M/S. HOUSING AND URBAN DEVELOPMENT CORPORATION LTD.(HUDCO),NEW DELHI vs. DCIT, NEW DELHI

PER SUDHANSHU SRIVASTAVA, JM:

These four appeals have been filed by the assessee and pertain to assessment years 1998-99, 1999-2000, 2000-01, 2001-02. All the appeals involve identical issue. They were heard together and they are being disposed of through this common order for the sake of convenience.

2.0 Brief facts of the case are that in the assessment year 1998-99 the return of income was filed at an income of Rs. 457,148,903/- and the assessment was completed at an income of Rs. 940,981,680/- after making certain disallowances. After the assessee’s appeal being dismissed by the Ld. First appellate authority, the assessee approached the Tribunal which, vide order dated 30th April, 2008, upheld the disallowance of Rs. 4,48,069/- on account of reversal of unclaimed interest on debentures and also upheld the disallowance of Rs. 267,700,000/- on account of withdrawal from Special Reserve account u/s 41(4A) of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The assessee’s appeal against the order of the Tribunal is pending adjudication after the Hon’ble Delhi High 2

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT Court havings framed question of law in this regard. However, penalty u/s 271(1)(c) of the Income Tax Act, 1961 amounting to Rs. 93,845,000/- has been imposed for furnishing inaccurate particulars of income. The assessee’s appeal against the imposition of penalty was dismissed by the Ld. Commissioner of Income Tax (Appeals) {CIT (A)} and now the assessee has challenged the same before this Tribunal (ITAT).

2.1 In assessment year 1999-2000, the return of income was filed declaring an income of Rs. 542,280,500/- and the assessment was completed at an income of Rs. 998,003,663/- after making certain disallowances which included disallowance of Rs. 93,230,000/- with respect to liability of stamp duty. The ITAT, vide order dated 30th May, 2008, upheld this disallowance. Penalty of Rs. 32,630,500/- was imposed u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income. The penalty was confirmed by the Ld. CIT (A) and now the assessee is before the Tribunal challenging the confirmation of penalty.

2.2 In assessment year 2000-01, the return of income was filed declaring an income of Rs. 890,354,208/- and the assessment was completed at an income of Rs. 1,341,084,620/- after making certain disallowances which included disallowance 3

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT of Rs. 71,778,000/- on account of provision for stamp duty, disallowance of Rs. 125,458/- on account of claim of depreciation on books and disallowance of Rs. 656,514/- on account of deduction u/s 36(1)(viii) of the Act. The ITAT, vide order dated 7th April, 2009 confirmed these disallowances. Penalty of Rs. 27,935,509/- was imposed u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income which was upheld by the Ld. CIT (A). Now, the assessee is before the ITAT challenging this confirmation of penalty.

2.3 In assessment year 2001-02, the return of income was filed declaring an income of Rs. 1,028,878,108/- and the assessment was completed at an income of Rs. 1,419,989,310/- after making certain disallowances which included disallowance of Rs. 957,812/- on account of expenditure booked under Urban Development Fund, disallowance of Rs. 70,049/- on account of depreciation on books and disallowance of Rs. 12,809,199/- on account of deduction u/s 36(i)(viii) of the Act. The ITAT also upheld the disallowances vide order dated 7th April, 2009. A penalty of Rs. 27,935,589/- was imposed u/s 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income which was confirmed by the Ld. CIT,(A) and now the

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT assessee is before the Tribunal challenging the confirmation of penalty.

3.0 The assessee has challenged the imposition of penalty on merits in its grounds of appeal. Apart from this, the assessee has also filed additional grounds of appeal in all the years under consideration wherein it has been pleaded that in the absence of specific charge being pointed out in the notice issued u/s 274 read with section 271 of the Income Tax Act, 1961 the notice is vague and consequently the levy of penalty u/s 271(1)(c) is arbitrary, unjust and illegal.

4.0 At the outset, the Ld. Authorised Representative (AR) submitted that the additional grounds raised by the assessee essentially raise an issue relating to question of law which goes to the root of the matter and accordingly affects the tax liability of the assessee. It was submitted that it is a question of law which arises from the facts which were already on record and it does not call for any investigation. The Ld. AR placed reliance on the judgment of the Hon’ble Apex Court in the case of NTPC Ltd. vs. CIT (1998) 229 ITR 383 (SC) for the proposition that where the Tribunal is only required to consider a question of law arising from the facts which are on record for the assessment 5

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT proceedings there is no reason that such a question should not be allowed to be raised when it is necessary to consider that question to correctly assess the tax liability of an assessee. The Ld. AR submitted that in view of this judgement of the Hon’ble Apex Court the additional grounds raised by the assessee should be admitted.

5.0 The Ld. CIT (DR) opposed the prayer for admitting additional grounds and submitted that since the assessee did not raise these grounds earlier before the Ld. CIT (A), it could not raise these additional grounds at this juncture.

6.0 Having heard both the parties on the admitting of additional grounds of appeal, we are in agreement with the averment of the Ld. AR that these additional grounds go to the very root of the matter and since they raise an essential question of law without calling for any investigation, the same should be admitted. While reaching this conclusion we are guided by the judgment of the Hon’ble Apex Court in the case of NTPC Ltd. vs. CIT (Supra). Accordingly, we admit the additional grounds of appeal in all the four years under appeal.

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 7.0 The Ld. AR was directed to address the bench on the additional grounds raised in the appeals.

8.0 The Ld. AR submitted that since the issue is identical in all the four years under appeal, assessment year 1998-99 may be taken as the lead case and since the arguments would also be identical the same will not be repeated with a view to conserve time.

9.0 The Ld. CIT (DR) agreed to the proposal of the Ld. AR.

10.0 The Ld. AR submitted that in all the four years under consideration the Assessing Officer (AO) had initiated the penalty proceedings after issuing notice u/s 274 of the Act in the form of a printed pro forma. He drew our attention to page No. 76 of the paper book for the notice pertaining to assessment year 1998-99 and submitted that from a perusal of this printed pro forma it can be seen from the AO has mentioned that the penalty has been initiated for concealment of income or for furnishing inaccurate particulars of income. It was submitted that the AO has not brought out any specific charge for imposing penalty u/s 271((1)(c) of the Act as concealment of income and furnishing of inaccurate particulars of income carrying different meanings. He

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT also drew our attention to the assessment order for Assessment Year 1998-99 placed at page No. 72 of the paper book wherein the proceedings u/s 271(1)(c) have been initiated without any reference to the specific limb under which the same have been initiated. It was submitted that even from the reading of the assessment order the charge was not discernable. It was submitted that subsequently the penalty order was passed for furnishing inaccurate particulars of income. The Ld. AR further submitted that since the AO has not brought out any specific charge for imposing penalty either in the assessment order or under the notice issued u/s 274 of the Act, therefore, in absence of any clear charge being indicated, the penalty could not be imposed. The Ld. AR placed reliance on the judgment of the Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory 359 ITR 565 (Karnataka) and also the order of the Hon’ble Apex Court in the case of CIT vs. SSA’s Emerald Meadows reported in (2016) 242 taxman 180 (SC) wherein SLP by the department on identical issue was dismissed by the Hon’ble Apex Court. Apart from this, the Ld. AR also placed reliance on numerous orders of the ITAT Delhi Bench on identical issue. The Ld. AR submitted that since the notices u/s

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 274 suffered from a basic defect, they could not form the foundation for imposition of penalty.

11.0 In response, the Ld. CIT (DR) vehemently argued that in the present appeals the quantum additions have been confirmed both by the Ld. First Appellate Authority as well as the ITAT and, therefore, the penalty had been rightly imposed. It was also submitted that the assesee’s reliance was on a judgment from the Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory (supra) which was not the jurisdictional High Court for the assessee. The Ld. CIT (DR) sought to distinguish the judgment of the Hon’ble Karnataka High Court and also cited numerous case laws from other benches of the ITAT wherein the judgment of the Hon’ble Karnataka High Court was not followed. The Ld. CIT (DR) also placed reliance on a judgment of the Hon’ble Madras High Court in the case of Sundaram Finance Ltd. vs. CIT (2018) 403 ITR 407 (Madras) wherein the Hon’ble Madras High Court had held that where the notice did not show the nature of default, it was a question of fact and where the assessee had understood the purport of notice, no prejudice was caused to the assessee. It was

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT submitted that on the facts and circumstances of the present appeals, the impugned penalties had been rightly imposed.

