TaxTMI 
TaxTMI 
2019 (9) TMI 373
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed return declaring Nil income. A survey under section 133A of the Act was conducted at the assessee's business premises on 20.03.2014. The case was taken up for scrutiny for this Assessment Year and the assessment was concluded under section 143(3) of the Act vide order dated 16.02.2015 and the AO simultaneously initiated proceedings under section 274 r.w.s. 271 of the Act. Subsequently, the AO passed an order dated 31.08.2015 levying penalty of Rs. 14,04,106/- under section 271(1)(c) of the Act which was upheld by the CIT(A) vide an ex-parte order dated 22.02.2019; without the benefit of the assessee's submissions in the matter. 3. Aggrieved by the ex-parte order of CIT(A) - 11, Bangalore, dated 22.02.2019, upholding the AO's action in levying penalty of Rs. 14,04,106/- under section 271(1)(c) of the Act for Assessment Year 2012-13, the assessee has filed this appeal wherein it has raised the following grounds: 1. The Order of the Learned Commissioner of Income Tax (Appeals) - 11, Bangalore, rCIT(A)1 to the extent prejudicial to the Appellant is bad in law and on facts; against the provisions of the Income-tax, Act, 1961 ['the Act'] and weight of evidence and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hould be quashed. The learned Counsel for the assessee also drew our attention to the show cause notice issued under section 274 r.w.s 271 of the Act for initiating penalty proceedings dated 24.06.2015 and submitted that the said notice does not specify as to whether the assessee is guilty of having "furnished inaccurate particulars of income" or of having "concealed particulars of such income". He pointed out that the show cause notice does not strike 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 issued for levy of penalty 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. It was further subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in 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, 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 impos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nciples 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 version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Officer to initiate the proceedings bec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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. 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....