M/S CHEMPROJECT CONSULTIG PVT. LTD.,,NEW DELHI vs. ITO, NEW DELHI

Brief facts of the case are that the assessee is a company engaged in the business of providing consultancy services in the field of pulp and paper, Market and the Resources Survey, Forest and Environment Studies and also Engineering and Consultancy Services in different field other than pulp and paper. For the assessment year 2012-13, it had filed its

Aggrieved by such penalty, assessee preferred appeal before the Ld. CIT(A) and contended that no penalty was warranted as the assessee made a claim under a bona fide belief and all the relevant facts were disclosed in ITR and financial statements of the assessee company. CIT(A), however, did not accept such an explanation on the ground that the income tax returns of large corporate assessees are invariably filed with the active professional assistance and advice of tax experts and had the return of income filed by the assessee not taken for scrutiny, the ineligible claim would have escaped the assessment. On this premise, Ld. CIT(A) dismissed the appeal of the assessee. Assessee is, therefore, before us in this appeal.

Ld. AR submitted that in this matter, there is neither concealment of income nor furnishing of inaccurate particulars thereof inasmuch as all the material particulars necessary for assessment were furnished along with ITR and it was only under the bona fide mistake and due to inadvertence, the provision for doubtful debts and the interest paid on

Per contra, placing reliance on the decision of the Hon’ble Madras High Court in the case of Sundaram Finance Ltd vs. CIT (2018) 403 ITR 407 (Madras), Ld. DR submitted that the assessee understood the purport of the notice and without raising any objection whatsoever they have participated in the penalty proceedings as well as the proceedings before the Ld. CIT(A) and, therefore, no prejudice was caused to the case of the assessee. He therefore, prayed to dismiss the appeal.

We have gone through the record in the light of the submissions made on either side. It could be seen from the assessment order that the learned Assessing Officer proposed the proceedings under section 271(1)(c) of the Act for concealing the particulars of income and furnishing of inaccurate particulars thereof. When it came to the notice issued under section 274 read with section 271 of the Act, such a notice does not specify whether it is for concealment of income or for furnishing of inaccurate particulars thereof, against which the assessee had to

In the case of CIT vs Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar),vide paragraph 60, the Hon’ble Karnataka High Court has held as follows :- “60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition

In Commissioner of Income Tax v. SSA’s Emerald Meadows (2016) 73 taxman.com 241 (Kar) the Hon’ble Karnataka High Court Considered the question of law as to,-

And the Hon’be High Court answered the same in favour of the assessee observing that:

The Special Leave Petition filed by the Revenue challenging the aforesaid judgement of the High Court was dismissed by the Hon’ble Supreme Court holding:

In PCIT vs. Sahara India Life Insurance Company Limited case ITA No 475/2019 and batch order dated 02/08/2019, Hon’ble Delhi High Court, upheld the view taken by the Tribunal basing on the decision of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) and SSA’s Emerald Meadows (supra) wherein it was held that the notice issued by the learned Assessing Officer would be bad in law if it did not specify under which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars thereof. Relevant observations of the Hon’ble High Court read that,-

In the result, appeal of the assessee is allowed. Order pronounced in the Open Court on 11th February, 2020.