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TMI Blog2021 (4) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has levied the penalty u/s 271(1)(c) by recording his finding that the assessee has filed inaccurate particulars and concealed income. The Assessing Officer has levied the penalty on both charges i.e. inaccurate particulars of income and concealment of income. In the bank account, the Assessing Officer made the addition. Hence, the addition was not made because of the reason that the assessee has concealed the particulars of income but it is only because of the reason that the legal representative/the widow of the deceased assessee could not explain the source of part of the deposits made in the bank account by deceased assessee. The Assessing Officer has accepted the contract receipt and garment business receipt and therefore, it cannot be ruled out that the deposit which could not be explained by the widow of the deceased assessee may be available as cash opening balance as the assessee was doing the business. Therefore, merely because the legal representative of the assessee failed to explain the deposits in the bank account would not ipso facto lead to the conclusion that it represents an undisclosed income or concealed income. The particulars regarding deposits as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the penalty u/s 271(1)(c) without recording the satisfaction whether the penalty envisaged to be levied was for furnishing inaccurate particulars of income or for concealing particulars of income. 3. Because the Assessing Officer levied the penalty u/s 271(1)(c) vide order dated 27.02.2015 for both the assessee has filed inaccurate particulars and concealed the income. 4. Because the Assessing Officer passed the penalty order during the pendency of the quantum appeal before the Hon'ble I.T.A.T. which was finally set aside. 5. Without prejudice to the above, the Ld. CIT(A) did not give opportunity to depose in the case. 6. Because the Ld. CIT(A) erred both on the facts and in law in confirming the penalty order of the Assessing Officer. 7. Because the penalty order is generally bad both on facts and in law. 8. Because the appellant reserves the right to add/alter/rescind any ground of appeal. 3. Ground No. 1 to 3 are regarding validity of the penalty order passed u/s 271(1)(c) on the ground that the Assessing Officer has not initiated the penalty proceedings for a definite default or a correct charge against the assessee. The Ld. AR of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 07.05.2018. 4. On the other hand, the Ld. DR has submitted that the Assessing Officer has initiated the scrutiny assessment during the lifetime of the assessee and only after the notice u/s 142(2) was issued by the Assessing Officer. The assessee died and thereafter the legal representative of the deceased assessee participated in the assessment proceedings. He has further submitted that during the assessment proceedings the assessee has failed to explain the source of the deposits made in the bank account to the tune of ₹ 7,19,036/-. Therefore, the Assessing Officer has rightly recorded the satisfaction for initiating the proceedings u/s 271(1)(c). He has further contended that as per section 271(1B) the Assessing Officer is required to record the satisfaction that the penalty proceedings are separately initiated. Thus at the time of recording the satisfaction it is not required on the part of the Assessing Officer to specify any charge. He has further contended that it is a clear case of failure on the part of the assessee to explain the source of deposit and consequently the penalty u/s 271(1)(c) is attracted. He has relied upon the orders of the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 the Assessing Officer has initiated penalty proceedings on the charge you have concealed the particulars of your income or furnished inaccurate particulars of such income . It is clear from the show cause notice that the Assessing Officer not specified the charge for which the penalty proceedings were initiated. Even the Assessing Officer was not sure about default/ charge at the time of issuing the show cause notice. Finally, the Assessing Officer has levied the penalty u/s 271(1)(c) by recording his finding that the assessee has filed inaccurate particulars and concealed income. The Assessing Officer has levied the penalty on both charges i.e. inaccurate particulars of income and concealment of income. This reason of levying the penalty is not factually correct as bank account in which the deposits are made has been disclosed by the assesse and complete particulars were furnished showing all the transaction. It is only due to the failure on the part of legal heir of the deceased assessee to explain the source of part of the deposits. In the bank account, the Assessing Officer made the addition. Hence, the addition was not made because of the reason that the assessee has concea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a penalty on you should not be made u/s 271 of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said dated which will be considered before any such order is made u/s 271(1)(c). Assessing Officer 6. From a perusal of this notice, it is crystal clear that the charge for which penalty is proposed to be levied under section 271(1)(c) of the Act, whether for concealment of income, or for furnishing of inaccurate particulars of income, is not specific. The law mandates that the authority, who is proposing to impose penalty, shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence, which he would like to take to support his case. This is even enshrined in the principles of natural justice and as has been upheld by Hon'ble Apex Court and other High Courts. 