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TMI Blog2017 (5) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... he penalty can be imposed on the assessee under different clauses (a), (b) and (c), the penalty has to be imposed on different rate. AO has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the provisions of section 271AAB are not mandatory which means that the penalty has to be levied in each and every case wherever the assessee has made default as stated under clauses (a), (b) and (c) of the Act. Sub-section (1) of section 271AAB uses the word "may" not "shall". "May" cannot be equated with "shall" especially in penalty proceedings. Using the word "may", in our opinion, gives a discretion to the Assessing Officer to levy the penalty or not to levy, even if the assessee has made the default under the said provision. In view of the aforesaid discussion, we set aside the order of the Commissioner of Income-tax (Appeals) and delete the penalty levied on the assessee. - Decided in favour of assessee. - I. T. A. Nos. 416, 417 and 418/Lkw/2016 - - - Dated:- 30-1-2017 - P. K. Bansal (Accountant Member) And A. T. Varkey (Judicial Member) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty imposed is not sustainable in law and on facts. 5. The learned Commissioner of Income-tax (Appeals)-IV, Kanpur has erred in law in holding that satisfaction is not required to be recorded by the Assessing Officer during the assessment proceeding or at the time of completion of the proceedings for initiation of penalty under section 271AAB. 6. The learned Commissioner of Income-tax (Appeals)-IV, Kanpur has erred in holding that principles of natural justice has not been violated by the Assessing Officer in not allowing proper opportunity of being heard before imposing the penalty and ignoring the specific requirement of law of providing 'reasonable opportunity of being heard'. 7. That without prejudice to the above grounds of appeal, the order under appeal is contrary to the principles of natural justice and equity and deserves to be annulled. 3. The only issue involved in all the grounds is sustenance of penalty of ₹ 40 lakhs levied under section 271AAB of the Income-tax Act. 4. The facts of the case, in brief, are that there has been a search and seizure operation carried out under section 132 of the Income-tax Act in Kamal Chandak Group of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had surrendered the income of ₹ 4,00,00,000 during the course of search, substantiated the manner in which the undisclosed income was derived and paid the tax due thereon before the specified date, the assessee is liable to pay penalty at the rate of ten per cent. of undisclosed income surrendered during search as per section 271AAB(a) of the Income-tax Act, 1961 which comes to ₹ 40,00,000. Accordingly, I, hereby, impose a penalty of ₹ 40,00,000. Issue notice of demand and challan. 5. When the matter went before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals) dismissed the appeal of the assessee and confirmed the order of imposing the penalty on the assessee under section 271AAB of the Act. 6. Before us, the learned counsel for the assessee vehemently contended that no penalty notice has been issued by the Assessing Officer during the course of assessment. The penalty has not been initiated during the course of assessment and for this our attention was drawn to the assessment order. It was contended that the assessment was completed on March 31, 2015 but the penalty notice dated September 23, 2015 was issued. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the issuance of the notice till the date of order of levying the penalty, it was pointed out that the notice issued on September 23, 2015 was received by the assessee on September 24, 2015 and 26th and 27th were Saturday and Sunday and the assessee was asked to appear on September 28, 2015. The assessee on the date attended and also stated that no penalty has been initiated during the course of assessment. Further it was submitted that the counsel of the assessee was out of station as his wife was undergoing chemotherapy etc. in MAX Hospital at Delhi and therefore, the adjournment sought for 10 days i.e. the case be fixed on any date after October 8, 2015 but the Assessing Officer was in hurry to pass the penalty order which was passed by him on September 29, 2015 without giving opportunity to the assessee. No doubt the provision of section 271AAB nowhere requires for the issue of show-cause notice but the principles of natural justice is inbuilt and therefore, there is mandatory requirement of reasonable opportunity of being heard. The authority has to issue show-cause notice to the party/assessee to explain and produce evidence before any adverse inference may be drawn against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings. No doubt, the Assessing Officer must give an opportunity to the assessee. It is a case where the Assessing Officer has duly issued the show-cause notice and given opportunity to the assessee. Thus, it was contended that the order of the Commissioner of Income-tax (Appeals) must be sustained. 8. I have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. We noted that this is a fact that in this case the notice has been issued under section 271(1)(c) of the Act and no show-cause notice has been issued under section 271AAB of the Act why a penalty under section 271AAB may not be imposed on the assessee. The provisions of section 271(1)(c) and the provisions of section271AAB are entirely different. In our view, issuing the notice under section 271(1)(c) of the Act will not automatically deem that the Assessing Officer has initiated the proceedings for imposition of penalty under section 271AAB and accordingly, given an opportunity to the assessee. There is no provision under section 271AAB that the penalty has to be initiated during the assessment proceedings but in our view, it is essential to initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal the Commissioner (Appeals) by order dated December 5, 1996, set aside the assessment order with a direction to frame the assessment de novo after affording adequate opportunity to the assessee. Meanwhile penalty under section 271D was levied by order dated September 23, 1996, i.e., before the appeal of the assessee against the original assessment order was heard and allowed thereby setting aside the assessment order itself. After remand, the Assessing Officer passed a fresh assessment order but in this assessment order, no satisfaction regarding initiation of penalty proceedings under section 271D of the Act was recorded. The Tribunal as well as the High Court held that the penalty order passed on the basis of the original assessment order could not still survive when that assessment order had been set aside because the satisfaction recorded therein for the purpose of initiation of the penalty proceedings would also not survive. On further appeals : Held, dismissing the appeals, that in the fresh assessment order there was no satisfaction recorded regarding penalty proceedings under section 271D of the Act though in that order the Assessing Officer wanted penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tural justice. This expression implies that a person must be given opportunity to defend himself. This principle is sine qua non of every civilized society. This rule covers various stages through the administrative adjudication process starting from notice to the final determination of tax liability. Right to fair hearing includes : (i) Right to notice 8.2. This is the very edifice of the principles of natural justice. There is mandatory requirement of reasonable opportunity of being heard. This pre-requires issuance of a proper notice. The authority has to issue show cause to the party/assessee to explain and produce evidence before an adverse inference may be drawn against him. The notice should be specific and unambiguous so that proper compliance can be made by the assessee. Any order passed by the assessing authorities without giving notice is violative of the principles of natural justice. 8.3 The Hon ble Supreme Court in C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC) ; [1993] 1 SCC 78 invoked the same principle and held that even though it was not statutorily required, yet the authority was liable to give notice to the affected parties while purchasing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t illusory. It appears that the notice in this case has been issued by the Assessing Officer just for the sake of providing the opportunity but this opportunity cannot be regarded to be a proper opportunity. We also noted that opportunity of being heard has been given to the assessee only in respect of the proceedings initiated under section 271(1)(c) of the Act. No opportunity has been given to the assessee in respect of the penalty to be levied under section 271AAB of the Act. On this basis also, the order passed by the Assessing Officer is against the principles of natural justice of providing the proper opportunity to the assessee and accordingly we quash the order of the Assessing Officer. We have also gone through the provisions of section271AAB and noted that this section specifies three different situations under which the penalty can be imposed on the assessee under different clauses (a), (b) and (c), the penalty has to be imposed on different rate. The Assessing Officer has not specified in the notice in respect of which clause the penalty is going to be levied on the assessee. On this basis also, in our opinion, the penalty cannot be sustained. We further noted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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