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ORDER/आदेश �या�यक सद�य iou flag iou flag के अनुसार PER PAWAN SINGH, JM iou flag iou flag 1. The present appeal is filed by assessee against of CIT(A)-9, Mumbai dated 19.02.2013, wherein the penalty order u/s 271(1) (c) was confirmed. The assessee vide his application dated 30.05.2016 filed one more additional Ground of appeal
, challenging the notice u/s 274 r.w.s 271(1)(c) issued by AO. That the notice was issued in a mechanical manner without satisfying himself, inasmuch as from the notice, it is not descrinable as to whether the penalty proceeding are initiated for furnishing inaccurate particular or concealment of income, which vitiate the entire penalty proceedings.
2. In nutshell, the facts of the case as gathered from the record are that the assessee filed return of income for relevant AY on 31.03.2009. In the return of income, the assessee disclosed his income under the head “Business”, Capital Gain and “Income from Other Sources” declaring total income of Rs. 1,26,970/-. Return of income was revised on 29.09.2010 declaring total income of Rs. 9,72,050/-. The assessment was completed on 26.12.2011 determining the total income of assessee at Rs. 10,70,130/-. While the assessing the income of assessee, the AO made the addition of unexplained expenditure of Rs. 98,083/- u/s 96C of the Act and STCG of Rs. 11,66,354/-. No appeal was filed by assessee against the quantum assessment. The AO initiated the penalty proceeding and served a notice dated 26.12.2011 u/s 274 r.w.s. 271(1)(c) of the Act. The assessee contested the notice of penalty and filed his reply dated 23.02.2012. In the reply, the assessee in sum and substance submitted that the addition made in the quantum assessment would not automatically justify the imposition of penalty. There was no conscious or deliberate act on the part of assessee. It was further contended that a small difference of Rs. 98,083/- are remained un-reconciled with regard to the information of AIR to match line by line. In respect of addition of STCG, it was contended that assessee wrongly classified STCG as LTCG while filing return of income, in absence of complete details the Reliance Portfolio Management Services. Since the mistake was realized the assessee voluntarily furnished the details to AO by submitting the computation of income by re-working of STCG and LTCG on 19.12.2011. The contention of assessee was not accepted by AO and AO levied the penalty of the disallowance/addition of Rs. 12,64,437/- at 100% which was calculated at Rs. 2,51,811/-. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A) but without any success, hence, the present appeal is filed before us.
We have heard the Authorised Representative (AR) of assessee and Departmental Representative (DR) for Revenue and perused the material available on record. The assessee filed additional ground of appeal
vide application dated 11.05.2006 raising the grounds that in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act was not valid as no specific charge was informed in the notice to the assessee. The AO has not mentioned as to whether the penalty proceeding are initiated for inaccurate particular or concealment of income. Ld. AR of the assessee argued that the assessee was not given specific charge to defend the charges as the notice of initiation of penalty does not specify the specific reason and relied on the decision of Karnataka High Court in CIT vs. Manjunath Cotton and Ginning Factory-359 ITR 565. DR for Revenue argued that the penalty was initiated for both the counts by the AO and strongly supported the order authorities below.
4. We have considered the rival contention of the parties and perused the material available on record. The Hon’ble jurisdictional High Court in CIT vs. Smt. Kaushalya reported vide 75 taxmann 549 (Bom) while dealing with the identical grounds held as under: “The issuance of notice is an administrative devise for informing the assessee about proposal of levy of penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used for mere non-striking or inaccurate portion cannot by itself invalidate the notice”. Entire factual background would fall for consideration in the matter and no one establishes would be decisive”.
Further, the Hon’ble Patna High Court in case of CIT vs. Mithila Motors Pvt. Ltd - 149 ITR 751(Patna) while dealing with identical grounds held as under: “U/s 274 of I.T. Act, all that is required is that assessee should be given an opportunity to show cause. No statutory notice has been prescribed in this behalf. Hence, it is sufficient if the assessee was aware of the charges he had to meet and was given an opportunity of being heard. Mistake in the notice would not invalidate the penalty proceeding.”
We have seen that assessee has duly contested the penalty proceeding before the AO and CIT(A) no such plea was raised before the authorities below. The assessee has not given any reason, if he suffered any prejudice by not specifying the specific charge for initiation of penalty. We further noticed that in the Act, no format of notice u/s274 is prescribed for issuing show cause notice for initiating the penalty. Hence, the notice issued by the AO was a non-statutory notice. Thus, respectfully following the decision of Hon’ble jurisdictional High Court in CIT vs. Kaushalya (supra), and the decision of Patna High Court in Mithila Motors(supra) we do not find any merit in this ground raised by the assessee at the belated stage. Thus, the additional ground raised by the assessee is dismissed.
