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TMI Blog2023 (10) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... which he was being proceeded against, therefore, the penalty u/s 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 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., set aside the order of the CIT(A) who had upheld the same. Thus penalty imposed by the A.O u/s 271(1)(c) is quashed - Decided in favour of assessee. - Shri Ravish Sood, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : S/shri Sakshi Gopal Aggarwal Siddharth Parakh, CAs 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 Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 16.06.2023, which in turn arises from the order passed by the A.O under Sec. 271(1)(c) of the Income-tax Act, 1961 (in short the Act ) dated 30.06.2018 for the assessment year 2015-16. The assessee has assailed the impugned order on the following additional ground of appeal: The learned Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledgement of Form no. 35 and copy of Form no. 35 is attached for your verification . 5.1.2 The reply of the appellant has been considered carefully and it is noticed the appellant had filed appeal against the assessment order passed u/s 143(3) of the Further, perusal of the records, it is noticed that the appellate order u/s 250 of the Inc_ Tax Act, 1961 in the appeal filed against order u/s 143(3) dated 22.12.2017 has already been passed on 30.05.2023 in which the appeal of the appellant has been dismissed. On perusal of the appellate order, it is noticed that appeal filed against the base order has been dismissed due to non compliance on the part of the appellant. Even, in this appeal, the appellant has not filed any reply along with evidences in support of his appeal filed. In the absence of any documentary evidences/written submission and also the appeal of the appellant filed against the base order u/s. 143(3) has already been dismissed. I sustain the penalty imposed by the A.O of Rs. 3,96,743/- u/s.271(1)(c) for concealment of income. Accordingly, the appeal of the appellant is not allowed. 6. In result, the appeal is not allowed. 5. The assessee, being aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd the ld. authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home their respective contentions. Admittedly, on a perusal of the SCN dated 29.12.2017, it stands revealed that the Assessing Officer had failed to strike-off the irrelevant default while calling upon the assessee to explain as to why he may not be subjected to penalty u/s 271(1)(c) of the Act. For the sake of clarity, the SCN dated 29.12.2017, Page 15 of APB is culled out as under: It may be observed that the aforesaid SCN dated 29.12.2017 (supra) was thereafter followed by another SCN/reminder letter dated 31.12.2017. However, in the SCN/reminder letter dated 31.12.2017, also the A.O had failed to point out the specific default for which the assessee was being called upon to explain that as to why he may not be saddled with penalty u/s 271(1)(c) of the Act. For the sake of clarity, the SCN dated 31.12.2017 (supra) is culled out as follows: As such the aforesaid failure to point out the specific default for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en thoughtful consideration to the facts of the case and are persuaded to subscribe to the claim of the Ld. AR that the A.O. in both the aforesaid SCN s dated 29.12.2017 31.12.2017 had failed to point out the defaults for which penalty was sought to be imposed on the assessee. In our considered view, as both of the two defaults envisaged in Sec. 271(1)(c), i.e., concealment of income and furnishing of inaccurate particulars of income are separate and distinct defaults that operate in their respective independent and exclusive fields, therefore, it was obligatory for the A.O to have clearly put the assessee to notice as regards the default for which he was being called upon to explain that as to why penalty under Sec. 271(1)(c) may not be imposed on him. As observed by us hereinabove, a perusal of the Show cause notice(s) issued in the present case by the A.O under Sec. 274 r.w. Sec. 271(1)(c), dated 29.12.2017 31.12.2017, clearly reveals that there was no application of mind by the A.O. while issuing the same. We, say so, for the reason that the A.O by using the term OR as a conjunction between both the defaults, i.e., concealed the particulars of your income or furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction between the said two defaults contemplated in Sec. 271(1)(c), viz. concealment of income and furnishing of inaccurate particulars of income had been appreciated at length by the Hon ble Supreme Court in its judgments passed in the case of Dilip Shroff Vs. Jt. CIT (2007) 210 CTR (SC) 228 and T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC). The Hon ble Apex Court, in its aforesaid judgments, had observed that the two expressions, viz. concealment of particulars of income and furnishing of inaccurate particulars of income, have different connotations. The Hon ble Apex Court was of the view that the non-striking off the irrelevant limb in the notice clearly revealed a non-application of mind by the A.O and had observed as under:- 83. It is of some significance that in the standard proforma 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. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he has furnished inaccurate particulars. Even before us, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he irrelevant default in the notice issued under Sec. 274 of the Act, which is in a standard proforma clearly indicates a non-application of mind by the A.O. while issuing the notice. Further, we find that the Hon ble High Court of Bombay, in the case of Pr. CIT (Central), Bengaluru Vs. Golden Peace Hotels Resorts (P) Ltd. (2021) 124 tamnn.com 249 (SC), by drawing support from its earlier order in the case of CIT Vs. Shri Samson Perinchery (2017) 392 ITR 4 (Bom) and PCIT Vs. New Era Sova Mine (2020) 420 ITR 376 (Bom), had observed that AO, while issuing show-cause, should clearly indicate that, as per him, the case of the assessee involves concealment of particulars of income or there is the furnishing of inaccurate particulars. It was further observed that if the notice is issued in printed form, then the necessary portions which are not applicable are required to be struck off so as to indicate with clarity the nature of the satisfaction recorded. The High Court observed that, as in the case before them, the AO had failed to strike off the irrelevant default in the body of the SCN issued under Sec. 274 of the Act, therefore, the penalty imposed by the AO u/s 271(1)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Central Circle-1, Bengaluru (2021) 280 Taxman 334 (Bombay), had observed that where the assessment order clearly records a satisfaction for imposing penalty on one or other or both grounds mentioned in Sec. 271(1)(c), but there is a defect in the SCN, wherein the AO had failed to strike-off the irrelevant default, then, the same would vitiate the penalty proceedings. The Hon ble High Court, while concluding as hereinabove, had held as under: 173. We, however, accept that the Revenue, often, adopts a pernicious practice of sending an omnibus, catch-all, printed notice. It contains both relevant and irrelevant information. It assumes, perhaps unjustifiably, that whoever pays tax is or must be well-versed in the nuances of tax law. So it sends a notice without specifying what the assessee, facing penalty proceedings, must meet. In justification of what it omits to do, it will ask, rather expect, the assessee to look into previous proceedings for justification of its action in the later proceedings, which are, undeniably, independent. It forgets that a stitch in time saves nine. Its one cross or tick mark clears the cloud, enables the assessee to mount an effective defence, and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 because Explanations 1(A) and 1(B), as the deeming provisions, create a legal fiction as to the grounds for penalty proceedings. Indeed, the Apex Court in CIT v. Atul Mohan Bindal [ 73], has explained the scope of section 271(1)(c) thus: [Explanation 1, appended to section 27(1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false, or the explanation offered by him is not substantiated, and he fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, for the purposes of section 271(1)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income. 177. That is, even if the assessment order does not contain a specific finding that the assessee has concealed income or he is deemed to have concealed income because of the existence of facts which are set out in Explanation 1, if a mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee s favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No.2: Has Kaushalya failed to discuss the aspect of 'prejudice'? 184. Indeed, Kaushalya did discuss the asp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show-cause notices. That practice certainly betrays nonapplication of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. ACIT (2018) 99 taxman.com 374 (Pune), had held that where in a notice issued u/s 274 of the Act the AO had used conjunction or to mention both limbs, i.e, concealment of income or furnishing inaccurate particulars of income and charge for levy of penalty was not explicitly clear from notice, then, the same was to be held as bad in law and penalty was liable to be set aside. On a similar footing was the view taken by the ITAT, Mumbai B Bench in ACIT Vs. Bhushan Kamanayan Vora (2018) 99 taxmann.com 373 (Mum). It was observed by the Tribunal that where the AO was not sure about the charge, i.e., whether it was for concealment of income or furnishing of inaccurate particulars of income, the penalty imposed by him u/s 271(1)(c) could not be sustained. 13. We have given thoughtful consideration to the issue before us and, after deliberating on the facts, are of the considered view that the failure on the part of the A.O. to clearly put the assessee to notice as regards the default for which penalty under Sec. 271(1)(c) was sought to be imposed on him by clearly and explicitly pointing out the specific defaults in the SCN(s), 29.12.2017 (supra) 31.12.2017 (supra) for which he ..... X X X X Extracts X X X X X X X X Extracts X X X X
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