EON AVIATION PVT. LTD.,MUMBAI vs. DCIT, 5(1), MUMBAI

1 ITA 3011/Mum/2016

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F”, MUMBAI

Before Shri Mahavir Singh(JUDICIAL MEMBER) AND Shri G Manjunatha (ACCOUNTANT MEMBER)

I.T.A No.3011/Mum/2016 (Assessment year: 2011-12)

Eon Aviation Pvt Ltd vs DCIT 5(1), Mumbai DB House, Gen. A.K. Vaidya Marg, Goregaon (E), Mumbai-63 PAN : AABCE8158R APPELLANT RESPONDENT

Appellant by Smt. Aarati Vissanji Respondent by Smt. Pooja Swaroop

Date of hearing 19-06-2018 Date of pronouncement 29-06-2018

O R D E R Per G Manjunatha, AM : This appeal filed by the assessee is directed against the order of

the CIT(A)-10, Mumbai dated 19-02-2016 and it pertains to AY 2011-12.

The assessee has raised the following grounds of appeal:-

“1. The Ld. CIT(A) erred in law and in facts in passing the order u/s. 250 of the Act and dismissing the appeal of the Appellant. 2. The Ld. CIT(A) and erred in law and in facts not appreciating that the provisions of Explanation 1 to u/s. 271{l)(c) of the Act can be invoked only in respect of concealment of particulars of income. 3. The Ld. CIT(A) erred in law and in facts in not appreciating that the initiation of penalty proceedings by the Assessing Officer was not in accordance with provisions of the Act. 4. The Ld. CIT(A) erred in law and in facts confirming the penalty levied by the Assessing Officer u/s. 271(l)(c) of the Act amounting to Rs. 79,05,625/-.”

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engaged in the business of hiring and renting of helicopters and

aeroplanes, filed its return of income for AY 2011-12 on 30-09-2011

declaring loss of Rs.39,84,49,162. The assessment has been

completed u/s 143(3) on 26-03-2014 determining total loss at

Rs.37,19,35,762 after making disallowance of Rs.2,63,52,083 towards

excessive claim of depreciation and bad debts and also disallowance of

expenses of Rs.1,61,316 u/s 40(a)(ia) for failure to deduct tax at source

on the basis of revised statement of total income filed by the assessee

during assessment proceedings. Thereafter, AO initiated penalty

proceedings u/s 271(1)(c) for furnishing inaccurate particulars of income

in respect of disallowance of claim of excessive loss being provision for

doubtful debts and loss on sale of fixed assets. Accordingly, the AO

issued show cause notice to the assessee to explain as to why penalty

shall not be levied for furnishing inaccurate particulars of income. In

response to show cause notice, assessee submitted that it has neither

concealed particulars of income nor furnished inaccurate particulars of

income in respect of excessive claim of loss on account of provision for

bad and doubtful debts and loss on account of sale of fixed assets as

the same has been withdrawn by filing revised statement of total income

before completion of assessment. Therefore, the same cannot be

3 ITA 3011/Mum/2016

considered as furnishing inaccurate particulars of income, which leads to

concealment of particulars of income. The AO, after considering

relevant submissions of the assessee and also relying upon certain

judicial precedents, including the decision of Hon’ble Delhi High Court in

the case of Zoom Communications India Ltd 327 ITR 510 (Del) held that

the assessee has deliberately filed inaccurate particulars of income

within the meaning of section 271(1)(c) of the I.T. Act, 1961 r.w.

