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TMI Blog2018 (2) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same is directed to be cancelled. - Decided against revenue - ITA No.1197/Kol/2015 - - - Dated:- 2-2-2018 - Shri N . V . Vasudevan, Judicial Member And Shri Waseem Ahmed, Accountant Member For The Appellant : Shri Sallong Yaden, Addl . CIT - SR - DR For The Respondent : Shri Ravi Tulsiyan, FCA ORDER PER Waseem Ahmed, Accountant Member :- This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-4, Kolkata dated 06. 07. 2015. Assessment was framed by DCIT, Circle-11, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 28. 08. 2013 for assessment year 2011-12. Revenue has raised following ground:- 1 . That on the facts and in the circumstances of the assessee Ld . CIT has erred in deleting the penalty of Rs . 23,68,786 /- imposed u / s . 271 ( 1 )( c ) of the IT Act . 1961 . 2 . That the appellant craves for leave to add, delete or modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the written submission of the AR of the appellant . I have also gone through the various judicial decisions relied upon by the AR . on an overall analysis of the matter and also the AR s submissions on the imposition of penalty u / s . 271 ( 1 )( c ) by the AO, I find that the appellant had conceded suo motto during the course of the assessment proceeding that an inadvertent mistake had occurred on the pt of the Auditor in claiming the impugned depreciation which was sought to be rectified and a bona fide explanation in this regard . , whereby, the said amount was offered for taxation . Going by the various court decisions as well as Explanation 1 to section 271 ( 1 )( c ) , I find that penalty for concealment does not arise in the appellant s case . The appellant had offered an explanation which was not found to be false by the AO and also that the appellant had offered an explanation which was duly substantiated and such explanation was bona fidely made and that all the facts relating to the same and material to the computation of its total income had been disclosed by the appellant . I find that there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther with expressed words recorded by the Assessing Officer himself or by his overt act and action. 2. 2 The Bangalore bench of Income-tax Appellate Tribunal ( ITAT ) in a recent decision in the case of Jaysons Infrastructure India Private Limited vs ITO [TS-5873-ITAT-2017(BANGALORE)-0] held that since the assessment order clearly mentioned the reason for initiation of penalty proceedings, not mentioning the reason In the penalty notice should not cause any prejudice to the taxpayer. Therefore, it was held that the requirements of section 271(1)(c), as discussed by the KHC, were complied with in this case. 2. 2 The Jaipur Bench of Income-tax Appellate Tribunal ( ITAT ) in a most recent decision in the case of Airen Metals Pvt. Ltd. , Jaipur vs Acit, Jaipur on 29 September, 2017 in ITA No . 820 / JP / 2016 held that the requirements of section 271(1)(c), as discussed by the Hon'ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, were complied with in this case. 2. 3. In this case, the assessee submitted that the show cause notice issued u/s 274 r/w 271(1)(c), is not at all clear as to for what precise charge, the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 22. As the Hon'ble High Court held in the above case that the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The grounds for levy of penalty are thus linked to the adherence to the Principle of natural justice and it was held that such Principle of natural justice should not be offended. Now, let's examine how the same is applicable in the facts of the case. In the instant case, the assessee has been issued two show-cause notices. The first show-cause notice dated 28. 12. 2011 was issued along with the passing of the assessment order dated 28. 12. 2011 where the assessee was made aware of initiation of the penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04 . 2013 10 . 04 . 2013 but the assessee neither attended the penalty proceedings on the first two dates nor was any written submissions explanations submitted on 10 . 04 . 2013 when the AR appeared before the Assessing officer . The assessee was made aware of the penalty proceedings having initiated against it and was granted aforesaid opportunities by the Assessing officer to present its case / offer its explanation . But the assessee failed to do so . Hence, besides legal issue under consideration, even the facts of the case are identical to the case of Airen Metals Pvt . Ltd . , Jaipur vs Acit . Therefore, the Order of the AO CIT ( A ) should be confirmed . 2 . 5 . The ITAT Mumbai in its order in Trishul Enterprises Vs . DCIT ( ITA Nos . 384 385 / Mum / 2014 for A . Yrs . 2006 - 07 2007 - 08 ) , Dt . 10 - 02 - 2017, dismissed the contention of the assessee regarding failure of the AO to strike off the relevant part of the notice u / s . 274 for initiating proceedings u / s . 271 ( 1 )( c ). The ITAT relied upon the judgement of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at penalty u / s 271 ( 1 )( c ) of the Income Tax Act, 1961 stands attracted, in the case of an assessee, when :- An assessee has concealed particulars of his income . An assessee has furnished inaccurate particulars of his income . Here, it will be befitting for us to discuss the meaning of ( i ) 'concealment of particulars of income' and ( ii ) 'furnishing of inaccurate particulars of income' : The dictionary meaning of the word conceal is to hide, withdraw, or remove from observation; cover or keep from sight; to keep secret; to avoid disclosing or divulging . Thus concealment of 'particulars of income' means non disclosure of particulars of income . On the other hand, where particulars are disclosed but such disclosure is not correct, true or accurate, it would amount to 'furnishing of inaccurate particulars of income' . The key phrase used in both the above charges is Particulars of income . It is thus important to understand the meaning of this phrase : The concealment or furnishing of inaccurate is with reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see . If the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u / s 271 ( 1 )( c ). That is clearly not the intendment of the Legislature . ( iii ) The law laid down in Dilip Shroff 291 1TR 519 ( SC ) as to the meanings of the words conceal and inaccurate continues to be good law because what was overruled in Dharmendra Textile Processors 306 ITR 277 ( SC ) was only that part in Dilip Shroff where it was held that mens rea was an essential requirement for penalty u / s 271 ( 1 )( e ). 9 . 1 . An analysis of the said decision clearly brings out that making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars of income . 9 . 