TaxTMI 
TaxTMI 
2016 (6) TMI 838
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....aw. 2. For that imposition of penalty R.11,62,260/- u/s. 271(1)(c) of the Act without jurisdiction, opposed to requirement of law and bad in law. 3. For that the imposition of penalty Rs. 11,62,260/- u/s 271(1)(c) of the Act is neither tenable in law nor in facts. 4. For that imposition of penalty at 200% is without basis, arbitrary and bad in law." 3. Briefly stated facts are that assessee is a co-operative society and engaged in the business of contracting activity. During the course of assessment proceeding, Assessing Officer has made the addition to the total income of assessee on account of following:- i) Non disclosure of interest income earned on the FDR of Rs. 19,022/- ii) Claim of bogus purchases for Rs. 18,61,658/- At the time of assessment, AO initiated the penalty proceedings u/s. 271(1)(c) for the concealment of income in relation to non-disclosure of income from FDR and for the bogus purchase on account of furnishing inaccurate particulars of income. Finally, AO imposed the penalty by way of passing order dated 21.01.2013 @ 200% of the tax sought to be evaded. 4. Aggrieved, assessee preferred an appeal before Ld. C....
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....drew our attention to a decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 218 Taxman 423 (Kar.) wherein it was held that if the show cause notice u/s.274 of the Act does not specify as to the exact charge viz., whether the charge is that the Assessee has "furnished inaccurate particulars of income" or "concealed particulars of income" by striking out the irrelevant portion of printed show cause notice, than the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. Reference was also made to several judicial pronouncements. In particular, our attention was drawn to a decision of the Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt.Ltd. Vs. CIT 348 ITR 306 (SC) wherein it was held inadvertent errors in the return of income filed cannot be the basis to impose penalty u/s.271(1)(c) of the Act. On the other hand L'd DR relied on the order of the CIT(A). 6. We have given a very careful consideration to the rival submissions. The facts go to show that the AO came to know that the Assessee had not disclosed the interest income earned on the FDR and claimed the bogus purch....
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....the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption 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 part....
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....urate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately 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." 6.2 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 concealmen....
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....ty. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement 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 asp....