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TMI Blog2018 (6) TMI 1681X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Merely sending a printed performa without striking off the particular limb or specifying the particular ground or default would not satisfy the requirement of law. The assessee must know specifically the ground which he has to meet otherwise, no penalty can be imposed on the assessee. AO has not specified which limb of the provision, the assessee was asked to reply. This does not meet with the requirement of law. The Hon ble Karnataka High Court in the case of CIT vs. M/s Manjunatha Cotton Ginning Factory Ors. [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] held that sending printed form where all the grounds mentioned in section 271 would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be could be imposed to the assessee. Notices issued u/s 274 r.w.s. 271(1)(c) of the Act dated 19.03.2013 are not valid and the same are quashed. - Decided in favour of assessee. - ITA No. 398, 399, 400 & 401/JP/2015 - - - Dated:- 21-6-2018 - SHRI VIJAY PAL RAO, JM AND SHRI BHAGCHAND, AM For the Assessee : Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008-09, AY 2009-10 and AY 2010-11 respectively. Accepting the income declared in the returns of income filed u/s 153A, the AO completed the assessments without making any addition, whatsoever. No appeal was preferred by the assessee against the assessment so made. On the other hand, the AO initiated penalty u/s 271(1)(c) invoking Expl. 5A. Accordingly, Show cause notice u/s 274 r/w section 271(1)(c) of the Act were issued for all years on dated 19.03.2013. In response, the assessee filed detailed submission which have been reproduced by the AO in respective penalty orders. After considering the same, the AO imposed penalties u/s 271(1)(c) on the grounds that the additional income so surrendered was not voluntary in as much as in absence of such action, the assessee would not have made this disclosure; merely filling of return of income u/s 153A does not exonerate the assessee from the charge of concealment/ furnishing inaccurate particulars. The AO invoked Expl. 5A to Sec. 271(1)(c) holding that despite declaring of higher income after the search, penalty can be imposed. He also alleged that the decision of CIT vs. Suresh Chandra Mittal (2001) 251 ITR 9 (SC) was not applicable on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in any books of account or other documents or transaction and he claims that such entry in the books of account or other documents or transaction represents his income (wholly or in part) for any previous year, which has ended before the date of search and the due date for filing the return of income for such year has expired and the appellant has not filed the return then notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under section 271(1)( c) of the Act, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 5.4 Precisely for this reason of applicability of the explanation 5A to Section 271(1) ( c ) of the Act, the assessing officer has levied the penalty as mentioned at page 3 of the penalty order. 5.5 At the cost of repetition, it is to mention here that in the instant case, the Assessment Year involved is A.Y. 2007-08 and the due date of filing the return was 31-07-2007. The search operation was conducted on 13-10-2010 i.e. after the due date for filing the return 31-07-2007. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a penalty u/s 271(1)(c ) of the Act, the tax payer be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 5.3 As per the explanation 5A to section 271(1)( c ) of the Act, where the course of search initiated under section 132 on or after 1-06-2007, the appellant is found to be the owner of (i) Any money, bullion, jewellery or other valuable article or thing (hereinafter in this explanation referred to as assets) and the appellant claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year; or (ii) Any income based on any entry in any books of account or other documents or transaction and he claims that such entry in the books of account or other documents or transaction represents his income (wholly or in part) for any previous year, which has ended before the date of search and the due date for filing the return of income for such year has expired and the appellant has not filed the return then notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lained by the appellant himself, the concealment penalty provision u/s 271AAA rewards only those taxpayer whose undisclosed income falls within the specified previous year and if undisclosed income falls in the previous years other than the specified previous years then the concealment penalty provision of explanation 5A to Section 271(1) straight way provide deeming provisions for concealment of income. It states where undisclosed income for any previous year is found in a case where search was initiated on or after 10-06-2007 but the tax payer has not filed the return for that previous year, although due date of filing has expired for the purpose of imposition of a penalty u/s 271(1)(c ) of the Act, the tax payer be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. 