TaxTMI 
TaxTMI 
2018 (12) TMI 1812
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....e appears to have concealed particulars of income or furnished inaccurate particulars of income without specifying whether the charge is for concealment of income or for both. In the penalty order dated 27.01.2017, it is stated that assessee is found guilty of furnishing inaccurate particulars of income and therefore, penalty U/s 271(1)(c) is imposed on the concealed income. Thus, on such vague notice issued U/s 271(1)(c) and finding given in the penalty order, penalty is not levible. In support, reliance was placed on various decisions including decision in case of CIT vs. SSA'S Emerald Meadows (2016) 242 Taxman 180 (SC), CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors. 359 ITR 565 (Kar.) and decision of the Third Member of the Tribunal in case of HPCL Mittal Energy Ltd. vs. ACIT in ITA No. 554 & 555/Asr/2014 dated 07.05.2018. 3. In order to appreciate the aforesaid contentions of the ld AR, we refer to the facts of the case. The assessee filed his return of income declaring total income of Rs. 17,66,330/- wherein he has disclosed income under the head "long term capital gains" amounting to Rs. 9,01,537/- after claiming deduction U/s 54 of the Act amounting to Rs. 17,80,0....
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....is income. (b) As such, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to 'furnishing of inaccurate particulars of income'. (c) Had the case not been sleeved for scrutiny, the said amount of Rs. 17,80,000/- would have been remained out of ambit from Tax Liability. The case of the assessee is a clear case of furnishing inaccurate particulars of income. Hence, the assessee is liable for imposition of penalty u/s 271(1)(c) of the Act for the amount of Rs. 17,80,000/-" And thereafter in para 3, the AO has held that in view of totality of the facts and keeping in view the provisions of Section 271(1)(c) of the Act, the assessee is found guilty of furnishing inaccurate particulars of income to the extent of amount of Rs. 17,80,000/- and for that reasons he is satisfied that assessee has committed default U/s 271(1)(c) of the IT Act and, therefore, penalty U/s 271(1)(c) is imposed on the concealed income which was determined at Rs. 4 lacs and the penalty order was issued after seeking necessary approval of the Additional Commissioner of Income Tax. On appeal, the ld. CIT(A) has confirmed the said levy of ....
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....y of penalty is not sustainable?". After analyzing catena of judicial pronouncements including the decisions which have been cited by the ld AR, the Coordinate Bench speaking through the Third Member has held as under: "9. On an analysis of the factual matrix narrated above, it is manifested that the AO recorded satisfaction qua the three items of disallowance/additions leading to penalty, as 'concealment of income' in all the assessment orders; initiated penalty in all the four cases by treating them as covered under the expression 'concealment of particulars of income'; and then finally passed penalty orders on the assessees finding them guilty of 'concealment of particulars of income/furnishing inaccurate particulars of such income'. As against that, the actual position is that all the three items of disallowance/additions fall only under the category of 'furnishing of inaccurate particulars of income'. Now the question arises if the penalty is sustainable in such circumstances? 10. At this juncture, it is pertinent to note that penalty proceedings are distinct from the assessment proceedings. Merely because an addition ....
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....come or loss of an assessee in any order of assessment or reassessment and the said order contains a direction for initiation of penalty proceedings under clause (c) of sub-section (1), such an order of assessment or reassessment shall be deemed to constitute satisfaction of the Assessing Officer for initiation of the penalty proceedings under the said clause (c).' 13. The effect of this insertion is that when an amount is added or disallowed in an assessment and the order contains a direction for initiation of penalty proceedings u/s. 271(l)(c), it shall be deemed to constitute satisfaction of the AO for initiation of the penalty proceedings. Crux of the new provision is that a mere direction in the assessment order to initiate penalty proceedings under clause (c) is sufficient to conclude that the AO recorded proper satisfaction as to whether the additions/disallowances are 'concealment of particulars of income' or 'furnishing of inaccurate particulars of income' or both. It is incorrect to argue that even after the insertion of sub-section (1B), the AO still needs to specifically record as to whether each item of addition/disallowance is a case of co....
