TaxTMI 
TaxTMI 
2022 (8) TMI 1079
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....t on the facts and circumstances of the case the Ld. CIT(A) grossly erred in sustaining the action of the Ld. DCIT, Circle 13(1), New Delhi to record his satisfaction towards furnishing of inaccurate particulars of income in the course of assessment proceedings as required by the provisions of section 271(l)(c) of the Income Tax Act, 1961. 4. That the Ld. CIT(A) was not justified in deciding the appeal against the appellant on the basis of notice issued u/s 274 r.w.s. 271 (l)(c) of the IT Act, 1961 ,which is bad in law as it does not specify under which limb of section 271 (l)(c) of the Income Tax Act, 1961 the penalty proceeding had been initiated i.e. whether for concealment of particulars of income or furnishing inaccurate particulars of income. 5. That the appellant craves, leave to add, amend or alter any grounds of appeal either before or at the time of hearing of appeal." FACTS OF THE CASE 2. Facts giving rise to the present appeal are that the assessment was framed by the Assessing Officer ["AO"] vide order dated 08.03.2013 u/s 143(3) of the Income tax Act, 1961 ["the Act"]. Thereby, the AO made addition of Rs.15,69,500/- on account of cash credits u....
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....xplanation as to why there was an omission or wrong statement in original return must be due to bona fide inadvertence or bona fide mistake on part of assessee and even if assessee agreed to addition with a condition that penalty could not be imposed, department is not precluded from initiating penalty proceedings 5. B.A. Balasubramaniam & Bros. Co Vs CIT [116 Taxman 842, 236 ITR 977, 157 CTR 556] where Hon'ble Supreme Court held that difference between income assessed and income returned being more than 20 per cent, Explanation to section 271(1)(c) became applicable and assessee having failed to discharge onus being cast on assessee by virtue of said Explanation, Assessing Officer was justified in imposing penalty 6. CIT vs Gates Foam & Rubber Co [91 ITR 467] CIT vs India Seafood M05 ITR 708] where Hon'ble Kerala High Court held that Claiming excessive deduction also amounts to concealment of income 7. Steel Ingots Ltd vs. CIT [296 ITR 228] where Hon'ble Madhya Pradesh High Court held that in case of concealment of true income chargeable to tax by making bogus claim, levy of penalty u/s 271(1 )(c) read with Explanation 1 is jus....
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....the penalty by applying the ratio laid down by Karnataka HC in Manjunatha Cotton and Ginning Factory case; Further takes note of Bangalore ITAT ruling in case of P.M.Abdulla, wherein it was clarified that the said HC decision had not considered the provisions of sec.292B, also notes that as per subsequent Karnataka HC ruling in case of Sri. Durga Enterprises, it was held that in a case where the assessee participated in the entire proceedings, if such a defect in the notice was not allowed to be cured, the purpose/intent of sec.292B would be defeated; Thus remarks that, "... we are of the considered opinion that Id. CIT(A) ought not have deleted the penalty based on the decision of Manjunatha Cotton and Ginning Factory.": ITAT In Manjunatha Cotton case [TS-936-HC-2012(KAR)1, Karnataka HC had held that ground of initiation of penalty should be clearly stated in notice for initiation. Last year, Revenue had filed a SLP before SC. regarding Karnataka HC interpretation of Sec. 271(1) (c) in State Bank of Mysore case [TS-6803-HC-2017(KARNATAKA)-Q) which relied upon Manjunatha Cotton decision. The issue is still pending adjudication. 2. Sundaram Finance Ltd. Vs....
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....od what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage. 17. Thus, for the above reasons, Substantial Questions of law Nos. 1 and 2 are answered against the assessee and in favour of the revenue. The additional substantial question of law, which was framed is rejected on the ground that on facts the said question does not arise for consideration as well as for the reasons set out by us in the preceding paragraphs. In the result, Tax Case Appeals are dismissed. No costs." 4. CIT Vs Smt. Kaushalya T19941 75 Taxman 549 (Bombav)/[1995] 216 ITR 660 (Bombay) In the above case, IAC had issued show-cause notice dated 28-3-1972 under section 274(2). Assessee had no knowledge of exact charge against him. Not only word 'or' had been used between two groups of charges but there was use of word 'deliberately' also. IAC imposed penalty of Rs. 13,000 for assessment ye....
