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TMI Blog2020 (9) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... by learned first appellate authority for the first time, which were never invoked by Ld. AO and which was never confronted to the assessee during penalty proceedings, could also not be sustained. Moreover, the condition of framing of specific charge, in any case, was required to be fulfilled before invoking Explanation 5A against the assessee - we hold that impugned penalty was unsustainable in the eyes of law and therefore, we direct for deletion of the same. -Decided in favour of assessee. Penalty proceedings u/s 271AAA - notice u/s 274 read with Section 271AAA was issued to the assessee without specifying the exact charge - HELD THAT:- It is quite evident that beside failure to frame specific charges against the assessee, the penalty was initiated u/s 271AAA in the quantum assessment order whereas the same has finally been levied u/s 271AAB which would show non- application of mind on the part of Ld. AO to factual matrix of the case. It is noted that the penal provisions of Sections 271AAA were not, at all, applicable to the facts of the case since the search was conducted on the assessee after 01/07/2012. Therefore, from any angle, the penalty would not be sustainable in the ey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as 'CIT(A)'], Appeal No. CIT(A)-52/IT/DC- CC-4(3)/113/2015-16 order dated 16/06/2016, the assessee is in appeal before us with following ground of appeal: - 1. The learned CIT(A)-52 has erred in confirming the penalty levied by the learned Assessing Officer without appreciating the fact of the case in the right perspective. 2.2 The assessee, vide petition dated 29/07/2019, has filed additional ground of appeal and pleaded for the admission of the same by submitting that the same are legal grounds and do not require appreciation of new facts. The said ground reads as under: - 2. The learned Assessing Officer has erred in levying penalty u/s 271(1)(c) of the Income Tax Act, 1961 on the ground that the validity of penalty order passed by the learned Assessing Officer u/s 271(1)(c) of the Act is bad in law and void ab initio as the notice issued u/s 274 r.w.s. 271(1)(c) of the Act is not in accordance with the law especially since he has grossly erred in not specifying the limb under which he intends to initiate penalty proceedings. The Ld. DR has opposed the admission of additional ground by pleading that the said ground was never raised before first appellate authority. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any further additions. 2.6 The bogus purchases were stated to be made by the assessee from various concerns controlled, operated and managed by one Shri Jagdish Mundra, an alleged entry provider. The statement of Shri Jagdish Mundra and his accountant was recorded u/s 132(4) wherein it was confirmed by them that various concerns run by Shri Jagdish Mundra were mere paper concerns involved in giving accommodation entries to various parties without supplying any material. 2.7 During the course of search proceedings, statements of key persons of assessee's group was also recorded wherein all these persons were, inter-alia, required to explain the standard operating procedure adopted by the assessee with respect to purchases made by it. Certain discrepancies were noted in the purchase documents maintained by the assessee, which have already been enumerated in page no.-7 of the assessment order. The party-wise purchases made by the assessee from various suspicious concerns have also been tabulated on page nos. 9-10 of the assessment order. 2.8 The director of assessee company, Smt. Shobha Kapoor, in statement recorded on 02/05/2013 u/s 132(4) during search operations, while answering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 2.79 Crores barely constituted 0.80% of the turnover and it was practically impossible for Managing Director to abruptly certify the authenticity of the expenditure at the time of search proceedings by producing supporting documents like bills, delivery challans, lorry receipts, entries inward /outward register and to attend to a list comprising-off of almost 50 to 75 such dealers. Nevertheless, the said admission was made to buy peace with the Income Tax Department. The attention was drawn to the fact that tax was voluntarily paid by the assessee on 31/01/2014 which was much before the issuance of notice u/s 148 i.e. 11/02/2014 and the said notice was bad in law especially since the tax was paid strictly to maintain the spirit of the disclosure even without going into the authenticity of the documents that duly support the expenditure of ₹ 2.79 Crores. It was also pleaded that all the goods / materials as referred to in the bills was actually used in the ordinary course of production of films / tele films. It was also pleaded that statement of the director was neither backed by any incriminating material or any document that would conclude that the purchases were non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds inward register. The attention was also drawn to the fact that surrender was not backed by any incriminating material or document which would conclude that the purchases were non-genuine and no opportunity of cross-examining the suppliers was ever provided to the assessee in violation of principle of natural justice. Reliance was placed on the decision of Indore Tribunal rendered in Radheshyam Sarda V/s ACIT for the submissions that once the revised ROI has been regularized by the revenue, the assessee's explanation that he had declared the additional income to buy peace had to be treated as bona fide and penalty u/s 271(1) (c) could not be levied. 3.2 However, the said pleas could not find favor with first appellate authority. The Ld. CIT(A) after appreciating the factual matrix, at para-8, invoked explanation 5A to Section 271(1) (c) for the first time and concluded that with effect from 01/06/2007, the assessee does not get any immunity from penalty even if he surrenders such income during the course of the search and even if such income is included in the return of income filed subsequent to the date of search and penalty has to be necessarily levied. 