M.Arun, Chennai V. DCIT,CC-2(4), Chennai

ITA 573/CHNY/2021

AI Insights

The case involves an appeal by M. Arun against the penalty imposed by the Deputy Commissioner of Income Tax, Central Circle-II(4), Chennai, which was confirmed by the Commissioner of Income Tax (Appeals)-18, Chennai. The penalty was levied following additions made to the assessee's income for the Assessment Year 2008-09, which included disallowances of business expenses and unexplained investments. The primary legal contention raised by the assessee was the vagueness of the show-cause notice, which failed to specify the exact nature of the charges, leading to the Tribunal's decision to set aside the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134938 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-05-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 06-12-2021
• Other Referred Cases: M/s PVP Ventures Ltd. vs. DCIT, M/s TVS Supply Chain Solutions vs. ACIT, Babuji Jacob vs. ITO, Mak Data (P) Ltd. Vs. CIT, II, K.P.Madhusudhanan Vs. CIT, CIT, Chennai-IV Vs. Gem Granites (Karnataka), CIT Vs. Smt.Anitha Kumaran, CIT Vs. Reliance Petro Products (P) Limited, CIT Vs. Samson Perinchery, CIT Vs. Manjunatha Cotton & Ginning Factory, CIT Vs. SSA’s Emerald Meadows, National Textiles Vs. CIT, Mohd. Farhan A.Shaikh V/s DCIT, Gangotri Textiles Ltd. V/s DCIT, Sundaram Finance Ltd. Vs ACIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Question of law; Initiation of penalty proceedings; Set aside
• Section: 271(1)(c); 143(3); 14A; 274; 143(2); 139(1); 73; 13

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHENNAI ी मनोज कु मार अ वाल, लेखा सद$ एवं ी मनोमोहन दास, ाियक सद$ के सम( BEFORE SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER AND SHRI MANOMOHAN DAS, JUDICIAL MEMBER आयकर अपील सं./ITA No.573/Chny/2021 िनधा)रण वष) /Assessment Year: 2008-09 M. Arun No.53, Rajasekaran Street, Mylapore, Chennai – 600 004. Vs. DCIT Central Circle-II(4), Chennai. [PAN: AAGPA-8202-L] ( अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क ओर से/ Appellant by : Shri P.M. Kathir, Advocate यथ क ओर से /Respondent by : Shri S. Senthil Kumaran, CIT सुनवाई क तारीख/Date of Hearing : 09.05.2023 घोषणा क तारीख /Date of Pronouncement : 19.05.2023 आदेश / O R D E R PER MANOMOHAN DAS, J.M: 1. Aforesaid appeal by assessee for Assessment Year (AY) 2008- 09 arises out of the order of learned Commissioner of Income Tax (Appeals)-18, Chennai dated 22-11-2021 confirming penalty u/s 271(1)(c) for Rs.6,78,134/- as levied by learned DCIT, Central Circle- II (4), Chennai vide penalty order dated 28-03-2013. The assessment for the year was framed by Ld. Assessing Officer [AO] under section 153A read with section 143(3) of the Act on 31-12-2010 wherein certain addition of Rs.15,95,100/- representing disallowance of ITA No.573/Chny/2021 :- 2 -: business expenses and Rs.4,00,000/- on account of unexplained investment was made to the income of the assessee. Consequently, Ld. AO levied impugned penalty on the assessee which was confirmed by Ld. CIT(A). 2. During appellate proceedings, the assessee contested the impugned penalty on merits as well as on legal grounds. It was submitted that assessment and penalty proceedings were different and penalty is not exigible merely because the addition has been made. It is not the case of AO that the explanation offered by the assessee was fanciful or totally untenable. However, rejecting the same, Ld. CIT(A) held that the quantum additions were confirmed by first appellate authority and the assessee did not prefer any further appeal against the same. The fact of additions came to light only because of search operations conducted by revenue. Therefore, Ld. AO was justified in levying the penalty. The Explanation-1 to Section 271 would apply to the case of the assessee which provide for penalty if the assessee is not able to substantiate the claim made. Aggrieved, the assessee is in further appeal before us. 3. The Ld. AR, at the outset, drew our attention to legal ground Nos. 1 & 2 in which the assessee submit that the show-cause notice was bad-in-law and Ld. CIT(A) has erred in confirming the impugned penalty which is contrary to law. The said grounds read as under: - ITA No.573/Chny/2021 :- 3 -: 1. The Order of the Commissioner of Income Tax (Appeals) confirming the penalty levied u/s.271(1)(c) of the Act is contrary to law, facts and circumstances of the case. 2. The Commissioner of Income Tax (Appeals) erred in confirming the penalty) levied u/s.271(1) (c) of the Act when the show cause itself is bad in law. The Ld. AR submitted that a specific charge was not framed against the assessee in the notice which would vitiate the penalty proceedings as per the decision of this Tribunal in M/s PVP Ventures Ltd. vs. DCIT (ITA No.778/Chny/2019 dated 08-06-2022). A copy of the same has been placed on record. The Ld. AR also submitted that mere making of claim which was not accepted by the revenue would not lead to imposition of penalty in a mechanical manner. 