12.0 The Ld. CIT (DR) also filed detailed written submissions which were taken on record and are being reproduced hereunder for ready reference:

“In this case, the quantum additions have been consistently confirmed by the CIT(A) and the ITAT. As regards, validity of notice issued under Section 274 due to non-striking off of the irrelevant limb (namely concealment of the particulars of income or furnishing of inaccurate particulars of income) in the said notice, the reliance of the assesseis apparently on the Hon'ble High Court of Karnataka judgment in the case of CIT V. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 TAXMAN 424/35 TAXMANN.COM 250 (KAR.) (PARA 4). 2. The Hon'ble Karnataka High Court (referred to as 'HKHC') in this case has held that if the appropriate limb of Section 271(1)(C) of the act is not struck-out indicating the proposal for penalty in order to invite the explanation from the assessee, the notice becomes invalid. The High Court has held that as Section 271(1)(C) of the act provides for imposing penalty for "concealment of income" or "furnishing inaccurate particulars", the notice should specify that which limb of the above default is invoked. The High Court has further held that even if the penalty is for both the limbs, the same should be indicated in the notice, otherwise the order of penalty is invalid and liable to be set-aside. The above order has been followed in hundreds of cases by the appellate authorities and penalty has been deleted on the above technical defect in the notice issued under Section 271(1)(C) r.w.s 274 of the Act. Considering the above, the entire gamut of the jurisprudence needs to be discussed in the context of the language used in the provisions of Section 271 & 274.

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT The relevant part of the judgment of Manjunatha (supra) in para 59 is reproduced hereunder: "NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation l (B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(I)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee." Further, the Hon'ble Karnataka High Court ("HKHC") had held that the notice under Section 274 read with Section 271(1)(c) of the Act need not explicitly mention the reason for initiation of penalty

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT proceedings, however, if during the course of the assessment proceedings, the tax officer has applied his mind and has recorded his satisfaction that the taxpayer has either concealed particulars of his income or furnished inaccurate particulars of income, non- mentioning of the specific reasons in the notice issued under Section 274 of the Act for initiating the penalty proceedings will not vitiate the penalty levy under Section 271(1)(c) of the Act. In the case before the HKHC, since such reasons were neither mentioned in the penalty initiation notice, nor were clearly discernible from the assessment order where the taxable income was enhanced, the penalty levy was deleted for want of application of mind by the tax officer. Revenue's appeal against this HKHC judgment before the Supreme Court came to be summarily rejected. 3. In this context it is observed that the Hon'ble Supreme Court in the case of Amitabh Bachchan 384 ITR 200, while considering the provisions of Section 263 of the Act, have very recently, held that the issuance of show cause notice under provisions of Section 263 of the Act is not mandatory, as the said Section does not mandate issuing show cause notice. The Hon'ble Supreme Court has held that the Section 263 of the Act only contemplates extending opportunity of hearing to the assessee. For reaching this conclusion, the Hon'ble Apex Court has made a comparison of the language of the provisions of Section 147 with that of Section 263. The relevant part of the judgment is reproduced hereunder: “6. The assessment in question was set aside by the learned CIT by the order dated 20th March 2006 on the principal ground that requisite and due enquiries were not made by the Assessing Officer prior to finalization of the assessment by order dated 30th March, 2004. In this connection, the learned CI T. on consideration of the facts of the case and the record of the proceedings came to the conclusion that in the course of the assessment proceedings despite several opportunities the assessee did not submit the requisite books of account and documents and deliberately dragged the matter leading to one adjournment after the other. Eventually, the Assessing Officer, to avoid the bar of limitation, had no 12

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT option but to "hurriedly" finalize the assessment proceedings which on due and proper scrutiny disclosed that the necessary enquiries were not made. On the said basis the learned C.I T. came to the conclusion that the assessment order in question was erroneous and prejudicial to the interests of the Revenue warranting exercise of power under Section 263 of the Act. Consequently, the assessment for the year 2001-2002 was set aside and a fresh assessment was ordered. At this stage, it must be noticed that in the order dated 20th March 2006 the learned C.I T. arrived at findings and conclusions in respect of issues which were not specifically mentioned in the show cause notice dated 7th November, 2005. In fact, on as many as seven/eight (07/08) issues mentioned in the said show cause notice the learned C.I. T. did not record any finding whereas conclusions adverse to the assessee were recorded on issues not specifically mentioned in the said notice before proceeding to hold that the assessment needs to be set aside. However, three (03) of the issues, details of which are noticed herein below, are common to the show cause notice as well as the revisional order of the learned C.I. T. 7. On appeal, the learned Tribunal took the view that the learned CIT. exercising powers under Section 263 of the Act could not have gone beyond the issues mentioned in the show cause notice dated 7th November, 2005. The learned Tribunal, therefore, thought it proper to take the view that in respect of the issues not mentioned in the show cause notice the findings as recorded in the revisional order dated 20th March 2006 have to be understood to be in breach of the principles of natural justice. The learned Tribunal also specifically considered the three (03) common issues mentioned above and on such consideration arrived at the conclusion that the reasons disclosed by the learned CI T. in the order dated 20th March 2006 for holding the assessment to be liable for cancellation on that basis are not tenable. Accordingly, the learned Tribunal allowed the appeal of the

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT assessee and reversed the order of the suomotu revision dated 20th March 2006. 8. At this stage, it may be appropriate to reproduce hereunder the provisions of Section 263 of the Act to appreciate the arguments advanced and to understand the contours of the suomotu revisional power vested in the learned C/. T. by the aforesaid provision of the Act. "263 - Revision of orders prejudicial to revenue. -(1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation …………………………………………………………." 9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passed by the primary authority. While Section 147 confers power on the Assessing Authority itself to proceed against income escaping assessment, Section 154 of the Act empowers such authority to correct a mistake apparent on the face of the record. The power of appeal and revision is contained in Chapter XX of the Act which includes Section 263 that confer suomotu power of revision in the learned CI. T. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act.In this regard, it must be specifically noticed that against an order of

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under Section 147 and/or to revise the assessment order under Section 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal. 10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre- condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assessment under Section 147of the Act, the power of revision under Section 263 is not contingent on the giving of a notice to show cause. In fact, Section 263 has been understood not to require any specific show cause notice to be served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT render the revisional order legally fragile not on the ground oUack ofiurisdiction but on the ground of violation of principles of natural justice. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal v. CIT [19701 76 ITR496 and in CIT v. Electro House [1971]82 ITR824 (SC). Paragraph 4 of the decision in Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder: "This Section unlike Section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The Section does not speak of any notice. It is unfortunate that the High Court failed to notice the difference in language between Sections 33-B and 34. For the assumption of jurisdiction to proceed under Section 34, the notice as prescribed in that Section is a condition precedent. But no such notice is contemplated by Section 33-B. The jurisdiction of the Commissioner to proceed under Section 33-B is not dependent on the fulfilment of any condition precedent. All that he is required to do before reaching his decision and not before commencing the enquiry, he must give the assessee an opportunity of being heard and make or cause to make such enquiry as he deems necessary. Those requirements have nothing to do with the jurisdiction of the Commissioner. They pertain to the region of natural justice. Breach of the principles of natural justice may affect the legality of the order made but that does not affect the jurisdiction of the Commissioner. At present we are not called upon to consider whether the order made by the Commissioner is vitiated because of the contravention of any of the principles of natural justice. The scope of these appeals is very narrow. All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice and if he was so required what that notice should have cantained? Our answer to that question has already been made clear. /n our judgment no notice was required to be issued by the Commissioner before assuming

