SHRI ARUNA KUMAR RATH,BHUBANESWAR vs. ITO, WARD-2(2), BHUBANESWAR

This is an appeal filed by the assessee against the order 18.04.2018 passed by the CIT(A)-1, Bhubaneswar for the assessment year 2013-2014.

The sole issue involved in the present appeal is with regard to levy of penalty u/s.271(1)(c) of the Act of Rs.1,54,544/-.

At the outset, ld. Assessee Representative (AR) placing reliance on the decision of Hon’ble Supreme Court in the case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) and the decision of Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) submitted that the AO issued notice u/s.274 r.w.s.271(1)(c) of the Act on 23.03.2016, wherein both the allegations AO has not shown any clear indication to the assessee that on which allegation he intends to impose penalty u/s.271(1)(c) of the Act. Ld. AR contended that even in the assessment order there is no iota that on which allegation the AO intends to impose the penalty on the assessee either on the allegation on concealment of income or on the allegation of furnishing inaccurate particulars of income. Therefore, on both the counts penalty imposed by the AO u/s.271(1)(c) of the Act and confirmed by the CIT(A) cannot be held as sustainable.

After considering the rival submissions of both the parties and perusing the entire material available on record as well as orders of lower authorities, we find that the notice issued u/s 274 r.w.s.271(1)(c) of the Act apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s.274/271(1)(c) of the Act without specifying the assessee has concealed ''particulars of income" or assessee has furnished "inaccurate particulars of income", so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. The Hon'ble Apex Court vide judgment in case of M/s. SSA's Emerald Meadows, (2016) 73 taxmann.com 248(SC) dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the assessee. Operative part of the judgment in case of M/s. SSA's Emerald Meadows (supra) decided by Hon'ble High Court of Karnataka is reproduced below :- "2. This appeal has been filed raising the following substantial questions of law: (1) Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in. holding that the penalty notice under Section 274 r.w.s. 271(l)(c) is had in law and. invalid in spite the amendment of Section 271(1 B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued, under Section 274without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income? 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied 01 the derision of the Division Bench of this Court rendered In the case of COMMISSIONER or INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.

In our view, since the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no substantial question of law arises in this appeal for determination by this Court, the appeal is accordingly dismissed."

The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, 359 ITR 565 (Kar) observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. The Hon'ble Supreme Court in the case of Dilip N. Shroff vs. JCIT, 291 ITR 519(SC) has also noticed that where the Assessing Officer issues notice under section 274 of the Act in the standard proforma and the inappropriate words are not deleted, the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. According to the Hon'ble Supreme Court, in such a situation, levy of penalty suffers from non- application of mind. In the background of the aforesaid legal position and, having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 23.03.2016 without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable.

The facts of the present appeal are identical to the facts of the case before the Hon'ble Supreme Court in the case of SSA's. Emarld Meadows(supra) and, therefore, the decision of Hon'ble Supreme Court squarely applies to the case of the assessee. Hence, respectfully following the same, we set aside the impugned order passed by the CIT(A) and cancel the order of the Assessing Officer levying penalty u/s.271(1)(c) of the Act Rs.1,54,544/- and allow the sole ground raised