TaxTMI 
TaxTMI 
2018 (6) TMI 1525
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.... referred as 'Act') Act framed by the DCIT (Central), Indore. 2. Since common issues are involved, these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. Briefly stated, the facts, as culled out from record, are that search and seizure operations u/s 132 of the Act were carried out on 5.5.2011 at the business as well as residential premises of Keti Kalyan Group of Indore comprising of various companies, business concerns and individuals. During the course of search Mr. Tikamchand Garg, who is also a director and share holder in various group companies on behalf of the business concerns and individuals, surrendered unaccounted income of Rs. 51 crore and offered it for taxation and also gave post dated cheques of Rs. 7.51 crores towards taxes. Subsequently, assessment proceedings u/s 153A read with section 143(3) of the Act were carried out in the group cases after issuing necessary notices as required under the law. The unaccounted income was offered in various group cases as well as individuals. The assessments were completed with minor additions and in general income disclosed in return was accepted by the Assessing....
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.... the learned CIT(A) erred in upholding the penalty levied u/s 271(1)(c) overlooking the fact that neither the requisite conditions as envisaged by law for the purpose of levying this penalty are present/fulfileld in this case nor the order imposing penalty u/s 271(1)(c) is a speaking order. (iii) That, the learned CIT(A) erred in holding that the provisions of explanation 5A to section 271(1)(c) are applicable in this cae. That on the facts and in the circumstances of the case, the said observation is wrong and uncalled for. The learned CIT(A) ought not to have confirmed the penalty." 5. We would first take up the legal ground through which it is commonly pleaded that the alleged notice issued u/s 274 read with section 271(1)(c) of the Act is bad in law as the Assessing Officer has not specified the charge against the assessee as to whether the penalty has been levied for concealment of particulars of income or furnishing inaccurate particulars of income. 6. Before us, the learned counsel for the assessee submitted that the penalty proceedings were initiated without specifying any charge and the notices u/s 274/271(1)(c) of the Act were issued on both the counts and without spe....
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.... initiated. When the notice does not specify the charge for levy of penalty, it has been held in many cases by various Courts that penalty cannot be levied. For this proposition, the learned counsel for the assessee placed reliance on the following decisions:- (i) CIT and Anr. V/s Manjunath Cotton & Ginning Factory (2013) 359 ITR 565 (Karn.)copy enclosed at page no. 01to27 of case law paper book. (ii) Following this decision the Honourable Karnataka High Court in CIT V/s SSA'S Emerald MeadowsITA No. 380/2015 dated 23.11.2015 has dismissed the appeal of the revenue, where the Honourable Tribunal had allowed the appeal of the assessee holding that the notice issued by the AO u/s 274 r.w.s. 271(1)(c) of the Act to be bad in law as it does not specified under which limb of section 271(1)(c) of the Act under which it has been initiated. (copy enclosed at page no. 28 to 31 of case law paper book) (iii) The Honourable Supreme Court has dismissed the Special Leave Petition filed by the department against the above decision of Honourable Karnataka High Court in this case of M/s SSA'S Emerald Meadows. The copy of the order of Honourable Supreme Court dated 05.08.2016 is enclosed at pag....
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....hi of Honourable Andhra High Court dated 13.07.2017 (viii) CIT V/s Shri Samson Perinchery of Honourable Bombay High Court dated 05.01.2017 (ix) Aditya Chemicals Ltd. vs. ITO(2017) 51 CCH 0643(Deli-Trib) (x) ABR Auto(P) Ltd. vs. ACIT (2017) 51 CCH 0477(Deli-Trib (xi) SujataBhardwaj vs. DCIT (2017) 190TTJ 406 Jodhpur Tri. 7. On the other hand, the learned DR vehemently argued supporting the orders of the lower authorities and submitted that the assessee has surrendered undisclosed income which was not offered to tax in earlier assessment years and, therefore, the penalty has been rightly levied. He, however, could not controvert the fact that the alleged notice was issued without specifying the particular limb as to under which the penalty proceedings have been initiated. 8. We have heard both the parties, perused the material available on record and have also gone through the case laws cited by the learned counsel for the assessee. In this bunch of 9 appeals relating to different assessees which is a part of group cases under which search was carried out on 5.5.2011 u/s 132 of the Act, penalties were initiated u/s 271(1)(c) of the Act. The common legal ground taken by all ....
