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TMI Blog2019 (12) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... e the assessing officer erred in levying penalty without explicitly mentioning in the penalty notice the reason for initiating penalty proceedings. It is humbly submitted that the initiation of proceedings u/s 271(1)(C) of the Income-tax Act, is not valid as the assessing officer erred in not striking off the inappropriate portion of the notice. The assessing officer ought to have struck off the inappropriate portion and indicated to the assesses the applicable portion in the notice. Therefore, as the Notice u/s 271(1) (c) is bad in law, the penalty levied needs to be cancelled. 3. On the facts and in the circumstances of the case and in law the CIT(A) has erred in upholding the penalty levied u/s 271(1)(c) irrespective of the fact that the assessee did not conceal the income and did not submit inaccurate particulars of income and also the interest received by the assessee is to be treated as capital receipt in the hands of the assesses and also overlooked the judicial decisions. The above grounds are independent and without prejudice to one another. Your appellant craves to add, alter, amend or delete any of the grounds of appeal. 3. The brief facts of the case are that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposition laid down by the appellate authorities is that interest received by a company which carries on business, from bank deposits and loans could only be taxable as "income from other sources" and not as "business income. The income derived by an assessee has to be fitted under one or other head having regard to the source from which that Income is derived. It is the manner In which the Income is derived mat is relevant and not merely the fact that the persons in engaged In a business or in a profession. Moreover, the assessee had not deposited money by way of money lending business therefore the Interest earned on fixed deposits added under the head of Income from other sources. It was clear intention of the assessee to set off the expenses debited Into P&L A/c against the interest income. Such Interest income was deliberately routed through P&L A/c so that the expenses could be claimed. The assessee had earned interest income which is chargeable to tax under the head income from other sources instead of the head income from business. Had the case was not selected for scrutiny, the income earned by way of Interest would have been escaped. The said discrepancy came into light o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the case, I, therefore, levy a minimum penalty of Rs. 41,37,200/- (Forty one Lakh Thirty Seven Hundred Only)being 100% of the tax sought to be evaded. Working of penalty:- (I) Assessed Income including concealed Income: Rs. 1,2250436/- (ii) Tax on assessed Income inducing concealed Income: Rs. 41,63,924/- (iii) Assessed Income excluding concealed Income: Rs. 86,490/- (iv) Tax on assessed Income excluding concealed Income; Rs. 26,725/- Difference between (ii) and (iv) above: Rs. 4137199/- Minimum penalty 100% .. Rs. 41,37199/- Maximum penalty 300%.. Rs. 12411597 4. Aggrieved by the penalty order, the assesee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has filed elaborate written submissions on the issue, which has been reproduced at Para 4 on pages 4 to 9 of the Ld.CIT(A) order. The sum and substance of arguments of the assessee before the Ld.CIT(A) are that a claim, which was not substantiated per se cannot leads to conclusion that the assessee has furnished inaccurate particulars of income. The Ld.CIT(A) after considering relevant submission of the assessee and also by relied upon various judicial precedents rejected l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- and capitalized with a plea that the same had been earned out of share capital. After considering the contention of the appellant, the AO, assessed the interest income of Rs. 122,50440/- under the head "income from other sources." By holding that interest on Fixed Deposits are not incidental to the business of the appellant, as the appellant is engaged in business of manufacturing of galvanized steel. 5.2 The AO also initiated penalty proceedings u/s 271(1)(c) of the Act, for furnished inaccurate particulars of income. The appellant preferred first appeal before the CIT(A) 4 Mumbai, against the order passed u/s 143(3) of the Act. The Ld.CIT(A)-4, Mumbai, vide order dated 11.11.2014 dismissed the appal of the appellant by giving detailed finding. On receipt of the order of the CIT(A) the AO issued a show-cause on 19.06.2016, which was duly served upon the appellant. In compliance the Ld. AR requested for short adjournment and the sae was allowed. On given date the appellant, however, did not file any explanation thereafter, till the date of finalization of penalty order. Accordingly, the AO levied minimum penalty of Rs. 4137200/-, being 100% tax sought to be evaded, for furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, the contention of the appellant to treat the income earned against fixed deposits, as capital asset, as it had not started the business, is not tenable. The case laws cited by the appellant are distinguishable, as in appellant's case it had surplus fund which was parked with the bank, thereby earned the interest income which is liable to be assessed as income from other sources, hence not applicable to the fact of the present appeal. Had this case not been picked up for scrutiny, then the taxable income, to this extent would have escaped the assessment. 5.6 In view of the above discussions and having regard to the facts and circumstances of the case, I am of the considered view that the appellant has furnished inaccurate particulars of income by not offering the above income for tax thereby committed default within the meaning of section 271(1)(c) of the Act r.w. Explanation 1. Accordingly, this is a fit case for imposition of penalty u/s 271(1)(c) of the Act and the AO has rightly levied minimum penalty of Rs. 4137200/-, as per provisions of Sec 271(1)(c) of the Act, therefore, the same is upheld and all the above grounds of appeal are dismissed. 5. The Ld. AR for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income leading to concealment of income. Therefore, once a proper satisfaction has been arrived at before initiation of penalty proceedings or any time during proceedings, then subsequent issue of show-cause notice is a formality to communicate the assessee about initiation of penalty proceeding. Further, in this case, the Ld. AO had issued one more show-cause notice and also, called upon the assesse to explain why penalty proceedings shall not be initiated for furnishing inaccurate particulars of income, for which no compliance from the assessee. Therefore, we are of the considered view that once, a proper satisfaction has been arrived at before initiation of penalty proceedings, and then a defect in notice including mere non-striking of irrelevant portion in the notice does not invalidate the penalty proceedings. Although, the assessee has cited certain judicial precedents, including the decision of ITAT Mumbai 'B' Bench, in the case of Mehrjee Cassinath Holdings Pvt.Ltd. vs ACIT(supra), we find that facts of the present case are entirely different from the case laws relied upon by the assessee and hence, are not considered as applicable to the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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