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TMI Blog2025 (4) TMI 127X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the limbs i.e., concealment of income and furnishing of inaccurate particulars of income; penalty levied u/s.271(1)(c) dt.27- 6-18 is invalid and would be liable to be deleted. 2. On the facts and circumstances of the case And in law, ld CIT(A) has erred in sustaining penalty levied u/s.271(1)(c) of Rs. 2,80,000 that it is 'concealment of income' and 'furnishing of inaccurate particulars of income'; while exemption claimed u/s. 10(38) on LTCG on sale of shares does not come within the meaning of 'concealment of income' and also of `furnishing of inaccurate particulars of income' which is pre-requisite/ sine qua non for imposing penalty u/s.271(1)(c); in absence of this pre-condition, no penalty u/s.271(1)(c) could be initiated/levied; penalty levied is unjustified and is liable to be deleted. 3. On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining penalty levied u/s.271(1)(c) dt.27-6-18 of Rs. 2,80,000; when assessment order passed u/s143(3) dt. 13-12-17 by ITO-3(3), Raipur is invalid for want of jurisdiction; an invalid order u/s143(3) 'dt.13-12-17, cannot be made basis for imposing penalty u/s271(1)(c);pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause" notices (SCN)/letter to the assessee under Sec. 274 r.w.s 271(1)(c) of the Act, dated 14.12.2017 and dated 29.05.2018. It was the claim of the ld. A.R that as the Assessing Officer had failed to point out the specific default in both the "Show Cause" notices/letter (herein referred to as 'SCN's) issued u/s. 274 r.w.s 271 of the Act, dated 14.12.2017 (supra) and dated 29.05.2018 (supra) for which the assessee was called upon to put forth an explanation that as to why he may not be saddled with penalty u/s. 271(1)(c) of the Act, therefore, the order thereafter passed by him u/s 271(1)(c) of the Act cannot be sustained and is liable to be vacated. The ld. AR in order to drive home his aforesaid claim had drawn our attention to both of the aforesaid SCN's, i.e dated 14.12.2017 and 29.05.2018. Referring to the aforesaid discrepancy in the SCN's, dated 14.12.2017 and 29.05.2018, it was submitted by the ld. AR that as the AO had failed to validly put the assessee to notice as regards the specific default for which the impugned penalty under Sec. 274 r.w.s 271(1)(c) was sought to be imposed on him, therefore, the assessee had remained divested of an opportunity to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mposed on him. As the A.O in the aforesaid SCN's had mentioned both the defaults, i.e. "concealment of income" or "furnishing of inaccurate particulars of income" w.r.t. the aforesaid addition of Rs. 8,94,500/- (supra), therefore, by using "OR" as a conjunction between both the aforesaid default he had not only failed to validly convey to the assessee in clear terms the specific defaults for which the penalty was sought to be imposed in his case, but had in fact kept the latter guessing about the default for which penalty was sought to be imposed in his case. 11. Insofar the validity of the jurisdiction assumed by the A.O for imposing penalty u/s 271(1)(c) is concerned, we find that the same has been assailed before us on the ground that as the A.O had in the aforesaid "Show cause" notice(s), dated 14.12.2017 (supra) and 29.05.2018 (supra) failed to point out the specific default for which penalty u/s.271(1)(c) was sought to be imposed, 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. 12. We have given a thoughtful considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m, which we find had not been discharged in the present case as per the mandate of law. 13. We would now test the validity of the aforesaid "Show Cause" notice(s) dated 14.12.2017 and 29.05.2018, and the jurisdiction emerging therefrom in the backdrop of the judicial pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers to levy penalty under Sec. 271(1)(c) of the Act if in the course of the proceedings he is satisfied that the assessee had either 'concealed his income' or 'furnished inaccurate particulars of his income' or had committed both the defaults w.r.t. the various additions/disallowances made in his hands while framing the assessment. In our considered view as penalty proceedings are in the nature of quasi criminal proceedings, therefore, the assessee as a matter of a statutory right is supposed to know the exact charge for which he is being called upon to explain that as to why the same may not be imposed on him. The non-specifying of the charge in the 'Show cause' notice not only reflects the non-application of mind by the A.O, but in fact defeats the very purpose of giving a reasonable opportunity of bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of Karnataka in the case of CIT Vs. SSA's Emerald Meadows (73 taxmann.com 241)(Kar) following its earlier order in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar), had held that where the notice issued by the A.O under Sec. 274 r.w Sec. 271(1)(c) does not specify the limb of Sec. 271(1)(c) for which the penalty proceedings were initiated, i.e. whether