TaxTMI 
TaxTMI 
2019 (3) TMI 798
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....wance of Rs. 32.26 Lacs u/s 69C, being difference in cost of production as reflected in the Profit & Loss Account and as reflected in Schedule-8 of the accounts. Resultantly, penalty proceedings were initiated u/s 271(1)(c) in the quantum assessment order against this disallowance. The penalty was finally levied by Ld. AO on 29/03/2010 which was confirmed by Ld. first appellate authority and the same is under challenge before us. It has been submitted that the quantum disallowance has already attained finality. 4. Although the assessee, in the original grounds of appeal, has agitated the penalty on merits, however, vide letter dated 29/01/2019, an additional ground of appeal has been raised which contest the validity of penalty proceedings on the strength of certain judicial pronouncements. Since, additional ground goes to the root of the matter and contest the jurisdiction of Ld. AO in imposing the penalty, we take up the same first. This additional ground of appeal does not require appreciation of new facts and hence taken on record in terms of judgment of Hon'ble Apex Court rendered in National Thermal Power Co. Vs. CIT [1998] 229 ITR 383. The additional ground reads as under: ....
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....pires that Ld. AO has failed to frame a specific charge against the assessee. The terms furnishing of inaccurate particulars of income and concealment of income, as per settled legal proposition, carry different connotations and therefore, failure to specify the same violate the right of the assessee to defend the same. Our conclusion is duly supported by the cited decision of this Tribunal rendered in Mrs. Indrani Sunil Pillai Vs ACIT [ITA No.1339/Mum/2016] dated 19/01/2018, wherein in identical situation, the matter, after due deliberations, was decided in assessee's favor by making following observations: - 5. We have heard rival contentions and perused material on record in the light of the decisions relied upon. A reading of the impugned assessment order makes it clear that the Assessing Officer has initiated penalty proceedings under section 271(1)(c) without recording any satisfaction as to whether the assessee has furnished inaccurate particulars of income or concealed particulars of income. He has simply mentioned "the penalty proceedings u/s 271(1)(c) are initiated". There is not even an allegation by the Assessing Officer anywhere in the assessment order that the asses....
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....icer has not recorded any satisfaction in absolute terms whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income. In fact, the recording of satisfaction with regard to the actual offence committed by the assessee is not discernible from the assessment order. While dealing with the issue relating to directions of the Assessing Officer for initiation of penalty proceedings and recording of satisfaction the Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton and Ginning Factory, [2013] 359 ITR 565 (Kar.) has held as under:- "50. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous. It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly. They have to be interpreted only for the said issue for which it has deemed and the ma....
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....order. The Hon'ble Court observed, the satisfaction should be that the assessee has concealed particulars of income or furnished inaccurate particulars of such income and even in the absence of those express words or finding recorded in the assessment proceedings, if a direction as aforesaid is mentioned, it constitute satisfaction of the Assessing Officer. Further, while dealing with the scope and intent of sub- section (1B) of section 271(1)(c), the Hon'ble Court held as under:- "52. Sub-section (1)(B) only deals with satisfaction of the Assessing Officer. However, under the scheme of Section 271, the persons who are authorised to compute income as well as initiate the proceedings or the Assessing Officer or the Commissioner of Appeals or Commissioner in the course of revisional jurisdiction, Explanation 1 applies to all these three Officers whereas the deeming provision (1)(B) refers only to the Assessing Officer. Therefore, if an order of assessment is passed by Commissioner of Appeals or Commissioner in the course of the said proceedings, if they are satisfied that there is any concealment of particulars of his income or he has furnished inaccurate particular of income t....
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....ss it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide 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 1B 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. ....
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....ushalya & Ors. [1995] 261 ITR 660, on which the Learned Departmental Representative relied upon the Hon'ble Jurisdictional High Court has observed that notice issued under section 274 of the Act must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. 12. Reverting back to the facts of the present case, it is seen that in the assessment order, the Assessing Officer has not recorded any satisfaction whether the initiation of penalty proceedings under section 271(1)(c) of the Act is for furnishing of inaccurate particulars of income or for concealing the particulars of income or for both. Even, in the notice issued under section 274 r/w 271(1)(c) of the Act dated 2nd May 2008, which is in standard printed format, the Assessing Officer has not specified which limb of the provision contained under section 271(1)(c) of the Act he intends to invoke for imposing penalty on the assessee. The Assessing Officer has not struck off inap....