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TMI Blog2018 (5) TMI 1575X X X X Extracts X X X X X X X X Extracts X X X X ..... on of penalty levied u/s 271(1)(c) of the IT Act. There is a delay in filing of the appeal. As per the application for condonation of delay, which is accompanied by an affidavit of the assessee, The CIT(A) s order was not served on the assessee and the assessee filed application dated 16.12.2016 before the ld. CIT(A), for providing a certified copy of the CIT(A) s order. The ld. CIT(A), vide letter dated 20.12.2016, informed the assessee that the order had been sent by registered post on 30.04.2015 along with this letter of the CIT(A). A copy of theCIT(A) s order was, however, sent. This was received by the assessee on 24.12.2016. The appeal was filed thereafter. 2. The contents of the application of delay show that the assessee was prevented by sufficient cause from filing the appeal in time. The appeal was filed on 20.02.2017, i.e., within two months of the date of receipt of the CIT(A) s order by the assessee on 24.12.2016. Accordingly, the delay in filing the appeal is condoned. 3. The following grounds have been raised: 1. Because the Ld. CIT(A) has wrongly and illegally confirmed the penalty imposed by the Assessing Officer u/s 271(l)(c) of the I. T. Act. 2. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. 3. Because in the absence of specific satisfaction of the Assessing Officer the penalty imposed being bad in law and without jurisdiction deserves to be deleted. 5. The additional grounds raised concern a legal issue going to the root of the matter. They do not require any fresh material to be gone into. Accordingly, admitted. 6. The facts are that the AO had imposed penalty u/s 271(1)(c) of the Act at ₹ 9,44,043/-on the ground that the additions made on 10.12.2009, of ₹ 22,50,000/-being unexplained cash credits u/s 68 of the Act, ₹ 2,35,096/- u/s 69 of the Act and ₹ 2,42,933/- u/s 69C of the Act, were confirmed by the ld. CIT(Appeals), Ghaziabad vide order in Appeal No.48/2009-10/GZB-ALG, dated 21-02-2011. 7. The ld. Counsel for the assessee has contended that the penalty order dated 30.03.2012, as sustained by the ld. CIT(A), is void-ab-initio, as the notices issued u/s 247 r.w.s. 271(1)(c) of the Act, dated 21.12.2009 (APB-7), 25.03.2011 (APB-8) and 30.05.2011 (APB-9), are not in conformity with the law. 8. As per the ld. DR, however, the notices are entirely in accordance with law. 9. The notice dated 21.12.2009 (APB-7) rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, hold him sic her liable for penalty u/s 271(1) (c) of the Act accordingly . In the impugned order, the levy of penalty has been confirmed by holding (impugned order, page 18) as follows: On the basis of all the above case laws, which include the decision of the jurisdictional High Court also, I hold that in a case of unexplained unsecured loans/investment, burden is on the assessee to prove that there was no concealment of income or of true particulars. But, in the present case, the appellant has failed to adduce any satisfactory explanation in rebuttal of the fact that the impugned loans represented her unexplained money. In my firm view, the angle of concealment is more than established, and, therefore, I uphold the penalty of ₹ 9,44,043/- Grounds of appeal Nos.1 to10 are dismissed. 14. Heard. The matter, it is seen, is squarely covered by order dated 19.12.2017, passed by the Division Bench, in Sachin Arora vs. ITO , and other connected cases, in ITA No.118/Agra/2015, for A.Y. 2008-09, and other connected cases. 15. In Sachin Arora (supra), the Bench has observed as follows: 8. According to the ld. Counsel for the assessee, the notice, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthmoving 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 maintained by the Department. It is also up for adjudication as to whether, in case issuance of notice u/s 274 is to be taken as a mandatory statutory requirement before levy of penalty, if such a notice does not spell out the precise charge against the assessee, the very initiation of the penalty proceedings would not be liable to be struck down as null and void ab initio. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, this amount was not added back in the Computation of Income and the same ought to have been adjusted in the Block of Assets. The aforesaid amount was added back to the income of the assessee, with its consent. It was further noticed that another sum of ₹ 1 Lakh had been paid under the head Income Tax Paid , in the aforesaid Schedule relating to Admin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings 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 either found to be false, or remained unsubstantiated, the additions so made are deemed to be concealed income, and therefore, the penalty provisions are attracted. The case has no application to the points and controversy under question herein. 22. In the case of Harish Hosiery Mart Vs ITO , in ITA No. 3009 (Ahd) 2007, the Bench concluded the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the case under consideration, however, the issue is not about the applicability or non-applicability of Explanation- 1 to section 271(1)(c), the issue is regarding the validity and legality of the notice. It is only when a valid notice is issued, that the question of considering the assessee s explanation/reply in the light of Explanation - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 mere non-striking off of the inaccurate portion cannot by itself invalidate the notice. 31. The above argument of the Revenue was not accepted by the ITAT and after discussion of the Judgment delivered in the case of CIT Vs Kaushlaya Devi (supra), the Bench held that a combined reading of Smt B. Kaushlaya Ors (supra) and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccurate 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 came to the conclusion that since section 271(1) (c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was not necessity of mens rea. . The basic reason why decision in Dilip N Shroff v. Joint CIT was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 initiated contrary to the said legal position are liable to be set aside. Therefore, the appellate Authority was justified in setting aside the order imposing penalty. Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue. We do not find any merit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound 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 part of the assessing authority. ; and that: There can be no doubt that penalty u/s. 271(l)(c) of the Act is levied for concealing particulars of income or for furnishing inaccurate particulars of such Income, which are the two limbs of this provision. In other words, it is only when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 (supra), for the proposition that the Hon'ble High Court has stated that it is a question of fact and not a question of law and therefore, according to the ld. DR, it will not constitute a binding precedent. 51. In this connection, it is seen that in Muninaga Reddy (supra), the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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