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT jurisdiction to proceed under Section 33-B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. C/J, West Bengal ruled that Section 33-B does not in express terms require a notice to be served on the assessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied to a proceeding under Section 33-B." (Page 827-828). {Note: Section 33-B and Section 34 of the Income Tax Act, 1922 corresponds to Section 263 and Section 147 of the Income Tax Act, 1961] 11. It may be that in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the Section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the CIT to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263. Of course, there can be no dispute that while the CIT is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the CI T. prior to the finalization of the decision. 12. In the present case, there is no dispute that in the order dated 20th March, 2006 passed by the learned CI. T. under

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT Section 263 of the Act findings have been recorded on issues that are not specifically mentioned in the show cause notice dated 7th November, 2005 though there are three (03) issues mentioned in the show cause notice dated 7th November, 2005 which had specifically been dealt with in the order dated 20th March, 2006. The learned Tribunal in its order dated 28th August, 2007 put the aforesaid two features of the case into two different compartments. Insofar as the first question i.e. findings contained in the order of the learned CI. T. dated 20th March, 2006 beyond the issues mentioned in the show cause notice is concerned the learned Tribunal taking note of the aforesaid admitted position held as follows: "In the case on hand, the ClT has assumed jurisdiction by issuing show cause notice u/s 263 but while passing the final order he relied on various other grounds for coming to the final conclusion. This itself makes the revision order bad in law and also violative of principles of natural justice and thus not maintainable. If, during the course of revision proceedings the ClT was of the opinion that the order of the AO was erroneous on some other grounds also or on any additional grounds not mentioned in the show cause notice, he ought to have given another show cause notice to the assessee on those grounds and given him a reasonable opportunity of hearing before coming to the conclusion and passing the final revision order. /n the case on hand, the ClT has not done so. Thus, the order u/s 263 is violative of principles of natural justice as far as the reasons, which formed the basis for the revision but were not part of the show cause notice issued u/s 263 are concerned. The order of the ClT passed u/s 263 is therefore liable to be quashed insofar as those grounds are concerned. " 13. The above ground which had led the learned Tribunal to interfere with the order of the learned CIT. seems to be contrary to the settled position in law, as indicated above and the two decisions of this Court in Gita Devi Aggarwal (supra) 18

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT and Electro House (supra). The learned Tribunal in its order dated 28th August 2007 had not recorded any finding that in course of the suomotu revisional proceedings, hearing of which was spread over many days and attended to by the authorized representative of the assessee, opportunity of hearing was not afforded to the assessee and that the assessee was denied an opportunity to contest the facts on the basis of which the learned C/. T. had come to his conclusions as recorded in the order dated 20th March 2006. Despite the absence of any such finding in the order of the learned Tribunal, before holding the same to be legally unsustainable the Court will have to be satisfied that in the course of the revisional proceeding the assessee, actually and really, did not have the opportunity to contest the facts on the basis of which the learned C/. T. had concluded that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The above is the question to which the Court therefore, will have to turn to. 14. To determine the above question we have read and considered the order of the Assessing Officer dated 30th March 2004; as well as the order of the learned CI. T. dated 20th March 2006. From the above consideration, it appears that the learned C.I.T. in the course of the revisional proceedings had scrutinized the record of the proceedings before the Assessing Officer and noted the various dates on which opportunities to produce the books of account and other relevant documents were afforded to the assessee which requirement was not complied with by the assessee. In these circumstances, the revisional authority took the view that the Assessing Officer, after being compelled to adjourn the matter from time to time, had to hurriedly complete the assessment proceedings to avoid the same from becoming time barred. In the course of the revisional exercise relevant facts, documents, and books of account which were overlooked in the assessment proceedings were considered. On such re-scrutiny it was revealed that the original

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT assessment order on several heads was erroneous and had the potential of causing loss of revenue to the State. It is on the aforesaid basis that the necessary satisfaction that the assessment order dated 30th March, 2004 was erroneous and prejudicial to the interests of the revenue was recorded by the learned C.I.T. At each stage of the revisional proceeding the authorized representative of the assessee had appeared and had full opportunity to contest the basis on which the revisional authority was proceeding/had proceeded in the matter. If the revisional authority had come to its conclusions in the matter on the basis of the record of the assessment proceedings which was open for scrutiny by the assessee and available to his authorized representative at all times it is difficult to see as to how the requirement of giving of a reasonable opportunity of being heard as contemplated by Section 263 of the Act had been breached in the present case. The order of the learned Tribunal insofar as the first issue i.e. the revisional order going beyond the show cause notice is concerned, therefore, cannot have our acceptance. The High Court having failed to fully deal with the matter in its cryptic order dated 7th August, 2008, we are of the view that the said orders are not tenable and are liable to be interfered with." 4. Considering the above judgment of the Hon'ble Apex Court, we have to see the import of the provisions of Section 274 where in the legislature has used similar language. In this context it is relevant to see the provisions of the Section 271(1)(c ) rws 274 of the Act together with 263. "271. Failure to furnish returns, comply with notices, concealment of income, etc.- (1) If the Assessing Officer or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person- (a) ( ** ** **

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT (b) Has failed to comply with a notice under sub-Section (1) of Section 142 or sub- Section (2) of Section 143 or fails to comply with a direction issued under sub- Section (2A) of Section 142; or (c) Has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,- (i) ** ** ** (ii) In the cases referred to in clause (b), in addition to any tax payable by him, a sum which shall not be less than one thousand rupees but which may extend to twenty-five thousand rupees for each such failure; (iii) In the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than but which shall not exceed three times the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income: Explanation 1: Where in respect of any facts material to the computation of the total income of any person under this Act,- (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) to be false, or (B) Such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-Section be deemed to represent the income in respect of which particulars have been concealed."

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT Section 274 deals with procedure to be followed before imposing penalty under Chapter XXI. It reads as under: "274. Procedure. (1) No order imposing a penalty under this Chapter shall be made unless the assessee has been heard, or has been given a reasonable opportunity of being heard. (2) No order imposing a penalty under this Chapter shall be made- (a) by the Income- tax Officer, where the penalty exceeds ten thousand rupees; (b) by the Assistant Commissioner, where the penalty exceeds twenty thousand rupees, except with the prior approval of the Deputy Commissioner. (3) An income-tax authority on making an order under this Chapter imposing a penalty, unless he is himself the Assessing Officer, shall forthwith send a copy of such order to the Assessing Officer" . E.-Revision by the Principal Commissioner or Commissioner Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or] Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. The provisions of Section 263 and Section 274 only contemplate providing reasonable opportunity of being heard by using the phrases, " ...after giving the assessee an opportunity of being heard"(263) and " .....unless the assessee has been heard, or has been given a reasonable opportunity of being heard,"(274), respectively. The provisions 22

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT of the Section 263 does not contemplate any issue of notice for the purpose. If Section 271 rws 274 and Section 263 of the Act are read together, even Section 271 (rws Section 274) does not contemplate issuance of show cause notice. Section 271(1) empowers the Assessing Officer or Commissioner (Appeals), or Principal Commissioner or Commissioner to direct the assessee to pay penalty. The Section 274 of the Act provides for the procedure wherein it is mentioned as to; 'the granting of opportunity of hearing before imposing penalty'. Thus, the procedure of issuing a notice, created by the Department by way of a pre-printed format is only a call letter addressed to the assessee, calling for a hearing, so as to give an opportunity of being heard. This is not the entire process of opportunity. This is only a starting point and assessee if chooses to appear personally he (she/it) will be heard and written submissions filed in defence would be accepted before finally passing the orders. In view of the ratio decidendi of the judgment/law laid down by the Hon'ble Supreme Court in the case of Amitabh Bachchan (supra) holding that Section 263 of the Act does not contemplate issue of show cause notice and consequently, the failure to issue show cause notice, does not invalidate the proceedings. As the language of the provisions of Section 271 rws 274 is similar to that of Section 263 of the Act and since the provisions of Section 271 rws 274 of the Act specifically DO NOT contemplate the issue of notice, one can safely conclude that failure to issue a show cause notice does not invalidate the proceedings U/Section 271(l}(c ) of the Act, (let alone any defect in the notice). likewise, the non-striking out of the irrelevant limb of the notice issued u/Section 274 rws 271(l}(c) of the Act, would not invalidate the penalty proceedings, as long as the notice was duly served on the assessee and a sufficient / reasonable opportunity of being heard was provided to him/her. 5. It is observed that several Courts and Tribunals (including the jurisdictional ITAT), have affirmed the view that no notice 23

