TaxTMI 
TaxTMI 
2021 (2) TMI 866
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.... erred in not going in to the merits of the case that the penalty was levied on such income which was disclosed by assessee only on the basis of seized material and shown in return filed in response to notice u/s. 153A of the Income Tax Act, 1961. 3. Brief facts of the case as culled out from the records are that the assessee is an individual having main source of income as salary, remuneration from M/s. Mittal Appliances Ltd. and share of profit from partnership firm M/s. Palash & Co. besides other income of interest and dividend on investments. The assessee filed return of income u/s. 139(1) for A.Y. 2014-15 on 23.03.2015 declaring total income of Rs. 64,72,500/-. A search and seizure operation u/s. 132 of the Act were carried out on the business as well as residential premises of the Mittal Group including the assessee along with other concerns/business associates on 04.09.2015. In response to notice u/s. 153A of the Act the assessee has filed return for A.Y. 2014-15 on 08.06.2016 declaring total income of Rs. 3,62,34,200/- including additional income offered u/s. 132(4) of Rs. 2,97,66,605/-. The additional income of Rs. 2,97,66,605/- was previously claimed as exempt income u....
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....e further referred to the following judgments in support of the contention that mere non striking off one of the limb provided u/s. 271(1)(c) of the Act will not be make the penalty proceedings infructuous and bad in law:- (i) Judgment of Hon'ble Bombay High Court in the case of Ventura Textiles Ltd. V/s. CIT ITA No. 958 of 2017 dated 12.6.2020. (ii) Judgment of Hon'ble Madras High Court in the case of M/s. Sundaram Finance Limited V/s. ACIT T.C. (Appeal) No. s. 876 and 877 of 2008 order dated 23.04.2018. 7. As regards merits of the case Ld. Departmental Representative referred to the judgment of Hon'ble Calcutta High Court in the case of CIT V/s. Prasanna Dugar (2015) 371 ITR 0019 wherein the Hon'ble High Court confirmed the levy of penalty u/s. 271(1)(c) of the Act which was levied on the income voluntarily offered by the assessee during the course of search even though no incriminating document suggested such undisclosed income. 8. Per contra Ld. Counsel for the assessee referred to the following written submissions:- The very initiation of the impugned penalty proceeding by issuing a vague and wrong notice u/s. 274 is bad in law ....
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.... notice issued u/s. 274 was defective as it did not spelled out the ground/charge on which the penalty is sought to be imposed. The respondent places reliance on the following propositions: a. The Honourable Karnataka High Court in CIT V/s. SSA'S Emerald Meadows ITA No. 380/2015 dated 23.11.2015. b. The Honourable Supreme Court has dismissed the Special Leave Petition filed by the department against the above decision of Honourable Karnataka High Court in CIT V/s. SSA'S Emerald Meadows, (2016) 73 taxmann.com 248 (SC). c. CIT V/s. Manjunath Cotton Ginning Factory (2013) 359 ITR 0565 (Karnataka). d. Pr. CIT V/s. Kulwant Singh Bhatia (2018) 304 CTR 0103 The respondent wish to add that in the case of Kulwant Singh Bhatia (supra), the Honourable High Court of Madhya Pradesh in its latest decision dated 09.05.2018 dismissing the appeals filed by the revenue held in Para 11 of the order "on due consideration of the arguments of the Learned Counsel of the respondent, so also considering the fact that the ground mentioned in show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view....
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....Honourable Bombay High Court in the case of CIT V/s. Shri Samson Perinchery 1154 of 2014 dated 05.01.2017 c. The Honourable Karnataka High Court in the case of S. Chandrashekar, 396 ITR 538 (Karn.) d. Honourable Delhi Tribunal in case of Om Logistics Ltd. Vs. Deputy Commissioner Of Income Tax. No Concealment, Only Mere change in the head of income in the return filed under section 153A 6. The department has raised the ground that the ld. CIT(A) erred in not going in to the merits of the case that the penalty was levied on such income which was disclosed by assessee only on the basis of seized material and shown in the return filed under section 153A. However the fact is that the respondent has disclosed the sale of shares of "Unno Industries Ltd." and claimed the resultant long term capital gain earned as exempt u/s. 10(38) in the return of income filed u/s. 139 for the year under consideration on 23.03.2015. Copy of the computation of income of the return filed u/s. 139(1) is enclosed at page 01 to 07 of PB, wherein the transaction of sale of shares of Unno Industries is disclosed on page 03 and page 07. In the return of income filed u/s. 153A r.w.s. 139 on....
