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TMI Blog2017 (12) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 09.09.2015 for assessment years 2002-03 to 2007-08. Both the parties agreed that these appeals be disposed off on the facts for A.Y. 2002-03 2. In all the assessment years the Revenue has taken the following common grounds of appeal: - "1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty without appreciating that the penalty proceedings where correctly intiated as per section 271(l)(c) of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty without appreciating the fact the receipt of money outside the recorded the book was admitted in the statement under oath during search and that the assessee was not maintaining any record for such sum and therefore has clearly concealed the particulars of income." 3. The brief facts of the case are that a search and seizure operation was carried under section 132 of the Income Tax Act on 08.05.2007 at the residence and office premises of the Bindra-Rohira Group. The assessee was also covered in the search operation. The assessee is an individual and having income from business, rental and other sources. In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the penalty on technical ground and in this regard he relied on the decision of the Hon'ble Allahabad High Court in the case of Sushil Kumar Sharad Kumar vs. CIT 232 ITR 588 for the proposition of law that the assessee having shown low household expenses whereas there is evidence of higher expenditure. This proves that initial burden to prove concealment has been discharged by the Department as the assessee has not laid any fresh evidence in penalty proceedings. Reliance was also placed on the decision of the "I" Bench of this Tribunal in the case of Shri Mahesh M. Gandhi vs. ACIT, ITA No. 2976/Mum/2016 in which the Tribunal has confirmed the order of the CIT(A) levying penalty. Our attention was drawn to para 8 of this order in which the Tribunal has observed as under: - In the case laws cited by the assessee in the case of Dr. Sarita Milind Davare v. ACIT (supra), the notice issued u/s 271(1)(c) of the Act was primarily meant to ask the tax-payer to furnish a return of income and merely AO modified the last paragraph by show causing the taxpayer to explain as to why an order imposing a penalty should not be made u/s 271(1)(c) of the Act . In the case of Chandra Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inted out voluntarily after receipt of statutory notice u/s 143(2) which was issued after one year of filing of return of income. Even after that when the case was under hearing, the assessee did not offer the income of ₹ 12,23,642/- being redemption of HDFC Mutual Fund unless he was specifically asked to explain the same. It is, therefore evident from the conduct of the assessee that he was trying to evade the income to the extent of ₹ 12,23,642/- . Considering these facts, income of ₹ 12,23,642/- is assessed under the head income from capital gain. In view of the above facts, I am satisfied that the assessee has concealed his income by furnishing inaccurate particulars of income to the extent of ₹ 12,23,642/- and thus penalty proceedings u/s 271(1)(c) if the I T Act, 1961 is initiated separately on this point." Merely because AO has mentioned alternate charges at the stage of issue of notice u/s 274 r.w.s. 271(1)(c) of the Act which is a preliminary stage of initiating penalty proceedings, the proceedings cannot be held to be vitiated, as in the instant case, the AO has clearly recorded detailed satisfaction after application of mind in the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnishing inaccurate particulars of income. Thus, the assessee has committed default u/s. 271(1)(c) of the I.T. Act and the case of the assessee is a fit case for levy of penalty." Under these circumstances and as per detailed reasoning as set out above by us , we do not find any infirmity in the order of the A.O. as was confirmed by learned CIT(A), we confirm/uphold the appellate order of learned CIT(A) by confirming/sustaining the penalty of ₹ 3,13,000/- u/s 271(1)(c) of the Act." 6. The learned D.R. has also referred to pages 11 & 13 as well as page 19 of the said order and on that basis he submitted that no doubt clause (c) of Section 271(1)(c) deals with two specific offences, i.e. concealment of particulars of income and furnishing of inaccurate particulars of income. The facts of some cases may attract both the offences and in some cases there is overlapping of two offences but in such cases the initiation of penalty proceedings also must be for both the offences. The learned D.R. also relied on the order of the "B" Bench of this Tribunal in the case of Chempure vs. ITO dated 7th May, 2010 in which this Tribunal, while interpreting Explanation 1 under para 13 obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that from the so called show cause notice it was apparent that the show cause notice was specifically issued by the AO. Even from page 13 of the order it is apparent that the AO has mentioned that he has satisfied that the assessee has concealed income by furnishing inaccurate particulars of income. The learned Counsel for the assessee stated that the issue is squarely covered in favour of assessee and against Revenue by the decision of Hon'ble Bombay High Court in the case of CIT v. Samson Perinchery [2017] 392 ITR 4 (Bom.). 9. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. The facts involved in all these appeals are undisputed. In all these cases this is a fact that in each of the assessment years, the return of income in pursuant to notice under Section 133A was filed by the assessee on 15.10.2008 disclosing following income: - A.Y. Income (Rs. ) 2002-03 2,40,638/- 2003-04 17,83,423/- 2004-05 9,25,135/- 2005-06 7,09,592/- 2006-07 8,65,115/- 2007-08 16,63,833/- 2008-09 77,91,704/- Against these incomes the AO computed the addition at ₹ 1,82,50,000/- assuming a daily income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the said date which will be considered before any such order is made under Section 271(1)(C). Sd/- (PRASOON KABRA) ACIT CC 24 & 26" 11. After considering the reply of the assessee the AO levied penalty under Section 271(1)(c) of the Act by observing as under: - "8. In view of the fact and circumstances mention here-in-above, it is being concluded that assessee has knowingly furnished inaccurate particulars and concealed its income within the meaning of Sec.271(1)(c) of the I.T. Act to the tune of ₹ 50,18,750/- (addition is partly allowed by the Ld.CIT(A) in respect of club income) and hence it is a fit case where penalty under section 271(1) (c) is required to be imposed. Accordingly, the undersigned is proposed to levy penalty under section 271(1) (c) in this case which is worked out as under: Tax sought to be evaded Rs.15,37,173/- Minimum penalty leviable u/s. 271(1)(c) of the I T Act @ 100% of the tax sought to be evaded comes to Rs.5,37,173/- Maximum penalty leviable u/s. 271(1)(c) of the I T Act @ 300% of the tax sought to be evaded comes to Rs.46,11,519/- 9. Taking a balanced view on a well settled principle, I levy minimum penalty @100% which works o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. If the contentions stipulated under Explanation 1 are satisfied it is deemed that particulars of income have been concealed by the assessee. Explanation 1, no doubt, is rebuttable and the assessee can always adduce the evidence or put the explanation to come out of the applicability of Explanation 1. In view of this deeming provision the onus is on the assessee to prove that he has not concealed the particulars of income. So far the other default of furnishing of inaccurate particulars of income is concerned, there is no deeming provision and the onus, in our view, lies on the Revenue to prove that the assessee has furnished inaccurate particulars of income and for that the Revenue is bound to bring necessary evidence on record and put this evidence before the assessee so that the assessee can counter them and rule of natural justice is not violated. Since both the defaults are different, therefore, the Legislature, in our opinion, has used the word between both the defaults 'or' instead of 'and'. We cannot take the view that the assessee has committed both the defaults together although the nature of consequence of both the defaults is one, i.e. concealment of income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court under para 50 has clearly mentioned as under: - 50. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous. It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly. They have to be interpreted only for the said issue for which it has deemed and the manner in which the deeming has been contemplated to be restricted in the manner sought to be deemed. As the words used in the legal fiction or the deeming provisions of Section 271(1B) is Direction, it is imperative that the assessment order contains a direction. Use of the phrases like (a) penalty proceedings are being initiated separately and (b) penalty proceedings under Section 271(l)(c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. 4 The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v/s. Manjunath Cotton and Ginning Factory 359 ITR 565 to delete the penalty: "The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh ground of which the Assessee has no notice. 7 Therefore, the issue herein stands concluded in favour of the Respondent Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Ultimately it was held that the question as framed do not give rise to any substantial question of law. Therefore the finding given by the Tribunal that penalty must be initiated for specific charge has been confirmed. Even the finding of the Tribunal that the notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein represent non-application of mind on the part of the AO while issuing penalty notice has not been disturbed. 