Explanation 1 thereof and accordingly, levied penalty of Rs.79,05,625

which is 100% of tax sought to be evaded. The relevant portion of the

order of the AO is extracted below:-

“5. Explanation 1 to section 271(l)(c) automatically comes into operation i'ri respect of any facts material to the computation of the total income of any person, when there is failure to offer any explanation, or an explanation offered is found to be false, or not substantiated, as held in the case of CIT Vs. A Sreenivasa Pai 242 ITR 29 (Kerala). The Hon'ble Kerala High Court further held that the amount added or disallowed in computing the total income is deemed to represent the income in respect of which the particulars have been concealed. As per the provisions of the Explanation 1, the onus to establish that the explanation offered was bona fide "and all facts relating to the same, and material to the computation of his income, have been disclosed by him, will be on the person charged with'.'Concealment. In this connection, further reliance is placed on the case of Western Automobiles (India) Vs CIT (112 ITR 1048) wherein the Bombay High Court has held that where the assessee agree to inclusion of amount, onus shifts on assessee in penalty proceedings to show that the amount was not the concealed income. Hon'ble Delhi High Court in the case of Durga Timber Works Vs CIT (79 ITR 63) has held that it would amount to laying an impossible burden1 of proof " on Department and making provisions for imposition'; of penalty wholly unworkable, if even after admission by assessee that certain amount could be treated as its income, the Department has still to "prove by independent evidence that the assessee had concealed its income. Further, the Hon’bie MP High Court in the case of Additional Commissioner of Income Bhartiya Bhandar (122 ITR 622) has held that the Tribunal was .not right in holding that even in the presence of admission 'by the assesse,the Department should prove its independent evidence that the represented the concealed

4 ITA 3011/Mum/2016

income of the assessee. 6. It is clear that enough material was brought on; record to prove that the assessee made a conscious attempt to evade taxes by; furnishing inaccurate particulars of income. Hence it is justified to levy penalty u/s.271(1)(c) of thd IT Act, 1961. 7. In a recent decision of the larger bench of the Hon’ble Supreme Court in the case of CIT Vs M/s. Dharmendra Processors (306 if R 277) it was held that levy of penalty is a civil liability and willful concealment is not essential ingredient for attracting a civil liability as in the matter of prosecution u/s.276C of the Act. It was held by the Hon'ble Supreme Court after considering, the provisions of section 271(l)(c) and the explanation appended thereto that “The explanations appended to section 271(l)(c) of thec Income- tax Act entirely indicate the element of strict liability on the assessee for concealment or for giving inaccurate particulars while filing the return. THie judgement in Dilip; N Shroff's case(2007) 8 Scale 304(SC) has not considered the effect and relevance of section 276C of the Income-tax Act. The object behind the enactment of section 271(l)(c) read with the explanation indicates said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Willful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under section 276C of the Income-tax Act.: .Further, the High Court of Delhi in the case of CIT vs. Zoom Communication (P)ltd. 327JITR 510 has held as under:- "So long as the assessee has not concealed any material fact or the factual information given by him has not been found to.be incorrect, he will not be liable to imposition of penalty under s. 271(1)l(c), even if not substantiated, is found to be bona fide. If the explanatgion is neither substantiated, is found to be bona fide, Expln.1 to s.271(1)(c) would come into play and the assessee will be liable to the prescribed penalty.

The assessee concerned Is a company which declared an income of Rs.1,21,49,861 and accounts of which are mandatorily subjected to audit. It is not the case of the assessee that it was advised that the amount of income-tax paid by it could be claimed as a revenue,.expenditure. It is also not the case of the assessee that deduction of income-tax paid by it was debatable issue. In fact, in view of the specific provisions contained in s. 40(a)(ii), no such advice could be given by an auditor or other tax expert. No such advice has been claimed by the assessee even with respect to the amount claimed as deduction on account of certain equipment having become useless and having been, written off. The Tribunal was entirely wrong in saying that s. 32(l)(iii) applies to such a deduction. Thus it was the Tribunal which took the view that s. 32(1)(ii) could be attracted to the deduction claimed by the assessee. It is also not the case of the assessee that it was under a bona fide belief that these two amounts could be: claimed as revenue expenditure. The assessee, in fact, outrightly conceded before the AO that these amounts could not have been claimed as revenue deductions. The only plea.taken by the dssessee before fhe IT. authorities was that it was due to oversight that the amount of income-tax paid by the assessee as well as the amount claimed as deduction on account of certain equipment being written off could not be added back in the computation of income, it is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the

