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TMI Blog2017 (10) TMI 44X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. Brief facts of the case are that the assessee company filed return of income for relevant Ay on 31.10.2005 declaring total income of Rs. 11,40,310/-. The assessment order was completed on 16.11.2007 under section 143(3) of the Act. In the return of income the assessee has shown income from the house property of Rs. 82,08,386/-, from two office premises let out to M/s. Oracle and Star India. The assessee claimed certain expenses on account of Security, Brokerage and other charges. The AO while framing the assessment order made the disallowance on account of Security, Brokerage and other charges of Rs. 12,00,240/-, under the head "Income from House Property". The AO levied the penalty on such disallowance. On appeal before the ld. CIT(A), the order of penalty was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the present appeal is filed before us. 3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue perused the material available on record. The ld. AR of the assessee made his submissions by way of five alternative prepositions. In support of his first preposition, the ld. AR of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly rental income was assessable under the head "Business Income" and the corresponding expenses and depreciation are allowable. In support of submission that ld. AR of the assessee relied upon the decision of Hon'ble Apex Court in Chennai Properties and Investments Ltd. Vs. CIT (373 ITR 673) (SC). In fourth preposition, the ld. AR of the assessee argued that mere change of head of income, no penalty is leviable. In support of his submission, the ld. AR of the assessee relied upon the following decisions; (i) CIT vs. Bennet Coleman & Co. Ltd. (33 taxmann.com 227) (Bom. HC), (ii) ITO vs. Balkishen R. Mehra (ITA No. 3862/M/12 (Mum. Trib.), (iii) ITO vs. Prolifice Consultancy (ITA No. 2732/M/13 (Mum. Trib.), (iv) ACIT vs. Neerja Birla (ITA No. 3259/M/1997) (Mum. Trib.). Again in fifth preposition, the ld. AR of the assessee argued that assessee has disclosed all particulars while filing the return of income. The AO disallowed certain deductions, there was no question of furnishing inaccurate particular or concealing the income and his case is squarely covered by the ratio of the decision of Hon'ble Supreme Court in CIT vs. Reliance Petroproducts Pvt. Ltd. (322 ITR 158)(SC). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in mind of AO as to which charge is being proposed/initiated against the assessee. This infirmity in the notice was sought to be demonstrated as reflection of non-application of mind by ld. AR of the assessee. Recently the co-ordinate bench of this Tribunal in case of Meherjee Cassinath Holdings Pvt. Ltd. v/s ACIT (supra) after considering the various decisions of Hon'ble Apex Court, Bombay High Court, Karnataka High Court and the decisions of various Bench of Tribunal, some of which are also reiled by ld AR for assessee, held as under; "8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718]" 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of nonapplication of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon'ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the case of Lakhdir Lalji (supra), the AO issued notice u/s 274 for concealment of particulars of income but levied penalty for furnishing inaccurate particulars of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the AO, in our view, clearly show that the AO did not apply his mind when he issued notice to the assessee and he was not sure as to what purpose the notice was issued. The Hon'ble Bombay H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the observations of the Assessing Officer in the assessment order alongside his action of non-striking off of the irrelevant clause in the notice shows that the charge being made against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. 14. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non- application of mind having regard to the ratio of the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this count itself the penalty imposed u/s 271(1)(c) of the Act is liable to be deleted." 5. Considering the decision of various Superior Courts, the Hon'ble Bombay High Court in case of Shri Samson Perinchary (supra), and respectfully f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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