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TMI Blog2024 (11) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... which may result in imposition of penalty ranging from 100 to 300% of the taxability and therefore the charge must be unequivocal and unambiguous. Where the charges are either of concealment of particulars of income or furnishing of inaccurate particulars thereof, revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both. Following the decision of Manjunath Cotton and Ginning Factory [ 2013 (7) TMI 620 - KARNATAKA HIGH COURT] and the other decisions of different High Courts, the ITAT rightly held that the levy of penalty u/s 271(1)(c) of the Act in the case of the assessee was not valid. Decided in favour of assessee. - HON'BLE MR. JUSTICE YASHWANT VARMA And HON'BLE MR. JUSTICE RAVINDER DUDEJA For the Appellant : Mr. Zoheb Hossain, Sr. SC with Mr. Sanjeev Menon, Jr. SC. For the Respondent : Mr. Ajay Vohra, Sr. Adv with Mr. Rohit Jain, Mr. Aniket D. Agrawal and Mr. Samarth Chaudhari, Advs JUDGMENT RAVINDER DUDEJA, J. 1. These are three appeals by the Revenue against the impugned orders passed by the Income Tax Appellate Tribunal [ ITAT ]. 2. ITA 90/2020 is directed against an order passed by ITAT in ITA No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter recording his satisfaction, notice u/s 274 read with 271(1)(c) was issued, whereby, the assessee was asked to show cause as to why penalty u/s 271 (1) (c) may not be imposed upon it. 11. On 29.11.2017, after considering the reply of the assessee, a penalty order u/s 271(1) (c) was passed and penalty at the rate of 100% of the tax sought to be evaded under Section 271(1) (c) amounting to Rs. 1,54,50,000/- was imposed. 12. Feeling aggrieved, assessee preferred an appeal before Commissioner of Income Tax (Appeal) [ CIT (A) ] against the penalty order. However, the appeal of the assessee was dismissed vide order dated 01.11.2018. 13. Aggrieved by the order of CIT (A), assessee preferred an appeal before the ITAT. The appeal of the assessee was allowed holding that the notice was vague as there was no specific charge for initiation of penalty proceedings which the assessee could explain. The relevant paragraphs of the order are reproduced below:- 7. We have carefully considered the arguments of both the sides and perused the material placed before us. We will first deal with the assessee's contention that the levy of penalty is illegal because in the penalty notices, no specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the conclusion that the advance written off cannot be allowed as expense in the profit loss account. Thus, in the whole body of the order, no satisfaction has been recorded for initiating penalty proceedings. Only at the end of the computation of income, the Assessing Officer has recorded Keeping in view the facts of the case, I am satisfied that it warrants the initiation of penalty proceedings u/s 271(1)(c) of the I.T. Act . Thus, no specific charge is specified either in the assessment order or in the penalty notices. On these facts, the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) would be squarely applicable. The above decision has been followed by ITAT, Delhi Benches in the case of Dr. Sita Bhagi (supra), TA Steels Pvt. Ltd. (supra). Sanraj Engineering Pvt.Ltd. (supra). OSE Infrastructure Ltd. (supra) and Mindmill Software Limited (supra). 10. In view of the above, respectfully following the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory and Others (supra) and the above decisions of ITAT, we hold that the levy of penalty under Section 271(1)(c) of the Act in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) (c) is mandatory whenever an addition of disallowance is made. In assessment proceedings, the only concern is with the assessment of the income, quantification and computation of total income as per the provisions of the Act, whereas, in penalty proceedings, the primary concern is with the conduct of the assessee. Penalty is imposed not because an addition is made but because there is concealment or furnishing of inaccurate particulars by the assessee. It would be apposite here to refer to relevant portion of Section 271 (1)(c), which is reproduced as under:- ―271. Failure to furnish returns, comply with notices, concealment of income, etc.--(1) If the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person Xxxxxxxxxxx (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. 17. While dealing with the difference between the two phrases. In the case of NEW HOLLAND TRACTORS (INDIA) PRIVATE LIMITED v. THE COMMISSIONER OF INCOME TAX, DELHI-V, 2014 SCC OnLine Del 4927, the Predecessor Coordinate Bench of this Court observed as und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty ranging from 100 to 300% of the taxability and therefore the charge must be unequivocal and unambiguous. Where the charges are either of concealment of particulars of income or furnishing of inaccurate particulars thereof, revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both. 20. The decision of the ITAT that in the penalty notice there is no specific charge, on the basis of which penalty was sought to be levied, is covered by the following decisions which includes the decision rendered by the Coordinate Bench of this Court. (i) CIT and Anr. v. M/s. SSA s Emerald Meadows, passed in ITA No. 380/2015, dated 23.11.2015. (ii) Commissioner of Income Tax v. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar.) (iii) PCIT vs. M/s Sahara India Life Insurance Company Ltd., passed in ITA No. 475/2019, dated 02.08.2019. 7.1. To be noted, the Special Leave Petition filed against the Judgment in SSA s Emerald (mentioned above) was dismissed via order dated 05.08.2016. 21. The High Court in the case of Principal Commissioner of Income Tax vs. Sahara India Life Insurance Co. Ltd., (2021) 432 ITR 84 Delhi, followed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aspect of prejudice. As we have already noted, Kaushaiya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, fully knew in detail the exact charge of the Revenue against him . For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard . It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, it has to be established that prejudice is caused to the concerned person by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 interest . 190. Here, section 271(l)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [2006] 287 ITR 91 (SC); (2007) 2 SCC 181, in which the Apex Court has quoted with approval its earlier judgment in State of Orissa v. Dr. Binapani Dei, AIR 1967 SC 1269. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, the principles of natural justice must be followed. In such an event, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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