5.3 As per the explanation 5A to section 271(1)( c ) of the Act, where the course of search initiated under section 132 on or after 1-06-2007, the appellant is found to be the owner of (i) Any money, bullion, jewellery or other valuable article or thing (hereinafter in this explanation referred to as assets) and the appellant claims that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely consequential and cannot pull out the appellant from the yoke of the explanation 5A to section 271(1)( c) of the I.T. Act. Therefore, the penalty levied of ₹ 8,06,490/- is sustainable and is hereby confirmed. Assessment Year 2010-11 5. I have gone through the brief facts narrated by the assessing officer and the appellant and the applicable provision of law on concealment of penalty for search case in which search had been conducted on or after 01- 06-2007 but before 01-07-2012. 5.1 It is true that the appellant has honoured the undisclosed income that was surrendered during search and also has disclosed the same in respective previous years. The returns for these years as filed by appellant, includes the undisclosed income that was surrendered has also been accepted as it is. 5.2 However, as explained by the appellant himself, the concealment penalty provision u/s 271AAA rewards only those taxpayer whose undisclosed income falls within the specified previous year and if undisclosed income falls in the previous years other than the specified previous years then the concealment penalty provision of explanation 5A to Section 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filing the return i.e. 31-07-2010 and much after the date of search date 13-10-2010. The total income returned in original return was only ₹ 13,14,480/- that was revised to ₹ 15,94,500/- in the return in response to notice u/s 153A. Hence, the pleading on the ground of equity also fails. 5.7 Thus though surrender was during the search in course of statements u/s 132(4), the disclosure u/s 132(4), by itself cannot redeem the appellant from deeming provisions of the explanation 5A to section 271(1)( c) of the Act. Factually speaking the statement u/s 132(4) was wrong and incorrect to the extent the undisclosed income was pertaining to previous years other than the specified previous years was included in the statement u/s 132(4). Showing of undisclosed income surrendered in the relevant previous years with paying or relevant tax and interest thereon is merely consequential and cannot pull out the appellant from the yoke of the explanation 5A to section 271(1)( c) of the I.T. Act. Therefore, the penalty levied of ₹ 57,680/- is sustainable and is hereby confirmed. It is pertinent to mention that The ld. CIT(A) upheld the impugned penalties, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has made the pleadings, which are reproduced as under: In all the above years, the facts and the controversy is identical therefore, this common WS is filed for all the years i.e. AY 2007-08 to AY 2010-11. Submissions: 1.Firstly, we strongly rely upon the written submissions filed before the ld. CIT (A) in all the years placed in the PB 12-45 as also reproduced in the order of the ld. CIT(A). 2. The impugned penalty is without jurisdiction: 2.1. A perusal of the show cause notices for all the years issued u/s 274 r/w 271(1)(c) dated 19.03.2013 (PB 66-66C), it is not at all clear as to for what precise charge, the appellant was asked to show cause viz. whether the charge is that the assessee has furnished inaccurate particulars of income or it was for concealing particulars of such income in as much as a bare perusal of the said show cause notice clearly reveal that the inappropriate words/unwanted charge has not been struck off. The AO neither scored out nor ticked which particular part of alleged offence, he was relying in as much as the words and/or have been used between the two offences. For better appreciation rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Expl.-1 or in Expl.-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2016) 46 CCH 57 (koltrib), Shri Samson Perinchery (ITA Nos. 4625 to 4630/M/2013), dated 11.10.2013, M/s. Ittina Properties Pvt Ltd (ITA No.36/Bang/2014), dated 21.11.2014 (Bang), Dharini Developers (ITA No.1848 to 1851/M/2012), dated 7.1.2015 (Mum). Hence the impugned penalty in all the years deserves to be deleted at this stage itself and hence may kindly be quashed. However, it may be clarified that the above contention is in the alternative and based on the assumption that the initiation of proceedings by the AO u/s 271(1)(c) is held justified. 3. Imposition of penalty u/s 271(1)(c) is also without jurisdiction: 3.1.1. It is submitted that a new Sec.271AAA was inserted so as to provide that in a case where search has been initiated u/s 132 on or after 01.06.2007 but before 31.07.2012, the assessee shall be liable to pay by way of penalty @ 10% of the undisclosed income of the specified previous year. However, such provision shall not apply if certain conditions mentioned therein are fulfilled. Before referring to those conditions it is firstly submitted that the admitted facts of the present case are that a search was carried out on 13.10.2010 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opined/instructed as under: Applicability- This amendment will take effect from the 1st day of June, 2007 and will accordingly apply in relation to assessment year 2007-2008 and subsequent years in cases where search under section 132 is initiated on or after 1st June, 2007. Needless to say that this CBDT circular is binding upon the subordinate authorities and therefore, the authorities below seriously erred in completely ignoring the said circular. The lower authorities in their respective orders there is no whisper at all as to why the CBDT circular shouldn t have been applied. The ld. CIT(A) however, in Pr. 5.2 pg 10 has also visualized situation where there may be a simultaneous application of Sec. 271AAA as also of Sec. 271(1)(c) Expl. 5A which interpretation is running completely contrary to the specific provisions of law and as instructed by the CBDT as above. 