AI Drafter 
TaxTMI 
TaxTMI 
2023 (2) TMI 964
X X X X Extracts X X X X
X X X X Extracts X X X X
....along with other co-owners entered into a land development agreement with M/s. Western Constructions on 03.05.2007. As per the supplementary development agreement dated 26.03.2010 the landlords were supposed to get 40% of the total built up area of 10,35,565/- sq.ft. Accordingly, capital gains will arise in the hands of the assessee on sale of individual flats. A search and survey operation u/s. 132 of I.T.Act was conducted in the group case of Sri Arakula Vinod and others on 09.05.2018. The Assessing Officer on perusal of the records and returns of income, noted that assessee failed to file his return of income for the AY 2012-13 admitting the income under the head capital gains as accrued in his hands relevant to AY 2012-13. Accordingly, notice u/s. 148 for the AY 2012-13 was issued on 26.03.2019. In response to the notice the assessee filed return of income on 03.10.2019 declaring total income of Rs.1,84,41,140/-. 3. The AO issued statutory notices u/s. 143(3) and 142(1) of the Act to which the AR of the assessee appeared before the AO from time to time and filed the requisite details. The AO thereafter completed the assessment u/s. 143(3) r.w.s. 147 of the I.T.Act on 09.12.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d by the penalty levied by the AO. While doing so, he noted that in the instant case, the assessee has not filed the return u/s. 139 of the Act but filed the return in consequence to the notice issued u/s. 148 of the I.T.Act. Further, the assessee has not furnished any bonafide reply within the meaning of Explanation 1 to section 271(1)(c) of the I.T.Act. Relying on various decisions, the ld.CIT(A) upheld the penalty levied by the AO. 8. Aggrieved with such order of the ld.CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds of appeal. 1. The Hon'ble commissioner of Income Tax (Appeals) has erred both on facts of the case and in law involved in so far as it is prejudicial to the interest of the Appellant. 2.The Hon'ble CIT(A) without taking into consideration the information filed before him proceeded to complete the appeal u/s.250 of the 1T Act and the same is not sustainable. 3. The Hon'ble CIT(A) ought to have appreciated that the appellant had filed the return of income and had disclosed the property transaction resulting in capital gain in the return of income filed u/s 148 of the 1T Act. 4. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th by interjecting one or between two. 12. Referring to the decision of Hon'ble AP High Court in the case of CIT vs Lotus Constructions reported in 370 ITR 475, he submitted that the Hon'ble High Court in the said decision has held that where intention or satisfaction to initiate penalty proceedings u/s. 271(1)(c) of the I.T.Act was not evident from order of the assessment, initiation of said proceedings was untenable. 13. Referring to the decision of Hon'ble Karnataka High Court in the case of CIT vs Manjunatha cotton and Ginning Factory reported in 359 ITR 565, he submitted that the Hon'ble High Court in the said decision has held that the imposition of penalty is not automatic. It has been held that penalty cannot be imposed merely because assessee accepted assessment order levying tax and interest, unless it is discernible from the assessment order that addition was on account of concealment. 14. Referring to the said decision, he drew the attention of the Bench to para 63 of the order and submitted that notice u/s. 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) of the I.T.Act i.e whether it is for concealment of income or for furni....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation 1B to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grou....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the instant case was a non filer of return of income and only due to issue of notice u/s. 148 filed the return of income declaring total income of Rs.1,84,41,136/- which has been accepted by the AO. He submitted that had the department not initiated the reassessment proceedings, the assessee would not have declared its income, since the statutory due date for filing of the return had elapsed. Referring to the conduct of the assessee in the past also, he submitted that the assessee was also a non-filer. The ld.DR drew the attention of the bench to para 7 of the penalty order which reads as under:- 7. A search and seizure operation was conducted u/s. 132 of the I.T.Act. In this group case on 09.05.2018 and the assessee, Sri Arakula Vinod was covered under search operation u/s. 132 of the Act. During the search operations, it was found that the assessee is a non-filer and has concealed the capital gains income on the land given for development to M/s. Western Constructions vide Joint Development Agreement entered on 03.05.2007 between assessee and her family members as the landlords and M/s. Western Constructions as the developer of the said land and on the sale of such d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e deleted merely on the basis of defects in the notice and the provisions of section 292B come 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. 21. The learned DR submitted that the assessee in the instant case was duly put to notice by the AO, the assessee has replied to such notice and thereafter, the AO has levied penalty u/s. 271(1)(c) of the I.T.Act, 1961. Under these circumstances, the penalty cannot be cancelled merely on account of defect in the notice. So far as the various decisions of the Hon'ble AP High Court relied on by the Learned Counsel for the assessee are concerned, he submitted that in the later decisions where penalty has been cancelled for non-striking off of the inappropriate words in the notice, the Benches have not considered the earlier decisions of the Hon'ble High Court, since these were neither cited nor brought to the notice of the Hon'ble High Court. Therefore, the subsequent decisions cannot be followed, since they have not considered the earlier decisions of the same High Court. He accordingly submitted that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this sub-section, be deemed to have concealed the particulars of his income in respect of such A.Y, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a notice u/s 148". 24. A perusal of the assessment order as well as penalty order clearly shows that the assessee was a non-filer and only on the basis of issue of notice u/s. 148 of the Act, the assessee filed the return of income declaring income of Rs.1,84,41,136/- which has been accepted by the AO. In our opinion, had the AO not issued notice u/s. 148, the assessee would not have filed the return of income, especially considering the past conduct of the assessee and therefore, it is a clear case of concealment of income as per Explanation 3 to section 271(1)(c) of the I.T. Act. Therefore, penalty in our opinion was rightly levied by the AO and sustained by the ld.CIT(A). 25. So far as the argument of the ld.cousnel for the assessee that the AO has levied penalty for both concealment of income and furnishing of inaccurate particulars of income which he could not have done and therefore, the notice being defective such penalty should be cance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ce was caused to the assessee on account of the assesseee not being put in the knowledge of the nature of offence committed by him. The contention regarding the validity of the notice was urged only during the course of the appeal before the Tribunal and it seems to us that the explanation was only an after-thought. The assessee certainly understood the offence alleged against him and showed cause to the ITO by pointing of s. 274 would apply not only to concealment of income but also for furnishing inaccurate particulars of such income and where the offence is two-fold, there is no need on the part of the ITO to strike off any inappropriate portions. In the present case, the offence alleged against the assessee is that there is concealment of income and furnishing of inaccurate particulars of such income. It is not, therefore, necessary for the ITO to strike out any portion of the notice issued to him. 9. The principle of natural justice contained in s. 274 which requires that an assessee shall be heard before levying penalty under s. 271 is to ensure that the basic requirement of fair play in action is fulfilled. The rules of natural justice are flexible and cannot be put....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Income-tax Officer levying penalty under section 271(1) (C) of the Act does not suffer from want of jurisdiction. Support for this view can be found in a decision of this court in CIT v. Chandulal . 27. Though the learned Counsel for the assessee cited a few decisions of the Hon'ble AP High Court, cancelling the penalty for not specifying in the notice as to whether such penalty is for concealment of particulars of income or furnishing of inaccurate particulars thereof, we find the Hon'ble High court in the later decisions have not considered the earlier decisions of the High Court since these were not brought to the notice of their lordships and therefore, cannot be followed especially when the earlier decisions are not reversed by the Apex Court and therefore, still holds good. 28. In this view of the matter, we are of the considered opinion that merely for non-specifying in the notice as to under which limb the penalty is levied i.e., for concealment of income or furnishing inaccurate particular of income thereof, the penalty cannot be cancelled especially when the assessee who is a non-filer was put to notice which he has understood and has replied to such notice i....