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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 ..... he assessee has entered into a development agreement on 6.2.2006 with M/s. Kamal Builders for development of land owned by her of an extent of 1272 sq.yd. and agreed to share the built up area in the ratio of 50% for the assessee and 50% for the builder. During the course of survey, when these documents were confronted to the assessee, the assessee has agreed to pay tax in respect of sale proceeds on sale of flats for the assessment years 2007-08 to 2009-10. 3. Subsequently, the A.O. issued notice u/s 148 of the Act on 25.3.2011 for assessment year 2007-08 and on 27.5.2011 for assessment years 2008-09 & 2009-10. In response to notices, the assessee had filed returns of income disclosing income admitted as per sworn statement during the course of survey operation. Thereafter, the cases have been selected for scrutiny and accordingly, notices u/s 143(2) & 142(1) of the Act were issued. The assessments were completed u/s 143(3) r.w.s. 147 of the Act, on 30.12.2011 determining the taxable income of Rs. 1,04,16,000/-, Rs. 75,47,000/- & Rs. 66,36,320/- for the assessment years 2007-08, 2008-09 & 2009-10 respectively. During the course of assessment proceedings, for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of penalty. The A.O. was also of the view that mens rea was not an essential pre-requisite for civil liability u/s 271(1)(c) of the Act, since such penalty is for breach of civil liability and willful concealment is not an essential ingredient for attracting such penalty. In support of his findings, relied upon the decision of Hon'ble Supreme Court in the case of Union of India Vs. Dharmendra Textile Processors (SC) 306 ITR 277 and CIT Vs. Atul Mohan Bindal (SC) 317 ITR 1. The A.O. further opined that the assessee's agreement of addition of concealed income after detection thereof does not offer any immunity from penalty and for which the A.O. relied upon the decision of Hon'ble High Court of Kerala in the case of P.C. Joseph and Brothers Vs. CIT 240 ITR 818 and Hon'ble High Court of Allahabad in the case of CIT Vs. Rakesh Suri 331 ITR 458. With these observations, opined that the assessee has concealed the particulars of income as envisaged u/s 271(1)(c) of the Act and as such it is a fit case for levy of penalty and accordingly, levied penalty of 100% tax sought to be evaded u/s 271(1)(c) of the Act. 6. Aggrieved by the penalty orders, the assessee preferred an appeal before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts Pvt. Ltd. (2010) 230 CTR 32. In so far as assessment year 2009-10, the assessee contended that explanation (3) to section 271(1)(c) of the Act, has no application as the conditions set out in explanation (3) for attracting the penalty is not fulfilled. The A.O. has issued notice u/s 148 of the Act, prior to the expiry of the stipulated period, as such penalty cannot be levied under explanation (3) to section 271(1)(c) of the Act for the assessment year 2009-10. 8. The CIT(A) after considering the explanations of the assessee, held that from the perusal of the assessment orders, it is seen that the A.O. had stated that 'proceedings u/s 271(1)(c) of the Act are initiated separately'. It is to be seen whether the observation "penalty proceedings u/s 271(1)(c) of the Act are initiated separately" would be sufficient compliance to the requirement stipulated in section 271(1B) of the Act. It would be pertinent to note that Hon'ble Supreme Court, in CIT Vs. S.V. Angidi Chettiar 44 ITR 739 (SC), has held that a mere indication as to the initiation of penalty proceedings separately in the assessment order is tantamount to an indication as to the satisfaction of the authorities. A simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007-08, it is seen that the addition was on account of disallowance of claim of deduction u/s 54F of the Act. The claim made by the assessee was a bonafide claim and the entitlement of deduction to more than 1 flat was a debatable issue. Therefore, in view of the decision of the Hon'ble apex court, in the case of CIT Vs. Reliance Petro Products Pvt. Ltd. (supra), mere making of a claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars of income. Therefore, directed the A.O. to delete penalty levied in regard to the addition made of Rs. 35,79,000/-. As regards the penalty levied in regard to the income returned, the CIT(A) observed that the assessee's case is squarely covered by the provisions of explanation (3) to section 271(1)(c) of the Act for the assessment year 2007-08 & 2008-09. The conditions laid down in explanation (3) to section 271(1)(c) of the Act are satisfied in regard to the explanation filed by the assessee and therefore, the penalty levied by the A.O. for the assessment year 2007-08 & 2008-09 in regard to income returned is upheld. In so far as assessment year 2009-10, the CIT(A) held that it is seen that the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, without