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TMI Blog2021 (5) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... advances, hence, there is no conscious concealment of income, as held by the various Hon`ble High Courts These are the three varying degrees of defaults and the statute clearly keeps up the distinction between the three modes. In Hindustan Steel Ltd. v. State of Orissa [ 1969 (8) TMI 31 - SUPREME COURT] observed that whether the penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all relevant circumstances and that even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose a penalty when there is a mere technical or venial breach of the provisions of the Act. The words may direct that such person shall pay by way of penalty in section 271 leave a certain amount of discretion in imposition of penalty which need not be imposed when there is a minor breach of the law and when having regard do the facts ends of justice require that the assessee should not be penalized. So also where the circumstances of a case establish that the mistake is accidental and inadvertent and there is no material at all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company filed its return of income on 30.09.2008 declaring total income of ₹ 10,37,714/-. The scrutiny assessment under section 143(3) of the Act was finalized on 29.12.2010, with total income of ₹ 9,51,17,548/-. During the scrutiny assessment, the assessing officer has made two additions, on the followings issues: (i).Addition made on estimated bases, that is, Estimated business income of ₹ 19,60,875/- (₹ 6,53,62,500 x 3%), (ii). Addition, on account of Long Term Capital Gain of ₹ 9,31,56,673/-. The assessing officer, vide para 11 of the assessment order, had stated that penalty proceedings under section 274 r.w.s 271(1)(c) of the Act should be initiated on both the additions for furnishing inaccurate particulars of income and concealment of income. However, in para 8 of assessment order, in respect of penalty on estimated addition, the assessing officer has initiated the penalty proceedings for furnishing inaccurate particulars of income. In respect of Income from capital gains, vide para 9 of assessment order, assessing officer has initiated penalty proceedings for concealment of income. However, in penalty order under section 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the ld. CIT(A) has confirmed the penalty under section 271 (1) (c ) of the Act, in respect of addition made by the assessing officer under the head Long Term Capital Gain(LTCG). That is, the penalty, under section 271 (1) (c ), imposed by the assessing officer, in respect of addition of LTCG of ₹ 9,31,56,643/-, was confirmed by the ld CIT(A). 6. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us in respect of the penalty, under section 271 (1) (c ) of the Act pertaining to addition of LTCG of ₹ 9,31,56,643/- which was confirmed by the ld CIT(A). 7. Shri Rasesh Shah, ld. Counsel for the assessee submits before us that facts and circumstances of the case are to be considered afresh in penalty proceedings and penalty cannot be levied solely on the basis of reasons given in the assessment order. In the assessee`s case there is neither furnishing of inaccurate particulars of income nor concealment of income on the part of the assessee hence, the levy of concealment penalty in respect of long term capital gain is not justified at all. The ld Counsel pointed out that assessing officer has initiated penalty proceedings u/s 271(1)(c ) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Singh Yadav and he immediately, voluntarily offered the long term capital gain in the hands of the assessee company by revising the return of income. Therefore, considering these circumstances, there is no concealment of income on the part of the assessee company. 9. On the other hand, Shri Ritesh Mishra, ld. Departmental Representative for the Revenue submitted that so far charge for initiation of penalty under section 271(1) (c ) of the Act is concerned, it is only a typographical error made by the assessing officer to levy penalty in assessment order on account of concealment of income and to levy penalty in the penalty order for concealment of income and furnishing inaccurate particulars of income, hence these technicality may be ignored, as the intention of the assessing officer was to levy penalty which is getting reflected in the assessment order itself. 10. On merits, Shri Ritesh Mishra, submits that assessee was given sufficient opportunity during the assessment stage to submit the details and documents, however, the assessee has failed to do so. The assessee sold the immovable property for the sale consideration of ₹ 9,31,56,673/-. This income was not refle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this regard, was not accepted by ld CIT(A) to be a bonafide explanation. Therefore, the penalty imposed by the assessing officer, in respect of addition of LTCG of ₹ 2,31,56,643/- was confirmed by the ld CIT(A). 