TaxTMI 
TaxTMI 
2019 (12) TMI 262
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....s. 271(1)(c) of the Act it is not discernable as to 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....
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....ed that even assuming that there was a defect in the notice, it has 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 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 i....
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....als 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. 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 sectio....
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.... intention to hide an item of income or a portion thereof. It amounts to suppression of truth or a factum so as to cause injury to the other. The word 'conceal' means to hide or to keep secret. As held in Law Lexicon, the said word is derived from the latin word 'concelare' which 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 additi....
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....pect of the first addition is that cash flow statement filed by the assessee is nothing but an afterthought and a colourable devise to avoid tax. This cash flow statement was sought to be supported by cash flow statement in respect of two partners, Shri N.S. Panwar and Shri Y.S. Panwar. These statements were also examined and various defects 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....
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.... in the course of proceedings under the Act; it cannot be exercised if he is not satisfied about the existence of conditions specified in clauses (a), (b) or (c) before the proceedings are concluded. The proceeding to levy penalty has, however, not to be commenced by the Income-tax Officer before the completion of the assessment proceedings by the Income-tax Officer. Satisfaction before conclusion of the proceeding under 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 asses....
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....thout supplying him a copy of the enquiry officer's report [ Managing Director, E.C.I.L. v.B.Karunkar] or without affording him a due opportunity of cross-examining a witness [K.L.Tripathi] it would be a case falling in the latter category - violation of a facet of the said rule of natural justice - in which case, the validity of the order has to be tested on the touch-stone of prejudice, i.e., whether, all in all, the person concerned did nor did not have a fair hearing. It would not be correct - 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 procedura....
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.... Karnataka High Court has failed to take note of the decisions of other High Courts already given on the same issue. The issue of a mistake in the language of the notice issued u/s 274 or not striking off the inapplicable phrase was already decided by the Hon'ble Bombay High Court in the case of CIT vs. Smt. Kaushalya and Athers 216 ITR 660 wherein the following was held:- "9. We will first take up the show-cause notice dated March 29, 1972, pertaining to the assessment years 1968-69 and 1969-70. The assessment orders were already made and the reasons 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 q....
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....artment has contended that, even if the notice under Section 274 read with Section 273(b) of the Act was a bad one, wrong labelling of the section by some mistake in the charge framed in the notice did not prejudice the assessee, as the assessee was given an opportunity of being heard. The assessee, in fact, gave a written reply, after having understood correctly the charges that he was to meet. The learned senior standing counsel for the Department contended that the assessee did give the reply to his satisfaction understanding the charges that he was to meet." [Para 11] "The contention of the learned senior 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 c....
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....statutory form has been prescribed for the notice. In this regard, we may refer to the decision of the Hon'ble Bombay High Court (Nagpur Bench) as given in the case of M/s. Maharaj Garage & Company, vs. The Commissioner of Income Tax Income Tax Reference No. 21 of 2008 [2018] 400 ITR 292 (Bombay) "The requirement of Section 274 of the Income Tax Act for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged. The assessee was supplied with the findings recorded in the order of re-assessment, 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 ....
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....abad) wherein the Hon'ble High Court have affirmed the following finding of the CIT(A):- "The Ld. A.Rs have also challenged that the caption of the notice mentioned only Section 271 and not 271AAB. In this respect, the copy of notice has been produced by the Ld. A.R. before me. It is seen that the Ld. A.R. is correct in observing that the section of penalty has not been correctly mentioned by the AO in the caption. However, the AO will get the benefit of section 292BB of the Income Tax Act, 1961 because firstly, the assessee has raised no objection before the AO in this regard. Secondly, last line of the notice clearly mentions section 271AAB. Thirdly, the assessee has given reply to said notice which shows that the assessee fully comprehended 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 pur....
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....16] 9. As per the ratio of the Manjunatha Cotton case the need to mention the charge in the notice is necessitated only when the charge is not discernible from the assessment order The Manjunatha Cotton case does not lay down that in each and every case the penalty notice should specify the correct charge. Only when the charge is not mentioned in the assessment order (owing to reliance upon the deeming provisions as contained in section 271(1B) etc.) it would be necessary to specify the charge in the notice. This is evident from the following:- "59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty 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 Explanatio....
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....r perpetuate injustice, by any oppressive or punitive use. The well-recognised exceptions to this principle are: (i) where the statute prescribing the procedure, also prescribes specifically the consequence of noncompliance; (ii) where the procedural defect is not rectified, even after it is pointed out and due opportunity is given for rectifying it; (iii) where the non-compliance or violation is proved to be deliberate or mischievous; (iv) where the rectification of defect would affect the case on merits or will affect the jurisdiction of the court; (v) in case of memorandum of appeal, there is complete absence of authority and the appeal is presented without the knowledge, consent and authority of the appellant." [Para 19] "Earlier in Rani Kusum versus Kanchan Devi and Others, (2005) 6 SCC 705, after referring to the ratio in Kailash versus Nanhku 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 ....
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.... *have without reasonable cause failed to comply with a notice under section 142(1)/143(2) of the Income Tax Act, 1961 dated.............. √* have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1, 2, 3, 4, and 5/undisclosed income in the case of search....." 6.1 After perusing the aforesaid contents of the Notice dated 28.12.2011, we are of the view that the AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. We are of the view that notice issued by the AO u/s. 271(1)(c) read with Section 274 of the Act is bad in law as it does 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. Therefore, the penalty in dispute is not sustainable in 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 r....
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....or furnished inaccurate particulars of such income...". After perusing the notice dated 26.3.2013 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 or concealment of income as well as in the penalty order dated 30.9.2013 AO has stated that he is satisfied that the assessee has concealed particulars of his income, which is contrary to law. In view of above, the penalty is not sustainable in the eyes of law. Our aforesaid view is fortified by the following decisions:- 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 render....
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....me. 7.1 However, the Ld. CIT(A) has given clear finding regarding the furnishing of inaccurate particulars. For the sake of convenience, the relevant para no. 5.3.1 of the impugned order passed by the Ld. CIT(A) is reproduced as under:- "5.3.1 The above findings of the Ld. CIT(A) clearly establishes that the appellant has concealed the income of Rs. 26,50,500/- and did not declare in the return of income inspite of admitting a disclosure of Rs. 40,00,000/- during survey. Thus, the appellant has furnished inaccurate particulars of his income. The facts of the case clearly reveal that the appellant tried to evade payment of taxes by furnishing inaccurate particulars of income. Therefore, I hold that the AO was fully justified in levying the penalty u/s. 271(1)(c) of the Act. The penalty levied by the AO is upheld. This ground of appeal is rejected." 8. Keeping in view of the aforesaid finding of the Ld. CIT(A), we are of the considered view that the AO has passed the assessment order wherein the AO has recorded his satisfaction on the 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....