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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI R.C SHARMA & SHRI SANDEEP GOSAIN
Date of Hearing-27.10.2017 Date of Order-17.11.2017 O R D E R PER: SANDEEP GOSAIN, JUDICIAL MEMBER. This appeal filed by the revenue is directed against the order of the Ld. CIT(A)-16, Mumbai, dated 27.03.2015 for AY 2010-11 on the grounds mentioned herein below:- ./2015 Anchor Daewoo Industries Ltd., i) "Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the penalty levied by AO by placing reliance on the case of CIT vis. Aleo Manali Hydro Power P. Ltd 38 Taxmann.Com 288 since in the judgement relied upon by CIT(A), the addition was made under normal provisions of the Act and penalty levied on the same which did not have a tax effect as the company was paying tax under MAT whereas in the present case, the addition has been made on the book profits of the assessee company which has made the assessee liable to pay tax under MAT thereby raising a tax demand of Rs.12,05,73,210/- on which the assessee did not prefer any appeal and paid due taxes and penalty was levied on the addition made which actually resulted in evasion of taxes." ii) "Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the penalty levied by the AO thereby ignoring the fact that the assessee company adopted a dubious method of avoidance of taxation on its book profits by making a patently ineligible and inaccurate claim under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB of the Act." iii) "Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the penalty levied by the AO without appreciating the factual findings given by the AO in Para No.2 to Para 4 of his penalty order and Para 3 of his assessment order which clearly bring out the fact that the assessee had adopted a colourable and dubious method to a avoid payment of due taxes." iv) "Whether on the facts and in the circumstances of the case, the Ld. CIT-(A) erred in deleting the penalty levied by the AO without ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., appreciating that the assessee had made a patently ineligible and inaccurate claim under clause (vii) below Explanation (1) to sub- section (2) of Section 115JB of the Act whereas the fact is that the assessee was never registered or declared a sick industrial company u/s. 17(1) of SICK which is also not disputed by the assessee."
The appellant prays that the order of the CIT(A) on the aboveground above set aside and that of the A.O. be restored.
The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.
Brief facts of the case are that the return of income was e-filed by the assessee on 14.10.2010 declaring total income at Rs. Nil. After claiming set off of brought forward business losses to the extent of business income available of Rs.80,64,65,098/- and claiming carry forward of net short term capital loss to the tune of Rs.48,83,884/-. In its return of income, the assessee had declared book profit u/s. 115JB of the Act, at Rs. Nil. In the course of scrutiny proceedings, it was noted by the AO that the assessee had declared book profit at Rs. Nil after claiming the reduction of Rs.80,53,63,722/-, under clause (vii) below Explanation (1) to sub-section (2) Section 115JB(2) of the I.T. Act, 1961. It was found by the A.O that there was no evidence on record that the assessee company ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., had become sick industry company within the meaning of Section 17(1) of the sica (special provisions) 1985. After verifying the claim raised by the assessee, it was held that the assessee was not eligible for reduction of book profit under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB of the Act. Accordingly, the book profit was recomputed denying the claim made by the assessee under the above provisions. It the time of passing the assessment order, proceedings u/s. 271(1)(C) of the I.T. Act, 1961, were also initiating on the assessee claims of reduction of Rs.80,53,63,722/- from its book profit under clause (vii) below Explanation (1) to sub-section (2) Section 115JB of the Act. After serving notices and seeking reply, penalty of Rs.13,68,71,560/- was levied by the AO holding that the assessee has furnished inaccurate particulars of income thereby, suppressing its real income vide order dated 31.07.2013.
3. Aggrieved by the order of levy of penalty passed by the DCIT, the assessee preferred an appeal before Ld. CIT(A). The CIT(A) after considering the case of both the parties had ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., allowed the appeal filed by the assessee and deleted the penalty u/s. 271(1)(C) of the Act.
Aggrieved by the order of Ld. CIT(A), revenue has preferred the present appeal before us on the grounds mentioned here in above.
At the very outset our attention was drawn towards application filed by the assessee for seeking admission of additional evidences under Rule 29 of the Income Tax (Appellate Tribunal) Rules 1963. The Ld. A.R, pointed out that Tribunal is highest and last fact finding authority, therefore assessee the documents in the shape of various correspondence with government authorities which are at serial no. 16 to 25 of the paper book, be admitted as additional evidences and adjudicated upon. On the other hand, the Ld. D.R, appearing on behalf of the revenue refuted the claim of the assessee for seeking admission of additional evidences.
We have heard the counsels for both the parties on this application. Ld. AR during the course of hearing submitted that only the order dated 31.05.10 passed by the Board for Industrial and Financial Reconstruction (BIFR), be admitted as 5 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., additional evidence and stated at bar that he restrict his arguments qua these documents which are placed at serial no. 22 and page no. 114 to 118.
Be that as it may, the power of appellate tribunal is equivalent to the power of Civil Court as held in 83 ITR 223 and moreover the documents in the shape of order of BIFR being relied upon by the assessee are the orders passed by statutory authority, therefore we admit the document at serial no.22 at page 114 to 118 to be read as additional evidence under Rule 29 of the Income Tax Act (Appellate Tribunal) Rules 1963 and thus partly allowed the application filed by the assessee under rule 29 of the Income Tax Act (Appellate Tribunal) Rules 1963.
Ground (i) to (iv)
Since all the above grounds raised
by the revenue are inter related and inter connected and relates to challenging the order of Ld. CIT(A) in deleting the penalty levied by A.O. Therefore, we thought it fit to dispose of the above grounds by passing the present consolidated order. ./2015 Anchor Daewoo Industries Ltd.,
9. Ld. DR submitted before us that as per the facts of the present case, the addition was made under normal provision of Act and penalty levied on the same which did not have a tax effect as the company was paying tax under mat. It was further, argued that in the present case the addition has been made on the book profit of the assessee company which has made the assessee liable to pay tax under mat thereby, raising a tax demand of Rs.12,05,73,210/- on which the assessee did not prefer any appeal and paid due taxes and therefore, the penalty of levied on the addition made which actually resulted in evasion of taxes. It was also argued by Ld. D.R that Ld. CIT(A), had ignored the fact that the assessee company adopted a dubious method of avoidance of taxation of its book profit by making a patiently in eligible and inaccurate claim under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB of the Act. It was further submitted by Ld. D.R that the return of income was e-filed on 14.10.2010, declaring total income at Rs. Nil, after claiming of set off of brought forward business losses to the extent of business income available of Rs.80,64,65,096/-, and claiming carry forward of net short term capital loss to the tune of Rs.48,83,884/-. The 7 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., Ld. DR, relied upon the orders passed by A.O while dealing with the claim of reduction of Rs.80,53,63,722/- from book profit under clause (vii) below Explanation (1) to sub-section (2) of Section 115JB(2) of the Act. Our attention was drawn by Ld. D.R, towards the order of A.O dated 31.07.2013, passed by the u/s. 143(3) of the I.T. Act, 1961.
On the other hand, the Ld. A.R appearing on behalf of the assessee relied upon the orders passed by Ld. CIT(A) and further submitted that the notice dated 31.1.2013, issued u/s. 274 r.w.s. 271 of the I.T. Act is defective and hence no penalty can be levied in pursuant thereto. On this point, a question was put by the bench to the Ld. A.R as to whether this ground has been raised by the assessee before Ld. CIT(A), and in the absence thereof, whether such a new ground could be allowed to be raised by the assessee in the appeal filed by the revenue before the Tribunal. On this specific query raised by the bench, the Ld. A.R submitted that a legal ground can be raised at any stage of the proceedings and moreover the power of the tribunal are similar to the power of appellate court under the civil procedure code and in this respect, reliance was placed ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., upon the judgment of jurisdictional High Court in the case of B.R Bamasi vs. CIT 83 ITR 223, wherein it has been held that the respondent in an appeal filed by the appellant is also entitled to raise a new ground before the Tribunal. It is further mentioned in the aforementioned judgment that the powers after tribunal are similar to the powers of appellate court as envisaged under the civil procedure code.
After considering the rival contentions on this plea and after considering the judgment of the jurisdictional High Court we allow the assessee to raise additional ground in the appeal filed by the revenue regarding challenging the legality of the notice issued u/s 274 r.w.s 271 of the I.T. Act dated 31.01.13.
The Ld. AR further submitted that the assessee had made bonafide claims and all disclosures were made in the return of income and the AO failed to point out and identify which part or particular filed by the assessee are inaccurate.