specifying whether penalty is levied for concealment of particulars of income or furnishing inaccurate particulars of income. The A.R. further submitted that there is neither concealment of particulars of income nor furnishing inaccurate particulars of income as the assessee is an illiterate not assessed to income tax for the past, had admitted income in pursuance of joint development agreement and filed return disclosing income admitted during the course of survey and paid taxes. Though there is difference in income returned by the assessee and income assessed by the A.O. for the assessment year 2007-08, which is because of disallowance of exemption claimed u/s 54F of the Act in respect of 4 flats retained by her, which was supported by the decision of Hon'ble High Court of Karnataka in the case of CIT Vs. K.G. Rukminiamma (supra) and Hon'ble High Court of A.P. in the case of CIT Vs. Syed Ali Adil. Therefore, levy of penalty on agreed addition by the assessee and also for disallowance of bonafide claim of exemption, which was supported by the decision of judicial forums is incorrect. 13. The Ld. D.R. on the other hand, strongly supporting orders of the CIT(A) for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income or furnishing inaccurate particulars of income. Mere issue of printed form of notice without striking off inappropriate clause in the notice is invalid, consequently any proceedings in pursuance of invalid notice are liable to be quashed. 15. The A.O. levied penalty u/s 271(1)(c) of the Act, for the reason that the assessee has not been able to make out any case for reasonable cause to justify non-levy of penalty. The A.O. further observed that the assessee has concealed the particulars of income as envisaged u/s 271(1)(c) of the Act and as such, it is a fit case for levy of penalty. The A.O. issued notice u/s 274 r.w.s. 271(1)(c) of the Act for all the 3 years. On perusal of the notice issued by the A.O., we find that the A.O. has issued printed form of notice with a tick mark on the portion of the notice which is stated that "have concealed the particulars of your income or furnishing inaccurate particulars of such income", without specifying the reasons for which penalty proceedings are initiated, i.e. whether it is for concealment of particulars of income or furnishing inaccurate particulars of income". The Hon'ble High Court of Karnataka, in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch limb of section 271(1)(c) of the Act penalty proceedings had been initiated and High Court, on appeal, held that there was no substantial question of law arising for determination, SLP was to be dismissed. Since, the Hon'ble apex court has dismissed SLP filed by the revenue, the issue of invalid notice is reached finality as such the Hon'ble Supreme Court has upheld the order of Hon'ble High Court of Karnataka, in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (supra), wherein it was specifically held that issuing printed form of notice without striking off inappropriate portion of the notice or without mentioning the reasons for which penalty proceedings are initiated, i.e. whether it is for concealment of particulars of income or furnishing inaccurate particulars of income, the penalty proceedings initiated is invalid. 17. In this case, on perusal of the facts available on record, we find that the A.O. has issued printed form of notice u/s 274 r.w.s. 271(1)(c) of the Act, wherein he has put a right mark on the portion of the notice "have concealed the particulars of income or furnished inaccurate particulars of such income" without specifying the reasons for which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not satisfied and therefore, the failure on the part of the assessee to furnish the return within the specified period cannot be deemed to be concealment within the meaning of explanation 3 to section 271(1)(c) of the Act and no penalty u/s 271(1)(c) of the Act could be levied. Therefore, we are of the view that even on this count, penalty levied by the A.O. u/s 271(1)(c) of the Act for the assessment year 2009-10 cannot sustain in the eyes of law. 20. The assessee has contended levy of penalty u/s 271(1)(c) of the Act on merits in as much the penalty levied by the A.O. u/s 271(1)(c) of the Act is bad in law as there is neither concealment of particulars of income nor furnishing inaccurate particulars of income. We find that the assessee had admitted income in respect of development agreement as soon as she came to know that she had to pay tax on development agreement which cannot be termed as concealment of particulars of income, more particularly when she is an illiterate lady not assessed to income tax in the earlier period. The matter would have been different if she had assessed to income tax regularly and filed her return of income for these assessment years under regular pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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