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT is contemplated under the provisions of Section 271 rws 274 of the Act or that if the Quantum order clearly shows that the reason for initiating the penalty proceedings (ie whether for concealment of income or for the furnishing inaccurate particulars), no prejudice is caused to the assessee. The Case Laws are discussed hereunder: 1. Sundaram Finance Ltd. Vs CIT [2018] 93 taxmann.com 250 (Madras)/[2018] 403 ITR 407(Madras) Herein the Hon'ble Madras High Court held that where notice did not show nature of default, it was a question of fact. The assessee had understood purport and import of notice, and hence, no prejudice was caused to the assessee.This decision was rendered after considering the judgement of Hon'ble Karnataka High Court in ClT v. Manjunatha Cotton & Ginning Factory (supra). Relevant part of the order is reproduced below: "15. Before us, the assessee seeks to contend that the notices issued under Section 274 r/w Section 271 of the Act are vitiated since it did not specifically state the grounds mentioned in Section 271(1)(c) of the Act. 16. We have perused the notices and we find that the relevant columns have been marked, more particularly, when the case against the assesseeis that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee's case, as it is purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that onaccount of a defect in the notice, they were put to prejudice. All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT be a different matter. This was never the plea of the assessee either before the Assessing Officer or before the first Appellate Authority or before the Tribunal or before this Court when the Tax Case Appeals were filed and it was only after 10 years, when the appeals were listed for final hearing, this issue is sought to be raised. Thus on facts, we could safely conclude that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r/w, Section 271 of the Act. Therefore, principles of natural justice cannot be read in abstract and the assessee, being a limited company, having wide network in various financial services, should definitely be precluded from raising such a plea at this belated stage. 17. Thus, for the above reasons, Substantial Questions of law Nos. 1 and 2 are answered against the assessee and in favour of the revenue. The additional substantial question of law, which was framed is rejected on the ground that on facts, the said question does not arise for consideration as well as for the reasons set out by us in the preceding paragraphs. In the result, Tax Case Appeals are dismissed. No costs." 2. ITO v S. Anandlakshmi in ITA No 1948/Mds?2016 & CO No 142/Mds/2016 In this case, the Hon'ble ITAT, Chennai Bench has discussed the issue of validity of show-cause notice issued under Section 274. The Hon'ble Tribunal has discussed the decision of CIT v Manjunath Cotton & Ginning Factory (supra) and the case of CIT v SSA Emerald. The Hon'ble Tribunal has referred to and relied on the following decisions to hold that non- striking off the relevant limbs in the penalty show-cause notice will not make the penalty notice invalid:-

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT a. Tanna financial Services P ltd v ACIT{ITA No 206/Mum/20ll) b. CIT v Mithila Motors P. ltd. 149 ITR 751{Patna) 3. CIT v Mithila Motors P. ltd. 149 ITR 751(Patna) Reference is invited to para 12 and 13 of the above order. In the above case, the Hon'ble Patna HC relied upon the decision of the Hon'ble Supreme Court in the case of Kantamani Venkata Narayana and Sons v First AddllTO [1967] 63 ITR 638 in which it was held that a mistake in the notice does not invalidate the penalty proceedings. 4. CIT Vs Smt. Kaushalva [1994] 75 Taxman 549 (Bombay)/[1995] 216 ITR 660 (Bombay): In this case, the IAC had issued show-cause notice dated 28- 3-1972 under Section 274(2). Assessee had no knowledge of exact charge against him. Not only word 'or' had been used between two groups of charges but there was use of word 'deliberately' also. The lAC imposed penalty of Rs. 13,000 for assessment year 1967-68 and ITO imposed penalty of Rs. 22,000 and Rs.10,000 for assessment years 1968-69 and 1969-70, respectively. Tribunal quashed penalties and held that there was absence of reasonable opportunity of hearing because three show-cause notices were ambiguous and defeated very purpose of giving reasonable opportunity of hearing as contemplated under Section 274 and two orders of ITO were without jurisdiction. It was held by the Hon'ble Mumbai High Court that mere mistake in language used or mere non-striking off of inaccurate portion cannot by itself invalidate notice under Section 274. Penalty orders passed by ITO for assessment years 1968-69 to 1969-70 were perfectly valid and there was no justification for quashing same on ground of absence of jurisdiction.

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 5. Trimurti Engineering Works Vs ITO [2012J 25 taxmann.com 363 (Delhi)![2012J 138 ITO 189 (Delhi)f[2012) 150 TTJ 195 (Delhi): Wherein the Hon'ble ITAT Delhi has held that it was apparent from combined reading of notice and assessment order that impugned notice had been issued in respect of concealment of particulars of income. Relevant part of the order is reproduced below: "5.2 It is also submitted that the notice is vague. We have already seen that in the notice one of the alternatives, i.e., concealment of particulars of income or furnishing of inaccurate particulars of income has not struck off. In the case of Gujarat Credit Corporation Ltd v Asstt ClT [2008] 113 ITD 133 (Ahd.) (SB), relied upon by the Id. Counsel, the AO had initiated penalty proceedings for Page # 3 disallowance of loss as capital loss. This ground was not accepted by the CIT (Appeals) as correct. It was held that in view of the finding of the ClT (Appeals), the foundation on which penalty was initiated has fallen down. Therefore, the penalty on that ground cannot fructify. The CIT (Appeals), however, upheld the disallowance on a totally different ground. In such a situation, the penalty could have been initiated by the ClT (Appeals) but that will not give jurisdiction to the AD to levy the penalty. We have given serious consideration to this issue also. This decision may have some implication on the levy of penalty in respect of first addition regarding the cash shortage. At the same time, it is also true that the assessee must be apprised of the charge in the notice for which he is sought to be penalized. The whole issue has to be decided on the basis of the facts of each case. When we go through the assessment order, it is seen that the AO has examined the cash book in a great detail and various entries therein between 01.07.2004 to 31.3.2005 have been reproduced on page nos. 14 to 27. Similarly, the receipts by way of advances from Trimurti Engineering Works, having implication on the second addition, have been reproduced in the assessment order on page nos. 27 to 29.The finding of the 27

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT AO in respect of the first addition is that cash flow statement filed by the assessee is nothing but an afterthought and a colourable devise to avoid tax. This cash flow statement was sought to be supported by cash flow statement in respect of two partners, Shri N.S. Panwar and Shri V.S. Panwar. These statements were also examined and various defects were noticed. Coming to advances for job work, it is inter-alia mentioned that most of the entries are above Rs. 20,000/-, but in the reconciliation statement the entries have been bifurcated so that each one of them is less than Rs. 20,000/-, which seems to have been done to avoid penalties under Sections 2710 and 271E of the Act. The assessee has not done any job work and no income has been shown although an amount of Rs. 16.25 lakh is stated to have been taken from a single party on a number of occasions. Finally, it has been recorded in respect of both the additions that the amount is treated as income from undisclosed sources. All these observations made by the AO show that it was his case that particulars of income have been concealed. It is not a case where any disallowance has been made but a case where the assessee was found in possession of certain unaccounted money which was utilized in the course of business without paying tax thereon. Therefore, when we see the notice and the contents of assessment order, it is clear that the notice was issued for concealing particulars of income. The notice is not a standalone document. It is based on the assessment order. Without finding regarding one or the other charge, the notice cannot be issued. However, if two are read together, it is clear that the notice has been issued in respect of concealment of particulars of income. In view of these observations, it is held that the notice is not vague." 6. Hybrid Rice International Pvt.Ltd. Vs elT (ITA no. 285/0el/2007): Wherein, the Hon'ble ITAT Delhi held that it was apparent from combined reading of notice and assessment order that impugned notice had been issued in

