On Apr 30, 2019 INDORE TRIBUNAL held that Without mentioning the limbs i.e., of “concealment of particulars of income” or “furnishing inaccurate particulars of income” for which penalty proceedings have been initiated u/s 271(1)(c), notice issued by AO u/s 274 r.w.s. 271(1)(c) is not valid.
SHASHI YADAV vs. INCOME TAX OFFICER
INDORE TRIBUNA L (2019) 55 CCH 0491 IndoreTrib
KUL BHARAT, JM & MANISH BORAD, AM.
ITA No. 446/Ind/2017 Apr 30, 2019
Legislation Referred to Section 271(1)(c)
Case pertains to Asst. Year 2012-13
AO has merely mentioned the section but the specific charge i.e., whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Though AO has made proper satisfaction in the body of the assessment order but in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act, he failed to mention the limbs for which penalty proceedings have been initiated. It is the negligence of the A.O in not making proper specific charge in the notice u/s 274 about the addition for which penalty proceedings have been initiated. A.O should be clear as to whether the alleged addition goes under the limb of “concealment of particulars of income” or “furnishing inaccurate particulars of income”. (Para 9)
Varad Mehta, ITA No.693/Ind/16, followed.
Cases Referred to
PCIT Vs Kulwant Singh Bhatia ITA No.9 of 2018 dated 9.5.2018
Dilip N Shraf 161 Taxmann 218
Counsel appeared:
B.J. Boricha, Sr. DR for the Revenue.: Sudhir Padliya ,CA for the Assessee
MANISH BORAD, AM.
- This appeal is filed at the instance of the assessee pertaining to Assessment Year 2012-13 and is directed against the order of Ld. Commissioner of Income Tax(Appeals)-II (in short ‘CIT(A)’), Indore dated 02.03.2017 which is arising out of the order u/s 271(1)(c) of the Income Tax Act 1961(In short the ‘Act’) dated 29.04.2015 framed by ITO-5(3), Indore.
- The assessee has raised following grounds of appeal;
01)That the appellant assessee filed appeal on 14.06.2017 raising the following ground
“That learned Commissioner of Income Tax (Appeals) erred in confirming the penalty imposed by the Ld. A.O. u/s 271(1)(c) of the Income Tax Act, 1961 for a sum of Rs. 1250000/- on account of additions made for treating the transactions of current in nature as loan to the assessee by M/s SSP Enterprises P Ltd and consequently treated the same as deemed dividend u/s 2(22)(e) of the Act without
2)That later on it came to the knowledge that one important issue related with point of Law remain to be raised before the Honourable Bench, which other-wise affect the decision in connection with imposition of penalty by the Ld. A.O. Therefore, the appellant wishes to raise the following additional ground in the interest of Justice, as the objection in connection with the crucial, point of law remained to be considered earlier. As such the appellant pray your honors that considering the same as important point of Law and which does not require any further investigation of facts and in order provide proper justice to the appellant the same may kindly be permitted to raise now as an additional ground as per the provisions of Section249 of the Act. It Is before your honour that for adjudication in the interest of justice.
03) ADDITIONAL GROUND
“That the Ld, A.O. has neither recorded his satisfaction whether the assessee has concealed her income or furnished the inaccurate particulars of her income in the assessment order nor in the Show Cause Notice served upon the appellant u/s 274 of the Act. Which ultimately decides the jurisdiction of the Ld. A.O. to levy the penalty”
It is submitted with great respect that the important legal issue which was not raised by the appellant at the time of filing the appeal may now be permitted to raise the same. It is therefore prayed that the above additional ground of appeal may very kindly be admitted for adjudication.
- Brief facts of the case as culled out from the records are that the assessee is an individual filed her return of income on 27.09.2012 for Assessment Year 2012-13 declaring income of Rs.8,93,500/-. The assessee has taken loan/advance of Rs.36,56,741/- from his company M/s. SSP Enterprises Pvt. Ltd and the Ld.A.O treated this loan amount as dividend u/s 2(22)(e ) of the Act and added to total income of the assessee and assessment completed u/s 143(3) of the Act by assessing total income at Rs.8,93,500/- (loss of Rs.6,24,742/-). Penalty proceedings u/s 271(1)(c) at Rs.12,50,000/- was initiated. Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to succeed.
- Aggrieved assessee is now in appeal before the Tribunal challenging the legality of the penalty proceedings as well as raising grounds on merits challenging the penalty levied u/s 271(1)(c) of the Act at Rs. 12,50,000/-.
