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Income Tax Appellate Tribunal, Camp Bench at Jalandhar
Before: Shri N.K. Saini & Shri Ravish Sood
PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order
passed by the CIT(A)-2, Jalandhar, dated 08.08.2017 which in turn arises
from the order passed by the Assessing Officer u/s 271(1)(c) of the Income
Tax Act, 1961 (for short 'I.T. Act'),dated 29.3.2017 for Assessment Year
2008-09. The assessee assailing the order of the CIT(A) has raised before us
the following grounds of appeal:
“1. That the Ld. CIT(A) has erred in sustaining on order leving penalty for concealment which was bad in law.
That the Ld. CIT(A) has erred in confirming the levy of penalty u/s 271 (1) (c) for concealment at Rs.
P a g e | 2 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
1,10,521/- without appreciating the explanation giving including relevant case laws.
We find that the appeal filed by the Assessing Officer involves a delay
of 24 days. The assessee has filed an application seeking condonation of delay involved in filing of the present appeal. It is stated by the assessee that the order of the CIT(A)-2, Jalandhar, dated 08.08.2017 which was received
by her on 21.09.2017 was delivered to her chartered accountants viz. M/s
V.P Vijh & Company, Jalandhar in the last week of September, 2017. The ld.
A.R explaining the delay involved in filing of the appeal submitted that Sh.
V.P Vijh (Partner of M/s V.P Vijh & Company) was taken unwell since
2017 and had thereafter due to medical complications expired on 03.10.2017. The Ld. A.R submitted that the other partner of M/s V.P Vijh &
Company viz. Sh. Sandeep Vijh (son of Sh. V.P Vijh) due to untimely demise
of his father could not attend to his office and lost track of the pending tax
matters/litigation. It was submitted by the ld. A.R that as the delay in filing
of the present appeal had occasioned due to the aforesaid unfortunate
circumstances and not for any lapses or laches on the part of the assessee,
thus the delay of 24 days involved in filing of the appeal may be condoned.
In support of the aforesaid facts the assessee has placed on record the ‘death certificate’ of Late Sh. V.P Vijh. Apart therefrom, an ‘affidavit’ of Shri
Sandeep Vijh, Partner of M/s V.P. Vijh, wherein the latter had duly
confirmed the aforesaid factual position had also been filed.
We have given a thoughtful consideration to the reasons leading to the delay of 24 days in filing of the present appeal by the assessee before us. In P a g e | 3 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
our considered view, as the delay of 24 days involved in filing of the present
appeal had occasioned because of bonafide reasons, we, therefore, condone
the same.
Briefly stated, the facts of the case are that the assessee had filed her
return of income for A.Y 2008-09 on 27.6.2008, declaring total income of Rs.
79,31,290/-. The return of income was initially processed u/s 143(1) of the I.T. Act. Subsequently, the case was selected for scrutiny assessment u/s 143(2) of the I.T Act.
The Assessing Officer while framing the assessment made the following additions/disallowances to the income of the assessee.
Sr. No. Particulars Amount ( in Rs.) 1 Addition towards 15,159 interest in respect of bank account with capital local area bank 2 Addition towards 3,10,000 unexplained cash credits 3 Disallowance of 3,00,000 commission expenses
On the basis of the aforesaid additions/disallowances the Assessing Officer
assessed the income at Rs. 85,56,450/-.
Aggrieved, the assessee carried the matter in appeal before the Ld.
CIT(A), who vide his order dated 04.08.2014 though deleted the addition of Rs. 3 lacs on account of commission expenses, but confirmed the remaining
two additions of Rs. 15,159/- and Rs. 3,10,000/-, respectively.
P a g e | 4 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
The Assessing Officer after receiving the order of the CIT(A) called
upon the assessee to show cause as to why penalty u/s 271 (1)(c) of the I.T
Act may not be imposed on her. In reply, the assessee tried to impress upon the Assessing Officer that no penalty u/s 271 (1) (c) of the Act was called of in her hands. However, the Assessing Officer, not being persuaded to accept
the explanation tendered by the assessee imposed a penalty of Rs.
1,10,521/- for furnishing of inaccurate particulars of income.
Aggrieved, the assessee carried the matter in appeal before the Ld.
CIT(A). The CIT(A) after deliberating at length on the contentions advanced
by the assessee though deleted the penalty imposed by the Assessing Officer
in respect of addition of Rs. 15,159/-, but confirmed the same in respect of the addition of Rs. 3,10,000/- made towards unexplained cash deposits in the bank account of the assessee.
