SANJAY KUMAR AGRAWAL ,BURHANPUR vs. JOINT COMMISSIONER OF INCOME TAX -OSD, CENTRAL-1, INDORE , INDORE

O R D E R Per B.M. Biyani, A.M.:

The captioned three (3) appeals are filed by same assessee against a single consolidated order of first-appeal dated 23.07.2024 passed by learned Commissioner of Income Tax (Appeals)-3, Bhopal [“CIT(A)”], which in turn arises out of a single consolidated penalty-order dated 28.06.2018 passed by learned DCIT-Central-1, Indore [“AO"] u/s 271(1)(c) of the Income Tax Act, 1961 [“the Act”] for three (3) Assessment Years [“AYs”] 2012-13, 2013-14 & 2014-15.

4. For reference purpose, we re-produce the grounds raised in first appeal of AY 2012-13:

“1. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the Order of Penalty passed by the JCIT-OSD, Central-1, Indore u/s. 271(1)(c) of the Income-Tax Act, 1961 imposing a penalty of Rs. 2,10,000/- on the assessee.

2. That, the learned CIT(A) grossly erred, in law, in not considering the material fact that in the instant case, the ld. AO imposed the penalty without first issuing a proper and valid show-cause notice to the appellant under s.274 without making him aware of the specific charge leveled against him.

3. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the Id. AO for imposing the penalty on the allegation of concealment of income whereas, while passing the assessment order, no proper satisfaction was recorded by him either on the Page 2 of 9 to 716/Ind/2024 A.Ys.: 2012-13 to 2014-15 allegation of furnishing of inaccurate particulars of income or on the allegation of concealment of particulars of income. 4.That, without prejudice to the above, the learned CIT(Appeals) grossly erred in confirming the order of penalty passed by the ld. AO, without considering the fact that the appellant had neither concealed nor furnished inaccurate particulars of his income for the year under consideration and therefore he was not liable for any penalty u/s.271(1)(c) of the Act. 5 (a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the order of penalty passed u/s. 271(1)(c) of the Act, qua the fresh income of Rs.6,70,713/-, in respect of withdrawal of excess claim of interest on house loan, as made by the appellant, in his return of income filed under s. 153A on the allegation that such income was not shown by the appellant in his return of income under s. 139 of the Act. 5(b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the order of penalty passed u/s. 271(1)(c) of the Act, qua the withdrawal of the deductions aggregating to Rs.6,70,713/-made by the appellant in his return of income filed under s.153A, vis-à-vis the return filed under s.139 for rectifying the inadvertent mistakes committed in the original return filed under s. 139 without considering and appreciating the material fact that when the AO himself has accepted the revised return filed by the assessee under s.153A of the Act, then there was absolutely no justification for making any reference of the original return filed under s. 139 for the purpose of levying any penalty under s.271(1)(c) of the Act.

6. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the order of penalty passed u/s. 271(1)(c) of the Act, qua the withdrawal of the deductions of Rs.6,70,713/-which were claimed by the appellant in the original return of income filed under s. 139 of the Act without considering and appreciating the material fact that even if the aforesaid fresh income so shown was wrongly claimed as deduction in the original return, penalty under s.271(1)(c) of the Act cannot be imposed for a mere wrong claim of the appellant as held by the Honble Supreme Court in the case of CIT vs. Reliance Petro Products (P) Ltd. (2010) 36 DTR (SC) 449.

8. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal

as and when considered necessary.”

5. Ld. Ld. AR for assessee opened his arguments by drawing our attention to the show-cause notices dated 29.12.2017 issued by AO u/s 274

Page 3 of 9 to 716/Ind/2024 A.Ys.: 2012-13 to 2014-15 read with section 271(1)(c) placed in Paper-Book. For the sake of immediate reference, we re-produce below the notice of AY 2012-13:

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“Whereas in the course of proceedings before me for the A.Y. 2012-13, it appears to me that you:- XXX have concealed the particulars of your income or furnished inaccurate particulars of such income” 7. Ld. AR submitted that the notice u/s 274 sets in motion the penalty- proceeding. According to Ld. AR, the aforesaid notice issued by AO is very much vague in as much it contains stereotype language of section 271(1)(c).

