TaxTMI 
TaxTMI 
2019 (12) TMI 262
X X X X Extracts X X X X
X X X X Extracts X X X X
....whether the penalty proceedings were initiated for furnishing of inaccurate particulars of income or concealment of income and therefore, the impugned penalty order passed deserves to be quashed. 2. Under the facts and circumstances of the case, the Ld. CIT(A) has grossly erred in passing the appellate order without affording adequate opportunity of being heard to the appellant. 3. Under the facts and circumstances of the case, the Ld. First Appellate Authority has grossly upholding the action of Assessing Authority imposing the penalty of Rs. 74,908/- u/s. 271(1)(c) of the I.T. Act, 1961 which is highly injudicious, unwarranted, against the facts of the case and bad at law. 4. The appellant prays for leave to add, amend, alter or withdraw any grounds of appeal. 3. Facts narrated by the revenue authorities are not disputed by both the parties, hence, the same are not repeated here for the sake of brevity. 4. At the time of hearing, Ld. Counsel of the Assessee has stated that no specific allegation as to the concealment of particulars of income or furnishing of inaccurate particulars has been levied by the AO in the notice dated 28.12.2011 issued by him u/s. 271(1)(c) of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....port and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice were followed. In the assessment order penalty has specifically been initiated for concealment of income therefore there was no reason/occasion for the assessee's interest getting jeopardised due to non specification of limb of penalty u/s 271(1)(c)of the I T Act in the penalty notice. Moreover, assessee could also not establish that his interest were jeopardised because assessee has not produced any evidence that this issue was raised by the assessee before Assessing Officer during penalty proceedings. Had there been any prejudice to the assessee due to non striking of the limb in the penalty notice, the same should have been brought to the knowledge of the Assessing Officer, thus giving him/her an opportunity to clarify/rectify the issue. Further, following decisions may kindly be considered with regard to levy of penalty u/s 271(1)(c) in light of decision of Karnataka High Court in CIT V. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Para 4) and Hon'ble Supreme Court in case of CIT Vs SSA's Emerald Meadows [2016] 73 Taxmann.com 248 (SC)/[2016] ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. 17. Thus, for the above reasons, Substantial Questions of law Nos. 1 and 2 are answered against the assessee and in favour of the revenue. The additional substantial question of law, which was framed is rejected on the ground that on facts the said question does not arise for consideration as well as for the reasons set out by us in the preceding paragraphs. In the result, Tax Case Appeals are dismissed. No costs." 3. CIT Vs Smt. Kaushalya [1994] 75 Taxman 549 (Bombay)/[1995] 216 ITR 660 (Bombay) In the above case, IAC had issued show-cause notice dated 28-3-1972 under section 274(2). Assessee had no knowledge of exact charge against him. Not only word 'or' had been used between two groups of charges but there was use of word 'deliberately' also. IAC imposed penalty of Rs. 13,000 for assessment year 1967-68 and ITO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... implies 'con' & 'celare' to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent discovery of; to withhold knowledge of. The word 'inaccurate' in Webster's Dictionary has been defined as 'not accurate; not exact or correct; not according to truth; erroneous; as inaccurate statement, copy or transcript'. The word 'particular' means detail or details of a claim or separate items of an account. Thus, the words 'furnished inaccurate particulars' is broader and would refer to inaccuracy which would cause under-declaration or escapement of income. It may refer to particulars which should have been furnished or were required to be furnished or recorded in the books of accounts etc. Inaccuracy or wrong furnishing of income would be covered by the said expression, though there are decisions that ad hoc addition per se without other or corroborating circumstances may not reflect 'furnished inaccurate particulars'. Lastly, at times and it is fairly common, the charge of concealment and 'furnishing of inaccurate particulars' may overlap. [Para 26]" 5. Trimurti Engineering Works Vs ITO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fects were noticed. Coming to advances for job work, it is interalia mentioned that most of the entries are above Rs. 20,000/-, but in the reconciliation statement the entries have been bifurcated so that each one of them is less than Rs. 20,000/-, which seems to have been done to avoid penalties under sections 271D and 271E of the Act. The assessee has not done any job work and no income has been shown although an amount of Rs. 16.25 lakh is stated to have been taken from a single party on a number of occasions. Finally, it has been recorded in respect of both the additions that the amount is treated as income from undisclosed sources. All these observations made by the AO show that it was his case that particulars of income have been concealed. It is not a case where any disallowance has been made but a case where the assessee was found in possession of certain unaccounted money which was utilized in the course of business without paying tax thereon. Therefore, when we see the notice and the contents of assessment order, it is clear that the notice was issued for concealing particulars of income. The notice is not a stand alone document. It is based on the assessment order. Wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er the Act, and not the issue of a notice or initiation of any step for imposing penalty is a condition for the exercise of the jurisdiction." [Para 11] Since, the jurisdictional fact is existence of satisfaction and not issuance of the notice u/s 274, any defect in such a notice would not invalidate the penalty proceedings. Any procedural defect can at worst make the proceedings irregular and such an irregularity can be cured. 