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TMI Blog2017 (2) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ing inaccurate particulars of income. Though there is a slight difference in income admitted by the assessee and income determined by the A.O. for the assessment year 2007-08, this is because of disallowance of exemption claimed u/s 54F towards 4 flats retained by her, which was further supported by case of CIT Vs. K.G. Rukminiamma [2010 (8) TMI 482 - Karnataka High Court] which was followed by the Hon’ble High Court of Andhra Pradesh in the case of CIT Vs. Syed Ali Adil (2013 (6) TMI 278 - ANDHRA PRADESH HIGH COURT). Therefore, we are of the view that there is neither concealment of income nor furnishing inaccurate particulars of income, which warrants levy of penalty u/s 271(1)(c) of the Act. Hence, penalty levied by the A.O. u/s 271(1)(c) of the Act for all the assessment years 2007-08 to 2009-10 is not sustainable, even on merits. - Decided in favour of assessee. - I.T.A.Nos.604 & 605/Vizag/2014, I.T.A.Nos.625/Vizag/2014 - - - Dated:- 2-2-2017 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri C. Kameswara Rao, AR For The Respondent : Shri R.S. Aravindan, DR ORDER PER G. MANJUNATHA, Accountant Member: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice, the assessee filed a written submission on 16.9.2013 stating that there is no concealment of particulars of income or furnishing inaccurate particulars of income, as she is an aged and illiterate lady not assessed to income tax in the past. The assessee further submitted that she had admitted income in respect of development agreement before the search party and filed her return of income for all the assessment years disclosing income admitted during the course of search and paid taxes. Therefore, her own admission of additional income in respect of development agreement cannot be considered as concealment of particulars of income or furnishing inaccurate particulars of income. It was further submitted that although there is a difference in income assessed by the A.O., when compared to income returned for the assessment year 2007-08, which is because of rejection of exemption claimed u/s 54F of the Act, towards 4 flats retained by her. She had claimed exemptions towards 4 flats u/s 54F of the Act, based on the decision of Hon ble Karnataka High Court in the case of CIT Vs. K.G. Rukminiamma, which was followed by the Hon ble A.P. High Court in the case of CIT-2 Hydera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after introduction of clause 1(B) to section 271 of the Act, the satisfaction recorded has to be discernible from the assessment order and accordingly, initiation of penalty proceedings is bad in law and liable to be quashed. To support her arguments relied upon the decision in the case of Madhushree Gupta Vs. UOI 317 ITR 107 and also the decision of Hon ble A.P. High Court in the case of Chennakesava Pharmaceuticals Vs. CIT 349 ITR 196. The assessee further contended that notice issued u/s 274 r.w.s. 271(1)(c) of the Act is vague, as the A.O. had not specified under which limb of section 271(1)(c) of the Act, the penalty is exigible. In support of her arguments relied upon the decision of Hon ble High Court of Karnataka, in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Karn). 7. In so far as merits, the assessee contended that she is an old lady and was also illiterate and was not a person regularly assessed to income tax. It was because of her transaction to sell away her land on development basis, there was liability of income tax which was came to know during the survey proceedings. It was further contended that as soon as she came to know the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order in its entirety. The Hon ble Supreme Court in the case of MAK Data Pvt. Ltd. Vs. CIT 358 ITR 593 (SC), has observed that the A.O. has to satisfy whether the penalty proceedings are initiated or not during the course of assessment proceedings and the A.O. is not required to record his satisfaction in a particular manner or reduce into writing . Thus, it is not necessary that the A.O. had to spell out the satisfaction in detail at the time of finalising the assessment proceedings and hence, the claim of the assessee that the A.O. has not recorded satisfaction before initiation of penalty u/s 271(1)(c) of the Act is rejected. 