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2019 (10) TMI 441
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....in the hands of the assessee on 18-09-2013. During the course of search, it was noticed that the assessee is carrying on money lending business and the income therefrom was not declared by the assessee in its return of income. It was also noticed that the assessee was also operating two bank accounts in the name of his children. When these materials were confronted, the assessee agreed to offer the credits found in the bank account & interest income in money lending business as his income in various years. The assessee also offered Rs. 50.00 lakhs as his investment in money lending business. Though the assessee did not disclose the investment in money lending business in the return of income filed, yet he agreed for the addition of the above said amount in various years during the course of assessment proceedings. The AO also made certain small additions in various years and accordingly completed the assessment. 3. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act for assessment years 2008-09 to 2012-13 and u/s 271AAB in AY 2013-14 and 2014-15. The AO levied penalty under the above said sections in all the years. The Ld CIT(A) also confirmed the penalties so lev....
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....me'. 5. The Ld A.R submitted that the view so expressed by the Ld CIT(A) is not in accordance with the decisions rendered by Tribunals and Courts. He submitted that the two types of charges mentioned in sec. 271(1)(c), viz., "concealment of particulars of income' and 'furnishing of inaccurate particulars of income' are two separate charges and hence the AO could not have initiated penalty proceedings on both the charges for the additions made. Accordingly he submitted that the AO was not clear about the charge for which penalty proceedings were initiated, meaning thereby, he has not applied his mind on the same. Accordingly he submitted that the penalty orders passed by him are liable to be quashed. He further submitted that the assessee has voluntarily surrendered income during the course of search proceedings and also agreed for further additions during the course of assessment proceedings. He submitted that the assessee has offered entire credits found in the bank accounts as his income, while he could have prayed for addition of only peak credit balances. He further submitted that the investments in money lending business has been surrendered on estimated basis. He submit....
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....mi (supra) support this legal position:- "8. We heard rival submissions and perused the material on record. The only disputed issue prima facie is in respect of levy of penalty u/s 271(1)(c) of the Act. The contention of the learned AR is that the AO has passed the penalty order without application of mind and referred to page 39 & 40 of the paper book where notice u/s 274 r.w.s 271(1)(c) dated 31.12.2007 is enclosed. On perusal of the notice at page 40, as demonstrated by the learned AR, the AO has initiated penalty proceedings both for concealment of particulars of income and furnishing of inaccurate particulars of such income. We are of the opinion that penalty proceedings are attracted only where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is well accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meaning and the AO should be clear as to the limb under which penalty is being levied. When the AO proposes to invoke the first limb being concealment of income, notice has to be appropriately marked. But in the present case, as demonstrated before us, we found that ....
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....nalty proceedings under both the limbs for the same additions. Hence there was lack of application of mind on the part of the AO. Accordingly, as held by Hon'ble jurisdictional High Court in the case of Manjunatha Cotton and Ginning Factory (supra), the principles of natural justice are offended and no penalty could be imposed on the assessee on the basis of the notices issued by the AO u/s 271(1)(c) of the Act. 12. Accordingly, we set aside the orders passed by Ld CIT(A) for assessment years 2008-09 to 2012-13 and direct the AO to delete the penalty levied u/s 271(1)(c) of the Act in the above said years. 13. We shall now take up appeals filed for AY 20013-14 and 2014-15, wherein penalty levied u/s 271AAB of the Act was confirmed by Ld CIT(A). 14. The Ld A.R submitted that the assessing officer has, in these two years, has mentioned in the assessment order that the penalty proceedings have been initiated u/s 271AAB of the Act. However, he has issued notices pertaining to provisions of sec.271(1)(c) and in the notices, he has (a) tick marked the portion "have concealed the particulars of income and furnished inaccurate particulars of such income" and ....
