TaxTMI 
TaxTMI 
2018 (5) TMI 1575
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.... cause from filing the appeal in time. The appeal was filed on 20.02.2017, i.e., within two months of the date of receipt of the CIT(A)'s order by the assessee on 24.12.2016. Accordingly, the delay in filing the appeal is condoned. 3. The following grounds have been raised: "1. Because the Ld. CIT(A) has wrongly and illegally confirmed the penalty imposed by the Assessing Officer u/s 271(l)(c) of the I. T. Act. 2. Because the assessee duly discharged her onus of proving the cash credits to be genuine. The addition on account of negative cash balance was duly explained. In the quantum proceedings the Ld. CIT(A) has erred both on facts and in law in confirming the same. 3. Because considering the facts of the case and the legal position, the Ld. CIT(A) should have deleted the penalty imposed u/s 271(l)(c) instead of confirming the same. 4. Because Ld. CIT(A) while confirming the penalty has erred on facts in treating the quantum appeal to have been confirmed by Hon'ble ITAT Delhi whereas the quantum appeal is pending as on date before Hon'ble ITAT, Agra Bench. On this ground also the penalty confirmed by Ld. CIT(A) is wrong and bad in law. ....
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....dated 21-02-2011. 7. The ld. Counsel for the assessee has contended that the penalty order dated 30.03.2012, as sustained by the ld. CIT(A), is void-ab-initio, as the notices issued u/s 247 r.w.s. 271(1)(c) of the Act, dated 21.12.2009 (APB-7), 25.03.2011 (APB-8) and 30.05.2011 (APB-9), are not in conformity with the law. 8. As per the ld. DR, however, the notices are entirely in accordance with law. 9. The notice dated 21.12.2009 (APB-7) reads as follows: "When translated in English; In the hearing for A.Y. 2007-08, it appears to me that you have: x-1 concealed your income to quite an extent and you have furnished inaccurate particulars of your income. -2. You have not complied with the notices issued under sections 142(1)/143(2) of the Act, Therefore, kindly state the reason as to why penalty under sections 271(1)(B) and 271(1)(c) of the Act be not imposed on you.............................." 10. The notice dated 25.03.2011 (APB-8) is as under: "Whereas in the course of the assessment proceedings before me for the Asstt. Year 2007-08, it was found that you have concealed the particulars of your income/furnished inaccurate ....
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....nt is more than established, and, therefore, I uphold the penalty of Rs. 9,44,043/- Grounds of appeal Nos.1 to10 are dismissed." 14. Heard. The matter, it is seen, is squarely covered by order dated 19.12.2017, passed by the Division Bench, in 'Sachin Arora vs. ITO', and other connected cases, in ITA No.118/Agra/2015, for A.Y. 2008-09, and other connected cases. 15. In 'Sachin Arora' (supra), the Bench has observed as follows: "8. According to the ld. Counsel for the assessee, the notice, not being specific about the charge against the assessee, is void. The Counsel have, in their respective cases, relied on the following decisions: (i) "CIT vs. Manjunath Cotton and Ginning Factory", 359 ITR 565 (Kar). (ii) "CIT vs. M/s Veerabhadrappa Sangappa & Co", ITA No. 5020/2009 (Kar). (iii) "CIT vs. SSA Emerald Meadows", ITA No. 380/2015 (Kar). (iv) "Dilip N. Shroff Vs. JCIT", 291 ITR 519 (SC). (v) "Ashok Pai vs. CIT", 292 ITR 11 (SC). (vi) "CIT vs. Reliance Petroproducts (P) Ltd.", 322 ITR 158 (SC). (vii) "Uma Shankar Agarwal vs. DCIT", ITA No. 1831 to 1835/Kol/2015. (viii) "Suvaprasanan Bhatacharya vs. A....
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....ce under section 274 of the Act is a prerequisite sine qua non for the levy of concealment penalty u/s 271(1)(c), or whether it is not so, the initiation of penalty proceedings, as contained in or evincible from the assessment order amounting to sufficient notice to the assessee, as maintained by the Department. It is also up for adjudication as to whether, in case issuance of notice u/s 274 is to be taken as a mandatory statutory requirement before levy of penalty, if such a notice does not spell out the precise charge against the assessee, the very initiation of the penalty proceedings would not be liable to be struck down as null and void ab initio. 11. Let us consider the numerous case laws relied on respectively by the parties. 12. The case of "S.V. Angidi Chettiar" (supra) is not applicable. 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) of the IT Act, 1922, 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&#....
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.... Ltd." (supra), the facts of the case are that during assessment, it was noticed by the AO that in Schedule 9, relating to Administrative and other Expenses, forming part of the Profit & Loss Account, a sum of Rs. 1,21,49,861/- had been debited under the head "Equipment Written Off ". It was 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 back 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 aforesaid 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 Tribunal, as to in what circumstances and on account of whose mistake, the amounts claimed....
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....tion 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 Laws Amendment Act 1975, if the explanation offered by the assessee regarding the additions is either found to be false, or 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 herein. 22. In the case of "Harish Hosiery Mart Vs ITO", in ITA No. 3009 (Ahd) 2007, the Bench concluded the appeal by holding that the assessee did not place any material before the authorities to show that the explanation of low G.P. during post survey period was bonafide. 23. The ITAT found that assessee did not discharge its onus and failed to prove its bonafideness and therefore, penalty was justified . No issue of Notice U/s 274 was subject matter of consideration before the ITAT and therefore, reliance placed is misplaced. 24. In the case of "Arco tech Ltd." (supra), the H....
