AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 512
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....chased property at Anchel and purchased a Benz car. The Assessing Officer noticed that the assessee has not filed any return of income voluntarily. Therefore, based on the information, the A.O. has reason to believe that income chargeable to tax has escaped assessment. This resulted in 143(3) r.w.s. 147 assessment. During the course of assessment proceeding, the said building in question was referred to the Valuation Cell of the Income-tax Department for the purpose of determining the cost of construction. The District Valuation Officer (DVO) valued the said building at Rs. 2,00,27,000. Total investment on the building including the electrical work, lift, generator, transformer, etc. was determined at Rs. 2,37,47,450. The cost of construction admitted by the assessee is Rs. 2,17,90,906 including the cost of electrical work. The difference in the cost of construction on the building which came to Rs. 24,87,474 was treated as unexplained investment and spread over the assessment years 2000-2001 to 2004-2005. The CIT(A) confirmed the addition. The assessee carried the matter in appeals before the Tribunal. The Tribunal sustained the addition to the extent of 50% of the total add....
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....nted form and the assessing officer has indicated in the said notice as to whether the penalty is sought to be levied on the assessee for "furnishing inaccurate particulars of income" or "concealing particulars of such income" by striking off the irrelevant portion of the printed show cause notice. On this aspect we find that in the show cause notice under section 274 of the Act the assessing officer has not struck out the irrelevant part. It is not spelt out as to whether the penalty proceedings are sought to be levied for "furnishing inaccurate particulars of income" or "concealing particulars of such income". 11. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar.) : 2014 TaxPub (DT) 0202 (Karn-HC), has held that notice under section 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High Court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has als....
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....ome tax (Appeals), Trivandrum erred in deleting the penalty levied u/s 271(1)(c) of the Act on the ground that the notice issued ii]» 274 r w s 27,1(1)(c) without striking off the irrelevant limb is invalid and consequently penalty order passed by the Assessing Officer is invalid. 2. Whether on the facts and in the circumstances of the case the CIT(A) is correct in deleting the penalty without considering the fact that the assessee did not even object the defect in the notice before the Assessing Officer, at the time of penalty proceedings, by which it is clear that it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued u/s 274 r w s 271. 3. The CIT(A) ought to have noticed that the assessment order dated 26.09.2007 for A Y 2000-01 u/s 143(3) r w s 147, the Assessing officer clearly mentioned "penalty proceedings u/s 271(1)(c) is initiated for concealment of income". 4. The CIT(A) ought to have noticed that the addition on account of unexplained investment made by the assessee on construction of building was confirmed by the ITAT and hence the same was nothing but undisclosed i....
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....on of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. 6.1 The learned DR further submitted that the Hon'ble Karnataka High Court had neither considered nor brought to the notice of the Hon'ble High Court, provisions of Section 292B of the Act. Even assuming that there is a defect in the show cause notice issued, as canvassed by the learned Counsel for assessee that will vitiate the entire penalty proceedings, the judgment was rendered by the Hon'ble High Court in the case of Manjunatha Cotton & Ginning Factory (supra) without considering the provisions of Section 292B. Subsequently, the Hon'ble Karnataka High Court in the case of CIT vs. Sri Durga Enterprises (2014) 44 taxmann.com 442 (Kar) while dealing with the validity of notice u/s.148 of the Act as valid and responded to it in letter and spirit and participated in the proceedings and in light of the provisions of Section 292B, notice issued u/s.148 was held to be valid. The relevant paragraph....
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....mstance, we allow this appeal answering both the substantial questions of law in favour of the Revenue and against the assessee. In view of the peculiar facts and circumstances of the case, there shall be no order as to costs. Thus, having regard to the ratio laid down by the Hon'ble Jurisdictional High Court in the subsequent decision in the case of Sri Durga Enterprise (supra) we hold that show cause notice issued u/s.274 r.w.s 271(1) ( c) cannot be held to be invalid." 6.2 The learned DR also relied on the order of the ITAT Delhi Benches in the case of Trimurti Engineering Works v. ITO in ITA No.3889/Del/2011 - order dated 04.04.2012, and also the judgment of the Hon'ble Supreme Court in SLP in the case of Sundaram Finance Ltd. v. DCIT [(2018) 99 taxmann.com 152 (SC)]. 6.3 The learned DR therefore, submitted that the CIT(A) ought not have deleted the penalty based on the decision of Manjunatha Cotton and Ginning Factory (supra) and remand back the matter to the CIT(A) for adjudication of the appeals on merits. 6.4 The learned DR further submitted that the Circular No.3/2018 dated dated 11.07.2018 issued by the Central Board of Direct Taxes, cannot be applied to....
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.... 2000-2001, as under:- INCOME TAX DEPARTMENT Office of the Additional Commissioner of Income-tax Kollam Range, Kollam Notice u/s 274 read with section 271(1)(c) of the Income-tax Act, 1961 Date : 03/10/2007 PAN-AGSPP7003N/Wd-3/KLM Sri.A.Shihabudeen Fouzy Shopping Complex Kadakkal, Kollam. Where as in the course of proceedings before me for the Assessment year 2000-01 it appears to me that you:- • have concealed the particulars of your income or furnished inaccurate particulars of such income. You are requested to appear before me at 10:30 AM on 05/11/2007 and show cause why an order imposing penalty on you should not be made under section 271 of the Income tax act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before my such order is made under section 271. Sd/- (K.DEVARAJAN) Income tax Officer, Ward-3, Kollam. 8.1 As seen from the above notice, the A.O. has not struck out the irrelevant portion in the above notice. It is not clear whet....
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....ge 3 of the penalty order as follows: "Accordingly, a penalty of Rs. 2,20,48,706/- is imposed u/s. 271(1)(c) of the I.T. Act, 1961 for furnishing inaccurate particulars of income and concealing its true and correct taxable income." 6.2 Hence, in our opinion, it cannot be said that the penalty was levied for furnishing inaccurate particulars of income and concealment of income. When the penalty is levied for one of the offence, it is incumbent upon the Assessing Officer to struck down the irrelevant portion of the notice issued u/s 274 of the Act. We have gone through the contents of the notice issued u/s. 274 of the Act. As held by the Karnataka High Court in the case of CIT & Anr. vs. M/s. SSA's Emerald Meadows (2015) (11) TMI 1620 that the notice issued by the Assessing Officer u/s. 274 r.w.s 271(1)(c) is 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. This view was confirmed by the Supreme Court in the same case, i.e., CIT & Anr. vs. M/s. SSA's Emerald Meadows reported in (2016) ....
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....re was another estimate by an approved valuer which put the cost at Rs. 3,10,541. As earlier mentioned, the Departmental Valuer put the figure at Rs. 5,67,300. As if these were not enough, the ITO himself put his valuation at Rs. 5,55,580. In this welter of estimates, there is no scope whatever for drawing the inference that the assessee's book figure of cost at Rs. 4,41,280 was not only an understatement but it involved an actual concealment of income. 5. There is no evidence in this case to show that the assessee had understated the construction expenses in its accounts. The only basis for the addition in the assessment as well as for the levy of penalty is that furnished by the Department Valuer's estimated figure. We are satisfied that a valuation estimate, without more, cannot justify a finding of concealment. 6. The Department had obtained from the Tribunal a reference on two questions of law. The first question is as follows : "Whether, on the facts and in the circumstances of the case, and having regard to the Appellate Tribunal's finding in the quantum appeal, the Appellate Tribunal was right in cancelling the entire penalty of Rs. 1,....