Case Law Details
ITO Vs Shri Bimal Talukdar (ITAT Guwahati)
The issue under consideration is whether the penalty proceeding u/s 271(1)(c) initiated by the AO sustain Under Income Tax Law?
In the present case, the ITAT earlier had allowed the appeal of the assessee and cancelled the penalty levied u/s. 271(1)(c) of the Act by taking note of the invalid notice, since the AO failed to specify the charge by striking down the irrelevant fault/charge i.e. “having concealed the particulars of income or furnishing inaccurate particulars of such income”. Now the revenue filed an application before the Court where it was contended that the AO had found in the assessment order itself that assessee had faulted on both the charges i.e. having concealed particulars of income as well as furnished inaccurate particulars of such income. Therefore, according to revenue, there is a difference in the facts of the case and the aforesaid case laws cannot be applied.
ITAT states that sometimes in some cases, it may attract both the offenses and in some cases there may be overlapping of the two charges, then in such event in the penalty proceedings also notice should clearly specify the same by adding the adjunctive ‘and’ and not the disjunctive ‘or’. The omission of the AO to strike off ‘or’ between the two charges and write/add ‘and’ in between both the charges makes the notice vague. Moreover, it has to be kept in mind that the assessment proceeding is distinct from the penalty proceedings and it is a settled law that imposition of penalty is discretionary and not mandatory. Therefore, any observation or finding made in the assessment order cannot come to the rescue of the AO’s action of issuing defective/vague penalty notice.
Accordingly the appeal filed by the revenue dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
This is a Misc. Application preferred by the revenue against the order of this Tribunal dated 08.01.2018 for AY 2011-12 wherein the penalty levied by the AO u/s. 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) was cancelled.
2. From the Misc. application preferred by the revenue it is discerned that the Tribunal had allowed the appeal of the assessee and cancelled the penalty levied u/s. 271(1)(c) of the Act by taking note of the invalid notice, since the AO failed to specify the charge by striking down the irrelevant fault/charge i.e. “having concealed the particulars of income or furnishing in accurate particulars of such income”. For doing so, the Tribunal relied on the decision of Hon’ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 which was followed by the decision of Hon’ble Karnataka High court in the case of CIT vs. SSA’s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 which decision though has been challenged by the revenue before the Hon’ble Supreme Court and the SLP has been dismissed.
3. However, the main grievance of the revenue is that in the present case the AO had found in the assessment order itself that assessee had faulted on both the charges i.e. having concealed particulars of income as well as furnished inaccurate particulars of such income.
Therefore, according to revenue, there is difference in the facts of the case and the aforesaid case laws cannot be applied. Per contra, the ld. AR brought to our notice that even if the revenue’s contention is accepted i.e. if the AO has found in the assessment order itself that the assessee had faulted on both the charges i.e. having concealed particulars of income as well as have furnished inaccurate particulars of such income then, in place of ‘or’ it should have been ‘and’ which is not the case. The Ld. AR pointed out that in the impugned notice dated 02.12.2016 ‘or’ has been used between the two faults. He also drew our attention to the observation of Hon’ble Karnataka High Court decision which takes care of such a situation as pleaded by Revenue before us and took our attention to the case of Manjunatha Cotton and Ginning factory (supra) wherein their Lordhips has held at page 600 as below:
“Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in section 271(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what the assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable.” (emphasis given by us)
4. So, according to us, sometimes in some cases, it may attract both the offences and in some cases there may be overlapping of the two charges, then in such event in the penalty proceedings also notice should clearly specify the same by adding the adjunctive ‘and’ and not the disjunctive ‘or’. The omission of the AO to strike of ‘or’ between the two charges and write/add ‘and’ in between both the charges makes the notice vague. So, even if the AO is of the opinion that action/omission of assessee attracts both the charges, then it was incumbent upon him, to put the assessee on notice by expressing his intention to proceed against the assessee for both charges by striking out ‘or’ and substituting it with ‘and’ which AO has failed to do in this case. The AO by not bothering even to do the exercise as suggested by us reveals the mechanical approach of issuing penalty notice which action exposes the non-application of the mind on the part of the AO to put the assessee on clear notice for which he intends to levy penalty. Moreover, it has to be kept in mind that the assessment proceeding is distinct from the penalty proceedings and it is a settled law that imposition of penalty is discretionary and not mandatory. Therefore, any observation or finding made in the assessment order cannot come to the rescue of the AO’s action of issuing defective/vague penalty notice. So, in the facts and circumstances discussed supra, the Misc. Application filed by the Revenue fails since we find no error leave alone error apparent on the face of the impugned order of the Tribunal. Therefore, Misc. Application of the revenue is dismissed.
3. In the result, the Misc. application of the revenue is dismissed.
Order is pronounced in the open court on 24June, 2020.
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