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....that in Explanation-1 to section 271(1)(c), the onus is the assessee; that where the AO issues a notice to the assessee, he makes the assessee aware that the provisions thereof are to be used against him and these provisions include Explanation-1 to section 271(1)(c); that where the returned income is less than 80% of the assessed income, the Explanation is automatically attracted. In the case under consideration, however, the issue is not about the applicability or non-applicability of Explanation- 1 to section 271(1)(c), the issue is regarding the validity and legality of the notice. It is only when a valid notice is issued, that the question of considering the assessee's explanation/reply in the light of Explanation -1 would arise. The role of Explanation-1 is to put the initial burden on the assessee, which is rebuttable and once rebutted, the burden shifts to the Revenue to establish that the assessee has concealed his income. 28. In 'ACIT vs. Dr. Prakash Kanhaiyalal Kankariya' (supra), has been relied on for the proposition that if there is satisfaction of the AO in the assessment order, notice u/s 274 is immaterial. Here, it is seen that this decision has been rende....
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....eration before the Mumbai ITAT in the case of 'Dr. Sarita Milind Davare Vs ACIT', in ITA No. 2187/Mum/2014 wherein, the DR that in the assessment order, the AO had clearly specified that penalty was initiated for concealment of income and placing reliance on the Hon'ble Bombay High Court's decision in the case of 'CIT Vs Kaushlaya Devi' 216 ITR 660, submitted that a mere mistake in the language used, or mere non-striking off of the inaccurate portion cannot by itself invalidate the notice. 31. The above argument of the Revenue was not accepted by the ITAT and after discussion of the Judgment delivered in the case of 'CIT Vs Kaushlaya Devi' (supra), the Bench held that a combined reading of 'Smt B. Kaushlaya & Ors' (supra) and the decision rendered by the Hon'ble Supreme Court in the case of 'Dilip N. Shroff' (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing the notice. 32. That the illegality in the Notice cannot be saved by recourse to section 292BB of the Act, was held by the ITAT, Mumbai Bench in the case of 'Dr. Sarita Milind Davare Vs ACIT' (supra) wherein this plea was taken by the revenue befor....
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....would not constitute a deliberate act of suppressio veri or suggestio falsi."(Para 22). 39. In "CIT vs. Reliance Petroproducts (P) Ltd.", 322 ITR 158 (SC), the Hon'ble Supreme Court has clarified as follows: ".....It was only on the point of mens rea that the judgment in 'Dilip N. Shroff v. Joint CIT' was upset. In Union of India v. 'Dharmendra Textile Processors' after quoting from section 271 extensively and also considering section 271(1) (c), the Court came to the conclusion that since section 271(1) (c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was not necessity of mens rea. ........................................ The basic reason why decision in 'Dilip N Shroff v. Joint CIT' was overruled by this Court in 'Union of India v. Dharmendra Textile Processors' was 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 reas....
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....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." 45. In "Ajay Kumar vs. ITO" (supra), vide order dated 19.05.2017, this Bench deleted penalty under similar circumstances. 46. In "N.N. Subramania Iyer vs. UOI" (supra), it was held as under: "The penalty notice, Exhibit P-2, is illegal on the face of it. It is in ....
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....ars the copies of which are placed in the paper book. We found that the said notices have been issued on standard performa and in the notices the inappropriate words and paragraphs were neither struck off nor deleted. Thus, the assessing authority was not sure as to whether he had proceeded on the basis that the assessee had either concealed its income or had furnished inaccurate particulars. Thus, the notices so issued are not in compliance with the requirement of the particular section and therefore it is a vague notice, which is attributable to a patent non-application of mind on the part of the assessing authority."; and that: "There can be no doubt that penalty u/s. 271(l)(c) of the Act is levied for concealing particulars of income or for furnishing inaccurate particulars of such Income, which are the two limbs of this provision. In other words, it is only when the authority invested with the requisite power is satisfied that either of the two events existed in a particular case that proceedings u/s. 271(l)(c) of the Act are initiated. This pre-requisite should invariably be evident from the notice issued u/s. 274 r.w.s. 271 of the Act, which is the jurisdic....
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....inning Factory reported in [2013] 359 ITR 565 (Karn) is considered, the resultant effect would be that the notice in question issued under section 271(l)(c) for levy of penalty and consequently the penalty imposed, both would be unsustainable and cannot stand in the eye of law." 49. Thus, 'Muninaga Reddy' (supra), following 'Manjunatha'(supra), unambiguously lays down that the notice u/s 274 must specifically state the ground for which penalty is being levied, i.e., whether for concealment of income, or for furnishing inaccurate particulars. 50. Reliance has been placed by the ld. DR on 'Muninaga Reddy' (supra), for the proposition that the Hon'ble High Court has stated that it is a question of fact and not a question of law and therefore, according to the ld. DR, it will not constitute a binding precedent. 51. In this connection, it is seen that in 'Muninaga Reddy' (supra), the Hon'ble High Court first framed a question of law for its consideration and passed judgment holding the appeal of the Revenue to be meritless and refused to the answer the question of law, holding that the issue is already covered by the decision of the same Court in the c....