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TMI Blog2021 (10) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... amount in the return of income filed consequent to receipt of the notice under section 153A, was not voluntary, rather assessee was forced to surrender, on account of the search carried out by the Department. In our view the penalty was rightly imposed by the assessing officer after being satisfying that the assessee was habitual defaulter and despite survey/search the assessee had not declared the income and had only declared income after the receipt of the notice. Whether the penalty can be deleted on the basis of non-specific notice? - It is pertinent to note here that in this case the assessee was having the clarity as to what charge were levelled in the notice i.e. concealment of income only and, therefore, the assessee had not asked the Assessing Officer to specifically mention on what basis he sought to impose the penalty. On the other hand, the assessee in the reply reproduced hereinabove, in the penalty proceedings, had mentioned that no penalty can be levied on account of concealment of income (refer para 3.3 supra). Since there was no ambiguity in the mind of the assessee on what basis the penalty sought to be imposed and after considering the reason for imposing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rastructure India Pvt. Ltd wherein it has been held that once the reason for levying penalty u/s 271(1)(c) is mentioned in the assessment order, mere mention in the notice for concealing the particulars of income' or furnished inaccurate particulars of income' would not cause prejudice to the assessee? 3. Whether on facts and in circumstances of the case, the Ld. CIT(A) erred in not considering the decision of the Hon'ble ITAT, Mumbai Bench in TS-5465-ITAT-2017 in the case of Shri. Mahesh M. Gandhi wherein it has been held that the Assessing Officer had duly recorded well-reasoned satisfaction before invoking penalty u/s 271(1)(c ) in the assessment order, evidencing application of mind by the Assessing Officer? 4. Whether on facts and in circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that there was proper recording of reason for initiation of penalty u/s 271(1)(c ) in the body of the assessment order? 5. For the above grounds and any additional grounds that may be agitated during the course of the hearing it is prayed that the order of the Ld. CIT(A)-2, Panaji may be quashed and that of the AO restored. 3. Ld. DR, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome on 06.09.2010. Thus the assessee has disclosed additional Interne 01 ₹ 7,20,38,58 6/- only after the search dtd. 21.04.2010. Thus, it Is seen that the assessee has knowingly and deliberately concealed the Income. Further, it is noted that in this case search seizure action was conducted on 15.11.2006, and again on 21.04.2010, which shows that the assessee is a habitual defaulter and evaded taxes again even after search seizure action conducted on 15.11.2006. 3.1 Thereafter he drew our attention to page 11 of the penalty order which reads as under :- In view of the facts and circumstances of the case as discussed above and assessee s habitual act of evading of taxes, I consider this is a fit case to levy penalty u/s.271(1)(c). The minimum maximum penalty leviable u/s.271(1)(c) is 100% and 300% respectively of the amount of tax sought to be evaded works out to ₹ 2,40,78,728/- and ₹ 7,22,36,184/- respectively. Considering the facts of the case as discussed above, I consider this is a fit case of levy of maximum penalty @300% of tax evaded, which is ₹ 7,22,36,184/- and hereby levy penalty u/s.271(1)(c) of ₹ 7,22,36,184/- (Rupees se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of penalty i.e it was on account of concealment of income and was not on account of inaccurate particulars of income. It was submitted that since the assessee was aware of the charges, therefore, the penalty was rightly imposed by the Assessing Officer and the deletion made by the CIT(A) was without any basis . 4. Per Contra, the ld. AR of the assessee in support of the order passed by the CIT(A) had drawn our attention to the notice for imposition of penalty dated 31.12.2012 levied for the assessment year 2007-2008, which reads a sunder :- NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT, 1961 To, M/s Timblo Pvt. Ltd., Kadar manzil, Near Hari Mandir, MARGAO, GOA WHEREAS in the course of proceedings before me for the assessment year 2007-2008 it appears to me that you have concealed the particulars of your income or furnished inaccurate particulars of such income. You are, therefore, requested to appear before me at 10.00 A.M. on 23rd January, 2013 and show cause why an order imposing penalty on you should not be passed u/s.271(1)(C) of the IT Act, 1961. If you do not wish to avail yourself of this opportunity of being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only prima facie. Even if the assessment order gives no reason, a mere direction for penalty proceedings triggers the legal fiction as contained in the Explanation (1). 178. Therefore, in every instance, it is a question of inference whether the assessment order contained any grounds for initiating the penalty proceedings. Then, whenever the notice is vague or imprecise, the assessee assails it as bad; the Revenue defends it by saying that the assessment order contains the precise charge. Thus, it becomes a matter of adjudication, opening litigious floodgates. The solution is a tick mark in the printed notice the Revenue is used to serving on the assessees. 73 ] [2009] 317 ITR 1 (SC) 56 txa nos.51 57 of 2012 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory notice suffered from neither non-application of mind nor any prejudice. According to it, the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard . It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the procedure followed . Kaushalya closes the discussion by observing that the notice issuing is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done . 