AI Drafter 
TaxTMI 
TaxTMI 
2024 (6) TMI 1051
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....al and is opposed to 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(l)(c). 2. The learned Commissioner Of Income (Appeals)-20 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)-20 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 non-application of mind thereby making the said levy illegal and opposed to law. In the instant case the penalty notice suffers from aforesaid infirmity. 4. The learned CIT(A) ought to have seen that the discretion to impose penalty must be exercised judicially. The learned CIT(A) failed to see that addition made in the assessm....
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.... at the time of hearing it is most humbly prayed that the Hon'ble Tribunal may be pleased to allow the appellants appeal and thus render justice. 3. The brief facts of the case are that the assessee, M/s. Enrica Enterprises Pvt. Ltd., is engaged in the business of manufacture and sale of Indian Made Foreign Liquor (IMFL) and it is one of the prime suppliers to M/s.Tamilnadu State Marketing Corporation Ltd (TASMAC). A search and seizure operation u/s. 132 of the Income Tax Act, 1961 (in short "the Act"), was conducted at the premise of the assessee on 06.12.2018. During the course of search, a sum of Rs. 55,27,70,000/- of unaccounted cash was found and seized from the residential premise of Shri M.Kothandarami Reddy as well as six individuals who identified themselves as associates of the assessee and claimed that they have held the cash for and on behalf of the assessee. The amount of cash seized during the course of search and seizure on 06.12.20128 in the residential premise of Shri. M.Kothandarmi Reddy and others was tabulated in Page No. 2 of the assessment order. In the course of search, a sworn statement u/s.132(4) of the Act, was recorded from Shri S.D.Rami Reddy, wor....
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....me on 23.11.2020 admitting a total income of Rs. 7,92,44,724/- and Rs. 14,52,34,049/- which includes additional income offered during the course of search towards inflated expenditure. In the return of income filed for AYs 2015-16 & 2016-17, the assessee company has offered additional income of Rs. 16.39 Crs. & Rs. 23.62 Crs. respectively towards additional income offered during the course of search on account of inflated expenditure under the head marketing expenses being purchase of 'gift articles'. During the course of assessment proceedings, on enquiry with the suppliers of gift articles, replies were received from the suppliers of gift articles along with account copy as reflected in the books of the assessee, where, all of them stated to have supplied gift articles to the assessee, but some of them also stated that the assessee took back some cash at times. The AO completed the assessment u/s.143(3) r.w.s. 153A of the Act on 26.07.2021, accepting the additional income voluntarily offered by the assessee towards inflated expenditure under the head 'gift articles'. While completing the assessment, the AO observed that after considering relevant submissions of the assessee, the ....
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....2.2018. Unless action has been taken by conducting search, the assessee would have continued the practice of evasive methodology and caused huge loss to the Revenue. Therefore, the Assessing Officer opined that admission of additional income and payment of taxes does not absorb the assessee from penalty proceedings. Therefore, rejected arguments of the assessee and levied penalty u/s.271(1)(c) of the Act, amounting to Rs.5,67,22,512/- which is equivalent to 100% tax sought to be adopted. The relevant findings of the AO are as under: 7. Being aggrieved by the penalty order, the assessee preferred an appeal before the Ld.CIT (A). Before the Ld.CIT (A), the assessee challenged the penalty order passed by the AO u/s.271(1)(c) of the Act, in light of show cause notice issued u/s.274 r.w.s.271(1)(C) of the Act, dated 26/11/2021 and argued that, in absence of proper satisfaction recorded by the AO and also show cause 'as to why' penalty proceedings are initiated, the AO cannot levy penalty u/s.271(1)(c) of the Act. The assessee has also challenged penalty levied on estimated addition towards additional income offered by the assessee for inflated expenditure under the he....
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....he suppliers. Therefore, rejected arguments of the assessee and penalty levied by the AO t u/s.271(1)(c) of the Act. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 9. The Ld. Counsel for the assessee, Shri D. Anand, Advocate, referring to show cause notice issued u/s.274 r.w.s.271(1)(c) of the Act dated 26.07.2021 submitted that, the AO has issued a printed form of show cause notice without specifying under which limb the assessee is charged to levy penalty u/s.271(1)(c) of the Act, which shows non- application of mind by the AO. The Ld. Counsel for the assessee further submitted that the AO should arrive at a clear satisfaction and such satisfaction should be discernable from the assessment order itself. Further, show-cause notice issued by the AO should clearly spelt out the charge, on which, he proposed to initiate penalty proceedings. Issuing printed form of notice without specifying the charge, i.e. whether penalty proceedings has been initiated for 'concealment of particulars of income or furnishing of inaccurate particulars of income' vitiates the entire proceedings, including consequent order passed by the AO imposing penalty u/s.271(1)(C) ....
