PVP Ventures Limited, CHENNAI V. DCIT Corporate Circle 5(2), CHENNAI

ITA 778/CHNY/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9346 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 21-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Invalid notice; Principle of natural justice; Question of law; Initiation of penalty proceedings; Reasonable cause; Set aside
• Section: 68; 271(1)(c); 143(3); 14A; 292BB; 274; 143(2); 69A; 139(1); 73; 13

Judgement Text

आयकर अपीलीय अिधकरण ’ए’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ITA No.778/Chny/2019 (िनधाBरणवषB / Assessment Year: 2008-09) M/s. PVP Ventures Ltd. 9 th Floor, KRM Centre, Chetpet, Chennai – 600 031. बनाम/ V s. DCIT Corporate Circle-5(2), Chennai. थायीलेखासं./जीआइआरसं./P AN /GI R No. AA AC S -3 1 0 1 -P (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri T. Banusekar (Advocate)-Ld. A.R थ कीओरसे/Respondent by : Shri ARV Sreenivasan (Addl. CIT) – Ld. DR सुनवाईकीतारीख/ Date of Hearing : 12-04-2022 घोषणाकीतारीख / Date of Pronouncement : 08-06-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): 1. Aforesaid appeal by assessee for Assessment Year (AY) 2008-09 arises out of the order of learned Commissioner of Income Tax (Appeals)-3, Chennai dated 04.01.2019 which has confirmed the penalty u/s 271(1)(c) for Rs.1276.57 Lacs as levied by learned Assessing Officer (AO) vide penalty order dated 15.04.2016. The assessment for the year was framed by Ld. AO u/s. 143(3) of the Act on 31.12.2010 wherein the returned loss of Rs.17.47 Lacs was determined at income of ITA No.778/Chny/2019 - 2 - Rs.41520.26 Lacs after certain additions / disallowances. Consequently, penalty proceedings were initiated by Ld. AO in the assessment order as under: “Penalty proceedings u/s 271(1)(c) is initiated separately.” 2. The Ld. AR, drawing attention to ground no.2 of the appeal, submitted that the penalty stood vitiated for want of requisite satisfaction as required under law. The ground read as under: - 2. The Learned Commissioner of Income Tax (Appeals) erred in not appreciating the fact that the Penalty order is bad in law for the reason that the Show cause notice for levy of penalty did not specify whether the said notice is for concealment of income or furnishing of inaccurate particulars and consequently, the order of penalty passed u/s 271(1)(c) of the Act on an invalid notice does not have any legal existence. The Ld. AR submitted that this plea, though raised before lower authorities, was dismissed overlooking the binding judicial precedents. The Ld. AR also referred to various judicial pronouncements in support of the argument and sought distinction in the case laws being relied upon by the revenue. The Ld. Sr. DR, on the other hand, submitted that no prejudice was caused to the assessee and the assessee had completely understood the contents of the notice. Therefore, assumption as acquired by Ld. AO was perfectly valid. Having heard rival submissions and after going though the orders of lower authorities as well as various case laws as cited before us, our adjudication would be as under. Proceedings before Ld. AO 3.1 Upon perusal of penalty order, it could be gathered that penalty has been levied by Ld. AO against (i) bad-debt claim of Rs.50 Lacs; (ii) Advances written-off for Rs.370.36 Lacs; (iii) Reduction in Capital WIP ITA No.778/Chny/2019 - 3 - for Rs.228.18 Lacs; (iv) Short-Term Capital Gains on land for Rs.3107.20 Lacs. 3.2 Subsequent to framing of assessment, penalty proceedings were initiated against the issue and initial show cause notice u/s 274 r.w.s. 271(1)(c) was issued 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:- *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. ..... *have concealed the particulars of your income or .............................................furnish inaccurate particulars of such income. .... Subsequently, another notice was issued on 15.02.2016 which read as under:- From the above referred Order, it is seen that additions with respect to advances written off of Rs.3.70 Crores, bad debts written off of Rs 50 lakhs, Section 69A of Rs. 31.07 Crores, reduction in Capital Work in Progress of Rs, 2.28 Crores have been confirmed by the ITAT. In view of the above, you are hereby required to show cause why penalty u/s 271(1)(c) should not be levied in your case. Reply should reach this office by 22.02.2016, failing which penalty u/s 271(1)(c) will be levied without providing any further opportunity. The notice issued on 05.04.2016 read as under: - You are hereby required to appear before me a!: rny office at Room NO, 415, IV Floor, Main Building, "Aayakar Bhavan', 121, Uthamar Gandhi Saiai, Chennai - 600 034 at 11.00 A.M. on 11.04.2016 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 ITA No.778/Chny/2019 - 4 - said date which will be considered before any such order is made under section 271(1)(c) of the Act. 3.3 The assessee, vide letter dated 22.02.2016, submitted that notice was defective since it failed to specify the ground under which the penalty was proposed to be levied. The notice does not delete the appropriate words and paragraphs and therefore, the notice was issued in a mechanical manner and hence, not sustainable in the eyes of law. However, this plea was rejected by Ld. AO on the ground that applicable clause was ticked-off. The plea is also not acceptable since additions were made u/s 68 & 69A which amounts to concealment of income and other disallowance like bad-debts, provision of FBT and advances written-off which amounts to furnishing of incorrect particulars of income. Considering the nature of additions made by Ld. AO which itself is self- explanatory, it was clear that penalty proceedings were initiated for concealment of income and for furnishing of inaccurate particulars of income though it was not explicitly mention under each head of addition in the assessment order. Therefore, the penalty notice was held to be valid. 