Income Tax Appellate Tribunal - Panji
Chandmal Kumawat, Jaipur vs Ito, Jaipur on 21 December, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 441/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2010-11
Shri Chandmal Kumawat cuke ITO
Vs. Ward-3(5)
444, Nemi Sagar Colony, Jaipur
Queens Road, Vaishali Nagar,
Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN No.: ASLPK9960E
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by : Shri P.C. Parwal (CA)
jktLo dh vksj ls@Revenue by : Smt. Prithviraj Meena (Addl.CIT)
lquokbZ dh rkjh[k@Date of Hearing : 16/10/2017
?kks"k.kk dh rkjh[k@Date of Pronouncement: 21/12/2017
vkns'k@ORDER
PER: SHRI VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of Ld. CIT(A)- 01, Jaipur dated 15.03.2017 wherein the assessee has taken following grounds of appeal:-
"1. Under the facts and circumstances of the case, the order passed u/s 271(1)(c) is illegal and bad in law.
2. The ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the levy of penalty of Rs. 16,16,775/- u/s 271 (1)(c) of the IT Act, 1961."ITA No. 441/JP/2017
Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur
2. Briefly stated, the facts of the case are that during the year under consideration, the assessee has sold agriculture land measuring 20 Bighas situated at Beawar, Vijay Nagar Road for a sale consideration of Rs. 1,60,00,000/- and also sold commercial land for Rs. 40,00,000/- respectively totalling to Rs. 2,00,00,000/-. In the return of income filed by the assessee, it has offered long term capital gains of Rs. 3,85,600/- and while computing the said long term capital gains, assessee has claimed indexed cost of acquisition of Rs. 1,26,40,000/- and has also claimed deduction u/s 54F for Rs. 69,74,400/-. In order to verify the claim of the assessee, a show cause letter dated 04.01.2012 was issued to the assessee asking to furnish basis along with documentary evidence of cost of acquisition as well as deduction u/s 54F of the Act. Further, the assessee was also asked to furnish the proof of value of land taken as on 01.04.1981 with supporting evidence. In response to the show cause, the assessee vide his reply dated 04.03.2012 submitted a revised computation of long term capital gain along with valuation report of the registered valuer in support of value of land taken as on 1.4.1981. In the revised computation, the assessee claimed indexed cost of acquisition of Rs. 54,15,793/- as against the indexed cost of Rs. 1,26,40,000/- as claimed in the original return of income. Further, the assessee shown an investment of Rs. 1,00,00,000/- in residential building on which exemption u/s 54F was claimed at Rs. 72,29,683/- as against figure of Rs. 69,74,400/- claimed in the original return of income.
3. On perusal of the revised working of long term capital gain and valuation reports submitted by the assessee, the AO observed that the assessee has not produced a single voucher for verification regarding value taken of the items mentioned in valuation reports like value of land, construction of one Pakka open well, filling and levelling charges, PVC pipe line, water storage tank etc. and it was held by the AO that the value taken by 2 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur the registered valuer in the valuation report cannot be verified in absence of the documentary evidence. At the same time, the AO observed that on perusal of the registered sale deed, it is noted that pakka open well, filling and levelling charges, PVC pipe line, water storage tank etc. have been constructed which proves that the assessee would have incurred certain expenses on this items and the expenses so incurred cannot be denied. Considering the discrepancies, the AO held that the working of capital gain filed by the assessee cannot be relied in totality without supporting evidence and he accordingly disallowed 10% of the total indexed cost of Rs. 54,15,793/- and worked out a disallowance of Rs. 541,579. Subsequently in appeal before the ld. CIT(A), the said disallowance was deleted by the ld. CIT(A).
4. In light of the same, one of the reasons for the levy of penalty under the impunged penalty order u/s 271(1)(c) relates to difference between the cost of acquisition as claimed by the assessee in the return of income amounting to Rs 1,26,40,000 and cost of acquisition amounting to Rs 54,15,793 as per the revised computation of income which has been filed during the course of assessment proceedings, and the latter being accepted by the assessee and the revenue given that the order of the ld CIT(A) has attained finality in absence of any further appeal.