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....Assessee Company during the course of search. Except this, there is no evidence with the AO to allege that the assessee has concealed the particulars of income or furnished inaccurate particulars of income, which warrants levy of penalty u/s.271(1)(C) of the Act. The Ld.Counsel for the assessee further referring to the decision of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd., v. State of Orissa [1972] 83 ITR 26 and also the decision of the Hon'ble Delhi High Court in the case of CIT vs. Escorts Finance Ltd. [2009] 226 CTR 105 (Del) submitted that penalty cannot be levied merely because amount taxed as income. In the instant case, quantum assessment is completed based on ad-hoc disallowance on estimating portion of marketing expenses and based on surrender of income by the assessee, but not backed by any incriminating material which would neither mean that the assessee has neither concealed the particulars of income nor furnished inaccurate particulars of income. Therefore, he submitted that penalty levied by the AO and sustained by the Ld.CIT(A) should be deleted. 11. The Ld.DR, Shri. R. Clement Ramesh Kumar CIT, on the other hand, supporting the order of the Ld....
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....a reasonable opportunity of being heard. From the conjoint reading of section 271(1)(c) r.w.s.274 of the Act, it is undisputedly clear that charge must be precise and imposing of penalty only on that footing. Therefore, before deciding the issue of penalty levied u/s.271(1)(c) of the Act, in light of show cause notice issued by the AO u/s.274 r.w.s.271(1)(c) of the Act dated 26.07.2021, one has to examine the assessment order passed by the AO and show cause notice issued by the AO u/s.274 r.w.s.271(1)(c) of the Act and consequent penalty order passed by the AO. 13. It is an admitted legal position that before initiating penalty, the assessee must be apprised of the precise charge brought against the assessee. The assessee must be told distinctly whether he has held guilty of having concealed the particulars of income or furnished inaccurate particulars of income. Section 274(1) provides for reasonable opportunity to be given to the assessee so that he can meet the charge. Therefore, from the above, it is very clear that the satisfaction arrived at by the AO before charging the assessee on particular limb of u/s.271(1)(c) of the Act, the AO must clearly record his satisfaction an....
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.... initiation of proceedings u/s.271(1)(c) of the Act. The existence of such conditions should be discernable from the assessment order or order of the appellate authority or revisional authority. Even, if there is no specific finding regarding the existence of the conditions u/s.271(1)(c) of the Act, at least the facts set out in Explanation-1A & 1B should be discernable from the order which is by legal fiction constitutes concealment because of deeming provision. Even if these conditions do not exist in the assessment order, at least a direction to initiate proceedings u/s.271(1)(c) of the Act, is a sine qua non for the AO to initiate the proceedings, because of deeming provision contained in sec.1B. The Hon'ble High Court further held that notice u/s.274 of the Act should specifically stated the ground mentioned in s.271(1)(c) of the Act i.e. whether it is for 'concealment of particulars of income or furnishing of inaccurate particulars of income'., Sending a printed form of notice with grounds mentioned in Sec.271(1)(c) of the Act would not specific requirement of law. This legal position is re-affirmed by the Hon'ble Supreme Court in the case of CIT v. SSA's Emerald Meadows 73 T....
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....e. The Ld.Counsel for the assessee has relied upon the decision of the Hon'ble jurisdictional High Court of Madras in the case of Babuji Jacob v. ITO reported in [2021] 430 ITR 259 (Madras). The Hon'ble Madras High Court after considering its earlier decision in the case of Sudaram Finance Ltd. v. ACIT reported in [2018] 93 taxmann.com 250, has held that penalty levied u/s.271(1)(c) of the Act, consequent to vague/defect notice issued u/s.274 r.w.s.271(1)(c) of the Act, cannot be sustained under the law. The relevant findings of the Hon'ble High Court are 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 asset, the long term capital gains were computed and the assessee requested for deduction ....
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....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 funds for purchase of a new flat, that he sold trees with roots, coconut seedling and ot....
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....d 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 reduce it 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 this Court, to which, one of us (TSSJ) was a party, in the case of CIT, Chennai-IV Vs.....
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....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) dated 30.6.2017. 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 rejected the plea of the assessee, which was a limited company, when they raised an....