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....f such a charge against him that he can present his side. Thus prescribing the charge in the penalty notice and penalty order is must. Absence of a charge in the penalty notice or not finding the assessee guilty of a clear offence in the penalty order, vitiates the penalty order. 15. The moot question is that what should be the nature of specification of a charge by the AO at the stage of initiation of penalty proceedings and at the time of passing the penalty order. Is the AO required to specify in the penalty notice/order as to whether it is a case of 'concealment of particulars of income'; or 'furnishing of inaccurate particulars of income'; or both of them, which can be expressed by using the word 'and' between the two expressions. When the AO is satisfied that it is a clear-cut case of concealment of particulars of income, he must specify it so in the notice at the time of initiation of penalty proceedings and also in the penalty order. The AO cannot initiate penalty on the charge of 'concealment of particulars of income', but ultimately find the assessee guilty in the penalty order of 'furnishing inaccurate particulars of income....
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....t: 'Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income.... But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law..... Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid'. 17. In Manu Engg. Works (supra) penalty was imposed by noting: 'that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income'. Striking down the penalty, the Hon'ble High Court held that: 'it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear-cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by....
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....ith a conclusive default at the time of passing the penalty order. If the penalty is initiated with doubt and also concluded with a doubt as to the concealment of particulars of income or furnishing of inaccurate particulars of such income etc., the penalty order is vitiated. If on the other hand, if the penalty is initiated with an uncertain charge of 'concealment of particulars of income/furnishing of inaccurate particulars of income' etc., but the assessee is ultimately found to be guilty of a specific charge of either 'concealment of particulars of income' or 'furnishing of inaccurate particulars of income', then no fault can be found in the penalty order. 22. In Manu Engineering Works (supra), the Hon'ble Gujarat High Court noticed that the charge at the stage of initiation of penalty proceedings as well in the penalty order was uncertain and the expression used at both the stages was concealment of particulars of income and/or furnishing of inaccurate particulars of such income. It struck down the penalty by holding that the assessee must have been found to be guilty of a certain charge in the penalty order. It, however, did not find anyth....
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....s. 1,36,665/- Penalty levied (100% of the tax sought to evaded Rs. 45,555/- In view of the above, a penalty of Rs. 45,555/- is hereby levied u/s 271(1)(c) of the Income-tax Act, 1961. Issued demand notice." 4.5 It is thus a case where the AO has recorded the satisfaction in the assessment order stating that the assessee has concealed his particulars of income whereby the assessee has not disclosed his investment in construction of the house to the extent of expenditure incurred during the previous year relevant to impunged assessment year. Therefore, the notice initiating the penalty proceedings is uncertain where he uses the expression "concealment particulars of income or furnished inaccurate particulars of income". However, during the penalty proceedings, he has given a decisive finding as reflected in the penalty order that the assessee is guilty of 'concealment of particulars of income' by not disclosing the investment in the construction of his house. As held by the Coordinate Bench (supra), the uncertain charge at the time of initiation of penalty has been made good and substituted with a conclusive default at the time of passing the penalty o....
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....of the ld CIT(A) contained in para 3.1.2 (ii) are hereby confirmed: "(ii) The contention of the appellant that the return of income was filed by the accountant and he was not aware of the provisions of the Act is devoid of any merit as it is trite law that ignorance of law is no excuse. Further, the appellant has not filed any documentary evidence to support its contention. It was another contention of the appellant that the first notice was issued to the appellant to attend on 20-06-2016 calling document of property sales consideration as the sale consideration for sale of property in ITR was less than consideration reported along with details of other income and the AO has neither asked for capital gain nor given any notice for capital gains. It was further submitted that it has filed written reply before the AO that it has wrongly claimed the deduction u/s 54, hence filed the revised computation of income and surrendered the amount of long term gain for taxation. Therefore, the facts were submitted by it on first hearing itself and not detected by AO and thus, the AO could not prove that the deduction was claimed deliberately. It was only a mistake as wrong deduction wa....