AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (1) TMI 155
X X X X Extracts X X X X
X X X X Extracts X X X X
....intents to impose penalty by striking off the inappropriate words in the show cause notice. Since additional ground raised by the assessee is purely a legal ground, it is submitted that the same be admitted and adjudicated. 3. Reliance is placed on the following decisions: (a). National Thermal Power Co. Ltd [229 ITR 383 (SC)] (b). Dilip N. Shroff v. Joint CIT [291 ITR 519 (SC)] (c). SSA's Emerald Meadows [2016] 73 taxmann.com (Kar) confirmed by the Supreme Court in [2016] 73 taxmann.com 248 (SC) / [2016] 242 Taxman 180 (SC) (d). Samson Perinchery [2017] 88 taxmann.com 413 (Bom) On hearing both the parties, we admit the additional ground since the ground taken is only a legal ground. 4. Ld. Counsel for the assessee referring to the notice issued u/s. 274 r.w.s 271(1)(c) of the Act which are placed at Page Nos. 109 and 69 of the Paper Book, submitted that the Assessing Officer is not clear as to the charge for which the penalty is initiated i.e. either for concealment of income or for furnishing inaccurate particulars. Referring to the notice Ld. Counsel for the assessee submitted that the inappropriate limb in the notice was not strike o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... decision of the Hon'ble Madras High Court in the case of Sundaram Finance wherein it was held that even assuming that there was defect in notice it had caused no prejudice to assessee as the assessee understood what was the purpose of notice. Ld. DR submitted that SLP filed by the assessee was also dismissed by the Hon'ble Supreme Court reported in 259 Taxman 220. 7. We have heard the rival submissions, perused the orders of the Authorities below, notice issued u/s. 274 r.w.s 271(1)(c) of the Act for initiation of penalty proceedings in both the assessment years i.e. A.Y.2013-14 and A.Y. 2014-15. We observe that Assessing Officer did not strike off and specify the charge/limb for which he is proposing to initiate the penalty proceedings. In the assessment order Assessing Officer records that the penalty proceedings are initiated for furnishing inaccurate particulars and for concealment of income. However, in the penalty order passed U/s. 271(1)(c) of the Act the Assessing Officer records that it is a fit case for levy of penalty u/s. 271(1)(c) of the Act for furnished inaccurate particulars of income leading to concealment of income. 8. An identical situation has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fficer 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 quasi-criminal 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 explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter and no one aspect would be decisive. In this context, useful reference may....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing tax should familiarize themselves with the relevant provisions and become well versed with the law on the subject. This is a salutary advice. Indeed, there have been lapses and faults resulting in the present litigation. Notice under Section 147/148 of the Act was issued at the end of the limitation period. Noticeably, Assessment Order for the assessment year 2013-2014 was passed on 31.03.20I6, one year earlier. Second lapse is also apparent. Despite correctly noting the background, notice under Section 147/148 of the Act was not addressed in the correct name and even the PAN Number mentioned was incorrect. Nevertheless, human errors and mistakes cannot and should not nullify proceedings which are otherwise valid and no prejudice had been caused. This is the effect and mandate of Section 292B of the Act." In Smt. Shantidevi Mahavir Prasad Gupta (supra), the Tribunal held as under: "10. The question before us is not whether the income is of the nature of "notional income" but the question is whether the assessee has filed inaccurate particulars or concealed the true facts. As stated hereinabove, in our humble opinion, the assessee has concealed the true facts t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [See Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, Kerala State, (2000) 2 SCC 718]" In CIT vs. Samson Perincherry (ITA No. 953, 1097, 1154 & 1226 of 2014), the Hon'ble Bombay High Court held: "Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the order breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initia....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as to the exact allegations made against her in the said show-cause notice. Learned counsel would therefore argue that raising the issue of lack of clarity in the show- cause notice for the first time before the Tribunal was an afterthought and that the Tribunal ought not to have given the assessee the benefit of doubt in this regard. 9. Per contra, Sri R.Raghunandan, learned senior counsel representing Sri T.Bala Mohan Reddy, learned counsel for the assessee, would rely upon the decisions of the Karnataka and Gujarat High Courts and assert that when penal proceedings are initiated under Section 271(1)(c) of the Act of 1961, an assessee must be made aware in no uncertain terms as to what is the specific allegation which forms the basis for the proposed penalty. 10. A copy of the proforma notice under Section 271 read with Section 274 of the Act of 1961 addressed to the assessee on 22.03.2013 is produced. Perusal thereof reflects that the irrelevant contents therein, which had no application to the assessee, were struck out leaving only one clause which reads as under: "Whereas in the course of proceedings before me for the Assessment Year 2010-11 it appea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e penalty proceedings must be specifically for both the offences. Drawing up penalty proceedings for one offence and finding the assessee guilty of another or finding him guilty for either, the one or the other, was held to be unsustainable in law. 12. In CIT v/s. Manu Engineering Works [122 ITR 3006 (GUJ)] , a Division Bench of the Gujarat High Court observed that the Assessing Officer must give a positive finding as to whether there is concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the event there was no such clear-cut finding, the penalty order was held liable to be struck down. 13. Smt.Kiranmayee, learned counsel, placed reliance on the judgment of the Supreme Court in K.P.Madhusudhanan v/s. CIT [251 ITR 99 (SC)]. Therein, the Supreme Court held that it is not necessary for the Assessing Officer, while issuing a notice under Section 271(1)(c), to expressly invoke Explanation 1(B) appended to the provision. It is however relevant to note that Explanation 1(B) merely adverts to a case of failure of an assessee to substantiate the explanation offered whereby the amount added or dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elt out in clear terms. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an or between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied that the assessee was guilty of both. 18. We are therefore of the opinion that the order under appeal does not brook interference on any ground. We find no question of law, much less a substantial one, arising for consideration warranting admission of this appeal." 11. Recently the Hon'ble Bombay High Court in the case of the PCIT v. Goa coastal Resorts and Recreation Pvt. Ltd., in Tax Appeal No.24 of 2019 order dated 11.11.2019, held as under: - ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rm, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine(supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference. 8. The contention based upon MAK Data (P.) Ltd.(supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... came to be reduced due to the reason that the block of assets got reduced in the earlier assessment years i.e. A.Y. 2013-14 and A.Y. 2014-15 on account of disallowance made. Therefore, he submits that there is no concealment of income or furnishing of inaccurate particulars during the current assessment year. 18. Ld. DR vehemently supported the orders of the Authorities below. 19. We have heard the rival submissions, perused the orders of the authorities below. In this case on a reading of the Assessment Order passed u/s. 143(3) of the Act for the A.Y. 2015-16 it is observed that search and seizure operation u/s. 132(1) was conducted on M/s.Geochem Laboratories Pvt. Ltd., on 11.11.2014. Consequent to this search operation the case of the assessee was also centralized with DCIT-(5)(1) for the purpose of assessments. The Assessing Officer completed the assessment u/s. 143(3) of the Act by making disallowance u/s. 14A r.w. Rule 8D and also interest on service tax. In the course of the assessment proceedings the Assessing Officer accepted the revised computation filed by the assessee reducing the WDV block of assets consequent to the adjustments made in the A.Y.2013-14 and A.Y. ....