3.4 Thought the assessee contested the penalty on merits also, however, Ld. AO levied impugned penalty of Rs.1276.57 Lacs against the above stated items (para 3.1) considering the fact that the quantum additions were confirmed by the Tribunal. Aggrieved, the assessee contested the levy of penalty before Ld. CIT(A). Appellate Proceedings 4.1 During appellate proceedings, the assessee assailed penalty on legal grounds as well as on merits. The attention was also drawn to the status of quantum appeal as admitted by Hon’ble High Court. On legal ITA No.778/Chny/2019 - 5 - grounds, the assessee submitted that the notice issued u/s 274 r.w.s. 271 dated 31.12.2010 was defective since Ld. AO failed to mention the ground for which the penalty was proposed to be levied. The Ld. AO merely placed a tick mark in the paragraph without deleting the inappropriate words and paragraphs. The notice failed to frame specific charges as to whether the penalty was for concealment of income for furnishing of inaccurate particulars of income. The notice was issued in mechanical manner which do not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically otherwise principles of natural justice would be violated. Reliance was placed on the decision of Hon’ble Apex Court in SSA’s Emerald Meadows (73 Taxmann.com 248) as well as the decision of Hon’ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory (359 ITR 565). Further, the defect in the show cause notice could not be said to be curable defect u/s 292BB of the act. The assessee also contested the levy of penalty on merits. 4.2 However, Ld. CIT(A) concurred with the findings of Ld. AO with respect to validity of notice. It was held that there was no infirmity in the show cause notice. The Ld. AO had placed a tick mark at the appropriate place on the notice which indicates that the assessee had concealed the particulars of income as well as furnished inaccurate particulars of income. Accordingly, the legal grounds were rejected. The imposition of penalty, on merits, was sustained, in view of the decision of Tribunal wherein quantum additions were confirmed. Finally, penalty was upheld against which the assessee is in further appeal before us. ITA No.778/Chny/2019 - 6 - Our findings and Adjudication 5. Upon careful consideration of factual matrix, it could be gathered that certain additions were made in the hands of the assessee during the course of assessment proceedings, few of which are sub-judice before Hon’ble High Court of Madras. However, in the present appeal, we are only concerned with the fact whether the penalty is justified or not. Upon perusal of assessment order initiating the penalty, it could be gathered that though various additions have been made, however, separate penalty has not been initiated for each head of addition. The Ld. AO has merely initiated the penalty proceedings in a blanket manner. Upon perusal of show-cause notices as extracted above, it could be gathered that no specific charge has been framed against the assessee in the notices also i.e., whether the penalty was being levied for concealment of income or for furnishing of inaccurate particulars of income. The notices do not specify the exact charge for which the penalty was being initiated against the assessee. This defect in the notices was contested by the assessee during penalty proceedings as well before Ld. CIT(A). However, Ld. AO rejected the same by observing that applicable clause was ticked-off in the notice. It was also observed that the quantum additions were made u/s 68 & 69A which amounts to concealment of income and other disallowances like bad-debts, provision of FBT and advances written-off amounts to furnishing of incorrect particulars of income and therefore, both the limbs were applicable. Considering the nature of additions, which itself is self-explanatory, it is clear that penalty proceedings were initiated for concealment of income and for furnishing of inaccurate particulars of income though it was not explicitly mention ITA No.778/Chny/2019 - 7 - under each head of addition in the assessment order. Therefore, the penalty notice was held to be valid. 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 ITA No.778/Chny/2019 - 8 - 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 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 ITA No.778/Chny/2019 - 9 - 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 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 Assessing Officer while submitting the reply to the penalty notice, in the ITA No.778/Chny/2019 - 10 - 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 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 ITA No.778/Chny/2019 - 11 - 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 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 ITA No.778/Chny/2019 - 12 - 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. 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) ITA No.778/Chny/2019 - 13 - 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. 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. ITA No.778/Chny/2019 - 14 - 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 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 ITA No.778/Chny/2019 - 15 - 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. 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. ITA No.778/Chny/2019 - 16 - 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 an event, 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 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 ITA No.778/Chny/2019 - 17 - 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. ITA No.778/Chny/2019 - 18 - 15. The appeal stands partly allowed in terms of our above order. Order pronounced on 08 th June, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 /ACCOUNTANT MEMBER चे,ई/ Chennai; िदनांक/ Dated : 08-06-2022 EDN आदेशकीVितिलिपअ6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant2. यथ /Respondent 3. आयकरआयु (अपील)/CIT(A)4. आयकरआयु /CIT 5. िवभागीय ितिनिध/DR6. गाड फाईल/GF