TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 903
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....ion 271(1)(c)/270A penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income or whether for under reporting or misreporting of income. Therefore, it is submitted that in the absence of specific charge in the notice issued u/s 271(1)(c) of the Act the said notice is bad in law and consequently the penalty order is bad in law. Reliance was placed on the following decisions: - 1. CIT s. SSA's Emerald Meadows (242 Taxman 180) (SC); 2. PCIT Vs. Gopal Kumar Goyal (153 taxmann.com 534) (Del); 3. PCIT Vs. Sahara India Life Insurance Company Limited 432 ITR 84 (Del); 4. Schneider Electric South East Asia (HQ) Pte. Ltd. vs. ACIT (145 Taxmann.com 665) (Del.) 5. Manish Manohardas Asrani vs. Int. Tax (170 taxmann.com 792) (Mumbai - Trib.) 3. On the other hand, the Ld. DR supported the orders of the authorities below. 4. Heard rival submissions. On perusal of the penalty notices issued u/s 274 r.w.s. 271(1)(c)/270A of the Act, we observe that the notices were issued mechanically stating that assessee has concealed the particulars of income or furnished inacc....
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....nds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushaiya does not lay down the correct proposition of law. Question No.2: Has Kaushaiya failed to discuss the aspect of 'prejudice? 184. Indeed, Kaushaiya did discuss the aspect of prejudice. As we have already noted, Kaushaiya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushaiya, "fully knew in detail the exact charge of the Revenue against him". For Kaushaiya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a r....
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.... N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays non-application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, section 271(l)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT[74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei[ 75]. According to it, when by reason of action on the part of a statutor....
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....n by the Hon'ble Jurisdictional High Court in the case of PCIT Vs. Gopal Kumar Goyal (supra), wherein the Hon'ble High Court held as under: - "11. The Tribunal, after perusing the record and considering the submissions, observed as follows: "13. In the present appeal, the show-cause-notice dated 15-3-2013 which has been issued by the Assessing Officer under section 274 read with section 271(1 )(c) of the Act reveals that Assessing Officer has not recorded any clear cut satisfaction as to whether the penalty under section 271(l)(c) of the Act has been levied for concealment of income or for furnishing of inaccurate particulars of income." 12. As is evident upon a perusal of the impugned order, the Tribunal, in concluding that there was a requirement in law for the AO to clearly indicate his satisfaction, as to which limb of section 271(l)(c) of the Act was triggered qua the respondent/assessee, placed reliance on the following judgments: Pr. CIT v. Sahara India Life Insurance Co. Ltd. [20191 108 taxmann.com 597/[2021] 432 ITR 84 (Delhi) and Mohd. Farhan A Sheikh v. Dy. CIT [20211 125 taxmann.com 253/280 Taxman 334/434 ITR 1 (Bom.) (FB). 13. Thus, ....
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....quired to apply his mind to the material particulars, and indicate clearly, as to what is being put against the respondent/assessee when triggering the penalty proceedings. 22. In case the AO concludes, that a case is made out under section 271 (l)(c) of the Act, he needs to indicate, clearly, as to which limb of the said provision is attracted. The reason we say so is, that apart from anything else, the pecuniary burden may vary, depending on the infraction(s) committed by the respondent/assessee. In a given case, where concealment has taken place, a heavier burden may be imposed, than in a situation where an assessee is involved in furnishing inaccurate particulars. 23. Therefore, it is necessary for the AO to indicate, broadly, as to the provision/limb under which penalty proceedings are triggered against the assessee. 24. Clearly, this has not happened in the instant case. " 8.1 As could be seen from the above the Hon'ble jurisdictional High Court upheld the order of the Tribunal in holding that the notice issued by the Assessing Officer was bad in law if it did not specify under which limb of section 271(1)(c) of the Act the penalty proceeding....
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....s not only erroneous but also arbitrary and bereft of any reason as in the penalty notice the Respondents have failed to specify the limb - "underreporting" or "misreporting" of income, under which the penalty proceedings had been initiated. 7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting. 9. This Court is further of the view that the impugned action of Respondent No.1 is contrary to the avowed Legislative intent of Section 270AA of the Act to encourage....
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....sessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary. 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No. 1 was actually voluntary computation of income filed by the Petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in assessment order as well and consequently, there is no question of any misreporting." 7.1 The Hon'ble Tribunal also taken into account the judgment of the co-ordinate Bench of the Tribunal at Mumbai in the case of Saltwater Studio LLP v. NFAC, Delhi (ITA No.13/Mum/2023) dated 22.5.2023, [2023] 157 taxmann.com 749 (Mumbai - Trib.), wherein the identical issue as involved in the instant case was also dealt with and ultimately the penalty levied u/s 270A of the Act was deleted by holding as under: "10. The Mumbai Bench of the Tribunal in ITA No. 13/Mum/2023 in the case of Saltwater Studio LLP v. NFAC, Delhi vide order dated 22.5.2023 held as under:- 11. It has to be examined as to whether the action of the AO to have levied penalty under sub-section (9) of section 270A of ....
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....levy of penalty by Shri Manish Manohardas Asrani the AO u/s 270A of the Act suffers from the vice of non- application of mind as well as violates principles of natural justice. And therefore, the penalty levied on addition of sustained quantum addition of Rs. 67,970/- cannot survive. And therefore, it is directed to be deleted." 7.2 The Hon'ble co-ordinate Bench of the Tribunal in Jaina Marketing & Associates case (supra) ultimately deleted the identical penalty as imposed u/s 270A(9) of the Act, by holding as under: "15. In the instant case, on perusal of the penalty notice placed on record dated 02/06/2021, it is evident that the Ld. AO had show caused the assessee as to why the assessee should not be imposed with penalty for 'under reporting of income'. The assessee had filed its submissions stating that he had not 'under reported its income' We are unable to comprehend ourselves to accept to the argument of the Ld. DR that assessee did not make any submissions with regard to 'mis reporting of income'. The assessee could be expected to give reply only in respect of show cause notice that is put to him. Why at all the assessee should ....
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....ure." 8. Coming to the instant case, admittedly in the assessment order, the AO initiated the penalty proceedings u/s 270A of the Act without mentioning any sub clause of the section 270A of the Act or not specifying any limb of the penalty proposed to be levied. Further, in the penalty notice issued u/s 274 r.w.s 270A of the Act dated 11.11.2021 mentioned under reporting of the income. Subsequently during the penalty proceedings again issued the notice dated 20.12.2021 u/s 274 r.w.s 270A of the Act, without specifying any limb or sub clause of section 270A of the Act and ultimately vide order dated 22.02.2022 u/s 270A of the Act levied the penalty for misreporting of the income as well as underreporting of the income, as per provisions of section 270A(8) of the Act with the aid of section 270A(9)(e) of the Act. As the AO issued the vague notice without specifying any particular limb or sub clause for levying the proposed penalty. There is no whisper at all in the notice issued u/s 270A read with section 274 of the Act about "misreporting of income" whereas the penalty has been levied ultimately for both 'under reporting' and 'misreporting of income' @ 200%....