TaxTMI 
TaxTMI 
2025 (5) TMI 512
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....nd hence the same kindly be quashed. 2. That the impugned SCN issued u/s 274 r.w.s 271(1)(c) of the Act, is quite vague and did not at all specify which limb of S.271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment particulars of income or furnishing of inaccurate particulars of income. The impugned penalty based on such a notice being contrary to the provisions of law & facts kindly be quashed. 3. Rs. 1,71,452/-: The ld. CIT(A)/NFAC erred in law as well as on the facts of the case in confirming the order imposing penalty u/s 271(1)(c) of the Act of Rs. 1,71,452/-. The penalty so imposed by the AO & confirmed by the ld. CIT(A)/NFAC being totally contrary to the provisions of law and facts kindly be deleted in full. 4. The appellant prays your honor indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing. 3. Succinctly, the fact as culled out from the records is that in this case return of income declaring an income of Rs. 3,47,613/- was filed by the assessee on 23.11.2010. Later on, it has come to notice that the assessee had purchased and sold certain lands w....
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....constructed. The reply submitted by the assessee was general and vague. Considering the fact and circumstances of the case, A.O. had to add Rs. 3,75,917/- in total Income of the assessee on a/c of boundary wall expenses. 4. Aggrieved from that order of the ld. AO levying the penalty the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below: "5. After examination of the material on record, the appeal order is passed as herein under. 6. In the case, appeal order on AO's order u/s 143(3) rws 254 has been passed on 23.11.2023. The same reads as under:- "Coming to the facts of the case, it is to be seen that assessee has not refuted the fact that in the photographs printed on transfer deed, there was no boundary wall surrounding the plot and in the transfer deed also there was no mention of existing boundary wall. Against these facts, assessee has filed the hand written letter from person who has claimed that he constructed the boundary wall and received payments on various dated. But all the payments were below Rs. 20,000/- and there was no evidence of any pay....
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....gs were initiated for "furnishing inaccurate particulars". This clearly shows that assessee was aware that the penalty proceedings were initiated for furnishing inaccurate particulars of income. Since there was clarity in the assessment order, the mistake in the penalty notice, which was issued through standardized proforma, in no way caused prejudice to the assessee and prevented him from filing an effective reply on the facts of his case. This issue stands settled by Hon'ble Supreme Court which had confirmed the judgment of Hon'ble High Court of Madras in the case of Gangotri Textiles Ltd. (order dated 25.08.2020). In that judgment, it has been observed that all violations will not result in nullifying the order passed by statutory authorities. If assessee fails to establish that he had been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply due to the defect in the notice, there is no case for treating the proceedings invalid. In view of above facts, assessee's contention regarding defective notice is rejected and Ground No.1 is dismissed. 6.4 Regarding Ground No.2, the fact remains that....
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....A) vide order dt. 23.11.2023 repeated the impugned addition without appreciating the facts, evidences and submission made by the appellant. The ITAT also confirmed these additions. In the penalty, aggrieved from the order u/s 143(3) of the Act, the assessee preferred an appeal before CIT(A), but did not find his favour. The ld. CIT(A), partly allowed the appeal of the assessee vide order dated 30.07.2021 and the AO revised the penalty amounting to Rs. 1,17,452/- u/s 275(1A)/154 of the Act. Hence this appeal. Submission: 1. Legal arguments: 1.1 Assessment and penalty - separate proceedings: It is pertinent to note that the AO has levied the penalty for concealment of income only & only on the basis of findings recorded by the AO in the assessment order. It is a settled principle of law that assessment and penalty proceedings are separate and distinct from each other. Kindly refer Durga Kamal Rice Mills v/s CIT (2004) 265 ITR 25 (Cal.), CIT & Anr. v/s Anwar Ali (1970) 76 ITR 696 (SC), CIT v/s Ishtiaq Hussain (1998) 232 ITR 673 (All). The AO after reproducing the relevant portion of CIT(A) order for quantum and discussing the provisions u/s....
