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(Appellant) (Respondent) Assessee represented by S/Sh. Naresh Kumar, Paras Savla and Ms. Sharddha Swarup - ARs Revenue represented by Sh. Suman Kumar -DR Date of hearing 17.04.2017 Date of order 28.04.2017
Order under section 254(1) of income Tax Act Per Pawan Singh Judicial Member; 1. This appeal by assessee under section 253 of Income Tax Act (Act) is directed against the order of Commissioner (Appeals) dated 29 September 2010 for assessment year 2004- 05. The assessee had challenged the validity of order passed by learned Commissioner (Appeals) in sustaining the order of penalty levied by Assessing Officer under section 271(1)(c) of the Act. Though, initially the assessee had raised as many as seven grounds of appeal, however as per our considered view the only substantial ground of appeal raised by assessee is as under; (i) “Whether the learned Commissioner (Appeals) erred in confirming the penalty of Rs.55,08,744/-levied by Assessing Officer under section 271(1)(c) of the Act. Rest of the grounds of appeal are argumentative in nature. The assessee again vide application dated 6th April 2017 raised the following additional grounds of appeal; (ii) “That learned Commissioner (Appeals) erred in upholding the action of Assessing Officer without appreciating that the Assessing Officer failed to state the charge of penalty i.e. furnishing of inaccurate particulars or concealment of income in the show cause notice under section 274 of the Act.”
2. The brief facts of the case are that the assessee filed return of income for the relevant assessment year on 21 October 2004 declaring total income in loss of rupees terrifies 56953/-. The assessment was completed under section 143 3 on 31 October 2006. The assessing officer besides the other addition and disallowance made the following addition/disallowances; (i) Disallowance of loss on account of Bank guarantee of Rs. 68,50,000/-. (ii) Disallowance of Long-Term Capital Loss on sale of shares of N.M. Hospitality Pvt Ltd of Rs. 97,31,466/-. (iii) Disallowance of loan written off claimed deduction under section 57(iii) of Rs. 700,000/-. On appeal before Commissioner (Appeals), the disallowance/additions were upheld vide order dated 10 September 2007. The Assessing Officer while passing the assessment order initiated penalty proceeding under section 271(1)(c). The penalty proceeding were kept in abeyance till the disposal of appeal by Commissioner (Appeals). After dismissal of the appeal by Ld Commissioner (Appeals) in quantum assessment the assessee was again served with notice dated 03rd March 2009 to furnish his explanation for the default committed within the meaning of section 271(1)(c) of the Act. The assessee filed his detailed reply vide reply dated 13 March 2009. The explanation given in the reply by assessee was not accepted by Assessing Officer and Assessing Officer levied the penalty @ 100% of the tax sought to be evaded. The Assessing Officer worked out the penalty of Rs.55,08,744/-. The assessee filed appeal against the penalty levied under section 271(1)(c) of the Act before Commissioner (Appeals) and the same was dismissed vide order impugned in the present appeal. Further, aggrieved by the order of Commissioner (Appeals) the assessee has filed present appeal before us.
We have heard the learned AR of the assessee and the learned DR for revenue and with their assistance perused the material available on record. In support of application for admission of additional grounds of appeal
the ld AR of the assessee argued that the assessee has raised alternative legal plea by raising additional ground of appeal; that penalty order passed by Assessing Officer is void ab initio. The ld AR further argued that the additional grounds of appeal raised by assessee are purely legal ground and would be essential for dispensation of substantial Justice. It was argued that no additional fact is required to be brought on record except the reliance on the fact available on record. The ld AR in support of his submission relied upon the decision of NTPC versus CIT 229 ITR 383(SC), Jute Corporation of India Ltd versus CIT 187 ITR 688(SC), Allahabad Electricity Company Ltd versus CIT 199 ITR 351(Bombay) and All Cargo Global Logistics Ltd versus DCIT 137 ITD 26(Mumbai) (SB). On the other hand the ld DR has argued that no such grounds of appeal was raised by assessee before Commissioner (Appeals) as urged/ raised in additional grounds of appeal. However, in all fairness the ld DR submit that he has no objection if the additional ground of appeal raised by assessee is considered along with the other grounds of appeal.
