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TMI Blog2023 (8) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... . 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. Decided in favour of assessee. - Shri Ravish Sood, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : Shri R.B Doshi, CA For the Revenue : Shri Satya Prakash Sharma, Sr. DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the CIT (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 01.03.2023, which in turn arises from the order passed by the A.O. u/s. 271(1)(c) of the Income-tax Act, 1961 (for short Act ), dated 30.12.2016 for A.Y. 2014-15. The assessee has assailed the impugned order on the following grounds of appeal before us: 1. In the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the penalty of Rs. 1,53,000/- imposed by the A.O u/s. 271(1)(c) without appreciating the facts of the case properly. The penalty imposed by the A.O and confirmed by the CIT(A) is arbitrary, illegal and not j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d claim had drawn our attention to both of the aforesaid SCN s, i.e dated 30.12.2016 and 22.05.2017. Referring to the aforesaid discrepancy in the SCN s, dated 30.12.2016 and 22.05.2017, it was submitted by the ld. AR that as the AO had failed to validly put the assessee to notice as regards the specific default for which the impugned penalty under Sec. 274 r.w.s 271(1)(c) was sought to be imposed on him, therefore, the assessee had remained divested of an opportunity to put forth in his defense a clear explanation that no such penalty u/s 271(1)(c) was called for in his case. The ld. AR in support of his aforesaid contention had relied on a host of judicial pronouncements, as under: (i) Raipur Securities Investments Ltd. Vs. ITO (2022) 65 CCH 127 (Raipur) (ii) Raigarh Nagrik Sahakari Bank Maryadit Vs. ITO, ITA No.116 118/RPR?2017 dated 23.09.2022 (iii) ACIT Vs. Agrawal Round Rolling Mills Ltd., ITA No.133/BLPR/2009 dated 14.07.2010. 7. Per contra, the Ld. Departmental Representative (for short 'D.R') relied upon the orders of the lower authorities. It was submitted by the Ld. D.R that as the assessee was afforded sufficient opportunity in the course of pena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me or furnished inaccurate particulars of such income in the aforesaid SCN s dated 30.12.2016 and 22.05.2017 in no clear terms conveyed to the assessee the specific defaults for which the penalty proceedings were sought to be proceeded with in his hands. In sum and substance, the A.O in neither of the aforesaid SCN s dated 30.12.2016 (supra) and 22.05.2017 (supra) had validly put the assessee to notice as regards the default for which he was called upon to put forth an explanation that as to why penalty u/s. 271(1)(c) may not be imposed on him. As the A.O in the aforesaid SCN s had mentioned both the defaults, i.e. concealment of income or furnishing of inaccurate particulars of income w.r.t. the aforesaid addition of Rs. 4,94,743/- (supra), therefore, by using OR as a conjunction between both the aforesaid defaults he had not only failed to validly convey to the assessee in clear terms the specific defaults for which the penalty was sought to be imposed in his case, but had in fact kept the latter guessing about the default/defaults for which penalty was sought to be imposed in his case. 9. Insofar the validity of the jurisdiction assumed by the A.O for imposing penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific default for which penalty under the said statutory provision was sought to be imposed. In our considered view, the indispensable requirement on the part of the A.O to put the assessee to notice as regards the specific charge contemplated under the aforesaid statutory provision, viz. concealment of income or furnishing of inaccurate particulars of income or both of the said defaults is not merely an idle formality but is a statutory obligation cast upon him, which we find had not been discharged in the present case as per the mandate of law. 11. We would now test the validity of the aforesaid Show Cause notice(s) dated 30.12.2016 and 22.05.2017, and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers to levy penalty under Sec. 271(1)(c) of the Act if in the course of the proceedings he is satisfied that the assessee had either concealed his income or furnished inaccurate particulars of his income or had committed both the defaults w.r.t. the various additions/disallowances made in his hands while framing the assessment. In our considered view as penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the Show cause notices dated 30.12.2016 (supra) and 22.05.2017 (supra), which we find he had failed to do in the case before us. The aforesaid failure of the A.O cannot be merely dubbed as a technical default as the same had clearly divested the assessee of his statutory right of an opportunity of being heard and defend his case. 12. We find that the Hon ble High Court of Karnataka in the case of CIT Vs. SSA s Emerald Meadows (73 taxmann.com 241)(Kar) following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings were initiated, i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars , then, the same has to be held as bad in law. The Special Leave Petition (for short SLP ) filed by the revenue against the aforesaid order of the Hon ble High Court of Karnataka had been dismissed by the Hon ble Supreme Court in CIT Vs. SSA s Emerald Meadows (2016) 73 taxmann.com 248 (SC). Apart from that, we find that a similar view had b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings, in the absence of such satisfaction, the two authorities have quite correctly ordered the dropping of penalty proceedings against the assessee. 6. Besides, we note that the Division Bench of this Court in Samson (supra) as applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Soya furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate clarity the nature of satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck off the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 32) is perused, it is apparent that the inapplicable portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dication, the Court looks forward, after an event or incident, and asks what effects the decision about this case will have in the future on parties who are entering similar situations and have not yet decided what to do, and whose choices may be influenced by the consequences the law says will follow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 72]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado 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 Kaushalya s approach to the issue, it requires the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds 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. 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 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 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 on the issue of non-application of mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 191. As a result, we hold that Dilip N. Shroff treats omnibus show cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication. Also, the Hon ble High Court of Bombay in the case of Pr. CIT (Central) Bengaluru Vs. Goa Coastal Resorts and Recreation Pvt. Ltd. (2020) 113 taxmann.com 574 (Bombay), had observed that where there was no recording of satisfaction by the AO in relation to any concealment of income or furnishing of inaccurate particulars by assessee in the notice issued for initiation of such proceedings, then, the Tribunal had in absence of said statutory requirement rightly vacated the penalty proceedings. Also, the Hon ble High Court of Bombay in the case of PCIT, Panaji Vs. G ..... X X X X Extracts X X X X X X X X Extracts X X X X
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