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....rs of income " which shows that the Assessing Officer was not sure of the specific charge for which penalty has been levied. In such a situation whether the alleged notice is valid or not needs to be examined in the light of various judicial pronouncements which have dealt with the very same issue. 10. We shall first go through the decision of the coordinate Bench in the case of Narayana Heights & Towers; ITA No. 1033/JP/2016 order dated 20.2.2017 which has decided this very issue in favour of the assessee by following the judgment of the Hon'ble Karnataka High Court in the case of Manjunath Cotton & Ginning Factory; 359 ITR 565 by observing as under :- "3.2. We have heard the rival contention, perused the material available on record and gone through the orders of the authorities below. For the sake of clarity the relevant contents of the Assessment Order are reproduced as under: "Penalty u/s 271(1)(c) is separately as assessee has concealed the income." Relevant contents of the Penalty Order are reproduced as under:- "As the assessee had not filed any appeal against order of the AO and it appears that the assessee is satisfied with the order passed by the AO. Therefore, it....
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....for the Assessment Year 2012-13. It appears to me that you have:- Read With Section 271(1)(c) concealed particulars of income or furnished inaccurate particulars of income." Therefore, there is no specific charge by the Assessing Officer. Further, it is noted that the Assessing Officer in penalty order (as noted hereinabove) has proceeded on the basis of the assumption that the assessee is satisfied with the assessment order. Therefore, it appears that the assessee has nothing to say and has no objection regarding the imposing of the penalty under section 271(1)(c) of the Act. In our considered view, the assessing officer was not justified in imposing the penalty on this basis, the action of the assessing officer is contrary to the provision of law. The ld. CIT (A) without considering the binding precedents proceeded to hold that the penalty order can not be invalidated on account of any mistake or affect or omission if anywhere in view of the provision of section 292B of the Act. This finding of the Ld. CIT (A) is contrary to the judgment of the Hon'ble Karnataka High Court rendered in the case of CIT and Another Vs. Manjunatha Cotton and Ginning Factory,359 ITR 565(Kar.) (supra).....
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....na fide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation 1(B) to section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the assessing authority. Notice under section 274 of the Act 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 (q) Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. (r) The assessee should know the grounds which he has to meet spe cifically. Otherwise, the principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty of ....
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...."concealment of income" or "furnishing of iriaccurat:e particulars". Thus, the penalty proceedings were initiated mwithout specifying any particular or specific charge against the as,sesscc in either the assessment order or even the penalty to point out that no charge either of "concealment (Ii' income" or "furnishing of inaccurate particulars" was made in. sessment orders in all these cases, Further perusal of the assessment order reveals that it is simply stated that penalty proceedings are initiated ii] s. 271 (lHc). Similarly the perusal of the penalty show cause notice is issued under section 274 read with section 271 (l)(c) showed that it was mentioned ... "Have concealed the particulars of income or furnished in.accurate particulars of such income" . Thus, we find that the charge against the assessee for levy of penalty was not specific. It is now a settled proposition that when the charge itself is not a specific and is vague, penalty cannot be levied. As held by the Hon-ble Supreme Court in the case of T. Ashok Pai v . CIT (2007) 292 ITR 11 (SC) wherein it was laid down that it is a settled proposition that concealment of income . and furnishing inaccurate particulars ....