The Ld. AR contended that by mentioning that the assessee has “concealed the particulars of income” or “furnished inaccurate particulars of income”, the AO is himself not sure about the default committed by the assessee.

According to Ld. AR, there are innumerable decisions of the Hon’ble Courts and ITAT where it has been loudly held that if the show-cause notice does not spell out the specific charge of default committed by assessee, the notice and subsequent proceeding founded thereon are invalid. In support of his contention, the Ld. AR placed a strong reliance on the decision of Hon’ble Jurisdictional High Court of M.P. in the case of Pr. CIT-I, vs. Kulwant Singh Bhatia, to 14 of 208, order dated 9th May 2018, wherein it was held as under:

“8. In the case of CIT V/s. Manjunatha Cotton Ginning Factory (supra), it was observed by the Karnataka High Court in para 59 that the practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the initiated presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax

Page 5 of 9 to 716/Ind/2024 A.Ys.: 2012-13 to 2014-15 liability. As the provisions have to be held to be strictly construed, notices issued under Section 274 should satisfy the grounds, which he has to meet specifically. Otherwise, principle of natural justice is offended if the show cause notice is vague. Even in the matter of search case where penalty is levied under Explanation 5A to Section 271(1)(c), it was held by the Karnataka High Court that the show-cause notice under Section 274 was defective as it does not spell out the ground on which the penalty is sought to be imposed and consequently penalty imposed was cancelled. The decision of CIT V/s. Manjunatha Cotton Ginning Factory (supra) was further followed by the Karnataka High Court in the case of CIT V/s. SSA'S Emerald Meadows, (2016) 73 taxman.com 248 (SC) / dated 23.11.2015 (ITA 380/2015), the High Court has dismissed the appeal of the revenue by observing that the Tribunal has allowed the appeal of the assessee holding that the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Act of 1961 was bad-in-law as it did not specify which limb of Section 271(1)(c) of the Act of 1961, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. The Tribunal while allowing the appeal of the assessee, had relied on the decision of the Division Bench of Karnataka High Court decision in the case of CIT V/s. Manjunatha Cotton Ginning Factory (supra). It is further pointed out that the SLP filed by the Deptt. before the Apex Court on 5.8.2016 in the matter of CIT V/s. SSA'S Emerald Meadows (supra) was dismissed. In the case of CIT V/s. Suresh Chandra Mittal, (2000) 251 ITR 9 (SC), the Apex Court has upheld the decision of M.P. High Court wherein, in similar circumstances, it was held that the initial burden lies on the revenue to establish that the assessee had concealed the income or had furnished inaccurate particulars of such income. In the present case, in show-cause notice the Assessing Officer has not specified specifically charges, there was no such mention.

11. On due consideration of the arguments of the learned counsel for the appellant, so also considering the fact that the ground mentioned in show- cause notice would not satisfy the requirement of law, as notice was not specific, we are of the view that the learned Tribunal has rightly relying on the decision of CIT V/s. Manjunatha Cotton Ginning Factory (supra) and CIT V/s. SSA'S Emerald Meadows (supra) rightly allowed the appeal of the assessee and set aside the order of penalty imposed by the authorities. No substantial question of law is arising in these appeals. ITA. No(s). 9/2018, 10/2018, 11/2018, 12/2018, 13/2018 and 14/2018, filed by the appellant have no merit and are hereby dismissed.”

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Therefore, the whole proceeding of penalty conducted by the AO is illegal and unsustainable as per the decision of Hon’ble jurisdictional High Court in Kulwant Singh Bhatia (supra).

CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 35 taxmann.com 250 (Karnataka): “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

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Pai 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 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.” The decision in Manjunatha (supra) was upheld by Hon’ble Karnataka High Court in CIT Vs. SSA’s Emerald Meadows (2016) 73 taxmann.com 241 (Karnataka), the relevant portion of order is re-produced below:

“3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 (Kar.).

Order pronounced in the open court on 15/09/2025