4. The Ld. CIT-DR, on the other hand, submitted that this legal plea was not taken by the assessee before any of the lower authorities. The Ld. CIT-DR submitted that the provisions of Sec. 274 only postulate opportunity of hearing to the assessee and the same could be given in any form. The Ld. CIT-DR also submitted that quantum addition made u/s 69 would fall under concealment of income whereas disallowance of business expenditure would fall under furnishing of inaccurate particulars of income. The Ld. AO was expected to issue only one notice which was been given. In the assessment order, Ld. AO has specifically initiated the penalty which was sufficient compliance of law. ITA No.573/Chny/2021 :- 4 -: The Ld. CIT-DR also submitted that all concealment of income would tantamount to furnishing of inaccurate particulars of income whereas furnishing of inaccurate particulars may not lead to concealment of income. The final outcome of both limbs would be concealment of income only and two different notices would not be issued to the assessee for each of the limbs. To support the submissions, Ld. CIT- DR relied on the decision of Hon’ble High Court of Madras in M/s Sundaram Finance Limited vs. ACIT (TCA NO.876 & 877 of 2008 dated 23-04-2018) as well as the decision of this Tribunal in M/s TVS Supply Chain Solutions vs. ACIT (ITA No.585/Chny/2019 dated 31- 08-2021). The Ld. AR controverted the same and relied on the decision of Hon’ble High Court of Madras in Babuji Jacob vs. ITO (124 Taxmann.com 363) which has already distinguished the decision in Sundaram Finance Ltd. (supra). The Ld. AR submitted that the satisfaction of Ld. AO about each of the limb should be discernible for the show-cause notice as well as from penalty order. In the absence of such clear satisfaction, the penalty proceedings would be bad in law. 5. Having heard rival submissions and after perusal of case records, our adjudication would be as under. 6. We find that the plea raised by the assessee is a legal plea which could be taken up since the same would not require appreciation of new facts and the legal plea raised by the assessee ITA No.573/Chny/2021 :- 5 -: goes to the root of the matter and challenges the very jurisdiction of Ld. AO. Accordingly, we take up the same for adjudication. 7. The provisions of Sec.274 postulate that no order imposing penalty shall be made unless the assessee has been heard or has been given reasonable opportunity of being heard. The aforesaid requirement is not mere formality. Despite the fact that no statutory notice has been prescribed in this regard to afford opportunity of hearing to the assessee, it is imperative that the show-cause notice is given in writing and it specifies, in clear terms, charge against the assessee since the accused must know the grounds which he is expected to address. A vague notice, in our considered opinion, would clearly not fulfill the requirement of the statutory provisions. 8. In our considered opinion, concealment of income and furnishing of inaccurate particulars of income are two different charges. These two expressions, in terms of ratio of various binding judicial precedents, carry different connotation / charges and non-framing of specific charge against the assessee would vitiate the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income would arise in a situation where the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas concealment of particulars of income would mean ITA No.573/Chny/2021 :- 6 -: that the assessee has concealed the income and has not reflected certain income, at all, in its return of income. Therefore, for each of the addition, Ld. AO has to specify as to which limb was applicable to the facts of the case and it could not be left to mere presumption or guess work of the assessee. Framing of specific charges is sine-qua- non for levy of penalty since the assessee must be put to allegations for which the penalty was being levied. In the absence of such a specific charge, the penalty would be bad in law and the same is not a curable defect u/s 292BB. This position has been settled in numerous binding judicial precedents. Even in the arguments of Ld. CIT-DR, the addition made u/s 69 would amount to concealment of income whereas disallowance of business expenditure would fall in the category of furnishing of inaccurate particulars of income. Therefore, we would have no hesitation in holding that these two charges are quite different charges and carry different connotation / meaning. 