5. On the merit of the case, AR of the assessee argued that assessee has not concealed any income nor filed any inaccurate particulars while filing of return. AR of assessee further argued that the penalty was initiated on two additions (1) disallowance of Rs. 98,083/- being addition u/s 69C and STCG of Rs. 11,66,354/-. The addition u/s 69C was made on account of difference on the credit details obtained under AIR by AO, the total amount was approximately Rs. 30,00,000/- and there was only a small difference of Rs. 98,083/- which remained un-reconciled, there was no deliberate act on the part of assessee and no penalty was leviable. So far as the addition of STCG is concerned, the assessee due to mistake classified STCG as LTCG in absence of complete details from Reliance Portfolio Management Services while filing return of income. The assessee realize the mistake and on his own will and voluntarily furnished the details to AO by submitting the computation of income by re-working of STCG and LTCG on 19.12.2011 and prayed that the assessee has sufficiently explained in the reply of notice that no penalty is leviable against the assessee. DR for Revenue strongly supported the orders of authorities below.
6. We have considered the contentions of the parties. We have seen that AO initiated the penalty vide notice dated 26.12.2011. The assessee submitted his reply. In reply, assessee explained that the addition made u/s 69C of the Act and addition of STCG, no penalty is leviable, however, the AO concluded that as per Explanation 1 to section 271(1)(c) create a legal fictions in certain circumstances, wherein the assessee is deemed to have been concealed the particular of income or furnished inaccurate particular and onus is upon the assessee to rebut the presumption. Ld. CIT(A) while considering the contention of the assessee concluded that the assessee concealed the particular of STCG of Rs. 11,66,354/- in his original return of income as well as in his revised return of income. The assessee also furnished inaccurate particular in respect of his credit card expenses which were not matching with the details with the I.T. Department. And finally such concealment of income of furnishing an inaccurate particular has been accepted by the assessee as no appeal filed against the quantum assessment and confirmed the order of AO. We have seen that the disallowance u/s 69C of the Act was made as assessee failed to reconcile the details of credit card expenses obtained through AIR by the Revenue. Another addition was on account of addition made under STCG which was classified as LTCG. The assessee himself filed revised return of income for STCG. In case of Zoom Communication Pvt. Ltd. (2010) 191 Taxman 179 (Del) wherein it was held by Hon’ble Delhi High Court that the claim which is incorrect in law would not amount to give inaccurate particular of income. Further, the Hon’ble Apex Court in CIT vs. Reliance Petroproducts (P.) Ltd. (2010) 322 ITR 158 held that mere disallowance of claim would not automatically attract the penalty. The co-ordinate Bench of this Tribunal in BSEL Infrastructure Realty Ltd. vs. ACIT (2012) 22 Taxmann.com 155 (Mum) held as under: “The judgment of Hon'ble Supreme Court in the case of Reliance Petroproducts (P.) Ltd. (supra) squarely applies in the appellant's case, wherein their lordships after considering the judgment of Dharmendra Textiles Processors (supra) has observed and held as under:- "A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By no stretch of imagination can making an incorrect claim tantamount to furnishing inaccurate particulars. There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct, not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271 (l)( c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars."
Now coming to the fact of the present case, the AO made an addition of Rs. 98,083/- u/s 69C of the Act and further addition of STCG of Rs. 11,66,354/-. The first addition of Rs. 98,083/- was made, as the assessee was unable to reconcile the detail of credit card expenses and the addition of STCG was added after extracting the detailed from claim of LTCG, thus both the addition/disallowance was made from the particulars of income furnished by the assessee at the time of filing of return of income. The assessee submitted his reply in the reply of show-cause notice, wherein the assessee substantiated both the addition made by AO. In our considered opinion, the reply furnished by the assessee was the sufficient compliance as per Explanation 1 of section 271(1)(c) of the Act and we are of the considered view that in the facts of the present case, no penalty was leviable by AO, thus with the above observations, the penalty levied by the AO is deleted. Hence, this ground of appeal
which was raised by the assessee initially at the time of filing of appeal is allowed.
8. In the result, appeal of assessee is allowed. Order pronounced in the open court on July, 2016. आदेश क� घोषणा खुले �यायालय म� �दनांक 27 tqykbZ ykbZ,2016 को क� गई । ykbZ ykbZ