5. Regarding claim of exemption u/s 54F of the Act, the Assessing Officer observed that the assessee has utilized only an amount of Rs. 64,50,000/- upto 31.07.2010 i.e before date of filing of return u/s 139 as against Rs. 1,00,00,000/- claimed by the assessee in the computation of income. He accordingly restricted the exemption u/s 54F of the Act at Rs. 48,40,830/- as against Rs. 72,29,683/- in the revised computation of income and an amount of Rs. 69,74,400/- in the original return of income. On appeal, the ld. CIT(A) 3 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur held that the investment made upto 31.3.2011 which is the date of filing of the return of income is to be considered for computing deduction u/s 54F of the Act. Accordingly the total investments of Rs. 8,12,4,915/- was considered as against Rs. 64,50,000/- by the Assessing Officer for determining the exemption u/s 54F of the Act. Therefore, another subject matter of levy of penalty relates to exemption u/s 54F of the Act as claimed in the return of income at Rs. 69,74,400/- and Rs 58,87,385 as finally assessed and accepted by both the parties.
6. The long term capital gains were accordingly worked out by the AO at Rs 98,22,156 as against Rs 3,85,600 declared by the assessee in the return of income and the penalty under section 271(1)(c) was accordingly initiated during the course of assessment proceedings for showing lesser quantum of capital gains.
7. In the penalty proceedings, the AO held that assessee would have escaped the taxation on the capital gains as so computed by the AO if the matter was not taken up for scrutiny proceedings. It was further held that basis the enquiry conducted by the AO during the course of assessment proceedings, the assessee was forced to file the revised computation of income which shows that the assessee has furnished inaccurate particular of income in respect of the long term capital gains. He accordingly levied the penalty @ 100% of the tax due on the differential income between the original return of income and the amount finally assessed pursuant to order of the ld CIT(A).
8. In the appellate proceeding, the ld. CIT(A) held that the appellant has initially declared a sum of Rs. 3,85,600/- as long term capital gain without any basis which was subsequently revised to Rs. 68,91,723/- and even in revised computation of income, the appellant claim deduction u/s 54F at a higher 4 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur amount which was not permissible in law. These facts clearly prove that the appellant has furnished inaccurate particulars of income. It was further held that the revised computation of income was filed by the assessee only when the same was detected by the AO and it cannot be treated as voluntary as claimed by the assessee. It was further held that the appellant had no intention to declare its true income in the return of income filed it. It was further held that the appellant has not brought on record any material which proves that in its return of income, it declared LTCG of Rs. 3,85,600/- or claimed higher deduction u/s 54F of the Act accidently or by mistake. Further the ld. CIT(A) referred to the various decisions including decision of Hon'ble Supreme Court in case of Mak Data (P) Ltd. vs. CIT [2013] 358 ITR 593, Hon'ble Bombay High Court in case of Mahesh N. Thakkar vs. ACIT [2015] 59 taxmann.com 272 (Bom). He accordingly confirmed the imposition of penalty by the AO u/s 271(1)(c) of the Act. In this background, the matter has now come up for hearing before this Bench against the said order of the ld CIT(A) confirming the levy of penalty.
9. During the course of hearing, the ld. AR submitted that the AO in the body of the assessment order has mentioned that penalty proceedings u/s 271(1)(c) are being initiated separately as assessee has furnished inaccurate particulars of income by showing less capital gain. At the end of the assessment order, penalty proceedings are initiated for concealment of income/furnishing inaccurate particulars of income. In the notice issued u/s 274 read with sec. 271(1)(c), penalty proceedings u/s 271(1)(c) is initiated for concealment of income or furnishing of inaccurate particulars of income. Thus, in the absence of any specific charge against the assessee in the penalty notice, consequent penalty imposed by AO is illegal and bad in law. Reliance in this connection was placed on the following cases:-
5 ITA No. 441/JP/2017Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur CIT Vs. SSA'S Emerald Meadows (2016) 242 Taxman 180 (SC):
Where Tribunal relying on decision of Division Bench of Karnataka High Court rendered in case of CIT Vs. Manjunatha Cotton & Grinning Factory 359 ITR 565, allowed appeal of assessee holding that notice issued by AO u/s 274 r.w.s. 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e. whether concealment of particulars of income or furnishing of inaccurate particulars of income and High Court on appeal held that matter was covered by aforesaid decision of Division Bench and therefore there was no substantial question of law arising for determination, there was no merit in SLP filed by revenue and same was liable to be dismissed.
