TaxTMI 
TaxTMI 
TaxTMI 
2024 (5) TMI 1626
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.... lakhs. and so is not maintainable. 3. Per contra, the Ld. DR submitted that even though, tax effect may be less than Rs.50 lakhs, however, since prosecution has been launched by the Department against the assessee, the assessee's case falls in the exemption clause (f) of CBDT Circular as enumerated in letter dated 20.08.2018. Therefore, according to the Ld. DR, the appeal filed by the Revenue is maintainable. In his rejoinder, the Ld.AR fairly admitted that prosecution has been launched against the assessee from/after reassessment order passed by the AO u/s.153A of the Act (after search) and not from the original assessment on the basis of which the impugned penalty has been levied. Be that as it may, we proceed to hear the appeal of Revenue also. 4. Coming to assessee's appeal, the main grievance of assessee is against the action of the Ld. CIT(A) not appreciating that the penalty imposed by the AO is bad in law, since the notice dated 30.03.2005 issued u/s.271 r.w.s.274 was invalid in law. Drawing our attention to the notice issued by the AO which is placed at Page No.17 of the Paper Book, he submitted that the AO has not struck down the limbs/faults which are not applicable i....
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.... to be conducted. In-short, the question that needs to be decided are- A. Whether a penalty proceeding u/s.271(1)(c) is initiated u/s.274 of the Act or u/s.271 of the Act? B. When does the initiation of penalty proceeding considered communicated to the assessee. C. Whether there is a legal obligation u/s.271 or u/s 274 of the Act to issue a notice? D. Even if it is held that a notice need to be served u/s 274, whether such notices can be considered as a 'Statutory notice'? wherein non-striking of non-relevant portions would vitiate the purpose of proper legal communication A. Whether a penalty proceeding u/s 271(1)(c) is initiated u/s 274 of the Act or u/s 271 of the Act? 1. Sub-section (1) of section 271 is read as follows: "If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person- (a).... (b).... (c) has concealed the particulars of his income or furnished inaccurate particulars of such income or (d).... he may direct that such person shall pay by way of penalty- ...... " 2. As can be seen from the use of language, the leg....
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....w has not envisaged initiation of penalty proceedings under section 274 of the Act. Under section 274 of the Act, the law has envisaged only affording the assessee a reasonable opportunity of being heard. Neither section 271 nor section 274 of the Act mandates issuance of any notice. This language use, when in comparison with Section 142(1), which is reproduced as under: "For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return... .......... a notice requiring him, a date to be therein specified... Similarly, the language use in Section 143(2) which is reproduced as under: "Where a return has been furnished under Section 139, or in response to a notice under sub-section (1) of Section 142, the Assessing Officer shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, before the Assessing Officer any evidence on which the assessee may rely in support of the return" Similarly, the language use in Section 148 which is reproduced as under: "Before making the assessment, reassessment or recomputation under Sectio....
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....ortunity of being heard has been provided. Such demonstration could be through order sheet noting, or through other circumstantial evidences or could even be through issuance of letter/notice in a pre-printed format. 6. Thus, even if the Assessing Officers had issued some notice in a pre-printed format, such notice cannot be under any stretch be treated as a statutory notice mandated to be issued under the Law. At the most, it can be treated as a communication of date fixed for hearing. 7. Wherever the law has mandated issuance of notice, even there, in many instances, the law itself has given liberty for the officers of the Department to frame the language of such notices in whatsoever manner in which they may deem fit. The examples for these are when notices are mentioned to be issued u/s 142(1) or u/s 143(2) or u/s 148 etc. 8. However, the same law has been stringent when it comes to some other provisions where law mandates issuance of notice. It had specifically mandated issuance of only a Statutory prescribed notices to be issued. All such statutory prescribed notices are prescribed under the Income tax Rules, 1962 and published. As can be seen from these rules, the only....
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....that the condition for levying penalty is that the AO or Ld. CIT(A) in the course of proceedings before them need to be satisfied (i.e. during assessment proceedings or Appellate proceedings should be satisfied) that assessee has concealed the particulars of his income or furnished inaccurate particulars of such income, then they may direct that such assessee shall pay penalty stated therein u/s.271 of the Act. Here, in this case, according to the Ld.DR, the AO has clearly recorded his satisfaction that the assessee has concealed Rs.1,28,38,410/- while passing the assessment order on 30.03.2005 u/s.143(3) of the Act; and by doing that exercise, according to Ld. DR, he has rightly initiated penalty, inter alia, u/s.271(1)(c) of the Act which is valid, because, sec.274 of the Act, only mandates reasonable opportunity be given to the assessee before imposing penalty; and therefore, in this case, since enough opportunities were given to assessee, action of AO levying penalty cannot be faulted, for any mistake in notice because in the first place there is no requirement of notice envisaged in sec.274 of the Act. Therefore, he does not want us to interfere with the order of the Ld. CIT(A....