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....e disclosed during the course of search & seizure proceedings. 11. It is submitted that once the income offered in the return filed u/s. 153A has been accepted by the Learned AO, the return that has to be taken into consideration for the imposition of penalty u/s. 271(1)(c) is the one filed u/s. 153A and the return filed u/s. 139 stands abated and becomes non-est. Further if for the sake of argument it is assumed that the intent of the law was to take the return filed u/s. 139 into consideration for the purpose of making assessment and levying the penalty than clause (a) section 153A(1) for filing of the fresh return u/s. 153A would never have existed. The language of the section 153A in itself corroborate that clause (a) of section 153A(1) providing an opportunity to file a return u/s. 153A is in the nature of second chance given to the assessee to make good any omission in the original return. The said return having been accepted so also the income offered, without any objection and without any adverse comment, ought not to have attracted penal consequences. In view of the above, it is submitted that the ld. CIT(A) has rightly deleted the penalty by relying on the decision ....
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.... i.e. 04.09.2015, then explanation 5A cannot be invoked and no penalty can be levied on it. In view of the above it is submitted that the Learned CIT(A) has very rightly deleted the penalty and the appeal filed by the department is prayed to be dismissed. 9. We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred and relied by Ld. Departmental Counsel and Ld. Counsel for the assessee. 10. Revenue is aggrieved with the finding of Ld. CIT(A) deleting the penalty of Rs. 1,01,17,700/- levied by the Ld. A.O. u/s. 271(1)(c) of the Act on account of concealment of income. Ld. CIT(A) has deleted the impugned penalty allowing the legal ground holding the notice issued u/s. 274 of the ACT as vague and bad in law. On merits also Ld. CIT(A) has allowed the assessee's ground. For better perusal, relevant finding of Ld. CIT(A) is extracted below:- 4.1 Ground No 1 & 2:-Through these grounds of appeal, the appellant has challenged the levy of penalty of Rs. 1,01,17,700/- u/s. 271(1)(c) of the Income Tax Act, 1961. The appellant filed return of income for A.Y. 2014-15 on 23.03.2015 declaring total income of Rs.....
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....d in levying the penalty without appreciating the facts of the case and imposed the penalty in a mechanical manner for concealment of income. 4.1.2 As per provisions of section 271(1)(c) of the Act, there are two different charges i.e. the concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed for a specific charge. It is a settled proposition that both these limbs i.e. concealment of particulars' of income or of 'furnishing inaccurate particulars' of income carry different connotations as held by the Hon'ble Supreme Court in the case of T Ashok Pai v/s. CIT (2007) 292 ITR (SC). 4.1.3 The penalty notice was issued in a mechanical manner without specifying the specific charge as to whether the appellant is found guilty of concealing the particulars of the income or have furnished inaccurate particulars of income. Thus the very initiation of the present penalty proceedings is not in accordance with the law and have led to vitiation of entire penalty proceedings. The Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax v/s. Kulwant Singh Bhatia dated 09.05....
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....s Allowed. 11. We will first take up the legal issue which has been decided by Ld. CIT(A) in favour of the assessee holding that the notice issued u/s. 274 r.w.s. 271(1)(c) of Act is vague and bad in law which thus makes the penalty proceedings void ab initio. To examine this issue we will first go through the notice issued to the assessee u/s. 274 of the Act for initiating penalty proceedings u/s. 271(1)(c) of the Act and the same is reproduced below:- PAN: AGCPM0468R Date: 30/11/2017 To, Shri Ankit Mittal, 15A/22, Manak, Prop. Y. No. Road Indore 452001 NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT, 1961 Whereas in the course of proceedings before me for the A.Y. 2008-09 it appears to me that you:- have concealed the particulars of your income or furnished inaccurate particulars of such income. You are hereby requested to appear before me at 12.30 PM on 29.12.2017 and show cause why an order imposing penalty on you should not be made under section 271(1)(c) of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being h....
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....fore reproducing below the notice dated 30.3.2016 issued u/s. 274 r.w.s. 271(1)(c) of the Act for Assessment Year 2008-09 placed at Page-13 of the paper book:- To, Shri Bansidhar Somani, Prop. M/s. Bio-Medics 74, S.R. Compound, Dewas Naka, Indore 452001 NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF THE INCOME TAX ACT, 1961 Whereas in the course of proceedings before me for the A.Y. 2008-09 it appears to me that you:- have concealed the particulars of your income or furnished inaccurate particulars of such income. You are hereby requested to appear before me at 04.00 PM on 26.04.2016 and show cause why an order imposing penalty on you should not be made under section 271(1)(c) of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorised representative, you may show cause in writing or before the said date which will be considered before any such order is made under section 271(1)(c). Sd/- (Amit Kumar Soni) Asstt. Commissioner of Income Tax (Central)-1 Indore 11. Perusal of the s....
