TMI Blog2016 (12) TMI 1349X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts relating to the case are set out in brief. The assessee is a practicing doctor specialised in pain and weight management. The assessee filed her return of income for the year under consideration declaring a total income of ₹ 36,19,140/-. The revenue carried out search and seizure operations in the hands of the assessee u/s 132 of the Act on 12.1.2010. Subsequently the assessee filed a revised return of income on 31.3.2010 declaring a total income of ₹ 2,56,11,923/-. 3. Consequent to the search operations, the assessing officer issued notice u/s 153A of the Act to the assessee. In response to the notice, the assessee filed her return of income for the year under consideration declaring a total income of ₹ 2,64,52,643/-. 4. During the course of search action, the search team found cash balance of ₹ 7.95 crores at the residence of assessee s sister named Ms. Sangeeta Koyal. In the statement taken u/s 132(4) of the Act, Ms. Sangeeta Koyal stated that the above said cash balance belongs to the assessee herein. In the statement taken from the assessee, she also admitted that the above said cash balance belongs to her and the source there of was her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee of any charge for which the penalty proceedings have been initiated. 7. The Ld D.R, on the contrary, submitted that the provisions of sec. 274 provides that the assessee should be given an opportunity before imposing penalty. He submitted that the assessee has been provided with an opportunity and she has also participated in the penalty proceedings. Accordingly he submitted that the deficiencies, if any, in the proceedings is automatically made good by the provisions of sec. 292B/292BB of the Act. He submitted that the AO has specified in the assessment order that he is initiating penalty proceedings u/s 271(1)(c) of the Act for concealing the income. He placed reliance on the decision rendered by Hon ble jurisdictional Bombay High Court in the case of CIT Vs. Smt. Kaushalya and others (216 ITR 660) and submitted that the Hon ble Bombay High Court has held that mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. 8. In the rejoinder, the ld A.R submitted that the AO, in the instant case, did not issue proper notice and he did not apprise the assessee about the charge for which the penalty proceedings w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 A.M. on 10.01.2012 and show cause why an order imposing a penalty on you should not be made under Section 271 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under Section 271(1)(c ). A careful perusal of the notice would show that the contents of the notice are primarily meant to ask the assessee to furnish a return of income. However, the assessing officer appears to have modified the last paragraph by show causing the assessee to explain as to why an order imposing a penalty should not be made u/s 271(1)(c) of the Act. There should not be any doubt that the provisions of section 271(1)(c) prescribes two types of charge viz., (a) concealment of particulars of income and (b) furnishing of inaccurate particulars of income. However, in the above said notice the AO did not specify the type of charge for which the penalty proceedings have been initiated. 10. In this regard, it is pertinent to refer to the following observations made by Hon ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non-striking inaccurate portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter and non one aspect would be decisive. In this context, useful reference may be made to the following observation in the case of CIT Vs. Mithila Motors (P) Ltd (1984)(149 ITR 751)(Patna) (head note): Under section 274 of the Income tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. A mistake in the notice would not invalidate penalty proceedings. The Hon ble Bombay High Court, thereafter, considered various decisions relied upon by the parties and came to the conclusion that there should be application of mind on the part of assessing officer. For the sake of convenience, we extract below the relevant observations made by Hon ble Bombay High Court. 11. The case of CIT v. Lakhdhir Lalji [1972] 85 ITR 77 (Guj) is the other decision upon which the Tribunal has placed reliance. In that case a not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication of mind on the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charges he had to face. In this background, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified. 12. A combined reading of the decision rendered by Hon ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the part of the AO at the time of issuing notice. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of mind on the part of the AO. 14. In view of the foregoing discussions, we are of the view that assessee should succeed on this legal issue. Accordingly the penalty proceedings initiated by the AO without application of mind is liable to be set aside and we order accordingly. 15. On merits, the ld A.R contended that the Explanation 5A to sec. 271 will not be applicable to the assessee on the reason that the Cash found during the course of search will not fall in the category of assets specified in Explanation 5A, which reads as under:- (i) any money, bullion, 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 utilizing (wholly or in part) his income for any previous year The Ld A.R submitted that the penal provisions should be construed strictly. He submitted that the expression such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year should be given proper meaning. The A.R submitted that Cash cannot be acquired by utilizing income of the assessee and accordingly contended that the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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