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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SH. G.D. AGRAWAL & SH. SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER :
This appeal has been preferred by the assessee against order
dated 29.10.2015 passed by the Ld. CIT (Appeals)-27, New Delhi for assessment year 2004-05 wherein, vide the impugned order, the Ld. CIT (Appeals) has upheld imposition of penalty of Rs.
2,65,132/- u/s 271(1)(c) of the Income Tax Act, 1961 (hereinafter called as the ‘Act’)
Brief facts of the case are that the assessee belongs to the Chaurasia group and is engaged in the business of manufacturing
of Pan Masala and Gutka. A search and seizure operation u/s 132 of the Income Tax Act was conducted in the business and residential premises of the assessee on 29.04.2008. No incriminating material or undisclosed asset or investment was found during the course of search. Subsequently, the assessee filed the return of income u/s 153A of the Act at a total income of Rs.
52,69,856/-. The assessment was completed u/s 153A read with section 143(3) of the Act wherein a trading addition of Rs.
7,39,037/- was made to the income of the assessee as undisclosed income. The addition of Rs. 7,39,037/- was made because on 25.06.2004 the premises of the assessee and its transporters had been searched by the DGCEI, Delhi and a demand of Excise Duty of Rs. 2,20,39,725/- had been created towards evasion of Excise
Duty. The assessee had approached the Hon’ble Settlement
Commission of Custom and Central Excise and the Settlement
Commission, vide its order dated 28.08.2008, had reduced the demand to Rs. 47,67,175/-. This amount pertained to assessment
(K.P.Pan Flavours (P) Ltd.) years 2004-05, 2005-06. The amount pertaining to assessment year 2004-05 i.e. the year under consideration was Rs.
27,55,000/-. Since the rate of Excise Duty in the year was 63% of the turnover, the supressed turnover of the assessee was determined at Rs. 43,73,000/-. Thereafter, gross profit rate of 16.90% (as declared by the assessee for the year) was applied and amount of 7,39,037/- was added to the income of the assessee as profit from undisclosed sales. Penalty was imposed u/s 271(1)(c) of the Act on this amount. The appeal of the assessee against this imposition of penalty was dismissed by the Ld. CIT (A) and now the assessee has approached the ITAT challenging the imposition of penalty by raising the following grounds of appeal :-
1. “1. Because the learned CIT(A) was wrong in law & on facts in confirming the penalty of Rs. 265132/- imposed u/s 271(l)(c) of the Act by the leaned A.O for A.Y. 2004-05.
2. Because the learned CIT(A) has failed to appreciate that there was neither any concealment nor filing of inaccurate particulars of income as explained in the reply filed before the A.O. 3. Because in the asstt. order as well as in the show cause notice issued by the A.O. there was no finding as to whether there was any concealment of income or filing of inaccurate particulars of income.
4. Because the asstt. order as well as in the penalty order there has been no finding about positive concealment of any income. The addition made by the A.O. was based on estimate basis and no incriminating material relating to earning of any income was found in search.
Because the provisions of section 271(l)(c) of the Income Tax Act were not applicable to the facts of the case.
6. That in any case & without prejudice to the above grounds the quantum of penalty imposed is much too high & excessive.
That the orders of the lower authorities are against law, facts & principles of natural justice.
That the appellant craves leave to add, delete, alter or modify any of the grounds stated hereinafter any time whether during the course of hearing of appeal or even earlier.”
The Ld. Authorised Representative, at the outset, submitted that the notice u/s 274 read with section 271 of the Act did not specify as to whether the penalty u/s 271(1)(c) of the Act was proposed to be imposed for concealing particulars of income or for furnishing inaccurate particulars of the income. It was also (K.P.Pan Flavours (P) Ltd.) submitted that the penalty order also did not make it clear whether the penalty was imposed on the assessee for concealing particulars of income or for furnishing inaccurate particulars of income. Our attention was drawn to copy of notice issued u/s 274, dated 30.12.2010, and it was submitted that the irrelevant portions had not been crossed out in the notice. Our attention was also drawn to the penalty order wherein the penalty was stated to be imposed u/s 271(1)(c) of the Act without specifying whether the penalty was being imposed for furnishing inaccurate particulars of income or for concealing the income. Reliance was placed on number of judicial precedents for the contention that where the charge is not specific, penalty could not be imposed.
