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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
This appeal preferred by the assessee is against the order of the Ld. CIT(A)-21, Kolkata dated 14.02.2018 for assessment year 2014-15 against the confirmation of penalty levied u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”).
At the outset itself, the Ld. Counsel drew our attention to the notice issued by the AO dated 18.10.2016 which is as under:
Prabhu Shankar Agarwal, AY 2014-15
Prabhu Shankar Agarwal, AY 2014-15 3. From a perusal of the aforesaid notice we find that though the AO had stricken off the charge – have concealed the particulars of income and has not stricken off the charge – furnishing inaccurate particulars of such income. We also note from perusal of the notice that several other faults like (i) failed to comply with the notices u/s. 142(1)/143(2) of the Act (ii) failed to furnish return of income given under notice u/s. 139(2)/148 of the Act etc. Therefore, as per the order of the Hon’ble Karnataka High Court in the case of CIT vs. SSA’s Emerald Meadows in of 2015 dated 23.11.2015 the penalty notice itself suffers from infirmity of not giving specific charge.
Even if we assume that the assessee had taken note of the fault of only notice for penalty i.e. “furnishing inaccurate particulars of such income” still we find that the AO while levying penalty vide para 5 and 6 of his order 21.03.2017 has held as under: “5. The penalty proceedings was fixed for hearing on 17.11.2016 at 01.30 PM vide penalty notice dated 18.1.2016, in reply to the said notice the assessee has submitted a letter along with a copy of challan of Rs.15,16,120/- as outstanding demand raised by order u/s. 143(3) on 18.10.2016 and only requesting to drop the penalty proceeding initiated u/s. 271(1)(c) for furnishing inaccurate particulars of income. Hence it may consider that the assessee has nothing to say against the penalty proceedings initiated u/s. 271(1)(c) of the I. T. Act and we have to decide on the merit of the case. 6. In view of the said facts, it is clearly seen that in this case, the assessee must be deemed to have concealed particulars of income within the meaning of explanation 5A to sec. 271(1)(c).” (emphasis given by us)
A perusal of the aforesaid order reveals that though the penalty notice was issued against the assessee for furnishing inaccurate particulars of income the AO has held the assessee to be at fault for concealing the particulars of his income which is illegal as held by the Hon’ble Bombay High Court in the case of CIT Vs. Shri Samson Perinchery in 953, 1097 and 1226 of 2014 dated 05.01.2017 wherein similar question of law was raised by the Department against the order of the Tribunal wherein their Lordships held as under: “2.All these appeals raises an identical question of law save the difference in the quantum, which read as under: “ Whether on the facts and in the circumstances of the caseand in law, the Tribunal was justified in deleting the penalty levied under Section 271(1)(c) of the IT Act, 1961?”
Prabhu Shankar Agarwal, AY 2014-15 3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-Assessee. This by holding that the initiation of penalty under Section 271 (1) (c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e: for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the, Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice. .
4. The impugned order relied upon the following extract of Karnataka High Court's decision in CIT vs. Manjunath Cotton and Ginning Factory 359 ITR 565 to delete the penalty:- “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 as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment 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 standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind.”
5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between Tweedledum and Tweedledee. In the above view, the deletion of the penalty, is justified.
6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai vs. CIT 292 ITR 11 [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 (1) (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 (1) (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 of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
Prabhu Shankar Agarwal, AY 2014-15 7. Therefore, the issue herein stands concluded. in favour of the Respondent-Assessee by the decision of the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunath Cotton and Ginning Factory (supra).
In view of the above, the question as framed do not give rise to any substantial question of law. Thus, not entertained.” Therefore, we find the penalty order passed by the AO is unsustainable in law and, therefore, has to be struck down and we do so. Moreover, we also note that the AO has taken the aid of Explanation 5A to sec. 271(1)(c) of the Act which is also bad in law because the said Explanation 5A is applicable only in case of an assessee where search has been initiated u/s. 132 of the Act on or after 1st day of June, 2007 where the assessee is found to be the owner of money, bullion etc. In this case, the assessee was not searched u/s. 132 of the Act. In the aforesaid facts and circumstances of the case as discussed above, the penalty notice and the penalty order suffer from legal infirmities as discussed above and, therefore, cannot be sustained in the eyes of law and therefore, we cancel the penalty order passed by the AO which has been erroneously confirmed by the Ld. CIT(A). Appeal of assessee is allowed.
In the result, appeal of assessee is allowed. Order is pronounced in the open court on 10.07.2018 Sd/- Sd/- (J. Sudhakar Reddy) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 10th July, 2018 JD(Sr.P.S.) Copy of the order forwarded to: 1. Appellant – Shri Prabhu Shankar Agarwal, P-420, Kazi Nazrul Islam Sarani, VIP Main Road, Kolkata-700 052. Respondent – DCIT, Central Circle-4(1), Kolkata. 2 3. The CIT(A)-21, Kolkata - (sent through e-mail)