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TMI Blog2018 (1) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax (Appeals)-2, Mumbai dated 28.03.2013 for the Assessment Year 2007-08 in deleting the penalty levied on Transfer pricing adjustment of ₹.77,50,450/- and in sustaining the penalty on the addition of ₹.96,39,000/- made on account of change in method of accounting on valuation of inventories. 2. At the outset the Ld. Counsel for the assessee submits that initiation of penalty proceedings u/s. 271(1)(c) of the Act is improper. Ld. Counsel for the assessee submits that the Assessing Officer is not clear as to the charge for which the penalty is initiated i.e. either concealment of income or furnishing inaccurate particulars. Ld. Counsel for the assessee further referring to notice issued u/s.274 r.w.s. 271(1)(c) of the Act submits that the Assessing Officer did not specify the charge for which the penalty proceedings were initiated, but penalty was levied for furnishing inaccurate particulars of income in the penalty order. Ld. Counsel for the assessee submits that the notice has been issued without specifying the charge for which the penalty is initiated as there is no striking off of the limb in the notice and therefore the initiation itself is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion this year will lead to an identical change in the next year s opening stock . ( ii ) Tax rate for AYs 2007 - 07 and 2008 - 09 is same . Case Law : CIT v . Excel Industries Ltd . [ 38 taxmann . com 100 ( SC )]. ( VI ) No penalty can be levied where there is no motive to obtain any tax advantage . The impact of the change in the method of valuation of closing stock was only ₹ . 96 . 39 lakhs, whereas, the assessee declared returned loss of ₹ . 14 . 05 crores and the assessed loss was ₹ . 12 . 30 Crores . Hence there is no intention or motive on part of the assessee to obtain any tax advantage - refer computation of income in the final Assessment Order - page Nos . 127 128 of the Paper Book . 4. Ld. DR strongly supported the penalty order of the Assessing Officer. 5. We have heard the rival submissions, perused the orders of the authorities below, the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act, Assessment Order and the penalty orders. On a perusal of the notice issued u/s. 271(1)(c) of the Act for initiation of proceedings we find that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 271 ( 1 )( c ) of the Act denote different connotations . In fact, this distinction has been appreciated even at the level of Hon'ble Supreme Court not only in the case of Dilip N . Shroff ( supra ) but also in the case of T . Ashok Pai, 292 ITR 11 ( SC ). Therefore, if 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application of mind by the Assessing Officer which can be demonstrated from the discussion in the assessment order, wherein after discussing the reasons for the disallowance, he has recorded a satisfaction that penalty proceedings are initiated u / s 271 ( 1 )( c ) of the Act for furnishing of inaccurate particulars of income . In our considered opinion, the attempt of the ld . CIT - DR to demonstrate application of mind by the Assessing Officer is no defence inasmuch as the Hon'ble Supreme Court has approved the factum of non - striking off of the irrelevant clause in the notice as reflective of non - application 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings 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 High Court has discussed about non - application of mind in the case of Kaushalya ( supra ) and observed as under :- .... The notice clearly demonstrated non - application of mind on the part of the Inspecting Assistant Commissioner . The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charge he had to face . In this back ground, quashing of the penalty proceedings for the assessment year 1967 - 68 seems to be fully justified . In the instant case also, we are of the view 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 aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 . We hold so . Since the penalty has been deleted on the preliminary point, the other arguments raised by the appellant are not being dealt with . 7. Following the above decision, similar view has been taken by the Coordinate Bench in the case of Orbit Enterprises v. Income Tax Officer [60 ITR (Trib.) 252]. Respectfully following the said decision, we hold that the notice issued by the Assessing Officer u/s. 274 r.w.s. 271(1)(c) of the Act is on account of non-application of mind and therefore on this account itself the penalty imposed u/s.271(1)(c) is liable to be deleted. Thus, we direct the Assessing Officer to delete the penalty levied u/s.271(1)(c) of the Act. As we ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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