2. The requirement of issuing a notice u/s 274 is merely to give effect to the principles of natural justice and not a jurisdictional necessity. The provisions of section 274 are being quoted as under:- Procedure. 274. (1) "No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard." The heading of the section makes it clear that the notice u/s 274 is just a part of the procedure for executing the penalty proceedings and not a jurisdictional matter. Section 274 merely requires that the assessee should be given an opportunity of being heard and there is no prescription about the manner in which such opportunity is to be granted. The section also does ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rrect - in the light of The above decisions to say that for any and every violation of a facet of natural justice or of a rule incorporating such facet, the order passed is altogether void and ought to be set aside without further enquiry. In our opinion, the approach and test adopted in B.Karunkar should govern all cases where the complaint is not that there was no hearing [no notice, no opportunity and no hearing] but one of not affording a proper hearing [i.e., adequate or a full hearing] or of violation of a procedural rule or requirement governing the enquiry; the complaint should be examined on the touch-stone of prejudice as aforesaid." "In the case of violation of a procedural provision, the position is this: procedural provisions are generally meant for affording a reasonable and adequate opportunity to the delinquent officer/employee. They are, generally speaking, conceived in his interest. Violation of any and every procedural provision cannot be said to automatically vitiate the enquiry held or order passed. Except cases falling under 'no notice', 'no opportunity' and 'no hearing' categories, the complaint of violation of procedural provision s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons for issuing the notice under section 274 read with section 271(1)(c) were recorded by the Income-tax Officer. The assessee fully knew in detail the exact charge of the Department against him. In this background, it could not be said that either there was non-application of mind by the Income-tax Officer or the so-called ambiguous wording in the notice impaired or prejudiced the right of the assessee to reasonable opportunity of being heard. After all, section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasicriminal in nature. Section 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the Principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to expla....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... standing counsel for the Department seems to me to be right as, in the instant case, the ITO had not only given the assessee an opportunity of being heard but the assessee did, in fact, give a written reply also and was quite aware of the charges which he was required to meet in the course of the hearing. Under Section 274 of the Act, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf and, in such circumstances, in view of the explanation given by the assessee in the course of hearing, it is obvious that the assessee was fully aware of the charges that he had to meet. Therefore, the notices cannot be said to be void ab initio." [Para 12] Similarly, in a recent decision, Hon'ble High Court of Madras in the case of Sundaram Finance Ltd. v. Assistant Commissioner of Income-tax [2018] 93 taxmann.com 250 (Madras) after noting the decision given by the Karnataka High Court in the case of Manjunatha Cotton Mills held as under:- "Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. All violations....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sment, which was passed on the same date on which the notice under Section 271(1)(c) was issued, initiating the proceedings of imposing the penalty. The assessee had sufficient notice of the action of imposing penalty. We, therefore, do not find either any jurisdictional error or unjust exercise of power by the authority." [Para 15] The same principle was laid down (even after referring to the Manjunatha Cotton case) by the Hon'ble ITAT Bangalore in the case of Jaysons Infrastructure India P Ltd vs. Income Tax Officer ITA No. 997/Bang/2015 [TS-5873- ITAT-2017 (BANGALORE)-O] wherein Hon'ble Judicial Member was the author. The relevant portion is quoted as under:- "Even otherwise, in our view, once the assessment order clearly mentioned that the "assessee has furnished inaccurate particulars of income", mere mentioning in the notice "for concealing the particulars of Income" or "furnished inaccurate particulars of income" would not cause any prejudice to