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Income Tax Appellate Tribunal, DELHI BENCH “A” BENCH NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI L.P. SAHU
ORDER PER AMIT SHUKLA, JUDICIAL MEMBER:
The aforesaid appeals have been filed by the above named assessees against the separate impugned order of even date, 31.1.2013, passed by Learned CIT(Appeals)-II, Dehradun, in relation to the penalty proceedings u/s 271(1)(c) for the A.Y. 2007-08. Since Page 1 of 10 the assessee’s issues involved in both the appeals are common arising out of the identical facts, therefore, the same were heard together and are being disposed off by way of consolidated order.
As a lead appeal we are taking up Shri Anil Kumar Sabhwaral, the assessee is mainly aggrieved by the levy of penalty of Rs. 14 lacs on account of short term capital gain on sale of land and building.
Before us the ld. counsel Shri Somil Aggarwal pointed out that the total addition made on account of short term capital gains by the Assessing Officer was received of Rs. 35,90,800/- which now reduced to Rs. 28,90,800/- by the Learned CIT(Appeals) against which the assessee had not preferred any appeal and revenue’s appeal got dismissed from the Tribunal. The other additions made by the Assessing Officer on account of unexplained in purchase of land and in cost of improvement the same stands deleted. From the stage of Learned CIT(Appeals) and no delay was filed by the department. The third issue of penalty is only with regard to the addition of Rs. 20,30,800/- on account of short term capital gains. At the outset, he raised a legal issue that the initiation of levy of penalty u/s 271(1)(C) by the Assessing Officer is bad in law in as much as the Assessing Officer while initiating the penalty proceedings and while in issuing the notice has properly framed the charge i.e. whether the penalty is being initiated for furnishing of inaccurate particulars of income or concealment of the particulars of the income. He drew our attention to the copy assessment order dated 1.12.2011 wherein the Assessing Officer has simply that mentioned that penalty proceedings u/s 271(1)(c) as initiated separately. In the penalty notice that date Page 2 of 10 1.12.2011, the ld. Assessing Officer has not stroked off of the inapplicable clause i.e. whether the initiation is on concealment of the particulars of the income or furnishing of inaccurate particulars. Finally, the penalty has been levied by the Assessing Officer on the charge of concealment of income. Thus, the said penalty order cannot be sustained because the Assessing Officer was not specific at the time of initiation of penalty about the charge in which penalty is being initiated. In support of his contention he relied upon the following decisions:-
• CIT vs. SSA ’S Emerald Meadows in of 2015 dated 23.11.2015 (Kar)(HC) • SLP dismissed by Hon ’ble Apex Court in CIT vs. SSA S Emerald Meadows dated 05.08.2016 • Safina Hotels Pvt. Ltd. vs. CIT, (2016) 237 Taxman 702 (Kar)(HC). • Dines h Chand Sharma vs. AC IT in ITA No 5521/Del/2016 dated 19.04.2017, ITA T Delhi bench. • M/s Parinee Developers Pvt. Ltd. vs. A CIT, ITA No. 6772/Mum/2013, date of order 11.09.2015. Page 1 • Sh. Hafeez S. Contractor vs. ACIT, ITA No. 6222,6223/Mum/2013, date of order 02.09.2015.
In the said judgments, the Hon'ble Courts have held that if the notice issued by the Assessing Officer u/s 274 read with section 271(1)(c) does not specify under which limb of section 271(1)(c). The penalty proceedings had been initiated, the penalty levied would be bad in law.
On the other hand the ld. DR submitted that what is required to be seen the penalty order wherein it is clear penalty has been levied for concealment of income. He further submitted that here in Page 3 of 10 this case, the assessee had not disclosed the sale of capital asset in the return of income and therefore even if the addition has been reduced the fact remains that the assessee had not shown the short term capital gain in the return of income at all. Therefore, the penalty has rightly been initiated and levied by the Assessing Officer and also which has been confirmed by the Learned CIT(Appeals).
