TaxTMI 
TaxTMI 
2017 (3) TMI 82
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....e-Tax (Appeals)-1, Jaipur has erred in confirming the penalty of Rs. 34,05,436/- imposed under section 271(1)(c) of I.T. Act, 1961 by ld. AO. (3) The appellant prays or leave to add, to amend, to delete, to modify the all or any grounds of appeal on or before the hearing of appeal." 2. Briefly stated the facts are that, the case of the assessee was picked up for scrutiny assessment and the assessment was completed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) vide order dated 25/03/2015. While framing the assessment , the Assessing Officer also directed penalty under Section 271(1)(c). Subsequently, the Assessing Officer imposed penalty vide order dated 30.09.2015 by observing that the assessee had not filed an appeal aginst the assessment order and it appears that the assessee is satisfied with the order passed by the Assessing Oficer. Therefore, it appears that the assessee has nothing to say and has no objection regarding imposing the penalty under Section 271(1)(c) of the Act and proceeded to impoed a penalty of Rs. 34,05,436/- on the concealed income. Aggrived by this, the asessee preferred an appeal before the Ld. CIT(A) but after co....
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...., 1961 i.e. concealed particulars of income or furnishing inaccurate particulars of income. Reliance is placed on the decision in the case of H. Lakshminarayana Vs. ITO, ITAT Banglore Tribunal ITA Nos. 992 to 996/Ban/2014 order dated 3rd July, 2015 wherein the decision of Hon'ble Karnataka High Court in the case of CIT & Anr. Vs Manjunatha Cotton and Ginning Factory has been considered wherein it has been held that penalty proceeding is a 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 to 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. 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 ....
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.... furnished return for A.Y. 2007-08 before search and additional income has been disclosed U/s 153A.Therefore, deeming provisions are applicable. It is undisputed fact that the assessee has disclosed additional income in return filed U/s 153A on the basis of incriminating document found during the course of search. We have considered view that Explanation 5A is not required to be mentioned by the Assessing Officer specifically at the time of initiation or even in the show cause notice issued by the Assessing Officer, but basic defect we found that the ld Assessing Officer has mentioned at the time of initiation of penalty proceeding under both the limbs i.e. concealed the particulars of income and furnished inaccurate particulars of income but at the time of notice U/s 274 he simply has ticked in prescribed proforma concealed particulars of income or furnished inaccurate particulars of income without deleting either limb of penalty even he has not put and in the notice itself between two limbs. The amended provisions of Sub-section (1B) of Section 271 has been considered by the Hon'ble Delhi High Court in the case of Madhu Shree Gupta vs. UOl, 317 ITR 107 wherein it has been h....
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....T Vs Vegetable Products Ltd. (1973) 88 ITR 192 (SC) and a recent decision in the case of CIT Vs. Vatika Township P Ltd. (2014) 367 ITR 466 (SC). Therefore, we are of the considered view that initiation of penalty proceedings is not as per law and Assessing Officer did not have any jurisdiction to impose penalty U/s 271(1)(c) of the Act. As the matter has been decided on technical issue, we are not expressing any view on merit of the case. Accordingly, we delete the penalty confirmed by the ld CIT(A). 7. In the result, the appeal of the assessee is allowed." 4. Hon'ble ITAT in its recent judgment in case of Shri Murari Lal Mittal ITA No. 334/JP/2015 order dated 09/11/16 has canceled the penalty on the same grounds following the decision of Shri Shanker Khandelwal. The findings of Hon'ble ITAT are as under:- 2.5 I have heard the rival contentions and perused the materials available on record. It is noted from the record that the assessee is an individual declaring income from house property and income from business or profession as proprietor of M/s. Mittal Enterprises. The return u/s 139(1) of the Act was filed on 25-10-2004 by the assessee declaring total income of Rs. 1,51,....
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....s of such proceedings, no penalty could be imposed on the assessee.'' It is also noted that similar type of issue was decided in favour of the assessee by ITAT Coordinate Bench in the case of Shankar Lal Khandelwal vs. DCIT, Central Circle- 1, Jaipur vide its order dated 11-03-2016 in ITA No. 878/JP/2013 for the assessment year 2007-08 by observing as under:- 6. We have heard the rival contentions of both the parties and perused the material available on the record. In this case, the ld Assessing Officer initiated penalty proceedings for concealing of particulars of income and for furnishing inaccurate particulars of income vide order dated 31/12/2009. Notice U/s 274 read with Section 271-272 of the Act was issued on 30/12/2009 by ticking of the notice as under:- "U/s 271(1)(c):- Concealed particulars of income or furnished inaccurate particulars of income". The ld Assessing Officer again gave notice during the course of penalty proceedings on 23/1/2012 wherein he gave show cause notice U/s 271(1)(c) for imposing of penalty without specifying the limb for reasons to impose the penalty, whether it is for concealed particulars of income or furnished inaccurate particulars of ....