Meherjee Cassinath Holdings Pvt. Ltd Vs. ACIT ITA No.2555/Mum/2012 dt. 28.04.2017 (Mum):
Sec. 271(1)(c) penalty proceedings are "quasi-criminal" and ought to comply with the principles of natural justice. The non-striking of the irrelevant portion in the show-cause notice means that the AO is not firm about the charge against the assessee and the assessee is not made aware as to which of the two limbs of s. 271(1)(c) he has to respond. The fact that the assessment order is clear about the charge against the assessee is irrelevant.
CIT vs. M/s Manjunatha Cotton & Ginning Factory & Ors. 359 ITR 565 (Kar.):
The relevant extract of this decision as contained in para 60 to 63 of the order is reproduced as under:-
60. 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 6 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur 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(1)(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 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.
61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai 7 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable.
Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non- application of mind.
INDEPENDENT PROCEEDING
62. The penalty proceedings are distinct from assessment proceedings, and independent therefrom. The assessment proceedings are taxing proceedings. The proceedings for imposition of penalty though emanating from proceedings of assessment are independent and separate aspects of the proceeding, Separate provision is made for the imposition of penalty and separate notices of demand are made for recovery of tax and amount of penalty. Also separate appeal is provided against order of imposition of penalty. Above all, normally, assessment proceedings must precede penalty proceedings. Assessee is entitled to submit fresh evidence in the course of penalty proceedings. It is because penalty proceedings are independent proceedings. The assessee cannot question the assessment jurisdiction in penalty proceedings. Jurisdiction under penalty proceedings can only be limited to the issue of penalty, so that validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter in penalty proceedings. It is not possible to give a finding that the re- assessment is invalid in such penalty proceedings. Clearly, there is no identity between the assessment proceedings and the penalty proceedings. The latter 8 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur are separate proceedings that may, in some cases, follow as a consequence of the assessment proceedings. Though it is usual for the Assessing Officer to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law requires, so far as the penalty proceedings are concerned, is that they should be initiated in the course of the proceedings for assessment. It is sufficient, if there is some record somewhere, even apart from the assessment order itself, that the Assessing Officer has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases, it is possible for the Assessing Officer to issue a penalty notice or initiate penalty proceedings even long before the assessment is completed. There is no statutory requirement that the penalty order should precede or be simultaneous with the assessment order. In point of fact, having regard to the mode of computation of penalty outlined in the statute, the actual penalty order cannot be passed until the assessment is finalised.
CONCLUSION
63. In the light of what is stated above, what emerges is as under:
a) Penalty under Section 271(1)(c) is a civil liability.
b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities.
c) Wilful concealment is not an essential ingredient for attracting civil liability.
d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271.
e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority.9 ITA No. 441/JP/2017
Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur
f) Ever if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision.
g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B).
h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner.
i) The imposition of penalty is not automatic.
j) Imposition of penalty even if the tax liability is admitted is not automatic.
k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order.
1) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed.
m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed.
10 ITA No. 441/JP/2017Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur
n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity.
o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority.
p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income
q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law.
r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee.
s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law.
t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings.
u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings.