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....le 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 assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the ....
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....lty 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 are incorrect; 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 particula....
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....te 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. 16. The assessee is also relied upon the decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra), wherein, the Hon'ble Karnataka High Court has considered an identical issue in light of show cause notice issued u/s.274 r.w.s.271(1)(c) of the Act and after considering relevant facts held that notice u/s.274 of the Act should speci....
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....found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty can be passed. If the explanation offered, even though not substantiated by the assessee, is found to be bona fide and all facts relating to the same and material for the compulation of his total income have been disclosed by him, no penalty can be imposed. [Para 63] * The direction referred to in Explanation IB to section 271 should be clear and without any ambiguity. If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings in appeal, but the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. * Notice under section 274 should specifically state the grounds mentioned in section 271(T)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically....
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....n setting aside the same. Hence, the substantial questions of law framed in this case is answered in favour of the assessee and against the revenue. [Para 66] Case 3 * In the instant case, the penalty proceedings were initiated by the Assessing Authority initially on the basis of his assessment order. During the pendency of the said penalty proceedings, the assessment order was challenged by way of an appeal. In appeal the Appellate Authority deleted the additions made under section 69 by the Assessing Authority. Instead, he sustained additions under new grounds of under valuation of the closing stock. However, the Assessing Authority, in the penalty proceedings, took note of the Appellate order and suitably amended the penalty proceedings and proceeded further in the matter and then imposed penalty. Therefore, it is clear, that the subject matter of the penalty proceedings was the order of the Appellate Authority and not the order passed by the Assessing Authority. If the Appellate Authority was satisfied that the addition had to be made on the ground of under valuation of the closing stock, which was not the finding recorded by the Assessing Authority, on which ....
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.... 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 well as the decision of Hon'ble Bombay High Court in PCIT V/s Goa Coastal Resorts and Recreation (P.) Ltd (272 Taxman 157) against which revenue's Special Leave petition (SLP) has already been dismissed by Hon'ble Supreme Court which is reported at 130 Taxmann.com 379. The Ld. Sr. DR, has similarly relied on decision of 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. 8. Upon perusal of notice issued u/s 274 r.w.s. 271(1)(c) as extracted above, we find that though the applicable clause has been ticked by Ld. AO, however, the applicable limb i.e., whether the penalty was being initiated for furnishing of inaccurate particulars of income or for concealment of income has not been specified. Even in the body of penalty order, penalty has mechanically been levied without framing specific charge against....
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....al 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 asset, the long term capital gains were computed and the assessee requested for deduction under Section 54F of the Act, as the sale consideration received was utilized for purchase of a new flat, in which, the name of the assessee's wife was also included as a purchaser. The assessee further stated about the sale of livestock and standing crops. The assessee also stated that he is a senior citizen carrying on agricultural operations for 27 years and that his income was based upon the interest received from bank deposits and offered that a sum of Rs.50 lakhs may be treated as revenue in nature and taxed as income though there was no positive fact or finding had been found so as to avoid protracted litigation. 19. Further, with regard to deposits, the assessee explained that he had received the amount of Rs. 21,56,250/- towards development cost of the agricultural land and a copy of the letter acknowledging payment made by the party was produced. This amount was received by RTGS to his bank account and the buyer had co....
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...., 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 funds for purchase of a new flat, that he sold trees with roots, coconut seedling and other miscellaneous items, that the farming sector was an unorganized sector, that all were sold to agriculturists and that he cannot be compelled to furnish details in this regard. The assessee furthermore pointed out that full particulars such as bank statements, cash deposit out of accumulated income were fully disclosed and furnished to the Assessing Officer, that there was no non disclosure, that the explanation offered was bona fide and that therefore, penalty could not be imposed. 24. The Assessing Officer, while imposing penalty vide order dated 28.9.2016, held that but for the scrutiny assessment under Section 143(3) of the Act, the cash deposits would not have come to light and therefore, rendered a finding that the assessee furnished inaccurate particulars. 25. This finding of the Assessing Officer is incorrect because while completing the assessment under Section 143(3) of the Act, there was no allegation against t....
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....ported 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 this Court, to which, one of us (TSSJ) was a party, in the case of CIT, Chennai-IV Vs. Gem Granites (Karnataka) [reported in (2014) 42 Taxmann.com 493] and the aspect as to how onus/burden of proof shifts from the assessee to the Revenue when penalty proceedings are initiated, is held in the following terms : "11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No. 9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanatio....
