TaxTMI 
TaxTMI 
2017 (3) TMI 1641
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.... commercial premises, malls and hotels. There was a search action on the assessee on 23.12.2010. Assessee offered undisclosed income in this case and filed the return of income disclosing the same. This additional income of Rs. 11.23 Crs (rounded of) relates to the bogus purchases from three parties namely (i) M/s. J.B. Interlink; (ii) M/s. P.K. Trading Co and (iii) M/s. N.B. Enterprises. Assessment was completed and the penalty u/s 271(1)(c) was ordered vide the order dated 26.9.2013. In the said penalty order, AO imposed the minimum penalty of Rs. 1,02,77,764/-. 3. During the first appellate proceedings, in connection with the said penalty, CIT (A) granted relief substantially except the income of Rs. 9,68,620/-. Aggrieved with the said relief granted by the CIT (A), Revenue is in appeal vide its appeal ITA No.4733/M/14. Further, aggrieved with the CIT (A)‟s decision in connection with the penalty relates to the income of Rs. 9,68,620/-, assessee is in appeal before the Tribunal vide its appeal ITA No.4199/M/2014. 4. With the background of the above facts, Ld Counsel for the assessee raised the legal issue stating that the said penalty proceedings are bad in law as th....
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.... the Ld AR‟s argument, relying on the judgment of the Hon‟ble Apex Court in the case of MAK Data P. Ltd vs. CIT in Civil Appeal No.9772 of 2013, Ld AR submitted that the said case is distinguishable on facts but the with reference to the confusion in the minds of the AO on the jurisdiction and the satisfaction of the AO is one of the issues adjudicated in the said judgment. 7. On hearing both the parties and on going through the above extracted portions from the orders of the AO, it is obvious that the officers suffer from ambiguity as to which limb of the clause-(c) of section 271(1) of the Act should be invoked. The relevant addition is undisputedly the disallowance of such bogus purchases from the purchases accounts and the same was not properly understood in the light of clause-(c) of section 271(1) of the Act. In this regard, we have examined the legal propositions in the case of Shri Samson Perinchery (supra), wherein one of us (AM) is a party to the said order and find it relevant to extract the relevant paras for the sake of completeness of this order. Paras 9 to 13 of the said decision of the Tribunal dated 11.10.2013 (supra) are extracted as under:- ....
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....Rs. 9,30,200/-. Accordingly, I hereby levy a minimum penalty at 100% of tax i.e., Rs. 9,30,200/-." 11.1. Further, we have also perused the notice issued u/s 274 of the Act and the relevant para reads as under: "have concealed the particulars of your income or ________ Furnished inaccurate particulars of such income" Knowingly or otherwise, the AO has not bothered to fill the blanks with appropriate limb of the provisions of section 271(1)(c) of the Act. 12. The above extracts reveal that the AO has not applied his mind to the fact for which reason of the penalty, the notices were issued. The above documents reveal that the penalty proceedings were initiated for "failure to furnish inaccurate particulars of income and however, the penalty was levied for concealment of income" . 12.1. In this regard, we have perused the said praras 59 to 61 of the Hon‟ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) and the same read as under: "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 ....
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....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 determined with reference to the information, facts arid materials in the hands of the authority imposing the penalty at the time the order was passed and f....