2016 (10) TMI 415

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....has received Rs. 3 lakhs from 3 persons towards gift. Before the AO the assessee could not produce the said three persons to prove the same. Accordingly, the AO held that the claim of gift is bogus and for non furnishing of proper explanation, the AO initiated penalty proceedings and imposed a penalty of Rs. 91,800/- u/s. 271(1) ( c) of the Act. Against which the assessee preferred an appeal before the CIT(A). The CIT-A relying on various case laws and considering the submission of the assessee confirmed the imposed penalty. Aggrieved, the assessee is in appeal before us by raising the fol lowing additional grounds:- 1. That the order dt. 31.03.2012 passed u/s. 271(1) ( c) of the Income Tax Act, 1961 is barred by l imitation as per Sec. 275(1) (c) of the Act. Hence, the penalty order is bad in law & need to be quashed. 2. That the penalty order dt. 31.03.2012 passed u/s. 271(1) of the Income Tax Act, 1961, without issuing any notice of hearing to the assessee, is bad in law & void ab initio, . Such defective order need to be quashed. and further contended that the notice issued by the AO u/s 274/271 of the Act is defective. With the consent of both the parties,....

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....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 given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposing penalty have to be held as bad in law and liable to be quashed. 8.2 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 groun....

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....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 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 pe....

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....ng 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 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....