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....on the basis of the facts of each case. When we go through the assessment order, it is seen that the AO has examined the cash book in a great detail and various entries therein between 01.07.2004 to 31.3.2005 have been reproduced on page nos. 14 to 27. Similarly, the receipts by way of advances from Trimurti Engineering Works, having implication on the second addition, have been reproduced in the assessment order on page nos. 27 to 29. The finding of the AO in respect of the first addition is that cash flow statement filed by the assessee is nothing but an afterthought and a colourable devise to avoid tax. This cash flow statement was sought to be supported by cash flow statement in respect of two partners, Shri N.S. Panwar and Shri Y.S. Panwar. These statements were also examined and various defects were noticed. Coming to advances for job work, it is inter-alia mentioned that most of the entries are above Rs. 20,000/-, but in the reconciliation statement the entries have been bifurcated so that each one of them is less than Rs. 20,000/-, which seems to have been done to avoid penalties under sections 271D and 271E of the Act. The assessee has not done any job work and no income h....
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....n that prima facie satisfaction of the AO that the case may be served imposition of penalty should be discernible from the order passed during the course of the proceedings. In the case on hand the prima facie satisfaction of the AO is discernible from the assessment order. At para 36, page 128 of this order the Hon'ble Court has observed as follows. "A bare reading of section 271(l)(c) would show that to initiate penalty proceedings following pre-requisites should obtain. (i) The Assessing Officer should be satisfied that:- a) The assessee has either concealed particulars of his income; or b) furnished inaccurate particulars of his income; or c) infracted both (a) and (b) above (ii) This satisfaction should be arrived at during the course of any proceedings. These could be assessment; reassessment or rectification proceedings, but not penalty proceedings. (Hi) If ingredients contained in (i) and (ii) are present a notice to show cause under Section 274 of the Act shall issue setting out therein the infraction the assessee is said to have committed. The notice under Section 274 of the Act can be issued both during o....
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....ity of the satisfaction arrived at by the Assessing Officer during the course of proceeding before him. In the result, our conclusion are as follows: (i) Section 271(1B) of the Act is not violative of Article 14 of the Constitution. (ii) The position of law both pre and post amendment is similar, in as much, the Assessing Officer will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings. (iii) Prima facie' satisfaction of the Assessing Officer that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. Obviously, the Assessing Officer would arrive at a decision, i.e., a final conclusion only after hearing the assessee. (iv) At the stage of initiation of penalty proceeding the order passed by the Assessing Officer need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for. (v) ....
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....see very well knew the charges / grounds for which he was being penalized and he actively contested the penalty before the Ld. AO. At this juncture, we find that the provisions of Section 292B comes to the rescue of the revenue which cures minor defect in the various notices issued provided such notice in substance and effect was in conformity with the intent and purpose of the act. On overall facts and circumstances, we find that such condition was fulfilled in the instant case. We find that the revenue's Special Leave Petition [SLP] dismissed by the Apex court in SSA'S Emerald Meadows (supra) confirmed the decision of Hon'ble High court, which in turn, relied upon the judgment rendered in Manjunatha Cotton & Ginning Factory (supra). The decision rendered by Hon'ble Bombay High court in Samson Perinchery (supra) also placed the reliance on this judgment. After perusing the ratio of the judgment rendered in Manjunatha Cotton & Ginning Factory (supra), we find that the assessee's appeal was allowed by Hon'ble High court after considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore, we are of the opinion that the pen....
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.... Works v. CIT (2014) 227 taxman 253 (P & H) The Id. D.R relying on the aforesaid judicial pronouncements, submitted that as per the settled position of law, the objection raised by the Id. A.R during the course of hearing of the appeal as regards the validity of the jurisdiction assumed by the A.O for imposing penalty 271(l)(c) was not admissible and thus no cognizance of the same may be drawn. Alternatively, and without prejudice to the objection raised to the admission of the challenge thrown by the Id. A.R to the validity of the assumption of jurisdiction by the A.O for imposing penalty under Sec. 271(l)(c), it was averred by the Id. D.R that even otherwise the failure on the part of the A.O to strike off the irrelevant default did not in any way affected the validity of the penalty imposed by the A.O under Sec. 271(l)(c). The Ld. D.R. in support of his said contention relied on the following judicial pronouncements:- (i) M/s. Maharaj Garage & Company v. The Commissioner of Inc Nagpur (Income tax reference No. 21 of 2008, dated 22.08.2017. (ii) Commissioner of Income tax v. Smt. Kaushalya & Others (1995) 216 ITR 660 (Bom.). (iii) Earthmoving E....
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....n CIT Versus Manjunatha Cotton & Ginning Factory (supra) held that notice under section 274 of the act should specifically state the grounds mentioned in section 271(l)(c) that is, whether it is for concealment of income or for furnishing of inaccurate particular of income, sending printed form where all the grounds mentioned in the section 271 are mentioned would not specify the requirement of law, the assessee should know the grounds which he has to meet specifically. Otherwise, the Principles of Natural Justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee. Taking up the penalty proceeding on one limb and finding the assessee guilty on another limp is also bad in law. Though the penalty proceeding emanate from proceeding of assessment, they are independent and separate aspect of proceeding. All the other decisions relied by the Ld counsel for the assessee is based on the decision of CIT \/s Manjunatha Cotton & Ginning Factory (supra), wherein the decision of CIT Vs Kaushlya (supra) was not brought in the notice of coordinate bench of Mumbai Tribunal. 2.18. The Hon'ble Karnataka High Court in CIT Versus SSA'S Emerald ....
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....eration of the case for the reason that the Court might not have been inclined to exercise its discretion under Article 136 of the Constitution of India. The declaration of law will be governed by Article 141 where the matter has been decided on merit by a speaking judgment as in that case doctrine of merger would come into play. This Court laid down the following principles:- "(i) Where an appeal or revision is provided against an order passed by a court, tribunal or any other authority before superior forum and such superior forum modifies, reverses or affirms the decision put in issue before it, the decision by the subordinate forum merges in the decision by the superior forum and it is the latter which subsists, remains operative and is capable of enforcement in the eye of law. (ii) The jurisdiction conferred by Article 136 of the Constitution is divisible into two stages. The first stage is up to the disposal of prayer for special leave to file an appeal. The second stage commences if and when the leave to appeal is granted and the special leave petition is converted into an appeal. (iii) Doctrine of merger is not a doctrine of universal or ....
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.... a binding force on us. Thus, with utmost regards to the judgment of Karnataka High Court in CIT vs Manjunatha Cotton & Ginning Factory (supra) we are bound to follow the judgment of jurisdictional High Court in CIT Vs Kaushalya (supra). Our view also find support from a decision of the Mumbai Bench of the Tribunal in the case of Dhawal K. Jain vs Income Tax Officer (ITA No.996/Mum/2014) order dated 30/09/2016. With these observations, the argument of Id. counsel of the assessee on the legal/technical ground is rejected. Thus, all these four appeals are, therefore, dismissed and the stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed." 7. I have heard the contentions of Ld. Authorized representatives of the parties and perused the material available on record and gone through the orders of the authorities below. I find that there is no dispute with regard to the fact that the notice issued u/s 271(1)(c) of the Act is defective. The AO failed to strike down the correct limb under which he sought to impose penalty. Undisputedly, the AO was required to specify the charge. Ld. Counsel for the assessee has placed reliance on the judgement of Hon'ble Supreme Cour....