TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 60
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....cer u/s. 271(l)(c) of the Act amounting to Rs. 79,05,625/-." 2. The brief facts of the case are that the assessee company is engaged in the business of hiring and renting of helicopters and aeroplanes, filed its return of income for AY 2011-12 on 30-09-2011 declaring loss of Rs. 39,84,49,162. The assessment has been completed u/s 143(3) on 26-03-2014 determining total loss at Rs. 37,19,35,762 after making disallowance of Rs. 2,63,52,083 towards excessive claim of depreciation and bad debts and also disallowance of expenses of Rs. 1,61,316 u/s 40(a)(ia) for failure to deduct tax at source on the basis of revised statement of total income filed by the assessee during assessment proceedings. Thereafter, AO initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income in respect of disallowance of claim of excessive loss being provision for doubtful debts and loss on sale of fixed assets. Accordingly, the AO issued show cause notice to the assessee to explain as to why penalty shall not be levied for furnishing inaccurate particulars of income. In response to show cause notice, assessee submitted that it has neither concealed particulars of income nor fu....
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....hat certain amount could be treated as its income, the Department has still to "prove by independent evidence that the assessee had concealed its income. Further, the Hon'bie MP High Court in the case of Additional Commissioner of Income Bhartiya Bhandar (122 ITR 622) has held that the Tribunal was .not right in holding that even in the presence of admission 'by the assesse,the Department should prove its independent evidence that the represented the concealed income of the assessee. 6. It is clear that enough material was brought on; record to prove that the assessee made a conscious attempt to evade taxes by; furnishing inaccurate particulars of income. Hence it is justified to levy penalty u/s.271(1)(c) of thd IT Act, 1961. 7. In a recent decision of the larger bench of the Hon'ble Supreme Court in the case of CIT Vs M/s. Dharmendra Processors (306 if R 277) it was held that levy of penalty is a civil liability and willful concealment is not essential ingredient for attracting a civil liability as in the matter of prosecution u/s.276C of the Act. It was held by the Hon'ble Supreme Court after considering, the provisions of section 271(l)(c) and the explanation appe....
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...., outrightly conceded before the AO that these amounts could not have been claimed as revenue deductions. The only plea.taken by the dssessee before fhe IT. authorities was that it was due to oversight that the amount of income-tax paid by the assessee as well as the amount claimed as deduction on account of certain equipment being written off could not be added back in the computation of income, it is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim-made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Expln. 1 to s. 271(1) would come in to play and work to the disadvantage of the assessee..." 8. In view of the above facts and circumstances of the case and in law, I am of the opinion that the Assessee Company 'has deliberately filed inaccurate particulars of income within the meaning of section 271 (l)(c) of the I T Act, 1961 read with Explanation 1 thereto. From the above it it can be concluded that the assessee filed inaccurate particulars.and sought to evade tax on Rs. Rs. 2,63,52,083/-. I, th....
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....satisfactory or true, then the AO can reject such explanation and proceed to levy penalty u/s 271(1)(c). In this case, AO has levied penalty on two counts, i.e. firstly, the excess claim of loss has come to light only due to the findings of the AO during the course of assessment proceedings, but not by voluntary act of the assessee. Secondly, it is clearly evident that had the case not been selected for scrutiny, the excess loss claimed by the assessee would not have seen the light of the day. Therefore, the Ld.CIT(A) opined that the AO was correct in levying penalty u/s 271(1)(c) for furnishing inaccurate particulars of income. Aggrieved by the order of CIT(A), the assessee is in appeal before us. 4. The Ld.AR for the assessee, at the outset submitted that this issue is squarely covered in favour of the assessee on technical grounds by numerous decisions of High Courts and Tribunals, where the Courts have taken a consistent view that if the AO levied penalty on invalid notice without striking off irrelevant portion in the notice, then the whole proceedings is vitiated, consequently, penalty levied u/s 271(1)(c) cannot survive. The Ld.AR referring to the decision of ITAT in the ca....