S. Chandrashekhar Vs. ACIT (2017) 148 DTR 322 (Kar.):
The head note of this decision reads as under:-11 ITA No. 441/JP/2017
Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur Penalty u/s 271(1)(c)- Validity- Concealment vis-a-vis furnishing of inaccurate particulars- Notice issued in printed form mentioning you "have concealed the particulars of your income or furnished inaccurate particulars of such income"- Notice is thus not specific- Further, in the impugned notice, there is no clear indication about the concealment of the particulars of the income nor there is clear indication for furnishing inaccurate particulars of the income on application of mind- In any case as there is no specific ground, hence there would be breach of principles of natural justice and ultimately the order imposing penalty even otherwise also cannot be sustained.
Ms. Sandhya Gadkari Sharma Vs. DCIT (2016) 142 DTR 129 (Mum): It is incumbent upon the AO to specify whether the penalty u/s 271(1)(c) is being levied for concealment of income or for furnishing inaccurate particulars of income. In the absence of specific charge, levy of penalty would be bad in law.
Therefore, in the absence of specific mention in the notice u/s 274 as to whether the penalty proceedings are initiated for concealment of income or furnishing inaccurate particulars of income, the penalty levied is illegal and bad in law.
10. It was further submitted that so far as levy of penalty on merit is concerned, the assessee has disclosed all the facts and particulars in assessment proceedings and none of these particulars were found to be incorrect. The difference in the gain on sale of land has arisen on account of difference in value of cost of acquisition of land and deduction claimed u/s 54F. While filing the original return, assessee estimated the fair market value of property as on 01.04.1981 at Rs.20 lacs and computed the indexed cost of acquisition at Rs.1,26,40,000/-. Thereafter, in assessment proceedings, he 12 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur suo moto filed the report of the registered valuer in support of the fair market value of the land as on 01-04-1981 and accordingly furnished the revised working of the long term capital gain. This was accepted by Ld. CIT(A). In respect of deduction claimed u/s 54F, it was submitted that the assessee has incurred expenditure of approx. Rs.1 crore in respect of purchase of land and construction of house thereon before filing of return i.e. up to 31-03-2011. For this he has withdrawn sum of Rs.94,50,090/- out of the bank account (Rs.81,24,915/- up to 31-03-2011 and 13,25,175/- up to 12-09-2012). The balance expenditure was incurred out of the contribution and saving of various family members. Since the work has been completed up to 31-03-
2011, assessee has claimed deduction on entire amount though part of the payment of work completed up to 31-03-2011 was made subsequently. The assessee restricted the deduction with reference to investment of Rs.64,50,000/- by holding that assessee has withdrawn this amount only upto 31.07.2010 i.e. before the date of filing of the return. The Ld. CIT(A) held that investment made upto 31.03.2011 (date of filing of belated return) is to be considered for computing the deduction u/s 54F and accordingly he computed the deduction with reference to investment of Rs.81,24,915/-. Thus, assessee on bonafide belief claimed higher amount of indexed cost of acquisition and deduction u/s 54F. There is no falsity in the claim made by the assessee and therefore, for reduction in the claim of deduction, no penalty is leviable.
11. It was further submitted that from the assessment order, it can be noted that the AO has not given any finding as to the furnishing of inaccurate particulars of income so far as it relates to the claim made in the original return and the revised computation of income. His objection was in respect of the determination of indexed cost of acquisition as per the registered valuer report and claim of deduction u/s 54F. The disallowance in respect of the indexed cost of acquisition is deleted by CIT(A) whereas the assessee has 13 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur given plausible explanation in respect of claim of deduction u/s 54F. In these facts, assessee cannot be held to be guilty of furnishing inaccurate particulars of income or concealment of income.
12. It was further submitted that it is a settled law that where a claim for deduction is made under a bona-fide belief in respect of which full particulars were filed with the return, the disallowance of such claim which was ultimately held to be a wrong claim would not mean that assessee has furnished inaccurate particulars of income so as to warrant the levy of penalty. For this, reliance was placed on the following cases:-
CIT Vs. Reliance Petroproducts Pvt. Ltd. 322 ITR 158 (SC):
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 14 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(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.
