TaxTMI 
TaxTMI 
2019 (8) TMI 1123
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....up for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Act vide order dated 24.12.2009, wherein the AO simultaneously initiated proceedings under section 274 r.w.s. 271 of the Act by issue of notice dated 24.12.2009. Subsequently, the AO passed an order dated 11.06.2010 levying penalty of Rs. 11,38,000/- under section 271(1)(c) of the Act which was upheld by the CIT(A) vide the impugned order dated 22.01.2014. 3.1 Aggrieved by the order of CIT(A), Hubli, dated 22.01.2014, upholding the AO's action in levying penalty of Rs. 11,38,000/- under section 271(1)(c) of the Act for Assessment Year 2007-08, the assessee has filed this appeal wherein it has raised the following grounds: 1. The learned Commissioner of Income-tax (Appeal) is not justified is up holding the proposition of The Assessing Officer in levy of Penalty U/s 271(1)( c) for AY 2007-08 2. The learned Commissioner of Income-tax (Appeals) is not justified in holding that the existence of mens rea in levy of penalty U/s 271(1)( c). 3. The learned Commissioner of Income-tax (Appeals) is not justified in holding that for Penalty is for statutory offenc....
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....g "concealed particulars of such income". He pointed out that the AO has not struck 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 of the Act for the Assessment Year 2007-08. 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 relianc....
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....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, 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 t....
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.... 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 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 re....
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....rding 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 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 ....
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....ect 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. 274 r.w.s 271 of the Act dated 24.12.2009 issued for Assessment Year 2007-08 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 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....