PRABIR KUMAR RAY,MUMBAI vs. INCOME TAX OFFICER 26(2)(4), MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE SHRI G.S. PANNU, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 5389/Mum/2017 (Assessment Year 2011-12) Prabir Kumar Ray, ITO-26(2)(4) Room No. 601, 6th Floor, Flat No. 601, Block No.C, Trans Residency-1, MIDC, Smt. Kamladevi Mittal Andheri (E), Ayurvedic Hospital Building, Vs. Mumbai-400093. Charni Road (W), PAN: AEMPR8166A Mumbai-4000202. Appellant Respondent : Shri Aman Khandelwal (C.A) Appellant by Respondent by : Shri Ajay Kumar Keshari (DR) Date of Hearing : 30.04.2019 Date of Pronouncement : 22.05.2019 ORDER UNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee under section 253 of Income-tax Act (‘Act’) is

directed against the order of ld. Commissioner of Income-tax (Appeals)-

46, Mumbai [hereinafter referred as ld. CIT(A)] dated 22.05.2017 for

Assessment Year 2011-12. The assessee has raised the following

grounds of appeal:

ITA No. 5389 Mum 2017-Prabir Kumar Ray

declaring total income of Rs. 14,95,900/-. In the return of income the

assessee has shown his income from ‘salary’. The return of income was

selected for scrutiny and the assessment was completed under

section143(3). During the assessment, the Assessing Officer noted that

as per Form-26AS, the assessee earned salary from two employers

namely NRB Bearings Ltd. and from INA Bearings India Pvt. Ltd. of

Rs. 15,85,500/- and Rs. 16,90,761/- respectively. The assessee has not

shown the salary income from INA Bearings India Pvt. Ltd., though the

assessee received a sum of Rs. 16,90,761/-. The assessee was confronted

with the discrepancies. The Assessing Officer recorded in assessment

order that no reply was furnished by assessee. The Assessing Officer

after allowing deduction under section 80C and made addition of Rs.

15,30,230/- in the assessment order passed on19.02.2014 under section

143(3). The Assessing Officer issued show-cause notice 19.02.2014

under section 274 r.w.s. 271(1)(c) of the Act. In the reply to the show-

cause notice, the assessee stated that the assessee shifted from Mumbai

ITA No. 5389 Mum 2017-Prabir Kumar Ray

to Pune at the time of issuance of Form-16 and his employer namely

INA Bearings India Pvt. Ltd. despite reminders not issued Form-16. The

assessee claimed that it was unintentional and occurred due to

employment in two companies in one Financial Year. The assessee

further stated that during the assessment he has co-operated and paid the

entire tax of Rs. 2,10,350/-. The assessee was under bonafide belief that

TDS has been deducted by his employer. The assessee placed his

apology for his ignorance and prayed for dropping the penalty

proceeding. 3. The reply of assessee was not accepted by Assessing Officer holding

that it was mandatory on the part of assessee to disclose full and correct

information in the return of income. In case any income is left to offer

for taxation, the assessee had 21 months time from filing return of

income till issuance of notice under section 143(2) of the Act to correct

the mistake, which the assessee failed to do. It was also concluded by

the assessing officer that the assessee furnished his details only after

asking the Assessing Officer. The revised computation was filed after it

was deducted in the scrutiny assessment. Had the case been not selected

for scrutiny, the legitimate tax might have remained to be charged. The

Assessing Officer levied the penalty @ 100% of the tax sought to be

evaded. The Assessing Officer worked out the penalty of Rs. 4,72,841/-

vide order dated 27.08.2014 passed under section 271(1)(c) of the Act. 3

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the show caused notice under section 274 read with section271(1)(c) as

well as on merit. The ground related with the validity of show cause

notice was rejected by ld CIT(A) holding that it has no merit. However,

on merit the ld CIT(A) out of total penalty of Rs.472,841/-, restricted

it to Rs. 2,10,350/- holding that a TDS of Rs. 2,95,207/- was deducted

on the salary paid by INA Bearings India Pvt. Ltd. Therefore, the benefit

of set off of TDS to the extent of Rs. 2,95,207/- was given to the

assessee. The ld CIT(A) concluded that the penalty is to be levied at

100%, which is only short payment and the refund wrongly claimed that

attracts penalty. Further, aggrieved by the order of ld. CIT(A), the

assessee has filed the present appeal before us. 5. We have heard the submission of ld. Authorized Representative (AR) of

