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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 31.10.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
The grounds raised by the assessee are as under: “(1) On the facts and in the circumstances of the case and in law, the Ld, CIT(A) erred in confirming the levy of penalty amounting to Rs. 2,10,000/- u/s. 271(l)(c) of the Income-tax Act, 1961.
(2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming penalty u/s. 271(l)(c) of the Income-tax Act, 1961: a) Even though the A.O. had violated the principles of natural justice inasmuch as he initiated penalty proceedings for furnishing of inaccurate particulars of income yet levied penalty for famishing false information leading to concealment of particulars of income thereby not providing the appellant opportunity to meet the grounds raised against him. b) As the basis for initiation of penalty is not identical with the ground on which the penalty was imposed, the said imposition of penalty is not valid.
Without prejudice to the above:
(3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A), erred in confirming penalty u/s. 271(1)(c) of the Income-tax Act, 1961 even though there was no motive or incentive to conceal any particulars of income as the appellant had incurred huge losses and filed a nil return of income.
(4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming penalty u/s. 271(l)(c) of the Income-tax Act, 1961 even though the appellant furnished all the facts pertaining to income before the Ld. A. O. and did not conceal any particulars of income.
(5) On the facts and in the circumstances of the case and in law, the Ld, CIT(A) has erred in confirming penalty u/s. 271(l)(c) of the Income-tax Act, 1961 even though interest income. amounting to Rs.30,422/- being interest u/s. 244A of the Act was not included in the total income due to oversight as the said amount was not reflected in the Form 26AS.
(6) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming penalty u/s. 271(1)(c) of the Income-tax Act, 1961 even though capital gain of Rs. 6,00,0007- on the sale of land and building was inadvertently offered by the appellant in A. Y. 2013-14 due to accounting error and not with any motive or intention for concealment.
(7) The Appellant craves to add, alter or delete all or modify any or all the above grounds of appeal.”
3. The assessee has also raised additional ground which is as under: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the levy of penalty amounting to Rs. 2,10,0007- u/s 271(l)(c) of the Income-tax Act, 1961.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming penalty u/s 271(1 )(c) of the Income-tax Act, 1961:
a) Even though the Ld. A.O. had violated the principles of natural justice in as much as he initiated penalty proceedings for furnishing inaccurate particulars of income yet levied penalty for furnishing false information leading to concealment of particulars of income thereby not providing the appellant opportunity to meet the grounds raised against him. b) As the basis for initiation of penalty is not identical with the ground on which the penalty was imposed, the said imposition of penalty is not valid.”
After hearing both the parties on the maintainability of the additional ground, we find that the issue raised by the Ld. Counsel is a legal issue arising out of assessment record which was before the authorities below and which do not require any further verification of facts. We, therefore, are inclined to admit the same for adjudication.
The issue raised in additional ground is that the AO has initiated penalty proceedings for furnishing of inaccurate particulars of income but levied penalty for furnishing false information leading to concealment of particulars of income thereby not providing the assessee opportunity to reply on this specific charge qua the limb of penalty on which it was proposed and ultimately levied.
The facts in brief are that the penalty has been levied under section 271(1)(c) in respect of additions made towards interest on income tax refund of Rs.30,422/- and capital gain of Rs.6 lakhs which were not offered in return of income. From the assessment order dated 12.03.2015 it is clear that in respect of both the additions the penalty has been initiated for furnishing of inaccurate particulars of income. The notice dated 12.03.2015 was issued under section 274 read with section 271 wherein the AO has not struck off the relevant part and/or marked the relevant limb of the two on which the penalty was proposed to be levied. Thereafter the penalty order was passed dated 28.09.2015 on which the AO has levied penalty for concealment of income of Rs.2,10,000/-. The said penalty was also affirmed by the Ld. CIT(A).
After hearing the rival parties and perusing the relevant material on record, we find from the perusal of the notice that AO has not marked one of the two limbs on which the penalty as being proposed to be levied and thus this is a clear violation of principle of natural justice by not confronting the assessee with respect to the limb on which the penalty was proposed and ultimately levied. In other words the AO has not specified the specific charge in the notice issued under section 274 read with section 271(1)(c) for initiation of penalty which a sine qua non for initiating and levying penalty and therefore the notice is not a valid notice and is bad in law. The case of the assessee is squarely covered by the Hon’ble Bombay High Court in the case of CIT vs. Samson Perincherry in of 2014 and others dated 05.01.2017 wherein it has been held that the AO should be clear as to which of the two limbs to which the penalty is imposable. The High Court has held that it is not opened to the AO to initiate penalty on the one limb for furnishing of inaccurate particulars of income and imposed the penalty on the other limb i.e. concealment of income and thus constituted a non application of mind on the part of the AO while issuing penalty notice and therefore the same is bad in law and penalty has to be deleted. The case of the assessee is also supported by Hon’ble Karnataka High Court in the case of CIT and Anr. vs. Manjunath Cotton & Ginning Factory (2013) 359 ITR 565 (Kar.) dated 13.12.2012 wherein the High Court has held that the AO while issuing notice has to come to this specific conclusion whether the penalty is to be imposed for concealment of income or for furnishing of inaccurate particulars of income as both these charges have different meaning and any failure on the part of the AO to mention the particular limb on which penalty is being proposed to be levied is a non application of mind on the part of the AO. The assessee’s case is also supported by the decision of the Hon’ble Karnataka High Court in the case of CIT vs. M/s. SSAs Emerald Meadows ITA No.380 of 2015 which is affirmed by the Hon’ble Supreme Court in SLP No.11485/2016 dated 23.11.2015 wherein it has been held as under: “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(l)(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(2)(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 COMMISSIONER OF INCOME TAX -VS- MANJVNATHA COTTON AND GINNING FACTORY (2013) 359ITR 565.
4. In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed.” In view of the above said facts and ratio laid down by the various judicial forums, we set aside the order of Ld. CIT(A) and direct the AO to delete the penalty. Since we have already deleted the penalty on the legal issue in favour of the assessee, the issue raised on merit need no adjudication.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 29.10.2018.