PRESCY MENEZES,MUMBAI vs. ACIT 19(2), MUMBAI

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ITA 6111/MUM/2011Status: DisposedITAT Mumbai09 June 2017AY 2007-083 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that concealment of income and furnishing inaccurate particulars of income are distinct defaults. The AO must specify the exact breach for initiating penalty proceedings, and the penalty order can only be based on the ground for which notice was issued. Failure to do so is fatal to the penalty.

What were the facts?

The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, for both concealment of income and furnishing inaccurate particulars of income. The assessee argued that the AO's notice under Section 274 was vague and did not specify the exact default for which penalty was being levied.

What were the issues?

Whether a penalty under Section 271(1)(c) is valid when the AO's notice under Section 274 fails to specify whether it is for concealment of income or furnishing inaccurate particulars of income.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

For Appellant: Shri M. Subramaniam, AR, Shri Rajat Mittal, DR

Prescy Menezes ACIT 19 (2) Shop No.5, Saibaba Society, Pirmal Chambers Lallbaug Vakola Mumbai-400012 Santacruz(E) Mumbai-400055 PAN No.AANPM755J .. Appellant Respondent Assessee by .. Shri M. Subramaniam, AR .. Shri Rajat Mittal, DR Revenue by Date of hearing .. 30-05-2017 .. Date of pronouncement 09-06-2017 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-35, Mumbai, in appeal No. CIT(A)-35/ACIT19(2)/ITA-744/10-11 dated 16-06-2011. The Assessment was framed by ACIT, Circle-19(2), Mumbai for the A.Y. 2007- 08 vide order dated 04-12-2009 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty was levied by ACIT, Circle-19(2), Mumbai vide order dated 28-06-2010.

2.

The only issue in this appeal of assessee is against the order of CIT(A) confirming the levy of penalty under section 271(1)(C) of the Act.

3.

The assessee has raised three grounds qua levy of this penalty but he raised a jurisdictional issue in regard to the fact that the AO has initiated penalty for both the charges i.e. concealment of particulars of income as well as furnishing of inaccurate particulars of income. For this the learned Counsel for the assessee drew our attention to the ground No.3 which reads as under: -

“1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in Prescy Menezes (A.Y:2007-08) dismissing the appeal and confirming the penalty levied of Rs.11,33,370/- under section 271(1)(c) of the I.T. Act although there has been neither any concealment of income nor furnishing of inaccurate particulars of income.”

4.

The learned Counsel for the assessee first of all took us through page 21 to 22 of assessee’s paper book wherein notice under section 274 read with section 271 of the Income Tax Act 1961 is enclosed. He referred to this notice and stated that even the AO has not mentioned the assessment year, he has not given appointed dated on which the assessee is to be present before the AO and he has framed the charge for both the defaults i.e. concealed the particulars of income as well as furnishing of inaccurate particulars of income. Further, the learned Counsel for the assessee drew our attention to the assessment order for satisfaction while initiating the penalty proceedings, the AO noted in Para 5.3 as under: -

“5.3 In view of the above, penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 are initiated separately for concealing the particulars of income and / or furnishing inaccurate particulars of income.”

5.

In view of the above, the learned Counsel for the assessee argued that this case is squarely covered in favour of assessee and against Revenue by the decision of the learned Counsel for the assessee relied on the decision of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning factory (2013) 359 ITR 565 (Karn) and also on the decision of the Hon’ble Bombay High Court in the case of CIT Vs Samson Perinchery in of 2014 dated 05.01.2017, wherein it is held that failure by the AO to specify in the notice issued u/s 274 of the Act, whether the penalty is being initiated for ‘furnishing of inaccurate particulars of income’ or for ‘concealment of income’ is fatal. It reflects non-application of mind and renders the levy of penalty

Prescy Menezes (A.Y:2007-08) invalid. On the other hand, the ld. Sr. DR relied on the orders of the lower authorities.

6.

We find that the above 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. We find that this issue is squarely covered in favour of assessee and against the Revenue by the decision of Hon’ble Bombay High Court in the case of Samson Perinchery (supra), respectfully following the same, we allow the appeal of the assessee.

7.

In the result, the appeal of assessee is allowed. Order pronounced in the open court on 09-06-2017.

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