We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by revenue authorities. ./2015 Anchor Daewoo Industries Ltd., 14. Before we decide the merits of the case, it is necessary to evaluate the orders passed by Ld. CIT(A). The operative portion of the order of Ld. CIT(A) contained in para no. 3 of its order and the same is reproduced below:-
Decision After careful perusal of the penalty order and written submissions filed by the A/R of the appellant it has been observed that while filing ROI, the assessee has declared total income at Rs.NIL after claiming set-off of brought forward business losses to the extent of business income available of Rs.80,64,65,098/ - and claiming carry forward of net short term capital loss to the tune of Rs. 48,83,884/ -. In its return of income, the assessee had declared book profit u/ s. 115JB of the Act at Rs Nil. In the course of scrutiny proceedings, it was noted that the assessee had declared Book Profit at Rs.NIL after claiming reduction of Rs.80,53,63,722/ - under clause (vii) below Explanation [I] to Section 115JB(2) of the Income Tax Act, 1961. AO has made addition/ disallowance under section 115 JB and there was no any additions/ disallowance to the normal income. The AO has imposed penalty u/s 271(1)(c) as the appellant company has filed inaccurate particulars of its income. But the case of the appellant company is covered ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., by the order of the Allahabad High Court in the case of CIT vs. Aleo Manali Hydro Power (P) Ltd. (2013) 38 Taxmann.com 288 wherein the enalt u s 2711 c has been deleted while dealing with identical facts. The relevant part of the order in the case is reproduced here as under:- "8. The Delhi High Court held that in respect of company in question on the basis of normal provision income was assessed at negative i.e. on loss of Rs.36,95,21,018/-. The company was MAT company and that the assessment under Section 115-JB resulted in calculation of profit at Rs.4,01,63,180/-. The income of the assessee was thus assessed u/s. 115JB and not under normal provision. It was held “no doubt, there was concealment but that had its repercussions only when the assessment was done under the normal procedure. The assessment as per the normal procedure was, however, not acted upon. On the contrary, it is the deemed income assessed u/s. 115JB which has become the basis of assessment as it was higher of the two. Tax is thus paid on the income assessed u/s. 115JB. Hence, when the computation was made u/s. 115 B the concealment had no role to play and was totally irrelevant. Therefore, the concealment did not lead to tax evasion at all. The upshot of the aforesaid discussion would be to sustain the order of the Tribunal, though on different grounds. Therefore, 11 ./2015 Anchor Daewoo Industries Ltd., while the reasoning and approach of the Tribunal is not tenable, for the reasons disclosed above, penalty could not have been imposed even in respect of the false claim of depreciation made by the assessee. CIY v. Gold Coin Health Food (P) Ltd .,[2008] 218 CTR (Supreme Court 359: (2008) 11 DTR (Supreme Court 185: (2008) 304 ITR 308 (Supreme Court distinguished.” Respectfully following the judgment of Allahabad High Court and Delhi High court, supra the AO is directed to delete the penalty u/s 271(1)(c) of the I.T. Act.
After analyzing the aforementioned order passed by Ld. CIT(A) as well as hearing the parties at length, we are of the considered view that Ld. CIT(A) while dealing with the said grounds had considered the facts available on record and had rightly applied the judgments passed by the Allahabad High Court and Delhi High Court and the facts contained in both the judgments were identical to that of the present case.
In the penalty order dated 31.07.2013 passed by the AO under section 271(l)(c) of the Act, it has been alleged that the claim as made by the assessee of reduction of its book profit as 12 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., per clause (vii) of Explanation-1 below section 115JB(2) of the Act shows that it has filed inaccurate particulars of its income. In this regard we observe that the fact that it was no longer a sick industrial company in terms of provisions of SICA, as it had earned profits and consequently its accumulated losses did not exceed its net worth at the end of the year was brought out in the Director's report as placed at page 2 of the Paper Book and Notes to accounts forming part of the Annual Accounts as placed at page 23 of the Paper Book. The Balance Sheet placed at page 12 of the Paper Book also disclosed this position. It's claim under the said clause was reflected in the Computation of income placed at page 34 of the Paper Book, in the Audit Report in Form No.29B under section 115JB of the Act at page 37 of the Paper Book and in the 1 Income-tax Return Form in ITR-6 at page 63 of the Paper Book. The aforesaid documents were again filed by the Assessee with the AO in the course of assessment proceedings vide its letter dated 31.01.2011.