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.... 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 rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time before the High Court and considering the administrative set up of the said assessee and the fact that the assessee was never prejudiced on account of the alleged defect, the Court rejected the argument of the assessee. 33. In the case on hand, we find that at the first instance, while replying to the penalty show cause notice dated 30.3.2016, the assessee raised a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under Section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. Hence, the decision of this Court in the case of Sundaram Fin....
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....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 assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, t....
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....y 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 particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason,the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature." 37. On this issue, a useful reference can be to the decision of the Gujarat High Court in the case of National Textiles Vs. CIT [reported in (2001) 249 ITR 125], wh....
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....e carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner. 6. Besides, we note that the Division Bench of this Court in Samson Preinchery (supra) as well as in New Era Sova Mine (supra) has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era So....
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....n'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 proceedings. The failure to frame specific charge against the assessee during penalty proceedings would be fatal to penalty proceedings itself and the same could not be sustained in the eyes of law. 12. Recently, the issue of defect in notice has been dealt at length by larger bench of Hon'ble Bombay High Court in Mohd. Farhan A.Shaikh V/s DCIT (125 taxmann.com 253) wherein the Hon'ble Court has answered the issue of reference as follows: - 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(1)(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), ....
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..... 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. That said, regarding the other assessment year, it reasons 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 ....
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.... 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 findings that the assessee had understood the notices well and filed replies contesting the levy of penalty. The legal ground assailing defect in notice was raised for the first time before Hon'ble High Court and therefore, Hon'ble Court declined to entertain the same However, the same is not the case here. 14. Another decision as cited by Ld. CIT-DR is the decision of Hon'ble High Court of Madras 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. We find that this decision has already been distinguished by Hon'ble High Court of Madras in Babuji Jacob Vs. lTO (supra) as under:- 32. The decision of this Court in the case of Sundaram Finance Ltd., was couched on a different factual position wherein the Court rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time bef....
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....the Hon'ble Bombay High Court, Full Bench in the case of Mr. Mohd. Farhan A. Shaikh, supra, has considered exactly an identical issue. Even the Jurisdictional High Court in the cases of Babuji Jacob, supra and Original Kerala Jewellers, supra has considered identical situation and held that the very initiation of penalty proceedings on a defective notice is invalid and it do not warrant imposition of penalty u/s.271(l)(c) of the Act on the assessee. 7. As the issue of defect in notice i.e., jurisdictional issue, by the present assessee, being individual, raised before CIT(A) for the first time and the CIT(A) simpliciter rejected the plea of the assessee by observing in para 7.3 as under:-' "7.3 The content of the entire assessment order itself is sufficient reason for initiating penalty proceedings u/s.271(l)(c); the AO has duly initiated penalty proceedings in the Assessment Order itself; hence, there is no need to record reasons for initiating penalty proceedings. Accordingly, ground No. 5 is also rejected." It means that the assessee is vigilant from the beginning and raised this issue of defect in notice for the first time before CIT(A) and as....
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....nses. Further, the payments were made to suppliers by transferring by way of cheques/RTGS. Later, the vendor/suppliers withdrew cash and handed over to the assessee - M/s. Enrica Enterprises Pvt Ltd. By this modus operandi the assessee has generated unaccounted cash over a period of years.. L DEPARTMEN Further, Mr.Rami Reddy, director of M/s. EEPL decides the quantum of amount to be generated in cash from various suppliers. The close aide of the group were actively involved in assisting for safe keeping the cash. The huge sum of cash seizedduring the search action were such safely kept cash meant for meeting out certain expenditures. In his self-incriminating statement u/s 132(4) of the IT Act 1961, Mr.Rami Reddy, has claimed to have resorted into the activity of withdrawing, by wayof cash, a portion of his RTGS payments towards supply of gift articles booked under the head selling expenses as "marketing expenses". c.) During the search proceedings an amount of Rs.54,59,20,000/- was seized in the residence and office-of different parties including the employees of M/s. EEPL and relatives of Mr. Rami Reddy, who aided him in safe keepin....
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.... Principal Commissioner or Commissioner in the course of any proceedings under this Act, 1 satisfied that any person- (c) has concealed the particulars of his income or fumished inaccurate particulars of such income, or Explanation 54-Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of (0) any money, buillon, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year, or () any income based on any entry in any books of account or other documents or fransactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year which has ended before the date of search and- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein or (b) the due date for fling the return of income for such previous ....