3.1.4. Covered issue: The facts of the present case are otherwise directly covered by a decision in the case of Shri Ashwani Kumar Arora vs. ACIT in ITA No. 844/Del/2014 dated 19.05.2016 (DPB 61-68), wherein the Hon ble ITAT has held as under, When aforesaid undispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances being quite identical, the decision of Hon ble ITAT Bench, Delhi deserves to be applied on the facts of present case as well. Since in our case also, the AO has initiated penalty only u/s 271(1)(c) in all the years and has not imposed the penalty u/s 271AAA, the impugned penalties were completely without jurisdiction as held by the ITAT Bench, Delhi. Accordingly, impugned penalties in all the years kindly be quashed. 3.2. Even the issue in hand cannot be restored to the file of the AO in as much as it is not a case of irregularity but an illegality which cannot be cured given now. By invoking the provisions of Sec. 271(1)(c) Expl. 5A, the AO has committed an complete illegality and his action is nullity in the eyes of law which is void-ab-initio being without jurisdiction and cannot be cured now by giving him a second chance. There is yet another reason for contending so because allowing the assessee AO an opportunity will be rendering the limitation provisions a nugatory. Moreover, it is the satisfaction of the AO (or at the best of the CIT(A), in the first appeal) who has to satisfied itself as to which particular default in respect to which particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r w/s) 6.1 Also kindly refer CIT v/s Shri Samson Perinchery in ITA No. 1154, 953, 1097, 1226/2014 on dated 05.01.2017 (DPB 10-21). 6.2 Recently in the case of CIT Anr. v/s. M/s SSA s Emerald Meadows in CC No. 11485/2016on dated 05.08.2016 (DPB-II 18), it was held that 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short the Act ) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT v/s Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. It is submitted that in the above decisions the only stress was upon the SCN wherein only, the occasion arise for the first time for the assessee to reply towards the Show Cause as to why penalty be not imposed w.r.t one or w.r.t both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O though initiated proceedings in the assessment orders w.r.t. both the offenses by using the conjunction AND i.e. for A.Y.2009-10 10-11 however, in the other two years i.e. 2007-08 08- 09, he did not make clear which of the two he chose to ask the assessee. But in all the four SCN's he did not struck off which offense he wanted the assessee to reply. Further in the all the impugned penalty orders also the AO has used the word or and again it is not clear that for which particular offense the penalty was imposed. Thus, on these facts also, the impugned penalty was illegal and unjustified in view of the above decision of the Hon ble High Court which directly applies on the present case, hence deserves to be quashed. 7. Recently this Hon ble Bench in M/s Gopi Bai Foundation v/s ACIT 57 Taxworld 0001 (JP) (DPB) held that: Section 271(1)(c) penalty for concealment of income or furnishing inaccurate particulars of income - section 274 seeking to impose penalty u/s 271 (1)(c) contents of the notice requirements of. Assessee is a trust and running a school income of assessee is exempt u/s 10(23C)(iiiad) Search was conducted in the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished inaccurate particulars of such income 9. Very recent decisions on Penalty not valid based on deficient SCN: 9.1 Chandmal Kumawat vs. ITO in ITA No. 760/jp/2016 vide order dated 29.12.2016 (DPB-II 5-17)Pr. 15-19 9.2 Narayana Heights Towers vs. ITO, Ward 2-4, Jaipur (2017-LL-0220-58 In favour of: Assessee Date: 20/02/2017 9.3 M/s Gopi Bai Foundation v/s ACIT (2017) 57 TW 0001 (Jaip. Trib.) 9.4 Jai Ambey Associates v/s ITO in ITA No. 801/JP/2016 dated 25.01.2015 (DPB-II 28-42) 9.5. Laxmi Ram Rao VS. Income Tax Officer, Ward 3,(3) Banglore (2016-LL-0729-13 In favour of: Partly in favour of assessee/Partly in favour of revenue Date: 29/07/2016) 9.6 SHRI G.S Suhas VS. Income Tax Officer, Ward 1(2), Banglore (2016-LL-0205-225 In favour of: Assessee Date: 05/02/2016) 9.7 Jagannath s Shetty VS. Income Tax Office, Ward 1, Manday (2016-LL-0630-173 In favour of: Assessee Date: 30/06/2016) 9.8 Mahaveer Saraswati VS. Income Tax Office, Ward 2, Hassan (2016-LL-0729-8 In favour of: Partly in favour of assessee/Partly in favour of revenue Date: 29/07/2016) 9.9 Assis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is unsustainable. 