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TMI Blog2020 (10) TMI 793X X X X Extracts X X X X X X X X Extracts X X X X ..... persuade ourselves to subscribe to the imposition of penalty by the A.O. - Decided in favour of assessee. - ITA No.1585/Mum/2019 - - - Dated:- 9-10-2020 - Shri Shamim Yahya, Accountant Member And Shri Ravish Sood, Judicial Member For the Appellant : None For the Respondent : Shri Uodal Raj Singh, D.R ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the CIT(A)-6, Mumbai, dated 11.12.2018, which in turn arises from the order passed by the A.O under Sec. 271(1)(c) of the Income Tax Act, 1961 (for short Act ), dated 29.09.2016 for A.Y. 2013-14. The assessee has assailed the impugned order on the following grounds of appeal before us: 1. That on facts and circumstances of the case penalty imposed u/ s. 271 (1) (c) at ₹ 4,48,050/ - by ld. A.O and confirmed by Id. C.I.T.(Appeals) is bad in law and void-ab-initio therefore same be quashed on the following stated grounds:- (i) Appellant was never communicated either of twin exact charge envisaged in section 271(1)(c) for which impugned penalty has been imposed; and (ii) In the assessment order directing to initiate the penalty proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n , as under: F.Y. Assessment year Expenses Payments made 2011-12 2012-13 16,92,633/- 18,00,000 2012-13 2013-14 14,30,662/- 14,50,000 2013-14 2014-15 5,10,637/- 4,00,000 Total 36,33,932/- 36,50,000 As observed by the A.O, the assessee firm in order buy peace of mind and to avoid protracted and endless litigation had inter alia offered an additional income of ₹ 14,50,000/- for the year in question, with an understanding that penalty and prosecution provisions of the Income Tax Act, 1961 would not be invoked. In the backdrop of the aforesaid facts, the A.O made an addition of ₹ 14,50,000/- to the returned income of the assessee firm and assessed its total income at ₹ 1,62,09,000/-, vide his order passed under Sec. 143(3)(ii), dated nil. The A.O while culminating the assessment also initiated penalty proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as to why penalty may not be imposed on it, reliance was placed by the assessee on the order of the ITAT Bench E , Mumbai, in the case of Samson Perincherry Vs. ACIT-Central Circle 18 19 [ITA No. 4625 to 4630/Mum/2013, dated 11.10.2013]. The assessee had further relied on the judgment of the Hon ble High Court of Bombay in the case of CIT-11, Mumbai, Vs. Shri Samson Perincherry [ITA No. 1154 of 2014, dated 05.01.2017)(Bom)], wherein, the aforesaid order of the Tribunal was upheld by the Hon ble High Court and the appeal filed by the revenue was dismissed. However, the CIT(A) was not persuaded to subscribe to the aforesaid claim of the assessee. It was observed by the CIT(A), that the A.O had initiated penalty for concealment of income and by concealing the income to the extent of concealment, the assessee had furnished inaccurate particulars of income. As regards the reliance placed by the assessee on the judgment of the Hon ble High Court of Bombay in the case of Shri Samson Perincherry (supra), the CIT(A) was of the view that the facts involved in the said case were that penalty was initiated for one limb of the provisions of Sec.271(1)(c), while for the penalty was levied f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entative (for short D.R ) relied on the orders of the lower authorities. It was submitted by the ld. D.R that the CIT(A) had rightly upheld the penalty imposed by the A.O under Sec. 271(1)(c) of the Act. 8. We have heard the ld. D.R, perused the orders of the lower authorities and the material available on record. As the assessee has assailed the validity of the jurisdiction assumed by the A.O for imposing penalty under Sec. 271(1)(c) of the Act, we shall, therefore, first deal with the said objection of the assessee. As is discernible from the orders of the lower authorities, the A.O while culminating the assessment proceedings had initiated the penalty proceedings under Sec. 271(1)(c) for concealment and furnishing inaccurate particulars of income . However, on a perusal of the SCN , dated 31.03.2016 issued under Sec. 274 r.w.s 271, we find that the A.O had called upon the assessee to show cause as to why penalty may not be imposed upon it for having concealed the particulars of its income OR furnishing inaccurate particulars of such income. For the sake of clarity the SCN , dated 31.03.2016 issued by the A.O is reproduced, as under: Admittedly, the A.O while cul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to invite your attention that it is not discernible either from the assessment order passed or from the penalty notice issued u/s. 274 r.w.s 271(1)(c) as to whether the above referred penalty proceeding has been initiated for concealment of income or furnishing of inaccurate particulars of income since in the assessment order allegation made is on both the counts of 271(1)(c), whereas in the printed standard notice issued u/s. 274 r.w.s. 271(1)(c) there is no striking or deletion of inapplicable words by your ld. Predecessor. In the said circumstances assessee firm being not in knowledge of exact charge of penalty initiation hence is unable to rebut the allegation of penalty proceeding in definite terms as to whether above referred penalty proceedings initiated is for concealment of income or furnishing of inaccurate particulars of income, rendering the penalty proceeding initiated under reference as void ab initio and wholly unsustainable in law. We are of a strong conviction that the very purpose of affording a reasonable opportunity of being heard to the assessee as per the mandate of Sec. 274(1) would not only be frustrated but would be rendered redundant if an assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he has furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing reliance on the order of assessment laid emphasis that he had dealt with both the situations. 84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice [See Malabar Industrial Co. Ltd. Vs. CIT (2000) 2 SCC 718]. We are of the considered view that now when as per the settled position of law the two defaults viz. concealment of income and furnishing of inaccurate particulars of income are separate and distinct defaults, therefore, in case the A.O seeks to proceed against the assessee for either of the said defaults, then, it would be incumbent on him to clearly specify his said intention in the Show cause notice, which we find he had failed to do in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion i.e Sec. 271(1)(c), had been deliberated upon by a coordinate bench of the Tribunal, i.e. ITAT C Bench, Mumbai in the case of M/s Orbit Enterprises Vs. ITO-15(2)(2), Mumbai (ITA No. 1596 1597/Mum/2014, dated 01.09.2017). The Tribunal in the aforementioned case had after considering various judicial pronouncements, had concluded, that the failure to specify the charge in the Show cause notice clearly reflects the non-application of mind by the A.O, and would resultantly render the order passed by him under Sec. 271(1)(c) in the backdrop of the said serious infirmity as invalid and void ab initio. 11. In the backdrop of our aforesaid deliberations, we are of the considered view that the failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty under Sec. 271(1)(c) was sought to be imposed on it in the SCN , dated 31.03.2016, had left the assessee guessing of the default for which it was being proceeded against. Apart from that, as the two defaults viz. concealment of income and furnishing of inaccurate particulars of income as contemplated in Sec.271(1)(c) are separate and distinct defaults which operate in their e ..... 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