for 'concealment of particulars of income' or 'furnishing of inaccurate particulars', then, the same has to be held as bad in law. The 'Special Leave Petition' (for short 'SLP') filed by the revenue against the aforesaid order of the Hon'ble High Court of Karnataka had been dismissed by the Hon'ble Supreme Court in CIT Vs. SSA's Emerald Meadows (2016) 73 taxmann.com 248 (SC). Apart from that, we find that a similar view had been taken by the Hon'ble High Court of Bombay in the case of CIT Vs. Samson Perinchery (ITA No. 1154 of 2014; Dt. 05.01.2017)(Bom). The Hon'ble High Court relying on the judgment of the Hon'ble High Court of Karnataka in the case of Manjunathja Cotton and Ginning Factory (supra), which in turn had relied on the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Soya furnishing of inaccurate particulars of income or both, with clarity. 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 clarity the nature of satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck off the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 32) is perused, it is apparent that the inapplicable portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order is quite consistent with the law laid down in the case of Samson Perinchery and New Era Soya Mine (supra) and therefore, warrants no interference." The Special Leave Petition (SLP) filed by the revenue against the aforesaid order had therea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llow from them. The first perspective also might be called static since it accepts the parties' positions as given and fixed; the second perspective is dynamic since it assumes their behaviour may change in response to what others do, including judges. (for a detailed discussion, see Ward Farnsworth's Legal Analyst: A Toolkit for Thinking about the Law)[ 72]. 175. Kaushalya has adopted an ex-post approach to the issue resolution; Goa Dourado Promotions, an ex-ante approach. Kaushalya saves one single case from further litigation. It asks the assessee to look back and gather answers from whatever source he may find, say, the assessment order. On the other hand, Goa Dourado Promotions saves every other case from litigation. It compels the Revenue to be clear and certain. To be more specific, we may note that if we adopt Kaushalya's approach to the issue, it requires the assessee to look for the precise charge in the penalty proceedings not only from the statutory note but from every other source of information, such as the assessment proceedings. That said, first, penalty proceedings may originate from the assessment proceedings, but they are independent; they do not de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is a tick mark in the printed notice the Revenue is used to serving on the assessees. 179. Besides, the prima facie opinion in the assessment order need not always translate into actual penalty proceedings. These proceedings, in fact, commence with the statutory notice under section 271(1)(c) read with section 274. Again, whether this prima facie opinion is sufficient to inform the assessee about the precise charge for the penalty is a matter of inference and, thus, a matter of litigation and adjudication. The solution, again, is a tick mark; it avoids litigation arising out of uncertainty. 180. One course of action before us is curing a defect in the notice by referring to the assessment order, which may or may not contain reasons for the penalty proceedings. The other course of action is the prevention of defect in the notice-and that prevention takes just a tick mark. Prudence demands prevention is better than cure. 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(l)(c), does a mere defect in the notice-not striking off the irrelevant matter-vitiate the penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be done". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. Question No.3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187. In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. Conclusion: We have, thus, answered the reference as required by us; so we direct the Registry to place these two Tax Appeals before the Division Bench concerned for further adjudication." Also, the Hon'ble High Court of Bombay in the case of Pr. CIT (Central) Bengaluru Vs. Goa Coastal Resorts and Recreation Pvt. Ltd. (2020) 113 taxmann.com 574 (Bombay), had observed that where there was no recording of satisfaction by the AO in relation to any concealment of income or furnishing of inaccurate particulars by assessee in the notice issued for initiation of such proceedings, then, the Tribunal had in absence of said statutory requirement rightly vacated the penalty proceedings. Also, the Hon'ble High Court of Bombay in the case of PCIT, Panaji Vs. Goa Dourdo Promotions (P) Ltd. (2021) 433 ITR 268 (Bombay) relying upon its earlier orders in the case of, viz.(i). Goa Coastal Resorts & Recreation P. Ltd. (supra); (ii). Samson Perinchery (supra); and (iii). New Era Sova Mine (supra), had observed that recording of satisfaction by AO in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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