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assessee, but it cannot be disputed that the claim-made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Expln. 1 to s. 271(1) would come in to play and work to the disadvantage of the assessee…” 8. In view of the above facts and circumstances of the case and in law, I am of the opinion that the Assessee Company 'has deliberately filed inaccurate particulars of income within the meaning of section 271 (l)(c) of the I T Act, 1961 read with Explanation 1 thereto. From the above it it can be concluded that the assessee filed inaccurate particulars.and sought to evade tax on Rs. Rs. 2,63,52,083/-. I, therefore, hold that assessee has sought to evade tax on Rs. Rs. 2,63,52,083 /- and penalty u/s. 271 (l)(c) read with explanation 1 of the IT Act, 1961 is attracted in its case. I therefore, hold the assessee as a defaulter u/s.271 (l)(c) and accordingly I levy penalty asunder:- 9. The calculation of tax sought to be evaded is.as under:- Income sought to be evaded - Rs. 2,63,52,0837 Tax thereon - Rs. 79,05,625/- Minimum Penalty @ 100% - Rs, 79,05,625/- Maximum Penalty @ 300% - Rs. 2,37,16,8757- Considering the facts of the case I am satisfied that minimum penalty of Rs. 79,05,625/- be levied in he case ofhe assessee.,1 therefore direct: the assessee to pay a sum of Rs. 79,05,625/- by way of penalty u/s. 271(l)(c) of the I.T. Act, 1961. Issue demand notice and challan accordingly.”

the CIT(A). Before the CIT(A), the assessee submitted that the AO has

levied penalty without recording specific satisfaction as to which limb of

the penal provisions u/s 271(1)(c) attracts which is evident from the fact

that the notice issued u/s 274 r.w.s. 271(1)(c) is vague in nature. The

assessee further submitted that the AO has not deleted or struck off

inapplicable portion in the notice which is a clear case of non application

of mind by the AO before initiation of penalty proceedings u/s 271(1)(c).

The assessee further submitted that the AO has levied penalty for

6 ITA 3011/Mum/2016

furnishing inaccurate particulars of income by invoking provisions of

Explanation 1 which relates to case of concealment of particulars of

income, therefore, levying of penalty on the basis of furnishing of

inaccurate particulars of income is incorrect. Even on merits, assessee

submitted that it has filed necessary materials required for computation

of income in the return of income, therefore, the AO was incorrect in

holding that the assessee has furnished inaccurate particulars of income

in respect of excessive claim of loss on account of provision for bad and

doubtful debts and loss on sale of fixed assets without appreciating the

fact that those items are part of regular return filed by the assessee,

though the claim made by the assessee is not substantiated under law.

The Ld.CIT(A), after considering relevant submissions of the assessee

held that if the assessee has furnished the explanation but such

explanation is not satisfactory or true, then the AO can reject such

explanation and proceed to levy penalty u/s 271(1)(c). In this case, AO

has levied penalty on two counts, i.e. firstly, the excess claim of loss has

come to light only due to the findings of the AO during the course of

assessment proceedings, but not by voluntary act of the assessee.

Secondly, it is clearly evident that had the case not been selected for

scrutiny, the excess loss claimed by the assessee would not have seen

the light of the day. Therefore, the Ld.CIT(A) opined that the AO was

7 ITA 3011/Mum/2016

correct in levying penalty u/s 271(1)(c) for furnishing inaccurate

particulars of income. Aggrieved by the order of CIT(A), the assessee is

in appeal before us.

is squarely covered in favour of the assessee on technical grounds by

numerous decisions of High Courts and Tribunals, where the Courts

have taken a consistent view that if the AO levied penalty on invalid

notice without striking off irrelevant portion in the notice, then the whole

proceedings is vitiated, consequently, penalty levied u/s 271(1)(c)

cannot survive. The Ld.AR referring to the decision of ITAT in the case

of M/s Tata Communications Transformations Services Ltd vs DCIT in

ITA No.3108/Mum/2016 dated 21-02-2018 submitted that the said

decision has considered the law laid down by the Hon’ble Supreme

Court in the case of CIT vs SSA’s Emerald Meadows (2017) 242

Taxman 180 (SC) and also the decision of Karnataka High Court in the

case of CIT vs Manjunatha Cotton & Ginning Factory (2018) 218

Taxman 423 where it was held that the penalty proceedings initiated u/s

271(1)(c) without valid notice is a clear case of non application of mind

by the AO and consequent levy of penalty u/s 271(1)(c) cannot survive.