the assessee and ld. Department Representative (DR) for the revenue

and perused the material available on record. The ld. AR of the assessee

submits that during the relevant period, the assessee was employed with

two employer one of the Form-16 of second employer i.e. INA Bearings

India Pvt. Ltd. was not furnished to the assessee. The assessee fully co-

operated during the assessment and paid the entire tax. The assessee

accepts the mistake which was unintentional. The ld. AR of the assessee

further submits that while passing the assessment order as well as while

issuing show-cause notices dated 19.02.2014 has not specified the 4

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specific charge in the said notice. Therefore, the notice is invalid. The ld

AR for the assessee filed the copy of the notice dated 19.02.2014. In

support of his submission, the ld. AR of the assessee relied upon the

decision of Amritsar Tribunal (Third Member) in HPCL Mittal Energy

Ltd. vs. ACIT in ITA No. 510, 555 to 556/ASR/2004 dated 07.05.2014,

in CIT vs. Manjunatha Cotton & Ginning Factory [2013] 35

taxmann.com 250 (Karnataka Trib.), Sachin Arora vs. ITO in ITA No.

118/Agra/2015, New Sorthia Engg. Co vs. CIT [2006] 155 Taxman 523

(Guj.), Dilip N. Shroff vs. JCIT [2007] 161 Taxman 218 (SC) and Dr.

Sarita Miling Davare vs. DCIT in ITA No. 2187/Mum/2014). 6. On the other hand, the ld. DR for the revenue supported the order of

lower authorities. 7. We have considered the rival submission of the parties and have gone

through the orders of authorities below. We have also deliberated on

various case laws relied by the ld. AR for the assessee. The Assessing

Officer while passing the assessment order made addition of Rs.

15,30,230/- by taking his view that the assessee earned salary from two

employers namely NRB Bearings Ltd. and from INA Bearings India

Pvt. Ltd. of Rs. 15,85,500/- and Rs. 16,90,761/- respectively. The

assessee has not shown the salary income from INA Bearings India Pvt.

Ltd., though the assessee received a sum of Rs. 16,90,761/-. The

Assessing Officer after allowing deduction under section 80C and made 5

ITA No. 5389 Mum 2017-Prabir Kumar Ray

addition of Rs. 15,30,230/- . The Assessing Officer issued show-cause

notice 19.02.2014 under section 274 r.w.s. 271(1)(c) of the Act. In the

reply to the show-cause notice, the assessee stated that the assessee

shifted from Mumbai to Pune at the time of issuance of Form-16 and his

employer namely INA Bearings India Pvt. Ltd. despite reminders not

issued Form-16. The assessee claimed that it was unintentional and

occurred due to employment in two companies in one Financial Year.

The Assessing Officer levied penalty of Rs. 4,72.841/- on the addition of

Rs. 15,30,230/-. The ld. CIT(A) restricted the penalty to Rs. 2,10,350/-

holding that TDS of Rs. 2,95,207/- was deducted on the salary paid by

INA Bearings India Pvt. Ltd. The assessee was granted benefit of set off

of TDS to the extent of Rs. 2,95,207/- which was already deducted from

the income of assessee. The submission/objection of the assessee that

about the validity of show-cause notice was rejected by ld. CIT(A)

holding that the same is without merit. 8. We have noted that while passing the assessment order, the

Assessing Officer recorded that “the assessee has concealed the income,

the penalty proceeding under section 271(1)(c) initiated separately”.

However, while levying the penalty, the Assessing Officer invoked the

provision of Explanation-1 to section 271 and recorded that the onus is

on the assessee to prove that all material facts, the computation of

income disclosed by assessee are true and correct. The assessee failed to 6

ITA No. 5389 Mum 2017-Prabir Kumar Ray

discharge its onus. The Assessing Officer further recorded that

“I therefore, satisfied that the assessee has furnished inaccurate

particulars of income and concealed income within the meaning of

section 271(1)(c)”. 9. We have also perused the contents of the notice under section 274 rws

271(1) (c) dated 19.02.2014. In the said notice the assessing officer has

recorded “it appears to me that you have concealed the particulars of

your income and deliberately furnished inaccurate particulars of such

income for AY 2011-12”. The assessing officer while passing the

assessment order initiated the penalty for concealment of income, while

issuing notice under section 274rws 271(1) specified for concealment of

income and deliberate furnishing inaccurate particulars and finally while

imposing the penalty it was levied furnishing inaccurate particulars of

income and concealed income within the meaning of section 271(1)(c).