9. There is no quarrel on the argument made before us that Ld. AO is required to initiate penalty proceedings in the assessment order and mere expressing the intention to initiate penalty against the assessee in the body of assessment order would be sufficient compliance of law. However, the case of the assessee rest on the footing that show- cause notice is vague which fail to specify the exact limb which was applicable to the case of the assessee. ITA No.573/Chny/2021 :- 7 -: 10. We find that during the course of penalty proceedings, Ld. AO issued show cause notice under section 274 r.w.s 271(1)(c) to the assessee on 31-12-2010 which read as under:- “Whereas in the course of proceedings before me for the assessment year 2008-09 appears to me that you:- o have without reasonable cause failed to furnish me within of income which you were required to furnish by a notice given under Section 22(1)/22(2)/34 of the Indian Income-tax Act, 1922 or which your were required to furnish under section 139(1) or by a notice given under Section 139(2)/148 of the Income-tax Act, 1961, No............................Dated...................or have without reasonable cause failed to furnish it within the time allowed and the manner required by the said Section 139(1) or by such notice. o have without reasonable cause failed to comply with notice under section 22(4)/23(2) of the Indian Income-tax Act, 1922 or under section 142(1)/143(2) of the Income-tax Act, 1961. o have concealed the particulars of your income or .............................................furnish inaccurate particulars of such income. o You are hereby required to appear before me at 11.30 A.M/P.M on 10-02-2010 and show cause why an order imposing a penalty on you should not be made under section 271(1)(c) of the Income Tax Act, 1961. If, you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the above date which will be duly considered before any such order is made under section 271(1)(c).” Upon perusal of the notice, it could be seen that Ld. AO has failed to specify the exact limb which was applicable to the case of the assessee. The Ld. AO made two additions which fall under separate category. One of the addition amount to furnishing of inaccurate particulars of income whereas the other addition amount to concealment of income. In our opinion, Ld. AO was under an obligation to frame specific charge against each of the addition. The ITA No.573/Chny/2021 :- 8 -: non-framing of specific charge would make the notice defective. It did not specify the ground under which the penalty is proposed. The notice does not delete the appropriate words and therefore, the notice was issued in a mechanical manner and hence, not sustainable in the eye of law. This view has been taken by co-ordinate bench of this Tribunal in the cited decision of M/s PVP Ventures Ltd. vs. DCIT (supra) as under: - “6. However, the said observations, in our considered opinion, are in contradiction to settled legal position. In our considered opinion, concealment of income and furnishing of inaccurate particulars of income are two different charges. These two expressions, in terms of ratio of various binding judicial precedents, carry different connotation / charges and non-framing of specific charge against the assessee would vitiate the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas concealment of particulars of income would mean that the assessee has concealed the income and has not reflected certain income in its return of income. Therefore, for each of the addition, Ld. AO has to specify as to which limb was applicable to the facts of the case and it could not be left to mere presumption or guess work of the assessee. Framing of specific charges is sine-qua-non for levy of penalty since the assessee must be put to allegations for which the penalty was being levied. In the absence of such a specific charge, the penalty would be bad in law and the same is not a curable defect u/s 292BB. This position has been settled in numerous binding judicial precedents. 7. It could be seen that the show-cause notice issued u/s 274 r.w.s 271 on 31.12.2010 is a vague notice in a printed form without striking- off irrelevant portion and do not specify the exact charge for each head of addition for which the assessee was being penalized and therefore, it was a clear case of non-application of mind while initiating penalty against the assessee. Even in the body of penalty order, no specific charge has been framed for each head of addition and Ld. AO merely stated that both the limbs were applicable to the case of the assessee which was clear from the nature of additions itself. 