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TMI Blog2016 (12) TMI 1407X X X X Extracts X X X X X X X X Extracts X X X X ..... ther of the limbs has not been struck off. Hence, there is vagueness and ambiguity in the notice issued. Since the assessee in the present set of facts was not aware of exact charge of the Department against him, then the initiation of penalty proceedings are vitiated and the same are to be quashed. Relying on the ratio laid down by the Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT (2016 (12) TMI 1238 - ITAT PUNE ), we hold that penalty notice issued in the present case suffers from infirmity i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact charge against him, hence, the same is quashed. - Decided in favour of assessee - ITA Nos.1712 to 1715/PN/2014 - - - Dated:- 21-12-2016 - Ms. Sushma Chowla, JM And Shri Anil Chaturvedi, AM Appellant by : Shri Nikhil Pathak Respondent by : Shri B.Y. Chavan ORDER Per Sushma Chowla, JM This bunch of four appeals filed by the assessee are against consolidated order of CIT(A)-Central, Pune, dated 25.07.2014 relating to assessment years 2005-06, 2006-07, 2008-09 2010-11 against respective orders levying penalty under section 271(1)(c) of the Income Tax Act, 1961 (in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that during the course of search proceedings, the assessee had offered various amounts for taxation as its undisclosed additional income for different years totaling ₹ 79 lakhs. The year-wise details are tabulated under para 3 at page 2 of assessment order. For the year under consideration, the assessee had offered additional income of ₹ 11,50,000/- which has been disclosed by the assessee in the computation of income filed. The Assessing Officer was of the view that since the additional income was offered for taxation only due to search action, penalty proceedings under section 271(1)(c) of the Act for concealing the income and furnishing inaccurate particulars of income was being separately initiated. Thereafter, notice under section 274 r.w.s. 271(1)(c) of the Act was issued to the assessee. In the penalty proceedings levying penalty for concealment under section 271(1)(c) of the Act, the Assessing Officer makes mention that the proceedings were initiated under section 274 r.w.s. 271(1)(c) of the Act for concealing the particulars of income based on reasoning and satisfaction that the additional income was declared by the assessee only after search and seizure act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee pointed out that additional ground of appeal is raised, which goes to the root and does not involve investigation of facts and hence be admitted. For merits of issue, the learned Authorized Representative for the assessee placed reliance on the ratio laid down by the Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT in ITA Nos.1201 to 1205/PN/2014, relating to assessment years 2003-04 to 2007-08, order dated 30.11.2016. The learned Authorized Representative for the assessee further stated that where the satisfaction recorded by the Assessing Officer while initiating penalty proceeding was on both the limbs, thereafter, the notice under section 274 r.w.s. 271(1)(c) of the Act was also issued without striking off either of the limbs, then the notice suffers from infirmity and consequently, penalty order passed is invalid. 11. The learned Departmental Representative for the Revenue placed reliance on the decision of Hon ble Bombay High Court in CIT Vs. Smt. Kaushalya (1994) 75 Taxman 549 (Bom) . He further referred to the order of Assessing Officer, wherein he had given a finding that the Assessing Officer had initiated penalty proceedings on account of concealment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n opportunity to make the case of the Revenue. The said issue has been deliberated upon in Kanhaiyalal D. Jain Vs. ACIT (supra), wherein it was held as under:- 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 or the Commissioner of Appeals or the Principal Commissioner or Commissioner, in the course of any proceedings under the Act, is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may direct that such person shall pay by way of penalty the amounts as specified in sub-clause (iii) which would be in addition to tax, if any, payable by the said person. The section thus requires the concerned Officer to record satisfaction in the course of any proceedings under the Act, that the person has concealed the particulars of his income or furnished inaccurate particulars of his income. After recording the satisfaction, during the course of penalty proceedings also, the concerned Officer has come to a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the 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 case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis 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 particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different conno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 Karnataka High Court (supra) and held that where there is no striking off of either of limbs, then notice issued under section 274 r.w.s. 271(1)(c) of the Act was invalid and subsequent penalty proceedings were held to be vitiated. 18. The Mumbai Bench of Tribunal in Sanghavi Savla Commodity Brokers P. Ltd. Vs. ACIT in ITA No.1746/Mum/2011 , relating to assessment year 2007-08, order dated 22.12.2015 while deciding similar issue, wherein the Assessing Officer had initiated penalty proceedings for concealment of particulars of income without striking inappropriate words or any parts of notice and proceeded to levy penalty for concealment, then following the ratio laid down by the Hon ble Karnataka High Court, the Tribunal held that notice issued for initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 1967-68 was issued even before the assessment order was made and where the assessee had no knowledge of exact charge of Department against him as in the notice not only there was use of word or between the group of cases but there was use of word deliberately also. The Hon ble High Court held that notice clearly demonstrated non-application of mind on the part of Assessing Officer. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity to the assessee since he did not know of exact charges he had to face. In this background, quashing of penalty proceedings for assessment year 1967-68 was held to be justified. Applying the said principle laid down by the Jurisdictional High Court, application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes 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 ble Karnataka High Court in CIT Anr. Vs. Manjunath Cotton and Ginning Factory (supra) and CIT Vs. SSA S Emerald Meadows (supra) and in view of SLP being dismissed, we find merit in the plea of assessee that the satisfaction recorded in the present case to initiate penalty proceedings both for concealment of income and furnishing of particulars of income against additional income offered by the assessee is incorrect. Further, where the assessee is not aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 case of assessee falls. In the present set of facts, the satisfaction as recorded by the Assessing Officer which is evident from the assessment order itself does not establish the case of Revenue against the assessee that it is liable for levy of penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articulars of income. It may be reiterated here that no further addition was made by the Assessing Officer except the additional income which was offered by the assessee in its return of income. So at best, it is the case of concealment of income where the assessee had offered the income on the basis of incriminating documents found during the course of search. However, the Assessing Officer does not record satisfaction in this regard but is satisfied that penalty for concealment under section 271(1)(c) of the Act is to be levied on account of either concealment of income or furnishing of inaccurate particulars of income. The notice issued under section 274 r.w.s. 271(1)(c) of the Act also suffers from infirmity, where either of the limbs has not been struck off. Hence, there is vagueness and ambiguity in the notice issued. Since the assessee in the present set of facts was not aware of exact charge of the Department against him, then the initiation of penalty proceedings are vitiated and the same are to be quashed. Relying on the ratio laid down by the Pune Bench of Tribunal in Kanhaiyalal D. Jain Vs. ACIT (supra), we hold that penalty notice issued in the present case suffers fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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