INDU DEVI TIBAREWAL,CUTTACK vs. ASST.CIT, CENTRAL CIRCLE-1, BHUBANESWAR

It was submitted by the ld. AR that both the assessees had disclosed agricultural income in their respective returns. The AO had disallowed agricultural income and had treated the same as income from other sources. In the assessment order the AO has initiated penalty 2 & 197/CTK/2022 proceedings for concealment of income and for furnishing of inaccurate particulars. It was submitted that in the show cause notice issued u/s.271/274 of the Act, the AO has not struck off inappropriate portion of furnishing of inaccurate particulars or concealment of income. It was also submitted that the word used in the show cause notice was “or”. It was further submitted that the AO proceeded to levy the penalty u/s.271(1)(c) of the Act for concealment of income. It was the submission that in view of the decision of the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, reported in (2016) 73 taxmann.com 248 (SC), wherein the Hon’ble Supreme Court had upheld the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, reported in [2013] 35 taxmann.com 250 (Karnataka), wherein it has specifically mentioned that the notice u/s.274/271(1)(c) of the Act, must specify the sub-clause mentioned in Section 271(1)(c) of the Act, i.e., whether it is for concealment of income or furnishing of inaccurate particulars of income. Sending printed form wherein all the grounds mentioned in Section 271(1)(c) of the Act are mentioned, would not meet the satisfaction of law. It was the submission that in the circumstances taking up the penalty proceedings on one limb and finding of the AO on another limb is bad in law. It was the submission that this principle has already been followed by the coordinate bench of this Tribunal in the case of M/s Bishandayal Jewelers, in ITA Nos.88&89/CTK/2019, order dated 15.10.2020 and in the case of S.M.Enterprises, in ITA Nos.199/CTK/2020 and other connected appeals, order dated 20.10.2022. It was thus, the prayer of the ld. AR that 3 & 197/CTK/2022 the penalty as levied by the ld.AO and confirmed by the ld. CIT(A) deserves to be deleted.

In reply, ld. Sr. DR drew our attention to the assessment order. It was the submission that the penalty has been levied on account of the fact that the assessee has concealed its income and has furnished inaccurate particulars. It was the submission that the Hon’ble Madras High Court in the case of Sundaram Finance Ltd., reported in [2019] 93 taxmann.com 250 (Madras), in para 16, has held that this issue of striking off the relevant clause would not have any bearing. It was the submission that the above decision of the Hon’ble Madras High Court in the case of Sundaram Finance Ltd. (supra) has been upheld by the Hon’ble Supreme Court by dismissing the SLP filed by the assessee. It was the submission that the penalty as levied by the AO and as confirmed by the ld. CIT(A) is liable to be upheld.

We have considered the rival submissions. A perusal of para 16 of the decision of the Hon’ble Madras High Court in the case of Sundaram Finance Ltd., cited by the ld.Sr. DR, clearly shows that the issue of striking off of the inappropriate limb in the notice u/s.274/271(1)(c) of the Act was a plea that was not taken by the assessee either before the AO or before the First Appellate Authority or before the Tribunal or before the Hon’ble High Court when the Tax Appeals were filed before the respective forums. Therefore, the Hon’ble Madras High Court had taken a view “even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the 4 & 197/CTK/2022 purport and import of notice issued under section 274 read with section 271” of the Act. Thus, it is not the principle of striking out of the relevant clause which has been decided by the Hon’ble Madras High Court. The Hon’ble High Court in the above case has held that no prejudice has been caused to the assessee in the case of non-striking off, insofar as the assessee himself has not challenged the issue before the authorities during the appropriate time. Therefore, the decision of the Hon’ble Madras High Court in the case of Sundaram Finance Ltd. (supra) has no bearing to the facts of the present case. The issue of striking off of appropriate clause in the show cause notice issued u/s.274/271 of the Act has been held to be an absolute necessity by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, reported in [2013] 35 taxmann.com 250 (Karnataka), which has been approved by the Hon’ble Supreme Court in the case of SSA’s Emerald Meadows, reported in [2016] 73 taxmann.com 243 (SC). It is also noticed that this principle had also been applied by the coordinate bench of the Tribunal in the case of Bishandayal Jewelers (supra) and in the case of S.M.Enterprises (supra). This being so, respectfully following the principle laid down by the Hon’ble Supreme Court and the principle of consistency, as it is noticed that in the show cause notice the AO has not struck off the inappropriate clauses, the penalty as levied by the ld. AO u/s.271(1)(c) of the Act and as confirmed by the ld.CIT(A) in the present appeals of both the assessees stand deleted.