TaxTMI 
TaxTMI 
2019 (7) TMI 83
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....d. in ITA No. 3324/Bang/2018 are as under. "1. The order of the learned CIT(A) is opposed to facts of the case. 2. The CIT(A) erred in holding that the notice issued under section 271 r.w.s 274, without specifically mentioning whether the proceedings are initiated against concealment of income or on account of furnishing of inaccurate particulars is invalid and thereby setting aside the penalty order u/s 271(1)(c)? 3. The CIT(A) erred in not appreciating the fact that in the present case, as discussed by the AO in the penalty order, the assessee had filed inaccurate particulars in respect of two incomes and had concealed the particulars in respect of another income and thus the penalty was leviable for filing of inaccurate particulars of income as well as for concealment of particulars of income. 4. The CIT(A) erred in not considering the fact that the Assessing Officer has mentioned in his penalty order that, the penalty was levied for concealment of particulars and furnishing of inaccurate particulars of income for the relevant assessment year and nowhere the word 'or' was used by him. 5. For these and other grounds that may be....
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....dered the judgment of Hon'ble Apex Court rendered in the case of MAK Data P. Ltd. Vs. CIT as reported in 358 ITR 593. He also submitted that in this para, the AO has given a categorical finding that the assessee company has concealed particulars of income and furnished inaccurate particulars of income. He submitted that it is clear from the penalty order that the assessee is guilty of both i.e. concealment of income and furnishing of inaccurate particulars of income and therefore, this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra) is not applicable. He placed reliance on the judgment of Hon'ble Apex Court rendered in the case of Sundaram Finance Ltd. Vs. DCIT as reported in [2018] 99 taxmann.com 152 (SC). He submitted a copy of this judgment. He pointed out that as per this judgment of Hon'ble Apex Court, the SLP filed by the assessee against the judgment of Hon'ble Madras High Court rendered in the case of Sundaram Finance Ltd. Vs. CIT as reported in 403 ITR 407 was dismissed by Hon'ble Apex Court. He submitted that in this case also, this was the judgment of Hon'ble Madras High Court that the assessee....
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....other judgment of Hon'ble Karnataka High Court as reported in 396 ITR .... but he could not point out page no. of such decision and in spite of this, we tried to locate the decision of Hon'ble Karnataka High Court reported in 396 ITR but found that several judgments of Hon'ble Karnataka High Court are reported in 396 ITR but these are not in favour of the revenue. There are certain decisions of Hon'ble Karnataka High Court reproduced in this ITR 396 but these judgments are in favour of the assessee. 6. We have considered the rival submissions. First of all, we reproduce relevant para from the order of CIT(A). These paras are para nos. 7 to 7.7 of his order and these paras are reproduced hereinbelow for ready reference. "7. In ground of appeal 3, the appellant has contended that the notice u/s 274 is defective as the same is not in accordance with law. It is submitted that the AO has mentioned in the impugned penalty order at para 11 that the penalty was levied for concealment of income and furnishing of inaccurate particulars of income. But as per the decision of the Hon'ble Karnataka HC in the case of Manjunath Cotton Ginning Factory 359 ITR 565, the requir....
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....ent of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained 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....
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....sing 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." 7.3 This decision of the jurisdictional HC was followed by the Jurisdictional ITAT Bangalore in the case of Shri H Lakshminarayana v ITO in ITA No 992 to 996/Bang/2014. The relevant part of the same reads as follows: "16. It is clear 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. In our view, the aforesaid defect cannot be said to be curable u/s. 292BB of the Act, as the defect cannot be said to be a notice which is in substance and effect in conformity with or according to the intent and purpose of the Act. Following the decision of the Hon'ble Karnataka High Court, we hold ITA Nos.992 to 996/Bang/2014 that the orders imposing penalty in all the assessment years have to be he....