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....t in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income or that a deduction has wrongly been claimed, cannot automatically be adopted, though a finding in the assessment proceedings constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the AO is required to bring positive material showing intentional concealment. 2. On merits: Firstly, we strongly rely upon the detailed submissions dated 22.04.2024 filed before Hon'ble ITAT during the hearing of the quantum appeal and hence, may kindly be considered as regards the merits of the claim made. The Apex Court in CIT vs. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 0158 (SC) has held that: "Merely because the assessee claimed deduction of interest expenditure which has not been accepted by the Revenue, penalty under s. 271(1)(c) is not attracted; 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." The Hon'ble ITAT at Pg. 12 Para 6, of the order passed by the Hon'ble ITAT in quantum appeal dated 23.04.2024, has held the ....
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....ineness of the letter. Therefore, the account made for Nirman Theka Karya" was fabricated one and is suspicious. (iii) As per photographs printed on the sale deed, the boundary wall was not appearing in the photographs, this also shows that while registering the documents of sale deed to Smt. Neeta Garg, the boundary wall on the plot situated near Suchna Kendra, was not even in existence. "Thus, the expenses incurred on the boundary wall construction, were not properly supported with the documentary evidences, hence, the same were disallowed and added back to the income of the assessee during the assessment proceedings u/s 147/143(3) of the Act. As discussed above, on verification of the facts as per directions given by the Hon'ble ITAT, it has been established that the expenses incurred on the boundary wall construction, are not properly supported with the documentary evidences and the same are not allowable and hereby added to the total income of the assessee for the A.Y. 2010-11." Furthermore, ld. CIT(A) erred in drawing wrong conclusion without appreciating the independent evidences and additional evidences, at pg.4 pr. 9 of order concluded the ap....
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....lant did construct a boundary wall, so as to be allowed the benefit of the cost of construction thereof while computing LTCG. Before the Hon'ble ITAT, additional evidence in the shape of a bill raised by the civil contractor, Shri Kamal Raniwal, was submitted (as was not admitted by the CIT(A)), which, was admitted by the Hon'ble ITAT, and the issue was restored to the file of the AO with certain observations and directions, reproduced here in above. It was also requested before the Hon'ble ITAT that the authorities below may kindly be directed have a physical verification at the site to ascertain the facts. The Hon'ble ITAT directed the directed the AO, to consider the evidences placed in support of construction cost, or else the AO may have a site inspection. The AO rejected the construction bill raised by the contractor, but chose to have a site verification. Pertinently, the Inspector duly visited and gave a factual report that a boundary wall was constructed at all side of the plot and is still available there. 2.2 Crucial Independent Evidence ignored: At the outset it is submitted that in compliance to the Hon'ble ITAT order, the ld. AO directed Ward Inspector to sub....
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....portunity/ confronting the appellant, an affidavit sworn by Shri Kamal Raniwal dt.15.07.2021(PB 23-24) was filed before the ld. CIT (A) wherein Shri Kamal Raniwal contractor categorically affirmed having constructed the boundary wall between the period 18.08.2009 to 31.10.2009 and getting the payment. The sworn statement was just to clarify the thing that 17,000/- was actually paid to him on 21.09.2009 and there was only a clerical mistake committed in the contractor's bill. Thus, the contractor bill together with the clarification through the duly sworn affidavit, both of which, remaining completely uncontroverted, were the evidences binding upon the authority's bellow. There was no reason why not to accept these evidences in absence of any contrary evidence brought on record. Further, fact of construction of the boundary wall, the availability and existence thereof found by the Inspector in his factual report cannot be denied and has to be accepted. Kindly refer Mehta Parikh & Co. v. CIT (1956) 30 ITR 181(SC). 2.3.3 There apart, it is a matter of common knowledge and prevailing practice also that whenever a buyer an immovable property like a plot, a boundary wall is ....
