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TMI Blog2018 (3) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Order, the levy in the penalty order and the confirmation of such penalty in the first appellate order are on one and the same charge, the contents of the notice u/s 274 are of no effect, the assessee having been duly apprised of the specific charge against them, is not acceptable in law. Therefore, particularly following ‘Manjunatha’ (2013 (7) TMI 620 - KARNATAKA HIGH COURT), we hold that the notices under challenge are not in conformity with the law and they are void ab initio. - Decided in favour of assessee - I.T.A No. 118/Agra/2015, I.T.A No. 161/Agra/2015, I.T.A No. 300/Agra/2016, I.T.A No. 77/Agra/2016, I.T.A Nos. 83 & 84/Agra/2016, I.T.A No. 171/Agra/2015, I.T.A No. 293/Agra/2016, I.T.A No. 326/Agra/2015, I.T.A Nos. 78 & 79/Agra/2016 - - - Dated:- 19-12-2017 - SHRI A. D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER I.T.A No. 33/Agra/2016, I.T.A No. 62/Agra/2014, I.T.A No. 140/Agra/2017, I.T.A No. 130/Agra/2016, I.T.A No. 18/Agra/2016, I.T.A No. 117/Agra/2015, I.T.A No. 378/Agra/2014 And I.T.A No. 110/Agra/2015 Das Cold Storage (P) Ltd., Smt. Pravesh Agarwal, Late Shri Trilok Singh Kalra Through Shri Gurmeet Kalra, Late (Smt.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in confirmity with the law. 4. As per the ld. DR, however, the notice is entirely as per law. 5. The aforesaid notice (APB page 7) reads as follows: Sub: Penalty notice u/s 274 read with section 271(1)(c) of the I.T. Act, 1961 - A.Y. 2008 -09 Reg:- Whereas in the course of the proceedings before me for the assessment year 2008-09 it appears to me that you;- ** have concealed the particulars of your income or have furnished inaccurate particulars of such income. You are hereby requested to appear before me at 11.00 AM on 14.09.2010 and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through an authorized representative, you may show cause in writing on or before the said date which will be considered before any such order Is made under section 271(l)(c). Sd/- (Yuvraj Malik) Income Tax Officer-3(4) Mathura. 6. So, as per the notice, the assessee had concealed the particulars of his income, or had furnished inaccurate particulars thereof. 7. In the assessment order (APB-149-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No.480/2012, Delhi High Court. (h) Shyam Biri Works , 259 ITR 625 (All). (i) Sangam Enterprises vs. CIT , 288 ITR 396 (All). (j) Harish Hosiery Mart , ITAT, Ahmedabad. (k) CIT vs. Arcotech Ltd. (Formerly SKS Ltd. ITA No.71/2013, dated 12.09.2013. Delhi (H.C.). (l) B.A. Balasubramanian Bros. , 20 Taxman 215 (Mad). (m) Earthmoving Equipment Service Corporation vs. DCIT ITA No.6617/Mum/2014. (n) ACIT vs. Dr. Prakash Kanhaiyalal Kankariya , ITA No.1645/Pune/2013. (o) Madanlal Kishorilal vs. CIT , 197CTR (All) 144. (p) Muninaga Reddy (supra). (q) Jaysons Infrastructure India P. Ltd. vs. ITO , ITA No. 997/Bang/2015. (r) CIT vs. Smt. Kaushalya Devi , 216 ITR 660 (Bom). 10. We have heard the parties and have perused the material on record. The issue is as to whether, as contended by the assessee, issuance of a notice under section 274 of the Act is a prerequisite sine qua non for the levy of concealment penalty u/s 271(1)(c), or whether it is not so, the initiation of penalty proceedings, as contained in or evincible from the assessment order amounting to sufficient notice to the assessee, as maintain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices Ltd. Vs ACIT- Circle-IV, Ahmedabad , in ITA No. 2078/Ahd/2006, the ground raised by the assessee for adjudication was as under: The learned Commissioner of Income-tax (Appeals) erred in not appreciating the fact that there was no satisfaction as regards concealment of income or furnishing of any inaccurate particulars while passing the assessment order. It is submitted that in absence of such satisfaction penalty u/s 271(l)(c) cannot be levied. It is submitted that it be so held now. 16. This, again, is not the issue before us. 17. In K.P. Madhusudanan (supra), the Assessing Officer noted that the demand draft and telegraphic transfer were not entered by the assessee in its cash book on the dates on which the same were purchased and made. These are nowhere the facts of the present case. 18. In Zoom Communication Pvt. Ltd. (supra), the facts of the case are that during assessment, it was noticed by the AO that in Schedule 9, relating to Administrative and other Expenses, forming part of the Profit Loss Account, a sum of ₹ 1,21,49,861/- had been debited under the head Equipment Written Off . It was stated by the assessee that due to oversight, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under section 80IA and seeks no such advantage. Therefore, the case is distinguishable on facts. 