2016 (11) TMI 533

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....m of Rs. 8,47,981/- being the addition in respect of creditors and Rs. 3,88,925/- being the sustained addition in respect of alleged inflation of wages, the provision of section 271 (1 )(C) are not attracted. 3. The true tests laid down by the binding decision of the Karnataka High Court in 359 ITR 565 have not been satisfied and hence no penalty u/s. 271 (1 )(C) is exigible. 4. It should have been appreciated that there was no "direction" in the assessment order for action u/s. 271 (1)(C) as clarified by the above decision and therefore the provisions of 271 (1B) do not come to the assistance of the department to justify the levy of penalty and therefore, the law prior to the introduction of that sub-section would be oper....

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.... the Act. He has also placed reliance upon the orders of Tribunal and the judgment of jurisdictional High Court in the case of CIT & Anr. V. Manjunatha Cotton & Ginning Factory reported in 359 ITR 565 (Karn). Copy of the judgment of the High Court is placed on record. 3. Per contra, the ld. DR has submitted that mere non-striking a particular column in the notice would not be that much fatal to the validity of penalty proceedings. 4. Having carefully examined the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act, we find that notice was issued on a printed proforma in which the AO did not identify, whether the assessee has concealed income or furnished inaccurate particulars of such income. Now the question arises whether, it is nece....

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.... which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 1 or in Explanation 1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, 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 section 274 makes it clear that the 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 p....

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.... 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 the 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 the 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 initi....

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....n 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." 5. This aspect was also examined by the Hon'ble High Court of Gujarat in the case of National Textiles v. CIT 249 ITR 125 (Guj) and CIT v. Manu Engineering Works 122 ITR 306 (Guj). Following the aforesaid judgments, this Bench of the Tribunal in the case of E. Krishnappa v. ITO in ITA No.313 to 315/Bang/2014 dated 14.08.2015 and in the case of M/s. SLN Traders (in ITA No.....