AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 197
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by holding that the assessee had furnished the inaccurate particulars of income. Therefore, the initiation and imposing of penalty proceedings is wrong, bad in law, in valid and void ab initio. The notice u/s 271 should be specific on imposing of penalty u/s 271(1)(c) of Income Tax Act, 1961 i.e. concealed particulars of income or furnishing inaccurate particulars of income. In this regard the reliance is placed on the following decisions: - i) Hon'ble Karnataka High Court in the case of CIT & others Vs M/s SSA'S EMERALD MEADOWS reported in 2015 (11) TMI 1620 -, wherein Hon'ble Court has held that:- "3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Asses sing Officer under Section 274 read with Section 271(1)( c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify 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. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless 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 authori....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reinbelow, the notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, should specify 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. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271 (1) (c) of the Act. 16. There can be no doubt that penalty u/s. 271(1)(c) of the Act is leviedforconcealingparticularsofincomeorforfurnishinginaccuratepartic ulars 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(1)(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 jurisdictional notice, for visiting an assessee with the penal provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) and the Delhi High Court in the case of CIT v. Virgo Marketing P Ltd reported in [2008 171 Taxman 156 has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment then the notice has to be appropriately marked Similar is the case for furnishing inaccurate particulars of income. "(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 incorrect particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind 19. Thereafter, in so far as the manner in which the statutory notice was required to be issued, the Hon'ble Court concluded thus: (p) Notice u/s 274 of the Act should be 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. 20. Finally, in concurring with the findings recorded in the order of the Tri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccordingly dismissed." 23. The SLP filed by the department in the aforesaid case also was dismissed by the Hon'ble Supreme Court vide Petition for Special Leave to Appeal (C) No .... ./2016 (CC No. 11485/2016) dated05.08.2016. 24. The Hon'ble Bombay High Court in the case of CIT v. Shri Samson Perinchery [Income Tax Appeal No. 1154 of 2014 and others dated 05.01.2017] had also occasion to consider a similar issue. In this case, though proceedings u/s. 271(1)(c) of the Act were initiated for furnishing of inaccurate particulars of income, in the notice issued u/s. 274 r.w.s. 271 of the Act in the standard form, the charge for which it was issued was also not identified, as in the present case. In deleting the levy ,so far as non-specification of the default in the jurisdictional notice, the following findings were recorded by the Hon'ble Bombay High Court: "7 Therefore, the issue herein stands concluded in favour of the Respondent-Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory(supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccepted and in the finding of Assessing officer in the assessment order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order ....." 27. Applying the proposition of law laid down by the various Hon'ble High Courts including the Hon'ble Jurisdictional High Court, we do not find any merit for the penalty so imposed, accordingly, AO is directed to delete the penalty so imposed u/s. 271(1)(c) of Act. 28. In the result, appeal of the assessee isallowed iii) Similarly in the case of partner of assessee Shri Gulam Farooq Ansari Hon'ble ITAT Jaipur Bench had allowed the appeal in favour of assessee vide order dated 23/04/2018 and cancel the penalty so imposed by AO (The Copy of order at Pb Page 132- 140): - iv) Hon'ble High Court of Rajasthan in the case of Shevata Construction Co Ltd in ITA No. 534/2008, The finding of Hon'ble High court at Para 9 is as under (Copy at PB Page182- 184) :- "...... Taking into consideration the decision of the Andhra Pradesh H....