TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 1001
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....owing additions to the total income declared by the Assessee: (i) Disallowance of Rs. 39,00,000/- Litigation Expenses on the ground that the suit against the Assessee was dismissed and hence the Assessee was not liable to pay litigation expenses/compensation. (ii) Disallowance u/s.40(a)(ia) of the Act of interest expense of Rs. 9,46,000/- on account of non deduction of tax at source, and (iii) Disallowance u/s.40(a)(ia) of the Act of a sum of Rs. 55,00,000 on account of non deduction of tax at source u/s.194-C. 4. In respect of the addition made as aforesaid, the AO initiated penalty proceedings u/s.271(1)(c) of the Act but without specifying as to whether the Assessee is guilty of concealing particulars of income or furnishing inaccurate particulars of income. The AO issued a show cause notice u/s.274 of the Act and imposed penalty on the Assessee which was confirmed by the CIT(A). Hence, appeal by the Assessee before the Tribunal. 5. Before the Tribunal the learned counsel for the Assessee contended that the notice issued before imposing penalty was not accordance with law and on this ground the order imposing penalty should be quashed. The learned counsel for the Assesse....
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.... 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 find the Assessee guilty on another limb of Sec.271(1)( c) of the Act. 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 u/s.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 the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming pro....
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....se 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 the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different.....
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....osition 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 explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to S....
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....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 ld. 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. As far as the decisions cited by the learned DR are concerned, we observe that a Co-ordinate bench in the case of Shri A Nagarju (ITA No.2196/Bang/2016 dated 6/4/2018), has considered the decision cited by the learned DR in the case of P.M.Abdullah (supra) and has held that the same is contrary to the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Spinning Mills Ltd., (supra) and therefore cannot be followed. The decision rendered in the case of Sri Durga Enterprises (supra) was in a totally different context of defect in notice issued u/s.148 of the Act wherein the AY was not mentioned and period within which the return was to be filed was not mentioned. The defect was held to be curable u/s.292B of ....