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.... of the department in the above case was dismissed by SC in Commissioner of Income-tax v. SSA's Emerald Meadows [2016] 73 taxmann.com 248 (SC)." 7.5 In the case of Sh S Chanderashekhar v ACIT ITA No 386/2016 dt 15.02.2017 too, the HC allowed the appeal of the assessee by holding as follows: "7. We may record that during the course of hearing the learned counsel for the appellant has tendered the copy of notice issued to the assessee under Section 271(1)(c) of the Act dated 15.12.2008 for imposition of penalty, which as per the learned counsel for appellant was a part of record in the proceedings before the Tribunal. Learned counsel for the respondent - revenue is unable to dispute that notice dated 15.12.2008 was issued by the Department for imposition of penalty under Section 271(1)(c) of the Act. Hence, said notice for the purpose of consideration is taken on record. Said notice disclose that it is a printed notice and further no specific ground is mentioned, which may show that the penalty could be imposed on the particular ground for which said notice was issued. If the decision of this Court in case of COMMISSIONER OF INCOME-TAX AND ANOTHER vs. MANJUNATHA COT....
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....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 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. (r) The assessee should know the grounds which he has to meet speci....
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....n of this Court would apply and it cannot be said that the decision of this Court in the case of COMMISSIONER OF INCOME-TAX AND ANOTHER vs. MANJUNATHA COTTON AND GINNING FACTORY reported in [2013] 359 ITR 565 (KAR) (supra) would not apply. 11. In view of the aforesaid discussion, if the decision of this Court in case of COMMISSIONER OF INCOME-TAX AND ANOTHER vs. MANJUNATHA COTTON AND GINNING FACTORY reported in [2013] 359 ITR 565 (KAR) (supra) is considered, the resultant effect would be that the notice in question issued under Section 271(1)(c) for levy of penalty and consequently the penalty imposed, both would be unsustainable and cannot stand in the eye of law." 7.6 In view of the binding decisions of the jurisdictional High Court and the decision of Supreme Court on identical issue, the penalty levied by the AO under Section 271(1)(c) cannot be legally sustained and the same is deleted. 7.7 Considering above, the ground of appeal 3 of the appellant is allowed. Consequently, the remaining grounds of appeal become only academic and as such no specific adjudication is required for those grounds." 7. We find that ld. CIT(A) has reproduced the notice i....
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....r Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(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(1)(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 suf....
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....udicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." 8. As per the above discussion particularly clauses (p) to (s) of Para 63 of this judgment as reproduced above, we are satisfied that in the facts of present case, this judgment of Hon'ble Karnataka High Court is squarely applicable and therefore, we find no infirmity in the order of CIT(A) as per which he has deleted the penalty by respectfully following this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra). 9. Having held so, now we examine the applicability of various judgments cited by ld. DR of revenue. The first judgment cited by him is the judgment of Hon'ble Apex Court rendered in the case of Sundaram Finance Ltd. Vs. DCIT (supra) and also the judgment of Hon'ble Madras High Court in the same case as reported in 403 ITR 407. Para nos.....
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.... Ltd. Vs. CIT (supra), we find that in that case, the issue regarding defect in the penalty notice was not raised by assessee in that case before the AO or CIT(A) or before the Tribunal or even before the Hon'ble High Court and this question was raised at the time of hearing of the appeal before the Hon'ble High Court and it was noted by Hon'ble Madras High Court that this issue is raised after 10 years when the appeals are listed for final hearing and therefore, under these facts, it was held by Hon'ble Madras High Court that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under Section 274 r.w. Section 271of the IT Act. In the present case, the facts are different because this issue was raised by assessee before CIT(A) also and therefore, in our considered opinion, this judgment of Hon'ble Madras High Court and the subsequent judgment of Hon'ble Apex Court in that case as per which SLP was dismissed are not applicable in the present case. 11. The next judgment cited by ld. DR of revenue is the judgment of Hon'ble Apex Court rendered in the case of ....