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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:
The learned Commissioner of Income-tax (Appeals) erred in Law as well as on facts while allowing only partial grounds of Appeal
2. The learned Commissioner of Income - tax (Appeals) has mentioned in the order that assessee has co-operated at the time of assessment proceedings and paid the entire tax. This clearly shows the intention of assessee. Evasion of tax was never the intention of assessee.
3. Penalty u/s 271 (1)(c) does not go with concealment and should not be in penal nature. 1 Mum 2017-Prabir Kumar Ray
Due to non-receipt of Form No.16 from M/s INA Bearings India Pvt. Ltd., the assessee could not include the income in computation of income and error occurred.
5. The appellant craves leave to add, alter, amend, delete, modify or withdraw all or any ground or grounds of Appeal
herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.
2. Brief facts of the case are that the assessee filed his return of income 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 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 ITA No. 5389 Mum 2017-Prabir Kumar Ray
4. On appeal before the ld. CIT(A), the assessee challenged the validity of 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.
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 Mum 2017-Prabir Kumar Ray 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 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.
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 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)”.
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.
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 Mum 2017-Prabir Kumar Ray 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 ITA No. 5389 Mum 2017-Prabir Kumar Ray 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 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.
In view of the above factual and legal discussions the assessing officer 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