18. We noted that Hon'ble "C" Bench in ITA Nos. 1597 & 1597/Mum/ 2014 in the case of M/s. Orbit Enterprises vs. Income Tax Officer 15(2)(2), Mumbai had a chance to decide whether penalty can be levied when penalty has not been initiated for a specific charge. The Coord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two expressions, namely 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of income' have different connotations, it is imperative for the assessee to be made aware as to which of the two is being put against him for the purpose of levy of penalty u/s 271(1)(c) of the Act, so that the assessee can defend accordingly. It is in this background that one has to appreciate the preliminary plea of assessee, which is based on the manner in which the notice u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 has been issued to the assessee-company. A copy of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice as reflective of nonapplication of mind by the Assessing Officer. Since the factual matrix in the present case conforms to the proposition laid down by the Hon'ble Supreme Court, we proceed to reject the arguments advanced by the ld. CIT-DR based on the observations of the Assessing Officer in the assessment order. Further, it is also noticeable that such proposition has been considered by the Hon'ble Bombay High Court also in the case of Shri Samson Perinchery, ITA Nos. 1154, 953, 1097 & 1126 of 2014 dated 5.1.2017 (supra) and the decision of the Tribunal holding levy of penalty in such circumstances being bad, has been approved. 11. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s 271(1)(c) of the Act. We have carefully Shri Dhanvinder Bindra considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew that the AO has issued a notice, that too incorrect one, in a routine manner. Further the notice did not specify the charge for which the penalty notice was issued. Hence, in our view, the AO has failed to apply his mind at the time of issuing penalty notice to the assessee." 12. The aforesaid discussion clearly brings out as to the reasons why the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) is to prevail. Following the decision of our coordinate Bench in the case of Dr. Sarita Milind Davare (supra), we hereby reject the aforesaid argument of the ld. CIT-DR. 13. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of penalty for shortfall in the payment of advance tax paid as compared with the tax finally assessed as payable, but in the notice issued u/s 274 r.w.s. 273(b) of the Act it was incorrectly mentioned that assessee had failed to file its estimate of advance tax. The Hon'ble Patna High Court held that mention of such incorrect charge would not render the penalty proceedings void-ab-initio. The aforesaid parity of reasoning has been relied upon by the ld. CIT-DR before us to state that non-striking off of the irrelevant portion of the notice u/s 274 r.w.s. 271(1)(c) of the Act does not render the proceedings invalid. In our view, the said decision does not help the case of the Revenue qua the issue before us. Firstly, the Hon'ble Patna High Court itself noted that it was a case of mere "wrong labelling of the section or some mistake in the charge framed against the assessee" which does not prejudice the assessee. Secondly, non-striking off of the irrelevant clause in the notice u/s 274 r.w.s. 271(1)(c) of the Act has been completely differently understood by the various High Courts, including that by the Hon'ble Jurisdictional High Court of Bombay. In the case of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. CIT-DR would be clear. In the assessment order dated 22.12.2008, the Assessing Officer records that the penalty proceedings u/s 271(1)(c) of the Act are initiated for concealment of income while in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are left intact in the standard printed notice, as the irrelevant clause has not been struck-off. This contradiction in the assessment order vis-a-vis the penalty notice issued u/s 274 r.w.s. 271(1)(c) of the Act on the same date clearly brings out a confusion on the part of the Assessing Officer, and apparently it is a situation where assessee is not aware about the clear and crystallised charge being made against him, thus violating the principles of natural justice. The penalty proceedings being quasicriminal in nature, as noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the same are necessarily required to be in compliance with the principles of natural justice. In this view of the matter, in our view, the ld. CIT-DR is not correct in contending that non-striking off of the irrelevant clause in the notice issued u/s 274 r.w.s. 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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