In response, the Ld. Sr. Departmental Representative placed reliance on the concurrent findings of the lower authorities and submitted that the penalty had been imposed as there was a finding of suppressed sales by the Custom and Central Excise Department and the demand due towards Excise Duty payable had also been finally settled by the Hon’ble Settlement Commission. It was submitted that it was a clear case for imposition of penalty and it
(K.P.Pan Flavours (P) Ltd.) did not really matter that the charge was not specifically mentioned.
The Ld. Sr. DR also submitted that this ground of defect in the notice was not raised before the Ld. CIT (A).
5. We have gone through the facts and records of the case and have duly considered the rival submissions made before us. A perusal of the notice issued u/s 274 read with section 271(1)(c) as appearing on page 6 of the paper book shows that notice has been issued in mechanical manner by merely filling up the format of the notice and it is not clear as to whether the penalty is proposed to be imposed for concealment or for furnishing inaccurate particulars as the relevant portions in the notice have been crossed out. The assessment order dated 30.12.2010 passed u/s 143(3) / 153A of the Act mentions initiation of penalty proceedings u/s 271(l)(c) of the Act for concealment of income and furnishing of inaccurate particulars. The penalty order dated 20.03.2014 passed u/s 271(l)(c) of the Act mentions that the assessee is liable to be penalized u/s 271(1)(c) of the Act but does not specify whether the penalty is being imposed for concealment or for furnishing inaccurate particulars. It is our considered opinion that the AO is empowered to initiate penalty proceedings
(K.P.Pan Flavours (P) Ltd.) once he is satisfied in the course of any proceedings that there is concealment of income or furnishing inaccurate particulars of income u/s 271(1)(c) of the Income Tax Act, 1961. Concealment and furnishing inaccurate particulars are different. The AO, while issuing notice, has to come to the conclusion as to whether it is a case of concealment of income or whether it is a case of furnishing of inaccurate particulars. The Hon'ble Apex Court in the case of T. Ashok Pai vs. CIT reported in 292 ITR 11 (SC) has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Hon'ble Gujarat High Court in the case of CIT vs. Manu Engineering Works reported in 122 ITR 306 (Guj.) and the Hon'ble Delhi High Court in the case of CIT vs. Virgo Marketing Ltd. reported in 171 Taxman 156 (Delhi) have 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. Mere filling up of the standard proforma without striking of the relevant clauses will lead to inference as to non application of mind. Reliance is placed on the decision of the Hon'ble High Court of Karnataka in the case of Commissioner of Income Tax & Another vs. Manjunatha Cotton &
(K.P.Pan Flavours (P) Ltd.) Ginning Factory (2012) 83 CCH 0282 (Kar.) wherein the Hon'ble Karnataka High Court has held :
"(1) Notice u/s 274 of the Act should specifically state the grounds mentioned in section 271(l)(c), i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income; ( ii )Sending printed form where all the ground mentioned in section 271 are mentioned would not satisfy requirement of law; (iii) The assessee should know the grounds which he has to meet specifically. Otherwise principle of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee."
5.1 Therefore, on the facts of the present case and respectfully following the decision of Hon’ble Karnataka High Court in the case of Commissioner of Income Tax & Another vs. Manjunatha Cotton & Ginning Factory (supra) we hold that the penalty imposed u/s 271(1)(c) of the Act was improperly imposed by the AO. While accepting the assessee’s legal ground, we are not going into the merits of the penalty of the penalty.
In the final result, the appeal of the assessee stands allowed.
(Order pronounced in the open court on 28th June, 2018).