AI Drafter 
TaxTMI 
TaxTMI 
2021 (9) TMI 1081
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....r 'furnishing inaccurate particulars of income' and in the penalty order also the penalty was imposed for the same default? 2. Whether Ld. CIT(A) is correct in law holding that the notice is invalid due to non-striking of irrelevant column in the notice when no prejudice is caused to the assesses, as the assessee was fully aware of his default regarding furnishing of inaccurate particulars of income as is clearly mentioned in assessment order by claiming bogus purchases and the assessee was offered adequate opportunity before the Assessing Officer to set out his defense against levy of penalty? 3. Whether Ld. CIT(A) is correct in law by following the decision of CIT Vs SSA Emeraled Meadows case where the dismissal of the case by Hon'ble Apex Court is dismissal simpliciter and the same is not binding in view of the decision of Hon'ble SC as held in Shanmugavel Nadar 263ITR 658 (SC)? 4. Whether Ld. CJT(A) is correct in cancelling penalty by ignoring several decisions like CIT Vs Chandulal 152 ITR 238 (AP) and Srinivasa Pitty & Sons Vs CIT 173 FTR 306 where it was held that non striking off irrelevant portion cannot render penalty notice as i....
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.... income in its return for the relevant year, by claiming bogus purchases in its books and thereby inflating its CWIP. He further observed that the assessee has admitted that it had claimed bogus purchases for the said various years, which were reversed in its books in the year to relevant to A.Y.2011-12, This leaves little doubt that the purchase entries originally made were inaccurate and therefore the assessee is liable for penalty u/s.271(1)(c). The argument of the assessee that even after the assessment u/s. 143(3) r.w.s.153A, its income remained unchanged and therefore it cannot be said that any tax was sought to be evaded, were rejected by the AO on the ground that it had not booked any income for the relevant year only because it was following percentage completion method of accounting and the project was not substantially completed, resultantly the entire bogus purchases were capitalized as CWIP. The AO finally levied penalty u/s.271(1)(c) in respect of the bogus purchases claimed for the relevant year. Aggrieved by the penalty order, the assessee preferred an appeal before the First Appellate Authority (FAA). The FAA noted that as per this Explanation 5A to sec. 2....
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....of the FAA that the ratio of the decision in the case of Nalwa Sons Investments Ltd. (supra) cannot be applied since in the said case the income was computed under the provisions of MAT u/s.115JB whereas, in the instant case, the income was computed as per the normal provisions of the Act. However, in course of the proceedings before the Hon'ble ITAT, the assessee had also raised an additional ground that the penalty order is bad in law since the relevant limb under which penalty has been levied was not struck off in the notice issued u/s.271 (1 )(c). The Hon'ble ITAT observed that this additional ground of appeal was not raised before the FAA and therefore he never had an opportunity to examine the same. The Hon'ble ITAT therefore remitted the issue to the file of the FAA to give a finding on this additional ground of appeal after giving an opportunity of being heard to the assessee. 5. The Ld.CIT(A) in the present proceedings has given following finding:- The contentions of the assessee have been duly considered. As discussed earlier, the issue was remitted by the Hon'ble ITAT to the FAA on a limited point for examining as to whether the penal....
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....he assessee on the same set of facts, is deleted. 7. Against the above order assessee is in appeal before us. 8. We have heard both the parties and perused the record. Ld. Counsel of the assessee submitted that issue is fully covered in favour of the assessee by Hon'ble Bombay High Court decision in Mohammed Farhan A. Shaikh Vs. PCIT (125 taxamnn.com 253). Ld.DR stated that this decision was not cited before Ld.CIT(A). However, he did not dispute the proposition that relevant limbs of framing of charge upon the assessee was not specified in the notice of penalty. We find that the issue is covered in favour of the assessee on the basis of full bench decision by Hon'ble Bombay High Court in the case of Farhan Sheikh (supra). We may gainfully refer to the said order as under:- We have already discussed what constitutes the ratio decidendi or case holding and what it takes to b a precedent. Now, we will see what makes a precedent conflict with another. The Precedential Conflict: 164. To cut the discussion short, we will take aid of the latest Supreme Court judgment on this point. In Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax[2....
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....lems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above." For the purposes of the parties themselves and their privies, ingredient (Hi} is the material element in the decision for it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedents, ingredient (ii) is the vital element in the decision. This indeed is the ratio decidendi. 167. Then, Mavilayi applied the above principle and held that the ratio decidendi in Citizen Cooperative would not depend upon the conclusion arrived at on facts in that case. For the case is an authority for whaf it actually decides in law and not for what may seem to logically follow from it. Do Goa Dourado Promotions and Kaushalya conflict? 168. As we have seen Goa Dourado Promotions concludes the case based on the reasoning given in Tax Appeal No. 24/2019 (decided on 11-11-2019), Samson Perincherry, and New Era Sova Mine. 169. The Tax Appeal No. 24/2019, decided on 11-11-2019, relates to The Principal Co....
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....ra Sova Mine-not even in Manjunatha pointed, in both sets of cases, the proposition is this: To an assessee facing penalty proceedings, the Revenue must supply complete, unambiguous information so that he may defend himself effectually. This proposition has given rise to this question: Where should the assessee gather the required information from? 172. Goa Dourado Promotions and other cases have held that the information must be-gathered from the notice under section 271(l)(c) read with section 274 of the IT Act. No other source was_in_the_Court's contemplation. In Kaushalya, both the proposition and the question were the same. But it has one extra input: the order in assessment proceedings. So it has held that the notice alone is not the sole source of information the assessment proceedings, too, may shed light on the issue and inform the assessee on the scope of penalty proceedings. Whether assessment proceedings can be a source of information and whether it can complement the notice have not been considered in Goa Dourado Promotions and other Cases. 173. We, however, accept that the Revenue, often, adopts a pernicious practice of sending an omnibus, catch-all,....
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....ic, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not depend on the assessment proceeding for their outcome. Assessment proceedings hardly influence the penalty proceedings, for assessment does not automatically lead to a penalty. 176. Second, not always do we find the assessment proceedings revealing the grounds of penalty proceedings. Assessment order need not contain a specific, explicit of whether the conditions mentioned in section 271(l)(c) exist in the case. It is because Explanation 1(A) and 1(B), as the deeming provisions, create a legal fiction as to the grounds for penalty proceedings. Indeed, the Apex Court in CIT v. Atu Mohan Binda [2009]317 ITR 1 (SC) has explained the-scope of section 271(l)(c) thus: "Explanation 1, appended to section 27(1) provides that if that person fails to offer an explanation or the explanation ....
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....dings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(l)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(l)(c), read with section 274 of IT Act. True the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceeding to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be inform....
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.... the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off? 187 In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done". Then, Dilip N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise, it should give no room for ambiguity. The....