CIT(A) submitted that the CIT(A) has brought out clear facts to the effect

8 ITA 3011/Mum/2016

that although the AO has not framed the assessee under a particular

charge, at the time of initiation of penalty u/s 271(1)(c), but while levying

penalty u/s 271(1)(c), the AO clearly levied penalty for furnishing

inaccurate particulars of income in respect of excess claim of loss on

account of provision for bad and doubtful debts and loss on sale of fixed

assets within the meaning of Explanation 1 to section 271(1)(c).

Therefore, there is no merit in the argument of the assessee that the

whole penalty proceedings is vitiated merely for the reason that the initial

notice issued by the AO is not struck off all inappropriate portion in the

said notice. In this regard he relied upon the decision of Hon’ble

Bombay High Court in the case of CIT vs Smt Kaysalya & Others (1995)

216 ITR 650 (Bom) and also the decision of Bombay High Court in the

case of Maharaj Garage Company vs CIT in Income Tax Reference

No.21 of 2008 dated 22.08.17.

on record. The issue of invalid notice issued u/s 274 r.w.s. 271(1)(c)

and consequent penalty proceedings is liable to be quashed is no longer

an issue res integra. The Hon’ble Karnataka High Court in the case of

CIT vs Manjunatha Cotton & Ginning Factory (supra) has clearly held

that issue of penalty notice under one limb and levying penalty on

another limb is a clear case of non application of mind by the AO. The

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Hon’ble Supreme Court in the case of CIT vs SSA’s Emerald Meadows

(supra) has dismissed SLP filed by the department in the light of ratio

laid down by Hon’ble Karnataka High Court in the case of CIT vs

Manjunatha Cotton & Ginning Factory (supra). Thus, the law is very

clear inasmuch as the issue of vague notice issued u/s 274 r.w.s.

271(1)(c) before levy of penalty u/s 271(1)(c). The co-ordinate bench of

ITAT, Mumbai Bench “H” in the case of M/s Tata Communications

Transformations Services Ltd vs DCIT (supra) has considered the issue

in the light of various decisions rendered by Hon’ble Supreme Court and

Bombay High Court and held that penalty proceedings initiated u/s 274

r.w.s. 271(1)(c) without striking off irrelevant portion of notice is a clear

case of non application of mind by AO as to whether the penalty has

been initiated for concealment of particulars of income or for furnishing

inaccurate particulars of income. The relevant portion of the order is

extracted below:-

“7. We have heard both the parties, perused materials available on record and gone through the case laws cited by both the parties. The assessee has challenged penalty order passed by the AO under section 271(l)(c) on the ground that the AO has issued vague notice without striking off inappropriate portion in the notice whether the penalty has been levied for concealment of particulars of income or furnishing of inaccurate particulars of income, therefore, the penalty levied on such vague notice cannot survive. We find that the issue of notice under section 274 r.w.s 271(l)(c) has been dealt by this Tribunal in various cases including in the case of M/s. Cenzar Industries Ltd. vs. ITO in ITA No.l970/M/2015 dated 29.12.17 wherein after considering the relevant facts and also relied upon various judicial precedents including the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) and also the decision of Hon'ble Bombay

