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TMI Blog2016 (12) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of penalty for concealment varies. In such circumstances, there is no merit in levy of penalty under section 271(1)(c) of the Act and there is no merit at all in levying the penalty @ 150%. Accordingly, we allow the claim of assessee even on merits. - ITA Nos.1201 to 1205/PN/2014 - - - Dated:- 30-11-2016 - MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM. Appellant by : S/Shri Nikhil Pathak and Deepak Sharma Respondent by : Shri Anil Kumar Chaware ORDER PER SUSHMA CHOWLA, JM: This bunch of appeals filed by the assessee are against consolidated order of CIT(A)-I, Nashik, dated 16.04.2014 relating to assessment years 2003-04 to 2007-08 against respective orders levying penalty under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. All the appeals filed by the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. However, reference is being made to the facts and issues in ITA No.1201/PN/2014 to adjudicate the issues. 3. The assessee in ITA No.1201/PN/2014 has raised the following grounds of appeal:- 1] The learned CIT(A) erred in directing levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his bunch of appeals is against levy of penalty under section 271(1)(c) of the Act. The assessee has also raised an additional ground of appeal wherein he has challenged the jurisdiction to levy penalty under section 271(1)(c) of the Act since as per the assessee, notice issued by the Assessing Officer was bad in law. 6. Before addressing the issue, we shall take up jurisdictional issue raised by the assessee by way of additional ground of appeal. Since the ground of appeal does not involve any investigation of facts and is purely legal, the same is admitted for adjudication. 7. Briefly, in the facts of the case, search and seizure action under section 132 of the Act was carried out on Chhoriya Group of cases on 22.08.2008. The assessee had filed original return of income on 01.12.2003 declaring total income of ₹ 5,94,985/-. Consequent to notice issued under section 153A of the Act, the assessee filed return of income declaring income of ₹ 45,70,765/-. The additional income was filed because of declaration made during the course of search and seizure operations, wherein the assessee had admitted that it had received on-money on sale of plots and shops which was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the counts. The CIT(A) in the first round, had deleted the levy of penalty under section 271(1)(c) of the Act, against which the Revenue filed an appeal before the Tribunal in ITA Nos.1389 to 1395/PN/2012, ITA Nos.1922 to 1938/PN/2012, ITA Nos.1946 to 1953/PN/2012 and ITA Nos.1957 1958/PN/2012 and the Tribunal vide order dated 20.12.2013 had set aside the order of CIT(A) and restored the matter back to the file of CIT(A) holding that Explanation 5A to section 271(1)(c) of the Act was attracted. However, the matter was remanded to the file of CIT(A) for consideration of other pleas that may be raised by the assessee in support of its stand against the levy of penalty. The CIT(A) in the second round held that in view of order of Tribunal, the Assessing Officer was justified in levying the penalty under section 271(1)(c) r.w.s. Explanation 5A of the Act . Thereafter, the CIT(A) noted the factual aspects of the case and the documents seized during the course of search and also the declaration made by the Karta of assessee s family. He noted that the assessee had revised its return of income on account of transaction of purchase and sale of plots. However, on perusal of seized d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntities and in the return of income filed in response to notice under section 153A of the Act, the income was declared at ₹ 13.99 crores in different years in the hands of different persons. He admitted that Explanation 5A to section 271(1)(c) of the Act was attracted since the assessee offered the additional income. However, attention was drawn to the satisfaction recorded by the Assessing Officer, wherein the requirement was satisfaction of one of the limbs, whereas the Assessing Officer was satisfied that the assessee had both concealed the particulars of income and furnished inaccurate particulars of income. He further pointed out that during the course of search when diaries were seized, unaccounted entries were found and the assessee offered income, so it was the case of concealment and not case of inaccurate particulars of income. In this regard, he stated that the charge of Assessing Officer for levying penalty for concealment was not clear and hence, the satisfaction recorded was incorrect. Our attention was drawn to the copies of notice issued under section 271(1)(c) of the Act which are placed at pages 169 to 177 of the Paper Book for the respective years, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was attracted. 11. The learned Departmental Representative for the Revenue placed reliance on the orders of Assessing Officer and CIT(A). He further placed reliance on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Smt. Kaushalya (1994) 75 Taxman 549 (Bom). He stressed that in view of the ratio laid down by the Hon ble Bombay High Court, penalty in the case merits to be upheld. He also pointed out that the Hon ble Supreme Court in the case of CIT Vs. SSA S Emerald Meadows (supra) had only dismissed the SLP but there was no discussion on the issue. 12. The learned Authorized Representative for the assessee in rejoinder pointed out that the decision in CIT Vs. Smt. Kaushalya (supra) refers to assessment years 1968-69 to 1969-70 and also pointed out that the Hon ble Bombay High Court had held that where exact charge was not known could prejudice the rights of assessee, as held for assessment year 1967-68. 