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आदेश/Order
PER N.K. SAINI, VICE PRESIDENT
This is an appeal by the Assessee against the order dt. 17/04/2018 of Ld. CIT(A), Ajmer.
Following grounds have been raised in this appeal:
That on the facts and in the circumstances of the case the Id CIT (A) erred in upholding the validity of order of imposition of penalty u/s 271(1)(c) of the Act.
That on the facts and in the circumstances of the case the Id CIT (A) erred in upholding the validity of notice issued u/s 274 of the Act which does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income.
That on the facts and in the circumstances of the case the Id CIT (A) erred in sustaining penalty of Rs. 2,10,000/- under the provision of section 271( 1)(c) of the Act.
That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing. 5. The petitioner prays for justice & relief.
From the above grounds it is gathered that the only grievance of the assessee relates to the sustenance of penalty of Rs. 2,10,000/- levied by the A.O under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’).
Facts of the case in brief are that on the basis of information that the assessee deposited Rs. 24,31,000/- in her HDFC Saving Bank Account and had not filed her return of income under section 139(1) of the Act. The A.O initiated the proceedings under section 147 r.w.s 148 of the Act. In response the assessee filed the return of income on 11/06/2014. The AO asked the assessee to furnish the source of cash deposits of Rs. 24,31,000/-. The assessee submitted that the said transaction related to various persons / business contract and petty contract received during the year. The AO was not satisfied from the submissions of the assessee, however considered the sum of Rs. 2,67,500/- as explained and the remaining amount of Rs. 21,63,500/- was treated as unexplained.
Being aggrieved the assessee carried the matter to the Ld. CIT(A) who held that the sum of Rs. 16,90,000/- was deposited by Shri Pintu Jain, Shri Vipin Pitiliya and Smt. Lad Devi Gurjar, in the bank account of the assessee for the purpose of Business contract for construction of their houses, but the assessee failed to produce any evidence except the Affidavit in support of such receipt. The Ld. CIT(A) estimated the profit @ 8% on the said amount of Rs. 16,90,000/- i.e; Rs. 1,35,200/- and held that the entire amount received from those persons could not be taxed as unexplained deposit in the hands of the assessee and that cash deposit of Rs. 2,09,100/- remained unexplained. The sum of Rs. 72,000/- claimed to be cash deposited by the spouse of the assessee was also not accepted. In this manner the source of cash deposits of Rs. 4,16,300/- (Rs. 1,35,200/- + Rs. 2,09,100/- + Rs. 72,000/-) deposited in the bank account was considered to be concealed income for which the assessee furnished the inaccurate particulars of income.
As regards to the cost of construction it was stated by the assessee in the penalty proceedings that the CA of the assessee wrongly claimed capital loss of Rs. 38,500/- on the vacant plot and that how the construction cost was shown was not clear. It was also stated that the assessee purchased the plot on 30/09/2019 for a consideration of Rs. 1,40,000/- which was sold on 17/12/2009 for a consideration of Rs. 7,25,000/- and the construction work was to be carried out as per the agreement with the purchaser who had taken loan from LIC, HFL, the entire sale consideration was received in advance where as the construction work was incurred in subsequent period, therefore the assessee had claimed construction cost. However, the AO was not satisfied from the explanation of the assessee given in the penalty proceedings and treated the amount of Rs. 5,85,000/- (Rs. 7,25,000/- (-) 1,40,000/-) as concealed income of the assessee and held that the assessee had concealed her income / furnished inaccurate particulars of her income to the tune of Rs. 10,01,300/- (Rs. 4,16,300/- + Rs. 5,85,000/-). Accordingly, the AO levied the penalty of Rs. 2,10,000/- under section 271(1)(c) of the Act.
Being aggrieved the assessee carried the matter to the Ld. CIT(A), and furnished the written submission which has been incorporated by the Ld. CIT(A) in para 4.2 of the impugned order for the cost of repetition the same is not reproduced herein. Ld. CIT(A) however did not find merit in the submission of the assessee and sustained the penalty levied by the AO.
Now the assessee is in appeal.
