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TMI Blog2018 (4) TMI 1756X X X X Extracts X X X X X X X X Extracts X X X X ..... ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For the Appellant : Shri Vimal Punmiya (AR) For the Respondent : Shri Rajesh Kumar Yadav (DR) ORDER PER PAWAN SINGH, J.M. 1. This appeal by assessee under section 253 of the Income-tax Act (the Act) is directed against the order of ld. Commissioner of Income-tax (Appeals) (ld. CIT(A)-17, Mumbai dated 25.06.2014 for Assessment Year 2010-11, which in turn arises from the penalty levied by Assessing Officer under section 271(1)(c) of the Act dated 28.08.2013. The assessee has raised the following grounds of appeal: 1. The CIT(A) erred in confirming the levy penalty of amount ₹ 13,26,711/- u/s 271(1)(c) of Income Tax Act, 1961. 2. The assessee craves leave to add further grounds of or to amend or alter the existing grounds of appeal on or before the date of hearing. 2. Brief facts of the case are that the assessee filed return of income for relevant Assessment Year 2010-11 on 16.03.2011 declaring total income of ₹ 16,85,000/-. The assessment was completed on 01.02.2013 assessing the total income at ₹ 55,88,280/-. The Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue submits that the Assessing Officer while passing the assessment clearly mentioned that penalty is initiated for furnishing inaccurate particulars of income as well as concealment of income. The assessee was aware about the charges. The assessee has not raised any specific grounds of appeal about striking off inappropriate portion of the notice under section 274 read with section 271(1)(c) of the Act. To strengthening its submission, the reliance is made on the decision of jurisdictional High Court in case of CIT Vs Smt. Kaushalya (2005) 216 ITR 660(Bom) and decisions of Tribunal in case of Ms. Laudres Austin vs. ITO in ITA No. 1683/Mum/2009 dated 28.09.2017 and Sansui Steel Pvt. Ltd. vs. ITO in ITA No. 1403/Mum/2015 dated 30.11.2017. 5. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that during the assessment, the Assessing Officer noted that the assessee was undertaking a transaction in different commodities. The assessee was asked to furnish trading account maintained by assessee with cardholder. The statement of assessee was also recorded under section 131 of the Act on 22.01.2013. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied penalty for furnishing inaccurate particular of income thereby concealed the particular of income. The co-ordinate bench of Mumbai Tribunal in Meherjee Cassinath Holdings Pvt. Ltd. V/s. ACIT in ITA No. 2555/M/12 (this combination) while considering the similar issues held as under: 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 a well accepted proposition that 'concealment of the particulars of income' and 'furnishing of inaccurate particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers 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 disallowance, he has recorded a satisfaction that penalty proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the part of the Inspecting Assistant Commissioner. The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 nonapplication 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. 6. Considering the above referred legal and factual matrix, we are of the view that the penalty order passed by assessing officer is not sustainable and the same is set-aside. As we have observed earlier that the addition, which is the basis of levying the penalty was made on telescoping method/ adhoc basis. It is settled legal position that on adhoc addition no penalty under section 271(1)( c) is leviable. 7. The decision re ..... 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