12. We note that the first grievance of the ld. Counsel, in respect of long term capital gain is that there is no any definite charge/ accusation on the assessee, whether initiation of penalty proceeding is on account of concealment of income or on account of furnishing inaccurate particulars of income . Let us first examine the charge in the assessment order and penalty order: (1) Charge in assessment order: We note that in respect of the above two additions, the Assessing Officer has initiated and made a charge of penalty in the assessment order under section 143(3) of the Act as follows: (A). Penalty on estimated addition: The assessing officer has initiated penalty on the limb inaccurate particulars of income in respect of estimated addition observing as follows: 8. In his statement recorded on 26-09-2007, Shri Rajendrasingh Yadav, the main director of the assessee, in reply to question no.9, had stated that in his business he gets 1% net pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,17,548/- 11. Assessed u/s.143(3).Give credit for prepaid taxes after due verification. Interest u/s.234A, 234B, 234C is charged as per calculation given in ITNS-150 which is part of this order. Issue notice under section 271(l)(c) for concealment of income and furnishing inaccurate particulars of income. From the above (A), (B) and (C) analysis it is abundantly clear that in the assessment order itself the assessing officer has made different charge on the assessee under section 271(1) (c ) of the Act. Thus, there is no definite charge on the assessee under section 271(1) (c ) of the Act during the assessment proceedings. Thus, the assessing officer was not certain that for which limb he wanted to initiate penalty proceedings, that is, for concealment of income or for furnishing inaccurate particulars of income. 13. Whereas in penalty order under section 271(1) (c ) of the Act, the Assessing Officer made a charge on account of both limbs, that is, concealment of income and furnishing inaccurate particulars of income, in respect of these two additions observing as follows: 9. In the light of the facts and circumstances of the case and forgoing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain is concealment of income only, therefore, the penalty initiated by the assessing officer is bad in law. As stated above, no clear finding was given by the assessing officer regarding the invocation of the limb in the penalty order. The assessing officer levied the penalty for both the limbs for concealment and furnishing inaccurate particulars of income. under section 271(1 )(c) of the Act, whereas in the assessment order the assessing officer initiated penalty only on one limb that is for concealment of income . We note that Hon`ble Supreme Court in the case of T Ashok Pai - 292 ITR 11 (SC) held. that concealment of income and furnishing of inaccurate particulars of income carry different connotations. The Hon`ble Gujarat High Court in case of Manu Engineering Works -122 ITR 306 (Guj.) held. that the penalty order has to be clear as to limb for which it is levied and the position being unclear penalty is not sustainable. Further, on the identical facts, Hon`ble Gujarat High Court in case of Nayan C. Shah vs. ITO [Tax Appeal No. 543 of 2012 (Guj- HC)] held. as follows: 11. Another notable aspect of the matter is that while the Assessing Officer has impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Mann Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of and/or may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assesses or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income. It was in this respect the Bench observed that Now the language of and/or may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of other two assesses. In view of the above discussion, penalties in the case of each assessee are not sustainable. We allow all three appeals, and delete penalty imposed by the AO. 16. Thus, we note that the assessing officer has initiated the penalty proceedings on one footing and concluded on other footing. The assessing officer made charge in respect of income from capital gain in penalty order stating concealment of income and furnishing inaccurate particulars of income that is on account of both limbs, whereas in assessment order the charge in respect of income from capital gain is concealment of income only. Therefore, in our opinion, the basis of levy of penalty itself is not correct, hence penalty order under section 271(1)(c) of the Act needs to be quashed. 17. On merits of the case, we are of the view that this is not a case, where the amount for sale of property has been received outside the regular books of accounts or that the property is not reflected in the regular books of accounts. That is, in assessee`s case, the property is duly reflected in the regular books of the assessee company and even the amount received for sale thereof has been accounted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her director, the Employees and the Accountant of the company were not aware of the fact that the sale agreement was executed by the director of the company with Ambuja Cement Ltd. and accordingly, they showed the amount received from the Ambuja Cement Ltd. as loans, and advances instead of transferring it to fixed asset account and thereby recognizing long term capital gain. We note that assessee has not concealed the particulars of income as the sale of property (long term capital gain) was shown under the head loans and advances. Hence, there is no any conscious concealment of income. The assessee company sold the land to Ambuja Cement for a consideration of ₹ 9,61,76,433/- and out of the said receipt the bank loans were to