TaxTMI 
TaxTMI 
2018 (12) TMI 1625
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....lty for concealment in respect of the leasing transactions entered into by the appellant. The reasons given by him in this regard are incorrect, unjustified and unwarranted. 2. Without prejudice to the Ground NO.1 above, the learned CIT(Appeals) was not justified in mixing up the leasing transactions entered into with Duckfin International Ltd., and those with Lloyd Steel Industries Ltd. He has failed to appreciate the clear differences and distinction between the leasing transactions entered into by the appellant with these 2 parties." 4. Assessee also raised additional grounds of appeal on technical issue contending that the proceedings initiated u/s. 271(1)(c) of the Act are illegal and bad in law, the additional grounds are as under: - "The levy of penalty u/s. 271(1)(c) of the Act is illegal and invalid. The show-cause notice did not strike off the irrelevant portion and even the Assessment Order did not specify the limb of section 271(1)(c) for which the penalty was initiated. Thus, there is non-application of mind rendering the penalty illegal and invalid." 5. The Learned Counsel for the assessee submitted that, the additional ground filed is purely a....
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....14 & 6915/Mum/2012, Shri Suresh Sheth v. ITO (v) ITA.No. 3108/Mum/2016, M/s. Tata Communications Transformation Services Ltd. v. DCIT (vi) ITA.No. 7370/Mum/2014 Gupta Gemhouse Pvt Ltd. v. ITO (vii) ITA.No. 6149/Mum/2017 M/s. Jalan Capitals Pvt Ltd. v. DCIT 9. Ld. DR placing reliance on the decision of the Hon'ble Bombay High Court in the case of CIT v. Smt. Kaushalya [75 taxman 549] and M/s. Maharaj Garage & Company v. CIT submitted that assessee was aware of the charge and therefore there is no infirmity in the order passed by the Assessing Officer in initiating the penalty proceedings. 10. In reply the Ld. Counsel for the assessee submitted that the decisions of the Bombay High Court in CIT v. Smt. Kaushalya (supra) and M/s. Maharaj Garage & Company v. CIT have been considered by the Coordinate Bench in the following cases: - (i) Trans Conduct (India) v. ACIT in ITA.No. 3198/Mum/2016 dated 10.11.2017 (ii) Bermaco Industries Limited v. ACIT in ITA.No. 2825/Mum/2016 dated 10.11.2017. (iii) P.K. Joshua Mararatha Tower v. Income Tax Officer in ITA.No. 4487 to 4491/Mum/2014 dated 07.06.2017. (iv) Mrs. Indrani Sunil Pill....
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....ice under section 274 r.w.s 271(1)(c) has been dealt by this Tribunal in various cases including in the case of M/s. Cenzar Industries Ltd. vs. ITO in ITA No.1970/M/2015 dated 29.12.17 wherein after considering the relevant facts and also relied upon various judicial precedents including the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) and also the decision of Hon'ble Bombay High Court in the case of Shri Samson Perinchery vs. ACIT (supra), has held that penalty proceedings initiated under section 271(1)(c) is void ab initio and liable to be quashed, if the AO issued vague notice under section 274 r.w.s 271(1)(c) without striking off irrelevant portion of notice and also if the AO has not made a specific charge whether penalty proceeding is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. The relevant portion of order is extracted below: "10. We have heard the rival submissions, perused the material available on record and also gone through the orders of authorities below. The AO has levied penalty u/s 271(1)(c) in respect of disallowance of reimbursement of ....
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....arly reiterated by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory Ltd (supra) wherein it was categorically held that satisfaction of the existence of the grounds mentioned in section 271(1)(c) when it is a sine qua non initiation of proceedings, the penalty proceedings should be confined only to those grounds and the said ground should be specifically stated so that the assessee would have the opportunity to meet those grounds. Initiation of penalty on one ground and levying penalty on another ground would cause injustice to the assessee as the assessee was kept in blank to justify his case whether the AO sought to initiated penalty for concealment of particulars of income or furnishing of inaccurate particulars of income. If the proceedings are initiated on a specific charge, then, the assessee can justify its case by advancing arguments on the charge framed by the AO. Thus, once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. If penalty proceedings are initiated on one ground and levied penalty on different ground or penalty proceedings are initiated on two grounds, i.e. concealment of pa....
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....t before initiation of penalty proceedings, the AO has to arrive at a correct satisfaction as to whether penalty is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. If the AO fails to initiate penalty proceedings by issuance of proper notice, then the whole penalty proceedings becomes vitiated and void ab initio. 13. Coming to the case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory vs CIT (supra), wherein the Hon'ble High Court has categorically observed that sending printed form of notice where all the grounds mentioned in section 271(1)(c) are mentioned would not satisfy requirement of law. Notice issued u/s 274 of the Act should specifically state the ground mentioned in section 271(1)(c), i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. Initiating the penalty proceedings on one limb and holding the assessee guilty of another ....
