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Income Tax Appellate Tribunal, BENCH “D”, MUMBAI
Before: SHRI B.R.BASKARAN & SHRI PAWAN SINGH
O R D E R
PER PAWAN SINGH, JM:
This appeal filed by assessee against the order of CIT (A)-8, Mumbai dated 01.03.2012 for AY 2002 -03. The assessee is aggrieved by the order of confirming the penalty order u/s. 271(1) (c) of the Act.
The brief facts of the case are that the assessee filed its return of income for relevant AY on 31.10.2002. The assessment was completed u/s 143(3) of the Act on 15.02.2005. While framing assessment order the Assessing Officer (AO) made as many as 12 additions/disallowances. Aggrieved by the order of AO on the quantum assessment the assessee filed appeal before CIT (A), wherein his appeal was partly allowed. The assessee further filed second appeal before Tribunal. After receipt of order of first appeal from CIT (A), the AO issued a notice u/s 271 r.w.s. 274 of the Act, vide notice dated 12.02.2008. Notice of initiation of penalty was contested by the assessee by filing reply vide reply dated 25.02.2008. The reply of assessee was not accepted by AO. The AO levied the penalty of Rs.8,37,360/- vide order dated 27/03/2008. Aggrieved by the order of levy of penalty the assessee filed appeal before the CIT (A), wherein CIT (A) deleted the penalty except with regard to the disallowance of medical expanses of Rs,12,78,000/- and claim of donation of Rs.16,042/- Further aggrieved by the order of CIT (A) the assessee filed the present appeal before us.
We have heard Authorised Representative (AR) of assessee and Departmental Representative (DR) for revenue and perused the material available on record. AR of the assessee argued that AO has not specified on which additions/ disallowance the penalty was initiated in the assessment order. The notice issued to the assessee u/s 271(1) (c) r.w.s. 274 of the Act, also does not specify under which charge the penalty is being initiated. The conclusion of concealment of income was opined first time only in the order of penalty u/s 271(1) (c) of the Act. In the quantum appeal before Tribunal the assessee filed additional evidence which was accepted, and the matter was restored to the file of CIT(A) with the direction to decide the appeal after admitting the additional evidences. The Ld. CIT(A) granted substantial relief to the assessee and deleted most the additions, however the disallowance of donation was confined to Rs.600/-, disallowance of foreign was confined to 10% and sustained the addition of Medical Expenses. The assessee further file appeal to the Tribunal in but the same was dismissed vide order dated03/12/2015. Ld. AR for assessee further argued that mere disallowance of claim will not attract the initiation of penalty when the assessee disclosed all the particulars in the return of income and relied on the decisions of Bombay High Court in CIT Vs. SM Construction in ITA No. 412of 2013 dated 03.03.2015, DIT Vs Admn. Of Estate of Late E F Dinshaw (2013) taxmann.com 95(Bom), decision of ITAT Mumbai in Bannett Colemen &Co Ltd Vs ACIT 144 ITD 459 and Karnataka High Court in CIT Vs Manjunatha Cotton and ginning Factory 369 ITR565(Karn) DR for the Revenue strongly supported the orders of authorities below and argued that notice was not challenged either before AO or CIT(A), moreover, there was a multiple reasons for initiating the penalty on number of additions in the assessment order. In the rejoinder ld AR for assessee argued that assessee objected before the CIT(A) and filed and written objection before the CIT(A) vide letter dated 09.02.2011 (page 36 & 37 of PB).
We have considered the rival contention of the parties and perused the material available on record. We have noticed that addition on account of disallowance of donation was confined to Rs. 600/- by ld. CIT( A) in its order dated 11/02/2012. Now only disputed addition remains now is with regards to the disallowance of medical expenses of Rs. 12,78,000/- incurred on the father of the director of the assessee company. We have perused the copy of the notice u/s 274 rws 271(1)(c) ( page 64 of the p/b) wherein the relevant column is left blank by AO. In the assessment order the AO has not specified on which addition/ disallowance the penalty in initiated, either for concealment or for filing inaccurate particulars of income. The Bombay High Court in SM construction (supra) held that: “The fact that the explanation of assessee is not accepted in the quantum proceeding would not ipso facto visits. The assessee was penalty in the absence of the claim been held to be not bonafides.”
Further, the coordinate bench of this tribunal in Bennett, Coleman & Co. Ltd (supra) it was held: “In the absence of any other contrary material or distinguishing feature brought on record by the revenue to show that the claim of deduction made by the assessee was not bonafide or was bogus, there is no concealment on the part of assessee which may call for levy of penalty under section 271(1)(c) and accordingly the penalty imposed by AO and sustained by Commissioner (Appeals) is deleted” The Hon’ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Karnataka) held as under: “As the provision stands, the penalty proceedings can be initiated on various grounds set out therein. If the order passed by the authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in section 271 should be made known about the grounds on which they intend imposing penalty on him as section 274 makes it clear that the assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in section 271(1) (c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100 percent to 300 percent of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under section 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principle of natural justice is offended if the show-cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee”.
In view of the above factual and legal discussion, narrated above we do not concur with the decisions of authority below. The clause (c) of section 271(1)(c) deals with the two specific actions i.e. concealment of particulars and/ or furnishing of inaccurate particulars. We may note that in some of case both the actions are attracted and in some case there may overlapping of both offences but in such case the initiation of penalty must be for both the actions. However, while initiating the penalty proceeding for one action and finding the assessee guilty of another action cannot be sustained in law. We may further point out that situation of existence of grounds mentioned in section 271(1)(c) when it is a sine qua-non for initiation of the penalty proceeding, the penalty proceeding should be confined only to those grounds which has been specifically notified to the assessee to have the opportunity to make those ground so that assessee may substantiate his claim.
No doubt, the AO is empowered under the statute to initiate the penalty proceeding, once he is satisfied during the course of proceedings that there is concealment of income or furnishing of inaccurate particulars of total income. However, in our considered opinion, it is not open to the authorities at the time of imposing the penalty not to opine their opinion about the charge of penalty. Thus, the AO while issuing notice has to come to a clear conclusion that whether it is a case of concealment of income or it is a case