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT respect of concealment of particulars of income. Relevant part of the order is reproduced below: "6.7. We now deal with the case laws cited by the Ld. Counsel for the Assessee. (i) CIT vs. Manjunatha Cotton and Ginning Factory and others (2013) 359 ITR 565 (Kar.): The Hon'ble Karnataka High Court was considering the case where there was no proof of concealment of income. It was a case where the Hon'ble High Court held that the Explanation given by the assessee was bonafide and merely because the assessee agreed to the addition and the assessment order was passed on the basis of this admission. The relevant part of the judgment in para 59 of the judgment is reproduced hereunder: .... in the absence of any material on record to show concealment of income, no penalty can be levied. The facts of the case on hand are entirely different. Our finding of fact is that the assessee has not voluntarily offered the income to tax. In fact the explanation given is in our opinion not bonafide ... (ii) The Hon'ble Delhi High Court in the case of Ms. Madhushree Gupta vs. UOI and another(2009) reported in 317 ITR 107 has laid down that prima facie satisfaction of the AO that the case may be served imposition of penalty should be discernible from the order passed during the course of the proceedings. In the case on hand the prima facie satisfaction of the AO is discernible from the assessment order. At para 36, page 128 of this order the Hon'ble Court has observed as follows. "A bare reading of Section 271(1)(c) would show that to initiate penalty proceedings following pre-requisites should obtain. (i) The Assessing Officer should be satisfied that:- a)The assessee has either concealed particulars of his 29

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT income; or b) furnished inaccurate particulars of his income; or c) infracted both (a) and (b) above (ii) This satisfaction should be arrived at during the course of any proceedings. These could be assessment, reassessment or rectification proceedings, but not penalty proceedings. (iii) If ingredients contained in (i) and (ii) are present a notice to show cause under Section 274 of the Act shall issue setting out therein the infraction the assessee is said to have committed. The notice under Section 274 of the Act can be issued both during or after the completion of assessment proceedings, however, the satisfaction of the Assessing Officer that there has been an infraction of clause (c) of sub-Section (1) of Section 271 should precede conclusion of the proceedings pending before the Assessing Officer. (iv) The order imposing penalty can be passed only after assessment proceedings are completed. The time frame for passing the order is contained in Section 275 of the Act. To summarize: The Supreme Court held that the satisfaction which the Assessing Officer was required to arrive at during the course of assessment proceedings for initiation of penalty proceedings was prima facie in nature as against a final conclusion that the assessee had committed an act of omission or commission which would bring him within the ambit of the provisions of clause (c) of subSection (1) of Section 271. The notice under Section 274 was to follow. What was important was that satisfaction had to be arrived at during the course of assessment proceedings and not issuance of notice under Section 274 of the Act. (See D.M. Manasvi (1972) 86 ITR557 and S.V. AngidiChettiar (1962) 44 ITR 739. A bare reading of the aforesaid extract from Rampur Engineering (supra) would show that the Full Bench: (i) applied the law, as it ought to, as declared in D.M. Manasvi (supra) and S.V. AngidiChettiar (supra)WP(C) No. 5059- 2008 Page 49 of 64

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT (ii) a fortiori the principle for initiation of penalty proceedings being the prima facie satisfaction of the Assessing Officer during the course of assessment proceedings being discernible from the record, was reiterated. (iii) the irrelevance of - the Assessing Officer having to say so in so many words that I am satisfied' was highlighted. (iv) the judgment of the Division Bench in Ram Commercial was affirmed which enunciated that: Firstly satisfaction should be that of Assessing Officer. Secondly, the assessment order should reflect such satisfaction. In our opinion the impugned provision only provides that an order initiating penalty cannot be declared bad in law only because it states that penalty proceedings are initiated, if otherwise it is discernible from the record, that the Assessing Officer has arrived at prima facie satisfaction for initiation penalty proceedings. The issue is of discernibility of the satisfaction arrived at by the Assessing Officer during the course of proceeding before him. In the result, our conclusion are as follows: (i) Section 271(lB) of the Act is not violative of Article 14 of the Constitution. (ii) The position of law both pre and post amendment is similar, in as much, the Assessing Officer will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings. (iii) Prima facie satisfaction of the Assessing Officer that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. Obviously, the Assessing Officer would arrive at

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT a decision, i.e., a final conclusion only after hearing the assessee. (iv) At the stage of initiation of penalty proceedings the order passed by the Assessing Officer need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for. (v) However, this would not debar an assesseefrom furnishing evidence to rebut the prima facie satisfaction of the Assessing Officer; since penalty proceeding are not a continuation of assessment proceedings. [See Jain Brothers v. Union of India (1970) 77 ITR 107(SC)] (vi) Due compliance would be required to be made in respect of the provisions of Section 274 and 275 of the Act. (vii) the proceedings for initiation of penalty proceeding cannot be set aside only on the ground that the assessment order states penalty proceedings are initiated separately' if otherwise, it conforms to the parameters set out hereinabove are met." 6.8. Applying the propositions laid down to the facts of the case, we are of the considered opinion that the penalty proceedings were rightly initiated in this case and that the penalty was rightly confirmed by the Ld.CIT(A)." 7. Earthmoving Equipment Service Corporation Vs DCIT [2017] 84 taxmann.com S1 {Mumbai Trib.)/[2017] 166 ITD 113 {Mumbai - Trib.)/[2017] 187 TIJ 243 (Mumbai - Trib.): Wherein the Hon'ble ITAT Mumbai held as under: "6. We have heard the rival contentions and perused the relevant material on record including cited case laws. So far as the legal grounds are concerned, a perusal of quantum order reveals that the penalty was initiated for furnishing of inaccurate particulars and finally the same was levied on the same ground. We find that the 32

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT assessee was issued two show cause notices- one in the standard printed form u/s 274 dated 04/03/2013 as placed on Page No.-86 of the paper book and another dated 27/08/2013 by way of letter as placed in Page No. 92 of the paper book. We find that in the first notice, the relevant clause has not been ticked off and the second notice is simply a show cause notice. However, in the quantum order Ld. AO, after due deliberations, clearly initiated the penalty proceedings for furnishing of inaccurate particulars which shows due application of mind qua penalty proceedings. The penalty was finally levied on the same ground as well. Therefore, mere marking of relevant clause, in our opinion, on the facts of the case, has not caused any prejudice to the assessee particularly when the assessee voluntarily offered certain additions in the quantum proceedings with a specific request to AD for not initiating the penalty against the same. The assessee very well knew the charges / grounds for which he was being penalized and he actively contested the penalty before the Ld. AO. At this juncture, we find that the provisions of Section 292B comes to the rescue of the revenue which cures minor defect in the various notices issued provided such notice in substance and effect was in conformity with the intent and purpose of the act. On overall facts and circumstances, we find that such condition was fulfilled in the instant case. We find that the revenue's Special Leave Petition [SLPj dismissed by the Apex court in SSA'S Emerald Meadows (supra) confirmed the decision of Hon'ble High court, which in turn, relied upon the judgment rendered in Manjunatha Cotton & Ginning Factory (supra). The decision rendered by Hon'ble Bombay High court in Samson Perinchery (supra) also placed the reliance on this judgment. After perusing the ratio of the judgment rendered in Manjunatha Cotton & Ginning Factory (supra), we find that the assessee's appeal was allowed by Hon'ble High court after 33

