S. 271(1)(c) Penalty: The law in Maharaj Garage (Bom) that it is not necessary for the penalty notice to frame a specific charge cannot be followed in the context of whether the notice should specify 'concealment' vs. 'inaccurate particulars' because the judgement does not consider SSA’s Emerald Meadows (SC) and is contrary to Samson Perinchery (Bom)
(i) It is clear that no proper charge has been levied by AO at any of the aforesaid three stages i.e. assessment order, jurisdictional penalty notice or the penalty order. Under the facts and circumstances of the case, the judgment of Hon’ble Supreme Court in the case of CIT & Anr. vs. SSA’s Emerald Meadows in SLP No. 11485/2016 dated 05.08.2016, is squarely applicable wherein Hon’ble Supreme Court has affirmed the view taken by Hon’ble High Court of Karnataka in its order dated 23.11.2015 which in turn relied upon the another judgment of Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory in 359 ITR 565 wherein it was held that jurisdictional notice issued by AO u/s 274 read with section 271(1)(c) of the Act was bad in law as it did not specify that in which limb of section 271(1)(c) of the Act, the penalty proceedings have been initiated i.e. whether for concealment of income or furnishing of inaccurate particulars of income. Thus, the mandate of the law as declared by Hon’ble Supreme Court is very clear and we are bound by it.
(ii) It is further brought to our notice that Hon’ble Bombay High Court in the case of CIT vs. Shri Samson Perinchery in ITA No. 1154 dated 05.01.2017 has followed the view taken by Hon’ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (supra) and dismissed the argument of the revenue that there is no difference between furnishing of inaccurate particulars or concealment of income. It is further noted by us that above judgment of Hon’ble Bombay High Court also took support of the judgment of Hon’ble Supreme Court in the case of Ashok Pai vs. CIT 292 ITR 11(SC) wherein it was observed that concealment of income and furnishing of inaccurate particulars of income in section 271(1)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the ground of which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the assessee has no notice.
(iii) During the course of hearing, our attention was drawn by the Ld. Counsel of assessee upon the reply filed by the assessee dated 27.02.2012 to the penalty notice of the Ld. AO wherein objection was raised to the AO that assumption of jurisdiction was bad as there was no belief of the AO in the assessment order or in the penalty notice as to whether the penalty proceedings were initiated by the AO for concealment of income or furnishing of inaccurate particulars of income by assessee. Relevant portion of the reply is reproduced below for ready reference:
“Our above named client is in receipt of your letter dated F. No. ITO/W-1(2)/Aditya/2011-12/780 dated 7.2.2012 for the above assessment year to submit evidence / documents in connection with the above proceedings. As has been informed to us by our above named client, no notice u/s 271(1)(C) was issued to the assessee company for the above assessment year. The only notice issued was for penalty u/s 271(1)(b) dated 26.3.2002 (Refer PB 1-2), with reference to assessment order passed dated 26.3.2002 (Refer PB 3-8), which refers to penalty proceedings initiated u/s 271(1)(c), but there is no mention for issuance of notice u/s 271(1)(b). Further, there is no mention or belief of the Ld. AO in the Assessment order passed, as to whether the penalty proceedings were initiated by him for concealment of income by the assessee or for furnishing inaccurate particulars of income by the assessee. In view of the above facts, the proceedings initiated by the Ld. AO u/s 271(1)(c) are void ab initio, contrary to facts of the case, bad in law, and as such proceedings initiated may kindly be dropped on these facts itself.”
(iv) Thus, from the perusal of above, it is clear that in the case before us the AO made a serious lapse in not fixing the charge clearly while assuming jurisdiction to levy penalty and whether at the stage of leaving the penalty.
(v) On the other hand, it is brought to our notice by the opposite party that judgment of Hon’ble Bombay High Court (Nagpur Bench) in the case of Maharaj Garage & Co. Income Tax Reference No.21 of 2008 has not considered the judgment of Hon’ble Supreme Court in the case of CIT vs. SSA’s Emerald Meadows (supra). Further as discussed above, Hon’ble Bombay High Court has itself in the case of CIT vs. Shri Samson Perinchery (supra) has followed the view taken by Hon’ble Supreme Court in the case of CIT vs. M/s SSA’s Emerald Meadows and CIT vs. Ashok Pai (supra). It is further brought to our notice that perusal of judgment shows that in the four questions of law determined by the Hon’ble High Court, the issue before us in this case was not involved in any of these questions. Further, Hon’ble High Court has made observations in para 15 of the judgment on the basis of specific facts of the said case to hold that the said assessee had sufficient notice of action of imposing penalty. Thus, the said judgment is not applicable on the facts and issue involved before us and more so when the judgment of Hon’ble Apex Court in the case of SSA’s Emerald Meadows, (supra) and Ashok Pai, (supra) is directly applicable on the issue involved before us.
(vi) It is further noted by us that the similar view has been followed recently by Hon’ble Andhra Pradesh High Court in the case of Pr. CIT vs. Smt. Baisetty Revathi dated 13.07.2017 in ITA No. 684 of 2016, wherein Hon’ble High Court observed inter alia as under:
“On principle, when penalty proceedings are sought to be initiated by the revenue under section 271(1)(c) of the Act of 1961, the specific ground which forms the foundation therefore has to be spelt out in clear term. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an or between the two, as in the present case. This ambiguity in the show-cause notice is further compounded presently by the confused finding of the Assessing Officer that he was satisfied that the assessee was guilty or both.
(vii) Lastly, we shall also deal with the other argument of Ld. Senior DR that penalty should be upheld for the reason that penalty was levied on both the grounds i.e. as per the AO the assessee had made concealment of income and also furnished inaccurate particulars of income. We find that this argument of revenue is also not sustainable. It is settled law that penalty cannot be levied for twin charges. Penalty cannot be levied for two mutually exclusive situations. The default for concealment of particulars of income or furnishing of inaccurate particulars are two mutually exclusive situations. The position of law in this is well settled and reference in this regard may be made to judgments of Hon’ble Gujarat High Court in the case of New Sorathia Engg Co. vs. CIT in 282 ITR 642, CIT vs. Manu Engg. Works in 122 ITR 306 and CIT vs. Lakhdhir Lalji in 85 ITR 77.
(viii) This view has been again reiterated also by Hon’ble Andhra Pradesh High Court in the case of Pr. CIT vs. Smt. Baisetty Revathi (supra). Thus viewed from any angle we find that levy of penalty in this case is not justified and the impugned penalty order is illegal. Therefore, we have no other option but to delete the same. Thus, the penalty of Rs. 15,20,000/- is hereby directed to deleted. Since, penalty is deleted on jurisdictional ground, we are not deciding other issues raised by assessee. As a result, the grounds of appeal raised by the assessee are allowed.