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2020 (9) TMI 767
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.... by AO penalty Details of penalty adjudication by first appellate authority 2007-08 143(3) r.w.s. 147 dated 31/03/2015 271(1)(c) Vide penalty order dated 28/09/2015 Appeal No. CIT(A)-52/IT/DC-CC- 4(3)/113/2015-16 dated 16/06/2016 2008-09 143(3) r.w.s. 153A dated 19/05/2015 271(1)(c) Vide penalty order dated 23/11/2015 Appeal No. CIT(A)-52/IT/DC-CC- 4(3)/147/2015-16 dated 01/09/2016 2009-10 143(3) r.w.s. 153A dated 19/05/2015 271(1)(c) Vide penalty order dated 23/11/2015 Appeal No. CIT(A)-52/IT/DC-CC- 4(3)/148/2015-16 dated 01/09/2016 2010-11 143(3) r.w.s. 153A 271(1)(c) Vide penalty Appeal No. CIT(A)-52/IT/DC-CC- dated 19/05/2015 order dated 23/11/2015 4(3)/149/2015-16 dated 01/09/2016 2011-12 143(3) r.w.s. 153A dated 19/05/2015 271(1)(c) Vide penalty order dated 24/11/2015 Appeal No. CIT(A)-52/IT/DC-CC- 4(3)/150/2015-16 dated 01/09/2016 2012-13 143(3) r.w.s. 153A dated 19/05/2015 271(1)(c) Vide penalty order dated 24/11/2015 Appeal No. CIT(A)-52/IT/DC-CC- 4(3....
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....t, 1961 on 31/03/2015. The assessee group, comprising-off of various entities, was subjected to search and seizure action u/s 132 on 30/04/2013 by DDIT (Investigation), Mumbai. The major allegations leveled against the assessee group were that the group had inflated their purchases by obtaining accommodation entries from bogus parties and had debited bogus consultancy and other charges. The year-wise disclosure made, in this regard, in the case of the assessee has already been tabulated at para-4.1 of the quantum assessment order framed on 31/03/2015. The perusal of the same reveal that the assessee made aggregate disclosure of Rs. 32.42 Crores for block period AYs 2007-08 to 2014-15. The disclosure made for AY 2007-08 amounted to Rs. 2.79 Crores. 2.4 The original return of income was filed by the assessee on 31/10/2007 declaring income of Rs. 114.43 Crores which was assessed u/s 143(3) on 05/05/2009 at Rs. 114.76 Crores but finally determined at Rs. 114.74 Crores after giving effect to appellate order. 2.5 Based on information captured during search operations, the case of the assessee was reopened vide issuance of notice u/s 148 on 11/02/2014. In response, the assessee file....
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....urred for non- business purposes. The director of assessee company, Smt. Shobha Kapoor, in statement recorded on 02/05/2013 u/s 132(4) during search operations, while answering to question no.20, inter-alia, accepted that genuineness of the payment could not be proved in absence of supporting documents and therefore, offered to voluntary disclose the same in various AYs. 2.10 Subsequently, the disclosure as made by the assessee on both these counts was offered in the return of income for various years which was accepted by the revenue and accordingly, the quantum issue attained finality. Consequently, penalty proceedings were initiated by learned AO in the quantum assessment order by asserting as under: - "Accordingly, penalty proceedings u/s 271(1)(c) are initiated separately for furnishing inaccurate particulars of income leading to concealment of income chargeable to tax." During penalty proceedings, notice u/s 274 read with Section 271 of the Income Tax Act was issued against the assessee on the same day i.e. on 31/03/2015 which has been placed in the paper-book. Upon perusal of the same, it is noted that neither the applicable clause has been ticked-off nor the ....
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....e, in defense, has not been found to be satisfactory. Reliance was placed on the decision of Hon'ble Supreme Court in UOI V. Dharmendra Textiles 306 ITR 266 for observation that penalty u/s 271(1)(c) was a civil liability and willful concealment was not an essential ingredient to attract civil liability. Reliance was also placed on other decisions for the conclusion that penalty was leviable in cases where the assessee had surrendered the undisclosed income and was unable to submit any documentary evidences for the same and also in cases where the surrender was based on statement of other persons. 2.13 Finally, at para-18 of penalty order, Ld. AO proceeded to levy penalty by observing as under: - "18. In view of the totality of the facts of the case and keeping in view the provisions of Section 271(1)(c) and the legal precedents as discussed above, I am satisfied that the assessee has concealed his income and filed inaccurate particulars of income for the year. Therefore, a penalty u/s 271(1)(c) is levied upon the assessee for this default." 2.14 Finally, the assessee has been saddled with impugned penalty of Rs. 94.16 Lacs, being 100% of tax sought to be evaded v....
