TMI Blog2017 (5) TMI 1799X X X X Extracts X X X X X X X X Extracts X X X X ..... as to the default committed by the assessee, i.e. whether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. In this regard, we find that in the case of M/s Manjunatah Cotton Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] relied on by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. Thus we hold that the notice issued under section 274 r.w.s. 271 for initiating penalty proceedings under section 271(1)(c) of the Act in the case on hand is invalid and consequently, the penalty proceedings are also invalid. Therefore the penalty levied by AO and upheld by the Ld. CIT(A) is hereby dropped. Appeal filed by the assessee stands allowed. - I.T.A. No. 7585/Mum/2016 - - - Dated:- 8-5-2017 - SHRI R. C. SHARMA, AM AND SHRI SANDEEP GOSAIN, JM For the Appellant : Shri Madhur Agarwal For the Respondent : Shri B.S.Bist ORDER Per Sandeep Gosain, Judicial Member : This appeal filed by the assessee is against the order of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, yes (in favour of assessee). 3. It is submitted that the Explanation to Section 73 is not applicable in the facts of present case in view of the decision of Hon ble Bombay High Court, therefore, there cannot be any question of levy penalty on the said issue. It was also argued that recently the Mumbai Bench of ITAT in the case of Fiduciary Shares and Stock Pvt. Ltd. in ITA No. 321/M/2013 has held that the amendment to Explanation to section 73 which excludes assessee s engaged in the business of trading in shares from the ambit of Explanation to section 73 is retrospective in nature. The learned AR also submitted that the assessee has not furnished any inaccurate particulars of income and rather on the contrary, the correct particulars were furnished by the assessee. It was submitted that mere treatment of business loss, as speculation loss i.e. change in the head of income does not warrant the levy of penalty. 4. Ld. AR submitted that at the time of filing the return of income, the assessee had decision favouring the stand taken by the assessee in treating the loss on Mark to market on stock of shares as business loss. Further it was argued that the issue is strongly de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of inaccurate particulars of income. 9. It is pertinent to note that the phrase particulars of income is common in both the above conditions for levy of penalty. Thus, the thrust of the legislature for imposition of penalty is upon the particulars of income which, has to be either concealed or furnished inaccurately by the assessee. The Hon ble Supreme Court of India in the case of CIT Vrs. Reliance Petroproducts (P) Ltd. [2010] 189 Taxman 322 (SC) has held as under:- Section 271(1)(c) of the Income Tax Act 1961 for concealment of income Assessment year 2001-02 whether merely because assessee had claimed expenditure, which claim was not accepted or was not acceptable to revenue, that by itself would not attract penalty under section 271(1)(c). 10. From the aforementioned facts as well as legal points contained in the said judgements, we conclude that the word particulars used in the section 271(1)(c) would embrace, the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. The assessee at the time of finalizing their return of income was under bonaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. In this regard, we find that the Hon'ble High Court of Karnataka in its order in the case of M/s Manjunatah Cotton Ginning Factory in ITA No. 2546 of 2005 dated 13.12.2012, relied on by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The relevant portion of their Lordships judgement at paras 59 to 62 thereof are extracted hereunder for reference: - 59. As the provision stands, the penalty proceedings can be initiated on various ground set therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, inthe notice to be issued under Section 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particular ..... X X X X Extracts X X X X X X X X Extracts X X X X
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