TaxTMI 
TaxTMI 
2020 (2) TMI 983
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....-2, Jal. 73,030/- 2. The assessees have challenged the affirmation of penalty levied by the Assessing Officer in the instant cases. As the issue involved in all these appeals under consideration is identical, therefore, for the sake of brevity, have been taken simultaneously for adjudication by this composite order. For brevity the facts of ITA No.490/Asr/2019 shall be quoted as a lead case and result of the same shall be applicable mutatis mutandis to all appeals under consideration. 3. In the instant case, the assessee had filed his original return of income on 22.07.2008 at a total income of Rs. 2,23,600/-. Subsequently, a search operation u/s 132(1) of the Act was held at the premises of the assessee on 05.12.2012 and thereafter, various statutory notices have been issued to the assessee. In response to the notices, the assessee had filed his return of income on 27.10.2015 by declaring total income of Rs. 2,23,600/-. Thereafter, the assessee had filed another revised return on dated 12.03.2015 by declaring an income of Rs. 6,35,280/- on account of long term capital gain. The Assessing Officer observed in the assessment order that the penalty proceedings u/s 271(1)(c) are b....
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....ch will be considered any such order is made under section 271 (l)(c). Sd/- (Aditya Shukla) Deputy Commissioner of Income-tax, Central Circle-II, Jalandha 4. Ultimately the Assessing Officer levied the penalty u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income on the amount of capital gain voluntarily offered at Rs. 4,11,680/- in revised the return by the assessee. 5. The assessee challenged the imposition of penalty before the Ld. CIT(A) on the aforesaid grounds. 1. That the order passed by the Ld. Assessing Officer dated 28.02.2019 is against the law and facts of the case. 2. That having regard to the facts and circumstances of the case, Ld. AO has erred in law and on facts in passing the impugned assessment order u/s 271(1)( c) and without complying with the mandatory conditions u/s 271 as envisaged under the Income Tax Act, 1961. 3. That the Ld. Assessing Officer is erred in law in imposing penalty u/s 271(1)( c) of the Act, ignoring the facts of case and without observing the principles of natural justice. 4. That assessee requested to add or amend any ground of appeal before the appeal is finally heard and disposed off. 6. The assessee als....
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....e Apex Court in the case of CIT vs. S. V. Angidi Chettiar [1962] 44 ITR 739 (SC). The Ld. DR further argued that requirement of issuing of a notice u/s 274 is merely to give effect to the principles of natural justice and not a jurisdictional necessity. Further heading of Section 274 makes it clear that notice u/s 274 of the Act is just a process of jurisdictional procedure for adjudicating penalty proceedings and not a jurisdictional matter. The Ld. CIT DR also referred sections 464, 465 and 215 of the Criminal Procedure Code, 1973 and submitted that on the defective charges, no order or sentence or conviction can be altered or set aside unless the same has occasioned as failure of justice . 9. Having heard the parties at length and perused the material available on record. The issue involved in the instant case relates to the issuance of notice u/s 274 r.w.s 271(1) (c) of the Act as well as difference in recording of satisfaction/mentioning of reasons for initiation of penalty proceedings and imposition of penalty finally. There are four stages involved for dealing with the penalty proceedings. (i) Satisfaction for initiation of penalty proceedings (ii) Initiation of penalt....
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....e legislature has used the word 'shall' therefore, it is a mandatory for the authorities to give a reasonable opportunity of being heard and for that opportunity, the charge(s) has to be clear, therefore, the issuance of notice u/s 274 requires to be given while specifying the charge(s) therein and the notice is instrumental and having main role for penalty proceedings for fair play and reasonable opportunities of being heard. Reasonable opportunity of being heard is based upon principle of natural justice which has wide implication and cannot be given strict interpretation. The principle of Audi Alteram Partem is the basic concept of the principle of natural justice and has not evolved from the constitution but evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution. Article 14 enshrines that every person should be treated equally. In the landmark case of 'Maneka Gandhi vs. The Union of India' (1978 AIR 597), it has been held by Constitution Bench of the Apex Court that the law and procedure mus....
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....her held that otherwise principle of natural justice is offended, if show cause notice is vague and on the basis of such proceedings, no penalty can be levied on the assessee. In our considered view the issue raised by the Ld. DR that participation by the assesse during the course of proceedings, cures the irregularities and minor defects in the notice needs to be ignored u/s 292B of the Act is devoid of merits as the Hon'ble Karnataka High Court in the Manjunatha Cotton and Ginning Factory (supra) has clearly laid down the law that It is to be kept in mind that section 271(1)(c) is a penal provision and such a provision has to be strictly constructed . The Hon'ble Court further held that "Notice under section 274 should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. 35. It has further been held that the assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice are offended. On the basis of su....
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....d 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 the decision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VSMANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565. 4. In our view, 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 in this appeal for determination by this Court, the appeal is accordingly dismissed." 9.5 Kerala High Court in "N.N. Subramania Iyer vs. UOI", 97 ITR 228 (Ker) has held "The penalty notice, Exhibit P-2, is illegal on the face of it. It is in a printed form, which comprehends all possible grounds on which a penalty can be imposed under section 18(1) of the Wealth-tax Act. The notice has not struck off any one of those grounds, and there is no indication for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. Even in the counter-affidavit filed by the second respondent, he has not stated for what specific violation he issued it. It is not that it woul....
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....t the decision is kind of monologue and against the established principles of law laid down by the Hon'ble Apex Court qua doctrine of prejudice. Even otherwise we do not have any jurisdiction to act against any judgment of the higher Courts and to declare any judgment as per in-curiam as desired by the Ld. CIT DR though written synopsis. 9.8 Though, we have gone through all the judgments referred by the Ld. CIT- DR and Ld. A. R. and found some of them distinguishable on facts and not applicable to the instant cases, however we have referred few relevant judgments only for the sake of brevity and just decision of this case. 9.9 No doubt there are judgments on both side qua validity of notice and its effects on the penalty proceedings, however, as per decision Hon'ble Apex Court in the case of CIT Vs. Vegetable Products 88 ITR 192 , wherein the Hon'ble Court laid down the proposition to the effects " whenever there are two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted". Hence considering the issue involved in the instant appeal is identical to the issue decided by the Hon'ble Karnataka High Court in ....
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....so a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to strike - off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Office....