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.... Ld D.R also submitted that the Ld CIT(A) has followed the decision rendered by Kolkatta bench of Tribunal in the case of DCIT vs. Manoj Beswal (ITA No.1471/Kol/2015 dated 10-11-2017), wherein the penalty levied u/s 271AAB was confirmed. The Ld D.R also placed his reliance on the decision rendered by Hon'ble Delhi High Court in the case of Pr. CIT vs. Smt. Ritu Singhal (ITA 672/2016 dated 12-03-2018) rendered in the context of provisions of sec.271AAA of the Act. He submitted that the principles mentioned in the above said decision shall be applicable to the instant cases also. 16. In the rejoinder, the Ld A.R submitted that the decision rendered by Hon'ble Delhi High Court in the case of Ritu Singhal (supra) is not applicable, since the same has been rendered u/s 271AAA of the Act on the facts prevailing in the above said case, where as the penalty has been levied in AY 2013-14 and 2014-15 u/s 271AAB of the Act. Further, there is no dispute with regard to the manner in which the undisclosed income was derived by the assessee, while the same was absent in the case of Ritu Singhal which fact led the Hon'ble Delhi High Court to confirm the penalty u/s 271AAA of the Act....
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....he provisions would show that the penalty u/s 271AAB is levied on the "undisclosed income" and the expression "undisclosed income" is defined in section 271AAB itself. As noticed earlier, the provisions of sec.271(1)(c) shall not apply if the provisions of sec.271AAB is applied. Under the provisions of sec.271(1)(c), penalty may be levied for either of two charges, viz., for "concealment of particulars of income" or for "furnishing inaccurate particulars of income". Hence the expressions "undisclosed income" is different from the two charges mentioned in sec.271(1)(c) of the Act. 20. With this back ground, we shall now examine the facts available in the present cases. A perusal of assessment orders would show that the assessing officer has stated in the body of the assessment order that the "penalty proceedings u/s 271AAB are initiated for concealment". At the end of the assessment order, he has stated that "Demand notice and Penalty notice u/s 271AAB issued accordingly". 21. The penalty notice issued by the assessing officer for AY 2013-14 is extracted below: - --- Space left intentionally --- Identical notice has been issued by the assessing officer for AY 2014-15 ....
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....1AAB that section 274 and section 275 of the Act shall, so far as may be, apply. Sub-section (1) of section 274 of the Act mandates that order imposing penalty has to be imposed only after hearing the assessee or giving a assessee opportunity of hearing. Opportunity that is to be given to the assessee should be meaningful one and not a farce. Notice issued to the assessee reproduced (supra) does not show whether penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income or for having undisclosed income within the meaning of Section 271AAB of the Act. Notice in our opinion was vague. Hon'ble Karnataka High Court in the case of SSA's Emerald Meadows (supra) relying on its own judgment in the case of Manjunatha Cotton and Ginning Factory (supra) had held as under:- ''2. This appeal has been filed raising the following substantial questions of law: (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been prove....
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....he basis of such proceedings, no penalty could be imposed on the assessee ; taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law ; penalty proceedings are distinct from the assessment proceedings : though proceedings for imposition of penalty emanate from proceedings of assessment, they are independent and a separate aspect of the proceedings ; The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the proceedings on the merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared invalid in the penalty proceedings''. View taken by the Hon'ble Karnataka High Court in the above judgment was indirectly affirmed by the Hon'ble Apex Court, when it dismissed an SLP filed by the Revenue against the judgment in the case of SSA's Emerald Meadows (supra), specifically observing that ....
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....alty notice issued u/s 271AAB of the Act to the assessee for AY 2013-14 and 2014-15 cannot be sustained and accordingly the penalty orders passed for the above said years are liable to be quashed. We order accordingly. 28. Since we have quashed the penalty orders on the above discussed legal grounds, there is no necessity to adjudicate other grounds urged by the assessee. 29. In the result, all the appeals of the assessee are treated as allowed. Order pronounced in the Open Court on 1st October, 2019. ============= Document 1 Page 15 of 23 NOTICE UNDER SECTION 274 READ WITH SECTION 271AAB OF INCOME TAX ACT, 1961 PAN-ADCPK8481E Office of the Deputy Commissioner of Income Tax, Central Circle, Belagavi Date: 30-11-2015 To SHRI. KRISHNA PRASAD C-2, KSSIDC INDUSTRIAL ESTATE SUJATA ARMS MANUFACTURING CO. BANGALORE ROAD, BELLARY Whereas in the course of proceedings before me for the assessment year 2013-14 it appears to me that you :- *have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or w....