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Penalty is sustainable where imposed by invoking both limbs of Section 271(1)(c), which vitiates need to specify under exactly which part it is being levied: ITAT

2019-TIOL-1524-ITAT-MAD

IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘A’ CHENNAI

ITA No.779/Chny/2019
Assessment Year: 2013-14

SMT M MALARVIZHI
18, METTU THERU
KUMANANCHAVADI
CHENNAI-600056
PAN NO:APJPM2455H

Vs

INCOME TAX OFFICER
NON CORPORATE WARD-8(5)
CHENNAI-600034

Duvvuru RL Reddy, JM & S Jayaraman, AM

Date of Hearing: July 04, 2019
Date of Decision: July 19, 2019

Appellant Rep by: Shri Pranay J Shah, CA
Respondent Rep by: Shri AR V Sreenivasan, JCIT

Income Tax – Sections 148, 271(1)(c) & 274

Keywords – Concealment of income – Furnishing inacurrate particulars of income – Penalty proceedings

THE assessee has not filed return for AY 2013-14. As per the information available with the Department, the assessee sold immovable properties and the guideline value for the sold property sold was Rs 6.51 cr and as per section 50C this value has to be taken as sale consideration for the computation of capital gain. Since, the assessee has not filed any return admitting any capital gain on the sale of the property. The assessment was reopened by issuing notice u/s 148 and in response of it, the assessee filed her return admitting only Rs 2.15 lacs. The assessment was completed and a demand of Rs. 68.03 lacs was raised. Therefore demand notice u/s 156 penalty notice u/s 274 r.w.s.271 were issued. But even after the lapse of six months, the assessee has neither paid the tax fully nor filed any appeal before the CIT(A).

Further on initiation of penalty proceedings the Counsel for the assessee requested to drop the penalty proceedings. However, the counsel has not given any valid explanation for not filing the return in time and for not admitting correct income even after receipt of notice issued u/s 148. Since the assessee has concealed the particulars of income as well as filed inaccurate particulars of income, the AO levied penalty u/s 271(1)(c). On appeal, the CIT(A) held that no prejudice can be said to have been, prima facie, caused to the assessee through the issue of the penalty notice and accordingly, dismissed the appeal.

On appeal, the Tribunal held that,

Whether penalty is sustainable if it is imposed under both the limbs of Section 271(1)(c), owing to which the necessity of specifying either of the two parts of Section 271(1)(c), gets vitiated – YES: ITAT

++ the assessee has not filed any return voluntarily and even after receipt of notice issued u/s 148, admitted only Rs 2.15 lacs as against the income admitted during the assessment Rs 1.91 cr after showing the evidences of sold properties. Thus, it is clear the assessee, having huge income by way of house property income, interest income and capital gain, has not come forward and declared the correct income. Even after issunace of notice u/s 148, she has concealed the actual income and has filed inaccurate particulars in the return stating that she had earned only Rs. 2.15 lacs. Hence the levy of penalty is warranted under both counts on concealment of particulars of income as well as furnishing of inaccurate particulars of income. As it is not the case in which the Department issued notice of printed form where all the grounds mentioned in section 271 as in the case of M/s. Original Kerala Jewellers, which was relied on by the assessee. Thus, the penalty levied under which limb of section 271(1)(c) does not arise in this case, because, penalty is warranted under both limb and as such, the AO has rightly levied penalty u/s 271(1)(c).

Assessee’s appeal dismissed

ORDER

Per: Duvvuru RL Reddy:

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 9, Chennai dated 30.01.2019 relevant to the assessment year 2013-14. The grounds raised by the assessee in the grounds of appeal are reproduced as under:

“1. For that the order of the Learned Commissioner of Income Tax (Appeals) – 9, Chennai u/s.271(1)(c) of the Income Tax Act, 1961is opposed to law, facts and circumstances of the case.

2. For that the Learned Commissioner of Income Tax (Appeals) erred in passing the order dismissing the appeal filed by the Appellant herein without noting that the notice issued by the Assessing Officer under section 274 read with section 271(1)(c) is bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income.

3. For that the Learned Commissioner of Income Tax (Appeals) committed a grave error in dismissing the Appeal of the Appellant relying on the judgement of the Hon’ble Madras High Court in M/s. Sundaram Finance Ltd V. ACIT especially when the said case is not applicable to case of the Appellant.

4. For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon’ble Tribunal may be pleased to cancel the assessment and/or to delete the addition made in the assessment order and pass such other orders as the Hon’ble Tribunal may deem fit.”

2. Brief facts of the case are that The assessee, Smt. M. Malarvizhi, assessed in this ward has not filed return of income for the assessment year 2013-14. As per the information available with the Department, the assessee sold immovable properties for a consideration of Rs. 5,91,57,000/- and the guideline value for the property sold was Rs. 6,51,76,500/-. As per section 50C of the Act, this value of Rs.6,51,76,500/- has to be taken as sale consideration for the computation of capital gain. Since, the assessee has not filed any return of income admitting any capital gain on the sale of the above property, the assessment for the assessment year 2013-14 was reopened by way of issuing notice under section 148 on 08.01.2016. In response to this notice, the assessee has filed her return of income on 29.01.2016 admitting only Rs.2,15,130/- as interest income and claimed an amount of Rs.25,420/- as refund.

2.1 During the course of scrutiny proceedings, when the assessee was asked to explain why the capital gain on the sale of property and other income was not admitted fully, then the assessee has admitted additional interest income of Rs.4,09,025/-; House property income of Rs. 8,400/- and Long term capital gain of Rs.1,86,40,192/-. The assessment was completed on 31.12.2016 determining the income at Rs.1,91,62,741/- and a demand of Rs. 68,03,570/- was raised. Accordingly demand notice under section 156 penalty show cause notice under section 274 r.w.s.271 of the Act were issued and served upon the assessee. But even after the lapse of six months, the assessee has neither paid the tax fully nor filed any appeal before the ld. CIT (appeals).

