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TMI Blog2019 (2) TMI 275X X X X Extracts X X X X X X X X Extracts X X X X ..... ge, be fatal to the proceedings? The difference between the two limbs, which signify omission and commission respectively, may in the facts of a case, or considering the explanation furnished, be very thin or even overlap (refer: A.M. Shah v. CIT [1998 (8) TMI 607 - GUJARAT HIGH COURT]. The penalty u/s. 271(1)(c), it was further explained, could in either case be levied only where there is a failure to disclose fully and truly particulars of his income by the assessee, and that there could be no straitjacket formula for ascertaining the two charges. In the instant case, in fact, both the satisfaction as well as the levy of penalty is qua concealment of particulars of income. A defective notice, even assuming so, would not defeat the proceedings. As regards the issue on merits, what all, as a bare reading of the relevant provision (s.271(1)(c)) would reveal, the assessee is to do is to render a bona fide explanation, substantiating it (Explanation 1). This explains the ambit of the penalty proceedings u/s. 271(1)(c), also exhibiting as to how these are, thus, different from the assessment proceedings. A plausible explanation, thus, saves penalty. The requirement of substan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessee agitating the order by the Commissioner of Income Tax (Appeals), Bathinda [ (CITA) short for] dated 04.05.2017, dismissing the assessee s appeal contesting the confirmation of the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 ( the Act hereinafter) for Assessment Year (A.Y.) 2011-12 vide order dated 18/2/2016. 2. The assessee-individual, running a brick kiln, was found during assessment proceedings to be maintaining a bank account with Indus Ind Bank (Account No. 0125 K52425 001), which, having a credit balance of ₹ 6,97,480/- (as on 31.03.2001), was not disclosed inasmuch as the same did not form part of his regular books of account. The same bore cash deposits during the relevant year (i.e., f.y. 2010-11) at a total of ₹ 47.60 lacs, qua which the assessee was accordingly questioned by the Assessing Officer (AO). Cash deposits to the extent of ₹ 22.10 lacs were explained to be out of cash advanced by his younger brother, Shri Babu Singh, who had sold lands for ₹ 8.51 lacs during October/November, 2008. The purpose of the advance was stated to be safe custody . Another ₹ 3 lacs was stated to be similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the assessment proceedings, so that the confirmation of the addition in assessment would not lead to an automatic levy of penalty, adverting to the decision in CIT v. Agrochemicals (India) [2007] 288 ITR 149 (P H). Reliance was also placed on the decision in National Textiles v. CIT [2001] 249 ITR 125 (Guj), reproducing there-from. Both the deponents, i.e., Shri Babu Singh and Shri Harjeet Singh, had in their respective statements admitted to have advanced cash to the assessee, so that the rejection of their statements, forming part of the assessee s explanation, as unsubstantiated, was not proper. Finally, reliance is placed on the decision in SSA s Emrald Meadows case [2016] 73 Taxmann.com 248 (SC), dismissing the Revenue s SLP. The decisions by the Hon ble Karnataka High Court deleting the penalty u/s.271(1)(c) levied without specifying the limb, i.e., concealment of particulars of income or furnishing inaccurate particulars of income, in the notice u/s. 274, as bad in law, gets accordingly upheld. I shall take up the assessee s legal argument first, which is to the effect that the notice u/s. 274, not specifying the limb under which the penalty is being proposed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ua concealment of particulars of income . A defective notice, even assuming so, would not defeat the proceedings. The law in the matter is trite, toward which reliance stands placed before me by the Revenue on the decision in Kantamani Venkata Narayana Sons vs. First Additional ITO [1967] 63 ITR 638 (SC) (copy on record). The facts of the said case are telling, though it may not be necessary to recount them here, where the intent is to give an overview of the matter. The decision is under the 1922 Act, even as the notice under the Act, even if construed as defective, is protected u/s. 292B of the Act. In fact, on this precise issue, i.e., the legal impact of the non-specification of the limb of sec.271(1)(c) in the notice u/s. 274, there are several decisions by the Hon ble High Courts, as in CIT v. Manu Engineering Works [1980] 122 ITR 306 (Guj); CIT vs. Mithila Motors (P.) Ltd. [1984] 149 ITR 751 (Pat); CIT v. Chandulal [1985] 152 ITR 238 (AP); CIT vs. Kaushalya Ors . [1994] 216 ITR 660 (Bom), holding it to be of little consequence, also clarifying the import of the notice u/s. 274. Again, it may be noted that these decisions are either under the 1922 Act or prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , or that furnished by him is found to be false by the Revenue. The law in the matter is trite, explained by the Hon ble Apex Court per a series of decisions, viz. Mak Data (P.) Ltd. vs. CIT [2013] 358 ITR 593 (SC); Union of India v. Dharmendra Textile Processors [2008] 306 ITR 277 (SC); K.P. Madhusudhanan vs. CIT [2001] 251 ITR 99 (SC); B.A. Balasubramaniam and Bros v. CIT [1999] 236 ITR 977 (SC); Addl. CIT vs. Jeevan Lal Shah [1994] 205 ITR 244 (SC); CIT vs. K. R. Sadayappan [1990] 185 ITR 49(SC), to cite some, followed by Hon ble High Courts throughout the country, as by the jurisdictional High Court in CIT v. Lalchand Tirath Ram [1997] 225 ITR 675 (P H); Prem Pal Gandhi v. CIT (in ITA No. 353 of 2009, dated 22/7/2009), the latter also relied upon by the Revenue before me. Continuing further, in my opinion, both clauses (A) and (B) of Explanation 1 to the section are attracted in the present case. Limb (A) of Explanation 1 , i.e., where the assessee either fails to furnish an explanation or renders one which is found false, becomes applicable as the assessee has not, at any stage of the proceedings, either in quantum or penalty, explained as to why the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s case. The amount has not been, as stated, given for safe custody, but for, as stated, purchase of a tractor, falsifying the assessee s explanation. Further, why, then, was the tractor not purchased, with, again, the money, rather than being returned back immediately or even in due course, i.e., on the non-fulfillment of the purpose for which it was given, utilized by the assessee for his purposes? It is inconceivable that an amount given, assuming so, under trust by a close relative for a specific purpose/need, presumably urgent, is, as stated, retained for years, for which there is again no explanation. Why did not the assessee state the truth ? A tractor, rather, could be purchased directly by his brother-in-law, even if by taking guidance from the assessee in the matter, if that was the reason, or from a dealer known to the assessee, where that was the case. No purchase of a tractor is shown in the relevant year or even subsequently. If indeed it was for the purchase of the tractor, his co-brother would have asked back the amount for acquiring it, rather than leaving it with the assessee to use the same and return it on his whim and fancy. The return of money, a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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