8. On the given factual matrix, the decision of Hon’ble High Court of Madras in Babuji Jacob Vs. lTO (430 lTR 259; 08.12.2020) would ITA No.573/Chny/2021 :- 9 -: apply. The Hon’ble Court, inter-alia, held that since the notice under section 271(1)(c) did not specifically state as to whether assessee was guilty of concealing particulars of his income or had furnished inaccurate particulars of income, the impugned penalty was invalid and same was to be set aside. The relevant adjudication of Hon’ble Court in this case was as under: - 25. This finding of the Assessing Officer is incorrect because while completing the assessment under Section 143(3) of the Act, there was no allegation against the assessee as to furnishing of inaccurate particulars. But, the Assessing Officer did not accept the explanation offered by the assessee and made certain additions, which will not automatically result in interpreting the same as furnishing of inaccurate particulars. Further, we find that there is no specific finding as regards the concealment against the assessee because, on facts, it has been established before the Assessing Officer while completing the assessment under Section 143(3) of the Act that all transactions were through banking channels. Hence, the argument of Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the Revenue that both limbs of Section 271(1)(c) of the Act are attracted has to necessarily fall. Hence, we hold that there is inherent defect in the notice dated 30.3.2016 issued under Section 271(1)(c) of the Act, as it will vitiate the entire proceedings. 26. Since we have heard the learned counsel on the correctness of the orders passed by the Assessing Officer, the CIT(A) and the Tribunal on the merits of the matter, we proceed to discuss the other issues as well. 27. The CIT(A), while confirming the order of penalty, took note of the order passed by the Assessing Officer wherein the Assessing Officer rejected the explanation offered by the assessee, which ultimately resulted in an addition and the assessment was completed vide order dated 30.3.2016. The question would be as to whether rejection of the explanation and the consequential addition would automatically result in an order of penalty. 28. Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the Revenue seeks to substantiate her case by relying upon the decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd. Vs. CIT, II [reported in (2013) 38 Taxmann.com 448] wherein it was held that voluntary disclosure does not release the assessee from mischief of penalty proceedings under Section 271(1)(c) of the Act and in terms of the said provision, the Assessing Officer has to satisfy as to whether the penalty proceedings have to be initiated or not during the course of assessment proceedings and he is not required to record his satisfaction in a particular manner or reduce it into writing. 29. Reliance is also placed on the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan Vs. CIT [reported in (2001) 118 Taxman 324]. The decision of the Hon'ble Supreme Court in the case of Mak Data (P) Ltd., was taken note of by the Division Bench of this Court, to which, one of us (TSSJ) was a party, in the case of ITA No.573/Chny/2021 :- 10 -: CIT, Chennai-IV Vs. Gem Granites (Karnataka) [reported in (2014) 42 Taxmann.com 493] and the aspect as to how onus/burden of proof shifts from the assessee to the Revenue when penalty proceedings are initiated, is held in thefollowing terms : “11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering theExplanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitute our interfere with the finding of the Tribunal on the aspect of the bonafides of the conduct of the assessee.” 30. In the instant case, the assessee offered an explanation and we find the explanation to be cogent because all deposits were made through banking channels and out of two properties sold, the Assessing Officer accepted the assessee's stand that one of the properties was an agricultural land. Hence, we find that the burden cast upon the assessee to offer an explanation stands fulfilled. Consequently, the burden now shifts to the Revenue to establish the concealment of income or furnishing of inaccurate particulars of income or both. If the Revenue does not agree with the explanation offered by the assessee as in the instant case, then the onus is on the Revenue to prove that there was concealment of particulars of income or furnishing of inaccurate particulars of income. We find this aspect to be completely absent in the instant case. Therefore, we also find the imposition of penalty to be unjustified. 