TaxTMI 
TaxTMI 
2016 (5) TMI 544
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....ts and circumstances under which penalty u/s 271(1)(c) of the Act was imposed on the assessee by AO are as follows :- The Assessee is an HUF. The Assessee carries on the business of infrastructure developments and trading. There was a search and seizure operation carried out u/s.132 of the Income Tax Act, 1961 (Act) on 18.3.2008 by the Income Tax department. In the course of said search & seizure proceedings Mr.Manoj Kumar Jain, Karta of the assessee made a disclosure of Rs. 8.75 crores u/s 132(4) of the I.Tax Act. The assessee filed a letter dt.19.02.09 claiming that some of the assets and documents found and seized in the course of search & seizure operation at the various premises of the group, belonged to it. In the said letter, Mr. Manoj Kumar Jain, Karta of the assessee also stated that the disclosure of income made u/s 132(4) of the I.Tax Act on 19.03.08 by him of Rs. 8.75 crores was on behalf of the assessee. The break-up of the said additional income which has been offered to tax subsequently in the return filed after search & seizure proceedings were as under :- Asst.Year Amount 2002-03 21,00,000/- 2003-04 10,50,000/- 2004-05 21,00,000/- 2005....
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....ll apply to the additions made by the AO based on the seized documents or assets found and not on the income returned u/s 153A/139 of the Income tax Act. The Assessee also submitted that the following statements would show that the income disclosed for A.Y.2002-03 to 2007-08 has not been utilised for any investments based on the seized documents or assets found except Rs. 8,50,000/- in the A.Y. 2004-05 and Rs. 51,61,439/- in the A.Y. 2007-08. The detailed workings are as under :- BREAK-UP OF THE INCOME DISCLOSED YEAR WISE AND CUMULATIVE INCOME: Asst.Year Addl.Voluntary Disclosure of Income Cumulative of the Voluntary Addl.Income 2002-03 21,00,000/- 21,00,000/- 2003-04 10,50,000/- 31,50,000/- 2004-05 21,00,000/- 52,50,000/- 2005-06 24,50,000/- 77,00,000/- 2006-07 5,00,000/- 82,00,000/- 2007-08 3,93,00,000/- 4,75,00,000/- 2008-09 4,51,50,000/- 9,26,50,000/- STATEMENT OF CASH IN HAND AVAILABLE AFTER CONSIDERAING THE ADDITONAL INCOME DISCLOSED STATEMENT OF UTILISATION OF ADDITONAL INCOME DISCLOSED BASED ON THE SEIZED DOCUMENTS : Asst.Year Cumulative Additional Income Cash in Hand (Cumula....
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....tiated Accordingly." It was the plea of the Assessee that in the light of the above factual position which emanates from records, it can be safely concluded that the AO was not satisfied in the course of assessment proceedings that the Assessee was guilty of having furnished inaccurate particulars of income or concealed particulars of income. 9. The AO issued show cause notice u/s 274 of the Act for imposing penalty u/s 271(1)(c) of the Act on the Assessee and imposed penalty on the Assessee. According to the AO but for the search and seizure operations and discovery of material in such search, the Assessee would not have offered income to tax in the course of search proceedings and in the return of income filed after the search in the proceedings u/s.153A of the Act. The AO imposed penalty equal to 300% of the tax sought to be evaded. In the show cause notice u/s 274 of the Act issued prior to the passing of the order u/s 271(1)(c) of the Act imposing penalty, the AO has not specified as to whether the charge against the Assessee is for furnishing inaccurate particulars of income or for concealing particulars of income. 10. Before CIT(A) the assessee submitted that the as....
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....the Hon'ble Supreme Court held that adjudication of a legal ground by way of an additional ground when facts are available on record should be permitted. 15. We have heard the submissions of the learned counsel for the assessee and the learned DR. The learned counsel for the assessee also submitted that no proper satisfaction has been recorded by the AO in the order of assessment. It was also submitted that in the show cause notice issued u/s 274 of the Act, the AO has not struck off the irrelevant portion. In other words it was submitted that the show cause notice u/s 274 of the Act is not clear as to whether penalty is being imposed for concealing particulars of income or for furnishing inaccurate particulars of income. In this regard our attention was drawn to the decision of ITAT Kolkata Bench in the case of Satyananda Achariya Biswas vs DCIT in ITA No.05/Kol/2010 for A.Y.2003-04 dated 02.12.2015 wherein it was held that such defect in the show cause notice u/s.274 of the Act renders the order imposing penalty illegal. The learned DR relied on the order of the AO. 16. We have carefully considered the rival submissions. As far as the appeals filed by the assessee are conce....
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....a facie' satisfaction of the AO that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. At the stage of initiation of penalty proceeding the order passed by the AO need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for. The decision of the Hon'ble Supreme Court in the case of MAK Data (P) Ltd. (supra) has to be understood in the context of the facts of the said case. The relevant portion of the judgment in the aforesaid case, reads thus: "9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders an....
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....t specifying the reasons why penalty proceedings are initiated u/s.271(1) ( c) of the Act. In the present case, we have read the order of assessment as a whole and are satisfied that satisfaction for initiation of penalty proceedings is not discernible from the order of assessment. We therefore concur with the argument of the learned counsel for the Assesssee that initiation of penalty proceedings was not proper in the present case and on that ground the imposition of penalty u/s.271(1)( c) of the Act is unsustainable. 9. The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for "furnishing inaccurate particulars of income" or "concealing particulars of such income". On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for "furnishing inaccurate particulars of income" or "concealing particulars of such income". 9.1. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and....
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....sumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to thos....
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....y marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." The final conclusion of the Hon'ble Court was as follows:- "63. In the light of what is stated above, what emerges is as under: a) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment bec....
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....quirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." (emphasis supplied) 9.3. It is clear from the aforesaid decision that on t....