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.... matter of search case where penalty is levied under Explanation SA to section 271 (1)(c), following decision of CIT v. Manjunath Cotton Ginning Factory [2013] 359 ITI< 5(;5 (Karnataka) , it has been held that the show cause notice under section 274 was defective as it does not spell out the grounds on which the penalty is sought to be imposed and consequently, penalty imposed was cancelled. The case law in the case: of Mahabir Prasad Agarwal v . ACIT Kolkatta Tribunal in [LT.A. No. 738 & 739/Kol/2013 dated '15-10-2016] (P8-33 to 39) also support the. case of the assessee as the facts are identical with the facts of the present appeals as in these appeals the show cause notices issued before imposing penalty did not specified whether as to the assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income. We may also draw support for the recent decision of coordinated bench Mumbai Tribunal in the case of Meharjee Cassinath Holdings Pvt. Ltd. v. ACIT Circle 4(2) in I.T.A. No. 2555/ Mum/2012 order dtd. 28.04.2017 [PB- 40-54] has also held that the notice issued u/ s. 274 by the AO is untenable as it suffers from the vice....
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....9 appeals of six assessees are allowed". 12. Further we find that the Coordinate Bench Delhi in the recent decision pronounced on 26.3.2018 in the case of Ravine & Associates Private Limited v. ACIT (2018) 64 (Tri) 149 had an occasion to decide an identical issue wherein it was held as follows :- "11.8 We have considered the rival submissions and perused the material on record. It is evident from the notices u/s 274 r.w.s. 271 of the Act dated 27.12.2007 and 6.3.2012 that the AO has not specifically specified under which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated by him, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Hon'ble High Court of Karnataka in the case of CIT v. Manjunatha Cotton & Ginning Factory reported in 359 ITR 565 (Kar) has inter-alia held as under: "(p) Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) i.e., whether it is for concealment of income or for furnishing of inaccurate particulars of income (q) Sending printed form where all the ground mentioned in section 271 are mentioned would not satisfy requir....
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....ly dismissed. 11.10 The SLP filed by the revenue against the above judgment has been dismissed by Hon'ble Supreme Court of India and the decision of Hon'ble Supreme Court is reproduced here in below: "1 Delay condoned 2 We do not find any merit in this petition. The special leave petition is accordingly dismissed. 3 Pending application, if any stands disposed off." 11.11 Therefore, in the circumstances and on the facts of the present case and in light of the judgments of the Hon'ble Karnataka High Court and the Hon'ble Supreme Court reproduced hereinabove, we are of the considered view that the Assessing officer is required to specify as to under which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. From the perusal of the notice u/s 274 r.w.s. 271 of the Act, Assessing officer has not specified as to under which of the two limbs the penalty is imposable. In the circumstances and facts of the case, the penalty proceedings so initiated by the AO are bad in law and accordingly the penalties so initiated are ordered to be cancelled and the order/s ....
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....he date and time of filing the return. When the AO starts scrutiny of the return and initiates assessment proceedings there is nothing concealed and the inaccuracy, if any, disappeared.. A perusal of this provision clearly shows that it is in the course of any proceedings under the Act, assessment proceedings in this case, that the AO is to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It is thus to be judged at this stage and if at this stage he has declared the correct income and/or furnished accurate particulars of his income then there is no scope, in our opinion, to arrive at the satisfaction by the AO because at that stage there in no such concealment. It disappeared by an action of the AO. In this case the assessee has no doubt did not show the amounts received as alleged gifts as his income, but no details of loans - are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the AO requiring him to furnish details of any loans/gifts, if any, the assessee offered....
