TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 83
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...."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 urged at the time of hearing, it is prayed that the order of the CIT(A) in so f....
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....ed 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 is guilty of both i.e. concealment of income and furnishing of inaccurate particulars of income and in the present case also, this is ....
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....n 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 requirement of the law is that the notice u/s 274 has to clearly mention about concealment or furnishing of inaccurate particulars of income. Thus, the ....
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.... 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 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. Aft....
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....auses 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 held as invalid and consequently penalty imposed is cancelled." 7.4 On identical facts, in the case of Commissioner of Income-tax, Bangalore v. SSA'S Emerald Meadows [2016] 73 taxmann.com 241 (Karnataka), the HC held as follows: "2. This appeal has been filed raising the follo....
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....e 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 COTTON AND GINNING FACTORY reported in [2013] 359 ITR 565 (KAR) (supra) is considered, this Court in the said decision had observed at paragraph 63 as under: "63. In the light of what is stated above, what emerges is as under: (a) Penalty under Section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty....
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.... 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 specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. (t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. (....
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....nder 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 issued by the AO u/s. 274 r.w.s. 271(1) of IT Act, 1961 and in that notice, the AO has not struck down the irreverent portion and hence, the notice has not specified the charge of the AO as to whether the assessee is guilty of concealment of income or furnishing of inaccurate particulars of income. In para no. 61 of the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra) which is reproduced by CIT(A) in para 7.2 of his order as reproduced above, it is noted by Hon'ble Karnata....
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....ction 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 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 have escaped from tax net and as opined by the assessing 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 explan....
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....wing 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. 16 and 17 of this judgment of Hon'ble Madras High Court rendered in the case of Sundaram Finance Ltd. Vs. CIT (supra) are relevant and hence, we reproduce these paras from this judgment. "16. We have perused the notices and we find that the relevant columns have been marked, more particularly, when the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee's case, as it is purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of ....
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.... 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 Sky Light Hospitality LLP Vs. ACIT (supra). In this case, the issue involved was regarding defects in the notice of reassessment issued by the AO u/s. 147 and 148 of IT Act. The notice in that case was issued in the name of erstwhile company despite company ceasing to exist as it had been converted into LLP and under those facts, it was held that section 292B of IT Act is applicable and hence, the defect in the notice can be cured because only wrong name was given in the notice. It was held that it was merely a clerical error which could be corrected u/s. 292B of IT Act. In the present case, the issue involved is regarding defect in penalty notice and that too not regarding defect in the name but regarding the defect in the allegation....