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....s.30 lakhs added u/s.69 of the Act, confirmed by the Tribunal and (2) issue regarding Rs.34,13,386/- (claimed to be included by assessee in his revised statement of income). Meanwhile, the AO having passed the assessment order, initiated penalty u/s.271(1)(c) of the Act by issuing notice dated 30.03.2005, thereafter, noticing the Tribunal order passed in year 2016 and after considering assessee's reply dated 15.03.2017, levied penalty on 31.03.2017 u/s.271(1)(c) of the Act, wherein penalty of Rs.46,78,788/- was imposed upon the assessee. 9. Aggrieved by penalty order, the assessee preferred an appeal before the Ld. CIT(A) who taking note of the Hon'ble Madras High Court action/order of setting aside two issues (infra) back to the file of AO for fresh consideration, directed deletion of those penalties levied on these additions i.e. (i) outstanding payment due to the tune of Rs.34,13,386/-, the Ld. CIT(A) deleted the same. (ii) Rs.30 lakhs which was added as unexplained investment u/s.69 of the Act; and the Ld. CIT(A) confirmed penalty on the addition made by the AO regarding Rs.40 lakhs which was shown as remuneration from direction of Hindi version of Kushi and the Ld. CIT(A) als....
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.... bad in law for not specifying the specific fault for which the assessee was being proceeded against for levy of penalty. And this action of the Tribunal has been upheld by several judgments of the various High Courts. We note that the Full bench of the Hon'ble Bombay High Court in the case of Mohd. Farhan A. Shaikh Vs. DCIT (2021) 434 ITR 1 (Bombay) dated 11.03.2021 held that the show cause notice issued prior to levy of penalty without specifying the fault/charge against which the assessee is being proceeded, would vitiate the penalty itself. And thus the Hon'ble High Court upheld the view of the division bench order in the case of PCIT Vs. Goa Dourado Promotions (P.) Ltd. (Tax Appeal No.18 of 2019, dated 26.11.2019) and held that the contrary view taken by another division bench in the case of CIT Vs. Smt. Kaushalya (1995) 216 ITR 660 (Bom) does not lay down the correct proposition of law. 11. As noted earlier, we find that the penalty notice dated 30.03.2005 did not explicitly convey to the assessee the specific fault/charge the assessee was being proceeded against for levy of penalty. Resultantly, the show cause notice is found to be defective/invalid, and therefore it is hel....
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....? " 13. The Hon'ble Madras High Court observed regarding defective show cause notice in that case as under: 8. A show cause notice was issued to the assessee proposing to initiate proceedings under Section 271(1)(c) of the Act vide notice dated 30.3.2016. A copy of the said notice dated 30.3.2016 has been furnished in the typed set of papers and we find that the said notice does not specifically state as to whether the assessee is guilty of concealing particulars of his income or has furnished inaccurate particulars of income. 14. And the Hon'ble Madras High Court observed further as under: 13. The first aspect to be considered is as to whether the notice issued under Section 271(1)(c) of the Act dated 30.3.2016 is legally valid and proper. Admittedly, the notice did not specifically mention as to whether the assessee concealed particulars of his income or furnished inaccurate particulars or both. 14. Such notices, which did not specify as to which limb of Section 271(1)(c) of the Act would get attracted, were held to be bad in law in the decision of the Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory [reported in (2013) 359 ITR 565], which....
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....l with the argument of the Ld. DR that both the faults/limbs are attracted in the facts of this case i.e. the notice was issued for both the faults and it should be read as if assessee had not only concealed the particulars of his income but also inaccurate particulars of such income, such a contention cannot be countenanced for the simple reason that the notice does not say so. It is noted that in the impugned notice the conjunction 'or' has been used between two faults i.e. concealment of his income or furbishing of inaccurate particulars which is a disjunctive; if the contention of the Ld. DR has to be accepted, then penalty notice ought to have used the conjunction 'and' in place of 'or' between the two faults which is not discernable from perusal of the impugned notice of penalty. Moreover, we note that while initiating penalty in the quantum assessment order dated 30.03.2005, the AO has stated in the assessment order that the assessee has concealed Rs.1,28,38,410/-, whereas, the notice initiated u/s.271 r.w.s.274 of the Act, proposed penalty under both the faults which exposes the non-application of mind/whimsical attitude of AO which vitiates the contents of the notice; and ....