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....evidence/explanation submitted by the assessee, it has to be objectively tested. A good proof cannot be converted into no proof. Moreover, discretion conferred upon the AO has to be exercised judiciously as held in CIT vs Smt. P.K. Noorjahan (1999) 237 ITR 0570 (SC). Therefore, the impugned addition, kindly be deleted in full. GOA 5: CIT(A) erred in non-admission of additional evidence u/r 46A: Facts: The assessee during the course of appellate proceeding before CIT(A) submitted prayer for admission of additional evidence u/r 46A being two affidavits in related to issue under consideration. However, ld. CIT (A) at Pg.3 Pr.8 held as under: "7. As mentioned above, assessee has filed two affidavits. They are discussed as under: (i) Shri Kamal Raniwal son of Ramesh Raniwal, Ajmer. The affidavit is dated 15.07.2021 and claims that Kamal Raniwal had received Rs. 2,43,160/- on various dates from 18.08.2009 to 31.10.2009 and on 01.11.2009, he had given one confirmation (the hand written letter already mentioned above in this appeal order) and in that confirmation he had made a mistake that one payment of Rs. 17,000/- which was actually received ....
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....le from a bare look upon the contractor bill (PB21-22) also. The AO however, held the contractor bill as fictitious and suspicious completely without confronting and without giving any opportunity to the appellant on this aspect, but straightforwardly made his observations adverse to the appellant, this itself constituted a sufficient ground for the very admission of the affidavit under Rule 46A. Again, Affidavit of Smt Neeta Garg was also quite relevant and was rightly filed wherein she affirmed the fact of getting a boundary wall constructed while purchasing the land, because there were contradictory claims on facts were made by both the parties. The ld. CIT(A) instead of understanding the evidential value and applying the same on the facts of the present case while deciding the issue before him, merely rejected the same by saying that they don't constitute any independent evidence, but has not explained how it is so. In fact, it cannot be denied that in the peculiar factual circumstances, these affidavits went to the root of the matter and were essential to decide the appeal. Powers of the first appellate authority are very wide and co-terminus with those of the AO.....
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....ence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under S. 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Expl.-1 or in Expl.-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in S. 271 should be made known about the grounds on which they intend imposing penalty on him as the S. 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in S. 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in S. 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature....
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....hat sending printed form where all the grounds mentioned in S. 271 would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be could be imposed to the assessee....... X X X X ...............Accordingly, in view of the above facts and circumstances of the case as well as the decisions cited (supra) we hold that the notices issued u/s 274 r.w.s. 271(1)(c) of the Act dated 19.03.2013 are not valid and the same are quashed. Consequential levy of penalty in all the years are also deleted. Since we have deleted the penalty on legal Ground No. 4, therefore, the other legal ground being academic is not adjudicated upon. 4.0. In the result, the appeals of the assessee are allowed." 3.5. It is submitted that in the above decisions the only stress was upon the SCN wherein only, the occasion arise for the first time for the assessee to reply towards the Show Cause as to why penalty be not imposed w.r.t one or w.r.t both the offences. But by not becoming specific in inviting a reply from the assessee, it is a g....
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....se statements are alleged to be contradictory. Hence the imposed penalty deserves to be quashed. 6. To support the contention so raised in the written submission reliance was placed on the following evidence / records /: S. NO. PARTICULARS PAGE NO. 1. Assessment order u/s143(3) r/w 147 dt. 27.01.2016 1-12 2. Penalty notice u/s 274 r/w 271 of IT Act 1961 dt.28.01.2016 13 3. SCN u/s 274 r/w 271 of IT Act 1961 dt.01.03.2018 14 4. Reply dt. 09.03.2018 filed before AO in response to SCN 15-16 5. Rectification order u/s 154 read with section 271(1)(c) dt. 30/07/2021 17-18 6. Hearing notice dt. 12.10.2023 u/s 250 19-22 7. Submission dt.18.10.2023 filed before CIT(A) 23-30 8. Hearing notice dt. 26.12.2023 u/s 250 31-34 9. Submission dt.02.01.2024 and 03.01.2024 filed before CIT(A) 35-36 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee notice issued by the ld. AO dated 28.01.2016 did not specify the limb upon which he intend to levy the penalty. Even otherwise the disallowance of claim cannot be subjected to penalty as held by ....