- Ld. Counsel for the assessee submitted that as per provisions of Section 271(1)(c) of the Act the penalty can be initiated either for concealing the particulars of income or for furnishing inaccurate particulars of income, whereas the Ld.A.O has not recorded any charge on the assessee, as to whether penalty is to be levied for ‘furnishing inaccurate particulars of income or concealing the particulars of income’. Placing reliance on the judgment of Hon’ble Jurisdictional High Court in the case of PCIT Vs Kulwant Singh Bhatia ITA No.9 of 2018 dated 9.5.2018, the Ld. Counsel for the assessee contended that the Ld.A.O has failed in comply the provisions of section 271(1)(c) of the Act by initiating the penalty proceedings with no specific charge. Reliance was also placed on Indore Tribunal decision in the case of Varad Mehta ITA No.693/Ind/16 dated 06.12.2018.
- Per contra Departmental Representative vehemently argued supporting the orders of lower authorities.
- We have heard rival contentions and perused the records placed before us. The issues raised by the assessee revolves around the levy of penalty at Rs.12,50,000/- levied by the Ld. A.O and confirmed by Ld.CIT(A).
- Now the assessee is in appeal before the Tribunal, firstly raising the legal issue pleading that Ld. A.O has wrongly initiated the penalty proceedings by not specifying the charge for levy of penalty i.e. whether the penalty proceedings has been initiated for concealing particulars of income or for furnishing the inaccurate particulars of income. It was also pleaded by the Ld. Counsel for the assessee that though the Ld. Assessing Officer has made proper satisfaction on record in the assessment order for initiating penalty proceedings but in the notice issue u/s 274 r.w.s. 271(1)(c) of the Act, but Ld. A.O remained silent by not specifying as for which charge the penalty proceedings have been initiated. To examine this fact we have gone through the impugned notice issued on 01.04.2015 for initiating the penalty proceedings u/s 271(1)(c) of the Act for Assessment Year 2012-13. For reference we reproduce below the notice u/s 274 of the Act for Assessment Year 2012-13;
NOTICE UNDER SECTION 274 READ WITH SECTION 271(1)(c) OF INCOME TAX ACT, 1961
PAN ABGPY9514N/2715
OFFICE OF THE
INCOME TAX OFFICER-5(3),IDNROE
Dated 01/04/2015
To
Smt. Shashi Yadav,
403, Rukmani Plaza,
14, Old Palasia, Indore
Whereas in the course of proceedings before me for the assessment year 2012-13 it appears to me that you:
**Have without reasonable cause failed to furnish me return of income with you were required to furnish by a notice given under section 22(1)/22(2)/34 of the India Income Tax Act, 1922 which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148 of the Income Tax Act, 1961, No…………. dated ……….. or have without reasonable cause failed to furnish it within the allowed and the manner required by the side section 139(1) or by such notice.
** Have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the India Income tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act, 1961.
**Have concealed the particulars of your income or furnished inaccurate particulars of such income.
You are hereby requested to appear before me on 10/4/2015 at 11.30 AM/P.M and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the Income Tax Act 1961 if you do not wish to avail yourself of this opportunity of being heard in person of through authorized representative you may show cause in writing on or before the side date which will be considered before any such order is made under section 271(1)(c).
Sd/-
(DINESH SHRIVASTAVA))
Income Tax Officer-5(3), Indore
- From perusal of the above show cause notices we find that the Ld.A.O has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined.
- We find that similar issue came up for adjudication before us in the case of Varad Mehta ITA No.693/Ind/16 dated 06.12.2018 (supra)wherein we have decided the issue in favour of the assessee, relying on the judgment in case of Kulwant Singh Bhatia (supra) observing as follows;
“11. We have heard rival contentions and perused the records placed before us. The issues raised by the assessee revolves around the levy of penalty at Rs.16,00,000/- levied by the Ld. A.O and confirmed by Ld.CIT(A) on the addition of Rs.51,00,000/- from undisclosed sources for purchase of immovable properties. Perusal of records shows that the assessee remaining negligent and non compliant to various opportunities provided by the Ld. A.O as well as Ld.CIT(A) during the course of penalty proceedings as well as appellate proceedings towards the levy of penalty.