3.3 Reliance was plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Reliance has been placed on following judicial precedents in support of legal submissions: - No. Case Law Judicial Authority Citation 1. CIT V/s SSA's Emerald Meadows Hon'ble Supreme Court 73 Taxmann.com 248 SLP dismissed on 05/08/2016 2. Shri Samson Perinchery Hon'ble Bombay High Court ITA No. 1154 of 2014 & Ors. 3. Mrs. Piedade Perinchery Hon'ble Bombay High Court ITA No. 1310 of 2014 dated 10/10/2017 4. Muninaga Reddy V/s ACIT Hon'ble Karnataka High Court 88 Taxmann.com 21/09/2016 545 5. New Sorathia Engg. Co. V/s CIT Hon'ble Court Gujarat High 155 Taxman 513 25/01/2016 6. Balaji Motion Pictures Ltd. V/s DCIT ITAT, Mumbai ITA 7643/Mum/2016 03/01/2018 dated 7. Cenzar Industries Ltd. V/s ITO ITAT, Mumbai ITA No. 1970/Mum/2015 dated 29/12/2017 8. YKM Holding Pvt. Ltd. V/s ITO ITAT,Delhi ITA No. 2174/Del/2016 dated 12/10/2018 9. Orbit Enterprises V/s ITO ITAT, Mumbai ITA Nos. 1596-97/Mum/2014 dated 01/09/2017 10. Meherjee Cassinath Holdings Pvt. Ltd. ITAT, Mumbai ITA No. 2555/Mum/2012 dated 28/04/2017 11. Financial V/s ACIT Technologies (I) Ltd. ITAT, Mumbai 61 Taxmann.com 04/03/2015 406 12. Radhey Shyam Mittal V/s DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 So far as the legal grounds are concerned, it is evident from observation of Ld. AO as extracted in para-2.10 above, that penalty was initiated against the assessee, in the quantum assessment order, on both the charges i.e. concealment of income as well as for furnishing of inaccurate particulars of income which would show that Ld. AO was not clear as to specific limb which was applicable to given factual matrix. This is further fortified by the fact that exact charge has not been framed even while issuing notice u/s 274 r.w.s. 271 of Act which has been issued in plain printed form without ticking / marking the applicable clause as well as without striking-off the irrelevant limb. This conclusion draws all the more strength upon perusal of penalty order wherein penalty has finally been levied on both the limb which is evident from para-18 of the penalty order, which has already been extracted by us in preceding para 2.13. The aforesaid three events, put together, reveal that the penalty was initiated as well as levied for both the charges. 5.3 It is apparent that if Ld. AO, in the course of assessment proceedings, was satisfied that the assessee has concealed the particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ginning Factory[2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 to delete the penalty:- "The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai[2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P. Ltd., reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V/s SSA's Emerald Meadows (2016 73 Taxmann.com 241) which was agitated by the revenue before Hon'ble Supreme Court. However, Special Leave Petition, against the same, was dismissed by the Hon'ble Court on 05/08/2016 reported at 73 Taxmann.com 248. This decision of Hon'ble Karnataka High Court rendered in Manjunatha Cotton & Ginning Factory has subsequently been followed extensively in catena of judicial pronouncements rendered by various Hon'ble High Courts as well as different benches of Tribunal, few of which have already been tabulated by us in preceding para 4.1 of the order. 5.5 Following the same decision, Hon'ble Karnataka High Court, in its later decision titled as Muninaga Reddy V/s ACIT (88 Taxmann.Com 545 21/09/2016) observed as under: - 7. We may record that during the course of hearing the learned counsel for the appellant has tendered the copy of notice issued to the assessee under Section 271(1)(c) of the Act dated 15.12.2008 for imposition of penalty, which as per the learned counsel for appellant was a part of record in the proceedings before the Tribunal. Learned counsel for the respondent - revenue is unable to dispute that notice dated 15.12.2008 was issued b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. (p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice could be said as violated. 10. In our view, if the observations made by this Court in the above referred decision and more particularly clauses (p), (q) and (r) are considered, it was a case wherein the decision of this Court would apply and it cannot be said that the decision of this Court in the case of Manjunatha Cotton & Ginning Factory (supra) would not apply. 11. In view of the aforesaid discussion, if the decision of this Court in case of Manjunatha Cotton & Ginning Factory (supra) is considered, the resultant effect would be that the notice in question issued under Section 271(1)(c) for levy of penalty and consequently the penalty imposed, both would be unsustainable and cannot stand in the eye of law. It has been held by Hon'ble Court that the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to whether the penalty was for concealment of income or furnishing of incorrect particulars of the income. Further, issuing printed form would not satisfy the requirement of law since the assessee should know the ground which he has to meet specifically otherwise the principles of natural justice would be violated and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same is not applicable here, as specified by the bench in concluding lines, however, we find that factual matrix to be identical here also which is evident from basic facts already enumerated by us in the opening paragraphs. Therefore, we concur with the principle laid down by the co- ordinate bench in that decision and inclined to follow the same here also, factual matrix being identical. 5.9 In view of the aforesaid discussion, we hold that impugned penalty was unsustainable in the eyes of law and therefore, we direct for deletion of the same. 5.10 Since the penalty has been deleted on legal grounds, the other arguments of the assessee including arguments on merits assailing impugned penalty are not being dealt with as the same have been rendered academic in nature. 5.11 In the result, the appeal stands allowed. Appeals for AYs 2008-09 to 2012-13 6. Facts are pari-materia the same in all these years except for the fact that assessment has been framed u/s 143(3) r.w.s. 153A of the Act wherein returned income filed by the assessee has been accepted by the revenue. The penalty has been initiated, levied as well as confirmed on similar factual matrix. The penalty has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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