SHRI KISHORBHAI DE vs. HIBHAI IYAVA,,KHEDAVS.THE INCOME TAX OFFICER, WARD-2,, NADIAD

The assesse has raised following grounds of appeal:- “1. The notice issued u/s 274 read with Sec. 271 of the Act Dt. 24/02/2014 did not specified any specific limb or clause whether penalty initiated for Concealment of income or for providing inaccurate particulars of income, was thus by issue of invalid and defective notice. The penalty order passed is thus bad in law and hence penalty order passed By A.O and confirmed by CIT(A)-

During the course of penalty proceedings, the show cause notices and letter dated 13-08-2014, 23-03-2015 and 26-06-2016 were issued, however, the assessee had not made any compliance. The assessing officer has stated that the assessee has committed a default within the meaning of section 271(1)(c) of the act and imposed maximum penalty@ 300% of the tax sought to be evaded to the amount of Rs. 8,37,540/- considering being second default of concealment.

Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has provided partial relief and restricted the imposition of penalty @ 200% after taking into consideration that assessee has committed similar default second time.

During the course of appellate proceedings before us, the ld. counsel has placed reliance on the decision on the Hon’ble Karnataka High Court in the case of CIT vs. Manjunath Cotton and Ginning Factory (2013) 35 ITR Taxman.com 250 (Kar) and stated that assessing officer has not deleted the inappropriate words and part of notice therefore it was not clear what was default committed by the assessee. The ld. counsel has also submitted that assessee was a salaried employee, however, he has disclosed the commission income in the revised return of income filed. Therefore, the ld. CIT(A) is not justified in sustaining the penalty levied by the assessing officer. On the other hand, ld. departmental representative has vehemently contended that assessee has not disclosed the commission in the original return of income filed and the assessing officer has obtained the information from Form No. 26A that assessee has not offered any tax on the commission income, therefore, the ld. CIT(A) has correctly sustained the penalty levied by the assessing officer.

We have heard the rival contentions and perused the material on record carefully. The assessee has filed his return of income on 13th Sep, 2011 declaring total income at Rs. 3,77,044/-. The assessing officer was having information as per information in Form No. 26AS that assessee had received commission as well as interest income. Therefore a letter was issued to the assessee on 19th Jan, 2012 to furnish detail of income from other sources earned if any. In response, the assesse has filed a revised return on 30th Dec, 2012 declaring total income at Rs. 9,71,910/-. During assessment, the total income of the assessee was assessed at Rs. 14,62,510/- as the assessee has failed to substantiate the claim of expenses of Rs. 4,85,000/- incurred for earning commission income. Since the assessee has not filed the original return within the period prescribed u/s. 139(1) of the Income Tax Act, therefore, revised return filed after a query letter raised by the assessing officer on 19th Jan, 2012 was considered as belated return of income. During the course of penalty proceedings, the assessee has not made any compliance, since the assessee has committed the same nature of default second time, therefore, the assessing officer has imposed 300% of penalty for not disclosing commission income and interest income in the return of income. As elaborated supra in this order, the assessee has not disclosed the commission and interest income to the amount of Rs. 10,85,472/- in the original return of income, therefore, the same was added to the total income of the assessee. During the course of penalty proceedings, the assessee has not made any compliance before the assessing officer in spite of issuing of numbers of notices and letters as cited above in this order. We have also gone through the penalty order passed u/s. 271(1)(c) of the act and it is noticed that assessing officer has categorically concluded that it is case of furnishing of inaccurate particulars of income which attract the penalty proceedings u/s. 271(1)(c) of the act. After considering the detailed findings of the ld. CIT(A) of the ld. CIT(A) and the decision of Hon’ble Gujarat High Court in the case of Sunita Transport, we do not find any merit in the appeal of the assessee. Finally, while passing the penalty order u/s. 271(1)(c) of the act, the assessing officer has categorically stated that this being second default of concealment of particulars of same type of income therefore he was satisfied to impose maximum penalty @ 300% of the tax sought to be evaded. Regarding contention of the assessee that assessing officer has failed to specify charge whether penalty is being imposed for furnishing inaccurate particulars or concealment of income. We find that this aspect has been considered by the Hon'ble Gujarat High Court in the case of Snita Transport P. Ld. Vs. ACIT 42 taxmann.com 54 (Guj). In this case the Hon'ble High Court has observed that for the purpose of issuing show cause, the Id.AO can use expression "and/or" in between whether explanation of the assessee is being sought for concealment of income or furnishing of inaccurate particulars of income. However, while passing the final order, the AO has to specify his conclusion whether he visited the assessee with penalty for concealment of income or furnishing of inaccurate particulars. The discussion made by the Hon'ble High Court in para-9 in this regard is worth to note. It reads as under: "9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."

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