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT considering the multiple factors and not solely on the basis of defect in notice u/s 274. Therefore, we are of the opinion that the penalty could not be deleted merely on the basis of defect pointed by the Ld. AR in the notice and therefore, the legal grounds raised are rejected." 8. Hon'ble Calcutta High Court in the case of Dr.Syamal Baran Mondal Vs. CIT (2011) 244 CTR 631 held that "Section 271 no-where mandates that recording of satisfaction about concealment of assessee's income must be in specific terms and words, satisfaction of AD must reflect from the order either with expressed words recorded by the Assessing Officer himself or by his overt act and action." 9.The Jaipur Bench of Income-tax Appellate Tribunal ("ITAT") in a most recent decision in the case of Airen Metals Pvt. ltd., Jaipur vs Acit, Jaipur on 29 September, 2017 in ITA No. 820/JP/2016 held that the requirements of Section 271(1)(c), as discussed by the Hon'ble Karnataka High Court in the case of ClT &Anr. v. Manjunatha Cotton and Ginning Factory, were complied with in this case. In this case, the assessee submitted that the show cause notice issued u/s 274 r/w 271(1)(c), is not at all clear as to for what precise charge, the appellant was asked to show cause viz. whether the charge is that the assessee has furnished inaccurate particulars of income or it was for concealing particulars of such income in as much as a bare perusal of the said show cause notice clearly reveal that the inappropriate words/unwanted charge have not been struck off. The AO neither scored out not ticked which particular part of alleged offence, he was relying upon. The assessee placed reliance on Hon'ble Karnataka High Court in the case of ClT &Anr. v. Manjunatha Cotton and Ginning Factory. The Hon'ble Tribunal referred to para 59 of decision of the Hon'ble Karnataka High Court in case of Manjunatha Cotton while arriving at its decision, excerpt of which is reproduced as under:

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT "59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation lor in Explanation 1 (B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. "

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT "22. As the Hon'ble High Court held in the above case that the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The grounds for levy of penalty are thus linked to the adherence to the Principle of natural justice and it was held that such Principle of natural justice should not be offended. Now, let's examine how the same is applicable in the facts of the case. In the instant case, the assessee has been issued two show-cause notices. The first show-cause notice dated 28.12.2011 was issued along with the passing of the assessment order dated 28.12.2011 where the assessee - ,was made aware of initiation of the penalty proceedings and thereafter, another show-cause notice was issued on 18.06.2012. Though the first show-cause notice talks about concealing the particulars of income or furnishing inaccurate particulars of income and the latter show-cause notice talks about both concealing the particulars of income and furnishing inaccurate particulars of income, the assessee however chose to ignore both the show-cause notices and neither attended the penalty proceedings nor any written submissions/ explanations were submitted before the Assessing officer. Therefore, it is crystal clear the assessee was made aware of the penalty proceedings having initiated against it and was granted two opportunities by the Assessing officer to present its case offer its explanation. However, the assessee chooses to ignore those show-cause notices and now has come up before us and pleaded that the principle of natural justice has been violated by stating that the show-cause notice is vague. In our view, by not attending to the penalty proceedings before the AD without showing any reasonable cause, the assessee has effectively waived its right to contest at higher appellate forum that his rights to 36

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT plead have been violated. Even before us, no pleadings have been taken to show that there existed a reasonable cause for not attending to the penalty proceedings and offering its explanation before the AD. Further, no such pleading has been taken before the Id CIT(A) as well regarding violation of principle of natural justice. Having recorded the satisfaction in the assessment order, the penalty proceedings have been validly initiated and the issuance of notice u/s 274 is in furtherance of recording of such satisfaction and has thus to be read along with the assessment order and not independent of it. In our view, the assessee has rightly been made aware of the initiation of penalty proceedings and it for reasons best known to it choose to remain silent and failed to offer any explanation during the penalty proceedings. We therefore do not see any infirmity in the initiation of the penalty proceedings and there is clearly no violation of principle of natural justice as canvassed by the Id AR". 10. The Mumbai bench of ITAT in a recent decision in the case of Mahesh M Gandhi vs ACIT [TS-S46S-ITAT-2017(MUMBAI)- O] also dealt with this aspect. The taxpayer had not offered Director's fees and income from short term capital gains to tax in the return of income. During the course of assessment proceedings when these incomes were picked up by the tax officer, the taxpayer admitted earning of the incomes and filed a revised computation of income. Based on this finding, the tax officer mentioned in the assessment order that penalty proceedings under Section 271(1)(c) of the Act will be initiated for furnishing of inaccurate particulars of income. Subsequently the tax officer issued a notice under Section 274 read with Section 271(1)(c) of the Act wherein the reason for penalty was not mentioned. The taxpayer filed an appeal before the CIT(A) which ruled in favour of the revenue. The CIT(A) referred to the decision of the KHC in the case of CITvs Manjunatha Cotton and Ginning Factory (supra), the ClT(A) ruled in favour of the revenue. Aggrieved the taxpayer preferred an appeal before the ITAT. The ITAT after observing

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT the facts of the case held that the tax officer had recorded satisfaction in the assessment order in relation to invoking penalty provisions. The tax officer had applied his mind while detailing the reasons for initiation of penalty proceedings in the assessment order. Accordingly, not mentioning the reasons in the penalty notice cannot invalidate the penalty proceedings. In the following two cases, the Hon'ble ITAT, Bengaluru has also upheld the penalty orders rejecting the plea of the assessee in those cases that reason in penalty notice was not mentioned or that there was violation of principles of natural justice. 11. P.M Abdulla in ITA No 1224 & 1224/Bang/2012 the Hon'ble Bangalore ITAT in their order dated 17/10/2016 has held that if the assessee has replied to the penalty notice to the point and has participated in the proceedings without complaining the violation of the principles of natural justice at any stage before the AO, then it is a sufficient compliance of the requirement of the provisions of Section 274 of the Act. 12. The Bangalore bench of Hon'ble ITAT in a recent decision in the case of Jaysons Infrastructure India Private limited vs ITO [TS-5873-ITAT-2017(BANGALORE)-O} had also an opportunity to examine this aspect. The taxpayer in the instant case filed nil return of income after claiming deduction under Section 80-IA of the Act on certain infrastructure development income. During the course of assessment proceedings and survey it was observed that the taxpayer was not rendering services covered under Section 80-IA of the Act and therefore, the entire claim made was false. This fact was admitted by the Director of the taxpayer company as well. Based on this finding, the tax officer stated in the assessment order that "in view of the facts discussed above ....penalty proceedings under Section 271{l}{c)of the Act are initiated for furnishing inaccurate particulars of income" .... The tax officer consequently issued a notice under Section

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 274 read with Section 271(1)(c) of the Act but the reason for initiation of penalty proceedings was not clear. Based on this the taxpayer did not respond to the penalty notice and tax officer levied a penalty of 100 percent of the tax amount. Aggrieved by the penalty order, the taxpayer challenged the validity of the penalty order before the Commissioner of Income-tax (Appeals) ["CIT(A)"]. After referring to the decision of the HKHCin the case of ClT vs Manjunatha Cotton and Ginning Factory (supra), the CIT(A) ruled in favour of the revenue. The CIT(A) mentioned that the tax officer had recorded the satisfaction in Pages 2 and 3 of the assessment order and initiated penalty proceedings for furnishing inaccurate particulars of income. Accordingly, the penalty proceedings are valid. Aggrieved, the taxpayer filed an appeal before the ITAT. The ITAT after going through the facts of the case observed that the taxpayer had deliberately furnished inaccurate particulars of income and accepted the same during the course of the survey and was a fit case for initiation of penalty proceedings. Also, it held that since the assessment order clearly mentioned the reason for initiation of penalty proceedings, not mentioning the reason in the penalty notice should not cause any prejudice to the taxpayer. 13. R. Vasuki v DCIT ( ITA No 899/Mds/2015) ITAT Chennai In the above case Hon'ble ITAT has considered and discussed the decisions of Manjunath Cotton and SSA Emerald. It has been held by the ITAT that notice u/s 274 is embodiment of principle of natural justice and non-striking off the specific limb will not make the proceedings invalid. 14. ITO v Sh Rajan Kalimuthu ( ITA No 2900/CHNV/2018) ITAT Chennai order dated 22.05.2019