31. The assessee filed an appeal before the Tribunal, which confirmed the order passed by the CIT(A) that the assessee raised a new stand before the CIT(A). No such new stand has been raised. The stand taken by the assessee after receipt of the notice under Section 143(2) of the Act dated 02.9.2014 has been consistent i.e. before the ITA No.573/Chny/2021 :- 11 -: Assessing Officer while submitting the reply to the penalty notice, in the appeal before the CIT(A) and before the Tribunal. This is evident on a reading of the grounds of appeal filed before the CIT(A) as well as the notes of arguments filed by the assessee before the CIT(A) dated30.6.2017. Therefore, to that extent, the CIT(A) and the Tribunal have committed an error. 32. The decision of this Court in the case of Sundaram Finance Ltd., was couched on a different factual position wherein the Court rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time before the High Court and considering the administrative set up of the said assessee and the fact that the assessee was neverprejudiced on account of the alleged defect, the Court rejected the argument of the assessee. 33. In the case on hand, we find that at the first instance, while replying to the penalty show cause notice dated 30.3.2016, the assessee raised a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under Section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. Hence, the decision of this Court in the case of Sundaram Finance Ltd., cannot be applied. 34. The decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan is factually different wherein the assessee was unable to furnish evidence for loans and that he offered the amount of transaction as additional income and this explanation was not acceptable to the Assessing Officer and he applied Explanation (1B) to Section 271(1)(c) of the Act and imposed penalty. 35. In the instant case, the assessee has been able to explain the transaction even at the first instance i.e. while submitting the reply dated 15.3.2016 in response to the notice under Section 143(2) of the Act, which explanation he maintained till he filed an appeal before the Tribunal. Therefore, on facts, the decision of the Hon'ble Supreme Court in the case of K.P.Madhusudhanan is distinguishable. 36. Further, the CIT(A) found fault with the assessee in not challenging the assessment order and for having accepted the same. However, this cannot be a ground to enable the Assessing Officer to automatically levy penalty. In this regard, it is beneficial to refer to the decision of the Hon'ble Division Bench of this Court in the case of CIT Vs. Smt.Anitha Kumaran [reported in (2017) 79 Taxmann.com304] wherein the decision of the Hon'ble Supreme Court in the case of CIT Vs. Reliance Petro Products (P) Limited [reported in (2010) 322 ITR 158] was followed wherein the Hon'ble Supreme Court examined the issue threadbare and discussed at length as to what was meant by the ITA No.573/Chny/2021 :- 12 -: expression 'concealment of particulars of income and/or furnishing of inaccurate particulars of income' and after applying the decision in the case of Reliance Petro Products (P) Ltd., the Hon'ble Division Bench of this Court dismissed the appeal filed by the Revenue in the following terms : “13.3. The Supreme Court examined the issue threadbare and discussed at length as to what was meant by the expression concealment of particulars of income and/or furnishing inaccurate particulars of income and went on to observe as follows: ".....A glance at this provision would suggest that in order to be covered, 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. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the Learned Counsel for Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word "particular" is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word "particulars" used in Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the Return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The Learned Counsel argued that "submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income". We do not think that such can be the interpretation of the concerned words. The words are plain and simple. In order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In Commissioner of Income Tax, Delhi Vs. Atul Mohan Bindal [2009(9) SCC 589], where this Court was considering the same provision, the Court observed that the Assessing Officer has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income...." 9. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:- "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript". We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must ITA No.573/Chny/2021 :- 13 -: hasten to add here that in this case,there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false. Such not being the case, there would be no question of inviting the penalty under Section 271(1)(c) of the Act. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to the inaccurate particulars. 10. It was tried to be suggested that Section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms; (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature." 37. On this issue, a useful reference can be to the decision of the Gujarat High Court in the case of National Textiles Vs. CIT [reported in (2001) 249 ITR 125], which related to the assessment year 1974-75 wherein it was held that in order to justify the levy of penalty, two factors must co-exist namely (i) there must be some material or circumstance leading to a reasonable conclusion that the amount does not represent the assessee's income and it is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus i.e. conscious concealment or act of furnishing inaccurate particulars on the part of the assessee. ITA No.573/Chny/2021 :- 14 -: 38. Further, the decision of the Hon'ble Division Bench of this Court in the case of CIT Vs. S.I.Paripushpam [reported in (2001) 118 Taxman 844] would support the case of the assessee. In the said case, the Appellate Assistant Commissioner, in the penalty proceedings, held that the amount, the addition of which was agreed to by the assessee was an amount, which had been set out in an enclosure filed along with the return. While testing the correctness of the order, the Tribunal held that the levy of penalty under Section 271(1)(c) of the Act was wholly unwarranted as there had been no fraud or wilful neglect and that the assessee had only, with a view to cooperate with the Department, agreed to the addition. We observe that the above position will help the assessee, as there is not even a remote allegation that there was any fraudulent act by the assessee or the assessee was guilty of wilfully or negligently concealing the income and that his agreement to the addition of the amount, by itself, will not establish fraud or wilful neglect without something more. 39. For the above reasons, the assessee has to succeed on all grounds and consequently, it has to be held that the notice initiating the penalty proceedings is defective and invalid and the other findings rendered by the Assessing Officer, the CIT(A) and the Tribunal do not warrant imposition of penalty on the assessee. 40. In the result, the above tax case appeal is allowed, the impugned order passed by the Tribunal is set aside and the substantial questions of law are answered in favour of the assessee. No costs. 9. Similar is the decision of Hon’ble Bombay High Court in PCIT V/s Goa Coastal Resorts and Recreation (P.) Ltd (272 Taxman 157) which has refused to admit question of law as raised by the revenue by observing as under: - 5. We have carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner. 6. Besides, we note that the Division Bench of this Court in Samson Preinchery (supra) as well as in New Era Sova Mine (supra) has held that the notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. ITA No.573/Chny/2021 :- 15 -: 7. In the present case, as well if the notice dated 30/09/16 (at page 33) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine(supra) and therefore, warrant no interference. 8. The contention based upon MAK Data (P.) Ltd.(supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars. 9. For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed. The revenue’s SLP against this decision has already been dismissed by Hon’ble Supreme Court on 31.08.2021 (130 Taxmann.com 379) by observing as under: - 1. Delay condoned. 2. We are not inclined to interfere with the impugned order. 3. The special leave petition is, accordingly, dismissed. 4. Pending application stands disposed of. 10. Similar is the decision of Hon’ble Bombay High Court rendered in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein Hon’ble Court has confirmed the ratio laid down by Hon’ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory (359 ITR 565). This decision of Hon’ble Karnataka High Court was subsequently followed by the same court in the case of CIT V/s SSA’s Emerald Meadows (2016 73 Taxmann.com 241) which was agitated by the revenue before Hon’ble Supreme Court. However, Special Leave Petition, against the same, was dismissed by the Hon’ble Court on 05/08/2016 which reported at 73 Taxmann.com 248. This decision of Hon’ble Karnataka High Court rendered in Manjunatha Cotton & Ginning Factory has subsequently been followed extensively in catena of judicial pronouncements rendered by various Hon’ble High Courts as well as different benches of Tribunal and taken a view that non-framing of specific charge in the show-cause notice would vitiate the penalty proceedings. The failure to frame specific charge against the assessee during penalty proceedings would be fatal to penalty proceedings itself and the same could not be sustained in the eyes of law. 11. Recently, the issue of defect in notice has been dealt at length by larger bench of Hon'ble Bombay High Court in Mohd. Farhan A.Shaikh V/s DCIT (125 taxmann.com 253) wherein the Hon'ble Court has answered the issue of reference as follows: - Answers: Question No. 1: If the assessment order clearly records satisfaction for imposing penalty on one or the other, or both grounds mentioned in Section 271(1)(c), does amere defect in the notice—not striking off the irrelevant matter—vitiatethe penalty ITA No.573/Chny/2021 :- 16 -: proceedings? 181. It does. The primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings, Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 182. More particularly, a penal provision, even with civil consequences, must be construed strictly. And ambiguity, if any, must be resolved in the affected assessee's favour. 183. Therefore, we answer the first question to the effect that Goa Dourado Promotions and other cases have adopted an approach more in consonance with the statutory scheme. That means we must hold that Kaushalya does not lay down the correct proposition of law. Question No. 2: Has Kaushalya failed to discuss the aspect of 'prejudice'? 184. Indeed, Kaushalya did discuss the aspect of prejudice. As we have already noted, Kaushalya noted that the assessment orders already contained the reasons why penalty should be initiated. So, the assessee, stresses Kaushalya, "fully knew in detail the exact charge of the Revenue against him". For Kaushalya, the statutory notice suffered from neither non-application of mind nor any prejudice. According to it, "the so-called ambiguous wording in the notice [has not] impaired or prejudiced the right of the assessee to a reasonable opportunity of being heard". It went onto observe that for sustaining the plea of natural justice on the ground of absence of opportunity, "it has to be established that prejudice is caused to the concerned person by the procedure followed". Kaushalya closes the discussion by observing that the notice issuing "is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done". 185 No doubt, there can exist a case where vagueness and ambiguity in the notice can demonstrate non-application of mind by the authority and/or ultimate prejudice to the right of opportunity of hearing contemplated under section 274. So asserts Kaushalya. In fact, for one assessment year, it set aside the penalty proceedings on the grounds of non-application of mind and prejudice. 186. That said, regarding the other assessment year, it reasons that the assessment order, containing the reasons or justification, avoids prejudice to the assessee. That is where, we reckon, the reasoning suffers. Kaushalya's insistence that the previous proceedings supply justification and cure the defect in penalty proceedings has not met our acceptance. ITA No.573/Chny/2021 :- 17 -: Question No. 3: What is the effect of the Supreme Court's decision in Dilip N. Shroff on the issue of non-application of mind when the irrelevant portions of the printed notices are not struck off ? 187 In Dilip N. Shroff, for the Supreme Court, it is of "some significance that in the standard Pro-forma 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". Then, Dilip N. Shroff, on facts, has felt that the assessing officer himself was not sure whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. 188. We may, in this context, respectfully observe that a contravention of a mandatory condition or requirement for a communication to be valid communication is fatal, with no further proof. That said, even if the notice contains no caveat that the inapplicable portion be deleted, it is in the interest of fairness and justice that the notice must be precise. It should give no room for ambiguity. Therefore, Dilip N. Shroff disapproves of the routine, ritualistic practice of issuing omnibus show- cause notices. That practice certainly betrays non- application of mind. And, therefore, the infraction of a mandatory procedure leading to penal consequences assumes or implies prejudice. 189. In Sudhir Kumar Singh, the Supreme Court has encapsulated the principles of prejudice. One of the principles is that "where procedural and/or substantive provisions of law embody the principles of natural justice, their infraction per se does not lead to invalidity of the orders passed. Here again, prejudice must be caused to the litigant, "except in the case of a mandatory provision of law which is conceived not only in individual interest but also in the public interest". 190. Here, section 271(1)(c) is one such provision. With calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling with or dilution. For a further precedential prop, we may refer to Rajesh Kumar v. CIT [(2007) 2 SCC 181], in which the Apex Court has quoted with approval its earlier judgment in State ofOrissav. Dr. Binapani Dei [AIR 1967 SC 1269]. According to it, when by reason of action on the part of a statutory authority, civil or evil consequences ensue, principles of natural justice must be followed. In such anevent, although no express provision is laid down on this behalf, compliance with principles of natural justice would be implicit. If a statue contravenes the principles of natural justice, it may also be held ultra vires Article 14 of the Constitution. 