- Now the assessee is in appeal before the Tribunal, firstly raising the legal issue pleading that Ld. A.O has wrongly initiated the penalty proceedings by not specifying the charge for levy of penalty i.e. whether the penalty proceedings has been initiated for concealing of particulars of income or for furnishing the inaccurate particulars of income. It was also pleaded by the Ld. Counsel for the assessee that though the Ld. Assessing Officer has made proper satisfaction on record in the assessment order for initiating penalty proceedings but in the notice issue u/s 274 r.w.s. 271(1)(c) of the Act, but Ld. A.O remained silent by not specifying as to which charge the penalty proceedings have been initiated. To examine this fact we have gone through the impugned notice issued for initiating the penalty proceedings u/s 271(1)(c) of the Act which is placed at Page-52 of the Paper book and the relevant extract is reproduced below:
To
Shri Varad Mehta
239, Sunny Palace M P Nagar Zone-1,
Bhopal Sir / Madam,
Sub:- Penalty proceeding u/s .. 271(1)(c) ..
of the Income Tax Act 1961 for the AY 2008.09
In connection with the penalty proceedings u/s, 271(1)(c) for the assessment year(s) 2008-09 you are requested to attend my office on 18.01. 2010 at 11.00 AM to show cause why penalty should not be imposed. However if you do not wish to be heard in person in this regard, you may submit your written submissions so as to reach me by the above date which will be considered before disposal of the matter.
Sd/-
(Shrlkant Namdeo )
Deputy GommissfsonerOf1ncome Tax-1(1), Bhopal Bhopal
- From perusal of the above show cause notice we find that the Ld.A.O has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined.
- We find that similar issue came up before the jurisdictional High Court in the case of Shri Kulwant Singh Bhatia (supra) wherein the Hon’ble Court discussed the judgment of Hon’ble High Court in the case of CIT V/s Manjunatha Cotton Ginning Factory (supra)and CIT V/s SSA’s Emeralad Meadows (supra)held that “on due consideration of the arguments of the Ld. counsel for the appellant, so also considering the fact that the ground mentioned in show cause notice would not specify the requirement of law, as notice was not specific, we are of the view that Ld. Tribunal has rightly allowed the appeal of the assessee and set aside the order of penalty enforced by the authority”.
- Similarly in the case of CIT V/s Manjunatha Ginning Factory, Hon’ble High Court of Karnataka held that “the notice issued u/s 274 r.w.s. 271(1)(c) of the Act should specifically mention the ground in section 271(1)(c) whether concealment of income or for furnishing in accurate particulars of income. Sending printed form where all ground of section 271(1)(c ) would not mentioned the specific requirement of law. Assessee should know the grounds on which he has charged specific otherwise opportunities of natural justice denied. On the basis of such proceedings no penalty could be imposed to the assessee. Taking up the penalty proceedings on one limb and finding the assesssee in another limb is bad in law”.Though in the instant appeal the Ld. A.O has made proper satisfaction in the body of the assessment order but in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act he failed to mention the limbs for which penalty proceedings have been initiated. It is the negligence of the Ld. A.O in not making proper specific charge in the notice u/s 274 about the addition for which penalty proceedings have been initiated. Ld. A.O should be clear as to whether the alleged addition goes under the limb of “concealment of particulars of income” or “furnishing inaccurate particulars of income”. Merely issuing notice in general proforma will negate the very purpose of natural justice as held by the Hon’ble Apex Court in the case of Dilip N Shraf 161 Taxmann 218 that “the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice.
- We therefore respectfully following above referred judgments and in the given facts and circumstances of the case are of the considered view that the alleged notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 31.12.10 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. We accordingly direct to delete the penalty of Rs.16,00,000/- imposed u/s 271(1)(c) on this ground itself. We accordingly allow the additional ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. Since the penalty u/s 271(1)(c) also has been dealt on the preliminary points other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and the appeal of the assessee for the Assessment Year 2008-09 is allowed”.
- We therefore respectfully following above referred judgments and in the given facts and circumstances of the case are of the considered view that the alleged notice issued u/s 271(1)(c) of the Act dated 29.04.2015 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. We accordingly direct to delete the penalty of Rs.12,50,000/- for Assessment Years 2012-13 imposed u/s 271(1)(c) on this ground itself. We accordingly allow the additional legal ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act.
- Since the issue of penalty u/s 271(1)(c) has been dealt but us on the preliminary points, other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and thus the appeal of the assessee for the Assessment Year 2012-13 is allowed.
- In the result appeal of the assessee is allowed.
The order pronounced in the open Court on 30.04.2019.