TaxTMI 
TaxTMI 
2025 (4) TMI 127
X X X X Extracts X X X X
X X X X Extracts X X X X
....urate particulars of income; penalty levied for both the limbs i.e., concealment of income and furnishing of inaccurate particulars of income; penalty levied u/s.271(1)(c) dt.27- 6-18 is invalid and would be liable to be deleted. 2. On the facts and circumstances of the case And in law, ld CIT(A) has erred in sustaining penalty levied u/s.271(1)(c) of Rs. 2,80,000 that it is 'concealment of income' and 'furnishing of inaccurate particulars of income'; while exemption claimed u/s. 10(38) on LTCG on sale of shares does not come within the meaning of 'concealment of income' and also of `furnishing of inaccurate particulars of income' which is pre-requisite/ sine qua non for imposing penalty u/s.271(1)(c); in absence of this pre-condition, no penalty u/s.271(1)(c) could be initiated/levied; penalty levied is unjustified and is liable to be deleted. 3. On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining penalty levied u/s.271(1)(c) dt.27-6-18 of Rs. 2,80,000; when assessment order passed u/s143(3) dt. 13-12-17 by ITO-3(3), Raipur is invalid for want of jurisdiction; an invalid order u/s143(3) 'dt.13-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive (for short 'AR') for the assessee, submitted that the A.O had issued two "Show cause" notices (SCN)/letter to the assessee under Sec. 274 r.w.s 271(1)(c) of the Act, dated 14.12.2017 and dated 29.05.2018. It was the claim of the ld. A.R that as the Assessing Officer had failed to point out the specific default in both the "Show Cause" notices/letter (herein referred to as 'SCN's) issued u/s. 274 r.w.s 271 of the Act, dated 14.12.2017 (supra) and dated 29.05.2018 (supra) for which the assessee was called upon to put forth an explanation that as to why he may not be saddled with penalty u/s. 271(1)(c) of the Act, therefore, the order thereafter passed by him u/s 271(1)(c) of the Act cannot be sustained and is liable to be vacated. The ld. AR in order to drive home his aforesaid claim had drawn our attention to both of the aforesaid SCN's, i.e dated 14.12.2017 and 29.05.2018. Referring to the aforesaid discrepancy in the SCN's, dated 14.12.2017 and 29.05.2018, it was submitted by the ld. AR that as the AO had failed to validly put the assessee to notice as regards the specific default for which the impugned penalty under Sec. 274 r.w.s 271(1)(c) was sought....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hich he was called upon to put forth an explanation that as to why penalty u/s.271(1)(c) may not be imposed on him. As the A.O in the aforesaid SCN's had mentioned both the defaults, i.e. "concealment of income" or "furnishing of inaccurate particulars of income" w.r.t. the aforesaid addition of Rs. 8,94,500/- (supra), therefore, by using "OR" as a conjunction between both the aforesaid default he had not only failed to validly convey to the assessee in clear terms the specific defaults for which the penalty was sought to be imposed in his case, but had in fact kept the latter guessing about the default for which penalty was sought to be imposed in his case. 11. 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 14.12.2017 (supra) and 29.05.2018 (supra) failed to point out the specific default for which penalty u/s.271(1)(c) was sought to be imposed, therefore, the assessee was not validly put to notice as regards the default for which he was called upon to explain that as to why penalty m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; or both of the said defaults is not merely an idle formality but is a statutory obligation cast upon him, which we find had not been discharged in the present case as per the mandate of law. 13. We would now test the validity of the aforesaid "Show Cause" notice(s) dated 14.12.2017 and 29.05.2018, and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers to levy penalty under Sec. 271(1)(c) of the Act if in the course of the proceedings 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 his 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-appl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee of his statutory right of an opportunity of being heard and defend his case. 14. We find that the Hon'ble High Court of Karnataka in the case of CIT Vs. SSA's Emerald Meadows (73 taxmann.com 241)(Kar) following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings were initiated, i.e. whether for 'concealment of particulars of income' or 'furnishing of inaccurate particulars', then, the same has to be held as bad in law. The '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'b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es, we note that the Division Bench of this Court in Samson (supra) as 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 Soya 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 clarity the nature of satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck off the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application 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 Mi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e future-on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 72]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee 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 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 non-application 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 irrel....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication." Also, the Hon'ble High Court of Bombay in the case of Pr. CIT (Central) Bengaluru Vs. Goa Coastal Resorts 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0,000/- imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. The penalty of Rs. 2,80,000/- imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. The Ground of appeal Nos. 1, 2 & 3 a/w. additional ground of appeal raised by the assessee are allowed in terms of our aforesaid observations. 16. In the result, appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 30^th day of August, 2024. ============= Document 1 GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE INCOME TAX OFFICER WARD 3(3) RAIPUR 37 To SHYAM SUNDER AGRAWAL E-6, Sector-1 Devendra Nagar RAIPUR 492001, Chhattisgarh India 1854 PAN: Assessment Year: 2015-16 Date: Notice No. : ACIPA2459F 14/12/2017 Notice under section 274 read with section 271(1)(c) of the Income Tax Act, 1961 Sir/ Madam, Whereas in the course of proc....