4. The learned AR of assessee further argued that the Assessing Officer in para 8, 12 and 15 of Assessment Order initiated the penalty for furnishing inaccurate particular of income, however the order under section 271(1)(c) the penalty was levied for concealment of income. The Assessing Officer while issuing notice under section 274 has not specified the specific charge, by striking out the relevant portion of the notice dated 31st October 2 006. The notice under section 274 dated 31 October 2006 is placed on record by learned AR for assessee during making the submission. In support of his submission the learned AR of the assessee relied upon the decision of Bombay High Court in CIT versus Sh. Samson Perinchary dated 05th January 2017 in ITA(s) No. 1154 of 2014, 953 of 2014, 1097 of 2014 and 1226 of 2014, decision of Tribunal in Samson Perinchary versus ACIT in to 4630/M/2013 dated 11.102013 and Prince Consultancy P Limited versus DCIT in dated 13th January 2017. On the merits it was argued by learned AR of the assessee that 1st disallowance was made on account of bank guarantee further Rs. 6 850000/-. On appeal the disallowance was confirmed by ld Commissioner (appeals). The assessee is not file further appeal before the tribunal. The assessee while filing return of income relied upon the opinion of Chartered Accountant, copy of opinion of Shri S. Ramanujam CA dated 1 October 2003 is placed on record in the form of at page No. 22 to 26 PB. The assessee has given certain personal guarantee to the Bankers in respect of the Companies in which the assessee was one of the Directors and was having his own substantial stake. The assessee bonafide belief and on legal advice made a claim of loss on account of Bank guarantee. In support of his submission ld AR for assessee relied upon the decision of CIT versus K.M. Modi 141 ITR 903(Bombay) and in Pfizer Ltd versus DCIT (2012) 78 DTR (Mumbai)(tribunal) 239. The second disallowance was in respect of write off of loans. The disallowance was made by Assessing Officer holding that assessee was knowing that the company to whom the loan was given was running in losses and was not in a position to give and interest on the loan. Further it was held that it was not the business of assessee. In support of its submission the ld AR for assessee relied upon the decision of CIT versus Paramount Premises Private Limited (1991 ) 190 ITR 0259 (Bombay ) and recent decision of Nagpur bench of Hon’ble Bombay High Court in Central Provinces Manganese Ore Company Ltd Versus CIT in ITA No. 4 to 7 of 2002 dated 8th March 2017. The third disallowance was on account of long-term capital loss on sale of shares of M/s N.M. Hospitality Private Limited of Rs. 97,31,466/-. The learned AR of the assessee submitted that by mistake in the number of shares 750000 instead of 75000 and the value was taken at Rs. 75,00,000/- instead of Rs. 7,50,000 /-. The assessee has corrected the mistake when it was brought to his notice during the assessment itself. And in support of his submission the ld AR for the assessee relied upon the decision of PWC Vs CIT [2012] 348 ITR 0306 (SC). It was further argued that the assessee would have succeeded in case the matter was carried in appeal before the Tribunal.
5. On the other hand learned DR for the revenue argued that all the disallowance was confirmed by First Appellate authority and the assessee has not file further appeal before Tribunal. The disallowance made by Assessing Officer attains the finality. The Assessing Officer levied the penalty after confirmation of disallowance by Commissioner (Appeals). The learned DR for the revenue further argued that the assessee was given full opportunity of hearing as provided under section 274 of the Act, before passing the order under section 271(1)(c) of the Act. The assessee never objected about the infirmity in the notice under section 274 of the Act. No such ground in the grounds of appeal
was raised by assessee before the Commissioner (Appeals) while challenging the validity of levy of penalty. No prejudice was caused to the assessee. In support of his submission the learned DR for the revenue relied upon the decision of Hon’ble Bombay High Court in Kaushalya 216 ITR 660.
