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Income Tax Appellate Tribunal, PANAJI
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D BATTULL
आदेश / ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee is directed against the order passed by the CIT(Appeals), Panaji-1, dated 14.07.2017, which in turn arises from the order passed by the A.O under Sec. 271(1)(c) of the Income-tax Act, 1961 (for short ‘the Act’), dated 23.12.2011 for assessment year 2009-10. Before us the assessee has assailed the impugned order on the following grounds of appeal :
1. The Commissioner of Income Tax (Appeals), Panaji, Goa has erred in confirming the penalty amounting to Rs.13,94,460/- imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961.
2. The penalty under section 271(1)(c) has been confirmed by the Commissioner of Income Tax (Appeals) against the facts and circumstances of the case and submissions made by the appellant in her letter dated 07.02.2017 have not been considered properly. 3. The Commissioner of Income Tax (Appeals) has also not considered the fact that the return of income for the year was filed by the appellant based on the computation worked out by the appellant’s husband and his counsel and the appellant cannot be penalized for the mistake committed by the said husband and his counsel when full particulars of the income were given in the return as per the above computation and nothing was concealed.
Mrs. Suraj Melvin Masacarenhas Vs. ITO 3
Without prejudice to the earlier grounds the penalty proceedings initiated by the assessing officer for the year under section 271(1)(c) were bad in law since the notice issued by him under above section for initiating penalty proceedings was in printed from without specifying grounds of initiation of penalty proceedings i.e. whether the same was issued for concealment of income or for furnishing of inaccurate particulars of income.
5. Any other ground that may be urged at the time of hearing of appeal.”
Briefly stated, the assessee had filed her return of income for the assessment year 2009-10 on 11.03.2011, declaring a total income of Rs.17,76,520/-. Return of income filed by the assessee was processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee was re-opened u/s.147 of the Act and assessment was framed vide order passed u/s 143(3) r.w.s. 147 dated 23.12.2011, determining the total income of the assessee at Rs. 81,70,850/- after, inter alia, making the following additions:
Sr. No. Particulars Amount 1. Income from LTCG Rs.59,18,832/- 2. Undisclosed investment u/s.69 of the Act Rs.4,75,500/-
At the time of culminating assessment proceedings, the Assessing Officer also initiated penalty proceedings u/s 271(1)(c) of Mrs. Suraj Melvin Masacarenhas Vs. ITO 4 the Act, i.e, for ‘concealment of particulars of true income’ and ‘furnishing of inaccurate particulars of income’ by the assessee. A ‘Show cause’ notice (SCN), dated 10.07.2014 was issued to the assessee u/s 274 r.w.s 271(1)(c) of the Act. After culmination of the assessment proceedings the Assessing Officer vide his order passed u/s 271(1)(c) of the Act, dated 27.06.2012 saddled the assessee with a penalty u/s.271(1)(c) of the Act of Rs.13,94,460/-, for the reason that she had concealed particulars of her real income and furnished inaccurate particulars of income.
4. Aggrieved, the assessee assailed the order passed by the Assessing Officer u/s.271(1)(c) of the Act, dated 27.06.2012 before the CIT(Appeals), but without any success.
Assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
As the assessee despite having been put to notice about the hearing of the appeal had failed to put up an appearance before us, therefore, we are constrained to proceed with and dispose off the Mrs. Suraj Melvin Masacarenhas Vs. ITO 5 appeal as per Rule 24 of the Appellate Tribunal Rules, 1963, i.e, after hearing the respondent revenue and perusing the orders of lower authorities. As is discernible from the grounds on the basis of which the assessee had assailed the penalty imposed/sustained u/s.271(1)(c) of the Act by the lower authorities, we find, that the same, inter alia, is being challenged on the ground of invalid assumption of jurisdiction by the Assessing Officer who had imposed the same without pointing out the specific default in the ‘SCN’ for which the penalty proceedings were initiated. As the assessee had assailed before us the very validity of the jurisdiction assumed by the Assessing Officer for imposing the penalty u/s 271(1)(c) of the Act, therefore, we shall first deal with the same.
We have heard the ld. Departmental Representative (“D.R”, for short), and perused the orders of the lower authorities and the material available on record. Admittedly, on a perusal of the ‘SCN’, dated 10.07.2014, it stands revealed that the Assessing Officer had in the ‘SCN’, dated 10.07.2014 failed to strike-off the irrelevant default while calling upon the assessee to explain as to why penalty u/s 271(1)(c) of the Act may not be imposed on her.