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....the assessee from concealment penalty. The CIT(A) in my opinion is right in deleting the penalty, his order is affirmed and the appeals of the Revenue are dismissed." 13. From the perusal of the above judgments and examining the facts of the instant nine appeals, we find that in all these cases the Assessing Officer has not struck down the relevant "word" from the sentence in the cyclostyled proforma of penalty show cause notice which means that the Assessing Officer was not sure as to on what ground he has initiated the penalty proceedings and in such a case the alleged notice is not sustainable in law and is liable to be quashed. We, therefore, respectfully following the judgments and decisions referred to above, allow this common legal ground of the assessees in these nine appeals and delete the following penalties levied u/s 271(1)(c) of the Act in all these cases :- Name of assessee A.Y. Amount Rs. Kalyan Iron 2007-08 3,67,000 Kalyan Nav Nirman 2007-8 6,73,200 Kalyan Nav Nirman 2009-10 56,76,330 Kalyan Nav Nirman 2010-11 9,66,510 Kalyan Marble & Granite 2010-11 6,47,000 Name of assessee A.Y. Amount Rs. Keti-T Construction 2010-11 72,81,80....
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....d also categorically stated by the Learned CIT(A) in her order. 3. It is submitted that all these assessees are carrying on different business activities and the additional incomes were generated during the course of the respective business activities only. The assessee also explained these incomes before the Investigation wing and also in the returns of income filed subsequently through notes, which are enclosed in the respective paper books. 4. It is further submitted that even otherwise it is implied that the additional/ undisclosed income is generated from the business carried on by the assessee, as there can be no other source of generating such income. Further the assessee offered these income as business income, which was assessed and accepted without any variation and adverse comments in the assessment order. 5. So far as the issue of specifying and substantiating the manner of earning undisclosed income,which is sole ground on which penalties u/s 271AAA have been levied and confirmed, it is submitted that an important aspect of the matter is that the appellant was never required to explain and substantiate the method or manner of deriving such income, which duty was ....
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....enalty levied u/s 271AAA of the Act and confirmed by the learned Commissioner of Income Tax (Appeals). The Assessing Officer has denied the immunity to the assessee provided u/s 271AAA(2) of the Act for the sole reason that the assessee has not substantiated the manner in which the undisclosed income was derived. Before going ahead we would first like to reproduce the provisions of section 271AAA of the Act :- "Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under sub-section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner....
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....o paid taxes together with interest, if any, in respect of the undisclosed income. The bone of contention revolves round the second condition which says that the assessee should substantiate the manner in which the undisclosed income was derived. The learned counsel for the assessee has contended that during the course of giving the statement, the assessee admitted the undisclosed income and pursuant thereto there was no further question asked by the Assessing Officer to the assessee for substantiating the manner in which the undisclosed income was derived. It was also contended that the undisclosed income was earned out of the business income as accepted by Mr. Tikamchand Garg who gave the statement on behalf of group concern and in the return of income filed after the search the surrendered income has been disclosed as business income in various business concerns/associates and the same has been assessed as business income by the revenue authorities. Further no other addition was made and the return of income including the unaccounted business income was accepted by the revenue authorities. The revenue's contention is that the onus heavily lies on the assessee because the immunit....
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....of his statement dtd. 27-05-2011, he on behalf of all the individuals of Garg family and group of concerns and companies had made a disclosure of additional income of Rs. 70 Crores, by stating that this amount covers and represent any undisclosed income receipts, discrepancy or disallowances or any valuable article or things, money, jewellery, documents or papers found / or seized during the search operation. Such undisclosed income is disclosed on the basis discrepancies found in loose papers and books of accounts etc. during search in the course of our business activity. Thus, apparently the ssessee has made disclosure of undisclosed income, which has been earned from business activity not fully disclosed in the books of accounts. Accordingly, Shri Tikamchnad Garg has also gave postdated cheque against payment of taxes. Accordingly, the family members have shown this undisclosed return of income filed in response to notice u/s 153A. The perusal of statement recorded us 1324 shows that no specific question was put regarding manner in which the undisclosed income was derived. However, impliedly the manner of income earned was from business income only. We are also of the view that ....
