of this order the undersigned is satisfied that the assessee has concealed particul....
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....sment order and Para No.5 of the penalty order and the same reads as under : "Para 3 of the assessment order : 3. During search action, assessee has made disclosure of additional income of Rs. 3,91,04,244/-. Subsequently, notice u/s.148 was issued in response assessee filed return declaring disclosure of Rs. 3,91,04,244/- declared during search action. Thus, to this extent, assessee has concealed the particulars of income. It is pertinent to note here that said income has been disclosed by the assessee due to search action only. Had there been no search action, this income would not have been disclosed by the assessee and the same would have escaped assessment. Therefore, penalty proceedings u/s.271(1)(c) of the Act is initiated separately. Para 5 of the penalty order : 5. . . . . . . . . . . . .Thus, in view of the above, I am convinced that the assessee has concealed income of Rs. 5,01,04,244/- by furnishing inaccurate particulars and made itself liable for levy of penalty u/s.271(1)(c) of the I.T. Act, 1961. I, therefore, direct the assessee to pay a sum of Rs. 1,68,65,088/- by way of penalty u/s.271(1)(c) of the I.T. Act, 1961, which is equal to sum of tax sought to b....