20. In the case of Shyam Biri Works (supra), the Hon ble High Court has observed that though the AO must have satisfaction as required under section 273, it is not necessary for him to record that satisfaction in writing before initiating penalty proceedings under section 273 of the Act. The case of the assessee before us, however, is not on the ground of non recording of satisfaction, but is on the ground of absence of clear charge/default mentioned in the penalty notice. The assessee s case is that on account of absence of a clear charge having been spelt out in the penalty notice, the notice is rendered void ab initio in view of section 274 of the Act. 21. Sangam Enterprises (supra) pertains to the applicability of Explanation 1 to section 271(1)(c). The Hon ble High Court has held that the judgment of CIT vs. Anwar Ali , 76 ITR 696 (S.C.) is no longer applicable. It has further been observed that after the insertion of Explanation 1 to section 271(1)(c) by the Taxation Laws Amendment Act 1975, if the explanation offered by the assessee regarding the additions is eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is formally and legally conveyed, mentions both of the charges, can the penalty be sustained and whether such a penalty notice can be said to be not defective, the defect being minor in nature and so, curable under section 292BB of the Act. 27. Reliance on Madan Lal Kishori Lal vs. CIT (supra), wherein, the Hon ble Allahabad High Court, following K.P. Madhusudanan (supra), has held that Explanation-1 applies whether or not the Assessing Officer has invoked it in the order or in the notice. This judgment is not an authority for the issue under consideration before the Bench. The judgment explains the scope of Explanation- 1 appended to section 271(1)(c) of the Act. It has been held that the onus of the assessee will not get discharged by furnishing an explanation without any further proof; that in Explanation-1 to section 271(1)(c), the onus is the assessee; that where the AO issues a notice to the assessee, he makes the assessee aware that the provisions thereof are to be used against him and these provisions include Explanation-1 to section 271(1)(c); that where the returned income is less than 80% of the assessed income, the Explanation is automatically attracted. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f non-application of mind by the Assessing Officer; and that such a proposition has been considered by the Hon ble Bombay High Court in the case of Shri Samson Perinchery (supra). The Bench has further held that the observation of the AO in the assessment order and non-striking off the irrelevant clause in the notice clearly brings out the diffidence on part of the AO and there is no clear and crystallized charge being conveyed to the assessee u/s 271(1)(c) which has to be met by him, the observation of the AO in the assessment order alongside his action of non striking off the irrelevant clause in the notice was held be rendering the notice not complying with the principles of natural justice. The Bench thus deleted the penalty. 30. Again, a similar issue came up for consideration before the Mumbai ITAT in the case of Dr. Sarita Milind Davare Vs ACIT , in ITA No. 2187/Mum/2014 wherein, the DR that in the assessment order, the AO had clearly specified that penalty was initiated for concealment of income and placing reliance on the Hon ble Bombay High Court s decision in the case of CIT Vs Kaushlaya Devi 216 ITR 660, submitted that a mere mistake in the language used, or mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se falls within the four corners of the said provision, penalty cannot be imposed. (Para-12). 37. In Dilip N. Shroff Vs. JCIT , 291 ITR 519 (SC), it has been held that section 271(1)(c) of the Act is in two parts. Whereas the first part refers to concealment of income, the second part refers to furnishing of inaccurate particulars thereof. 