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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’: NEW DELHI
Before: SMT. DIVA SINGH
.:- 8026 to 8030/Del/2018 Shyam Kaur (Individual). SSA's Emerald Meadows reported in 386 ITR 13 and Manjunath etc would not help the assessee.
On the facts and in the circumstance of the case and in law the CIT(A) -la .was incorrect and unjustified in holding that penalty levied u/s 271(l)(c) by the AO was correct and justified even in the presence of SSA's Emerald Meadows and Manjunath judgments and also others as given before the CIT(A).
4. On the facts and in the circumstance of the case and in law the CIT(A) 15 was incorrect and unjustified in holding that penalty notice issued by the AO u/s 271(l)(c) was legal and therefore the contention of the assessee that penalty notice in fact was illegal and bad in law itself, in view of the aforesaid two judgments and therefore the penalty order was not sustainable.
5. On the facts and in the circumstance of the case and in law the reliance on several judgments of Hon'ble Supreme Court, High Courts and Tribunals in dismissing the appeal of the assessee are misplaced since they are either not applicable in the present case or rendered prior to the aforesaid two judgments.
On the facts and in the circumstance of the case and in law the CIT(A) -15 was incorrect and unjustified in holding that there is concealment of income even when the income assessed is the same as returned.
On the facts and in the circumstance of the case and in law the CIT(A) -15 was incorrect and unjustified in holding that penalty for concealment of income has been rightly levied even when the penalty notice has been issued both for concealment of income and also for filing incorrect particulars of income which is bad in law since inappropriate words have not been struck of.
On the facts and in the circumstance of the case and in law the CIT(A) -15 was incorrect and unjustified in holding the penalty proceedings have been rightly initiated even when the penalty proceedings have not been legally initiated even after the amendment in the Act.
Without prejudice to above grounds of appeal
, On the facts and in the circumstance of the case and in law the CIT(A) -15 was incorrect and unjustified in confirming penalty u/s 271(1)(c) without proving either the concealment or filing of inaccurate particulars of income and hence the orders of Authorities below needs quashing.”
3. The Ld. AR inviting attention to the arguments advanced before the CIT(A) submitted that the penalty Orders deserve to be quashed. In view of the settled legal position on the issue which has been a subject matter of consideration in various decisions of the ITAT and the Courts. It was submitted that para no. 5.6.2 of the impugned Order accepts the fact that in the quantum Order passed by the AO and in the penalty Order passed there is a discrepancy on the statutory notice issued to the assessee. Accordingly, it was his submission that the issue is fully covered in favour of the assessee. Reliance was placed upon the decisions mentioned in ground Nos. 2 & 3 namely itself i.e. SSA's Emerald Meadows reported in 386 ITR 13 and Manjunath Cotton & Ginning Factory of the Karnataka High Court amongst others. Reliance was ITA Nos.:- 8026 to 8030/Del/2018 Shyam Kaur (Individual). also placed on the decisions of Hon'ble Gujrat High Court and Delhi High Court in the cases of MANU ENGINEERING reported in 122 ITR 306 and in the case of VIRGO MARKETING reported in 171 Taxmn 156. Copy of order dated 25.04.2019 in in the case of DCIT Vs Gellette Diversified Operations Pvt. Ltd. was also filed. Specific attention was invited to paras 8 to 11 of the same, which is extracted hereunder : 8. We have heard the rival submissions qua the legal issue that impugned penalty proceedings are not valid on the ground that, Assessing Officer while issuing the show cause notice, had not specified the charge as to under which limb, he is proposing to levy the penalty u/s 27i(i)(c). From the perusal of the assessment order, it is seen that Id. Assessing Officer has though specified the charge that he is initiating the penalty proceedings u/s. 27i(i)(c) on account of furnishing of inaccurate particulars of income, however, at the time of issuance of show cause notice u/s.274, no such charge has been specified. The notices have been sent on a printed format wherein he has not strike down or mentioned as to under which limb he is proposing to levy the penalty. The Section 27i(i)(c) stipulates two limbs of charges in which penalty can be levied, one, where any person has concealed the particulars of his income; or second, he has furnished inaccurate particulars of such income.
9. The Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory (supra) has held that a person who is accused of conditions mentioned in Section 271 should be made known about the grounds on which the Department is imposing penalty, as Section 274 makes it clear that the assessee has right to contest such proceedings and should have full opportunity to meet the case of the Department and show that conditions stipulates in Section 27i(i)(c) did not exist and is not liable to pay the penalty. Their Lordships have further held that the practice of the Department sending a printed form where all the grounds mentioned in Section 271 would not satisfy the requirement of the law when the consequences of the assessee not rebutting the initial presumption is serious in nature and had to pay penalty from 100% to 300% of the tax liability. Therefore, the said provision has to be strictly construed and notice issued u/s. 274 should satisfy the grounds which the person has to meet Specifically. Otherwise, principle of nature justice is offended if a show cause notice is vague. On the basis of such proceedings, no penalty can be imposed on the assessee. The relevant observation and law specified by their Lordships in this regard reads 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 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 .:- 8026 to 8030/Del/2018 Shyam Kaur (Individual). provision contained in Explanation-i 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 27i(l)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm 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.
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 27i(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the Page 4 of 8 .:- 8026 to 8030/Del/2018 Shyam Kaur (Individual). imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.
