TaxTMI 
TaxTMI 
2022 (5) TMI 1003
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.... law. The learned Commissioner (Appeals) erred in law and on facts in confirming the action of learned assessing officer in levying penalty under section 271(1)(c). 2. The learned Commissioner Of Income (Appeals)-18 ought to have seen that the appellant has neither furnished inaccurate particulars of income nor has concealed the particulars of income warranting levy of penalty under section 271 (1)(C) . 3. The learned CIT(A)-18 ought to have seen that the penalty proceedings is deemed to have been initiated only with the issue of notice under section 274 r.w.s 271(1)(C) and that the said notice should specifically state the reasons for levy of penalty. Failure on the part of the AO to specifically state the reasons under which limb the penalty is levied would tantamount to failure to record satisfaction as well as nonapplication of mind thereby making the said levy illegal and opposed to law. In in the instant case the penalty notice suffers from aforesaid infirmity 4. The learned Commissioner (Appeals) erred in law and on facts in confirming the action of learned assessing officer in levying penalty under section 271(1)(c) solely on the basis that additi....
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.... 3.2 The Ld. Sr. DR, on the other hand, relied on the decision of the Hon'ble High Court of Madras in M/s. Gangotri Textiles Ltd vs DCIT (121 Taxmann.com 171) as well as another decision in Sundaram Finance Ltd. Vs. ACIT (93 Taxmann.com 250) against which the assessee's SLP has already been dismissed by Hon'ble Supreme Court which is reported at 99 Taxmann.com 152. 3.3 Having heard the rival submissions and after due consideration of relevant material on record, our adjudication would be as under. The assessment for AY 1998-99 has been framed u/s 143(3) r.w.s. 147 of the Act whereas the assessment for AYs 1999-2000 to 2004-05 has been framed u/s 153C r.w.s. 143(3) of the Act whereas the assessment for AY 2005-06 has been framed u/s 153C r.w.s. 144 of the Act Proceedings before Ld. AO 4.1 The assessee being resident individual was assessed u/s 143(3) r.w.s. 147 of the Act wherein the income was assessed at Rs.20.47 Lacs after certain additions of unexplained cash deposits in the bank account of the assessee. The assessee was engaged in the business of auctioneering under the name 'Kankaria Auctioneers'. Pursuant to search action on Shri Jaswant Chand Bhandari on 12.08.200....
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....portunity of being heard in person or through authorized representative your may show cause in writing on or before the said date which will be considered before any such order is made under section 271. (M. RAJASEKHAR IRS) Deputy Commissioner of Income Tax, Central Circle II(2), Chennai - 34. 4.3 Though the assessee opposed penalty, however, Ld. AO found it fit case for levy of penalty u/s 271(1)(c) and accordingly, a penalty of Rs.5.50 Lacs was proposed in penalty order dated 25.03.2014 by observing as under: - ".....The request of the assessee cannot be considered and is rejected as it is a fit case of levy penalty u/s 271(1)(c) of the Income Tax Act, 1961. I therefore propose to levy penalty u/s 271(1)(c) as per law........I therefore levy a penalty of Rs.5,50,000/- u/s 271(1)(c) of the Income Tax Act, 1961." Aggrieved, the assessee agitated the penalty before Ld. CIT(A). Appellate proceedings 5.1 During appellate proceedings, it transpired that the assessee's quantum appeals were dismissed by the Tribunal vide order dated 09.04.2014. The assessee challenged the correctness of impugned penalty on various grounds. The assessee, inter-alia, submitted....
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....e penalty was to be upheld. 5.5 Aggrieved as aforesaid, the assessee is in further appeal before us. Our findings and adjudication 6. Upon careful consideration of factual matrix, it could be gathered that the assessee made large cash deposits in his bank account and attributed the same to the fact that cash was received out of auctions as well as from private parties against equivalent amount of cheque. However, in the absence of any satisfactory explanation / evidences forthcoming from the assessee, the same has been added u/s 68 in the hands of the assessee. The additions have been confirmed up-to the level of Tribunal. 7. Before us, Ld. AR raised a pertinent legal issue and submitted that specific charge i.e., furnishing of inaccurate particulars of income or concealment of income, has not been framed against the assessee in the show-cause notice as well as in penalty order. Therefore, considering the ratio of various binding judicial precedents, the penalty stood vitiated for want of framing of specific charge. The copies of these decisions have been placed on record which include the decision of Hon'ble Madras High Court in Babuji Jacob vs ITO (430 ITR 259) as wel....
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..... 9. At this juncture, it would be useful to take note of the decision of Hon'ble High Court of Madras in the case of Babuji Jacob Vs. lTO (430 lTR 259; 08.12.2020). Upon perusal of the same, we find that the ratio of this decision is squarely applicable to the legal grounds raised by the assessee. The Hon'ble Court, inter-alia, held that the impugned notice under section 271(1)(c) did not specifically state as to whether assessee was guilty of concealing particulars of his income or had furnished inaccurate particulars of income. Hence, the impugned penalty was invalid and same was to be set aside. The adjudication of Hon'ble Court was as under: - 18. The first aspect is as to whether there is any concealment of particulars of the assessee's income. At the first instance i.e. during the scrutiny assessment, the assessee sent a letter dated 15.3.2016 explaining the entire transaction wherein he had stated that while filing the return of income, he was under the impression that both the properties were agricultural lands and that there was no tax liability. Consequently, since one of the properties namely the property at Egattur Village was treated to be a capital as....
