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TMI Blog2023 (9) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... at Rs. 97.58 lacs, less than Rs. 1 crore. Assessment was accordingly made, i.e., as against the returned income @ 5%, at Rs. 7,80,650, vide order u/s. 143(3) dated 20.11.2018, and proceedings for levy of penalty u/s. 271(1)(c) of the Act initiated by the simultaneous issue of notice u/s. 274. Penalty was levied and, further, confirmed in appeal, in the absence of any explanation by the assessee, at the minimum rate of 100% of the tax sought to be evaded. Aggrieved, the assessee is in second appeal. 3.1 Before us, the assessee's case was two-fold. Firstly, notice u/s. 274 of the Act, inasmuch as it does not strike out one of the two limbs of section 271(1)(c), for which penalty there-under stands to be levied, i.e., concealment of particulars of income or furnishing inaccurate particulars of income, is bad in law, as held in CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Kar), which is being regularly followed by the Cochin Bench of the Tribunal, as in Dy. CIT vs. R.R. Holdings Pvt. Ltd. (in ITA No. 513/Coch/2019, dated 06.11.2019). In fact, special leave petition (SLP) stands dismissed by the Hon'ble Apex Court, declining to interfere with the decision by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - on facts, to contend that the notice did not specify the 'default', which essentially is the under-reporting of income w.r.t. to the amount that the law deems as his income in case of non-audit of books of account in a given set of facts. The provision being unambiguously clear, the explanation boils down to, as is generally the case, explaining the facts and circumstances leading to, given the law in the matter, returning a lesser income on account of (say) claim of expenditure, or income, or deductions there-from, etc. We find no explanation in the penalty proceedings. We observe none in the assessment proceedings as well. We say so as the same, if any, could validly be relied upon in the absence of any further explanation in the penalty proceedings. Even as it is doubtful if it is available in law as an explanation, the assessee having got his accounts for the preceding years audited, cannot claim ignorance of the legal requirement as to audit, as well as the import thereof,also clarified by the fact of his returning income, in preference to his accounts, at a flat rate of 5% of the turnover. Further, even as he charges the Revenue - which is only following the mandate of la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulars of income, becomes largely irrelevant in the given facts and circumstances of the case where, as aforenoted, the income assessed is per the statutory mandate. There is no charge of unreported turnover, and the addition in assessment is by applying the prescribed profit rate on the reported turnover. All these facts are undisputed and within the knowledge of the assessee. How, one may ask, would it matter as to whether the said under-reported income is on account of concealment or furnishing inaccurate particulars of income? That, in any case - a pure matter of fact, is something which only the assessee, in the intimate know of his affairs, could tell; there being even otherwise no examination of his accounts by the AO, who merely adopted the statutory profit rate. Why, again, one may ask, being rather only another manner of stating the same thing, could it not possibly be that the under-reported income, i.e., w.r.t. that statutorily presumed, is on account of both, i.e., concealment and furnishing inaccurate particulars of income, and which could in fact obtain in any given case, pointing to the fundamental flaw in the argument advanced, predicated on the presumption that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of particulars of income or their inaccurate furnishing; the two representing acts of commission and omission respectively, inasmuch as the two are treated by law at par and, further, lead to the same default being deemed by law, i.e., of concealment of particulars of income? Why, in many a case the two may overlap or the difference a thin line, often blurred, as observed in A.M. Shah v. CIT [1999] 238 ITR 415 (Guj), to though no legal effect inasmuch as Explanation 1 to s. 271(1)(c), as is trite law, clarified by the Apex Court, as in Dilip Shroff v. Jt. CIT [2007] 291 ITR 519 (SC), is applicable to both limbs of the provision. Again, even as observed by the Bench during hearing, penalty u/s. 271(1)(c) may be initiated on more than one adjustment to the returned income in assessment, i.e., include instances of both concealment and furnishing inaccurate particulars of income - a common incidence. What default, then, one may ask, is the AO to specify in the s. 274 notice? Does the law contemplate issue of multiple notices, one for each default qua which the penalty proceedings are being initiated, and for which the assessee's explanation is therefore being sought to determine if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me returned at 5% (of the turnover) is not as per the accounts, but at a flat rate. The assessee is thus aware of both, i.e., the statutory obligation for audit, as indeed the profit rate that would otherwise hold. In other words, it is equally permissible in law for the assessing authority to hold it to be a case of concealment of particulars of income or furnishing inaccurate particulars thereof, as indeed expressed by the Hon'ble Court in Sivagaminatha Moopanar& Sons v. CIT [1964] 52 ITR 591 (Mad), so that nothing turns on the non-identification of the specific charge, much less in the show cause notice u/s. 274. The said notice, as afore-stated, is not a jurisdictional notice, but only a device to provide an opportunity of hearing in the matter to the assessee, and being a non-statutory notice, it would suffice where all it mentions is that in the facts and circumstances of the case, being already recorded in the course of assessment or other proceedings, why penalty u/s. 271(1)(c) be not levied in respect of the adjustments to the returned income in the assessment; the same, as afore-noted, only following recording his satisfaction by the assessing or any other authority impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osing the correct state of affairs, or otherwise explaining it's conduct, i.e., w.r.t. it's return of income, gets thus validated. As a corollary, is it, one may ask, open in law for the assessee to state that though he has concealed particulars of his income, he is not liable to penalty u/s. 271(1)(c) as he has not furnished inaccurate particulars thereof, or vice versa? If that is not available as an argument in law, what grievance, one wonders, can be projected on its basis? 4.3 We may for the sake of completeness of our order, continue further. The Hon'ble Apex Court in Vankata Narayana & Sons vs. ITO(First Addl.) [1967] 63 ITR 638 (SC)in the context of a jurisdictional notice u/s. 148 (sec. 34 of the 1922 Act), clarified that the specification of an incorrect limb of the provision, is of no moment. The legal position clarified, even in the context of a s. 274 notice, per several decisions by the Hon'ble Courts, none of which were referred to in Manjunatha (supra), is that a defect in notice, assuming so, would not invalidate proceedings, but only make it irregular Vankata Narayana & Sons (supra);T.A. Abdul Khader v. CWT [2008] 296 ITR 20 (Ker); CIT vs. Maharaj Krishna [2000] ..... X X X X Extracts X X X X X X X X Extracts X X X X
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