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TMI Blog2024 (4) TMI 424X X X X Extracts X X X X X X X X Extracts X X X X ..... ing grounds of appeal: "1. In the facts and circumstances of the case and in law, ld. CIT(A) erred in confirming penalty of Rs. 1,04,530/-levied by AO u/s 271(1)(c). The penalty levied by AO and confirmed by CIT(A) is arbitrary, illegal and not justified. 2. In the facts & circumstances of the case, penalty order passed by the AO is illegal and invalid inasmuch as the show cause notice issued by the AO is illegal and not in accordance with provisions of law. Ld. CIT(A) erred in confirming the penalty without appreciating the correct position of law. 3. The appellant reserves the right to amend, modify or add any of the ground/s of appeal." 3. Succinctly stated, a search and seizure action u/s. 132 of the Act was conducted at the residential premises of the assessee on 17.09.2014. Consequent to the search and seizure action, notice u/s. 153A of the Act was issued to the assessee on 22.05.2015. In response, the assessee filed his return of income u/s. 153A of the Act for A.Y.2009-10 on 23.09.2016 declaring his total income at Rs. 6,66,190/-. Assessment in the case of the assessee was framed by the A.O vide his order passed u/ss.153A/143(3) of the Act dated 16.12.2016 accepting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on 05.08.2016 vide (2016) 386 ITR 13 ( SC). (iii) PCIT Vs. Modi Rubber Ltd. (2024) 296 Taxman 381(Delhi). 8. 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 penalty proceedings, thus, it was incorrect on his part to claim that no opportunity of being heard was afforded to his. It was submitted by the ld. D.R that now when the assessee in compliance to the SCN, dated 16.12.2016 r.w SCN, dated 18.05.2017 had submitted that no penalty u/s 271(1)(c) of the Act was called for in his hands, therefore, it was beyond comprehension that as to on what basis he could thereafter claim that he was not validly put to notice about the default for which penalty u/s. 271(1)(c) of the Act was sought to be imposed on him. 9. We have heard 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 his contentions. Admittedly, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point out the specific default for which penalty u/s. 271(1)(c) was sought to be imposed in his case, therefore, the assessee was not validly put to notice as regards the default for which he was called upon to explain that as to why penalty may not be imposed on he under Sec. 271(1)(c) of the I.T Act. 11. We have given a 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 16.12.2016 and 18.05.2017 had failed to point out the specific default 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 which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects the nonapplication of mind by the A.O, but in fact defeats the very purpose of giving a reasonable opportunity of being heard to the assessee as envisaged under Sec. 274(1) of the I.T Act. We find that the fine distinction 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 a different connotation. 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Apex Court in T. Ashok Pai Vs. CIT, 292 ITR 1 (SC) had approved the order of the Tribunal that had deleted the penalty u/s 271(1)(c) imposed by the A.O and had, inter alia, observed, that the failure of the AO to strikeoff the 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 furnishing of inaccurate particulars. It was further observed, that 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 with clarity the nature of the satisfaction recorded. The H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Apex Court in Pr. CIT (Central) Vs. Golden Peace Hotels and Resorts (P) Ltd. (2021) 124 taxmann.com 249 (SC). Also, the "Full bench" of the Hon'ble High Court of Bombay in the case of Mohd. Farhan A. Shaikh V. DCIT, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utcome. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been done". Then, Dilip N. Shroff, 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 furnished 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 orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars by the assessee in notice issued u/s 271(1)(c) is the sine qua non for initiation of such proceedings. Further, we find that the ITAT, Pune in Ashok Sahahakari Sakhar Karkhana Ltd. Vs. 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. 14. We have given a 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 penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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