Ld. Counsel for the Assessee at the very outset stated that no specific charge was framed in the notice issued under section 274 of the Act, dt. 26/03/2015. My attention was drawn towards page no. 8 of the assessee's compilation which is the copy of the penalty notice under section 274 r.w.s 271(1)(c) of the Act. It was submitted that in the absence of specific charge
framed i.e; as to whether there was concealment of income or furnishing of inaccurate particulars of income the penalty levied by the AO and sustained by the Ld. CIT(A) under section 271(1)(c) of the Act was not justified. Reliance was placed on the following case laws:
• Shri Shiv Singh Chouhan Vs ACIT in ITA No. 23/Jodh/2019 dt. 07/05/2019
• Shri Manoj Singhvi V/s DCIT, Central Circle-2 in ITA No. 391/Jodh/2017 dt. 03/05/2019
• Shri Deepak Sheshrao Bakde Vs. ITO in ITA No. 43/Jodh/2019 dt. 03/05/2019
In his rival submissions the Ld. DR strongly supported the orders of the authorities below.
I have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the Assessing Officer in the notice issued under section 274 r.w.s 271(1)(c) of the Act dt. 26/03/2015 (copy of which is placed at page No. 8 of the assessee's compilation) had not specifically mentioned the charge against the assessee.
Similar issue has been adjudicated by this Bench of the Tribunal in case of Shri Deepak Sheshrao Bakde Vs. ITO in ITA No. 43/Jodh/2019 dt. 03/05/2019 wherein the relevant findings have been given in para 6 to 6.3 which read as under:
" 6. Now coming to the merits of the case. In the instant case, the A.O. initiated the penalty proceedings under section 271(1)(c) of the Act for 'furnished inaccurate particulars of income' and thereafter issued the notice u/s 274 without specifying the limb of the penalty impossible and finally imposed penalty for furnished inaccurate particulars of income. Therefore the question emerges as to whether penalty is sustainable, under the facts wherein the notice is not clear and/or issued without specifying the limb of charge. 6.1 Hon'ble Apex Court vide judgment in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below:-
"2. This appeal has been filed raising the following substantial questions of law: (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(l)(c) is had in law and. invalid inspite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same?
(3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income?
The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(l)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. .The Tribunal, while allowing the appeal of the assessee, has relied 01 the derision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.
4.) In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court, the appeal is accordingly dismissed."
6.2. The penalty provisions of section 271(l)(c) of the Act are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well' accepted proposition that the aforesaid two limbs of section 271(l)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to strike - off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be dear as to the limb under which it is being levied. As per Hon’ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon’ble High Court held that the standard proforma of notice under section 274 of the Act without striking off the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon’ble Supreme Court in the case of Dilip N. Shroff vs. JOT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under
section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon’ble Supreme Court, in such a situation, levy of penalty suffers from non- application of mind. 6.3 In the instant case, from the notice dated 22-01-2014 issued u/s 274 of the Act, it is clear that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(l)(c) of the Act without specifying as to whether the assessee has concealed "particulars of income" or assessee has furnished "inaccurate particulars of income", and without striking off the irrelevant words so as to provide adequate opportunity to the assessee to explain the show cause notice, which in our considered view, amounts to non-application of mind because while issuing the notice dated 22-01-2014 u/s 274 of the Act, the A.O. was not clear under which limb, the assessee was supposed to reply and defend its case and under which limb the penalty was supposed to be levied, hence the penalty becomes un- sustainable, therefore we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. CIT (A).
Since facts of the present case are similar to the facts of the case in ITA No. 43/Jodh/2019 in the case of Shri Deepak Sheshrao Bakde, Bhilwara Vs. ITO, W-1, Bhilwara (supra). So respectfully following the aforesaid referred to order dated. 03/05/2019, the penalty levied by the Assessing Officer and sustained by the Ld. CIT(A) is deleted.
In the result, appeal of the Assessee is allowed.
(Order pronounced in the open Court on 28/11/2019)
( N.K. SAINI) VICE PRESIDENT AG Date: 28/11/2019 Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Jodhpur 6. Guard File