SHRING CONSTRUCTION COMPANY PVT. LTD.,DEHRADUN vs. DCIT, CIRCLE-2, MUZAFFARNAGAR

The brief facts of the case are that the assessee is a company derives income from Hydro Power Projects consisting of Power House. The assessee filed its ITR for assessment year 2011-12 on 30.09.2011 at a loss of Rs. 4,61,767/. The case was selected for scrutiny and assessment u/s. 143(3) was completed on 31.3.202014 by making the additions on account of re-computation of long term capital gain by adopting stamp duty value of land amounting to Rs. 1,01,74,000/-; addition on account of unverified share application money amounting to Rs. 5,50,00,000/-; addition on account of unverifiable expenses amounting to Rs. 1,00,000/- and addition on account of non-deposit of employees contribution into PF by due date amounting to Rs. 989/-. Further, assessment order passed in the case of the assessee, contained a direction for initiation of penalty proceedings u/s. 271(1)(c) of the Act in respect of said additions. Accordingly, a show cause notice u/s. 274 read with section 271(1)(c) dated 31.03.2014 was issued requiring the assessee to show cause as to why a penalty u/s. 271(1)(c) may not be imposed for concealing the particulars of his income and furnished inaccurate particulars of income. Aggrieved by the assessment order, assessee filed an appeal before the CIT(A) who vide his order dated confirmed the additions amounting to Rs. 1,01,74,000/-; Rs. 5,50,00,000/- and Rs. 989/-. Further, a notice was issued to the assessee to show cause why penalty u/s. 271(1)(c) may not be imposed in respect of additions made by the AO and subsequently confirmed by the CIT(A). In response to the above notice, the assessee filed written explanation dated 11.09.2017 stating that the assessee company has made a second appeal before the ITAT against the assessment order and 1st appeal and requested to kindly do not take any action of penalty u/s. 271(1)(c) till the disposal of the second appeal. AO observed that assessee has not submitted anything regarding the concealment of income and furnishing of inaccurate particulars of its income and merely requested to keep the penalty proceedings in abeyance. Hence, AO noted that it appears that assessee has nothing to say regarding the concealment of particulars of his income and furnishing inaccurate particulars of income in respect of aforesaid additions made to its income. In view of above, it was held that assessee is liable for penalty u/s. 271(1)(c) of the Act and imposed the penalty of Rs. 2,01,39,072/- on account of being long term capital gain at Rs. 1,01,74,000/-, addition on account of unverifiable share application money at Rs. 5,50,00,000/- and addition of Rs. 989/- on account of non-deposit of employees contribution to PF by the due date which were confirmed by the Ld. CIT(A). 3. Against the Penalty order the Assessee appealed before the ld. CIT(A), who vide impugned order dated 28.08.2018 has dismissed the appeal of the assessee.

At the time of hearing, Ld. Counsel of the Assessee has stated that the penalty proceedings ought to fail because the penalty was initiated for furnishing of inaccurate particulars of income and concealment of income. Also the notice dated 31.3.2014 for penalty u/s. 271 read with Section 274 of the I. T. Act, 1961 was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars. For the sake of reference, the copy of Notice dated 11.3.2014 for initiation of penalty proceedings was filed at Paper Book Page no. 14 and further show cause notice dated 04.08.2016 is placed at Paper Book Page No. 15 wherein, no satisfaction was recorded by the AO. He further submitted that AO imposed the penalty of Rs. 2,01,39,072/- vide order dated 15.1.2018 without specifying any charge as per provisions of section 271(1)(c) of the Act, which is in not sustainable in the eyes of law. He thus stated that the entire penalty proceedings stand vitiated as the notice itself is not in accordance with law and in order to support his contention, he placed the reliance on the following decisions:- - Hon’ble Karnataka High Court decision in the case of CIT & Ors. Vs. M/s Manjunatha Cotton and Ginnig Factory & Ors. (2013) 359 ITR 565 - Apex Court decision in the case of CIT & Anr. Vs. M/s SSA’s Emerald Meadows in CC No. 11485/2016 dated 05.8.2016. 5

1 In view of above, he requested that the penalty in dispute may be cancelled and appeal of the assessee may be allowed. 5. On the contrary, Ld. DR relied upon the orders of the authorities below. 6. We have heard both the parties and perused the orders passed by the Revenue Authorities alongwith the relevant records available with us. Firstly, we have perused the Notice dated 31.3.2014 issued by the AO for initiating the penalty and directing the assessee to appear before him at 11.00 AM on 10/04/2014 and issued a Show Cause to the assessee stating therein that: “*have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice. * have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of Indian Income Tax Act, 1922 or under section 142(1)/143(2) of Income Tax Act, 1961. * have concealed the particulars of such income or furnished inaccurate particulars of such income.”

1 After perusing the said notice dated 31.3.2014 issued by the DCIT, Circle-I, Muzaffarnagar to the assessee, we are of the considered view that the AO has initiated the penalty proceedings u/s. 271(1)(c) against the assessee by issuing the show cause notice dated 31.3.2014 without specifying the specific limb of section 271(1)(c) i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income, as per provisions of section 271(1)(c) of the Act. 7. Further, AO issued show cause notice dated 04.08.2016 wherein no satisfaction was recorded by the AO, the contents therein are reproduced as under:- “Subject: Show cause notice for the penalty u/s. 271(1)© for the AY 2011-12 – Regarding. Please refer to this office notice issued in connection with the penalty proceedings noted under titled subject. You are hereby required to submit your reply or attend before the undersigned personally of through authorized representative on or before 11/08/2016 at Aayakar Bhawan, Meerut Road, Muzaffarnagar. In case of failure on your part, necessary order will be passed on merit and on the basis of material available on record.” 7.1 Upon perusing the aforesaid show cause notice dated 4.8.2016, it is observed that no satisfaction was recorded by the AO. 8. Further, we note that AO imposed the penalty of Rs. 2,01,39,072/- vide order dated 15.1.2018 by holding as under:-