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....wn to the fact that penalty was initiated on both counts / limbs viz. concealment of income as well as for furnishing of inaccurate particulars of income, which as per settled legal position carry different connotation /meaning. It has further been submitted that show-cause notice issued u/s 274 r.w.s 271 on 30/03/2015 was a vague notice in a printed form without striking-off irrelevant portion and did not specify the exact charge for which the assessee was being penalized and therefore, it was a clear case of non-application of mind while initiating penalty against the assessee. The two limbs viz. concealment of income and furnishing of inaccurate particulars of income, as per submissions of Ld. AR, were separate charges and non-framing of specific charges would vitiate the penalty proceedings. Our attention is further drawn to the penalty order to submit that the penalty has finally been levied by learned AO invoking both the limbs which is not tenable in law in view of catena of binding judicial precedents including the decision of Hon'ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory 359 ITR 565. In the light of these submissions, it has been submitted tha....
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.... further, Ld. AR submitted that no incriminating material was found during search operations and the sole reliance of the revenue is based on incriminating statement of a third person namely Shri Jagdish Mundra which was recorded at the back of the assessee and the same was never confronted to the assessee and no opportunity of cross- examination was ever provided to the assessee, which was in gross violation of principle of natural justice. However, the fact remains that revenue was not in possession of any incriminating material which would corroborate those third-party statements. The assessee made a voluntary disclosure to avoid further litigation and the disclosure, in toto, has been accepted by the revenue. In the said background, Ld. AR asserted that the penalty was unjustified, under the given circumstances. 4.3 Lastly, Ld. AR submitted that the returned income filed by the assessee has been accepted by the revenue and due taxes were paid even before issuance of notice u/s 148 and therefore, the penalty was not justified from this angle also since there was no concealment of income or furnishing of inaccurate particulars in the return of income furnished by the assessee.....
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....evied only for a specific charge. Furnishing of inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas, concealment of particulars of income would mean that the assessee has concealed the income and has not reflected certain income in its return of income. 5.4 For the said proposition, we straightway rely upon the decision rendered by Hon'ble Bombay High Court rendered in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein Hon'ble Court has held as under: - 3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-Assessee. This by holding that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicat....
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....stified. 6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT[2007] 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/connotations. 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 other 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 initiated, and it cannot be on a fresh ground of which the Assessee has no notice. 7. Therefore, the issue herein stands concluded in favour of the Respondent- Assessee by the decision of the Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra). Nothing ....
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....at paragraph 63 as under: "63. In the light of what is stated above, what emerges is as under: (a) Penalty under Section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. (e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. (f) Ever if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & 1(B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. (g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiat....
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....he assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. (u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." 8. We are not required to consider the other contingencies for examination of legality and validity of the penalty under Section 271(1)(c) of the Act, but clauses (p), (q) & (r) of the above referred observations are required to be considered. 9. As per the above referred decision of this Cou....
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....on has been laid in other binding judicial precedents as tabulated by us. 5.6 In other words, failure to frame specific charge against the assessee during penalty proceedings would be fatal to penalty proceedings itself and the same could not be sustained in the eyes of law. The revenue is unable to demonstrate that specific charge was ever framed and confronted to the assessee during penalty proceedings. Therefore, respectfully following the binding judicial precedents favoring the assessee, on the issue, we find substantial force in legal grounds raised by Ld. AR, in this regard. 5.7 For the aforesaid reasons, the provisions of Explanation-5A to Section 271(1)(c), as invoked by learned first appellate authority for the first time, which were never invoked by Ld. AO and which was never confronted to the assessee during penalty proceedings, could also not be sustained. Moreover, the condition of framing of specific charge, in any case, was required to be fulfilled before invoking Explanation 5A against the assessee. 5.8 Proceeding further, we find that one of the sister concerns of the assessee group, which was also covered under same search proceedings was saddled with pe....