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TMI Blog2017 (2) TMI 169X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order of CIT(A)-I, Nashik, dated 09.02.2015 relating to assessment year 2009-10 against penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (in short the Act ). 2. The assessee has raised the following ground of appeal:- On the facts and in law the CIT(A) has erred in confirming penalty of ₹ 2,83,600/- levied by the A.O. u/s. 271(1)(c), on the addition of ₹ 8,93,811/- on account of alleged non recording of credit notes of various parties. 3. The learned Authorized Representative for the assessee at the outset pointed out that the issue raised vide additional ground of appeal is being raised which is purely legal and does not require investigation into the facts and the same merits to be admitted for adjudicating the issue against levy of penalty under section 271(1)(c) of the Act. The additional ground of appeal raised reads as under:- 1] The assessee submits that in the notice issued u/s 271(1)(c) r.w.s. 274, the learned A.O. has not recorded proper satisfaction as to whether the penalty proceedings are initiated for furnishing inaccurate particulars of income or for concealing income and hence, the said notice is bad in law and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directs issue notice under section 271(1)(c) of the Income Tax Act, 1961. The notice under section 274 r.w.s. 271(1)(c) of the Act was issued in which inapplicable portion was not struck off and the Assessing Officer while levying penalty on both accounts had held the assessee to have furnished inaccurate particulars of income and also concealed the income within meaning of section 271(1)(c) read with Explanation (1) of the Act and consequently penalty was levied at ₹ 2,83,600/-. 8. The CIT(A) had upheld the levy of penalty under section 271(1)(c) of the Act. 9. The first issue which has arisen for adjudication by way of additional ground of appeal is non-recording of proper satisfaction by the Assessing Officer while completing assessment. The perusal of assessment order reflects though the Assessing Officer mentions that penalty proceedings needs to be initiated and eventually directs issuance of notice under section 271(1)(c) of the Act, but no satisfaction has been recorded by the Assessing Officer as to which limb of said section is attracted justifying levy of penalty for concealment under section 271(1)(c) of the Act. The plea of the assessee before us is that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the particulars of his income or furnished inaccurate particulars of such income and thereafter, levy the penalty accordingly. The word used between the two acts i.e. concealment of particulars of income and furnishing of inaccurate particulars of such income is or . So the penalty levied by the concerned Officer is on satisfaction of any of the limbs and not the satisfaction of both the limbs. Where the assessee had concealed the particulars of income in particular circumstances, then the Assessing Officer may record satisfaction to that effect and initiate penalty proceedings and thereafter on fixation of charge, levy the penalty for such act of concealing the particulars of income. Similarly, in cases where the assessee concerned had furnished inaccurate particulars of such income, then similar exercise has to be carried out by the concerned Officer. 14. The first stage of invocation of provisions of section 271(1)(c) of the Act is the satisfaction to be recorded by the Assessing Officer, which admittedly, has to be during the course of assessment proceedings. So, where the assessment proceedings are pending, then the Assessing Officer has to apply his mind and on being s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anu Engineering Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to nonapplication of mind. 15. The Hon ble Karnataka High Court has laid down the proposition that the Assessing Officer is to be satisfied in the course of proceedings that there is either concealment of income or furnishing of inaccurate particulars of income under clause (c) to section 271(1) of the Act. It has been categorically held that concealment of income and furnishing of inaccurate particulars of income are different. The Hon ble High Court has thus, laid down that the Assessing Officer while issuing notice has to come to conclusion that whether it is case of concealm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly penalty proceedings were invalid. 19. Similar proposition has been laid down by Kolkata Bench of Tribunal in Shri Deepak Kumar Patwari Vs. ACIT in ITA Nos.616 to 618/Kol/2013, relating to assessment years 2007-08 to 2009-10, order dated 03.02.2016 and it has been further held that the provisions of section 292B of the Act cannot cure the basic defect in assumption of jurisdiction and could only cure the mistake, defect or omission in the return of income, assessment, notice or the proceedings. The Tribunal further held that show cause notice and the reasons mentioned in the show cause notice were part of process of natural justice and the defect in such notice could not be overlooked. Similar proposition has further been laid down in other decisions of various Benches of Tribunal which have been relied upon by the assessee before us. 20. The learned Departmental Representative for the Revenue placed heavy reliance on the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Smt. Kaushalya (supra). In the facts of the case before the Hon ble Bombay High Court, the Hon ble High Court quashed the penalty levied for assessment year 1967-68 as the same was imposed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has to be considered. The Hon ble High Court clearly held that where there is vagueness and ambiguity in the notice issued which could demonstrate non-application of mind by the authority which in turn, would ultimately prejudice the right of opportunity of hearing of the assessee as contemplated under section 274 of the Act, then such notice is invalid. 22. Now, coming to the facts of the case before us, wherein search and seizure operations were carried out on Chhoriya group of concerns on 22.08.2008 and declaration of ₹ 11.44 crores was made in the hands of whole group for various years. Consequent to the notices issued under section 153A of the Act for various years, different entities filed the return of income for the respective years and cumulatively for ₹ 13.99 crores as additional income. The income was declared on account of on-money on sale of plots, which was detected from the documents seized during the course of search. Admittedly, Explanation 5A to section 271 (1)(c) of the Act is attracted in such cases. However, the case of assessee before us is that the Assessing Officer while completing the assessment proceedings had to be satisfied that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the satisfaction accordingly and issued the notice accordingly. 24. We find no merit on the partial reliance placed upon by the learned Departmental Representative for the Revenue on the decision of Jurisdictional High Court in CIT Vs. Smt. Kaushalya (supra). The Hon ble High Court has clearly laid down the proposition that the Assessing Officer has to make the assessee fully aware of exact charge of the Department against him. As pointed out, in present case, in the assessment order itself while recording satisfaction for initiating proceedings under section 271(1)(c) of the Act, exact charge of the Department against the assessee is not clear. The Assessing Officer records the satisfaction for initiating penalty proceedings on both the counts i.e. concealment of income and furnishing of inaccurate particulars of income. The Hon ble Bombay High Court had also upheld the quashing of penalty proceedings for assessment year 1967-68 to be justified on account of vagueness and ambi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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. The penalty proceedings completed pursuant to such notice are vitiated and the same are held to be invalid. 27. Now, coming to the merits of case, the assessee had offered additional income on account of on-money on sale of plots. The Assessing Officer had accepted the same and had initiated penalty proceedings under section 271(1)(c) of the Act. The CIT(A) during the course of appellate proceedings relating to section 271(1)(c) of the Act issued enhancement notice to the assessee. Thereafter, he had gone through the seized documents and elaborately referred to them and even reproduced the scanned copies of such documents and comes to conclusion that loans were received from Ratanlal Bafna, but still upholds the penalty levied under section 271(1)(c) of the Act. Once the finding of CIT(A) is that these are loans received from Bafna and are not on-money received on sale of plots, then in cases where penalty proceedings have been initiated on a different footing and the CIT(A) reverses the same and holds the same to be loans rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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