TaxTMI 
TaxTMI 
2016 (6) TMI 457
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....32(4)and included in the return filed u/s. 153A. The penalty levied is wrong and need to be deleted." ITA No. 922/Kol/2011 A.Y 2006-07 ( by the assessee) 3. In this appeal, the assessee has raised the following ground of appeal:- "That the Ld. CIT(A) erred in confirming the imposition of penalty u/s. 271(1) ( c) of the I.Tax Act @ 100% amounting to Rs. 2,29,779/- on the amount of income disclosed u/s. 132(4) and included in the return filed u/s. 153A. The penalty levied is wrong and need to be deleted." 4. Besides above, the appellant assessee has initially raised the following common additional grounds of appeal for both the assessment years under consideration:- "1. That the ld. AO erred in not mentioning the limb of sec 271(1) ( c) that has been violated by the assessee, in the notice issued u/s. 274 r.w.s 271 of the Income Tax Act 1961. Further, the ld. AO has not recorded any satisfaction as to whether the assessee has concealed his income or has furnished inaccurate particulars of his income in the penalty issued u/s. 274/271 of the Income Tax Act 1961. Hence, the penalty proceeding is bad in law and the same is liable to be quashed." 5. After he....
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....ditional income above was offered by the assessee claiming as its own and disclosed the same in the return filed u/s. 153A of the Act and which shall be treated as original return filed u/s. 139(1) of the Act. After considering the various submissions of the assessee, the AO was of the view that the assessee concealed particulars of income and not disclosed in the return filed u/s. 139 and accordingly, he imposed penalty of Rs. 3,55,422 & Rs. 2,29,779/- for both the assessment years under consideration imposition of penalty u/s. 271(1) ( c) for concealment of particulars of income. Relevant findings of the AO for imposition of penalty are reproduced herein below for the sake of clarity:- Besides the above the A.O. in the assessment order disallowed a sum of Rs. 48,568/- being valuation fee. The A.O. considered the valuation fee as not allowable as business expenditure. However, the valuation fee was for the purpose of valuing the assets hypothecated to the bank for renewal of working capital loan. As regards, the penalty proceedings u/s. 271(1)( C ) for concealment of income, it has been admitted by the AO that this amount represents a sum disclosed u/s 132(4), as....
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....in incriminating documents/books of accounts were found which clearly reveals that the assessee had earned income which was not disclosed in the return of income filed by the assessee u/s 139(1) with the I.T. Department. Only when search was conducted and those incriminating documents, unexplained jewellery etc are unearthed in course of search and the assessee was confronted with the same, the assessee had no other option but to make disclosure of incomes. Hence it is obvious that the income filed u/s. 153A was not disclosed voluntarily but directly related to the search took place . Had the search not taken place, the assessee would have never come out with the disclosure is voluntarily. The fact that the assessee had come out with the disclosure does neither mean that the assessee had not concealed its income nor does it mean that the disclosure was voluntarily. The disclosure would have been deemed to be voluntarily, had the assessee come out with the disclosure prior to search. As such the assessee's contention that the income disclosed was voluntary and the prayer that the proceeding should be dropped is not accepted. The contention of the assessee that Expl....
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....lty u/s. 271(1) (c) for concealment of particulars of income in the return filed u/s. 139 and accordingly, an amount of Rs. 3,55,422/- is imposed as penalty u/s. 271(1) (c ) of the I.T Act, 1961. " 8. Aggrieved by such order of the AO, the assessee preferred an appeal before the CIT-(A). Before him the assessee reiterated the submissions as made before the AO during the assessment proceeding u/s. 153A as well as penalty proceeding u/s. 271(1) ( c) of the Act. The specific finding of the CIT-(A) was that the assessee concealed the particulars of income as that the undisclosed income as found and declared thereafter u/s. 153A which was not declared in the original return, accordingly, made applicable the Explanation 5A of S. 271(1) (c) of the Act and confirmed the penalty order as imposed by the AO by observing as under:- "4. I have carefully considered the submission of the L.d A.r . There is no dispute that during the course of search evidence of unaccounted interest income earned during the F.Y.2004-05 amounting to Rs. 9,71,2981 was found . The return of income for the year under consideration was filed by the assessee, as per provision of section 139(1) of the Act on ....
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.... on or after the 1.06.2007 , the assessee will be liable for penalty on the said income/ investment not already declared in the return filed under 139(1) of the Act. In the case under consideration, the assessee had filed return of income for the previous year in question on 19.12.2005. However the income in question was not offered in the said return filed under section 139(1) of the Act. . Hence notwithstanding that such income is declared by him in return of income furnished after the date of the search, he shall, for the purposes of imposition of a penalty under clause (c) of sub- section (1) of this section, be deemed to have concealed the particular of his income or furnished inaccurate particulars of such income. Considering above I don't find any infirmity in the order of the A.O. Further the decisions relied by the L.d A.r are not applicable as the fact of the case and provisions of the Act applied by the A.O is not comparable. More over since the A.O has already imposed minimum penalty, hence no further relief can be granted. Accordingly the penalty of Rs. 3,55,422/- imposed by the A.O under section 271(1) ( C) is confirmed." 9. Challenging the impugned order of the CI....
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....o. 1303/Kol/2010 for the AY 2006-07 is applicable to the case on hand. The relevant findings in the order of Tribunal are reproduced herein below for better understanding:- "8. 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 spell out as to whether the penalty proceedings are sought to be levied for "furnishing inaccurate particulars of income "or "concealing particulars of such income". The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High court has further laid down that certain printed form where all the grounds ....
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....ague. 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 those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the ....
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....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 because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said dee....
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.... 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) It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequ....