TaxTMI 
TaxTMI 
2023 (9) TMI 832
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....ing the course of assessment proceedings. 2. That on the fact and circumstances of the case, CIT(A), NFAC and learned Assessing Officer, Ward-4(1), Raipur (C.G.) has been erred for levying penalty of Rs.5,19,400/- u/s.271(1)(c) of income tax act on sale of shares of Rs.20,50,910/- on the basis of notice u/s.274 which in itself is bad in law. 3. That on the fact and circumstances of the case, the honourable CIT(A) has been erred for confirming the order of learned assessing officer without properly appreciating the fact of the case." 2. Succinctly stated, assessment in the case of the assessee was framed by the A.O vide his order passed u/s.143(3) of the Act dated 08.12.2016, wherein after making an addition of Rs.20,50,910/- with respect to the unaccounted money introduced by the assessee in its books of accounts in the garb of long term capital gain (LTCG) that was claimed as exempt u/s. 10(38) of the Act the income of the assessee was assessed at Rs.22,47,480/-. Also, the A.O while culminating the assessment initiated penalty proceedings u/s.271(1)(c) of the Act for furnishing of inaccurate particulars with respect to the aforesaid addition of Rs.20,50,910/- ....
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.....03.2022 7. Per contra, the Ld. Departmental Representative (for short 'D.R') relied upon the orders of the lower authorities. It was submitted by the Ld. D.R that as the assessee was afforded sufficient opportunity in the course of penalty proceedings, thus, it was incorrect on its part to claim that no opportunity of being heard was afforded to it. It was submitted by the ld. D.R that now when the assessee HUF in compliance to the SCN, dated 08.12.2016 r.w SCN, dated 07.06.2017 had vide its reply dated 15.06.2017 come forth with an explanation that no penalty u/s 271(1)(c) of the Act was called for in its hands, therefore, it was beyond comprehension that as to on what basis it could thereafter claim that it was not validly put to notice about the default for which penalty u/s.271(1)(c) of the Act was sought to be imposed on it. 8. We have heard the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home their respective contentions. Admittedly, on a perusal of the SCN dated 0....
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....specific defaults for which the penalty was sought to be imposed in its case, but had in fact kept the latter guessing about the default/defaults for which penalty was sought to be imposed in its case. 9. Insofar the validity of the jurisdiction assumed by the A.O for imposing penalty u/s 271(1)(c) is concerned, we find that the same has been assailed before us on the ground that as the A.O had in the aforesaid "Show cause" notice(s), dated 08.12.2016 and 07.06.2017 failed to point out the specific defaults for which penalty u/s.271(1)(c) was sought to be imposed in its case, therefore, the assessee was not validly put to notice as regards the default/defaults for which it was called upon to explain that as to why penalty may not be imposed on it under Sec. 271(1)(c) of the I.T Act. 10. We have given a thoughtful consideration to the facts of the case, and are persuaded to subscribe to the claim of the Ld. AR that the A.O in both the aforesaid SCN's dated 08.12.2016 and 07.06.2017 had failed to point out the defaults for which penalty was sought to be imposed on the assessee. In our considered view, as both of the two defaults envisaged in Sec. 271(1)(c) i.e 'concealment of i....
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....gs he is satisfied that the assessee had either 'concealed his income' or 'furnished inaccurate particulars of his income' or had committed both the defaults w.r.t. the various additions/disallowances made in its hands while framing the assessment. In our considered view as penalty proceedings are in the nature of quasi criminal proceedings, therefore, the assessee as a matter of a statutory right is supposed to know the exact charge for which he is being called upon to explain that as to why the same may not be imposed on him. The non-specifying of the charge in the 'Show cause' notice not only reflects the non-application of mind by the A.O, but in fact defeats the very purpose of giving a reasonable opportunity of being heard to the assessee as envisaged under Sec. 274(1) of the I.T Act. We find that the fine distinction between the said two defaults contemplated in Sec. 271(1)(c), viz. 'concealment of income' and 'furnishing of inaccurate particulars of income' had been appreciated at length by the Hon'ble Supreme Court in its judgments passed in the case of Dilip & Shroff Vs. Jt. CIT (2007) 210 CTR (SC) 228 and T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC). The Hon'ble Apex Cour....