2 . In light of the same, if the facts of the case of the assessee is perused, it can be clearly seen that the assessee had purchased land as shall be evident from Schedule - E of the audited accounts enclosed at pages 3 - 21 of the paper book . Purchase deed of the land was duly furnished in the course of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance for the above can also be placed on the following judicial pronouncements : Commissioner of Income Tax V . Samurai techno Trading P . Ltd ( 2016 ) 389 ITR 357 ( Ker ) wherein it is held that Under section 271 ( l )( c ) of the Incometax Act, 1961, if anyone of the officers mentioned therein is satisfied that any person has concealed the particulars of income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty, the amount indicated . While appreciating the scope of clause ( c ) , one has to take into account the provisions of Explanation 1 which is in two parts . Under clause ( A ) in respect of any facts material to the computation of the total income such person fails to offer an explanation or offers an explanation and the officer concerned has found it to be false . Clause ( B ) takes in three parts . The . first part is that an explanation has been offered and the assessee is not able to substantiate it . The second part is that the assessee has failed to prove that such explanation offered by him is bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record that the Commissioner ( Appeals ) had rightly cancelled the penalty against the assessee . It was further recorded that the assessee made a bona . fide claim to deduction of the expenditure and even though it was not acceptable to the Department it would not lead to the conclusion that the assessee had concealed the particulars of income or . filed inaccurate particulars of income . The Tribunal was justified in cancelling the penalty under section 271 ( 1 )( c ) of the Act . PCIT Vs . S . S . Food Industries [ 2016 ] 382 ITR 388 ( P H ) wherein it is held that The assessee - firm engaged in the business of manufacturing of biscuits, cookies and other bakery products filed a nil return for the assessment year 2009 - 10 on September 30, 2009, claiming deduction under section 80 - IC of the Income - tax Act, 1961 . The Assessing Officer disallowed the deduction amounting . Penalty proceedings under section 271 ( l )( c ) were also initiated for filing inaccurate particulars of income and an order imposing penalty was passed . The Commissioner ( Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 271 ( 1 )( c ) of the Act which was upheld by the Ld . CIT ( A ) , the Hon'ble Tribunal upheld the imposition but reduced the quantum of penalty on the view that the assessee had made a mistake which could be described as a silly mistake . But since the assessee was a high calibre and competent organization, it was not expected to make such a mistake . The matter went to the Hon'ble High Court where the order of the Tribunal was confirmed . The matter ultimately went to the Hon'ble Supreme Court and the crux of the issue for consideration was whether it was a bona fide and inadvertent error on the part of the assessee, warranting no imposition of penalty u / s 271 ( 1 )( c ) of the Act . According to the Hon'ble Apex Court, although undoubtedly the assessee is a reputed firm and has great expertise available with it, despite this it is possible that even the assessee could make a silly mistake . The relevant portion of the observation / finding ( para 19 20 ) of the Hon'ble Supreme Court, to quote, is as under : The contents of the Tax Audit Report suggest that there is no quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the department . We also find that the version of the ld . AO in his penalty order that assessee was confronted with the specific issue on taxability of long term capital gain on sale of shares of M / s . Vishal Retail Ltd . is factually incorrect . It is relevant to reproduce herein below the Explanation 1 to section 271 ( 1 ) of the Act . Explanation 1 to section 271 ( 1 )( c ): Where in respect of any facts material to the computation of the total income of any person under this Act - ( A ) such person fails to offer an explanation or offers an explanation which is found by the assessing Officer or the Commissioner ( Appeals ) or the Commissioner to be false, or ( B ) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then the amount added or disallowed in computing the total income of such person as an result thereof shall, for the purposes of clause ( c ) of this sub - section, be de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that even a reputed firm like Prime Waterhouse Coopers Pvt . Ltd . having great expertise could make a silly mistake in computation and if such mistake is bona fide and inadvertent cannot lead to a penalty under section 271 ( 1 )( c ). This is all the more a good reason for us to reach an opinion that this was not a fit case where we can say that assessee had concealed any inaccurate particulars in respect of its income . In our opinion, levy of penalty under section 271 ( 1 )( c ) was not warranted . Such penalty stands quashed . In the result, appeal of the assessee is allowed . Vinita Pahwa vs . ACIT, Circle 3 ( 1 ) ( 25 . 04 . 2016 ITAT Delhi ) MANU / ID / 0400 / 2016 wherein it is held that Following the law laid down by the Hon'ble Apex Court in the judgment cited as Price Waterhouse Coopers Pvt . Ltd . ( supra ) and in view of the facts discussed in the preceding paras, we are of the considered view that the impugned order passed by the CIT ( A ) confirming the penalty order is not sustainable in the eyes of law as the assessee has claimed provision for bad and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice dated 28 . 08 . 2013 under section 274 read with sec 271 ( 1 )( c ) of the Act issued in the case of the assessee, does not specifically mention whether the same was issued for concealment of income or for inaccurate particulars of income ( enclosed at pages 48 - 49 of the paper book ). The said notice is a printed notice wherein all the grounds mentioned in section 271 ( 1 )( c ) are mentioned . In other words, the Ld . AO has not pointed out or marked in the notice whether the assessee had concealed his income or had furnished inaccurate particulars of income . Thus as per the aforesaid decision of the Karnataka High Court which was affirmed by the Hon'ble Supreme Court, the notice does not meet the requirements of law and hence no penalty shall be imposed upon the assessee . 16 . Thus on the basis of the facts as narrated above, it is humbly submitted before your Honours that the Ld . CIT has correctly deleted the penalty so imposed by the Ld . AO . amounting to Rs . 23,68,786, hence the appeal of the Department be dismissed . 8. We have heard the rival contentions of both the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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