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TMI Blog2018 (3) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.05.2016 of Principal CIT, Kolkata-3, Kolkata, relating to A.Y.2011-12. 2. In this appeal the assessee has challenged the order of Principal CIT whereby the CIT imposed penalty on the assessee u/s 271(1)(c) of the Income Tax Act, 1961 (Act). 3. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was imposed on the assessee by the Principal CIT are as follows :- The Assessee is a company. An order of Assessment u/s.143(3) of the Act dated 22.1.2014 in which the AO allowed long term loss on redemption/sale of mutual funds of ₹ 2,22,763/- while computing income from business. The Principal CIT in exercise of his powers u/s.263 of the Act issued show cause notice in respect of the long term loss of ₹ 2,22,763: The assessment order u/s 143(3) was passed on 22.01.2014 which was found to contain errors as under :- On perusal of the Assessment records, it was noticed that the assessee company debited an amount of ₹ 2,22,763/- in P/L account as long term loss on mutual fund. As it was exempted income/loss u/s 10(38) of I.T.Act, it was not required to be taken in consideration in computation of taxable income. Moreover, Long Term C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as to whether the charge is of concealment of particulars of income or furnishing of inaccurate particulars of income. The same is reproduced for the purpose of ready reference: Have concealed the particulars of your income or furnished inaccurate particulars of such income. 8. The ld. Counsel for the assessee drew our attention to the decision of the Hon ble Karnataka High Court in the case of CIT vs. SSA s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned DR. This is an unreported decision and a copy of the same was not furnished. 9. In the case of CIT Vs. Kaushalya (supra), the Hon ble Bombay High Court held that section 274 or any other provision in the Act or the Rules, does not either mandate the giving of notice or its issuance in a particular form. Penalty proceedings are quasi-criminal in nature. Section 274 contains the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the Principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The ITAT Mumbai Bench in the case of Dhanraj Mills Pvt.Ltd. followed the decision rendered by the Jurisdictional Hon ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, which was struck down by the Appellate Authority, the initiated penal proceedings, nolonger exists. If the Appellate Authority had initiated penal proceedings on the basis of the addition sustained under a new ground it has a legal sanctum. This was not so in this case and therefore, on both the grounds the impugned order passed by the Appellate Authority as well as the Assessing Authority was set-aside by its order dated 9th April, 2009. Aggrieved by the said order, the revenue filed appeal before High Court. The Hon ble High Court framed the following question of law in this appeal viz., 1. Whether the notice issued under Section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 2. Whether the proceedings initiated by the Assessing Authority was legal and valid? Therefore the decision rendered by the ITAT Mumbai in the case of Earthmoving Equipment Service Corporation (supra) is of no assistance to the plea of the revenue before us. 11. In the case of M/S.Maharaj Garage Co. Vs. CIT dated 22.8.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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