We have heard the rival submissions qua the legal issue raised by the counsel that the initiation of levy of penalty u/s 271(1)(c) is bad in law and is without the application of mind. From the perusal of the assessment order dated 1.10.2011 passed u/s 147/143(3), we find that the Assessing Officer has mentioned about the initiation of penalty proceedings separately under section 271(1)(c). Nowhere, in the assessment order he has recorded his satisfaction as to whether the penalty is being initiated by him either for concealment of particulars or for furnishing of inaccurate particulars of income. Similarly, the notice issued u/s 271(1)(c) read with section 274 dated 1.12.2011 the Assessing Officer has not specified the charge under which he proposed to initiate the penalty u/s 271(1)(c) i.e. he did not specified under which limb of the said section, he intends to initiate the penalty proceedings. The Assessing Officer has not striked off any applicable clause in the said notice of section 271(1)(c) envisages the levy of penalty on two distinct limbs i.e. when the Assessing Officer in the course of any proceedings is satisfied that any person has “concealment of particulars of income” or “furnished inaccurate particulars of such income”. Both the charge framed against the assessee under both the limbs to operate in two different situations for example concealment of particulars of income to include the cases like false deduction and exemption claimed by the assessee Page 4 of 10 then the return of income. The concealment involves knowledge on part of the assessee of the real income while giving or disclosing the particulars of income. The furnishing of inaccurate particulars of income that item which has been shown in the return of income but is not correct or has been wrongly shown. The Assessing Officer when issues the notice to the assessee, then he must disclose to the assessee about the charge on which he proposed to initiate or levy of penalty. The show cause notice issued should be without any ambiguity it has to be very specific. The Hon'ble Karnataka High Court in the case of CIT vs. Manjunath Cotton Ginning Factory reported in 2013 359 (Kar) 565 have discussed this issue in detailed. The relevant observation of the Hon'ble Tribunal in this regard reads as under:-
“59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form Page 5 of 10 where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee.
Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing 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 drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds 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 offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be Page 6 of 10 determined with reference to the information, facts and materials in the hands of the authority imposing the 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 which, when passed, was not sustainable.
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 under clause (c). Concealment, furnishing inaccurate particulars of 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 a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING 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 standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind.”
This judgment of the Hon'ble Karnataka High Court reported by the same court in the case of CIT vs. M/s. SSA’S Emerald Meadows in order dated 23.3.2015 and also in the case of Safina Hotels (P) Ltd. vs. CIT (2016) 137 DTR 0089, Hon'ble Karnataka High Court following the said judgments of ITAT Delhi Benches also several cases as cited by the Learned Counsel have followed the same ratio. Here in this case, as discussed above there is no satisfaction of the income or furnishing of inaccurate Page 7 of 10 particulars of income and this shows that he is applied his mind or come proper conclusion before initiating and levy the penalty. [171 taxman156].
The Hon'ble Delhi High Court in the case of CIT vs. Virgo Marketing Pvt. Ltd. reported in 2008 171 taxman. 156 have reiterated the same principle wherein held that the assessment order must clearly indicate as to under which part of section 271(1)(c). The Assessing Officer chooses to initiate the penalty proceedings against the assessee. Thus, we hold that here in this case the Assessing Officer has not specified the charge at the time of initiation of penalty proceedings which goes to show that he did not applied his mind or was specific about his satisfaction under which limb he intends to initiate or levy penalty. Thus, respectfully following the ratio laid down by the Hon'ble Karnataka High Court in the aforesaid cases which has been followed and carried out by the Benches we hold that initiation of penalty proceedings u/s 271(1)(c) and also levy of penalty of proceedings received of Rs. 14 lacs bad in law and therefore is quashed. Thus, the penalty levied by the Assessing Officer and confirmed by the Learned CIT(Appeals) is directed to be deleted.
In the case of Avatar Singh, it has been admitted by both the parties he has co-owner and exactly similar facts permeates in this case also wherein neither at the time of assessment order nor at the time of issuing of notice u/s 271(1)(c) read with section 274 as specified the charge under which he initiated the levy of penalty initiation. We are thus giving findings by applying mutatis mutandis, here in this case also. Therefore, initiation of penalty of Rs. 14 lacs is deleted.
In the result, the appeals of the assessee’s are allowed.
Order pronounced in the open court on 14.08.2017.