AI Drafter 
TaxTMI 
TaxTMI 
2015 (8) TMI 919
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....conducted at the assessee's premises on 11.11.2009. 2.2 Consequent to the survey under Section 133A of the Act, the assessee declared his share of income from the joint venture at 'Singapore Layout'. For Assessment Year 2007-08, the assessee filed a revised return of income on 8.1.2010 declaring income of Rs. 84,73,277 wherein the assessee's profit from 'Singapore Layout' was Rs. 84,56,800. For Assessment Year 2008- 09 the assessee filed a revised return of income on 8.1.2010 declaring income of Rs. 81,96,000 as profit earned from the 'Singapore Layout'. For Assessment Year 2009-10, the assessee filed a revised return of income declaring income of Rs. 27,96,500 which was admitted as profit earned by him from 'Singapore Layout'. Proceedings under Section 147 of the Act were initiated by the Department for Assessment Years 2007-08 and 2008-09 to bring to tax income of the assessee, earned from 'Singapore Layout' venture, that had escaped assessment. Consequently, notices under Section 148 of the Act dt.16.4.2010 were issued to the assessee for Assessment Years 2007-08 and 2008-09 and in response thereto, the assessee vide letter dt.6.5.2010 stated that the returns filed on 8.1.201....
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....tical grounds, we therefore extract hereunder the grounds raised for Assessment Year 2007-08 :- "1. The order of the learned CIT (Appeals), passed under Section 250 of the Act in so far as it is against the appellant is opposed to law, equity, weight of evidence, probabilities and the facts and circumstances in the appellant's case. 2. The penalty proceedings are bad in law and not sustainable in law under the facts and circumstances of the case. 3. The appellant denies itself liable to be levied a penalty of Rs. 28,12,034 under the facts and circumstances of the case. 4. The learned CIT (Appeals) failed to appreciate that no penalty can be levied under the facts and circumstances of the case in as much as - (i) No addition has been made to the income returned, pursuant to the survey operations and the case is squarely covered by Explanation (1) to Section 271(1)(c). (ii) Appellant has declared income voluntarily only to buy peace and to avoid protracted litigation. 5. The appellant craves leave to add, alter, delete or substitute any of the grounds urged above. 6. In the view of the above and other grounds that may be urged at the time of the hearing of the....
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....he submissions made by the appellant as regard to the merits of the matter under the facts and circumstances of the case. 8. The learned CIT (A) failed to appreciate that the appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore the penalty levied under section 271[1][c] of the Act requires to be cancelled. 9. Without prejudice the learned CIT(A) failed to appreciate the fact that mere additions and disallowances made in the assessment proceedings does not automatically warrant the levy of penalty under section 271[1][c] of the Act, under the facts and circumstances of the case. 10. Without prejudice to the above, the penalty levied is highly excessive and liable to be reduced substantially. 11. The appellant craves leave to add, alter, modify, delete or substitute any or all of the grounds at the time of hearing the appeal. 12. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed and appropriate relief may be granted in the interest of justice and equity." 4.1.1 The additional grounds rai....
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....ing Officer and the learned CIT (Appeals) in imposing penalty and confirming the levy of the same. It was contended by the learned Departmental Representative that since the assessee had raised the additional grounds before the Tribunal for the first time and not before the authorities below, the said additional grounds be remanded to the file of the learned CIT (Appeals) for consideration. In support of this contention, the learned Departmental Representative placed reliance on the decision of the Hon'ble Madhya Pradesh High Court in the case of CIT V Tolaram Hassomal reported in 298 ITR 22. 4.3 In his rejoinder, the learned Authorised Representative for the assessee submitted that the additional grounds raised by the assessee is purely question of law and no facts are required to be investigated other than the information and details available in the records of the Department. It was further contended that the additional grounds raised with regard to the validity of the notices issued under Section 274 rws 271 of the Act is a jurisdictional issue and the issue of notices which are proper and legally correct in all respects is since qua non for invoking penal provisions a....
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....ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory (supra) and of the co-ordinate bench of the Tribunal in the case of Raveerdhiraa L & Others V ITO in ITA Nos.1421 to 1426/Bang/2013 dt.12.12.2014. The co-ordinate bench in the case of Raveendhiraa L & Others (supra) following the decision of the Hon'ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory (supra) has held as under at paras 8 & 9 thereof as under :- " 08. We have considered the rival submissions. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act. "NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground 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 whic....
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....osed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final 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 o....
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....ntained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to th....
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....ticulars of income. Such initiation of penalty proceedings has been held to be illegal by the Hon'ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory (supra). Following the aforesaid decision of the Hon'ble High Court of Karnataka in the case of Raveendhiraa L & Others (supra), we hold that the notices issued under Section 274 rws 271 of the Act dt.29.12.2011 for Assessment Years 2007-08 to 2009-10 are bad in law for the reasons mentioned in the aforesaid orders and consequently hold the penalty orders passed in consequence of these defective, invalid notices also to be invalid and cancel them. 4.5.1 On a careful appreciation of the rival contentions, the material on record and the judicial decision cited by the learned Authorised Representative, we are of the opinion that the issue raised by the assessee in the additional grounds with regard to the validity of the defective notices issued by the Assessing Officer under Section 274 rws 271 of the Act for Assessment Years 2007-08 to 2009-10 in the case on hand is a jurisdictional matter, a pure question of law in respect of a defect in the notice that is not curable in nature. In this view of the matter....
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.... could not be precluded from considering the question of law arising in an assessment proceeding and not raised earlier. It was held that the Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee either before the Assessing Officer or the learned CIT (Appeals) but was raised for the first time before the Tribunal. The said order has been affirmed by the Hon'ble Apex Court in 168 Taxmann 107. 4.5.4 The Indore Bench of the Tribunal in the case of Basantilal Jain in IT(SS)A No.64/Ind/2007 has examined both the aforesaid decisions of the Hon'ble Madhya Pradesh High Court and at para 4 of its order held that :- " 4.............Hon'ble High Court of Madhya Pradesh in 11 the case of Either Motors reported in 293 ITR 464 have held that additional grounds can be raised before the ITAT even if not raised before the Assessing Officer or the learned Commissioner of Income tax (Appeals). Accordingly, the Tribunal was justified in permitting the assessee to raise additional grounds of appeal even through the issue was not raised before the Assessing Officer or the learned Commissioner of Income tax (Appeals). Similarly, Hon'ble Madhya Prad....