FRESENIUS KABI ONCOLOGY LIMITED,WEST DELHI vs. DEPUTY COMMISSIONER OF INCOME-TAX/ NATIONAL FACELESS ASSESSMENT CENTRE, DELHI

The ld. Authorized representative of the assessee submitted that in the assessment proceedings disallowance of Long- Term capital gain, Capital subsidy and addition on Arm’s Length price adjustment were made. The penalty proceedings under section 271(1)(c) of the Act were initiated in respect of the above said additions. The ld. Authorized Representative of the assessee submitted that a perusal of assessment order would show that penalty proceedings were initiated for filing inaccurate particulars of income. However, while levying penalty under section 271 (1) (c) of the Act vide order dated 29-03-2022, the Assessing officer mentioned the charge of section 271(1)(c) of the Act, ‘concealment’ of income. He also submitted that the first notice dated 29-04-2016 would show that the penalty proceedings were initiated for filing of concealed the particulars of income or furnished inaccurate particulars of such income but in the notice dated 06-03-2020 mentioned that assessee have concealed the particulars of income. He further submitted that notice dated 08-03-2022 and 09-03-2022 the reasons were mentioned for furnishing inaccurate particulars of income. He also submitted that the AO did not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated. Reliance has placed on the following decisions:

CIT Vs. Samson Perichery : {2017} 392 ITR 4 (Bom) 2. CIT Vs. Manjunatha Cotton & Ginning Factory : {2013} 359 ITR 565 3. Multivision Infotech (P) Ltd. Vs. ACIT {2017} 88 taxmann.com 874 4. Fairdeal Tradelink Company Vs. ITO (Mum) 5. CIT Vs. Manjunatha Cotton & Ginnin Factory {2013} 359 ITR 565 6. CIT Vs. SSA’s Emerald Meadows {2016} 73 taxmann.com 241 (Kar) 7. Mohd. Farhan A Shaikh Vs. DCIT {2021} 434 ITR 1 (Bom) 8. PCIT Vs. Sahara India Life Insurance Co. Ltd. {2021} 432 ITR 84 (Del) 9. PCIT Vs. Minu Bakshi : ITA 57/2021 10. PCIT Vs. Gragerious Projects (P) Ltd. {2025} 475 TIR 546 (Del) 11. CIT Vs. Reliance Petroproducts (P) LTd. : {2010} 322 ITR 158 (SC) 12. Dilip N Shroff VS. JCIT : {2007} ITR 519 (SC) 13. T Ashok Pai Vs. CIT {2007} 292 ITR 11 (SC)

The Ld. Departmental Representative defended the validity of penalty proceedings.

We have heard the parties and gone through the material available on record. The assessee has challenged the validity of penalty proceedings under section 271(1)(c) of the Act on the legal issue in ground no. 2.

At the time of passing order under section 271(1)(c) of the Act the Assessing Officer observes as under:

A bare perusal of satisfaction recorded for initiating penalty proceedings at the time of passing assessment order and the order levying penalty shows incoherence of charges invoked under section 271(1)(c) of the Act.

At the time of recording satisfaction, the Assessing Officer has initiated penalty for furnishing ‘inaccurate particulars’. However, at the time of levy of penalty, the Assessing Officer mentioned issued the notice mentioning both the charges of section 271(1)(c) of the Act i.e. furnishing ‘inaccurate particulars’ and concealment of income. In the penalty order the Assessing Officer levied the penalty on the concealment of income. The ambiguity in the mind of the Assessing Officer with regard to charging for levy of penalty is apparent from the order dated 29-03-2022 passed under section 271(1)(c) of the Act.

In the case of Commissioner of Income -Tax v. Samson Perinchery {2017} 58 taxmann.com 413 (Bombay) the Hon’ble Bombay High Court has held as under :-

The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT[2007] 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory (supra)] wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.

In the case of the Commissioner of Income Vs. Manjunatha Cotton & Ginning Factory {2013} 35 taxmann.com 250(Karnataka) the Hon’ble Karnataka High Court has held as under :- “Section 271(1)(c), read with section 274, of the Income-tax Act, 1961 Penalty For concealment of income [Agreed additions, effect off-Assessment years 2000-01, 2003-04 and 2004-05-Whether, where assessee had not challenged order of assessment levying tax and interest, that by itself would not be sufficient to impose penalty under section 271(1)(c), unless it was discernible from assessment order that addition was on account of concealment of income Held, yes Whether, only when no explanation was offered by assessee or it was found to be false or not bona fide, penalty could be imposed - Held, yes-Whether, however, where explanation offered was not substantiated by assessee, but it was found to be bona fide and all facts relating to same had been disclosed by assessee, penalty could not be imposed Held, yes Whether, where appellate authority deleted additions made by Assessing Officer as undisclosed investments, but sustained such additions on ground of under valuation of stock, penalty proceedings were required to be initiated by appellate authority and not by Assessing Officer, as subject matter of penalty proceedings was appellate authority's order Held, yes Whether, therefore, in such circumstances penalty proceedings initiated by Assessing Officer, in absence of appellate authority's direction to initiate penalty proceedings under section 271(1)(c), were unsustainable - Held, yes [Para 63] [In favour of assessee].”

In the light of the above discussion of the Hon’ble Bombay and Karnataka High Court in the facts and circumstances of the case we find merit in the legal ground raised by the assessee. The order passed u/s. 271(1)(c) of the Act dated 29.03.2022 suffers legal infirmity and hence, is void. The legal ground raised by the assessee is allowed.

Since we have decided the appeal on legal issue raised by the assessee, the other ground raised by the assessee have become academic and hence, not adjudicated. Hence, the impugned order is set aside.

In the result, the appeal of the assessee is allowed.