TaxTMI 
TaxTMI 
2019 (8) TMI 296
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.... the Act dated 22.01.2009 was issued to the assessee requiring it to file return of income for this Assessment Year as the Assessing Officer (AO) had information in his possession that the assessee had effected turnover in excess of Rs. 40 lakhs from VAT Department. Since there was no response to the many notices issued by the AO, the assessment was completed ex-parte under section 144 of the Act vide order dated 26.11.2010 wherein the assessee's income was determined at Rs. 18,97,038/- and penalty proceedings were simultaneously issued by issue of notice under section 274 r.w.s. 271 of the Act dated 26.10.2010. The assessee's appeal was dismissed by the CIT(A), Hubli. 2.2 Subsequent thereto, the AO took up the penalty proceedings under section 271(1)(c) of the Act and issued notices to the assessee to which there was no response. In that view of the matter, the AO passed an ex-parte order dated 26.03.2018 levying penalty of Rs. 4,79,920/- under section 271(1)(c) of the Act for furnishing of inaccurate particulars of income. The assessee's appeal was partly allowed by the CIT(A)-Hubli vide order dated 25.10.2018 reducing the levy of penalty under section 271(1)(c) of the Act on ....
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....rike 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 Vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Karn); wherein it was held that if the show cause notice under section 271(1)(c) 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, then the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. 5. We have also perused the show-cause notice issued under section 274 r.w.s. 271(1)(c) of the Act for the Assessment Year 2008-09 dated 26.11.2010. The AO, in the said show cause notice, has not struck off the irrelevant portion as to whether the charge against the assessee is "concealing particulars of income" or "furnishing of inaccurate particulars of income". 6. The learned DR relied on the order of the CIT(A). He placed reliance on the decision of the Hon'ble ITAT Bangalore ....
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.... 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, 359 ITR 565 (Karn), has held that notice under section 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and holding the Assessee guilty on another limb of Section 271(1)(c) of the Act is not valid. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty under section 271(1)(c) of the Act. "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 by the Authority categorically records a finding regarding t....
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....gs 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 and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to ....
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....egal 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 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. ....
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.... the aforesaid decision that, on the facts of the case on hand, evidently the show cause notice issued u/s. 274 r.w.s 271(1)(c) of the Act dated 26.11.2010 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 Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The Id. Counsel further brought to our notice that as against the decision of the Hon'ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon'ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. 11. We have already observed that the show cause notices issued in the case on hand issued und....
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....ave of this Hon'ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity. Document 2 L 2 3. 5. The notice issued under section 271(1)(c) of the Act, is bad in law, on the facts and circumstances of the case. The learned CIT(A) was not justified in appreciating that the AO has not assumed proper jurisdiction, as the mandatory conditions for invoking the provisions of section 271(1)(c) of the Act has not been complied with under the facts and circumstances of the case. The learned CIT(A) was not justified in appreciating that the issue of penalty notices under section 274 of the Act, permit the AO to assume jurisdiction over the appellant and was not a mere formality, to be divested with, nor was a curable defect, on the facts and circumstances of the case. The learned CIT(A) was not justified in law and on facts in appreciating that the levy of pe....