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....gricultural lands, that he had been carrying on agricultural operations for 27 years, that he had been filing return of income regularly and that the source of income was from agricultural income and interest income from bank deposits. These facts were never disputed by the Assessing Officer. 23. After receipt of the penalty notice, the assessee submitted a reply dated 11.4.2016 wherein the assessee reiterated the stand taken in his letter dated 15.3.2016. However, the same was not accepted by the Assessing Officer while completing the assessment under Section 143(3) of the Act. The assessee further stated that he had produced all the facts of the transactions namely sale documents, materials, etc., before the Assessing Officer and therefore, it cannot be construed as furnishing of inaccurate particulars. The assessee also pointed out that while allowing exemption under Section 54F of the Act, the Assessing Officer considered 50% of the investments whereas 100% investments were done through banking channels. Therefore, the assessee stated that it cannot be said that correct particulars of income were not furnished. The assessee further pointed out that he was in need of fu....
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....ition and the assessment was completed vide order dated 30.3.2016. The question would be as to whether rejection of the explanation and the consequential addition would automatically result in an order of penalty. 28. Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the Revenue seeks to substantiate her case by relying upon the decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd. Vs. CIT, II [reported in (2013) 38 Taxmann.com 448] wherein it was held that voluntary disclosure does not release the assessee from mischief of penalty proceedings under Section 271(1)(c) of the Act and in terms of the said provision, the Assessing Officer has to satisfy as to whether the penalty proceedings have to be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduceit into writing. 29. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan Vs. CIT [reported in (2001) 118 Taxman 324]. The decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd., was taken note of by the Division Bench of thi....
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....he explanation offered by the assessee as in the instant case, then the onus is on the Revenue to prove that there was concealment of particulars of income or furnishing of inaccurate particulars of income. We find this aspect to be completely absent in the instant case. Therefore, we also find the imposition of penalty to be unjustified. 31. The assessee filed an appeal before the Tribunal, which confirmed the order passed by the CIT(A) that the assessee raised a new stand before the CIT(A). No such new stand has been raised. The stand taken by the assessee after receipt of the notice under Section 143(2) of the Act dated 02.9.2014 has been consistent i.e. before the Assessing Officer while submitting the reply to the penalty notice, in the appeal before the CIT(A) and before the Tribunal. This is evident on a reading of the grounds of appeal filed before the CIT(A) as well as the notes of arguments filed by the assessee before the CIT(A) dated30.6.2017. Therefore, to that extent, the CIT(A) and the Tribunal have committed an error. 32. The decision of this Court in the case of Sundaram Finance Ltd., was couched on a different factual position wherein the Court r....
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.... (P) Limited [reported in (2010) 322 ITR 158] was followed wherein the Hon'ble Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression 'concealment of particulars of income and/or furnishing of inaccurate particulars of income' and after applying the decision in the case of Reliance Petro Products (P) Ltd., the Hon'ble Division Bench of this Court dismissed the appeal filed by the Revenue in the following terms : "13.3. The Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression concealment of particulars of income and/or furnishing inaccurate particulars of income and went on to observe as follows: ".....A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the asses....
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....the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they areincorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of pa....
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....allegation that there was any fraudulent act by the assessee or the assessee was guilty of wilfully or negligently concealing the income and that his agreement to the addition of the amount, by itself, will not establish fraud or wilful neglect without something more. 39. For the above reasons, the assessee has to succeed on all grounds and consequently, it has to be held that the notice initiating the penalty proceedings is defective and invalid and the other findings rendered by the Assessing Officer, the CIT(A) and the Tribunal do not warrant imposition of penalty on the assessee. 40. In the result, the above tax case appeal is allowed, the impugned order passed by the Tribunal is set aside and the substantial questions of law are answered in favour of the assessee. No costs. 10. Similar is the decision of Hon'ble Bombay High Court in PCIT V/s Goa Coastal Resorts and Recreation (P.) Ltd (272 Taxman 157) which has not admitted question of law raised by the revenue by observing as under: - 5. We have carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically he....
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....d. 2. We are not inclined to interfere with the impugned order. 3. The special leave petition is, accordingly, dismissed. 4. Pending application stands disposed of. 11. Similar is the decision of Hon'ble Bombay High Court rendered in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein Hon'ble Court has confirmed the ratio laid down by Hon'ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory (359 ITR 565). This decision of Hon'ble Karnataka High Court has subsequently been followed by the same court in the case of CIT V/s SSA's Emerald Meadows (2016 73 Taxmann.com 241) which was agitated by the revenue before Hon'ble Supreme Court. However, Special Leave Petition, against the same, was dismissed by the Hon'ble Court on 05/08/2016 which is reported at 73 Taxmann.com 248. This decision of Hon'ble Karnataka High Court rendered in Manjunatha Cotton & Ginning Factory has subsequently been followed extensively in catena of judicial pronouncements rendered by various Hon'ble High Courts as well as different benches of Tribunal and taken a view that non-framing of specific charge in the show-cause notice would vitiate the penalty proc....
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....halya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Kaushalya closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of nonapplication of mind and prejudice. 186.....
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....is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [(2007) 2 SCC 181], in which the Apex Court has quoted with approval its earlier judgment in State ofOrissav. Dr. Binapani Dei [AIR 1967 SC 1269]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such anevent, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. 13. The Ld. CIT-DR has relied on the decision of Hon'ble High Court of Madras in the case of Gangotri Textiles Ltd. V/s DCIT (121 Taxmann.com 171) which is distinguishable on facts. In this case, it was the f....