TaxTMI 
TaxTMI 
2018 (1) TMI 1226
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....een identified as hawala dealer providing accommodation bills only. Though, the assessee tried to impress upon the Assessing Officer that the purchases made by her is genuine, however, the Assessing Officer rejecting the claim of the assessee added back the amount of Rs. 6,05,717 to the income of the assessee. While doing so, he also initiated proceedings for imposition of penalty under section 271(1)(c) of the Act. It is an accepted fact that the assessee has not contested the addition made by the Assessing Officer. Be that as it may, on the basis of addition made as aforesaid, the Assessing Officer issued notice dated 12th March 2013, purportedly under section 274 r/w section 271(1)(c) of the Act calling upon the assessee to show cause why penalty under section 271(1)(c) should not be imposed. Subsequently, the Assessing Officer issued one more letter on 2nd September 2013, calling upon the assessee to appear before him with her explanation in connection with the penalty proceedings under section 271(1)(c). As alleged by the Assessing Officer, the assessee neither appeared nor filed any explanation in response to show cause notice issued. Hence, the Assessing Officer procee....
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....f penalty. Therefore, he submitted, there is no necessity to interfere with the decision of the first appellate authority. In support of his contention, learned Departmental Representative relied upon the judgment dated 22nd August 2017, of the Hon'ble Jurisdictional High Court in ITA no.21 of 2008 in M/s. Maharaja Garage & Co. v/s CIT. 5. We have heard rival contentions and perused material on record in the light of the decisions relied upon. A reading of the impugned assessment order makes it clear that the Assessing Officer has initiated penalty proceedings under section 271(1)(c) without recording any satisfaction as to whether the assessee has furnished inaccurate particulars of income or concealed particulars of income. He has simply mentioned "the penalty proceedings u/s 271(1)(c) are initiated". There is not even an allegation by the Assessing Officer anywhere in the assessment order that the assessee has either concealed the particulars of income or furnish inaccurate particulars of income. In the first show cause notice dated 12th March 2013, issued under section 274 r/w section 271(1)(c) which is in a standard printed format, the Assessing Officer has not specified ....
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....rnible from the assessment order. While dealing with the issue relating to directions of the Assessing Officer for initiation of penalty proceedings and recording of satisfaction the Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton and Ginning Factory, [2013] 359 ITR 565 (Kar.) has held as under:- "50. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not be ambiguous. It is well settled law that fiscal statutes are to be construed strictly and more so the deeming provisions by way of legal fiction are to be construed more strictly. They have to be interpreted only for the said issue for which it has deemed and the manner in which the deeming has been contemplated to be restricted in the manner sought to be deemed. As the words used in the legal fiction or the deeming provisions of Section 271(1B) is Direction, it is imperative that the assessment order contains a direction. Use of the p....
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....resaid is mentioned, it constitute satisfaction of the Assessing Officer. Further, while dealing with the scope and intent of sub-section (1B) of section 271(1)(c), the Hon'ble Court held as under:- "52. Sub-section (1)(B) only deals with satisfaction of the Assessing Officer. However, under the scheme of Section 271, the persons who are authorised to compute income as well as initiate the proceedings or the Assessing Officer or the Commissioner of Appeals or Commissioner in the course of revisional jurisdiction, Explanation 1 applies to all these three Officers whereas the deeming provision (1)(B) refers only to the Assessing Officer. Therefore, if an order of assessment is passed by Commissioner of Appeals or Commissioner in the course of the said proceedings, if they are satisfied that there is any concealment of particulars of his income or he has furnished inaccurate particular of income the said satisfaction must be expressly stated in the said order. If that is not stated, at least, the order should state what is mentioned in Explanation 1. It is only if those facts are set out in the order, then the deeming provision in Explanation 1 applies and the concealment of in....
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....sessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation 1B to Section 271 of the Act should be clear and without any ambiguity. 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 i....
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....sessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. 12. Reverting back to the facts of the present case, it is seen that in the assessment order, the Assessing Officer has not recorded any satisfaction whether the initiation of penalty proceedings under section 271(1)(c) of the Act is for furnishing of inaccurate particulars of income or for concealing the particulars of income or for both. Even, in the notice issued under section 274 r/w 271(1)(c) of the Act dated 2nd May 2008, which is in standard printed format, the Assessing Officer has not specified which limb of the provision contained under section 271(1)(c) of the Act he intends to invoke for imposing penalty on the assessee. The Assessing Officer has not struck off inappropriate words in the said notice. Thus, cumulative effect of the aforesaid facts if examined in the touch stone of the ratio laid down in the decisions referred to above, it becomes absolutely clear that the Assessing Officer has not recorded any satisfaction reg....