Mrs. Suraj Melvin Masacarenhas Vs. ITO 6
After having given a thoughtful consideration to the facts of the case, we are persuaded to subscribe to the claim of the assessee that the A.O had in the aforesaid ‘SCN’, dated 10.07.2014 failed to point out the default for which penalty was sought to be imposed on her. 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 independent and exclusive fields, therefore, it was obligatory on the part of the A.O to have clearly put the assessee to notice as regards the default for which she was called upon to explain as to why penalty under Sec. 271(1)(c) may not be imposed on her. As observed by us hereinabove, a perusal of the ‘Show cause’ notice issued in the present case by the A.O under Sec. 274 r.w. Sec. 271(1)(c), dated 10.07.2014 clearly reveals that there was no application of mind on the part of the A.O while issuing the same. We are of a strong conviction that the very purpose of affording a reasonable opportunity of being heard to the assessee as per the mandate of Sec. 274(1) would not only be frustrated but would be rendered as redundant if an assessee
Mrs. Suraj Melvin Masacarenhas Vs. ITO 7 is not conveyed in clear terms the specific default for which penalty under the said statutory provision was sought to be imposed. In our considered view, the indispensable requirement on the part of the A.O to put the assessee to notice as regards the specific charge contemplated under the aforesaid statutory provision, viz. ‘concealment of income’ or ‘furnishing of inaccurate particulars of income’ is not merely an idle formality but is a statutory obligation cast upon him, which we find had not been discharged in the present case as per the mandate of law.
We would now test the validity of the aforesaid ‘Show Cause’ notice 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 power 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’. 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 Mrs. Suraj Melvin Masacarenhas Vs. ITO 8 exact charge for which he is being called upon to explain that as to why the same may not be imposed. 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 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 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 different connotation. The Hon’ble Apex Court being of the view that the non-striking off the irrelevant limb in the notice clearly reveals a non-application of mind by the A.O, 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 Mrs. Suraj Melvin Masacarenhas Vs. ITO 9 fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he has furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing reliance on the order of assessment laid emphasis that he had dealt with both the situations.
The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice [See Malabar Industrial Co. Ltd. Vs. CIT (2000) 2 SCC 718].
We are of the considered view that now when as per the settled position of law the two defaults viz. ‘concealment of income’ and ‘furnishing of inaccurate particulars of income’ are separate and distinct defaults, therefore, in case the A.O sought to have proceeded against the assessee for either of the said defaults, then, it was incumbent on his part to have clearly specified his said intention in the ‘Show cause’ notice, which we find he had failed to do in the case before us. The aforesaid failure on the part of the assessee cannot be dubbed as merely a technical default, for the reason that the same had clearly divested the assessee of her statutory right of an opportunity of being heard and defend her case.
Mrs. Suraj Melvin Masacarenhas Vs. ITO 10
We find that the Hon’ble High 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 had been 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’ (‘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).
We find that as averred by the Ld. A.R. the indispensable obligation on the part of the A.O to clearly put the assessee to notice
Mrs. Suraj Melvin Masacarenhas Vs. ITO 11 of the charge under the aforesaid statutory provision, viz. Sec. 271(1)(c) had been deliberated upon by a coordinate bench of the Tribunal, i.e. ITAT “C” Bench, Mumbai in the case of M/s Orbit Enterprises Vs. ITO-15(2)(2), Mumbai (ITA No. 1596 & 1597/Mum/2014, dated 01.09.2017). The Tribunal in the aforementioned case had in the backdrop of various judicial pronouncements concluded, that the failure to specify the charge in the ‘Show cause’ notice clearly reflects the non-application of mind by the A.O, and would render the order passed under Sec. 271(1)(c) in the backdrop of the said serious infirmity as invalid and void ab initio.
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 penalty under Sec. 271(1)(c) was sought to be imposed on her, i.e, by failing to strike-off the irrelevant default in the ‘SCN’, dated 10.07.2014, had left her guessing of the default for which she was being proceeded against for. We, thus, in the backdrop of our aforesaid observations are of a strong conviction that as the A.O
Mrs. Suraj Melvin Masacarenhas Vs. ITO 12 had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default for which she was being proceeded against, therefore, the penalty under Sec. 271(1)(c) of Rs.13,94,460/- imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. We, thus, for the aforesaid reasons not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. The penalty of Rs.13,94,460/- imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations.
As the penalty imposed on the assessee under Sec. 271(1)(c) of the Act has been quashed by us for want of jurisdiction on the part of the A.O, therefore, we refrain from adverting to the grounds raised by the assessee qua the merits of the case.
Mrs. Suraj Melvin Masacarenhas Vs. ITO 13
The appeal of the assessee is allowed in terms of our aforesaid observations.
Order pronounced in Open Court on 31st day of March, 2022.
Sd/- Sd/- JAMLAPPA D BATTULL RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 31st March, 2022 *SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2.