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.... the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Act of 1961 was bad-in-law as it did not specify which limb of Section 271(1)(c) of the Act of 1961, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. The Tribunal while allowing the appeal of the assessee, had relied on the decision of the Division Bench of Karnataka High Court decision in the case of CIT Vs. Manjunatha Cotton Ginning Factory (supra)". 15. It is further pointed out that the SLP filed by the Deptt. before the Apex Court on 5.8.2016 in the matter of CIT Vs. SSA'S Emerald Meadows (supra) was dismissed. 16. Very recently the Hon'ble jurisdictional High Court in the case of Principal Commissioner of Income Tax v/s. Kulwant Singh Bhatia dated 09.05.2018 (ITA 9 to 14 of 2018) has held that the penalty u/s. 271(1)(c) of the Act of 1961 is not sustainable in law as the notice was not specific, observing as follows:- "on due consideration of the arguments of the Learned counsel for the appellant, so also considering the fact that the ground mentioned in sh....
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....hat ground he has initiated the penalty proceedings and in such a case the alleged notice is not sustainable in law. 20. We also find that in the recent decision authored by us in the case of Shri Varad Mehta ITA. No. 693/Ind/2016 adjudicating the similar legal issue challenging the validity of the penalty proceedings initiated u/s. 271(1)(c) of the Act for the alleged technical error and non application of mind by the Ld.A.O. in issuing notice u/s. 274 of the Act we observed as follows:- "13. From perusal of the above show cause notice we find that the Ld.A.O. has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined. 14. We find that similar issue came up before the jurisdictional High Court in the case of Shri Kulwant Singh Bhatia (supra) wherein the Hon'ble Court discussed the judgment of Hon'ble High Court in the case o....
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.... of mind by the Assessing Officer. We accordingly direct to delete the penalty of Rs. 16,00,000/- imposed u/s. 271(1)(c) on this ground itself. We accordingly allow the additional ground raised by the assessee on the legality of the penalty proceedings initiated u/s. 271(1)(c) of the Act. Since the penalty u/s. 271(1)(c) also has been dealt on the preliminary points other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and the appeal of the assessee for the Assessment Year 2008-09 is allowed". 21. We therefore in the given facts and circumstances of the case and respectfully following the above referred judgments of Hon'ble Apex Court, Hon'ble High jurisdictional Courts and other Hon'ble Courts and in view of the similarity of facts wherein the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act is suffering from serious technical error and non application of mind by Ld.A.O. who failed to level specific charge on the assessee at the time of initiating penalty proceedings due to which the principle of natural justice seems not to have been followed. We accordingly hold t....
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....ed exemption u/s. 10(38) of the Act applicable to gain from sale of equity shares on a recognised stock exchange held for more than one year. Almost after around 6 months of filing of this return of income, assessee was subjected to search u/s. 132 of the Act on 4.9.2015. During the course of search proceedings assessee stated to offer alleged Long Term Capital Gain of Rs. 2,97,66,605/- to tax as business income. No incriminating material was found by the search team relating to this transaction. Assessee honoured its statement and offered this income of Rs. 2,97,66,605/- as "business income" in the return filed u/s. 153A of the Act and paid taxes there on. Ld. A.O. initiated the penalty proceedings on this income of the assessee observing that the assessee would not have offered the Long Term Capital Gain of Rs. 2,97,66,605/- as business income and paid taxes thereon if he was not subjected to search u/s. 132 of the Act. Now the question before us is that "where the particulars of income are duly disclosed in the original return of income but later on post search u/s. 132 of the Act head of income is changed and income offered to tax under other head of income whether the assessee....
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....dence. The Apex Court further records that in the facts of the case before it the surrender of income was not voluntary but was made only on the account of detection by the Assessing Officer during the course of survey. Further, the Apex Court also records the fact that the survey was conducted more than 10 months before the assessee filed its return of income. However, the assessee therein had not declared this income in its return of income filed subsequent to the survey which again indicated the fact that he had no intention to declare its true income. In any event, the facts in the present case as found by the CIT(A) and the Tribunal is that the Respondent-assessee had disclosed an amount of Rs. 1.62 Crores in the original return by crediting the same to its capital account being Long Term Capital Gain on the sale of share. Thus, the Appellant was under bonafide belief that the income from long term capital gain was exempt from tax. Thus, the decision of the Apex Court would not apply to the facts arising in the present case. 11. The contention on behalf of the Revenue that in case there is a tax impact by virtue of change of head during the assessment proceedings then....