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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal by the Assessee are arising out of the order of Commissioner of Income Tax (Appeals)-37, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-37/IT-142/ACIT-25(3)/2013-14 dated 18-03-2016. The Assessment was framed by the Assistant Commissioner of Income Tax, Circle-21(2), Mumbai (in short ACIT) for the assessment year 2010-11 vide order dated 31-12-2012 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty was levied under section 271(1)(c) of the Act vide order dated 27-06-2013.
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty by the AO under section 271(1)(c)
Trans Conduct (India) (A.Y. 2011-12) of the Act on bogus purchases. For this assessee has raised following two grounds: - “Ground No.1:
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming penalty under section 271(1)(c) levied by the ACIT 21(2) of Rs 5,41.600/- on agreed addition on account of purchases from suspicious dealers.
Ground No 2:
On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in not considering the following judgements of the High Court and ITAT wherein penalty has been dropped in cases where addition was accepted by the assessee to avoid litigation and buy peace:
Manjunath Cotton and Ginning Factory (359 ITR 565) (Kar)
Vinay Sharma vs ITO (ITA No 871IDeI/2013) (Del)
Heranba Industries Ltd (ITA No 22921M/2013)”
3. At the outset, the learned Counsel for the assessee has raised the issue of jurisdiction for levy of penalty that the assessee has initiated the penalty proceedings for both the charges i.e. for furnishing of inaccurate particulars of income as well as concealment of particulars of income and also levied the penalty on both the charges vide his penalty order dated 27-06-2013. The learned Counsel for the assessee took us through the assessment order at Para 9 whereby penalty for issuing notice under Trans Conduct (India) (A.Y. 2011-12) section 271(1)(c) of the Act was initiated by observing that “penalty proceedings under section 271(1)(c) read with section 274 of the I.T. Act, 1961 are initiated for furnishing inaccurate particulars of income and concealment of income.” He further, took us through the order at para 5 which reads as under: -
5. I am therefore satisfied that the assessee has committed a default within the meaning of section 271(1)(c) of the I.T. Act by filing inaccurate particulars of income and concealment of income by taking accommodation entries from hawala traders and enhanced its purchases to the tune of ₹ 17,52,735/-. Minimum and Maximum penalty under section 271(1)(c) leviable at 100% and 300% comes to ₹ 5,41,600/- and ₹ 16,24,800/- respectively. Considering the facts of the case, I levy penalty under section 271(1)(c) of the income Tax Act @ 100% of amount of tax sought to be evades which come to ₹ 5,41,600/-.
In view of the above, the learned Counsel for the assessee sated that the AO is not sure about the specific charge for levy of penalty. On the other hand, the learned Senior Departmental Representative relied on the order of lower authorities and stated that the issue is covered in favour of Revenue by the decision of the Hon’ble Bombay High Court in the case of CIT vs. Smt. Kaushalya (1994) 75 taxman 549 (Bom.), wherein it is held that merely mistake in language used or merely non- striking of inaccurate portion account by itself not invalidate notice under section 274 of the Act. In view of the above, the learned CIT Departmental Representative argued that the penalty on this issue cannot be deleted.
Trans Conduct (India) (A.Y. 2011-12) 5. We have gone through the facts of the case and noticed that the AO has initiated the penalty proceedings for concealment of income under section 271(1)(c) of the Act for both the charges i.e. for furnishing of inaccurate particulars of income as well as for concealment of particulars of income. It means that the AO himself is not sure about the charge on which penalty is to be levied.
6. We are of the view that the issue is squarely covered in favour of assessee and against Revenue by the decision of Hon’ble Bombay High Court in the case of CIT v. Samson Perinchery [2017] 392 ITR 4 (Bom.), wherein it is held as under : - “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 Trans Conduct (India) (A.Y. 2011-12) 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 v/s. 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 Taxmn 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
Trans Conduct (India) (A.Y. 2011-12) 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 nonapplication of mind.”
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 unjustified.
The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in Ashok Pai v/s. 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.
Trans Conduct (India) (A.Y. 2011-12) 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).
We also find from the above that Hon’ble Bombay High court has followed Hon’ble Karnataka High Court on this very issue in the case of CIT vs. Manjunath Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka), wherein similar view is taken.
We have heard the rival contentions and gone through the facts and circumstances of the case. From the above, facts it is clear that the AO is not sure about the charge on which penalty is to be levied. The AO has also invoked issue of concealment of particulars of income. He is also levied penalty for furnishing of inaccurate particulars of income as is clear from the order of the AO. In view of this facts and circumstances, we are of the view that the AO himself is not sure about the levy of this charge. Since, the issue is covered by the decision of Hon’ble Bombay High Court in the case of Samson Perinchery (supra), respectfully following the same, we delete the penalty and allow the appeal of the assessee.