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TMI Blog2020 (2) TMI 983X X X X Extracts X X X X X X X X Extracts X X X X ..... der which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT [ 2007 (5) TMI 198 - SUPREME COURT] has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non-application of mind. Having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 27.03.2015 without striking off the irrelevant words, apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) of the Act without specifying whether the assessee has concealed ''particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Subsequently, a search operation u/s 132(1) of the Act was held at the premises of the assessee on 05.12.2012 and thereafter, various statutory notices have been issued to the assessee. In response to the notices, the assessee had filed his return of income on 27.10.2015 by declaring total income of ₹ 2,23,600/-. Thereafter, the assessee had filed another revised return on dated 12.03.2015 by declaring an income of ₹ 6,35,280/- on account of long term capital gain. The Assessing Officer observed in the assessment order that the penalty proceedings u/s 271(1)(c) are being initiated separately for furnishing inaccurate particulars of income qua addition of ₹ 2,90,568/- and for concealment of income qua amount of ₹ 4,11,680/-. Subsequently the Assessing Officer issued the notice u/s 274 r.w.s 271 of the Act on 27.03.2015 which is reproduced herein below for the sake of brevity. NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961. PAN: AISPG 9530B Office of the Deputy Commissioner of Income-tax, Central Circle-II, Jalandhar. Dated: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the mandatory conditions u/s 271 as envisaged under the Income Tax Act, 1961. 3. That the Ld. Assessing Officer is erred in law in imposing penalty u/s 271(1)( c) of the Act, ignoring the facts of case and without observing the principles of natural justice. 4. That assessee requested to add or amend any ground of appeal before the appeal is finally heard and disposed off. 6. The assessee also preferred to file written submissions while mentioning various judgments including the decision of the Hon ble Karnataka Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory [2013] 359 ITR 0565 (Kar.) and CIT vs. SSA s Emerald Medows, 380/15 [2016] 73 taxmann.com 241 (Kar.) and emphasized that notice issued u/s 274 of the Act, by the Assessing Officer was a defective notice as the same did not specify any specific charge. The assessee further emphasized that in the instant case the penalty proceedings have been initiated for furnishing inaccurate particulars of income and concealment of income, whereas the penalty was levied finally for concealment of income only, therefore, the very basis of imposing penalty is vitiated and hence penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties at length and perused the material available on record. The issue involved in the instant case relates to the issuance of notice u/s 274 r.w.s 271(1) (c) of the Act as well as difference in recording of satisfaction/mentioning of reasons for initiation of penalty proceedings and imposition of penalty finally. There are four stages involved for dealing with the penalty proceedings. (i) Satisfaction for initiation of penalty proceedings (ii) Initiation of penalty proceedings (iii) Providing opportunities of being heard to the assessee while Issuing notice u/s 274 r.w.s 271 of the Act. (iv) Final imposition of penalty. In our considered view there can be satisfaction of the Assessing Officer for initiation of penalty proceedings but there is no certainty with regard to the initiation of penalty in each and every case. The Assessing Officer may record the satisfaction for initiation of penalty proceedings, however, it is not mandatory and must that after recording satisfaction for initiation of penalty proceedings, the initiation of penalty proceeding in all case must be acted upon. Even after initiation of penalty proceedings, the prerogati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral justice and has not evolved from the constitution but evolved through civilization and mankind and is the concept of common law, which implies fairness, reasonableness, equality and equity. In India, the principles of natural justice are the grounds of Article 14 and 21 of the Constitution. Article 14 enshrines that every person should be treated equally. In the landmark case of Maneka Gandhi vs. The Union of India (1978 AIR 597) , it has been held by Constitution Bench of the Apex Court that the law and procedure must be of a fair, just and reasonable kind. The doctrine ensures a fair hearing. 9.3 The Ld. DR also raised the issue that a distinction has to be made between a case of no notice and a case of improper notice because in the former case the proceeding would be void and in a case of the latter, the proceedings would be merely irregular, and in case of such irregular proceedings, the test of prejudice has to be employed. In our view, issuance of notice with specific charge is must for the principles of Audi Alteram Partem, natural justice and fair play therefore improper notice also having no value in the eyes of law and cannot be regularized and havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be strictly constructed . The Hon'ble Court further held that Notice under section 274 should specifically state the grounds mentioned in section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. 35. It has further been held that the assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice are offended. On the basis of such proceedings, no penalty could be imposed on the assessee. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. The dictum laid down in Manjunatha Cotton and Ginning Factory (supra) is not only approved by the same High Court in the case of SSA s Emerald Meadows { (2016) 73 taxmann.com 248} but also by the Apex Court in the case of Income Tax, Bangalore Versus M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) wherein the Hon'ble Court dismissed the Special Leave Petition filed by the Revenue against the judgment passed in the case of M/s. SSA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.5 Kerala High Court in N.N. Subramania Iyer vs. UOI , 97 ITR 228 (Ker) has held The penalty notice, Exhibit P-2, is illegal on the face of it. It is in a printed form, which comprehends all possible grounds on which a penalty can be imposed under section 18(1) of the Wealth-tax Act. The notice has not struck off any one of those grounds, and there is no indication for what contravention the petitioner was called upon to show cause why a penalty should not be imposed. Even in the counter-affidavit filed by the second respondent, he has not stated for what specific violation he issued it. It is not that it would have saved his action. Apparently, Exhibit P-2 is a whimsical notice issued to an assessee without intending anything. 9.6 Even the illegality in the Notice cannot be saved by recourse to section 292BB of the Act, as held by the ITAT, Mumbai Bench in the case of Sarita Milind Davare vs. ACIT , ITA No. 2187/Mum/2014, wherein it was held that section 292BB would not come to the rescue of the revenue when the notice was not in substance and in conformity with, or according to the intent of the Act. 9.7 The Ld. DR at last submitted that rules of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have referred few relevant judgments only for the sake of brevity and just decision of this case . 9.9 No doubt there are judgments on both side qua validity of notice and its effects on the penalty proceedings, however, as per decision Hon'ble Apex Court in the case of CIT Vs. Vegetable Products 88 ITR 192 , wherein the Hon'ble Court laid down the proposition to the effects whenever there are two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted . Hence considering the issue involved in the instant appeal is identical to the issue decided by the Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory case (supra), M/s SSA s Emerald Medows (supra) and by the Apex Court in the case of M/s SSA s Emerald Medows (supra), we are of the considered opinion that once a notice u/s 274 is defective or not clarifying the charge/charges specifically then it shall vitiate the penalty proceedings and no penalty can sustain in that eventuality because even section 464, 465 and 215 of the Criminal Procedure Code, 1973 mandates that No finding sentence or order by a Court of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non-application of mind. 9.11 In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 27.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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