'Concealment of income' and 'furnishing of inaccurate particulars' are different. 38. In Ashok Pai vs. CIT , 292 ITR 11 (SC), the Hon ble Supreme Court has held that: Concealment of income and furnishing of inaccurate particulars carry different connotations. Concealment refers to deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppressio veri or suggestio falsi. (Para 22). 39. In CIT vs. Reliance Petroproducts (P) Ltd. , 322 ITR 158 (SC), the Hon ble Supreme Court has clarified as follows: ..It was only on the point of mens rea that the judgment in Dilip N. Shroff v. Joint CIT was upset. In Union of India v. Dharmendra Textile Processors after quoting from section 271 extensively and also considering section 271(1) (c), the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), the Tribunal held that: In fact, the order imposing penalty is contrary to law, declared by this court in the case of Commissioner of Income- Tax and Another v. Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Karn), in as much as, it is clear from the order that there is no direction to initiate penalty proceedings. In the aforesaid judgment, it was held that it is imperative that the assessment order contains a direction. The use of phrases like (a) penalty proceedings are being initiated separately, and (b) penalty proceedings under section 271(1) (c) are initiated separately, do not comply with the meaning of the word direction as contemplated even in the amended provisions of law. The direction should be clear and without any ambiguity. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the Income tax Officer whether or not take action, it cannot be described as a direction. It is settled law that in the absence of the existence of these conditions in the assessment order penalty proceedings could not be proceeded with. The proceedings which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a different fields. The courts have held that in the notice under section 274 r.w.s. 271, the AO has to specify the charge on which he intends to levy penalty. This aspect of the matter has been consistently reiterated by the Hon'ble High Courts from time to time. ; that: We found that Notice under section 271(l)(c) is issued on standard performa in which inappropriate words and paragraphs were neither struck off nor deleted. Reference is made to the copy of notice issued under section 274 r.w.s 271 of the Income Tax Act, 1961 on January 2, 2014 in respect of all the assessment years the copies of which are placed in the paper book. We found that the said notices have been issued on standard performa and in the notices the inappropriate words and paragraphs were neither struck off nor deleted. Thus, the assessing authority was not sure as to whether he had proceeded on the basis that the assessee had either concealed its income or had furnished inaccurate particulars. Thus, the notices so issued are not in compliance with the requirement of the particular section and therefore it is a vague notice, which is attributable to a patent non-application of mind on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esultantly the principles of natural justice could be said as being violated. In our view, if the observations made by this court in the above referred decision and more particularly clauses (p), (q) and (r) are considered, it was a case wherein the decision of this court would apply and it cannot be said that the decision of this court in the case of CIT v. Manjunatha Cotton and Ginning Factory reported in [2013] 359 ITR 565 (Karn) would not apply. In view of the aforesaid discussion, if the decision of this court in the case of CIT v. Manjunatha Cotton and Ginning Factory reported in [2013] 359 ITR 565 (Karn) is considered, the resultant effect would be that the notice in question issued under section 271(l)(c) for levy of penalty and consequently the penalty imposed, both would be unsustainable and cannot stand in the eye of law. 49. Thus, Muninaga Reddy (supra), following Manjunatha (supra), unambiguously lays down that the notice u/s 274 must specifically state the ground for which penalty is being levied, i.e., whether for concealment of income, or for furnishing inaccurate particulars. 50. Reliance has been placed by the ld. DR on Muninaga Reddy (su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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