9. In so far as penalty notice issued u/s 274 of the Act, the CIT(A) held that in view of the subsequent notice issued by the A.O. vide letter dated 12.8.2013 clearly specifying the reasons for initiation of penalty, for which the assessee had filed her reply in respect of which no deficiency was pointed out. The CIT(A) further held that in view of the decision of Hon ble Supreme Court in the case of S.V. Angidi Chettiar Vs. CIT (supra) and D.M. Mansavi Vs. CIT, the contention of the assessee that the impugned notice is vague is devoid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the revenue are in appeal before us. 11. The Ld. A.R. for the assessee, submitted that penalty proceedings initiated by the A.O. u/s 271(1)(c) of the Act, is bad in law and liable to be quashed as the A.O. has not recorded satisfaction before initiation of penalty proceedings. The A.R. further submitted that the A.O. has not recorded any satisfaction about his forming the opinion that the conditions stipulated in section 271(1)(c) of the Act are applicable to the assessee, therefore, the A.O. has no jurisdiction to impose penalty u/s 271(1)(c) of the Act. It is further submitted that deeming fiction created by section 271(1B) of the Act is not applicable for the assessment year 2008-09, as there is no difference between income returned and income assessed by the A.O. Once income returned by the assessee is accepted, there is no deeming concealment to initiate penalty proceedings u/s 271(1)(c) of the Act. The A.R. further submitted that penalty notice issued u/s 274 r.w.s. 271(1)(c) of the Act is vague in nature as the A.O. has not striked off inappropriate portion of the notice. The A.R. further submitted that notice issued by the A.O. u/s 274 r.w.s. 271(1)(c) of the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act dated 27.5.2011 was issued following survey operation conducted in assessee s case and it was well within the specified time limit in accordance with the provisions of section 151(2) of the Act. The CIT(A) without appreciating the facts simply deleted penalty and hence penalty levied by the A.O. should be upheld. 14. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The factual matrix which leads to imposition of penalty u/s 271(1)(c) of the Act, are that there was a survey operation in the case of assessee on 10.2.2011. During the course of survey operation, it was noticed that the assessee had entered into a development agreement with M/s. Kamal Builders for development of a land owned by her and agreed to share the built up area. During the course of survey, the assessee has agreed to disclose income in respect of development agreement, accordingly filed return and paid taxes. The A.O. initiated penalty proceedings for the reason that the assessee has concealed particulars of income within the meaning of section 271(1)(c) of the Act. The A.O. was of the opinion that the assessee has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther observed that the assessee should know the grounds, which he has to meet specifically, otherwise principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Taking up penalty proceeding on one limb and finding the assessee guilty on another limb is bad in law. The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judica in the penalty proceedings. It is open to the assessee to contest the proceedings on merits. Therefore, before issuing penalty notice, the A.O. should specify in the notice whether it is for concealment of particulars of income or furnishing inaccurate particulars of income. 16. A similar view has been taken by the Hon ble Karnataka High Court, in the case of CIT Vs. M/s. SSA s Emerald Meadows (supra), wherein it is held that the notice issued by the A.O. u/s 274 r.w.s. 271(1)(c) of the Act, is bad in law as it did not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether it is for concealment of particulars of income or furnishing of inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty proceedings without a valid notice is bad in law and liable to be quashed. Hence, we quashed penalty proceedings initiated by the A.O. u/s 271(1)(c) of the Act, for the assessment years 2007-08, 2008-09 2009-10. 18. In so far as assessment year 2009-10 is concerned, the assessee has made an alternative plea in as much the penalty proceedings initiated by the A.O. for the assessment year 2009-10 is bad in law, as conditions stipulated in explanation 3 to section 271(1)(c) of the Act are not fulfilled, as the A.O. has issued notice u/s 148 of the Act within 2 years from the end of the relevant assessment year. We find that the A.O. has issued notice u/s 148 of the Act on 27.5.2011, which is within 2 years from the end of the relevant assessment year i.e. 31.3.2012. To attract the provisions of explanation 3 of section 271(1)(c) of the Act, the assessee should not be previously assessed, the return of income was not filed within the period specified u/s 153(1) of the Act and no notice u/s 142(1) or 148 of the Act was issued to the assessee before the expiry of 2 years from the end of the assessment year. In this case, undoubtedly, the A.O. has issued notice u/s 148 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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