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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-31, Mumbai, [in short CIT(A)] in appeal No. CIT(A)-31/IT-85/DCIT-20(3)/2012-13, dated Nil. The Assessments were framed by the Income Tax Officer, Ward XV(3), Mumbai (in short ITO or AO) for the assessment year 2007-08 vide order dated 31-12-2009 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’). The penalty under dispute was levied by the Deputy Commissioner of Income Tax-20(3), Mumbai vide order dated 29- 05-2012 under section 271(1)(c) of the Act.
Simran Sunil Raheja (A.Y:07-08) 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) of the Act.
At the outset, the learned Counsel for the assessee drew our attention to the assessment order, wherein addition of sundry creditors disclosed in the balance sheet in the name of Shri TP Anand amounting to ₹ 30,05,000/- and in the name of Smt. Kalavantibai amounting to ₹ 27,50,000/- was added under section 68 of the Act. The learned Counsel drew our attention to the assessment order and argued that there is no ground on which penalty is initiated but the AO merely mentioned that “penalty proceedings under section 271(1)(c) is initiated”. She took us through the penalty order dated 29-05-2012 and according to her, the AO has levied the penalty for concealment of particulars of income as well as for furnishing of inaccurate particulars of income. She drew our attention to the relevant paras of penalty order which reads as under: - “After giving opportunities of being heard, the assessee has failed to show cause as to why the penalty under section 271(1)(c) of the Income Tax Act, 1961 should not be levied. An assessee’s statutory obligatory under section 139(1) is to give correct and complete information with the return of income. Explanation 1 to section 271(1)(c) applies where in respect of any facts material to the computation of the total income, the assessee fails to offer an explanation which is found to be false. Which is added in the assessment. Therefore, I am left with no option but to levy penalty under section 271(1)(c) of the Income Tax Act, 1961.
3. In view of the above mentioned facts, I am satisfied that this is a fit cause to levy penalty under section 271(1)(c) of the I.T. Act, 1961. The total
Simran Sunil Raheja (A.Y:07-08) additions made of ₹ 57,55,000/- made in the assessment order under section 143(3) of the Income-tax Act, 1961 as mentioned above, is treated and considered as concealment of income on account of furnishing inaccurate particulars of income on the part of the assessee.”
In view of the above, the learned Counsel for the assessee argued that the AO is not sure about the charge under which penalty under section 271(1)(c) of the Act is to be levied. The learned Counsel for the assessee stated 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,
Simran Sunil Raheja (A.Y:07-08) 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 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,
Simran Sunil Raheja (A.Y:07-08) 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 nonapplication 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 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
Simran Sunil Raheja (A.Y:07-08) proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
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).
She also stated 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.
6. On the other hand, the learned Senior Departmental Representative 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.
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 explanation 1 to section 271(1)(c) of the Act while levying penalty, which is for concealment 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,
Simran Sunil Raheja (A.Y:07-08) 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.
In the result, the appeal of assessee is allowed. 8.
Order pronounced in the open court on 27-10-2017.