the assessee. The assessee was already having the benefit of going through the assessment order wherein it is clearly mentioned that "the penalty proceedings are initiated for filing inaccurate particulars of income." There is no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hended the implication of the notice that it is for section 271AAB." [Para 27] It is also useful to refer to the observations made by Hon'ble Delhi High Court in the case of The CIT vs. M/s Sudev Industries Limited Income Tax Appeal No. 805/2005 [2018] [2018] 405 ITR 325 (Delhi) as under:- "16. Section 292B was introduced by Taxation Laws (Amendment) Act, 1975 with effect from 1st October, 1975. The object and purpose of introducing the said section as explained in Commissioner of Income Tax versus M/s Jagat Novel Exhibitors Private Limited, [2013] 356 ITR 562 (Del) is as under:- "28. The aforesaid provision has been enacted to curtail and negate technical pleas due to any defect, mistake or omission in a notice/summons/return. The provision was enacted by Tax Laws (Amendment) Act, 1975 with effect from 1st October, 1975. It has a salutary purpose and ensures that technical objections, without substance and when there is effective compliance or compliance with intent and purpose, do not come in the way or affect the validity of the assessment proceedings. In the present case, as noticed above, the respondent took the plea before the Assessing Officer that they were never se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hku and Others, (2005) 4 SCC 480, it was observed:- "10. All the rules of procedure are the handmaid of justice. The language employed by the draftsman of processual law may be liberal or stringent, but the fact remains that the object of prescribing procedure is to advance the cause of justice. In an adversarial system, no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Unless compelled by express and specific language of the statute, the provisions of CPC or any other procedural enactment ought not to be construed in a manner which would leave the court helpless to meet extraordinary situations in the ends of justice." [Para 20] It may kindly be noted that the assessee's case does not fall under any of the exceptions listed above. 11. The Manjunatha Cotton case cannot be considered to be a binding precedent It is trite that obiter dicta, per incuriam, sub silentio (when a particular point of law involved in the decision is not perceived by the court or present to its mind, that is without argument, without reference to the rule and without citation of any authority) are the exceptions to the doctrine of bindin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the eyes of law, hence, we cancel the penalty in dispute. The judicial decisions relied upon by the Ld. Sr. DR, have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand. Our aforesaid view is supported by the following decisions including the decision dated 12.3.2018 passed in assessee's own case in the assessment year 2007-08 passed in ITA No. 4034/Del/2017. i) "CIT & Anr. Vs. M/s SSA's Emerald Meadows - 2015 (11) TMI 1620 - Karnataka High Court has held that Tribunal has correctly allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) 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 Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rnishing 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 Commissioner of Income Tax vs. Manjunatha Cotton and Ginning Factory (2013) (7) TMI 620- Karanataka High Court. Thus since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion no substantial question of law arises - decided in favour of assessee." ii) CIT & Anr. Vs. M/s SSA's Emerald Meadows - Hon'ble Supreme Court of India - reported in 2016 (8) TMI 1145 - Supreme Court. The Apex Court held that High Court order confirmed (2015) (11) TMI 1620 (Supra) - Karnataka High Court. Notice issued by AO under section 274 read with section 271(1)(c) 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 - Decided in favour of assessee." 8. In the background of the aforesaid discussions and respectfully following the precedents, we delete the penalty in dispute and decide the issue in favor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... page 2, 2nd para viz. "I am satisfied that it is a fit case for initiation of penalty proceedings u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income/concealment of income." Further the AO vide his Notice dated 31.12.2007 for initiating the penalty and directed the assessee to appear before him at ---------AM/PM on ---- ----200------ and issued a Show Cause to the assessee stating therein that why an order imposing the penalty of amount should not be made u/s. 271(1)(c) of the I.T. Act, 1961. After perusing the notice dated 31.12.2007 issued by the AO to the assessee, we are of the view that the AO has initiated the penalty for furnishing inaccurate particulars of income/concealment of income, but in the penalty order dated 06.11.2009 he has stated that he is satisfied that the assessee has furnished the inaccurate particulars of income. In our view the penalty in dispute is not sustainable in the eyes of law, because the AO has not recorded any clear finding whether the assessee was guilty of concealment of income or furnishing of inaccurate particulars of income. Secondly, the notice u/s. 271(1)(c) has been issued to the assessee levying the penalty for....