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....on & Ginning Factory (supra). Thus, the law is very clear inasmuch as the issue of vague notice issued u/s 274 r.w.s. 271(1)(c) before levy of penalty u/s 271(1)(c). The co-ordinate bench of ITAT, Mumbai Bench "H" in the case of M/s Tata Communications Transformations Services Ltd vs DCIT (supra) has considered the issue in the light of various decisions rendered by Hon'ble Supreme Court and Bombay High Court and held that penalty proceedings initiated u/s 274 r.w.s. 271(1)(c) without striking off irrelevant portion of notice is a clear case of non application of mind by AO as to whether the penalty has been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. The relevant portion of the order is extracted below:- "7. We have heard both the parties, perused materials available on record and gone through the case laws cited by both the parties. The assessee has challenged penalty order passed by the AO under section 271(l)(c) on the ground that the AO has issued vague notice without striking off inappropriate portion in the notice whether the penalty has been levied for concealment of particulars of income or furnishing of inaccura....
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....naccurate particulars of income are two different connotations. The issue of notice u/s 274 r.w.s. 271(l}(c) goes to the root of the matter of assuming jurisdiction to levy penalty u/s 271(l)(c), therefore, before issuance of notice, the AO has to arrive at a satisfaction as to whether penalty proceedings are initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. The AO cannot take both the charges for levying penalty by stating that the assessee has concealed particulars of income and also furnished inaccurate particulars of income. 11. The provisions of section 271(l)(c) are very clear and there is no ambiguity. On a plain reading of section 271(l)(cl, it is very clear that clause (c) deals with two specific offences, that is to say, concealment of particulars of income or furnishing of inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases, there may be overlapping of the two offences but in such cases, the initiation of the penalty proceedings also must be for both the offences. But initiating penalty proceedings for one offence and finding the assessee guilty of anoth....
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....271(l)(c) of the Act. We further observe that it is not open to the authority, at the time of imposing penalty to impose penalty on the ground 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 violate principles of natural justice and cannot be sustained. The validity of order of penalty must be determined with reference to the information, facts and materials in the possession of the authority imposing penalty at the time, the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty. The AO 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. As already stated, facts of some cases may attract both the offences. In case, the AO has made multiple additions, one may relates to concealment of particulars of income and another may relate to furnishing of inaccurate particulars of income, but single addition made cannot lead to an inference of concealment....
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....being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The stand and proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." 14. The assessee has relied upon decision of Hon'ble Bombay High Court in the case of CIT vs Samson Perinchery in Income Tax Appeal No.1154 of 2014 & Ors order dated 5th January, 2017. The Hon'ble Bombay High Court after considering the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) observed that the satisfaction of the AO with regard to only one of the two breaches mentioned in section 271(l}(c) of the Act for initiation of penalty proceedings will not warrant / permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated / notice issued. It must, therefore, follow that the 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. The relevant port....
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....on'bJe Judicial Bombay High Court in the case of M/s. Maharaj Garage & Company vs. CIT (supra) relied upon by the Ld. D.R., the co-ordinate bench of ITAT in the case of Tndrani Sunil Pillai vs. ACIT in ITA No.l339/M/2016 dated 19.01.18 has considered the ratio of the Hon'ble Jurisdictional High Court in the case of M/s. Maharaj Garage & Company vs. CIT (supra) and held that the basic issue arising out of the reference application which tell for consideration of the Hon'ble Jurisdictional High Court was while granting previous approval by inspecting Assistant Commissioner as per provisions of section 271(l)(c)(iii) of the Act, whether the assessee was required to be given an opportunity of being heard. While considering the issue, the Hon'ble court observed that provisions of section 271(l)(c)(iii) does not attract rule of presumption of mensrea as the penalty imposed under the said provision is for the breach of civil obligation. The observations of the Hon'ble Court against issuance of show cause notice appear to be in the context of quantum of penalty proposed to be imposed and not with reference to the doing away with the issue of show cause notice as contemp....