Equest India (P) Ltd. Vs. ITO (2011) 136 TTJ 574/48 DTR 386 (Mum): Merely because the assessee has a different perception of the situation than the AO, even though, in the ultimate analysis, the stand of the AO is to be upheld, it cannot be said that the assessee has concealed any particulars. The admission or rejection of a claim is a subjective exercise and whether a claim is accepted or rejected has nothing to do with furnishing of inaccurate particulars of income. What is a correct claim and what is an incorrect claim is a matter of opinion. Raising a legal claim, even if it is ultimately found to be legally unacceptable, cannot amount to furnishing of inaccurate particulars of income. The development of law is a dynamic process which is affected by the innumerable factors, and it is always an ongoing exercise. In such circumstances, a bona fide legal claim by the assessee being visited with penal consequences only because it has not been accepted thus far by the tax authorities or judicial authorities is an absurdity. In any event, the connotations of expression 'particulars of income' do not extend to the issues of interpretation of law and as such making a claim, which is found to be unacceptable in law, cannot be treated as furnishing of inaccurate particulars of income.
ACIT Vs. Torque Pharmaceuticals Pvt. Ltd. (2015) 125 DTR 236 (Chd.) (Trib.): Assessee having made bona fide claim of deduction in the return and disclosed the entire facts, it cannot be held that the assessee has concealed particulars of income or filed inaccurate particulars of income simply because 15 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur the revenue authorities did not accept the assessee's claim and made additions. Therefore, penalty u/s 271(1)(c) could not be levied.
Meridian Impex Vs. ACIT (2014) 107 DTR 89/149 ITD 29 (Rajkot) (Trib.) (TM):
The assessee having made claim for deduction u/s 80IB on the basis of its legal perception, furnishing all the material facts relevant to the computation of total income and later withdrawn the claim during the assessment proceedings after discovering that it was not admissible, it was a bona fide claim and did not amount to filing of inaccurate particulars of income. Therefore, assessee is not liable for penalty u/s 271(1)(c).
13. It was further submitted that the cases reported at 358 ITR 593 (SC), 61 taxmann.com 363 (Chd.) (Trib.), 64 taxmann.com 91 (Cal.), 70 taxmann.com 175 (SC) relied by the Ld. CIT(A) are on different facts as evident from the gist of the cases mentioned in the order. In case of Gourav Goenka Vs. ACIT 54 taxmann.com 354 (Cal.), the Hon'ble Court levied the penalty as there was a finding that deduction was claimed knowingly on a wrong basis. However, considering that there was nothing to show any antecedent, reduced the quantum of penalty by 50%. As against this, in the case of assessee there is no finding that deduction was claimed knowingly on a wrong basis and therefore, this case is not applicable on facts. In case of Mahesh N. Thakkar Vs. ACIT 59 taxmann.com 272 (Bom.), the assessee acquired the property on 24.08.1981 but claimed that it was purchased prior to 01.04.1981 and thereafter when enquired accepted that property was not purchased prior to 01.04.1981. On these facts it was held that it was not a case of suo moto explanation and therefore, levy of penalty was confirmed. As against this, in the case of the assessee the property was acquired prior to 01.04.1981. While filing the return assessee estimated the FMV of the property as on 01.04.1981 at Rs.20 lacs but when it was got valued from the registered valuer, the same 16 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur was determined at Rs.8,55,206/-. It is for this reason that there is a violation in the capital gain offered in the return and that computed in course of assessment proceedings. It is not the case of the department that any particulars in respect of the properties has been concealed or inaccurately furnished. Thus, this case is not applicable on facts rather the principle laid down by the Calcutta High Court in case of Udayan Mukherjee Vs. CIT 291 ITR 318 is applicable where the Court clarified that there is a distinction between furnishing of wrong particulars and making a wrong calculation. In the case of former, there is case for imposition of penalty but in case of latter, there is no concealment.
14. On the other hand, ld. D/R vehemently argued the matter, took us through the findings of the lower authorities and supported the orders of the lower authorities.