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High Court in Ihe case of Shri Samson Perinchery vs. ACIT (supra), has held that penalty proceedings initiated under section 271(l)(c) is void ab initio and liable to be quashed, if the AO issued vague notice under section 274 r.w.s 27I(l)(c) without striking off irrelevant portion of notice and also if the AO has not made a specific charge whether penalty proceeding is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. The relevant portion of order is extracted below: "10. We have heard the rival submissions, perused the material available on record and also gone through the orders of authorities below. The AO has levied penalty u/s 271(l)(c) in respect of disallowance of reimbursement of selling and distribution expenses on the ground that the assessee has concealed particulars of income and also furnished inaccurate particulars of income. The AO has initiated penalty by issuing notice u/s 274 r.w.s. 271(l)(c) in a printed form without striking off of irrelevant portion which were not applicable to the facts of assessee's case. The AO has issued notice which states that penalty has been initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. In the assessment order, the AO has initiated penalty proceedings on both charges, i.e. for concealing the particulars of income and furnishing inaccurate particulars of income. The AO levied the penalty on both the charges, i.e. for concealing the particulars of income and furnishing inaccurate particulars of income. Right from the assessment stages to levy of penalty, the AO has initiated penalty on both charges which is not the case as per the provisions of section 271(l){c) as the two charges, i.e. concealment of particulars of income or furnishing of inaccurate particulars of income are two different connotations. The issue of notice u/s 274 r.w.s. 271(l}(c) goes to the root of the matter of assuming jurisdiction to levy penalty u/s 271(l)(c), therefore, before issuance of notice, the AO has to arrive at a satisfaction as to whether penalty proceedings are initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. The AO cannot take both the charges for levying penalty by stating that the assessee has concealed particulars of income and also furnished inaccurate particulars of income. 11. The provisions of section 271(l)(c) are very clear and there is no ambiguity. On a plain reading of section 271(l)(cl, it is very clear that clause (c) deals with two specific offences, that is to say, concealment of particulars of income or furnishing of 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 initiating penalty proceedings for one offence and finding the assessee guilty of another offence or holding him guilty for either one or the other cannot be sustained in law. This legal proposition is clearly reiterated by the Hon'ble Karnataka High Court in the case of Manjunatna Cotton & Ginning Factory Ltd (supra) wherein it was categorically held that satisfaction of the existence of the grounds mentioned in section 271fl)(cl when it is a sine qua non initiation of proceedings, the penalty proceedings should be confined only to those grounds and the said ground should be specifically stated so that the assessee would have the opportunity to meet those grounds. Initiation of penalty on one ground and levying penalty on another ground would cause injustice to the assessee as the assessee was kept in blank to justify his case whether the AO sought to initiated penalty for concealment of particulars of income or furnishing of inaccurate particulars of income. If the proceedings are initiated on a specific charge, then, the assessee can justify its case by advancing arguments on the charge framed by the AO. Thus, once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. If penalty proceedings are initiated on one ground and levied penalty on different ground or penalty proceedings are initiated on two grounds, i.e. concealment of particulars of income and also furnishing of inaccurate particulars of income would definitely vitiate the entire penalty proceedings. 12. In this case, on perusal of the facts available on record it is abundantly clear that the AO has initiated penalty proceedings in the assessment order on both the grounds, i.e. concealment of particulars of income and also furnishing of inaccurate particulars of income. The AO also levied penalty on both the grounds of concealment of particulars of income and also furnishing of inaccurate particulars of income which

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is quite contrary to the provisions of section 271(lj(c) where it was categorically stated that both the charges are standing in a different footing and the AO has to initiate penalty proceedings for concealment of particulars of income or furnishing of inaccurate particulars of income. Initiation of penalty by injecting and in place of or would definitely go against the basic provisions of the Act. In this case, the AO has initiated penalty on both the grounds, which cannot be the case for initiation of penalty u/s 271(l)(c) of the Act. We further observe that it is not open to the authority, at the time of imposing penalty to impose penalty on the ground 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 violate principles of natural justice and cannot be sustained. The validity of order of penalty must be determined with reference to the information, facts and materials in the possession of the authority imposing penalty at the time, the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty. The AO 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. As already stated, facts of some cases may attract both the offences. In case, the AO has made multiple additions, one may relates to concealment of particulars of income and another may relate to furnishing of inaccurate particulars of income, but single addition made cannot lead to an inference of concealment of particulars of income and furnishing of inaccurate particulars. Therefore, we are of the considered view that before initiation of penalty proceedings, the AO has to arrive at a correct satisfaction as to whether penalty is initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. If the AO fails to initiate penalty proceedings by issuance of proper notice, then the whole penalty proceedings becomes vitiated and void ab initio. 13. Coming to the case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory vs CIT (supra), wherein the Hon'ble High Court has categorically observed that sending printed form of notice where all the grounds mentioned in section 271(l)(c) are mentioned would not satisfy requirement of law. Notice issued u/s 274 of the Act should specifically state the ground mentioned in section 271(l)(c), i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. Initiating the penalty proceedings on one limb and holding the assessee guilty of another limb is bad in law. The relevant portion of the order is extracted below:- " 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 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 as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported (2007) 292 ITR 11 (SC) at page 19 has held that concealnment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P.Ltd., reported in 171 Taxman 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 proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The stand and proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." 14. The assessee has relied upon decision of Hon'ble Bombay High Court in the case of CIT vs Samson Perinchery in Income Tax Appeal No.1154 of 2014 & Ors order dated 5th January, 2017. The Hon'ble Bombay High Court after considering the ratio laid down by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) observed that the satisfaction of the AO with regard to only one of the two breaches mentioned in section 271(l}(c) of the Act for initiation of penalty proceedings will not warrant / permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated / notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground on which the penalty

