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TMI Blog2019 (10) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... declare its true income in the original return of income filed on 30.09.2011. Had it been the intention of the assessee to make a full and true disclosure of its income, it would have filed a revised return of income before the issuance of the notice 143(2)/ 142(1) by the AO. AO has rightly held that the assessee has deliberately and consciously failed to furnish full and true particulars of income and attempted to conceal income. To hold otherwise would be to exalt artifice over reality and to deprive the statutory provisions in question all serious purpose. However, the penalty is not levyable on the disallowance of 49,791/- (disallowance u/s 14A) and 5,00,000/- (salary). The AO is directed to restrict the levy of penalty u/s 271(1)(c) to 100% of the difference between revised income ( 23, 92, 594/-) and original income ( 9,733/-). - Decided partly in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT(A) has failed to appreciate the fact that there was a genuine error and the income was inadvertently omitted to be considered in the computation and the appellant had filed the revised computation of income and there was no intent on the part of the appellant to conceal or furnish inaccurate particulars of his income as contemplated under section 271 (1) (c) of the Act. Therefore, the initiation and imposing of penalty proceedings is wrong, bad in law, invalid and void ab-initio and CIT (A) has not justified in confirming the penalty u/s 271 (1)(c) of the Act. 3. Briefly stated, the facts are that the appellant filed his return of income for the assessment year (A.Y) 2011-12 on 30.09.2011declaring total income of ₹ 9,733/-. The nature of business of the appellant is arranging finance for real estate developers. The case was selected for scrutiny assessment. Notice u/s 143(2) and 142(1) was served by the A.O on the appellant on 12.09.2019 and 15.09.2019 respectively. The appellant filed a revised return of income on 25.09.2012 on a total income of ₹ 23,92,594/-. The A.O noted that "assessee has revised its income to ₹ 23,92,594/- from ₹ 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn of income filed on 30.09.2011, the assessee had suppressed the amount of income. Therefore, it is argued that the penalty of ₹ 7,55,811/- levied by the AO u/s 271(1)(c) and confirmed by the Ld. CIT(A) be upheld. 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. In the assessment order dated 20.03.2014, the A.O initiated the penalty proceedings u/s 271(1)(c) for concealing the income and filing inaccurate particulars of income. Subsequently, the A.O issued notice under Sec.274 r.w.s 271 to the assessee stating that he has concealed the particulars of his income. As mentioned in the penalty order dated 23.09.2014, the AO initiated penalty proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income. In response to the show cause notice dated 25.07.2014 issued by the A.O, the assessee filed a reply dated 04.08.2014 stating that: "..........I would like to state that when the assessee had filed his original return of income he did not have an accountant who could finalise the books of accounts. When the assessee was in receipt of the notice, his accountant went through the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the principle of natural justice of the assessee being heard before levying penalty. Rules of natural justice cannot be imprisoned in any straight-jacket formula. For sustaining a complaint of failure of the principles of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed. The issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The entire factual background would fall for consideration in the matter and no one aspect would be decisive. In this context, useful reference may be made to the following observation in the case of CIT v. Mithila Motor's (P.) Ltd. [1984] 149 ITR 751 (Patna) (head note): Under section 274 of the Income-tax Act, 1961, all that is required is that the assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. The Tribunal in ITA No. 866/PN/2009 for assessment year 2004-05 decided on 30-10-2013 further reduced the addition to 20% of the addition sustained by the CIT(A) i.e. 20% of ₹ 8,87,03,901/- (₹ 1,77,40,780/-). The Assessing Officer levied penalty of ₹ 64,91,794/- u/s. 271(1)(c) on account of furnishing inaccurate particulars of income to the extent of addition confirmed by Tribunal. Against the order passed u/s 271(1)(c) dated 13-08-2014, the assessee filed appeal before the CIT(A). The CIT(A) by placing reliance on the decision of Tribunal in assessee's own case for assessment years 2005-06 and 2006-07 deleted penalty in toto. The Tribunal held that no penalty u/s 271(1)(c) is sustainable where ad-hoc additions are made. The Tribunal further held that "the Assessing Officer was not clear of the charge u/s 271(1)(c) that has to be invoked for levy of penalty and hence mentioned both the limbs i.e. concealment of income, as well as, furnishing inaccurate particulars of income. However, the penalty has been levied only on the charge of furnishing inaccurate particulars of income". The Tribunal, therefore, set aside the order levying penalty. In the above case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 39,27,976/-. The Tribunal dismissed the appeal filed by the Revenue on the reason that "the questions of disallowance and its quantification are quite disputable and can lead to bona fide difference in opinion between the assessee and the authorities. In such a situation, the levy of penalty will not be justified". In the above case, the main reason for the difference in returned and assessed income was on account of disallowance u/s 14A and penalty proceedings were initiated in the course of assessment proceedings. In the instant case, there is a total difference in the items of the profit & loss account filed along with the original return of income submitted on 30.09.2011 and the revised return on 25.09.2012. It has resulted in difference in income of ₹ 23,82,861/-(₹ 23,92,594/- minus ₹ 9,733/-). Therefore, the instant case is distinguishable from the above decision. 7.2 In Union of India v. Dharmendra Textiles Processors (2007) 295 ITR 244(SC), the Hon'ble Supreme Court has held that penalty u/s 271(1)(c) is a civil liability and the wilfull concealment is not an essential ingredient for attracting civil liability, unlike the matter of prosecution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 143(2) by the assessee which was issued by the AO was 12.9.2012. The date of receipt of notice u/s 142(1) by the assessee which was issued by the AO was 15.9.2012. However, in the revised return of income filed on 25.09.2012, the assessee has declared total income of ₹ 25,22,599/-. The receipts were ₹ 1,08,01,725/- and expenses ₹ 82,79,126/-, thus resulting in a net profit of ₹ 25,22,599/-The tax payable on it as per the assessee comes to ₹ 5,88,931/-. Not claiming credit for tax deducted at source in the original return of income is not germane to the present issue. Section 143(2) states that where a return has been furnished u/s 139, the AO, if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not under paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the AO or to produce, or cause to be produced before the AO any evidence on which the assessee may rely in support of the return. For the purpose of making assessment, the AO may serve on any person a notice u/s 142(1) to produce or caus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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