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TMI Blog2021 (2) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... law. AO. was not justified in levying the penalty for the alleged concealment of income even when the income was duly disclosed in the original return of income, no incriminating material was found during search u/s. 132 of the Act relating to this transaction of sale of equity shares and assessee suo moto offered it to tax under other head of income. Thus the finding of Ld. CIT(A) deleting the penalty u/s. 271(1)(c) of the Act needs no interference - Decided in favour of assessee. - ITA No. 741/Ind/2019 - - - Dated:- 13-11-2020 - Kul Bharat , Member ( J ) And Manish Borad , Member ( A ) For the Appellant : K. G. Goel , Sr. DR For the Respondents : Ajay Tulsiyan and Shalini Mehta , CAs ORDER Manish Borad , Member ( A ) The above captioned appeal filed at the instance of the revenue pertaining to Assessment Year 2014-15 is directed against the orders of Ld. Commissioner of Income Tax (Appeals)-3 (in short 'Ld.CIT(A)'], Bhopal dated 08.04.2019 which is arising out of the order u/s. 271(1)(C) of the Income Tax Act 1961(In short the 'Act') dated 30.05.2018 framed by JCIT-OSD Central Circle-1, Indore. 2. The revenue has raised following gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax in the search proceedings. But Ld. A.O. came to the conclusion that the assessee's case falls within the ambit of explanation 5A of Section 271(c) of the Act and thus liable to pay the penalty for concealment of income and accordingly levied penalty of ₹ 1,01,17,700/- u/s. 271(1)(c) of the Act. 4. Aggrieved assessee preferred appeal before Ld. CIT(A) and succeeded. Ld. CIT(A) firstly allowed the legal ground in favour of the assessee relying on the judgment of Hon'ble jurisdictional High Court in the case of PCIT V/s. Kulwant Singh Bhatia dated 09.05.2018 (ITA No. 9 to 14 of 2018) and held that the penalty notice issued u/s. 274 of the Act was not legally sustainable since specific charge was not levelled against the assessee. On merits also Ld. CIT(A) relied on the judgment of Hon'ble Supreme Court in the case of CIT V/s. Suresh Chandra Mittal (2001) 251 ITR 9 wherein the Hon'ble Apex Court upheld the judgment of Hon'ble M.P. High Court holding that where an assessee filed revised return showing higher income after search to purchase peace and avoid litigation and department simply rested its conclusion on the Act of voluntarily surrender done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cealing the particulars of the income or have furnished inaccurate particulars of income. Thus the very initiation of the present penalty proceeding is not in accordance with the law and have lead to vitiation of entire penalty proceedings. 3. That as per provisions of section 271(1)(c) of the Act, there are two different charges i.e. the concealment of particulars of income or furnishing of inaccurate particulars of income. The penalty can be imposed for a specific charge. It is a settled proposition that both these limbs i.e. concealment of particulars' of income or of 'furnishing inaccurate particulars' of income carry different connotations as held by the Honourable Supreme Court in the case of T Ashok Pai V/s. CIT (2007) 292 ITR 11 (SC). 4. It is equally settled proposition that satisfaction of the concerned tax authority to the effect that the respondent has either concealed the particulars of income or furnished inaccurate particulars of income is the condition precedent for initiation of penalty. That the notice issued u/s. 274 r.w.s. 271(1)(c) is bad in law as it does not mention a specific limb of section 271(1)(c) of the Act under which it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch, which fact is also identical with the facts of this appeal. (iii) In the appeal before the Honourable High Court, it appears that penalties were levied by invoking explanation 5A of section 271(1)(c) (as mentioned in Para 10 of the order of the Honourable High Court) and in the instant case also the Learned AO has invoked explanation 5A to section 271(1)(c) for levying the penalty. Thus the case of the respondent is squarely covered by the proposition rendered by the jurisdictional High Court, which has a binding precedence, since in the instant case also the grounds/charges mentioned in the show cause notice do not satisfy the requirement of law and the show cause notice was not specific. The ld. CIT(A) has rightly deleted the penalty levied by ld. AO by relying on the above decision of Hon'ble M.P. High Court and also observed that the facts of the present case are identical to the facts of the case before the Honourable M.P. High Court. e. Smt. Shruti Garg V/s. DCIT Central Indore in ITA No. 988/Ind/2016 dated 28.06.2017 f. Shri Bansidhar Somani V/s. DCIT Central 1 Indore ITA NO. 619 to 624/Ind/2017 for AY 2008-09 to AY 2013-14 order dated 17.12.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not amount to concealment of income. Therefore, the imposition of penalty would not justify under Section 271(1)(c) of the Act for concealment of income. 9. That the respondent places reliance on the following judicial precedents which support the contention of the respondent which read as under: i. Hon'ble Bombay High Court in the case of Commissioner of Income-Tax v. Hiralal Doshi [2017] 79 taxmann.com 371 ii. High Court of Bombay in case of Commissioner of Income Tax Vs. Bennett Coleman Co. Ltd. (2013) 259 CTR 0383 iii. Further, the respondent places reliance on the decision of Hon'ble ITAT, Delhi in the case of Deputy Commissioner of Income-tax v. JMD Advisors (P.) Ltd. [2010] 124 ITD 223 In view of the above, it is submitted that mere change in head of income would not warrant penalty in the present case and the ground raised by the department on this ground is not sustainable. 10. It is further submitted that the income surrendered in the statements recorded u/s. 132 was also offered for the purpose of taxation in the return filed u/s. 153A. The income offered by the respondent was accepted as it is without any variation and without any objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b section (1) of this section, be deemed to have concealed the particulars of her income or furnished inaccurate particulars of such income. 13. It is submitted that explanation 5A is applicable where the return of income for such previous year has been furnished before the date of search but such income has not been declared there in. In the present case, the respondent has declared the sale of shares of Unno Industries Ltd. under the head Income from Capital Gains in the return of income filed under section 139(1) and it is not a case of non disclosure of income. The respondent not only recorded the said income and the related transactions of shares in the books of the accounts but was categorically disclosed in the return of income filed before the date of search. Mere change in head of income would not tantamount as concealment of income triggering explanation 5A of section 271(1)(c). Therefore, the Ld. AO erred in levying the penalty without appreciating the facts of the case and imposed the penalty in a mechanical manner for concealment of income. In view of the above, it is submitted that the penalty provisions require strict construction and interpretation and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The appellant has not filed the appeal against the addition made, it cannot be concluded that the appellant concealed the particular of income or filed inaccurate particulars. The appellant has disclosed all facts relating to assessment in the return of income. Making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. Merely because the appellant claimed the deduction which has not been accepted by the revenue will not attract the penalty. 4.1.1 The word 'Concealment' means when the assessee has concealed the income and has not shown the income in its return or in its books of accounts. In the present case, the appellant has made the complete disclosure of income in the books of accounts and also in the return of income u/s. 139(1) and mere change in head of income during search would not amount to concealment of income. Therefore, the imposition of penalty would not justify under section 271(1)(c) of the Act for concealment of particulars of income. The explanation SA is applicable where the return of income for such previous year has been furnished before the date of search but such income has not been declared there in. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat of the case of Kulwant Singh Bhatia (Supra) in so far as additional income was offered by the appellant in the returns filed after the search. In that case also, it was the observation of the AO that the assessee has offered additional income only due to search and the additional income was not declared in the return filed u/s. 139 and therefore, penalty proceedings u/s. 271(1)(c) were initiated. The penalties were also confirmed by the CIT(A) but were deleted by the Tribunal holding the same as not sustainable in law, as no specific charge was levied in penalty show cause notice, later the order of the Hon'ble IT AT was affirmed by the Hon'ble Jurisdictional High court. 4.1.4 It has been held by Hon'ble M.P. High Court which has been upheld by Hon'ble Supreme Court in the case of CIT Vs. Suresh Chandra Mittal [2001] 251 ITR 9, that where the assessee filed revised return showing higher income after search and notice for re-opening of assessment to purchases peace and avoid litigation, and department simply rested its conclusion on the Act of voluntarily surrendered done by the assessee in good faith. High court was justified in holding that no penalty coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating such type of notices as bad in law since they are not meeting the specific requirement of law. One of the recent decision of the this Tribunal in the case of Bansidhar Somani V/s. DCIT (supra) ITA No. 619 to 624/Ind/2017 order dated 17.12.2018 similar issue under similar set of facts and circumstances have been decided by us observing as follows:- 10. We have heard rival contentions and perused the records placed before us and carefully gone through various judgments referred and relied by the Ld. Counsel for the assessee. Assessee has taken up the common issue in all these six bunches challenging the legality of the penalty proceedings initiated by issuance of notice u/s. 274 r.w.s. 271(1)(c) of the Act by contending that in the penalty notice no specific charge has been leveled against the assessee and the Ld.A.O. has merely mentioned both the limbs i.e. concealed the particulars of income or furnished inaccurate particulars of income. To adjudicate this issue we will have to go through the impugned notice u/s. 274 r.w.s. 271(1)(c) of the Act which has been placed in the paper book and have been separately issued for all the assessment years. No dispute has been rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 that the practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the initiated presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the provisions have to be held to be strictly construed, notices issued under Section 274 should satisfy the grounds, which he has to meet specifically, otherwise, principle of natural justice is offended if the show cause notice is vague . Even in the matter of search case where penalty is levied under Explanation 5A to Section 271(1)(c), it was held by the Hon'ble Karnataka High Court that the show-cause notice under Section 274 was defective as it does not spell out the ground on which the penalty is sought to be imposed and consequently penalty imposed was cancelled. 14. The judgment in the case of CIT Vs. Manjunatha Cotton Ginning Factory (supra) was further followed by the Karnataka High Court in the case of CIT Vs. SSA'S Emerald Meadows, (2016) 73 taxman.com 248 (SC) dated 23.11.2015 (ITA 380/2015) wherein Hon'ble High Court dismiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income only due to search and the additional income was not declared in the return filed u/s. 139 and therefore, penalty proceedings u/s. 271(1)(c) were initiated. The penalties were also confirmed by the CIT(A) but were deleted by the Tribunal holding the same as not sustainable in law, as no specific charge was levied in penalty show cause notice. 18. The Hon'ble ITAT Indore Bench in the case of Smt. Shruti Garg in IT A No. 988 to 1005/Ind/2016 vide order dated 28.06.2017 following the above referred proposition held by the Hon'ble Supreme Court in T Ashok Pai V/s. CIT (2007) 292 ITR 11 (SC) and in CIT Vis SSAS Emerald Meadows (2016) 73 Taxmann.com 248 (SC) has also held the penalty levied u/s. 271(1)(c) as unsustainable in law as no specific charge was levied in the penalty show cause notice. 19. The ITAT Indore Bench in the case of group appeals of Keti Sangam Infrastructure (I) Ltd. and others ITA No 1343 601/Ind/2016 dated 27.06.2018 (authored by us) following the judicial precedents deleted the penalties levied u/s. 271(1)(c) by stating that the assessing officer has not struck down the relevant charge from the sentence in the cyclostyled proforma of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings on one limb and finding the assessee in another limb is bad in law . Though in the instant appeal the Ld. A.O. has made proper satisfaction in the body of the assessment order but in the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act he failed to mention the limbs for which penalty proceedings have been initiated. It is the negligence of the Ld. A.O. in not making proper specific charge in the notice u/s. 274 about the addition for which penalty proceedings have been initiated. Ld. A.O. should be clear as to whether the alleged addition goes under the limb of concealment of particulars of income or furnishing inaccurate particulars of income . Merely issuing notice in general proforma will negate the very purpose of natural justice as held by the Hon'ble Apex Court in the case of Dilip N Shraf 161 Taxmann 218 that the quasi-criminal proceedings u/s. 271(1)(c) of the Act ought to comply with the principles of natural justice. 14. We therefore respectfully following above referred judgments and in the given facts and circumstances of the case are of the considered view that the alleged notice issued u/s. 274 r.w.s. 271(1)(c) of the Act dated 31.12.10 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst him during the course of assessment proceedings. We however in view of judicial jurisprudence are bound to follow the judgment of Hon'ble jurisdictional High Court in the case of PCIT V/s. Kulwant Bhatia (supra) which is squarely applicable on the facts and issues raised before us in the instant appeal. Ld. Departmental Representative failed to bring any judgment of Hon'ble Supreme Court on this issue in its favour. We, therefore respectfully following the judgment of Hon'ble jurisdictional High Court in the case of PCIT V/s. Kulwant Bhatia (supra) and the decision of this Tribunal referred herein above find no reason to interfere in the finding of Ld. CIT(A) deleting the penalty levied u/s. 271(1)(c) of the Act at ₹ 1,01,17,700/- allowing the legal ground raised by the assessee. 14. As we have already confirmed the findings of Ld. CIT(A) deleting the impugned penalty on legal ground but for academic purpose we would like to deal with the merits of the case. We find that assessee has shown the transaction of sale of equity shares and having earned Long Term Capital Gain of ₹ 2,97,66,605/- in the Income Tax Return. Complete details of this transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hiralal Doshi (supra) and has claimed that the facts of the case are similar to that of the assessee and thus the decision is squarely applicable on the facts of the case. The relevant extract of the judgment of Hon'ble Bombay High Court in the case of CIT V/s. Hiralal Doshi (supra) is reproduced below:- 10. The reliance by the Revenue upon the decision of the Apex Court in Mak Data (P.) Ltd. (supra) to contend that the justification of having deleted and accepted the amount of ₹ 1.62 Crores as business income, to buy peace is not available. We find that the facts in that case are completely distinguishable and le observations made therein would not be universally applicable. In that case, a sum of ₹ 40.74 lakhs ad never been disclosed to the Revenue. During the course of survey, the assessee therein had surrendered that amount with a covering letter that this surrender has been made to avoid litigation and buy peace with the Revenue. In the aforesaid circumstances, the Apex Court held that the words like to avoid litigation and buy peace is not sufficient explanation of an assessee's conduct. It held that the assessee had to offer an explanation for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (A) reaches a prima facie conclusion that the income could be regarded as long term capital gain. Once the aforesaid conclusion has been reached coupled with two further facts viz. the authorities have rendered a finding of fact that the Respondent-assessee had not concealed its income nor filed inaccurate particulars attributable to capital gains in its regular return or income, the view taken to delete the penalty is a possible view. 13. In the present fact, the view taken by the CIT (A) as well as the Tribunal is a reasonable and possible view. Nothing has been shown to us to hold that the findings of the CIT (A) and Tribunal was perverse and/or arbitrary warranting any interference by this Court. It may be pointed out that even in the Memo of appeal, it is not urged by the Revenue that the finding of the CIT (A) and Tribunal are in any manner perverse. 14. In the above view, we see no reason to entertain the question as proposed, as it does not give rise to any substantial question of law. Accordingly, the appeal is dismissed. No order as to costs. 16. From going through the above judgment we find the same is squarely applicable on the facts of the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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