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proceedings has been initiated and it cannot be on a fresh ground of which assessee has no notice. The relevant portion of the order is extracted below:- "The above submission on the part of the Revenue is in the the decision of the Supreme Court in Ashok Pal v/s. CIT 292 ITR [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(lj(c) of the Act, carry different meanings/ connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(l)(c) of the Act, for initiation of penalty proceedings will not warrant/ permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated / notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated and it cannot be on a fresh ground of which assessee has no notice." 15. The assessee has also relied upon the decision of Hon'ble Supreme Court in the case of CIT vs SSA's Emerald Meadows (supra) wherein the Hon'ble Supreme Court dismissed SLP filed by the revenue by following the decision of the Karnataka High Court in the case of CIT vs Manjunatha Cotton & Ginning Factory (supra) by observing that notice issued u/s 274 r.w.s. 271(l)(c) was bad in law as it did not specify under which limb of section 271(lHc), penalty proceedings had been initiated. 16. Coming to the case laws relied upon by the Ld. DR. The Ld. DR relied upon the decision of Hon'ble Bombay High Court in the case of CIJ_vs Smt.Kaushalya (supra). We have gone through the case law relied upon by the Ld. DR in the light of the facts of the present case and find that the ITAT, Mumbai in the case of DCIT vs Dr. Sarita Milind Davare in ITA No.l789/Mum/2014 dated 21-12-2016 has considered the decision rendered by Hon'ble Bombay High Court in the light of Supreme Court judgement in the case of Dilip N Shroff 291 ITR 519 (SC) and observed that there should be application of mind on the part of the AO at the time of issuing notice. Since the co-ordinate bench has already considered the judgement of Hon'ble Bombay High Court, we are of the view that case law relied upon by the Ld.DR is not applicable to the facts of the'present case."

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we are of the considered view that the penalty proceedings initiated by the AO by issue of notice under section 274 r.w.s 271(l)(c) without striking off the irrelevant portion of notice is a clear case of non application of mind by the AO, whether penalty has been initiated for concealment of particulars of income or furnishing of inaccurate particulars of income. We further noticed that the AO has issued printed form of notice without striking off irrelevant portion and also in the penalty order he does not specify under which charge penalty has been initiated. Therefore, we are of the considered view that the penalty proceeding initiated by the AO is bad in law and liable to be quashed. Hence, we quash the penalty proceedings and delete penalty levied by the AO under section 271(l)(c) of the Act.” 7. In this view of the matter and consistent with the view taken by the

co-ordinate bench, we are of the considered view that the AO has

initiated penalty u/s 271(1)(c) by issuing show cause notice u/s 274

without striking off inapplicable portion in the notice. Therefore, it is a

clear case of non application of mind by the AO as to whether penalty

has been initiated for furnishing of inaccurate particulars of income or

concealment of particulars of income. Even in the penalty order, the AO

has levied penalty under Explanation 1 to section 271(1)(c) which is

applicable for deemed concealment of particulars of income. Therefore,

we are of the considered view that the AO was not clear while initiating

penalty u/s 271(1)(c) and hence, the whole penalty proceedings is

vitiated and consequently, penalty levied by the AO u/s 271(1)(c) cannot

survive. Hence, we direct the AO to delete penalty levied u/s 271(1)(c)

of the Act.

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Order pronounced in the open court on 29th June, 2018.

Sd/- sd/- (Mahavir Singh) (G Manjunatha) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dt : 29thJune, 2018 Pk/- Copy to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR /True copy/ By order Sr.PS, ITAT, Mumbai