Hafeez S. Contractor vs. ACIT (ITAT Mumbai)

DATE: September 2, 2015 (Date of pronouncement)
DATE: October 12, 2015 (Date of publication)
AY: 2007-08, 2008-09
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S. 271(1)(c): If the notice does not clearly specify whether the penalty is initiated for "concealment" or for "filing inaccurate particulars", it is invalid. Mere fact that assessee has surrendered income does not justify penalty if his explanation is not found to be false/ not bona fide

(i) The notice issued by the AO u/s 274 read with section 271 of the Act at the time of initiation of penalty proceedings states that it is issued for “concealment of particulars of income or furnishing of inaccurate particulars of income”. The assessing officer has not specified that as to which limb the notice was issued, i.e., whether it is issued for concealment of particulars of income or furnishing of inaccurate particulars of income. The assessing officer should be clear about the charge at the time of issuing the notice and the assessee should be made aware of the charge. The penalty order is liable to be quashed as the AO has not correctly specified the charge (decision dated 11.10.2013 in Shri Samson Perinchery in ITA No.4625 to 4630/M/2013 and CIT Vs. Manjunatha Cotton & Ginning Factory (2013)(35 Taxmann.com 250)(kar dated 13.12.2012) followed)

(ii) Surrender of commission expenditure would not automatically lead to the malafides of the assessee as presumed by the assessing officer, since the assessing officer has not afforded an opportunity to the assessee to contradict the documents that were relied upon by the AO. If we examine the explanations furnished by the assessee in terms of Explanation 1 to sec. 271 of the Act, we notice that the assessee has offered an explanation and the same has not been found to be false. It is pertinent to note that the revenue was having only suspicion about the genuineness of the payments at the time of search proceedings on the basis of enquiries conducted by them. However, the assessee has all through maintained that the payments were genuine. In support of the same, the assessee has stated that the payments were made by way of cheque, TDS were deducted and the service tax was also paid. Hence, in our view, it cannot be said that the explanation of the assessee was found to be false. Though the AO has expressed the view that the admission of the assessee proves malafides, we are of the view that the explanation of the assessee was not proved to be not bonafide one. It is not the case of the assessing officer that the assessee has failed to furnish all facts and material relating to computation of income. Accordingly, we are of the view the deeming provisions of Explanation-1 shall also not apply to the assessee.

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