2.2 During the course of penalty proceedings, the AR of the assessee requested to drop the penalty proceedings. However, the AR of the assessee has not given any valid explanation for not filing the return in time and for not admitting correct income even after receipt of notice issued under section 148 of the Act. The assessee has not filed any return of income originally admitting the interest income, house property income and huge long term capital gain and even after receiving notice under section 148 of the Act, the assessee has filed her return of income admitting only Rs. 2,15,130/- as income as against income admitted during the course of assessment proceedings of Rs.1,92,62,150/-. In view of the above and since the assessee has concealed the particulars of income as well as filed inaccurate particulars of income, the Assessing Officer levied penalty under section 271(1)(c) of the Act.

3. On appeal, by way of additional ground, the assessee challenged the validity of initiation of penalty stating that the notice issued does not specify whether the notice is for concealment of income or for furnishing of inaccurate particulars of income and that consequently the notice was invalid. Since the additional ground raised is a legal issue questioning the jurisdiction of penalty initiated, the ld. CIT(A) admitted the additional ground for adjudication on merit. After considering the submissions and verification of the notice issued to the assessee, the ld. CIT(A) held that no prejudice can be said to have been, prima facie, caused to the assessee through the issue of the impugned penalty notice and accordingly, the additional ground raised by the assessee was dismissed.

4. On being aggrieved, the assessee is in appeal before the Tribunal.

5. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. In this case, the assessee has not challenged the penalty levied under section 271(1)(c) of the Act. Whereas, the assessee has challenged the issue of notice under section 274 r.w.s. 271(1)(c) of the Act is bad in law, as it did not specify under which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. Before the ld. CIT(A), by way of additional ground, the assessee challenged the validity of initiation of penalty stating that the notice issued does not specify whether the notice is for concealment of income or for furnishing of inaccurate particulars of income and that consequently the notice was invalid. On perusal of the notice issued under section 274 r.w.s. 271(1)(c) of the Act, the ld. CIT(A) has observed that notice has been issued for concealment and for furnishing inaccurate particulars of income. The ld. CIT(A) further observed that the penalty has been levied for both concealment of particulars of income as well as furnishing of inaccurate particulars of income by the assessee. Accordingly, the additional ground raised by the assessee was dismissed.

5.1 We have perused the notice issued under section 274 r.w.s. 271 of the Act dated 31.12.2016 and find that the Assessing Officer has very well specified by striking off point No. 1 and 2 in the above notice issued to the assessee that the penalty proceedings initiated as per point No. 3, wherein, it was mentioned that

“3. *have concealed the particulars of your income and furnished inaccurate particulars of such income.”

Thus, we find no ambiguity in the notice served on the assessee for initiating penalty proceedings clearly indicating that the said penalty proceedings are initiated towards concealment of particulars of income and furnished inaccurate particulars of such income. Moreover, it is amply clear and reflected in the orders of authorities below that the assessee has concealed the particulars of income as well as furnished inaccurate particulars of such income.

5.2 In this case, the admitted facts are that the assessee has not filed any return of income voluntarily and even after receipt of notice issued under section 148 of the Act, the assessee has admitted only Rs. 2,15,130/- as against the income admitted during the course of assessment proceedings of Rs. 1,91,62,750/- after showing the evidences of selling the properties by assessee during the financial year relevant to the assessment year 2013-14. From the above it is clear that the assessee, in spite of having huge income by way of house property income, interest income and capital gain, has not come forward and declared the correct income. Even after receipt of notice issued under section 148 of the Act, the assessee has concealed the interest income of Rs.4,09,025/-, house property income of Rs. 8,400/-, and long term capital gain of Rs.1,86,40,192/- and has filed inaccurate particulars in the return of income filed in response to the notice issued under section 148 of the Act stating that she had earned only Rs. 2,15,130/-. In view of the above facts, since levy of penalty is warranted under both counts i.e., concealment of particulars of income as well as furnishing of inaccurate particulars of income, the Assessing Officer rightly and specifically mentioned in the notice by striking off other two points which were not relevant in this case. It is not the case of the assessee that the Department issued notice of printed form where all the grounds mentioned in section 271 of the Act as that of the notice issued in the case of M/s. Original Kerala Jewellers, which was relied on by the assessee. In view of these facts, penalty levied under which limb of section 271(1)(c) of the Act does not arise in this case, because, penalty is warranted under both limb and as such, the Assessing Officer rightly levied penalty under section 271(1)(c) of the Act. Under these facts and circumstances, the ground raised by the assessee stands dismissed.

6. The next issue raised in ground No. 3 is that the ld. CIT(A) has committed a grave error in dismissing the appeal of the assessee relying on the judgement of the Hon’ble Madras High Court in the case of M/s. Sundaram Finance Ltd. v. ACIT especially when the said case is not applicable to case of the assessee. We have also gone through the above judgement and find that the case law squarely applies to the facts of the assessee’s case. Admittedly, in this case, the assessee has not raised the issue before the Assessing Officer during the course of penalty proceedings except pleading for dropping the levy of penalty. More particularly, having concealed the particulars of income and furnishing of inaccurate particulars of such income, the assessee clearly understood the purport and import of notice issued under section 274 r.w.s. 271 of the Act,. Thus, the ld. CIT(A) has rightly followed the above decision of the Hon’ble High Court. We find no reason to interfere with the order passed by the ld. CIT(A). thus, the ground raised by the assessee stands dismissed.

7. In the result, the appeal filed by the assessee is dismissed.

(Order pronounced on the 19.07.2019)

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