2015 (5) TMI 893

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.... the Act vide order dt.20.10.2010 wherein the loss of the assessee was determined at Rs. 8,20,127 in view of the following additions/disallowances made by the Assessing Officer :- i. Interest on housing loan, claimed as business expenditure : Rs. 8,26,701. ii. Accident fund collected from drivers, but not accounted in the assessee's profit and loss account : Rs. 36,800. 2.2 While passing the order of assessment for Assessment Year 2008-09, the Assessing Officer simultaneously initiated penalty proceedings under Section 271(1)(c) of the Act separately by issue of notice under Section 274 rws 271 of the Act dt.20.10.2010. The Assessing Officer proceeded to levy of penalty of Rs. 2,10,687 under Section 271(1)(c) of the Act vide order dt.29.4.2011 @ 100% of the tax sought to be evaded in respect of both of the above additions / disallowances made in the order of assessment, i.e. on Rs. 8,26,700 in respect of interest on housing loan wrongly claimed as businesses and Rs. 36,800 collected from drivers but not accounted for by the assessee in her profit and loss account. 2.3 Aggrieved by the order dt.29.4.2011, wherein the Assessing Officer had levied penalty of Rs. 2,10,6....

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....uced substantially. 7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." 4. The Grounds raised at S.Nos.6 & 7 in this appeal are general in nature and not being urged before us, are rendered infructuous and therefore no adjudication is called for thereon. 5.1 The Grounds raised at S.Nos.1 to 5 challenge the action of the authorities below in both levying and confirming the levy of penalty of Rs. 2,10,687 under Section 271(1)(c) of the Act for Assessment Year 2008-09 in the case on hand. At the outset, the learned Authorised Representative put forth submissions on behalf of the assessee in respect of Ground raised at S.No.3 (supra) wherein the assessee challenges the validity of the notice initiating penalty proceedings under Section 271(1)(c) of the Act issued under Section 274 rws 271 of the Act dt.20.10.2010. It is contended by the learned Authorised Representative that the said notice, a copy of which has been file....

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....ought to be levied. We find that the Hon'ble High Court of Karnataka in its order in the case of M/s. Manjunatha Cotton & Ginning Factory in ITA No.2564 of 2005 dt.13.12.2012 has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The relevant portion of the judgment of the Lordships at paras 59 to 61 thereof is extracted hereunder for ready reference :- "'59. As the provision stands, the penalty proceedings can be initiated on various grounds set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. ....

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....inal order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of ....