The assessee being aggrieved with the order of the CIT(A) to the extent
he had upheld the penalty imposed by the Assessing Officer u/s 271(1)(c) of the I.T Act, has carried the matter in appeal before us. The ld. Authorized
Representative (for short ‘A.R’) for the assessee at the very outset of hearing
of the appeal assailed the validity of juri iction assumed by the Assessing
Officer for imposing penalty u/s 271(1)(c) of the I.T Act. The Ld. A.R
submitted that as the Assessing Officer had failed to strike off the irrelevant
default in the “Show Cause” Notice (herein referred to as ‘SCN’), dated
2010 issued u/s 274 r.w.s 271, therefore, the penalty which was thereafter imposed by him u/s 271(1)(c) of the I.T. Act cannot be sustained
and is liable to be vacated. In order to fortify his aforesaid contention, the P a g e | 5 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
Ld. A.R drew our attention to the ‘SCN’, dated 31.1.2010 (Page 4) of the assesses ‘Paper book’ (herein referred to as ‘APB’). It was the contention of the Ld. A.R that as the Assessing Officer had failed to put the assessee to notice as regards the nature of default for which penalty u/s 271(1)(c) was sought to be imposed on her, therefore, the penalty imposed without
affording of a reasonable opportunity of hearing to the assessee could not be sustained and was liable to be vacated.
Per contra, the Ld. Departmental Representative (for short 'D.R') relied
upon the orders of the lower authorities. It was submitted by the Ld. D.R
that as the assessee was afforded sufficient opportunity in the course of penalty proceedings, and the latter had furnished her reply, thus, it was incorrect on her part to claim that no opportunity of being heard was afforded to her in the course of the penalty proceedings.
We have heard the authorized representatives for both the parties,
perused the orders of the lower authorities and the material available on record. Admittedly, on a perusal of the ‘SCN’, dated 31.12.2010, it stands
revealed that the Assessing Officer had failed to strike off the irrelevant
default while calling upon the assessee to explain as to why the penalty u/s 271 (1) (c) of the Act may not be imposed on her. Insofar, the validity of the juri iction assumed by the A.O is concerned, the same has been assailed
before us on the ground that as the irrelevant default in the ‘Show cause’
notice, dated 31.12.2010 was not struck off by the A.O, therefore, the assessee was not put to notice as regards the default for which she was P a g e | 6 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
called upon to explain as to why penalty may not be imposed on her under Sec. 271(1)(c).
We have given a thoughtful consideration to the facts of the case and are persuaded to subscribe to the claim of the ld. A.R that the A.O had in the aforesaid ‘SCN’, dated 31.12.2010 failed to point out the default for which penalty was sought to be imposed by him on the assessee. 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 31.12.2010 clearly reveals that there has been 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 redundant, if the assessee 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 P a g e | 7 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
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 juri iction emerging therefrom in the backdrop of the judicial
pronouncements on the issue under consideration. Admittedly, the A.O is vested with the powers 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 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 the same seriously 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 its judgments passed 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’
P a g e | 8 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
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 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 however we
find he had failed to do in the case before us. The aforesaid failure on the part of the assessee cannot be characterised as merely a technical default,
as the same has clearly divested the assessee of her statutory right of an opportunity of being heard and defend her case.
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 P a g e | 9 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
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’, the same has to be held as bad in law. The ‘Special Leave
Petition’ (for short ‘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 therefrom, 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 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 resultantly 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 P a g e | 10 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
default for which penalty under Sec. 271(1)(c) was sought to be imposed on her by failing to strike off the irrelevant default in the ‘SCN’, dated
2010, had left the assessee 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 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.1,10,521/- imposed by him 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.1,10,521/-
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
had been quashed by us for want of juri iction on the part of the A.O,
therefore, we refrain from adverting to and adjudicating the merits of the case.
The appeal of the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 17.01.2019. (N.K. Saini) Judicial Member Place: Jalandhar; Date .01.2019 rkk
P a g e | 11 ITA No.757/Asr./2017 Mrs. Malti Gupta, Jalandhar
आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant
""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT
"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण DR, ITAT, Camp Bench at Jalandhar. 6. गाड" फाईल / Guard file. स"या"पत ""त //// आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.