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 100% tax evaded." In the light of the above, we need to examine whether assessment order and the penalty order comply with the provisions of section 271(1)(c) of the Act. We find that on page 3 of the assessment order, the assessing order, AO observed as under:- 14 ITA No. 1033/JP/2016 Narayana Heights & Tower. "As the assessee has concealed/furnished the inaccurate particulars of income therefore, penalty u/s 271(1)(C) is also initiated." 3.3. As per section 271 (1)(c), the assessing officer is empowered to impose penalty if in the course of any proceedings under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. From the above provision it is clear that there has to be a specific satisfaction by the Assessing Officer that the assessee is guilty of concealing the particulars of his income or furnishing inaccurate particulars of such incomes. 3.4. From the above, it is clear that the assessing officer should give a specific finding. In the present case, in the assessment order as noted above the assessing officer has stated that the assessee has concealed/furnished the inaccurate particulars of inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted 29/12/2016 2.5. The ld CIT(A) confirmed that penalty by holding that:- a) The plea has not been taken before the ld. AO. It is admitted position of law that the plea of the assessee is taken on the basis of facts available on record and being the legal issue the same can be taken at any stage of the proceedings. Being the co-terminus power vested to the CIT (A) he is also the authority to decide the issue raised before him. b) The dismissal of department's SLP by Hon'ble Apex Court in the case of CIT Vs SSA's Emerald Meadows is by a non speaking order:- Ld CIT(A) failed to appreciate that Hon'ble Apex Court dismissed the SLP of the department by mentioning that " we do not find any merit in this petition. The special leave petition is accordingly, dismissed. Therefore, Hon'ble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT Vs SSA's Emerald Meadows And CIT vs Manjunatha Cotton & Ginning Factory & other [2013] 359 ITR 565 by mentioning that they have not find any merit in the petition of the department. c) Relying on decision of Third Member judgment in the case of Grass Field Farms & Resorts (P) Ltd Vs DCIT [2016] 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me." e) The case in the case of K. P. Madhusudhana v/s CIT (2201) 118 Taxman 324 (SC) is also not applicable in the case of assessee as the same is on different facts and in view of subsequent decisions Hon'ble Jurisdictional High Court in the case of Shevata Construction Co Pvt. Ltd (supra) and decision of Hon'ble Apex court in the case of CIT Vs SSA's Emerald Meadows. f) The decision of M/s Airen Metals Pvt. Ltd Jaipur v/s ACIT ITA No. 820/JP/2016 of Hon'ble ITAT is not relevant in the case of the assessee because in such case the appeal of the assessee was rejected on the ground that the assessee did not file any submission/explanation before the lower authorities. g) The case of Dinesh Kumar Vijay v/s ITO in ITA No, 58/JP/2016 is also applicable in the case of the assessee because in this case it was held by ITAT that "the initiation of penalty proceedings included both the offences and the show-cause notice also included both the offences, the assessee got the adequate opportunity to explain both the offences and therefore, there is no illegality in levying the penalty."In the case of assessee the penalty was initiated without specifying the offence i.e. whether file....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers and by applying their ratio decidendi to the facts of this case, we are left with no option but to confirm the impugned order of learned CIT(A), who has also deleted the impugned penalty on the similar reasoning." 6. I have considered the rival contentions and carefully gone through the orders of the authorities below and found that the assessment of assessee was completed by the AO for AY 2005-06 to AY 2010-11 by estimation of Gross Profit @ 25% on the estimated Sales. Aggrieved by the order of the AO, the assessee preferred appeal before CIT(A) and Hon'ble ITAT Jaipur Bench. The details of Relief granted by ld. CIT(A) and ITAT as under:- AY Gross Profit Estimated by AO Net Addition Gross Profit Estimated by CIT(A) Net Addition Sustained Gross Profit Estimated by ITAT Net Addition Sustained 2005-06 Rs. 33,83,182/- (25% of 1,35,32,729) Rs. 29,41,395/- (Rs. 33,83,1824,41,787) Rs. 13,76,284/- (16% of Rs. 86,01,774) Rs. 9,34,497/- Rs. 7,40,657/- (14.22% of 52,08,563). Rs. 2,98,780 2006-07 Rs. 28,22,742/- (25% of 1,12,90,969) Rs. 23,77,539/- (Rs. 28,22,7424,45,203) Rs. 17,67,605/- (16% of Rs. 1,10,47,533) Rs. 13,22,402 Rs. 10,70,855/- (14.22% of75,30,620). Rs.....