In our view the assessing officer has not clearly specified the limb of

clause (c) of section 271(1) of the Act and in absence of a charge in the

penalty notice or not finding the assessee guilty of a clear offence in the

penalty order vitiates the penalty order. 10. The co-ordinate bench of Amritsar Tribunal in HPCL Mittal Energy vs.

ACIT (T.M.) (supra) while considering the validity of notice held that

the penalty proceedings are separate from assessment proceedings,

which get kicked with the issue of notice under section 274 and 7

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culminate in the penalty order under section 271(1)(c). Many a times,

penalty initiated in the assessment order on one or more counts by

means of notice under section 274, is not eventually imposed by the

Assessing Officer on getting satisfied with the explanation tendered by

the assessee in the penalty proceedings. In any case, confronting the

assessee with the charge against him is sine qua non for any valid

penalty proceedings. It is only when the assessee is made aware of such

a charge against him that he can present his side. Thus prescribing the

charge in the penalty notice and penalty order is must. Absence of a

charge in the penalty notice or not finding the assessee guilty of a clear

offence in the penalty order vitiates the penalty order. It was further held

that when the Assessing Officer is satisfied that it is a clear-cut case of

concealment of particulars of income, he must specify it so in the notice

at the time of initiation of penalty proceedings and also in the penalty

order. The Assessing Officer cannot initiate penalty on the charge of

'concealment of particulars of income', but ultimately find the assessee

guilty in the penalty order of 'furnishing inaccurate particulars of

income'. In the same manner, he cannot be uncertain in the penalty order

as to concealment or furnishing of inaccurate particulars of income by

using slash between the two expressions. When the Assessing Officer is

satisfied that it is a clear-cut case of 'furnishing of inaccurate particulars

of income', he must again specify it so in the notice at the time of 8

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initiation of penalty proceedings and also in the penalty order. After

initiating penalty on the charge of 'furnishing of inaccurate particulars of

income', he cannot impose penalty by finding the assessee guilty of

'concealment of particulars of income'. Again, he cannot be uncertain in

the penalty order as to concealment or furnishing of inaccurate

particulars of income by using slash between the two expressions. When

the Assessing Officer is satisfied that it is a clear-cut case of imposition

of penalty under section 271(1)(c) on two or more

additions/disallowances, one or more falling under the expression

'concealment of particulars of income' and the other under the

'furnishing of inaccurate particulars of income', he must specify it so by

using word 'and' between the two expressions in the notice at the time of

initiation of penalty proceedings. If he remains convinced in the penalty

proceedings that the penalty was rightly initiated on such counts and

imposes penalty accordingly, he must specifically find the assessee

guilty of 'concealment of particulars of income' and also 'furnishing of

inaccurate particulars of income' in the penalty order and the charge is

not levied in the above manner in all the three clear-cut situations

discussed above in the penalty notice and also in the penalty order, the

penalty order becomes unsustainable in law. Thus it is evident that when

the Assessing Officer is satisfied at the stage of initiation of penalty

proceedings of a clear-cut charge against the assessee in any of the three 9

ITA No. 5389 Mum 2017-Prabir Kumar Ray

situations (say, concealment of particulars of income), but imposes

penalty by holding the assessee as guilty of the other charge (say,

furnishing of inaccurate particulars of income) or an uncertain charge

(concealment of particulars of income/furnishing of inaccurate

particulars of income), the penalty cannot be sustained.

has not clearly specified the limb of clause (c) of section 271(1) of the

Act while issuing the show cause notice and in absence of a specific

charge in the penalty notice or not finding the assessee guilty of a clear

offence in the penalty order vitiates the penalty order. Thus, we allow the

grounds of appeal raised by the assessee. 12. In the result the appeal of the assessee is allowed. Order pronounced in the open court on 22/05/2019.

Sd/- Sd/- G.S. PANNU PAWAN SINGH VICE-PRESIDENT JUDICIAL MEMBER Mumbai, Date: 22.05.2019 SK Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “C” Bench, ITAT, Mumbai 6. Guard File

BY ORDER,

Dy./Asst. Registrar ITAT, Mumbai