Furthermore the said fact finds a reference in the Director's Report as placed at page 1 of the Paper Book, in the Profit and Loss Account along with the Schedule of other 13 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., income as placed at pages 13 and 18 of the Paper Book and in the Notes to accounts at page 24 of the Paper Book. This fact was also brought to the notice of the AO in the course of assessment proceedings vide its letter dated 15.10.2012 18.In view of the above the facts disclosing waiver of loan by Daewoo Electronics (Mauritius) Ltd, during the previous relating to assessment year 2010-11 as well as that it no longer remained a sick industrial company was brought to the notice of the AO in its Annual Accounts, Computation of income as well as the Income-tax return. It has not been pointed out which particulars furnished by the assessee before the AO was inaccurate justifying commission of the default of furnishing of inaccurate particulars of income by it. Hon'ble Apex Court in CIT v. Reliance Petro Products Pvt. Ltd. 322 1TR 158 in paragraph 8 at pages 163 and 164 has observed "..... However, the learned counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., items on an account Therefore, the word ''particulars" used in the section 271(l)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income." We do not think, that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars." 19. It has been further stated in paragraph 11 and 12 at pages 165 and 166. “We have already seen the meaning of the word "particulars" in the earlier part of this judgement. Reading the words in conjunction, they must mean the details supplied in the return, which are not accurate, not exact or correct, not according to truth or 15 ./2015 Anchor Daewoo Industries Ltd., erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under section 271(l)(c) of the Act. A mere making of the claim which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to the inaccurate particulars. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form a part of the total income under the Act. It was further pointed out that the dividends from the shares did not from the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deduction knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; ft) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves* were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept it's claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(l)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by 16 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., the Assessing Officer for any reason, the assessee will invite penalty under section 271(l)(c). That is clearly not the intendment of the Legislature."
20 Therefore, the Hon'ble Apex Court has laid emphasis on the burden of proof on Revenue before alleging furnishing of inaccurate particulars of income by an assessee. This burden has not been discharged in the present case. Further, in the present case, Ld. DR has argued that the Assessee's claim in its return of income was incorrect as it did not challenge the said finding in appeal in quantum proceeding. In this case, the court has also held that, the claim being unsustainable in law does not disclose furnishing of inaccurate particulars of income. This is also notwithstanding the position that, according to the assessee, as stated in greater detail hereafter, its claim was bona fide. We found that neither in the penalty order nor in the appellate order therefrom, it has not been pointed out which particulars of income furnished by the assessee was inaccurate. The Ld DR also could not point out anything in response to a specific question put by the Hon'ble Bench. Since it has not been pointed by the Revenue as to which particular furnished by the assessee before the AO was inaccurate it ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., cannot be said that the assessee has furnished any inaccurate particulars of its income. As stated above, mere making of a claim which is not accepted does not show that there was furnishing of inaccurate particulars of income by the assessee.
It is an undisputed position that, in the previous year relevant to assessment year 2009-10, the assessee had become a sick industrial company as per section 3(l)(o) of SICA, because its accumulated loss stood at Rs.98,17,61,467 which exceeded its net worth being Rs.81,19,13,400 (as on 31.03.2009. We found that the assessee had filed an application before the BIFR on 30.03.2010 which was mandatory in accordance with section 15(1) of the Act. In the course of hearing before the Tribunal, the Revenue has urged that reference to the BIFR is not as per section 15(1) of the Act as it was not made within 60 days from the date of finalisation of the Audited Accounts for the financial year 2008-09. As per our considered view, this is not the reason given by the BIFR for dismissing its reference. Furthermore, if any default is committed under SICA, it is not open to the Income-tax department to penalise the assessee for the same. 18 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd.,
Further, clause (vii) of Explanation-1 below section 115JB(2) of the Act becomes applicable from the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under section 17(1) of SICA and this benefit is available upto the year in which the entire net worth of such company becomes equal to or exceeds the accumulated losses. In the present case, the assessee became a sick industrial company in the previous year relevant to assessment year 2008-09 and its net worth exceeded its accumulated losses in the previous year relevant to assessment year 2009-10. Therefore, assessee was having sufficient reason to believe that it would be entitled to the benefit of clause (vii) of Explanation-1 below section 115JB as a sick industrial company for assessment year 2009-10. The Assessee genuinely and bona fidely believed that it is entitled to the benefit under the said clause as: (a)It was an undisputed position that assessee had become a sick industrial company as on 31.03.2009 as per section 3(l)(o) of ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., SICA, as its accumulated losses as on that date exceeded its