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....enue is in the the decision of the Supreme Court in Ashok Pal v/s. CIT 292 ITR [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(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." 15. The assessee has also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs SSA's Emerald Meadows (supra) wherein the Hon'ble Supreme Court dismissed SLP filed by the revenue by following the decision of the Karnataka High Court in the case of CIT vs Manjunatha....
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....ent with the view taken by the coordinate bench in the case of M/s. Cenzar Industries Ltd. vs. ITO (supra), we are of the considered view that the penalty proceedings initiated by the AO by issue of notice under section 274 r.w.s 271(1)(c) without striking off the irrelevant portion of notice is a clear case of non application of mind by the AO, whether penalty has been initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. We further noticed that the AO has issued printed form of notice without striking off irrelevant portion and also in the penalty order he does not specify under which charge penalty has been initiated. Therefore, we are of the considered view that the penalty proceeding initiated by the AO is bad in law and liable to be quashed. Hence, we quash the penalty proceedings and delete penalty levied by the AO under section 271(1)(c) of the Act." 13. The Coordinate Bench in the case of Suresh Seth v. ITO in ITA.Nos. 6914 & 6915/MUM/2012 dated 20.12.2017 held as under: - "8. We have heard the rival submissions, perused the orders of the authorities below. In this case as could be seen from the assessment orders ....
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....iples of natural justice. Therefore, the notice issued by the Assessing Officer under section 274 read with section 271(1)(c) was untenable and suffered from the infirmity of non-application of mind by the Assessing Officer. ..... 13. At this point, we may also make a reference to the judgment of the Hon'ble Patna High Court relied by the ld. CIT-DR before us. The issue before the Hon'ble Patna High Court was relating to levy of penalty for shortfall in the payment of advance tax paid as compared with the tax finally assessed as payable, but in the notice issued u/s 274 r.w.s. 273(b) of the Act it was incorrectly mentioned that assessee had failed to file its estimate of advance tax. The Hon'ble Patna High Court held that mention of such incorrect charge would not render the penalty proceedings void-ab-initio. The aforesaid parity of reasoning has been relied upon by the ld. CIT-DR before us to state that non-striking off of the irrelevant portion of the notice u/s 274 r.w.s. 271(1)(c) of the Act does not render the proceedings invalid. In our view, the said decision does not help the case of the Revenue qua the issue before us. Firstly, the Hon'ble Patna H....
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....Pradesh in the case of PCIT v. Smt Baisetty Revathi (supra) considered a similar issue and held as under:- "Perusal of the order reflects that the assessee did not raise the issue of invalidity of the penalty notice before the Commissioner. In her second appeal before the Income-tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam, in ITA No.599/Vizag/2014, the assessee, for the first time, raised the issue that the show-cause notice under Section 271(1)(c) did not specify as to whether it was prompted by concealment of particulars of income or furnishing of inaccurate particulars of income. Dealing with this contention, the Tribunal placed reliance on the judgment of the Karnataka High Court in THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX OFFICER V/s. M/s.MANJUNATHA COTTON AND GINNING FACTORY and opined that unless the show-cause notice is clear as to whether the penalty proposed to be imposed is for concealment of particulars of income or for furnishing inaccurate particulars of income, no penalty could be imposed, as such a notice would be defective. The Tribunal took note of the fact that in the penalty order; the Assessing Officer had not given a conclusive....
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....he Bench therefore held that penalty proceedings have to be conducted in accordance therewith, subject always to the rules of natural justice. It was pointed out that Section 271 makes appropriate provision for levying penalties on an assessee in different eventualities and one such eventuality is for concealment of income or furnishing of inaccurate particulars of such income. It was held that for starting the penalty proceedings, the condition precedent is that the Assessing Officer must be satisfied that a person has either concealed particulars of his income or furnished inaccurate particulars of such income. The person who is accused of the conditions mentioned in Section 271 should be made aware of the grounds on which imposition of penalty is proposed as he has a right to contest such proceedings and should have a full opportunity to meet the case of the revenue so as to show that the conditions stipulated in Section 271(1)(c) do not exist and that he is not liable to pay the penalty. It was further held that the practice of the revenue in sending a printed form where all the grounds mentioned in Section 271 are mentioned would not satisfy the requirement of law when the con....
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....e assessee is required to be put on notice as to whether she is to be penalized for concealment of particulars of income or for furnishing inaccurate particulars of income. These are two different acts. Concealment of income is an act of omission while furnishing of inaccurate particulars of income is an act of commission. The consequences of such acts, being penal in nature, an assessee has to be informed as to what exactly is the charge against him so that he may respond thereto. No doubt, in the present case, the assessee seems to have submitted her explanation on merits without raising a doubt as to what was the precise allegation leveled against her. However, we are more concerned with the principle involved and not just the isolated case of its application against the assessee. Further, the penalty order demonstrates that the Assessing Officer was not even certain as to what was the finding on the strength of which he imposed the penalty. This is clear from the fact that the Assessing Officer recorded that he was satisfied that the assessee had concealed/furnished inaccurate particulars of income. In the absence of a clear finding by the Assessing Officer himself, th....