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TMI Blog2019 (7) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 3. On the facts and circumstances of the case and in law, the learned Assessing Officer erred in issuing notice u/s. 274 r.w.s. 271 without striking off either of two charges i.e concealment of particulars of income or furnishing of inaccurate particulars of income and thereby rendering the penalty proceeding bad in law. 2. The brief facts of the case are that the assessee filed his return of income on 28/09/2011 declaring total income to the tune of Rs. 7,24,064/- and the return was processed u/s 143(1) of the I.T. Act, 1961. The case was selected for scrutiny under CASS. The notices u/s 143(2) & 142(1) were issued and served upon the assessee. The assessee was carrying on the business of manufacturing of P.V.C. Raincoats, Rain Suits, Reversible Suit and P.V.C. A/C jurking in the name of M/s. Super Plastic Corporation, a proprietary concern. The case was selected for scrutiny under CASS due to the deposit of an amount of Rs. 65,22,970/- in cash with ICICI Bank, BKC branch during the year which was not disclosed by the assessee. Notice 133(6) was also issued to the ICICI Bank for getting the statement of accounts. The statement reflected to deposit in sum of Rs. 80,48,061/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Perinchery and the order of the ITAT, Mumbai Bench in ITA. No.2555/M/2012 dated 28.04.2017 titled as Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, Circle-4(2).At the time of argument, the Ld. Representative of the assessee has also placed reliance upon the finding of the Hon'ble ITAT in ITA. No. 2555/M/2012 titled as Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, Circle-4(2). The relevant para is hereby reproduced below: - "8. We have carefully considered the rival submissions. Sec. 271(1)(c) of the Act empowers the Assessing Officer to impose penalty to the extent specified if, in the course of any proceedings under the Act, he is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. In other words, what Sec. 271(1)(c) of the Act postulates is that the penalty can be levied on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718]" 9. Factually speaking, the aforesaid plea of assessee is borne out of record and having regard to the parity of reasoning laid down by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the notice in the instant case does suffer from the vice of non-application of mind by the Assessing Officer. In fact, a similar proposition was also enunciated by the Hon'ble Karnataka High Court in the case of M/s. SSA's Emerald Meadows (supra) and against such a judgment, the Special Leave Petition filed by the Revenue has since been dismissed by the Hon'ble Supreme Court vide order 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of income. The Hon'ble Gujarat High Court quashed the penalty since the basis for the penalty proceedings disappeared when it was held that there was no suppression of income. The Hon'ble Kerala High Court has struck down the penalty imposed in the case of N.N.Subramania Iyer Vs. Union of India (supra), when there is no indication in the notice for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. In the instant case, the AO did not specify the charge for which penalty proceedings were initiated and further he has issued a notice meant for calling the assessee to furnish the return of income. Hence, in the instant case, the assessing officer did not specify the charge for which the penalty proceedings were initiated and also issued an incorrect notice. Both the acts of the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e against the assessee qua Sec. 271(1)(c) of the Act is not firm and, therefore, the proceedings suffer from non-compliance with principles of natural justice inasmuch as the Assessing Officer is himself unsure and assessee is not made aware as to which of the two limbs of Sec. 271(1)(c) of the Act he has to respond. 14. Therefore, in view of the aforesaid discussion, in our view, the notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act dated 10.12.2010 is untenable as it suffers from the vice of non-application of mind having regard to the ratio of the judgment of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) as well as the judgment of the Hon'ble Bombay High Court in the case of Shri Samson Perinchery (supra). Thus, on this count itself the penalty imposed 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." 5. In view of the above facts and circumstances, the penalty is not liable to be sustainable on account of defective notice. Since, the assessee has succeeded on the basis of legal issu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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