7. In CIT vs. SSA s Emerald Meadows , [2016] 73 Taxmann.com 248, the Hon'ble Apex Court looked into the facts bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which of the two limbs of section 271(1)(c) he has to respond. 10. In Chandra Prakash Bubna vs. Income Tax Officer, Ward 27(3), Kolkata , (ITAT Kolkata Bench) [2015] 64 taxmann.com 155, it was held that when the Assessing Officer levied penalty without bringing out any specific charge for which penalty had been imposed, penalty was liable to be deleted. 11. In Madan Lal Kishori Lal vs. CIT 197 CTR (All) 144, wherein, the Hon ble Allahabad High Court, following K.P. Madhusudanan in Civil Appeal No. 6465/2000 (SC), has held that Explanation-1 applies whether or not the Assessing Officer has invoked it in the order or in the notice. This judgment is not an authority for the issue under consideration before the Bench. The judgment explains the scope of Explanation- 1 appended to section 271(1)(c) of the Act. It has been held that the onus of the assessee will not get discharged by furnishing an explanation without any further proof; that in Explanation-1 to section 271(1)(c), the onus is the assessee; that where the AO issues a notice to the assessee, he makes the assessee aware that the provisions thereof are to be used against him and these provisions include Explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed before any such order is made under section 271(1)(c) of the Income Tax Act, 1961. From a perusal of this notice, it is crystal clear that the charge for which penalty is proposed to be levied under section 271(1)(c) of the Act, whether for concealment of income, or for furnishing of inaccurate particulars of income, is not specific. The law mandates that the authority who is proposing to impose penalty shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence which he would like to take to support his case. This is even enshrined in the principles of natural justice and as has been upheld by Hon'ble Apex Court and other High Courts. We place reliance on the following cases:- 1. CIT vs. SSA s Emerald Meadows , [2016] 73 Taxmann.com 248 (SC). In this case the Hon'ble Apex Court looked into the facts before them that Tribunal relying on the decision of Division Bench of Hon'ble Karnataka High Court in the case of CIT and Another vs. Manjunath Cotton Ginning Factory (supra) allowed the appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out bringing out any specific charge for which penalty had been imposed, penalty was liable to be deleted. 5. Sachin Arora vs. ITO and other cases, order dated 19.12.2017 passed by the Agra Bench of the Tribunal in ITA No.118/Agra/2015 etc. 6. The settled legal position on the issue, as enshrined in the aforesaid cases, is apparent and we arrive at the considered view that the show cause notice, which has not specified the charge and limb under which the penalty is proposed to be levied, is void ab initio and the consequent penalty imposed on the basis of such notice is, therefore, illegal and bad in law and liable to be deleted. We, therefore, direct deletion of the penalty. 8. In the case in hand, the Assessing Officer has recorded the satisfaction for initiation of penalty on incorrect charge and the penalty was also levied for an incorrect charge of inaccurate particulars of income and concealment of particulars of income which is not possible in the case of the assessee when the addition was made in respect of only one issue i.e. the source of deposit in the bank account. The Third Member decision in case of HPCL Mittal Energy Ltd. v. Addl. CIT (supra) has hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order. If the charge is not levied in the above manner in all the three clear-cut situationsdiscussed above in the penalty notice and also in the penalty order, the penalty order becomes unsustainable in law. 16. The Hon ble Karnataka High Court in Manjunatha Cotton and Ginning Factory 359 ITR 565 (Kar) has held that a 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 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 Hon ble High Court went on to hold that : `Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income . But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. Thus once the proceedings are initiated on one ground, the penalty should also be ..... 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