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT In the above case also, the Hon'ble ITAT, Chennai has held that non-striking off the non-applicable limb will not make the penalty show-cause notice invalid. 6. Defect pointed out by the tax payer is curable under Section 292B of the Act. Further, as per the provisions of the Section 292B of the Act, the notices issued under the provisions of the Act are valid under certain circumstances. The provisions of Section 292B is reproduced hereunder: Return of income, Notice etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income,assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. This matter was discussed by the Hon'ble Bangalore Bench of the ITAT in the case of PM Abdulla in ITA 1224 & 1224 Bang/2012 in the context of the judgment of the Hon'ble KHC in the case of Manjunatha Cotton(supra) to conclude that any defects in the notice issued under Section 274 also get cured due to the participation of the tax payer in the proceedings, by way of application of the Section 292BB of the Act. The relevant extract of the decision of the Hon'ble Bangalore ITAT is reproduced hereunder; “9. We heard rival submissions and perused material on record. The only issue involved is whether levy of penalty U/s. 271(1)(c) is valid in law keeping in view the decision of

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT the jurisdictional high Court in the case of Manjunatha Cotton and Ginning factory (supra). The contention of the assessee is that since the AO as not ticked off the relevant column in the show cause notice, it goes to prove that the AO had not reached satisfaction before initiating proceedings u/s. 271(1)(c}. The contention of the learned council for Assessee that the relevant column has not been ticked cannot be accepted as it is found from material placed before us that for both the years, the column relevant to concealment of particulars of income has been ticked by the AO. In any event, it is found that the assessee had offered an explanation for concealment of particulars of income only. The AO, considering the explanation, had levied penalty. The assessee, at no stage of penalty proceedings, has raised this issue. The assessee had participated in the penalty proceedings and at no stage had complained of violation of the principles of natural justices. Thus, no prejudice is caused on account of any commission or commission in the show cause issued. The provisions of Section 292B clearly laid down that: "Return of income, etc., not to be invalid on certain grounds: 292B. No return of income, ossessment, notice, summons or other proceedings, furnished or made issued or taken purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons, or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act." The Hon'ble Judicial High court had neither considered nor brought to the notice of the Hon'ble High court, provisions of Section 292B of the Act. Even assuming that there is a defect in the show cause notice issued, has canvassed by the learned council for assessee that will vitiate the entire

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT penalty proceedings, the judgement was rendered by the Hon'ble High Court of Manjunatha cotton and ginning factory (supra) without considering the provisions of Section 292B. Subsequently, the Hon'ble Jurisdictional High court in the case of CIT vs Sri Durga Enterprises (2014) 44 Taxmann.com 442(kar}, while dealing with the validity of notice u/s 148 r.w.s 292B held that where assessee has taken the notice u/s. 148 as valid and responded to it in letter and spirit and participated in the proceedings and in light of the provisions of Section 292B, notice issued u/s 148 was held to be valid. The relevant paragraph of judgement is extracted below: "9.ln the present case, as observed earlier, the assessee not only responded to the notice under Section 148 of the Act within one month, but on the basis of return filed earlier, participated in the proceedings till the matter reached the FAAand was disposed of. A glance at Section 2928 of the Act, shows that under this provision certain Acts are not to be treated as invalid, may be reason of any mistake, defect or omissions, either in return of income, assessment, notice, summons or other proceedings. In other words, a notice cannot be invalidated by reason of any mistake, such as the one occurred in the present case, namely, the period of filing return of income was not specified as contemplated by Section 148 of the Act. If such a defect is not allowed to be cured, or treated as invalid so as to declare the notice invalid, despite the fact that assessee had taken that notice as valid and responded to it in letter and spirit and participated in proceedings, the very purpose/objective of the provisions content in Section 292B of the Act would stand frustrated/defeated. The intent of legislature is clear from the language employed in this provision which states that a defective notice, such as the one in the present case, cannot be declared invalid by any reason of any mistake, defect or omission, if the notice in 'substance' and in 'effect'is in conformity with or according to the intent of purpose of this Act. The intent or purpose of issuing the notice is to coli upon

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT the assessee to file return, if the assessing officer finds that income as escaped the assessment. This being the intent and purpose of the Provisions contained in Section 148 of the Act, in our opinion, it stands satisfied if the notice is responded within reasonable time, which in the present case was 30 days, irrespective of the fact whether the period was specified or not in the notice for filing return of income. In the present case, if the assessee had not responded to this notice at all and had raised such ground of challenge, perhaps, he would not succeed (SIC). But having responded and participated in the proceedings he cannot be allowed to turn around and raise objection for the first time before the Tribunal seeking invalidation of the proceedings initiated by issuing notice under Section 148 of the Act. In the circumstances, we allow this appeal answering both the substantial questions of law in favour of the revenue and against the assessee. In view of the peculiar facts and circumstances of the case, there shall be no order as to costs. " Thus, having regard to the ration laid down by the Hon'ble Jurisdictional high court in the subsequent decision in the case of Sri. Durga enterprises (supra), we hold that show cause notice issued u/s. 274 r.w.s. 271(1)(c) cannot be held to be invalid. " Respectfully following the above decision one can conclude that any defects in the notice issued under the provisions of Section 274 of the Act also get cured by the application of the provisions of the Section 292B of the Act, if the tax payer responded to it in letter and spirit and understood the purport and purpose of the said notice. This aspect was held categorically by the Hon'ble Karnataka High Court in the case of ClT Vs Sri Durga Enterprises (2014) 44 Taxmann.com 442 (Kar), while dealing with the validity on notice u/s 148 rws 292B of the Act, held that where the assessee received the notice as valid and responded to it in letter and spirit and participated in the proceedings and in the light of the 43

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT provisions of Section 292B, notice issued u/s 148 was held to be valid. This aspect of the provisions of Section 292B was not brought to the notice of the Hon'ble bench of the Karnataka High Court while rendering the judgment in the case of Manjunatha Cotton{Supra), or else the out come would have been different. Considering the facts of the case in the light of the above judgment, it is observed that the appellant has received the notice u/s 274 and by treating the same as valid she responded to the same by filing the reply dated 20-03-2012, while participating in the penalty proceedings without raising any objection to the so-called technical defect in the notices. Hence, by way of application of the provisions of Section 2926, the notice of penalty issued u/Section 274 of the Act is deemed to be valid. In view of the above, the Notice issued under Section 274 is deemed to be valid in the instant case in appeal, as the appellant has submitted her reply to the penalty notice without raising any objection whatsoever on the technical grounds. 7. Further, it is notable that the penalty levy mechanism has undergone a substantive change with effect from Assessment Year 2017-18 and a new Section 270A applies for levying penalty in cases of under-reporting (50% of tax) and misreporting (200% of tax), as spelt out in the Section. Notably, Section 270A(1) also requires the tax officer or the ClT(A) or CIT to give directions for levy of penalty in the principal proceedings, which gives rise to the penalty levy. Therefore, the amendments made in Section 271(lB) of the Act in so far as giving "directions" for penalty also finds place in the new penalty code, viz, Section 270A of the Act. In such a case, the principles of what is a "direction" and the requirements of recording of satisfaction in the principal proceedings necessitating a penalty levy, as spelt out by the KHC, will equally apply. This requirement of "application of

