MRS. MALTI GUPTA,JALANDHAR vs. INCOME TAX OFICER,WARD-III(4), JALANDHAR

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.

P a g e | 2 1,10,521/- without appreciating the explanation giving including relevant case laws.

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

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.

appeal had occasioned because of bonafide reasons, we, therefore, condone

the same.

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.

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/-.

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

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.

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.

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 jurisdiction 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

and is liable to be vacated. In order to fortify his aforesaid contention, the P a g e | 5 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.

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.

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 jurisdiction 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 called upon to explain as to why penalty may not be imposed on her under Sec. 271(1)(c).

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 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.

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 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 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.

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.

Vs. SSA’s Emerald Meadows (73 taxmann.com 241)(Kar) following its P a g e | 9 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).

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.

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.

had been quashed by us for want of jurisdiction on the part of the A.O,

therefore, we refrain from adverting to and adjudicating the merits of the case.

P a g e | 11 आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant