TaxTMI 
TaxTMI 
2019 (7) TMI 1150
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....r 2006-07. The assessee claimed as expenditure incurred in connection with business of the assessee a sum of Rs. 8,57,872/-. These expenses were disallowed by the AO for the reason that they were purely personal in nature and the assessee could not establish the nexus of those expenses with the business of the assessee. In respect of addition made as aforesaid, penalty proceedings were initiated and levied on the assessee for concealing particulars of income and furnishing inaccurate particulars of income. 3. On appeal by the assessee, the CIT(Appeals) confirmed the order of the AO. Before the CIT(Appeals), the assessee submitted that show cause notice, before imposing penalty, issued u/s 274 of the Act does not specifically mention the charge against the assessee i.e. whether it is with regard to furnishing inaccurate particulars of income or concealing particulars of income. The assessee relied on the decision of the Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (359 ITR 165)(Kar) wherein it was held that if the show cause notice u/s 274 of the Act does not contain the specific charge or if the show cause notice does not strike out the i....
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....f the Act wherein the name of the erstwhile company which got converted into an LLP was mentioned. The defect was held to be curable and falling within the mischief of Section292B of the Act. This decision rendered in the context of Section 148, of the Act in our view is not relevant in the present case. The same reasoning would apply to the decision of the ITAT Bangalore in the case of Jayson Infrastructure India Ltd. (supra). 7. The learned DR relied on the decision of Mumbai ITAT in the case of Earthmoving Equipment Service Corporation Vs. DCIT 22(2), Mumbai, (2017) 84 taxmann.com 51. In this case the ITAT Mumbai did not follow the decision rendered in the case of Manjunatha Cotton & Ginning Factory (supra) for the reason that penalty in that case was deleted for so many reasons and not solely on the basis of defect in show cause notice under section 274 of the Act. This decision is also contrary to the decision of Hon'ble Karnataka High Court which is the jurisdictional High Court as far as the Bangalore Benches of ITAT are concerned and is therefore not binding. 8. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 35....
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....strued, 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. After, he places his versio....
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....f the Hon'ble Court was as follows:- "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 for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under 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(I)(c) is a sine qua non for the Assessment Officerto initiate the proceedings because of the deeming provision....
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....alty 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. u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata 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." (emphasis supplied) 10. It is clear from the aforesaid decision that, on the facts of the case on hand, evidently the show cause notice u/s. 271(1)(c) of the Act dated 31.12.2008 is defective as it does not spell out the grounds on which the penalty is sought to be imposed. The Hon'ble Karnataka High Court in the case of CIT vs. SSA's Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon'ble Karnataka High Court following its own decision in the ca....