6. We have considered the rival contention of the parties and gone through the various decisions referred and relied by ld representative of the parties. We have seen the notice under section 274 read with section 271 of income tax Act dated 31 October 2006. A careful perusal of the notice dated 31 October 2006 shows that it could have been issued either for failure to furnish return of income under section 139(1)/139(2)/148 of the Act; for failure to comply with a notice issued under section 142(1)/143(2) of the Act for concealment of particulars of income or furnishing inaccurate particulars of income under section 271(1)(c) of the Act. The Assessing Officer while issuing the notice in a standard Performa has not strike out the irrelevant portions therein. There was no application of mind while issuing notice under section 274 rws 271(1)(c) of the Act. The said notice only specify by ticking at the relevant space that it is being issued for levy of penalty under section 271(1)(c) of the Act. We have further seen the assessment order dated 30.10.2006, wherein in para 8 and 12, the Assessing Officer initiated penalty proceedings for furnishing inaccurate particulars of income. However, while passing the order of penalty, the Assessing Officer levied the penalty for concealment of income for disallowance of Bank Guarantee, deduction of claim of loss of loan and loss on sale of share para (14.1&14.2 of penalty order). In concluding para- 17 of penalty order the Assessing Officer again mentioned that penalty is levied @ of 100% of the tax sought to be evaded on the income in respect of which income has been concealed/ inaccurate particulars of income have been furnished. The assessing officer has not specified the specific charge, rather, in the assessment order the penalty was proposed for filing inaccurate particulars, while passing the penalty order the penalty was levied for concealment on income.
7. In recent decision by Hon’ble Bombay High Court in CIT Vs Shri Samson Perinchary (supra) while considering almost similar ground of appeal
held as under;
3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-assessee. This by holding that initiation of penalty under section 271(1)(c) of the Act by Assessing Officer was for furnishing inaccurate particular of income while order imposing penalty is for concealment of income. The impugned order holds that the concealment of income in furnishing inaccurate particulars of income carried 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 imposing a penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice under section 274 of the act is in a standard Performa, 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 decision in CIT Versus Manjunath Cotton and Ginning Factory 359 ITR 565 to delete the penalty:- “ The Assessing Officer is empowered under the act to initiate penalty proceeding once he’s satisfied in the course of any proceeding that there is concealment of income or furnishing inaccurate particulars of total income under clause(c). Concealment, furnishing inaccurate particulars of income is 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 case of Ashok Pai reported in[2007] 292 ITR 11(SC) at page 19
has held that concealment of income in furnishing inaccurate particulars of income carried different connotations. The Gujarat High Court in case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in case of Virgo Marketing Private limited 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. Therefore, when the Assessing Officer proposed 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 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 and drawn by the impugned order is between Tweedledum and Tweedledee. In the above view the deletion of penalty, is unjustified.
The above submission on the part of the Revenue is in the face of decision of Supreme Court in Ashok Pai versus CIT 292 ITR 11[relied upon in Manjunath Cotton and Ginning factory (supra)]-wherein it is observed that concealment of income and furnishing of inaccurate particulars of income and 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 proceeding will not warrant/permit penalty being imposed for the other breach. This is more so, as the 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 had been initiated, and it cannot be only fresh ground of which the assessee has no notice.
Therefore, the issue herein stand concluded in favour of the Respondent- Assessee by the decision of 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 case of the Manjunath cotton and Ginning Factory (supra).
Considering the decision of Jurisdictional High Court in Samson Perinchary (Supra), Gujarat High Court in Marlowe Engineering reported in 122 ITR 306, Delhi High Court in Virgo Marketing Private limited reported in 171 Taxman 156 and Karnataka High Court in Manjunath Cotton and Ginning Factory, we are inclined to allow the additional ground of appeal vide application dated 6th April 2017, raised by the assessee. As we have allowed the additional ground of appeal raised by the assessee, thus the discussion on the merit of the appeal is become academic. Thus, the appeal of the assessee is allowed. In the result appeals of the assessee is allowed. Order announce in the open court on 28th day of April 2017.