share capital. (b) Assessee had carried out the necessary formalities before the BIFR as per SICA, notwithstanding that there was a delay in filing the reference under section 15(1) of the said Act. (c) Registrar of BIFR by his order dated 28.04.2010 had informed the assessee that pursuant to registration of its reference it was restrained from disposing of or alienating in any manner any fixed assets of the company without the consent of the Board (d) In the course of hearing before the BIFR on 31.05.2010, it was pointed out to them that, the net worth of the assessee was likely to turn positive as on 31.03.2010. However, despite the same BIFR issued certain directions to the assessee 23. In view of the above, we can safely conclude that assessee was under a bona fide impression that it was a sick industrial company which was entitled to the relief from book profits for the previous year relevant to assessment year 2010-11 because it had become a sick industrial company in the assessment year 2009-10 and it had come out of sickness in the previous year relevant to assessment year 2010-11. 20 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., Thus, there is no justification for levy of penalty u/s.271(1)(c) of I.T. Act 24. Apart from above, we have also heard the rival contentions on additional legal issue in respect of challenging the legality of the notice issued u/s 274 r.w.s 271 of the I.T. Act dated 31.01.13. In this respect, our attention was drawn towards notice issued under section 274 r.w.s. 271 of the Act dated 31.01.13 for initiating of the penalty proceedings under section 271(1)(c) of the Act for A.Y. 2010-11. A perusal of the notice issued under section 274 r.w.s. 271 of the Act dated 31.01.13 (copy placed at paper book-96) reveals that the AO has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee, i.e. whether it is concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under section 271(1)(c) of the Act is sought to be levied. In this regard, we find that the Hon'ble High Court of Karnataka in its order in the case of M/s Manjunatah Cotton & Ginning Factory in of 2005 dated 13.12.2012, relied on by the assessee, has held that such a notice, as has also been issued in the case on hand, is invalid and the 21 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., consequential penalty proceedings are also not valid. The relevant portion of their Lordships judgement at paras 59 to 62 thereof are extracted hereunder for reference: - “59. As the provision stands, the penalty proceedings can be initiated on various ground set 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 farm 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 22 ./2015 Anchor Daewoo Industries Ltd., 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 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 ./2015 Anchor Daewoo Industries Ltd., 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 292 ITR 11 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 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. Thom, 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.” The conclusion drawn therein by their Lordships at para 63 thereof and particularly at p) to s) thereof are as under: - “63 ………………………………. a) ………………………………. p) Notice under section 274 of the Act should specifically state the ground mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. 24 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., s) Taking up of penalty proceedings on the limb and finding the assessee guilty of another limb is bad in law.”
There can be no doubt that penalty u/s. 271(1)(c) of the Act is levied for concealing particulars of income or for furnishing inaccurate particulars of such Income, which are the two limbs of this provision. In other words, it is only when the authority invested with the requisite power is satisfied that either of the two events existed in a particular case that proceedings u/s. 271(1)(c) of the Act are initiated. This pre- requisite should invariably be evident from the notice issued u/s. 274 r.w.s. 271 of the Act, which is the jurisdictional notice, for visiting an assessee with the penal provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out as to whether the notice u/s. 274 r.w.S. 271 of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. ./2015 Anchor Daewoo Industries Ltd., There are a catena of judgments highlighting the necessity for identifying the charge for which the assessee is being visited and in all those decisions, Hon'ble Courts have repeatedly held that where the jurisdictional notice is vague, similar to the one in the present case, the consequent levy cannot be sustained.
In this connection, reliance is first placed upon the judgment of the Hon'ble Karnataka High Court In the case of CIT v. Manjunatha Cotton and Ginning Factory & Ors. and Veerabhadrappa Sangappa and Co. (359 ITR 565, 577, 601, 603-604) in which the facts are similar. In those bunch of tax appeals, several assessee and several issues were involved. In so far as of 2009 was concerned, one of the substantial questions on which the appeal was filed by the revenue was:
Whether the notice issued under section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal?
./2015 Anchor Daewoo Industries Ltd., 27. While answering the above in favour of the assessee, the following findings were recorded by the Hon'ble Court:
61. 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 [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 Works reported in [1980] 122 ITR 306 (GUJ) and the Delhi High Court in the case of CIT v. Virgo Marketing P Ltd reported in [2008 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.
(p) Notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) i.e. whether it is for concealment of income or for furnishing of incorrect particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. ./2015 Anchor Daewoo Industries Ltd., 28. Thereafter, in so far as the manner in which the statutory notice was required to be issued, the Hon'ble Court concluded thus:
(p) Notice u/s 274 of the Act should be specifically state the grounds mentioned in section 271(1)(c), i.e. whether it is for concealment of income or for furnishing of incorrect particulars of income.