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....sclosed income was derived from the business which he was carrying on or from other Sources. The object of the provision is achieved by making the statement admitting the nondisclosure of money, bullion, jewellery, etc. Thus, we are of the opinion that much importance should not be attached to the statement about the manner in which such income has been derived. It can be inferred on the facts and circumstances of the case) in the absence of anything to the contrary. Therefore) mere non-statement of the manner in which such income was derived would not make Explanation 5(2) inapplicable. 7.1. Thus, applying the ratio of above decision, when the assessee has disclosed the income during search and paid the taxes and it has been accepted no penalty under section 271AAA is called for just because the manner in which such income was earned not specified in statement under section 132(4) of the Act. The following the ratio of said decision the coordinated bench of Delhi Tribunal deleted the penalty under section 271AAA in the case of Raj Rani Gupta v. DCIT [ITA. o.3371/Del/2011) (PB-78-88) by relying on the decision of Hon'bl Allahabad High Court in the case of CIT v . Radha Kishan....
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....capital and is loans which were ultimately offered by the assessee, hence it was school proved that the offer of income was without detection of the Department and accordingly the argument that but for the search, this income would not have been offered does not hold any water and deserve to be dismissed. Our view is also supported by decision of coordinated bench in the case of Shri Ashok Kumar Sharma vs. DCIT (2012)31 CCH310 (Cuttack-Trib)/77 DTR241/149 TTJ 33 wherein it was held that (where the assessee has disclosed concealed income while giving statement u/s 132 during the course of search and paid tax thereon and showed said undisclosed income in return filed under head "income fromj business and Department has accepted these returns and accordingly passed assessment orders. 7.3 Further reliance is placed in the case of DCIT vs. Ashok Nagrath [2015J 154 lTD 448/ 57 taxmann.com 15(Delhi-Trib) where assessee agreed for a declaration on account of excess stock-in trade and paid tax together with interest, no penalty under section 271 AM would be levied. 7.4. Our view is also supported with decision in the case of Concrete Developers vs. ACIT [2013] 34 taxrriann.com 62 (Nag-T....
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....antiation, the A.O. was not justified in imposing penalty under section 271AAA of the Act specifically when the surrendered undisclosed income has been accepted and due taxes has been paid by the assessee. Hence, we hereby set-aside the impugned orders of the authorities below and cancel the penalty levied u/s. 271AAA of IT Act in the cases of the above 7 appeals by the assessees by allowing by allowing their appeals." 22. We further observe that the Hon'ble High Court of Gujrat in another case of Principal CIT vs. M/s Shahlon Silk Mills Pvt. Ltd.; Tax Appeal No. 824 of 2017 dated 5.2.2018 relying upon the judgment of CIT vs. Mahindra C. Shah which was in connection with penalty u/s 271(1)(c) of the Act, again applied the same findings adjudicating the issue relating to 271AAA of the Act and held as follows :- "1. These Tax Appeals arise in common background. We may notice facts from Tax Appeal No.823 of 2017. The appeal is filed by the Revenue challenging the judgment of Income Tax Appellate Tribunal dated 27.03.2017 raising following questions for our consideration: "[A] Whether on the facts and in the circumstances of the case and in law, the Appellate Tribunal erred in c....
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....r it is incumbent upon the authorized officer to explain the provisions of Explanation 5 i in entirety to the assessee concerned and the authorized officer cannot stop short at a particular stage so as to permit the Revenue to take advantage of such a lapse in the statement. The reason is not far to seek. In the first instance, the statement is being recorded in the question and answer form and there would be no occasion for an assessee to state and make averments in the exact format stipulated by the provisions considering the setting in which such statement is being recorded, as noted by Allahabad High Court in case of CIT v. Radha Kishan Goel (supra). Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by Exception No. 2 while making statement under Section 132(4) of the Act. The view taken by the Tribunal as well as Allahabad High Court to the effect that even if the statement does not specify the manner in which the income is derived, if the income is declared and tax thereon paid, there would be substantial compliance not warranting any f....