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TMI Blog2023 (1) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty for furnishing inaccurate particulars of income in relation to deduction claimed under Section 10B of the Act back to the file of CIT (A) for adjudication on merits. Second Penalty Notice did not make any reference to furnishing of inaccurate particulars of income in relation to the transfer pricing addition - Assessing Officer had only pursued levy of penalty in relation to disallowance of deduction u/s 10B after the order passed by the CIT (A) in quantum appeal and did not put the Assessee to notice in relation to penalty for furnishing inaccurate particulars of income pertaining to the transfer pricing addition - Further, it was also contended by the Ld. Departmental Representative that the penalty has been levied on the basis of Second Penalty Notice. Thus, no penalty can be levied in relation to the transfer pricing addition. Revenue appeal partly allowed. - Shri Amarjit Singh, Accountant Member And Shri Rahul Chaudhary, Judicial Member For the Appellant/Department : Smt. Riddhi Mishra. For the Respondent/Assessee : Shri J.P. Bairgra. ORDER PER RAHUL CHAUDHARY, JUDICIAL MEMBER: 1. By way of the present appeal the Revenue has challenged the order, dated 27.07.2022, pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereto: (a) Transfer pricing adjustment of INR 7,46,225/- in respect of interest charged on loan given to Associated Enterprises. (b) Disallowance of deduction of INR 8,31,70,675/- under Section 10B of the Act (from the deduction of INR 8,83,74,822/- claimed in the return of income) on account of incorrect allocation of expenses to Export Oriented Units (EOUs) and Non-EOUs. (c) Addition of INR 79,50,000/- in respect of unaccounted cash receipts. (d) Addition of INR 6,05,304/- on account of sale of scrap. (e) Addition of INR 48,61,79,000/- pertaining to exception items written off during the relevant previous year. As per paragraph 4.2, 5.7, and 8.2 of the Assessment Order, penalty proceedings under Section 271(1)(c) of the Act were initiated for furnishing inaccurate particular of income in respect of (a), (b) and (e) above. Whereas, penalty proceedings under Section 271(1)(c) of the Act were initiated for concealment of income in respect of (c) and (d) the above as per paragraph 6.3 and 7.5 of the Assessment Order. 4. Notice, dated 31.03.2016, in respect of penalty proceedings was issued under Section 274 read with Section 271(1)(c) of the Act (hereinafter referred to as the Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2002 without specifying the charge brought against the appellants that is, whether it was for concealment of particulars of income or for furnishing of inaccurate particulars of income. I find from the notice issued u/s 274 r.w.s. 271 of the Act that the AO did not strike off one of the two limbs of penalty in the said notice and as such it was an omnibus notice not having the charge specified for which the penalty was initiated. A copy of the notice was forwarded to the Id. AO and he has also not controverted the fact that the notice was issued without striking off the limb which was not applicable. Hence, respectfully following the judgment of Full Bench of the Hon'ble jurisdictional High Court, and other decisions referred to above, am construed to hold that the penalty in this case gets vitiated as the notice issued u/s 274 r.w.s. 271 has to be held as void-ab-initio. I, therefore, overturn the impugned order and direct to delete the penalty. The additional grounds of appeal are accordingly allowed. (Emphasis Supplied) 7. Being aggrieved by the order, dated 27.07.2022, passed by the CIT (A) deleting penalty of INR 2,85,23,354/- under Section 271(1)(c) of the Act, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not been informed whether penalty proceedings were initiated for furnishing inaccurate particulars of income or for concealment of income. He also relied upon the judgment of the Hon ble Karnataka High Court in the case of Commissioner of Income-Tax Vs Manjunatha Cotton Ginning Factory, 359 ITR 565, and also the judgment of the Hon ble Supreme Court in the case of Commissioner of Income-tax Vs. SSA S Emerlad Meadows, 73 taxmann.com 248. The Ld. Authorised Representative for the Appellant submitted that the First Penalty notice was bad in law and the subsequent penalty notices issued by the Assessing Officer were not relevant. In any case the Assessee had raised additional ground before the CIT (A) that the notices were vague and had been issued without application of mind. Thus, depriving the Assessee a reasonable opportunity to defend. The Assessing Officer did not submit any reply/report in relation to the aforesaid additional ground despite a letter dated 18.07.2022, sent by the CIT (A) to the Assessing Officer asking the Assessing Officer to submit the report/reply. Therefore, the submissions advanced by the Ld. Departmental Representative are of no relevance and therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100 per cent. to 300 per cent. of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under section 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice is offended if the show-cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed) 12. The above judgment of Hon ble Karnataka High Court was taken into consideration by the Full Bench of the Hon ble Bombay High Court in the case of Mohd. Farhan A Shaikh (supra) wherein it was held as under: Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does a mere defect in the notice not striking off the irrelevant matter vitiate the penalty proceedings? 181. It does. The primary burden 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n perusal of the above, it can be seen that the Second Penalty Notice clearly puts the Assessee to notice about the charge of furnishing inaccurate particulars of income in respect of deduction claimed under Section 10B of the Act. Thus, the Second Penalty Notice fulfills the requirement of the Assessee being informed about the grounds of penalty proceedings through statutory notice issued under Section 274 of the Act and therefore, meets the test laid down by the Hon ble Bombay High Court as regards levy of penalty in relation to disallowance of deduction under Section 10B of the Act is concerned. 15. We reject the contention advanced on behalf of the Assessee that only the First Penalty Notice is relevant for determining the fate of the penalty proceedings whereas the subsequent penalty notices are irrelevant. The issuance of notice under Section 274 of the Act is not a jurisdictional requirement. The Assessing Officer does not obtain jurisdiction to levy penalty by issuing notice under Section 274 of the Act. As per Section 271(1)(c) of the Act the Assessing Officer acquires jurisdiction to levy penalty if the Assessing Officer, in the course of assessment proceedings, is satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0B of the Act back to the file of CIT (A) for adjudication on merits. 17. While we have held that the Second Penalty Notice was valid notice issued under Section 274 of the Act, we note that the same did not make any reference to furnishing of inaccurate particulars of income in relation to the transfer pricing addition of INR 7,46,225/-. Whereas, in the penalty order, penalty has also been levied in respect of the transfer pricing addition of INR 7,46,225/-. Therefore, it can be taken the Assessing Officer had only pursued levy of penalty in relation to disallowance of deduction under Section 10B of the Act after the order passed by the CIT (A) in quantum appeal and did not put the Assessee to notice in relation to penalty for furnishing inaccurate particulars of income pertaining to the transfer pricing addition of INR 7,46,225/-. Further, it was also contended by the Ld. Departmental Representative that the penalty has been levied on the basis of Second Penalty Notice. Thus, no penalty can be levied in relation to the transfer pricing addition of INR 7,46,225/-. Accordingly, we confirm the order of the CIT (A) of deleting penalty under Section 271(1)(c) of the Act in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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