11.2 Also refer Ms. Sandhya Gadkari Sharma vs. DCIT (2017) 82 Taxmann 73 (Mum. Trib) wherein it was held that: Section 271(1)(c) lays down that the penalty proceedings can be initiated on the basis of either of the two charges, i.e., (i) concealment of particulars of income or (ii) furnishing of inaccurate particulars of income. Both the charges are entirely different. If the proceedings are initiated on charge of concealment, then penalty cannot be levied on the charge of furnishing of inaccurate particulars of income and vice versa. Thus, there must be a clear finding about the charge for which penalty is imposed or initiated. It is incumbent upon the Assessing Officer to state whether penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income. In the absence of such findings, the order would be bad in law. Where the Assessing Officer was satisfied during the course of assessment proceedings that the assessee had concealed income from other sources and furnished inaccurate particulars of this income but initiated the proceedings under section 271(1)(c) without making out any particular charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere issued prescribing the due date Being 14.09.2011 whereas, the ROI pursuant to the said notices u/s 153A stood filed on 12 October 2011 itself. (PB- 68, 71, 74, 77) Thus, the ROI, as required by the AO, were filed within the due date and therefore Clause (b) to Expl. 5A is not fulfilled. Resultantly, the deeming fiction as created, cannot taken help by the revenue. 12.4 Supporting Case laws: 12.4.1 The issue is also directly covered by the decision case of Kshiti R. Maniar vs. ACIT in ITA No.1020/Mum/2011(DPB) for the A.Y. 2007-08, dated 28.08.2013 and the relevant part of the decision is reproduced as under: 7. In the present case, the search had taken place on 19th June 2007.The due date for filing of return of income for the assessment year 2007 08, had not expired on the date of search as the due date of filing of return of income under section 139(1) was 31st July 2007 and due date under section 139(4) was 31st March 2008. Thus, in the present case, deeming provisions of Explanation 5A cannot be applied here because at the time of search, the relevant previous year for the assessment year 2007 08, the due date of filing of return of income h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No difference between the return and assessed income hence no penalty levied imposable: 13.1 There is no dispute on the fact between the parties that the Ld. assessing officer assessed the same very income which was offered by the appellant as additional income surrendered during the course of survey but not only that he rather returned substantially more income then what was surrendered. During the course of search, the appellant surrendered ₹ 25 Lakh for all the subjected years however, while filing the return of income, the appellant offered total ₹ 32,66,194/. The same was assessed by the assessing officer as it is without any variation. It is submitted that in the cases of penalty of concealment/furnishing inaccurate particular, the very starting point is the last return of income filed by the assessee which has been acted upon by the assessing officer and it is only the difference between the income so returned and the income finally assessed by the AO, which invites imposition of penalty. In a case where however, there is no such difference, there cannot be any question of imposition of penalty. 13.2 Supporting case laws: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the A.O. accepts the revised return filed under Section 153A, the original return under Section 139 abates and becomes non-est. Now, it is trite to say that the concealment has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139 13.2.4 Prem Arora vs. DCIT (2012) 78 DTR 91 (Delhi) (Tribunal) (DPB) wherein , it was held as under: Section 271(1)(c), read with section 153A, of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 2004-05 - Whether for purpose of imposition of penalty under section 271(1)(c) resulting as a result of search assessments made under section 153A, original return of income filed under section 139 cannot be considered - Held, yes - Whether concealment of income has to be seen with reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of completing assessment under section 143(3) Also kindly refer Mehthan Ispat Ltd vs. DCIT (2015) 55 Taxmann 444 (Kolkata Trib.) Hence the impugned penalty deserves a complete deletion. 2.7 On the other hand, the ld. DR strongly relied on the orders of the authorities below. 2.8 We have carefully considered the rival contentions of both the parties and perused the material available on the record along with the various decisions cited by the parties. In this case, the . Assessing Officer initiated penalty proceedings for concealment of particulars of income and for furnishing inaccurate particulars of income vide assessment orders each dated 19.03.2013 for A.Y. 2009-10 and 2010- 11 respectively whereas in the assessment orders each dated 19.03.2013 for A.Y. 2007-08 and 2008-09, he simply mentioned that the penalty proceedings u/s 271(1)(c) are separately initiated on this issue. But the notices issued u/s 274 read with Section 271(1)(c) of the Act were issued in all the years on 19.03.2013 stating as under:- x x x x it appears to me that you have concealed the particulars of your income and/or furnished inaccurate particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Expl.- 1 or in Expl.-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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