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TMI Blog2023 (2) TMI 964X X X X Extracts X X X X X X X X Extracts X X X X ..... ly when the assessee who is a non-filer was put to notice which he has understood and has replied to such notice issued by the AO. In the light of the above discussion, we uphold the order of the ld.CIT(A) in sustaining the penalty levied by the AO. - Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee on sale of individual flats which was computed at Rs.1,84,41,136/-. The AO accordingly held that there is a clear-cut concealment of particulars of income for the relevant assessment year. Since the assessee had not filed the return of income, it clearly falls within the ambit of provisions of section 271(1)(c) of the I.T.Act by which the assessee concealed the taxable income. He accordingly levied penalty of Rs.37,61,793/- being 100% of the tax sought to be evaded u/s. 271(1)(c) of the I.T.Act. 6. Before the ld.CIT(A), the assessee made elaborate arguments. It was submitted that there was no addition made to the returned income and thus, there is no concealment and therefore, penalty is not leviable. It was argued that for levying penalty u/s. 217(1)(c) of the I.T.Act, the concealment of income has to be in the return filed by the assessee. Since the assessee admitted income voluntarily in the return filed which was accepted, therefore, there is no question of any concealment of such income. Various decisions were also brought to the notice of the ld.CIT(A). 7. However the ld.CIT(A) was not satisfied with the arguments advanced by the assessee and upheld by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase has initiated penalty proceedings on account of concealment of particulars of income and furnishing of inaccurate particulars of such income. He submitted that there cannot be levy of penalty for both the limbs i.e. concealment of income and furnishing of inaccurate particulars of income. 10. Referring to the decision of Hon'ble AP High Court in the case of Chennakesava Pharmaceuticals vs. CIT reported in 349 ITR 196, he submitted that the Hon'ble High Court in the said decision has held that the AO should, before imposing penalty, record in the assessment order his satisfaction that the assessee had either concealed the income or furnished inaccurate particulars of income in his return. 11. Referring to the decision of Hon'ble AP High Court in the case of PCIT vs Smt. Baisetty Revathi reported in 398 ITR 88, he submitted that the Hon'ble High Court in the said decision has held that when charge against assessee is either concealment of particulars of income or furnishing of inaccurate particulars thereof, revenue must specify as to which one of two is sought to be pressed into service and cannot be permitted to club both by interjecting one or between two. 12. Referring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party obliged, either acted deliberately in defiance of law or guilty of conduct, contumacious or dishonest or acted in conscious disregard to its obligation. Further, it has also been held that penalty will not also be imposed merely because it is lawful to do so. The Hon'ble Supreme Court has held that whether 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 consideration of all the relevant circumstances. He submitted that when the return of income filed in response to notice u/s. 148 has been accepted, therefore, the revenue authorities are not justified in levying penalty u/s. 271(1)(c) of the I.T.Act, 1961 and ld.CIT(A) is not justifiable sustaining the same. He also relied on various other decisions filed in the paper book and written submissions. 16. The ld.DR on the other hand heavily supported the order of the AO and the ld.CIT(A). He submitted that the assessee in the instant case was a non filer of return of income and only due to issue of notice u/s. 148 filed the return of income declaring total income of Rs.1,84,41,136/- which has been accepted by the AO. He submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the decision of Hon'ble AP High Court in the case of Sreenivasa Pitty & Sons vs. CIT reported in 173 ITR 306, he submitted that the Hon'ble High court in the said decision has held that even though the notice was defective, the assessee understood the notice as one for levy of penalty under section 271(1)(c) of the Act and sent a reply on which the penalty was levied. Therefore, no prejudice was caused to the assessee by the defective nature of the notice as he had full opportunity before the ITO to set out his defense against the levy of penalty u/s. 271(1)(c) of the I.T.Act. 20. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Earthmoving Equipment Service Corporation vs. DCIT reported in 166 ITD 113, he submitted that the Tribunal in the said decision after considering the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory and various other decisions held that penalty could not be deleted merely on the basis of defects in the notice and the provisions of section 292B come to the rescue of the revenue which cures minor defect in the various notices issued provided such notice in substance and effect was i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty cannot be levied for both the limbs and since the AO has not levied for any particular limb as per provisions of section 271(1)(c) of the I.T.Act, therefore, such penalty so levied being not in accordance with law has to be cancelled. 23. We do not find any force in the above argument of the ld.counsel for the assessee. We find Explanation 3 to section 271(1)(c) reads as under: "Where any person fails, without reasonable cause, to furnish within the period specified in sub-section (1) of section 153 a return of his income which he is required to furnish u/s 139 in respect of any A.Y commencing on or after 1st of April, 1989, and until the expiry of the period aforesaid, no notice has been issued to him under clause(i) of sub-section (1) of section 142 or section 148 and the Assessing Officer or the CIT(A) is satisfied that in respect of such A.Y such person has taxable income, then such person shall, for the purposes of clause (c) of this sub-section, be deemed to have concealed the particulars of his income in respect of such A.Y, notwithstanding that such person furnishes a return of his income at any time after the expiry of the period aforesaid in pursuance of a noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO under s. 274. If the assessee was under a mistaken view about the real intent and effect of the notice issued, he could have asked the ITO to clarify whether the penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of such income. In the present case, it is not denied that in the explanation given to the ITO in response to the notice issued under s. 274, the assessee did not raise any objection on the ground that the notice did not convey the nature of offence committed by him. No objection was also taken regarding the validity of the notice on that ground. It is, therefore, clear that the assessee was not under any misapprehension about the offence alleged against him. There was proper understanding and indeed, in the explanation filed, the assessee dealt with the reasons for contending that no penalty could be levied under s. 271(1)(c). It was not shown to us that any prejudice was caused to the assessee on account of the assesseee not being put in the knowledge of the nature of offence committed by him. The contention regarding the validity of the notice was urged only during the course of the appeal before the Tribunal an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the aforesaid order, the matter has been carried to this court by the assessee. Looking at the notice under section 274 dated March 12, 1974, we are inclined to accept the assessee's contention that the notice was defective, because the relevant portion in the notice concerning the levy of penalty for concealment of income and giving inadequate particulars of income was struck off. Fortunately, for the Revenue, however, the assessee understood the notice as one for the levy of penalty under section 271(1) (C) of the Income-tax Act. Accordingly, he sent a reply. The assessee's reply was considered and penalty was levied. We, therefore, think that no prejudice is caused to the assessee by the defective nature of the notice as he has had full opportunity before the Income-tax Officer to set out his defence against the levy of penalty under section 271(1) (C) of the Act. In that view, we consider that the order of the Income-tax Officer levying penalty under section 271(1) (C) of the Act does not suffer from want of jurisdiction. Support for this view can be found in a decision of this court in CIT v. Chandulal . 27. Though the learned Counsel for the assessee cited a few de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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