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y refer to Rajesh Kumar v. CIT[ 74], in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei[ 75]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 5. In rebuttal, the ld. DR submitted that the facts in the case of Mohd. Farhan A. Shaikh (supra) are distinguishable as the Hon'ble Constitutional Bench has only laid down the broad guidelines for deleting the penalty orders passed by the Assessing Officer, however, the Hon'ble High Court has not dealt with the present issue that where the assessee has himself mentioned in reply to the show cause notice that the notice was issued for concealment of penalty. In other words, it was a statement that the assessee was aware of the reasons for imposition of penalty and had also given the reply for the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was aware of the charges for which the notice was issued, as is clear from the reply the produced hereinabove(para3.3). further the notice issued under section 274 of the Act, was a non-statutory notice, as section 274 only provides the grant of hearing to the assessee before the imposition of penalty and section 274 has not provided for issuing any statutory show cause notice to the assessee, however in our view issuing of non-statutory notice is necessary for the purposes of adhering to the principle of natural justice. We are reproducing herein section 274 for record, it provides as under :- Procedure. 79 274. (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. 80 [(2) No order imposing a penalty under this Chapter shall be made- (a) by the Income-tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner 81 [or Deputy Commissioner], where the penalty exceeds twenty thousand rupees, except with the prior approval of the 82 [Joint] Commissioner.] 83 [(2A) The Central Government may make a scheme 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the penalty the assessee has specifically mentioned in the reply as reproduced herein above in paragraph 3.3. Therefore, the question of deleting/scoring one of the clause is immaterial being innocuous in nature. In the similar facts this bench in the matter of M/s. Fairyland Hotel Resorts Pvt. Ltd.,( supra) in ITA no 274/ Agra / had held as under :- 15. In the penalty proceedings the notice was issued to the assessee and in response to the notice the assessee s counsel had stated that the amount of 1.5 crore was declared during the course of survey and was offered for taxation to avoid litigation and to buy peace. In our opinion there was no ambiguity in the mind of the assessee either at the assessment stage or at the stage of imposition of penalty that the assessee had not disclosed the income of ₹ 1.5 crore in the return of income, despite surrendering ₹ 1,80,00,000/- during survey proceedings. The above said plea of non-specific notice was not raised by the assessee before the Commissioner (appeal). In our considered opinion the notice was issued to the assessee and the assessee had also filed the reply stating reason for not disclosing the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the appellant-assessee, was only after notices dated 14th January, 2009 were issued under Sections 142 and 143 of the Act. It was only an attempt to pre-empt the Revenue finding out the appellant had furnished inaccurate particulars. Therefore, it cannot be said that it was voluntary disclosure. In fact, the Apex Court in MAKData (P.) Ltd. (supra) has observed that The Assessing Officer, in our view, shall not be carried away by the plea of the Assessee like voluntary disclosure , buy peace , avoid litigation amicable settlement etc. to explain its conduct. The Apex Court has also further observed that It is trite law that the voluntary disclosure does not release appellant-assessee from the mischief of penal proceedings. The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he had to be absolved from penalty. In the peculiar fact of the present case, the so-called voluntary disclosure was only after the Assessing Officer initiated proceedings under Section 142 of the Act. Thus, it was not a voluntary disclosure. In fact, the Assessment Order dated 24th December, 2009 under Section 143(3) of the Act also records the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the decisions was dealt with. The Assessing Officer placed reliance on the decision of the Hon'ble Supreme Court in MakData (P.) Ltd. (supra) and stated that voluntary disclosure does not release the assesee from mischief of penalty proceedings under section 271(1)(c) of the Act. Therefore, we find that the penalty order is a reasoned order. 15. The learned counsel had argued that the defect in the penalty notice is a question of law which can be raised by the assessee at any point of time. We have considered this submission and we have rejected it. The learned counsel relied on the decision of the Hon'ble Supreme Court in the case of K. Lubna to submit that if the factual foundation for a case has been laid and the legal consequences of the same having been examined, the examination of such legal consequences would be a pure question of law. We have noted the factual position. The assessee understood the notice to be under both heads, namely, furnishing of inaccurate particulars and concealment of income. This is evident from the assessee's reply dated 8-4-2015 to the show cause notice dated 12-3-2015. Therefore, the decision in the case of K. Lubna does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll. Unless and until the legal provision then in force permitted exclusion of the amount of income tax already paid, the Chartered Accountant could not have done this. The Chartered Accountant cannot feign ignorance of Section 40(ii) of the Income-tax Act as he is well trained and well versed in law representing not only the assessee, but various other clients. As far as the assessee's malafide intention is concerned, the burden was entirely on the assessee to then show in terms of Explanation-I to the provision permitting imposition of penalty that such intention never existed when the above act was committed. For that, there was no material either in the form of evidence of the assessee or the affidavit of the Chartered Accountant. Hence the Commissioner was right, according to the Tribunal, in imposing this penalty. The attempt to blame the Chartered Accountant cannot result in the assessee's exoneration and claimed in absolute terms. In the circumstances, the penalty was rightly imposed. 18. Thus, for the above reasons, we find that the order passed by the Tribunal does not call for any interference and the Substantial Questions of law framed for consideration have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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