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT mind" is all the more important for levy of penalty under Section 270A for the reason that an addition made to the taxable income in the assessment proceedings will not automatically constitute "underreporting" if the assessee has offered a bonafide explanation and disclosed all material facts in relation to the addition and the tax officer is satisfied with the said explanation and disclosures. 8. Conclusions as to the import of the above analysis in the light of the judicial precedents including the Judgment of the Hon'ble Apex Court in the Amitab Bachchan case: General Conclusions:-  There is no mandate in the provisions of Section 271(1){c ) rws 274 of the Act as to the issue of notice to the appellant in any format and consequently, the non-striking out of the irrelevant limb (namely concealment of the particulars of income or furnishing of inaccurate particulars of income) in the said notice, cannot itself vitiate the initiation of the penalty proceedings. The issue of notice in the pre-printed format is to call the tax payer to avail the opportunity of being heard granted.  It is sufficient if the AO records the satisfaction in the assessment order in relation to invoking penalty provisions and if he had applied his mind while detailing the reasons for initiation of penalty proceedings in the assessment order.  Mere fact that the penalty notice does not mention the reason for initiation of penalty proceedings cannot be a reason for invalidating the penalty proceedings, if the reasons for initiating the penalty are discernible from the assessment order.  The reply of the assessee would speak volumes about the understanding of the assessee and the extent of clarity given in the penalty proceedings initiated, in the mind of the assessee.  The principles of natural justice demand that the assessee should be made aware of the issue and be given a 45

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT reasonable opportunity of being heard before proceeding to levy the penalty. Thus, the extent of opportunity & understanding be evident from the reply furnished by the appellant.  Absence of any further correspondence from the assessee regarding the lack of clarity in the penalty notice and the reasons for initiation of the said penalty, clearly confirms that the appellant and the AO are on the same page. The opportunity of being heard is only mandated in the provisions of Section 274 and which necessitates that proper opportunity has to be given to the appellant, before levying the penalty. This can be understood/deciphered from the combined reading of the above three (Asst Order, notice & the reply filed in response by the tax payer together with the penalty Order). This is also relevant to mention that the appellant has challenged that in the penalty notice the Assessing Officer has to specify whether the proceedings are initiated for concealment of income or for filing of inaccurate particulars of income. The plea of the appellant is that the penalty has been levied in pursuance of a vague notice without specific charge for imposing of penalty u/s 271(1)(c} of the Act whether the assessee has concealed the particulars of income or whether the assessee has furnished inaccurate of particulars of income. For this the appellant has relied upon many decisions All these decisions are based upon the old finding of the Hon'ble Courts that penalty u/s 271(1)(c) of the Income-tax Act, 1961 is a quasi- criminal proceedings which is not held good by the Supreme Court subsequently. The scope of Section 271(1)(c} has also been elaborately discussed by this Court in Union of India v. Dharmendra Textile Processors [2008] 13 SCC369 and CITv. Atul Mohan Binda/[2009] 9 SCC 589. In the case of CIT v. Atul Mohan Bindal 317 ITR 1 Hon'ble Supreme Court has held that "a close look at section 271(1)(c) and the Explanation (1) appended thereto would show that in the course of any proceedings under

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT the Act, inter alia, if the Assessing Officer is satisfied that a person has concealed the particulars of his income or has furnished inaccurate particulars of such income, such person may be directed to pay penalty. The quantum of penalty is prescribed in clause (iii). The Explanation 1 appended to section 271(1) provides that if that person fails to offer an explanation or the explanation offered by such person is found to be false or the explanation offered by him is not substantiated and he fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, for the purposes of section 271(l)(c), the amount added or disallowed in computing the total income is deemed to represent the concealed income. The penalty spoken of in section 271(l)(c) is neither criminal nor quasi-criminal but a civil liability, albeit a strict liability. Such liability being civil in nature, mens rea is not essential. [Para 11] Insofar as the instant case was concerned, the High Court relied upon its decision in Ram Commercial Enterprises Ltd.'s case (supra) which was said to have been approved by the Supreme Court in Dilip N. Shroff's case (supra). However, the decision in Dilip N. Shroff's case (supra) has been held to be not laying down good law in Dharamendra Textile Processors' case (supra). In view of the above, it is prayed that the appeal of the assessee is not maintainable on the above ground and needs to be rejected.”

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT Delhi on the issue of sustainability of penalty u/s 271(1)(c) which had been imposed subsequent to issuance of a notice which did not specify the limb under which the penalty proceedings were being initiated. We also note that both the judgments of the two Hon’ble High Courts i.e. of the Hon’ble Karnataka High Court and the Hon’ble Madras High Court were being applied and followed by the various benches of the ITAT on the facts of the cases before them. However, subsequent to the conclusion of the hearing in these appeals before us, the Hon’ble Delhi High Court in the case of Principal Commissioner of Income Tax vs. Ms/ Sahara India Life Insurance Co. Ltd, vide order dated 02/08/2019 in ITA Nos. 475/2019 & other connected matters, has upheld the order of the ITAT Delhi Bench wherein the penalty imposed u/s 271(1)(c) of the Act was held to be bad in law in absence of specific charge being mentioned in the notice issued u/s 274 of the Act. The ITAT Delhi Bench had, while deleting the penalty, followed the ratio of the judgment of the Hon’ble Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory (supra). While dismissing the Revenue’s appeal against the deletion of the penalty, the Hon’ble Delhi High Court also took note of the fact that the Hon’ble Apex Court had

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT dismissed the Revenue’s SLP on identical issue in SSA’s Emerald Meadows (supra). We have perused the impugned notices of the four years under appeal which have been placed in paper book and are not disputed. A perusal of all the four notices shows that they have been prepared on the printed pro forma and the irrelevant portions have not been struck off. Thus, penalty proceedings have been initiated both for concealment of income as well as for furnishing of inaccurate particulars of income. Similarly, in the all the four assessment orders, penalty proceedings have been initiated u/s 271(1)(c) of the Act but it has been not specified as to under which charge the proceedings have been initiated.

13.1 The Hon’ble High Court of Karnataka in case of CIT vs. Manjunatha Cotton and Ginning Factory (supra) while deciding the identical issue held that when the AO has failed to issue a specific show-cause notice to the assessee as required u/s 274 read with section 271, penalty levied is not sustainable. The operative part of the judgment is reproduced as under:-

“59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1 (B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271 (1)( c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise,

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 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 51

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 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 of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of T Ashok Poi v. CIT [2007] 292 ITR 11 /161 Taxman 340 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of CIT v. Manu Engg. [1980] 122 ITR 306 and the Delhi High 52

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT Court in the case of CIT v. Virgo Marketing (P) Ltd. [2008] 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non application of mind. ” 13.2 The Hon’ble Apex Court in case of CIT vs. SSA’s Emerala Meadows - (2016) 73 taxmann.com 248 (SC) while dismissing the SLP filed by the Revenue quashing the penalty by the Tribunal as well as Hon’ble High Court on ground of unspecified notice has held as under:- “Section 274, read with section 271(1)(c), of the Income-tax Act, 1961 - Penalty - Procedure for imposition of (Conditions precedent) - Tribunal, relying on decision of Division Bench of Karnataka High Court rendered in case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 1TR 565/218 Taxman 423/35 taxmann.com 250, allowed appeal of assessee holding that notice issued by Assessing Officer under section 274 read with section 271 (1 )(c) was bad in law, as it did not specify under which limb of section 53

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 271 (1 )(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income - High Court held that matter was covered by aforesaid decision of Division Bench and, therefore, there was no substantial question of law arising for determination - Whether since there was no merit in SLP filed by revenue, same was liable to be dismissed - Held, yes [Para 2] [In favour].

13.3 Therefore ,respectfully following the judgment of the Hon’ble Karnataka High Court, which has been accepted in principle by the Hon’ble Delhi High Court in the case of Principal CIT vs. Sahara India Life Insurance Co. Ltd (supra), it is our considered view that since the AO has failed to specify in the notice issued u/s 274 of the Act as to whether the assessee has concealed particulars of income or has furnished inaccurate particulars of income, in absence of specific charge both in the penalty notices as well as the assessment orders, the penalty levied by the AO and confirmed by the Ld. CIT(A) is not sustainable for all the four years under consideration. Accordingly, we direct deletion of penalty for all the years under consideration.

ITA Nos. 1160,1161,1162,5234/Del/2011 Housing and Urban Development Corporation Ltd. vs. DCIT 14.0 In the final result all the four appeals of the assessee stands allowed.

Order pronounced in the open court on 18th October, 2019. sd/- sd/- (R.K. PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 18 .10.2019 Veena Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi