TaxTMI 
TaxTMI 
2016 (1) TMI 1357
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....r I, Kolkata. In the course of search on 24-08-2006, Shri L.K. Agarwal, brother of the appellant, had made an ad-hoc disclosure, in his Statement given under Section 132(4) of the Income Tax Act, 1961, of Rs. 6.25 Crores in respect of himself and his family members. Subsequently, the Assessee, vide his letter dated 20.10.2006 addressed to the Deputy Director of Income Tax (Investigation), Unit - 1(2), Kolkata, offered to tax income of Rs. 3,25,00,000/- upto the date of search(23.08.2006) and duly reflected such disclosure in the regular books of accounts. The Assessee in this letter had also stated that his undisclosed income is Rs. 3,06,07,997/-, which he wanted the Department to treat as his undisclosed income which is being disclosed u/s. 132(4) read with explanation 5 of Sec. 271(1)(c) of the IT Act, 1961 and grant immunity from penalty u/s. 271(1)(c) and, prosecution. The Assessee had furnished the assessment year wise break-up of his disclosure as under: 2.1. In response to notices issued u/s. 153A of the I.T. Act, 1961, the Assessee had filed returns of income for A/Yrs. 2002-03 to 2006-07 on 26.09.2007 admitting the above disclosed incomes for taxation. The details are as ....
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.... given by the Assessee so as to extent the benefit of immunity under Explanation 5 to Sec. 271(1)(c) of the Act. With regard to the other conditions for grant of immunity the CIT(A) was of the view that the Assessee satisfied the other conditions for grant of immunity. The CIT(A) therefore confirmed the orders of the AO imposing penalty on the Assessee. 4. Aggrieved by the order of the CIT(A) the Assessee is in appeal before the Tribunal. 5. We have heard the rival submissions. Before the Tribunal the learned counsel for the Assessee reiterated the stand taken before the AO and CIT(A). He further submitted that the AO has not recorded satisfaction in the order of assessment that the Assessee is liable to be proceeded against u/s. 271(1)(c) of the Act except recording as follows in the order of assessment viz., "Penalty proceeding u/s. 271(1)(c) initiated." According to him the above manner of initiation of penalty proceedings in the order of assessment is not in accordance with law. In this regard he made reference to the decision of the Hon'ble Karnataka High Court in the case of CIT v. MWP Ltd. (2014) 41 taxmann.com 496 (Karn.). In the aforesaid decision it was held that me....
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....ed whatever evidence the Assessee produced and also the offer of the Assessee to tax.. 6. The learned counsel for the Assessee also drew our attention to the show cause notice issued u/s. 274 of the Act before imposing penalty and submitted that the said notice does not specify as to whether the Assessee is guilty of having "furnished inaccurate particulars of income" or of having "concealed particulars of such income". He pointed out that the printed show cause notice does not strike out the irrelevant portion viz., "furnished inaccurate particulars of income" or "concealed particulars of such income". He drew our attention to a decision of the Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (2013) 218 Taxman 423 (Kar.) wherein it was held that if the show cause notice u/s. 274 of the Act does not specify as to the exact charge viz., whether the charge is that the Assessee has "furnished inaccurate particulars of income" or "concealed particulars of income" by striking out the irrelevant portion of printed show cause notice, than the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. 6.1. Reference....
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.... Satyananda Achariya Biswas (supra) has taken the following view on both the question with regard to existence of satisfaction for initiation of penalty proceedings and the effect of not striking off the irrelevant portion in the show cause notice u/s. 274 of the Act as follows: "7. On the above issue the first aspect which we notice is that in the order of assessment, which we have extracted in the earlier part of this order, nowhere spells out or indicates that the AO was of the view that the Assessee was guilty of either concealing particulars of income or furnishing inaccurate particulars of income. The offer to tax of income by the Assessee has just been accepted. It is no doubt true that it is not the requirement of the law that the satisfaction has to be recorded in a particular manner, especially after the introduction of the provisions of Sec. 271(1B) of the Act with retrospective effect from 1.4.1989. Nevertheless, as laid down by the Hon'ble Delhi High Court in the case of Ms. Madhushree Gupta (supra), the position of law both pre and post Sec. 271(1B) of the Act is similar, inasmuch, the AO will have to arrive at a prima facie satisfaction during the course of proc....
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....ion 271 read with Section 274 of the Income Tax Act, 1961. 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing......." 8. The Revenue places reliance only on the sentence appearing in para-10 of the judgment without reading it in the context of the observations in the last portion of para-9 of the said judgment. Therefore even the Hon'ble supreme court's decision suggests that the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. If the AO accepts all the contentions of the Assessee and the offer of income that has not been declared in the return of income to tax without indicating either directly or indirectly that the Assessee has concealed particulars of income or furnished inaccurate particulars of income, it cannot be said that satisfaction for initiation of penalty proceedings is discernible from the order of assessment. If the Assessee in good faith offers income to tax voluntarily ....
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.... 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 grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority 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 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. The practice of the Department sending a printed farm where all the groun....
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....ing 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 penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. ....
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....n 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 bona fide 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 IB 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 in Section 271 are mentioned would not satisfy requirement of law. ....