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TMI Blog2018 (4) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... initiation of penalty is bad in law as there is no specific charge mentioned in the notice issued u/s. 274 r.w.s. 271 of the Act. Ld. Counsel for the assessee referring to the copy of notice issued u/s. 274 r.w.s. 271, he submitted that it is not specified in the notice, whether the penalty is going to be levied for concealment of income or furnishing inaccurate particulars and the notice was issued in a mechanical manner without specifying the charge for which the penalty was proposed to be levied. Learned Counsel for the assessee submitted that in the absence of specific charge mentioned in the notice by striking off of irrelevant charge, the initiation of penalty proceedings and passing penalty order levying penalty is bad in law. Ld. Counsel for the assessee placed reliance on the following decisions: (i) CIT v. SSA s Emerald Meadow [73 taxmann.com 248 (SC)] (ii) CIT v. SSA s Emerald Meadows [73 taxmann.com 241 Karnataka High Court] (iii) Supreme Court of India v. Joint Commissioner of income Tax, - Special Range, Mumbai [161 Taxman 218 (SC)] (iv) Meherjee Cassinath Holdings Private Limited v. ACIT in ITA.No. 2555/Mum/2012. 3. Ld.DR vehemently supported the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the existence of any of the two situations, namely, for concealing the particulars of income or for furnishing inaccurate particulars of income. Therefore, it is obvious from the phraseology of Sec. 271(1)(c) of the Act that the imposition of penalty is invited only when the conditions prescribed u/s 271(1)(c) of the Act exist. It is also a well-accepted proposition that concealment of the particulars of income and furnishing of inaccurate particulars of income referred to in Sec. 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, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 5.8.2016, a copy of which is also placed on record. 10. In fact, at the time of hearing, the ld. CIT-DR has not disputed the factual matrix, but sought to point out that there is due 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed 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. 6. 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]. 7. We also find that the Hon'ble High Court of Telangana and Andhra Pradesh in the case of PCIT v. Smt Baisetty Revathi in ITTA.No.684 of 2016 dated 13.07.2017 considered a similar issue and held as under: - Perusal of the order reflects that the assessee did not raise the issue of invalidity of the penalty notice before the Commissioner. In her second appeal before the Income-tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam, in ITA No.599/Vizag/2014, the assessee, for the first time, raised the issue that the show-cause notice under Section 271(1)(c) did not specify as to whether it was prompted by concealment of particulars of income or furnishing of inaccurate particulars of income. Dealing with this contention, the Tribunal placed reliance on the judgment of the Karnataka High Court in THE COMMISS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars of your income or furnished inaccurate particulars of such income. It would be apposite at this stage to consider the judgment of the Karnataka High Court in M/s.MANJUNATHA COTTON AND GINNING FACTORY. Therein, a Division Bench of the Karnataka High Court observed that Section 271 of the Act of 1961 is a specific provision providing for imposition of penalties and is a complete code in itself regulating the procedure for such imposition. The Bench therefore held that penalty proceedings have to be conducted in accordance therewith, subject always to the rules of natural justice. It was pointed out that Section 271 makes appropriate provision for levying penalties on an assessee in different eventualities and one such eventuality is for concealment of income or furnishing of inaccurate particulars of such income. It was held that for starting the penalty proceedings, the condition precedent is that the Assessing Officer must be satisfied that a person has either concealed particulars of his income or furnished inaccurate particulars of such income. The person who is accused of the conditions mentioned in Section 271 should be made aware of the grounds on which imposition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such person for the purposes of the penalty provision shall be deemed to represent the income in respect of which particulars had been concealed. The Supreme Court observed that the statutory provision included the Explanation and once the assessee was put on notice, no express invocation of the Explanation is necessary. This judgment has no application to the case on hand as what we are concerned with presently is whether the assessee is required to be put on notice as to whether she is to be penalized for concealment of particulars of income or for furnishing inaccurate particulars of income. These are two different acts. Concealment of income is an act of omission while furnishing of inaccurate particulars of income is an act of commission. The consequences of such acts, being penal in nature, an assessee has to be informed as to what exactly is the charge against him so that he may respond thereto. No doubt, in the present case, the assessee seems to have submitted her explanation on merits without raising a doubt as to what was the precise allegation leveled against her. However, we are more concerned with the principle involved and not just the isolated ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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