TaxTMI 
TaxTMI 
2021 (2) TMI 866
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....enalty 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/s. 10(38) of the Act in the original return of income filed ....
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....tention 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 1. A blanket and cyclostyled penalty notice was issued u/s. 274 r.w.s. 271(1)(c) on 30.11.....
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.... 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 that the Learned Tribunal has rightly relying on the decision of CIT V/s. Manjunath Cotton Ginning Factory (supra) and CIT V/s. SSA'S Emeralds Meadows (supra) right....
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....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 07.01.2017 the long term capital gain earned from the sale of shares of Unno Industries Ltd. was offered as business income. 7. Also, the Learned AO in the Para 6 of the penalty order has stated that the "submissions of the assessee are not accept....
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....he 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 of Hon'ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal (2001) 251 ITR 9 and held that AO is not justified in imposing the penalty on the retuned income. Also, the present case is on a much better footing as the respondent has made the complete disclosure of income ....
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....rused 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. 64,72,500/-. In response to the notice u/s. 153A the appellant has filed return for the 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 AO passed the assessment order u/s. 153A r.w.s. 143(3) on 30.11.2017 at the to....
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....me. 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 09.05.2018 (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 show cause notice would not sa....
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....t 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 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/- (P.K. Singi) Asstt. Commissioner of Income Tax (Central)-1 Indore 12. On perusal of the above show cause notice it is evident that the Ld. A.O. has mentioned both the charges as provided in Section 271(1)(c) of the Act. Ld. A.O. has not stri....
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....iculars 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 show cause notice clearly makes visible the fact that the Ld. A.O. while issuing the notice for initiating the penalty proceedings u/s. 271(1)(c) has leveled both the charges against the assessee along with mentioning the word 'or in between'. It is not emanating out of the penalty notice that the addition to the income for which the penalty proceedings initiated comes under which category i.e. whether the addition is for concealing the particulars of income or the addition is for furnishing inaccurate particulars of income. 12. In these given facts whe....
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....iled 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 show cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that Learned Tribunal has rightly relying on the decision of CIT V/s. Manjunatha Cotton Ginning Factory and CIT V/s. SSA'S Emerald Meadows rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA. No(s) 9/2018, 10/2018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed." 17. We observe that the facts of the case before the Hon'bl....
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....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 of CIT V/s. Manjunatha Cotton Ginning Factory (supra) and CIT V/s. SSA's Emerald Meadows (supra) held that "on due consideration of the arguments of the Ld. counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not specify the requirement of law, as notice was not specific, we are of the view that Ld. Tribunal has rightly allowed the appeal of the assessee and set aside the order of penalty enforced by the authority". 15. Similarly in the case of CIT V/s. Manjunatha Ginning Factory, Hon'ble High Court of Karnataka held that "the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act sh....
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....espectfully 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 that the impugned penalty notice u/s. 274 r.w.s. 271(1)(c) of the Act are invalid and untenable and thus deserves to be quashed. 22. We therefore allow the common legal ground raised by the assessee in the bunch of these 6 appeals challenging the legality of notice issued u/s. 274 r.w.s. 271(1)(c) of the Act and accordingly direct the Ld.A.O. to delete the penalty levied u/s. 271(1)(c) of the Act at Rs. 10,00,000/-, Rs. 6,00,000/-, Rs. 7,00,000/-, Rs. 6,00,000/- Rs. 7,00,000/- and Rs. 6,50,000/- for the Assessment Years 2008-09 to 2013-14 respectively. 13. However the Ld. Departmental Representative has referred to the judgments of Hon'ble Bombay High Court i....
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.... 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 is liable to pay penalty u/s. 271(1)(c) of the Act for concealment of income". We observe that Ld. CIT(A) has allowed the ground on merits by relying the judgment of Hon'ble Supreme Court in the case of CIT V/s. Suresh Chandra Mittal (2001) 251 ITR, 9 upholding the decision of Hon'ble jurisdictional High Court. Before us Ld. Departmental Representative has referred and relied on the decision of Hon'ble Calcutta High Court in the case of CIT V/s. Prasanna Dugar (supra). However the facts are not identical so much so that in the case of Prasanna Dugar voluntarily disclosure of income was during the search but in the instant appeal the particulars of income were dul....
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....n 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 penalty is imposable and the decision of this Court in Bennett Coleman (supra) would not apply. In such a case, Mr. Malhotra, for the Revenue emphasized the fact that in M/s. Bennett Coleman (supra) the Court was dealing with the change of head of income but not with regard to a claim for full exemption from payment of tax as in this case. We are unable to accept the aforesaid submission. According to us, the distinction sought to made on behalf of the Revenue is not acceptable as the ratio of the decision in Bennett Coleman & Co. Ltd. (supra) is where complete disclosure of income had been made in the return of income and head of the income undergoes a change at the hands of the Assessing ....