SRI MAHARANI FINANCE CORPORATION ,THIRUCHENGODE vs. DCIT CENTRAL CIRCLE, SALEM

1. 1. Aggrieved by confirmation of certain penalty in captioned assessment years, the assessee is in further appeal before us. First, we take up for AY 2016-17 which arises out of the order of learned Commissioner of Income Tax (Appeals)-20, Chennai [CIT(A)] dated 29-09-2023 in the matter of penalty levied by the Ld.AO u/s 271(1)(c) vide order dated 30-09-2022.

During appellate proceedings, the assessee, inter-alia, submitted that penalty could not be levied on mere confessional statement. The same was rejected by Ld. CIT(A). Another argument was that assessed income was the same as returned income and therefore, impugned penalty could not be levied. The same was also rejected on the ground that the assessee had to voluntarily disclose the income in the original return itself. It was only after the assessee was confronted with regard to genuineness of deposits and correctness of interest expenditure during survey proceedings, the assessee offered the same to tax. The said offer could not be treated as voluntary disclosure. Finally, the penalty was confirmed against which the assessee is in further appeal before us.

The Ld. AR, at the outset, raised a pertinent legal issue and drew attention to the penalty notice issued u/s 274 r.w.s. 271(1)(c) dated 22- 03-2022 to submit that no proper satisfaction was drawn by Ld. AO qua exact charge against the assessee before levying impugned penalty. The Ld. AR submitted that ‘concealment of income’ and ‘furnishing of inaccurate particulars of income’ are two separate distinct charges and only one of the specific charges could be pressed into by Ld. AR against impugned additions. To support the same, Ld. AR relied on the decision of this Tribunal in the case of Shri D. Senthil Kumar vs. ACIT (ITA No.1209/Chny/2017 dated 19-05-2023). The copy of the same has been placed on record. The Ld. Sr. DR, on the other hand, drew attention to subsequent notice issued on 13-09-2022 to submit that Ld. AO imposed penalty for concealment of income as clearly brought out in the said notice. 6. We are of the considered opinion that the two limbs viz. ‘furnishing of inaccurate particulars of income’ and ‘concealment of income’ are separate and distinct charges. It is quite clear that though impugned penalty has been initiated in the assessment order, however, in the notice dated 22-03-2022, the specific charge was not mentioned as is evident from extraction made by us in preceding para-3. Even in subsequent notice dated 13-09-2022, in para-3, Ld. AO had made allegation of under-reporting of income which is altogether a different charge and used in the context of Sec.270A. After perusal of these notices, it could be concluded that no specific charge has been framed against the assessee and Ld. AO remained unsure as to which limb was actually applicable to the case of the assessee.

In our considered opinion, ‘concealment of income’ and ‘furnishing of inaccurate particulars of income’ are two different charges. These two expressions, in terms of ratio of various binding judicial precedents, carry different connotation / charges and non-framing of specific charge against the assessee would vitiate the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income would arise in a situation where the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas concealment of particulars of income would mean that the assessee has concealed the income and has not reflected certain income, at all, in its return of income. Therefore, for each of the addition, Ld. AO has to specify as to which limb was applicable to the facts of the case and it could not be left to mere presumption or guess-work of the assessee. Framing of specific charges is sine-qua-non for levy of penalty since the assessee must be put to allegations for which the penalty was being levied. In the absence of such a specific charge, the penalty would be bad-in-law and the same is not a curable defect u/s 292BB. This position has been settled in numerous binding judicial precedents. Considering the same, we would have no hesitation in holding that these two charges are quite different charges and carry different connotation / meaning. The non-framing of specific charge would make the notice defective. It did not specify the ground under which the penalty was proposed. The notice does not press specific charge against the assessee and both limbs have been pressed against the assessee. Therefore, we would hold that the notice was issued in a mechanical manner and hence, not sustainable in the eye of law. Our view is duly supported by the cited decision of Tribunal in Shri D. Senthil Kumar vs. ACIT (supra). In this decision, co-ordinate bench relied on another decision of Tribunal in M/s PVP Ventures Ltd. vs. DCIT (ITA No.778/Chny/2019) which in turn, drew strength from the decision of larger bench of Hon’ble Bombay High Court in the case of Mohd. Farhan A. Shhaikh (125 Taxmann.com 253) as well as the decision of Hon’ble High Court of Madras in Babuji Jacob Vs. lTO (430 lTR 259; 08.12.2020) to take the same view. The Hon’ble High Court of Madras in the case of Babuji Jacob Vs. lTO (supra), considering various decisions holding the field, held that since the notice under Section 271(1)(c) did not specifically state as to whether assessee was guilty of concealing particulars of his income or had furnished inaccurate particulars of income, the impugned penalty was invalid and same was to be set aside. The Ld. Sr. DR has referred to a decision of Hon’ble High Court of Madras in the case of Amtex Software Solutions Pvt. Ltd. (W.P.No.16140 of 2019 dated 12.06.2019). In the litigation, the assessee filed writ petition assailing show-cause notice issued by Ld. AO u/s 274 r.w.s. 271 proposing penalty against the assessee. The assessee assailed the notice on the ground that specific charge was not framed against the assessee. The Hon’ble Court, in para 16 & 17 of the order, concurred with assessee’s submissions that the distinction between the two expressions viz. ‘concealed particulars of income’ and ‘furnished inaccurate particulars of income’ was beyond any pale of doubt. There could not be two opinions or disputes about the fact the aforesaid two expressions are distinct and that they fall under different realms. The Hon’ble Court finally directed revenue to keep the show- cause notice in abeyance and issue a corrigendum / addendum / errata to the assessee clearly stating the grounds on which the notice was issued. In the present case, that stage is already over since the assessee is in second appeal before us. Therefore, in our considered opinion, this case, in fact, supports the case of the assessee that non- framing of specific charges would be fatal to penalty proceedings.

Considering the entirety of facts and circumstances of the case, we would hold that there was failure on the part of Ld. AO to frame specific charge against the assessee and accordingly, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal. Consequently, going into the merits of the penalty has been rendered academic in nature.

In AYs 2017-18 & 2018-19, the assessee offered proportionate interest expenditure on unexplained deposits in respective returns of income which were accepted by Ld. AO while framing the assessment. The Ld. AO initiated penalty proceedings for under-reporting of income. A notice u/s 274 r.w.s. 270A was issued on 22-03-2022 separately for both the years. However, Ld. AO proposed penalty for under-reporting / misreporting of income and levied penalty of Rs.0.89 Lacs each in both the years for under-reporting of income. The Ld. CIT(A) confirmed the same. Aggrieved, the assessee is in further appeal before us.

We find that here also, Ld. AO has invoked both the limbs viz. under-reporting / misreporting of income in the penalty notice. These two expressions, on the same analogy as held earlier, would be separate and distinct charges. Applying the same logic and reasoning as for AY 2016-17, we delete impugned penalty in both the years. Consequently, going into the merits of the penalty has been rendered academic in nature.

All the appeal stand allowed in terms of our above order. Order pronounced 3rd June, 2024 Sd/- Sd/- (MANU KUMAR GIRI) (MANOJ KUMAR AGGARWAL) �ाियक सद4 / JUDICIAL MEMBER लेखा सद4 / ACCOUNTANT MEMBER चे5ई Chennai; िदनांक Dated : 03-06-2024 DS आदेशकीRितिलिपअ/ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु>/CIT Salem 4. िवभागीय�ितिनिध/DR 5. गाडCफाईल/GF