Finally, in concurring with the findings recorded in the order of the Tribunal, it was held thus:
In view of the aforesaid law, we are of the view that the Tribunal was justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law and accordingly justified in interfering with the order passed by the appellate authority as well as the assessing authority and in setting aside the same. Hence, we answer the substantial questions of law framed in this case in favour of the assessee and against the Revenue. "
The aforesaid judgment was unsuccessfully challenged by the revenue before the Supreme Court, as it was rejected vide Petition for Special Leave to Appeal (C) No. 13898/2014 dated 11.07.2016. Reliance was next placed upon another judgment ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., of the Hon'ble Karnataka High Court in the case CIT v. SSA'S Emerald Meadows (Income Tax Appeal No. 380 of 2015 decided on 23.11.2016). In this case also s similar situation arose in as much as the Hon’ble Court was required to adjudicate on the following substantial question:
(1) Whether, omission of assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?"
The aforesaid question was dealt with by the Honble Court in favour of the assessee in the following words:
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(1)(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(1)(c) of the Act the penalty proceedings had been initiated le. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunel 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. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565. ./2015 Anchor Daewoo Industries Ltd., 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.
The SLP filed by the department in the aforesaid case also was dismissed by the Hon'ble Supreme Court vide Petition for Special Leave to Appeal (C) No .... ./2016 (CC No. 11485/2016) dated 05.08.2016.
The Hon’ble jurisdictional High Court in the case of CIT v. Shri Samson Perinchery [Income Tax Appeal No. 1154 of 2014 and others dated 05.01.2017] had also occasion to consider a similar issue. In this case, though proceedings u/s. 271(1)(c) of the Act were initiated for furnishing of inaccurate particulars of income, in the notice issued u/s. 274 r.w.s. 271 of the Act in the standard form, the charge for which it was issued was also not identified, as in the present case. In deleting the levy, so far as non-specification of the default in the jurisdictional notice, the following findings were recorded by the Hon'ble Bombay High Court: ./2015 Anchor Daewoo Industries Ltd., "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 Menjuneth Cotton and Ginning Factory (supra). 8. In view of the above, the question as framed do not give rise to any substantial question of law Thus, not entertained"
The Hon'ble Supreme Court in Dilip N. Shroff v/s JCIT, [2007] 291 ITR 519 (SC), has observed that while issuing the notice under section 274 r/w section 271, in the standard format, the Assessing Officer should delete the inappropriate words or paragraphs, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. This, according to the Hon'ble Supreme Court, deprives the assessee of a fair opportunity to explain its stand, thereby, violates the principles of natural justice. As held by the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), the aforesaid principle laid in Dilip N. Shroff (supra) still holds good in spite of the decision of the Hon'ble 31 ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., Supreme Court in UOI v/s Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v/s Smt. Kaushalya & Ors., [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchery (supra), following the decision of Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton & Ginning Factory, [2013] 359 ITR 565 (Kar.), held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated.
In addition to the aforesaid binding judgments, there are several orders passed by co-ordinate Benches of the Tribunal on this very point. In all those orders also penalty levied u s. 271(l)(c) of the Act on the basis of similar vague notice was cancelled. ./2015 Anchor Daewoo Industries Ltd.,
It may be mentioned that in this regard, no contrary decision of the Hon'ble Apex Court or the Hon'ble Bombay High Court has been brought to our notice or placed before us for consideration. Therefore, respectfully following the decision of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory reported in (2013) 359 ITR 565 (Kar), decision of Hon’ble Bombay High Court in the case of CIT Vrs Samson Perinchery dated 05.01.2017, we hold that the notice issued under section 274 r.w.s. 271 of the Act dated 29.11.2007 for A.Y. 2005-06 for initiating penalty proceedings under section 271(1)(c) of the Act in the case on hand is invalid and consequently, the penalty proceedings are also invalid.
Apart from above, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld. CIT (A). Hence, ITA no.3960/Mum./2015 Anchor Daewoo Industries Ltd., we are of the considered view that the findings so recorded by the Ld. CIT (A) are judicious and are well reasoned. In addition the initiation of penalty proceeding on defective notice are also invalid and consequently, the penalty proceedings on the above grounds are also invalid. Resultantly, these ground raised by the revenue stands dismissed.
In the result, appeal of the Revenue is dismissed.