191. As a result, we hold that Dilip N. Shroff treats omnibus show-cause notices as betraying non-application of mind and disapproves of the practice, to be particular, of issuing notices in printed form without deleting or striking off the inapplicable parts of that generic notice. 12. The revenue has relied on the decision of Hon’ble High Court of Madras in the case of Gangotri Textiles Ltd. V/s DCIT (121 Taxmann.com 171) which is distinguishable on facts. In this case, it is the findings that the assessee had understood the notices well and filed replies contesting the levy of penalty. The legal ground assailing defect ITA No.573/Chny/2021 :- 18 -: in notice was raised for the first time before Hon’ble High Court and therefore, Hon’ble Court declined to entertain the same However, the same is not the case here. 13. Another decision as cited by Ld. Sr. DR is the decision of Hon’ble High Court of Madras in Sundaram Finance Ltd. Vs ACIT (93 Taxmann.com 250) against which the assessee’s SLP has already been dismissed by Hon’ble Supreme Court which is reported at 99 Taxmann.com 152. We find that this decision has already been distinguished by Hon’ble Court in Babuji Jacob Vs. lTO (supra) as under:- 32. The decision of this Court in the case of Sundaram Finance Ltd., was couched on a different factual position wherein the Court rejected the plea of the assessee, which was a limited company, when they raised an argument with regard to the validity of the notice for the first time before the High Court and considering the administrative set up of the said assessee and the fact that the assessee was never prejudiced on account of the alleged defect, the Court rejected the argument of the assessee. 33. In the case on hand, we find that at the first instance, while replying to the penalty show cause notice dated 30-3-2016, the assessee raised a specific plea that there was no concealment of income, that he had not furnished inaccurate particulars of income and that the notice was not proper. Therefore, the phraseology, which was adopted by the assessee, if read as a whole, would clearly show that he had objected to the issuance of the notice and as there was no basis for issuance of the notice under section 271(1)(c) of the Act, both limbs in the said provision do not get attracted. Hence, the decision of this Court in the case of Sundaram Finance Ltd., cannot be applied. Therefore, the ratio of this decision as cited by Ld. Sr. DR could not be applied in the present case since the issue of validity of notice was well taken up by the assessee during penalty proceedings as well as during appellate proceedings. 14. In the light of aforesaid legal position, since no specific charge was framed either in the show cause notice or in the body of penalty order, and there was failure on the part of Ld. AO to frame specific charge against the assessee, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal. Consequently, going into the merits of the penalty has been rendered academic in nature.” This decision has considered all the aspects of the matter as well as all the judicial decisions as relied upon by both the sides. In the decision of this Tribunal in M/s TVS Supply Chain Solutions vs. ACIT (ITA No.585/Chny/2019 dated 31-08-2021), as referred to by ITA No.573/Chny/2021 :- 19 -: Ld. CIT-DR, the bench has refused to admit the ground raised by the assessee and no adjudication has been done on the legal grounds raised by the assessee. Therefore, the same could not render any assistance to the case of the revenue. 11. Finally taking similar view, we would hold that there was failure on the part of Ld. AO to frame specific charge against the assessee and accordingly, the penalty would not be sustainable in the eyes of law. By deleting the impugned penalty, we allow the appeal. Consequently, going into the merits of the penalty has been rendered academic in nature. 12. In the result, the appeal of the assessee is allowed in terms of our above order. Order pronounced on 19 th May, 2023. Sd/- Sd/- ( मनोज मनोजमनोज मनोज कुमार कुमारकुमार कुमार अ वाल अ वालअ वाल अ वाल) (Manoj Kumar Aggarwal) लेखा लेखालेखा लेखा सद य सद यसद य सद य /Accountant Member (मनोमोहन दास) (Manomohan Das) ाियक सद /Judicial Member चे ई/Chennai, दनांक/Dated: 19.05.2023 EDN/- आदेश क ितिलिप अ ेिषत/Copy to: 1. अपीलाथ,/Appellant 2. -.थ,/Respondent 3. आयकर आयु//CIT 4. िवभागीय -ितिनिध/DR 5. गाड) फाईल/GF