15. We have heard the rival contentions and purused the material available on record. Firstly, regarding the preliminary plea of the ld AR that in absence of a specific charge against the assessee in the penalty notice, consequent levy of penalty by the AO is illegal and bad in law, we refer to the penalty notice dated 18.03.2013 which talks about assessee concealing the particulars of income or furnishing inaccurate particulars of income. The notice doesn't specify the exact charge against the assessee as to whether it relates to concealing the particulars of income or furnishing inaccurate particulars of income. The subsequent notice dated 17.08.2015 is against silent on the exact charge against the assessee. It is a settled position in law that the imposition of penalty under section 271(1)(c) is invited when the conditions specified therein are satisfied and further, the two expressions "concealing the particulars of income" and "furnishing inaccurate particulars of income"
denote different connotations. It is therefore imperative that the assessee be made aware as to which of the two charges, he is required to submit his 17 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur defence and supportive arguments. In the instant case, as we have noted above, the notice talks about both the charges and it doesn't convey to the assessee as to which charge he has to respond. The notice thus demonstrate non-application of mind on the part of the AO. Further, we refer to the assessment order where, after discussing the issue relating to computation of capital gains, the AO held that by showing less capital gains, the assessee has furnished inaccurate particulars of income and penalty proceedings are being initiated separately and thereafter, towards the end of the assessment order, the AO states that penalty proceedings u/s 271(1)(c) read with section 274 have been initiated separately for concealment of income/furnishing of inaccurate particulars of income. This thus shows that the AO himself is unsure about the charge against the assessee during the course of assessment proceedings. Considering the observations of the AO in the assessment order alongside his action of non-striking off the irrelevant clause in the penalty notice shows that the charge being made against the assessee qua 271(1)(c) is not firm, shows non-application of mind on the part of the AO, and the vagueness and ambiguity in the notice has thus prejudiced the right of reasonable opportunity to the assessee in as much as the assessee is not made aware as to which of the two charges, he has to submit his defence.
16. Here, we refer to the decision of Hon'ble Supreme Court in case of Dilip N Shroff reported in 161 Taxman 218 where it was held as under:
"83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate 18 ITA No. 441/JP/2017 Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations.
84. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. [See Malabar Industrial Co. Ltd. v. CIT [2000] 2 SCC 718]."
17. We find that similar proposition has been laid down by the Hon'ble Karnataka High Court in case of Manjunatha Cotton and Ginning Factory (supra) which has been followed in case of SSA Emerald Meadows (supra) and the SLP against the latter decision has since been dismissed by the Hon'ble Supreme Court. Further, we note that the Hon'ble Bombay High Court in case of Shri Samson Perinchery (in ITA No. 1154 and others dated 5.01.2017) and Karnataka High Court in its latest decision in case of S. Chandrashekhar (Supra) has reaffirmed the said legal proposition.
18. In light of above legal authorities where the factum of non-striking off of the irrelevant clause in the notice has been held as reflective of non- application of mind by the AO and in light of facts and circumstances of the present case and the above discussions, the penalty imposed under section 271(1)(c) is liable to be deleted.
19. As we have accepted the above preliminary plea of the assessee and the penalty has been deleted on this count itself, we don't think it would be relevant to examine other contentions raised by the ld AR and hence, the same are not being dealt with.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 21/12/2017.
19 ITA No. 441/JP/2017Shri Chandmal Kumawat, Jaipur Vs ITO Ward-3(5), Jaipur Sd/- Sd/-
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(Kul Bharat) (Vikram Singh Yadav)
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Jaipur
Dated:- 21/12/2017
*Ganesh Kr
vkns'k dh izfrfyfi vxzsf"kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- M/s Chandmal Kumawat, Jaipur
2. izR;FkhZ@The Respondent- ITO Ward-3(5), Jaipur
3. vk;dj vk;qDr@CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@Guard File (ITA No. 441/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@ Assistant. Registrar.20