TaxTMI 
TaxTMI 
2019 (5) TMI 100
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.... penalty on defective notice issued u/s. 274 of the Act on 16/03/2016 and the imposition/confirmation of penalty on defective notice is not maintainable in the eye of law. 4. On the other hand, the ld. DR stated that the written submission filed by the Department on earlier occasions with regard to this issue may kindly be taken on record which is reproduced hereunder:- "1. The Hon'ble ITAT, 'D' bench, Kolkata, in the course of hearing of appeal of M/s. Dadheech Furniture Pvt. Limited Vs.ITO, Ward 7(3), Kolkata for the A.Y 2012-13 , at the request of the DR, allowed the department to make a written submission, on the issue of whether non marking upon concerned detail in the notice u/s.274, outlining the type of default would constitute grounds for rejection of satisfaction and levy of penalty u/s.271(1)(c) of the IT. Act. 2. The judgement of the Hon'ble Calcutta High Court in the case Dr.Syamal Baran Mondal Vs. CIT (2011) 244 CTR631 states that "section 271 nowhere mandates that recording of satisfaction about concealment of assessee's income must be in specific terms and words, satisfaction of AO must reflect from the order either with expressed words recorded....
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....ng the course of assessment proceedings when these incomes were picked up by the tax officer, the taxpayer admitted earning of the incomes and filed a revised computation of income. Based on this finding, the tax officer mentioned in the assessment order that penalty proceedings under section 271(1)(c) of the Act will be initiated for furnishing of inaccurate particulars of income. Subsequently the tax officer issued a notice under section 274 read with section 271(1)(c) of the Act wherein the reason for penalty was not mentioned. The taxpayer filed an appeal before the CIT(A) which ruled in favour of the revenue. The CIT(A) placed reliance on the decision of the KHC in the case of CIT vs Manjunatha Cotton and Ginning Factory (supra), the CIT(A) ruled in favour of the revenue. Aggrieved the taxpayer preferred an appeal before the ITAT. The ITAT after observing the facts of the case held that the tax officer had recorded satisfaction in the assessment order in relation to invoking penalty provisions. The tax officer had applied his mind while detailing the reasons for initiation of penalty proceedings in the assessment order. Accordingly, not mentioning the reasons in the penalty ....
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.... and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage. 9. The assessee filed Special Leave Petition before the Hon'ble Supreme Court against the order of Hon'ble Madras High Court in the case of Sundaram Finance Ltd. (supra). The Hon'ble Supreme Court dismissed the SLP observing the following: Section 271(1)(c), read with section 32, of the Income-tax Act, 1961 - Penalty - For concealment of income (Disallowance of claim, effect of) - Assessment year 1994-95 - Assessee-company, engaged in business of leasing of assets, purchased air pollution control equipment from company, PE and leased back same to company, PIL ....
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....itted that the Hon'ble Calcutta High Court in the case of Dr.Syamal Baran Mondal Vs. CIT (2011) 244 CTR 631 (Cal) has taken a view that Sec.271 does not mandate that the recording of satisfaction about concealment of income must be in specific terms and words and that satisfaction of AO must reflect from the order either with expressed words recorded by the AO or by his overt act and action. In our view this decision is on the question of recording satisfaction and not in the context of specific charge in the mandatory show cause notice u/s.274 of the Act. Therefore reference to this decision, in our view is not of any help to the plea of the Revenue before us. 8. The learned DR relied on three decisions of Mumbai ITAT viz., (i) Dhanraj Mills Pvt. Ltd. Vs. ACIT ITA No.3830 & 3833/Mum/2009 dated 21.3.2017; (ii) Earthmoving Equipment Service Corporation Vs. DCIT 22(2), Mumbai, (2017) 84 taxmann.com 51 (iii) Mahesh M.Gandhi Vs. ACIT Vs. ACIT ITA No.2976/Mum/2016 dated 27.2.2017. Reliance was placed on two decisions of the Hon'ble Bombay High Court viz., (i) CIT Vs. Kaushalya 216 ITR 660(Bom) and (ii) M/S.Maharaj Garage & Co. Vs. CIT dated 22.8.2017. This decision was referred to in ....
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....w cause notice u/s.274 of the Act. This is not factually correct. One of the parties before the group of Assessees before the Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) was an Assessee by name M/s.Veerabhadrappa Sangappa & Co., in ITA NO.5020 OF 2009 which was an appeal by the revenue. The Tribunal held that on perusal of the notice issued under Section 271(1)(c) of the Act, it is clear that it is a standard proforma used by the Assessing Authority. Before issuing the notice the inappropriate words and paragraphs were neither struck off nor deleted. The Assessing Authority was not sure as to whether she had proceeded on the basis that the assessee had either concealed its income or has furnished inaccurate details. The notice is not in compliance with the requirement of the particular section and therefore it is a vague notice, which is attributable to a patent non application of mind on the part of the Assessing authority. Further, it held that the Assessing Officer had made additions under Section 69 of the Act being undisclosed investment. In the appeal, the said finding was set-aside. But addition was sustained on a new ground, that is under valua....
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..../s.274 of the Act, there is no mention whether the proceedings are for furnishing inaccurate particulars or concealing particulars of income, that will not vitiate the penalty proceedings. In the present case there is no whispher in the order of assessment on this aspect. We have pointed out this aspect in the earlier part of this order. Hence, this decision will not be of any assistance to the plea of the revenue before us. Even otherwise this decision does not follow the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) in as much as the ratio laid down in the said case was only with reference to show cause notice u/s.274 of the Act. The Hon'ble Court did not lay down a proposition that the defect in the show cause notice will stand cured if the intention of the charge u/s.271(1) (c ) is discernible from a reading of the Assessment order in which the penalty was initiated. 14. From the aforesaid discussion it can be seen that the line of reasoning of the Hon'ble Bombay High Court and the Hon'ble Patna High Court is that issuance of notice is an administrative device for informing the assessee about the proposal to levy penalt....