13. We have heard the rival contentions and perused the record. The issue arising in the present bunch of appeals is jurisdictional issue of levy of penalty under section 271(1)(c) of the Act. The requirement of section is that where the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or furnishing of inaccurate particulars of income. There may be cases where there is issue of both concealment of income and furnishing of inaccurate particulars of income, based on the nature of additions, then in such cases, satisfaction and notice thereon should specify exact charge against the assessee. The charge has to be further specified while completing penalty proceedings and the Assessing Officer has to come to a conclusion as to whether it is case of concealment of income or furnishing of inaccurate particulars of income. The question which further arises where the satisfaction recorded by the Assessing Officer and the notice issued thereafter is without application of mind, then can the subsequent order passed levying penalty be held to be valid?. The Hon ble Karnataka High Court in CIT Anr. Vs. Manjunatha Cotton and Ginning Factory (supra) had dealt upon the issue of notice under section 274 of the Act for the purpose of levying penalty for concealment and observed as under:- 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time 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 canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it was held that where the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similarly, for furnishing inaccurate particulars of income, the standard proforma without striking of relevant clauses, as per the Hon ble High Court would lead to inference as to non-application of mind. 16. Further, the Hon ble Karnataka High Court in CIT Vs. SSA S Emerald Meadows (supra) has dismissed the appeal of Revenue, where the Tribunal had allowed the appeal of assessee holding that the notice issued by the Assessing Officer under section 274 r.w.s. 271(1)(c) of the Act to be bad in law as it does not satisfy which limb of section 271(1)(c) of the Act under which it has been initiated The Hon ble High Court had relied on decision of Division Bench of the Court rendered in CIT Anr. Vs. Manjunatha Cotton and Ginning Factory (supra). The Hon ble Supreme Court in CIT Vs. SSA S Emerald Meadows (supra) has dismissed the Special Leave Petition. 17. The Pune Bench of Tribunal in M/s. Sai Venkata Construction Vs. Addl. CIT (supra) and in Sanjog Tarachand Lodha Vs. ITO (supra) have applied the ratio laid down by the Hon ble Karn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act were recorded by the Assessing Officer and since the assessee fully knew in detail the exact charge of Department against him, it could not be said that either there was non-application of mind by the ITO or so-called ambiguity wording in the notice impaired or prejudiced the right of assessee of reasonable opportunity of being heard. The jurisdictional High Court deliberated upon the provisions of section 274 of the Act which contained principle of natural justice of the assessee being heard before levying penalty. It also held that mere mistake in the language used or mere non-striking of inappropriate portion could not itself be invalidated the notice. It was held that the entire factual background would fall for consideration in the matter and no one aspect would be decisive. 21. In respect of assessment year 1967-68, the Hon ble High Court in CIT Vs. Smt. Kaushalya (supra) acknowledged that there could exist a case where vagueness and ambiguity in the notice could demonstrate non-application of mind by the authority and / or ultimate prejudice to the right of opportunity of hearing contemplated under section 274 of the Act. The show cause notice for assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der passed in the present case reflects that the Assessing Officer while initiating proceedings has recorded satisfaction as to the assessee has furnished inaccurate particulars of income and has also concealed the income. The only source of addition in the hands of assessee is additional income offered by the assessee pursuant to search operations. In such circumstances, it is categorically a case of concealment. However, the Assessing Officer refers to both the limbs of section 271(1)(c) of the Act and the satisfaction recorded in this case suffers from infirmity. Further, even in the notice issued under section 274 of the Act, irrelevant part has not been struck off. While completing penalty proceedings also, the Assessing Officer makes reference to both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income and in the final, levies penalty for concealment of income. 23. However, the question which is raised before us by way of additional ground of appeal is root of start of the proceedings i.e. recording of satisfaction and the issue of notice, which has been challenged by the assessee to be invalid. Applying the ratio laid down by the Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated and the same are to be quashed. The issue of notice under section 274 of the Act on such vagueness and ambiguity makes such notice invalid and proceedings thereafter are to be quashed. 25. The Hon ble Supreme Court in T. Ashok Pai Vs. CIT (supra) had held as under:- 23. Section 271(1)(c) remains a penal statute. The rule of strict construction shall apply thereto. The ingredients for imposing penalty remain the same. The purpose of the Legislature that it is meant to be a deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985. 24. Concealment of income and furnishing of inaccurate particulars carry different connotations. Concealment refers to a deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression very or suggestion falsi. 26. Where concealment of income and furnishing of inaccurate particulars of income are two different connotations, then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings as to under which limb the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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