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 Courtinlhe case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxmn 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"
Their Lordships while coming to the aforesaid conclusion have also referred to the judgment of Hon'ble Gujarat High Court in the case of Manu Engineering (supra); and Hon'ble Delhi High Court in the case of Virgo Marketing (supra). The aforesaid principle laid down by the Hon'ble High Court has also been followed by this Co-ordinate Bench in various cases. As pointed out by learned counsel, Hon'ble Supreme Court in the case of VeerbhadrapaSangappa & Co. (supra) have dismissed the Revenue's SLP against Karnataka High Court judgment laying down the law on penalty, wherein it was held that notice u/s.274 itself specifically state that ground for initiation of penalty proceedings whether for concealment of income or filing of inaccurate particulars of income. Mere sending of printed form with all the grounds mentioned is not sufficient compliance of law. The aforesaid principle and ratio laid down by the Hon'ble Karnataka High Court would also apply in the present case, because here in this case the Id. Assessing Officer while issuing a show cause notice u/s. 274 r.w.s. 271 in printed format has not specified the grounds as to under which limb he is proposing to initiate and levy a penalty u/s. 271(1)(c). Thus, respectfully following the aforesaid judgments, we hold that impugned penalty levied by the Assessing Officer is not valid and same is not sustainable. On this ground the entire penalty is deleted.
In the result, in view of the aforesaid finding, the Revenue's appeal is treated as dismissed and assessee's is appeal as allowed.”
Reliance was placed upon the Order dated 03.01.2019 in in the case of Smt. Krishna Devi Vs ACIT ( copy filed) which was stated to be a connected case of the family member on identical facts and circumstances.. .:- 8026 to 8030/Del/2018 Shyam Kaur (Individual).
The Ld. Sr. DR relies upon the impugned Order. It was also his submission that there are various other contrary decisions wherein the decision of the Hon’ble Karnataka High Court in the case of Manju Nath has not been followed. 6. The ld. AR who was given time to go through the decisions submitted that most of them are extracted from the impugned order. Relying on the latest decision of the ITAT on same set of facts and circumstances i.e. Smt. Krishna Devi, it was his submission that in the said case also same decisions had been relied upon by the CIT(A) on same facts and considering the similar arguments advanced by the same Sr. DR, appeals of the assessee on identical facts and circumstances was allowed. It was also his alternate submission that even if one were to consider that there are contrary decisions, then the issue admittedly is open to debate where consistent orders of Karnataka High Court are being pitted against some Tribunal decisions. In such an eventuality, he argued that the settled legal position is that the issue be decided on the basis of latest order of the ITAT in a connected case as facts remain identical. Alternately advancing a without prejudice argument in the circumstances, it was his prayer that once the issue even after the decision of the Apex Court in SSA Emerold Meadows is considered to be debatable by some contrary decisions of the ITAT, then in such an eventuality where two views are available in terms of the principle laid down by the Apex Court in the case of Vegetable Products, in such a situation also, the issue has to be decided by following a view favourable to the assessee. 7. I have heard the rival submissions and perused the material on record. In the facts of the present case, it is seen that in the Show Cause Notice dated 26.08.2018 as considered by the Co-ordinate Bench in paras 3 and 4 of the order cited, the specific limb of Section 271(1)(c) invoked has not been identified. Admittedly, the facts, circumstances and position of law remains identical. For ready reference, the relevant extract of ITA 8020/Del/2018 is extracted hereunder : .:- 8026 to 8030/Del/2018 Shyam Kaur (Individual). 3. The assessee filed the written statement stating therein that notice under section 271(l)(c) of the I.T. Act as enclosed Dated 26.08.2016 did not specify the exact charge of concealment or furnishing inaccurate particulars of such income. In these circumstances, notice is vague and liable to be set aside. The assessee relied upon the Order of ITAT, Delhi C-Bench in the case of Bharat Immunological and Biological Corporation Ltd., vs. DCIT [2019] 72 ITR (Trib.) (S.N.) 5 (Delhi). Copy of the Order is filed. 4. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that failure of the A.O. to strike-off column in show cause notice is no ground for deleting the penalty. The Ld. D.R. relied upon the Order of ITAT, Chennai Bench reported in TS-289-ITAT-2019-CHNY. 5. I have considered the rival submissions. The A.O. issued show cause notice before levy of the penalty under section 271(l)(c) of the I.T. Act, 1961, Dated 26.08.2016 in which the A.O. has mentioned as under : "Have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of Explanation 1, 2, 3, 4 & 5." 5.1. These facts, therefore, clearly show that notice issued by the A.O. for levy of penalty under section 271(l)(c) of the Act to be bad in law as it did not specify in which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The entire penalty proceedings are, therefore, vitiated and no penalty is leviable. On this score itself, similar view is taken by Hon^le Karnataka High Court in the case of CIT vs. M/s. SSAs Emerald Meadows 73 taxmann.com 241 and this decision is confirmed by the Hon'ble Supreme Court reported in 73 taxmann.com 248. Further, the ITAT, Delhi Benches are taking a consistent view that in such circumstances, levy of penalty is invalid. Since the show cause notice is invalid due to the above reason and as such the entire penalty proceedings are vitiated. Thus, no penalty is leviable against the assessee. The decisions relied upon by the Ld. D.R. would not support the case of the Revenue, In view of the above, I set aside the Orders of the authorities below and cancel the penalty. 6. In the result, appeal of assessee allowed.
7.1 Accordingly, in the absence of any change in facts, circumstances or position of law, respectfully following the order of the Co-ordinate Bench which has not been distinguished, the appeals of the assessee are allowed.