be paid by the company. When this fact was drawn to the attention of the Director, Shri Rajendra Singh Yadav, he immediately and voluntarily offered the long term capital gain in the hand of the company by revising the return of income. The amount received by the transferree company of Ambuja Cement has been shown by the assessee-company under the head loan and advances, therefore, penalty is not leviable unless it is shown that there is a conscio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny proceedings under this Act the AO is satisfied that income has been concealed. Therefore, if the assessee having filed a false return, makes as voluntary disclosure or files a revised return even before the AO takes up the original return for consideration and the assessment is made on the basis of such disclosure, penalty should not be imposed. An inadvertent omission for error in the original return, particularly when it is corrected by a revised return, or a rectification petition, would not attract penalty under section 271(1) (c ) of the Act. Reference in this regard can be usefully made to the judgment of Hon`ble High Court of Madras in the case of Sivagaminatha Moopanar Sons Vs. Commissioner Of Income-Tax,( 27 June, 1961)52 ITR 591 (Mad), wherein it was held as follows: Section 22(3) provides that, where a person furnishing a return discovers an omission or wrong statement therein, he could furnish a revised return at any time before the assessment is made. Therefore, in a case where the original return does not contain the true particulars by reason of a genuine mistake or accidental omission, it would be open to the assessee to furnish a revised return containin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of information. Apart from the statutory duty of the officer to give a hearing to the assessee before concluding the assessment, the process of assessment itself, in actual practice, would ordinarily take more than one sitting between the officer and the assessee, for mutual discussion, especially of item which are either under controversy or require clarification or elucidation. It is during these sittings or hearings, or inquiry , as it is described by the marginal note to s. 142, that the final shape of the assessment emerges. In the very nature of things, a perusal of the return of income alone would give an inadequate or even a misleading idea of the course of assessment proceedings. For, return is but the starting point of the proceedings, and even in the best of assessments, the return alone cannot give a true indication of the course and thrust of the proceedings. When, therefore, s. 271(1)(c) speaks about the ITO having to be satisfied in the course of any proceedings , it means that the officer's satisfaction must be obtained on an appraisal of the stand taken by the assessee in the whole course of the proceedings and not merely in his formal return of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee in that case was that in the connected assessment proceedings, he had filed a revised return showing the correct income and, therefor, penalty cannot be levied on the basis that the original return did not disclose the true income. This contention was also replied. The court went into the rationale behind the statutory provision enabling the assessee to file a revised return. The court pointed out that a revised return can be filed by an assessee only in a case where an omission or a wrong statement in the original return was discovered and not to enable an assessee to expiate himself from a false return. 7. We do not regard the above decision as a complete tract on the construction or s. 271(1)(c). The court, in that case, was merely minding to deal with and dispose of contentions raised before them, one based on s. 271(4A) and the other based on s. 139(4) of the Act. There was no attempt in that case to define what would be the proper subject of discourse on the issue as to concealment, much less an attempt to construe the expression in the course of any proceedings under this Act occurring in s. 271(1)(c). We are, therefore, not constricted in any manner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable cause and (iii) by punishing the assessee treating the assessee in default as an offence, if it is proved that it was caused by willful failure. These are the three varying degrees of defaults and the statute clearly keeps up the distinction between the three modes. In Hindustan Steel Ltd. v. State of Orissa [83 ITR 26) the Hon`ble Supreme Court observed that whether the penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all relevant circumstances and that even if a minimum penalty is prescribed the authority competent to impose the penalty will be justified in refusing to impose a penalty when there is a mere technical or venial breach of the provisions of the Act. Again in Mansukhlal Bros v. CIT [73 ITR 546] the Hon`ble supreme court had observed that the penalty is not uniform and its imposition depends upon the exercise of discretion by the taxing authorities and is imposed as a part of the machinery for assessment of tax liability. The words may direct that such person shall pay by way of penalty in section 271 leave a certain amount of discretion i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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