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....he 'Special Leave Petition' (for short 'SLP') filed by the revenue against the aforesaid order of the Hon'ble High Court of Karnataka had been dismissed by the Hon'ble Supreme Court in CIT Vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC). Apart from that, we find that a similar view had been taken by the Hon'ble High Court of Bombay in the case of CIT Vs. Samson Perinchery (ITA No. 1154 of 2014; Dt. 05.01.2017)(Bom). The Hon'ble High Court relying on the judgment of the Hon'ble High Court of Karnataka in the case of Manjunathja Cotton and Ginning Factory (supra), which in turn had relied on the judgment of the Hon'ble Apex Court in T. Ashok Pai Vs. CIT, 292 ITR 1 (SC) had approved the order of the Tribunal that had deleted the penalty u/s 271(1)(c) imposed by the A.O and had, inter alia, observed, that the failure of the AO to strike-off the irrelevant default in the notice issued under Sec. 274 of the Act which is in a standard proforma clearly indicates a non-application of mind by the A.O while issuing the notice. Further, we find that the Hon'ble High Court of Bombay in the case of Pr. CIT (Central), Bengaluru Vs. Golden Peace Hotels & Resorts (P) Ltd. (2021) 124 tamnn.....
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....ication of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 32) is perused, it is apparent that the inapplicable portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order is quite consistent with the law laid down in the case of Samson Perinchery and New Era Soya Mine (supra) and therefore, warrants no interference." The Special Leave Petition (SLP) filed by the revenue against the aforesaid order had thereafter been dismissed by the Hon'ble Apex Court in Pr. CIT (Central) Vs. Golden Peace Hotels and Resorts (P) Ltd. (2021) 124 taxmann.com 249 (SC). Also, the "Full bench" of the Hon'ble High Court of Bombay in the case of Mohd. Farhan A. Shaikh V. DCIT, Central Circle-1, Bengaluru (2021) 280 Taxman 334 (Bombay), had observed that where the assessment order clearly records a satisfaction for imposing penalty on one or other; or both grounds mentioned in Sec. 271(1)(c), but there is a defect in the SCN, wherein the AO had failed to strike-off the irrelevant default, then, the....
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....ssee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, 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 finding of whether the conditions mentioned in section 271(1)(c) exist in the case. It is because Explanations 1(A) and 1(B), as the deeming provisions, create a legal fiction as to the grounds for penalty proceedings. I....
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....in, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. 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(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's def....
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....that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure 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....
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....ts and Recreation Pvt. Ltd. (2020) 113 taxmann.com 574 (Bombay), had observed that where there was no recording of satisfaction by the AO in relation to any concealment of income or furnishing of inaccurate particulars by assessee in the notice issued for initiation of such proceedings, then, the Tribunal had in absence of said statutory requirement rightly vacated the penalty proceedings. Also, the Hon'ble High Court of Bombay in the case of PCIT, Panaji Vs. Goa Dourdo Promotions (P) Ltd. (2021) 433 ITR 268 (Bombay) relying upon its earlier orders in the case of, viz.(i). Goa Coastal Resorts & Recreation P. Ltd. (supra); (ii). Samson Perinchery (supra); and (iii). New Era Sova Mine (supra), had observed that recording of satisfaction by AO in relation to any concealment of income or furnishing of inaccurate particulars by the assessee in notice issued u/s 271(1)(c) is the sine qua non for initiation of such proceedings. Further, we find that the ITAT, Pune in Ashok Sahahakari Sakhar Karkhana Ltd. Vs. ACIT (2018) 99 taxman.com 374 (Pune), had held that where in a notice issued u/s 274 of the Act the AO had used conjunction "or" to mention both limbs, i.e, concealment of income or f....
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....g the other grounds of appeal raised by the assessee, wherein it has assailed the penalty sustained by the CIT(Appeals) qua the merits of the case, which, thus, are left open. 15. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in open court on 09th day of August 2023. ============= Document 1 Office of : WARD 4 (2), RAIPUR NOTICE UNDER SECTION 274 READ WITH SECTION 271 (1) (c) OF THE INCOME TAX ACT, 1961 File No: ITO4 (2)/RPR/ PAN: AAKHK2082E TO M/S KHOM RAM CHANDRAWANSHI (HUF). H NO 18 KRISHNA SAKHA SOCIETY ROHNIPURAM NEAR RING ROAD DAGANIA RAIPUR. Sir/Madam, Dated: 08/12/2016 me for the Assessment ушак Whereas in the course of proceedings before 2014-15, it that appears you have concealed the particulars of your income or furnished inaccurate particulars of such income show order imposing be made not under You are hereby requested to appear before me on 10-01-2017 at 11:30 AM and on you should cause why an Section 271 (1) (c) of the Income Tax Act, 1961. If no one attends this office on be of hearing, the....