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TMI Blog2022 (4) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... of income, or both. As stated above, no clear finding was given by the assessing officer regarding the invocation of the limb in the penalty notice. We note that Hon`ble Supreme Court in the case of T Ashok Pai [ 2007 (5) TMI 199 - SUPREME COURT] held that concealment of income and furnishing of inaccurate particulars of income carry different connotations. From the facts of the present case, it is abundantly clear that Assessing Officer has not fixed the charge on the assessee. Notice under section 271(1)(c) of the Act, issued by the assessing officer, does not speak about any specific charge for which the penalty on the assessee is to be levied. It is not clear as to whether the assessee is being penalized for the concealment of income or for the furnishing of inaccurate particulars of income.Assessing Officer did not strike off the irrelevant portion in the notice, therefore it is not clear for which particular default the assessee is being penalized. Considering these facts, and the precedents applicable to these facts, we are of the view that penalty should not be imposed on the assessee. Accordingly, we delete the penalty. - Decided in favour of assessee. - ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a on purchase of land. The assessee in his sworn statement u/s 131, recorded on 26.11.2009, stated that he purchased land at Block No.112 at Kadodara Village, Tal: Palsana, along with four other partners and paid ₹ 52,21,000/- towards the cost of land. The assessee has admitted on-money payment of ₹ 30,00,000/-. Therefore, assessing officer held that the assessee has knowingly and deliberately concealed the particulars of his income to the extent of ₹ 30,00,000/-. Therefore, assessing officer imposed penalty u/s 271(1)(c) of the Act to the tune of ₹ 9,96,263/-. 5. Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the penalty imposed by assessing officer. Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before us. 6. Before us, Shri P.M.Jagasheth, Ld. Authorized Representative (AR) for the assessee begins by pointing out that penalty proceedings initiated by assessing officer is time barred. To prove the stand to the effect that penalty proceedings were time barred, Ld. AR of the assessee took us through paper book page-1, wherein the various dates/events have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the alternative arguments advanced by the ld Counsel to the effect that notice issued by the assessing officer under section 274 read with section 271(1) (c ) of the Act, is defective. Therefore, let us first examine the notice issued under section 271(1) (c ) of the Act, which is reproduced below: 10. Having gone through the notice issued under section 271(1) (c ) of the Act, as noted above, we observed that none of the limbs has been ticked by the assessing officer. That is, assessing officer has not ticked any of the limbs, therefore it is not clear whether assessing officer has initiated the penalty on account of furnishing inaccurate particulars of income or concealment of particulars of income. Thus, from the above notice for initiation of penalty under section 271(1)(c ) of the Act, we see that there is no fix charge whether assessee has concealed the particulars of income or furnished inaccurate particulars of income. It is by now well settled that while issuing a notice under section 271(1)(c) of the Act, the Assessing Officer is required to specify as to what is the default on the part of the assessee, as to whether the case is one of furnishing inaccurate part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shwara Movies 144 ITR 127 (kar)]. 13. We note that Hon`ble Bombay High Court in the case of Mohd. Farhan A. Shaikh,[2021] 125 taxmann.com 253 (Bombay) held that where assessment order clearly records satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice, not striking off irrelevant matter would vitiate penalty proceedings. The findings of the Hon`ble Court is reproduced below: Summary: 160. From all the judgments we have quoted about the scope of penalty proceedings under section 271 (1)(c), read with section 274, of the IT Act, we gather the following: (a) Penalty under section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in section 271(1)(c) is a sine qua non for initiation of penalty proceedings under section 271. (e) The existence of such conditions should be discernible from the assessment order or the order of the appellate authority or the revisional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (r) The penalty proceedings are distinct from the assessment proceedings. (s) The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on the merits. (italics supplied and elaboration omitted) 161. In fact, these have been admirably summarised by Manjunatha. And we acknowledge our debt to the decision that has saved our labour. 162. As aptly pointed out by the referring Division Bench, before this Court there are two sets of cases. One set of cases is led by Kaushalya, a decision earliest in point of time. The other set does not have a lead case; they all have been cryptic but stand persuaded by Manjunatha. For that reason, we have discussed the Karnataka High Court's decision in detail. Nevertheless, the referring Division Bench has found on one precedential plank these cases: (1) Samson Perinchery; (2) Goa Coastal Resorts and Recreation (P.) Ltd.; (3) New Era Sova Min; and (4) Goa Dourado Promotions (P.) Ltd. On the opposite plank is Kaushalya. All by co-equal Benches, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Case (supra) points out, it remained uncontradicted by the majority: [A]ccording to the well-settled theory of precedents every decision contains three basic ingredients: (i) findings of material facts, direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of (i) and (ii) above. For the purposes of the parties themselves and their privies, ingredient (iii) is the material element in the decision for it determines finally their rights and liabilities in relation to the subject-matter of the action. It is the judgment that estops the parties from reopening the dispute. However, for the purpose of the doctrine of precedents, ingredient (ii) is the vital element in the decision. This indeed is the ratio decidendi[ 16 ]. 167. Then, Mavilayi applied the above principle and held that the ratio decidendi in Citizen Cooperative would not depend upon the conclusion arrived at on facts in that case. For the case is an authority for what it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, rather than stare decisis, as the reckoning factor. 171. That said, as Mavilayi found distinguishing features in Citizen Cooperative; here, too, the fact situation as obtained in Kaushalya has been seen in none of these decisions: Goa Dourado Promotions, Goa Coastal Resorts and Recreation, case (supra) Samson Perinchery case (supra), New Era Sova Mine-not even in Manjunatha. Granted, in both sets of cases, the proposition is this: To an assessee facing penalty proceedings, the Revenue must supply complete, unambiguous information so that he may defend himself effectually. This proposition has given rise to this question: Where should the assessee gather the required information from? 172. Goa Dourado Promotions and other cases have held that the information must be gathered from the notice under section 271(1)(c) read with section 274 of the IT Act. No other source was in the Court's contemplation. In Kaushalya, both the proposition and the question were the same. But it has one extra input: the order in assessment proceedings. So it has held that the notice alone is not the sole source of information; the assessment proceedings, too, may shed light on the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Smt. Kaushalya's case (supra) approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not depend on the assessment proceeding for their outcome. Assessment proceedings hardly influence the penalty proceedings, for assessment does not automatically lead to a penalty. 176. Second, not always do we find the assessment proceedings revealing the grounds of penalty proceedings. Assessment order need not contain a specific, explicit finding of whether the conditions mentioned in section 271(1)(c) exist in the case. It is be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee 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 avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice- not striking off the irrelevant matter-vitiate the penalty proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, it set aside the penalty proceedings on the grounds of nonapplication of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff Case (supra) on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff case (supra), for the Supreme Court, it is of some significance that in the standard Pro-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 . Then, Dilip N. Shroff case (supra), on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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