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.... on the basis of such proceedings, no penalty could be imposed to the assessee.The Hon'ble Punjab & Haryana High Court in the case of Tej Bhan Cotton Ginning & Pressing Factory Vs. CIT, Rohtak (supra) has held that the Assessing Officer in assessment order has satisfied himself regarding initiation of penalty proceedings, which was tantamount to satisfaction have recorded to the fact on the basis of addition made by the Assessing Officer for concealed income in assessment order. The Hon'ble Court has confirmed the penalty even penalty proceedings initiated by the Assessing Officer by mentioning penalty proceeding for concealing/furnishing of inaccurate particulars of income. The Hon'ble Punjab & Haryana High Court has expressed different view on initiation of penalty proceedings even notice U/s 274 issued by putting oblique between concealing and furnishing of inaccurate particulars of income whereas the Hon'ble Karnataka High Court has held that the Assessing Officer has to satisfy at the time of initiation of penalty proceeding and issuing notice U/s 274 of the Act that whether penalty is for concealed particulars of income or furnishing of inaccurate particulars of income. There....
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....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 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. 5.1 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 ....
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....tained 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 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 determi....
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....n271(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 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....
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.... 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 consequently penalty imposed is cancelled. For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We, therefore, cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. 11. In the present case, as we noted above, the AO failed to strike out the irrelevant portion in the said show cause notice, Respectfully following the order above, we cancel the penalty levied u/s. 271(1) ( c) of the Act by the Assessing Officer as confirmed by the CIT( A) for both the assessment years under consideration. Having held that the notice issued by the AO U/Sec 274 r/w Sec 271(1)(c) of the Act during the course of penalty proceedings is not in conformity with the relevant provisions of the Act, we are of the view that Section 292B can not come to the rescue of....
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....urse of any proceedings under this Act is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income. From the above provision it is clear that there has to be a specific satisfaction by the Assessing Officer that the assessee is guilty of concealing the particulars of his income or furnishing inaccurate particulars of such incomes. 3.4. From the above, it is clear that the assessing officer should give a specific finding. In the present case, in the assessment order as noted above the assessing officer has stated that the assessee has concealed/furnished the inaccurate particulars of income. Therefore, the penalty under Section 271(1) (c) was also initiated, from this it can not be inferred whether there is specific charge of concealing the particulars of income or furnished the inaccurate particulars of such income Law is well settled that the assessing officer has to come to a definite satisfaction whether the assessee has concealed the income of particulars or furnished the inaccurate particulars of income. The Hon'ble Karnataka High Court in the case of CIT and Another Vs. Manjunatha Cotton and Ginning Factory,359 ....
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....nditions mentioned in section 271(1)(c), at least the facts set out in Explanation 1(A) and 1(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(1)(c) is a sine qua non for the Assessing Officer to initiate the proceedings because of the deeming provision contained in sub-section (1B). (h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Income-tax (Appeals) and the Commissioner. (i) The imposition of penalty is not automatic. (j) The 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 the authorities it has resulted in payment of such tax ....
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.... be declared as invalid in the penalty proceedings." In the light of the above judgment we are unable to affirm the action of the authorities below. As the initiation of penalty under section 271(1)(c) vide notice 274 of the Act is not inconformity with the requirement of the law. Thus, the Penalty order can not be sustained in the eyes of the law. Same deserves to be quashed. Hence, Ground no. 1 the assessee's appeal is allowed. 4. Ground no. 2 is on merit, the ld. Counsel for the assessee reiterated the submission as made in the written brief. The ld. Counsel for the assessee submitted that the penalty proceedings are separate from assessment proceedings and finding in the assessment proceedings does not lead to the conclusion that the assessee is guilty of concealing the income as submissions of submitted inaccurate particulars of income. He submitted that the penalty under Section 271(1)(c) is not automatic. He submitted that there is no positive material to demonstrate that the assessee has made willful attempt to conceal the income and furnish the inaccurate particular of income. He submitted that there must be an independent finding to this effect as held by the Hon'ble Ca....