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TaxTMI 
2020 (10) TMI 840
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....n the course of such search, certain documents pertaining to assessee were seized. Proceedings u/s. 153C were initiated against assessee for all the assessment years. Based on the material found in the course of search, assessments were framed u/s. 153C of the Act and following additions were made in various assessment years on the basis of following discussion in the orders of assessment for AY 2010-11:- "4. During the search at his residence on 19-12-2014, cash books containing details of unaccounted cash transactions and investments were found and seized as A/MC/1 and A/MC/3. The assessee was questioned about entries in the said books in his statement u/s. 132(4). The relevant questions are reproduced below : "Q.No.21 I am showing you the seized material marked as A/MC/1 and A/MC/3 which contain the hand written transactions. Please state who has written these transactions and explain these transactions. Ans It is stated that these are the transactions written by me and it is explained that the unaccounted cash generated from mu regular business is credited here and corresponding expenses are also shown here. Q.No. 22 I am consolidating all th....
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....ngs u/s. 271AAB are initiated in respect of the undisclosed income." 5. In the penalty proceedings, the assessee contended that income which is ultimately brought to tax was the income declared in the return of income and this is accepted by the department and therefore there is no question of any concealment of particulars of income. Another argument advanced was that no assets were found in the course of search and penalty can be imposed only when assets are found in the course of search. The third argument was that the assessee had co-operated with the department and filed return of income disclosing the admitted income and paid taxes thereon and therefore no penalty should be imposed. These arguments were dealt with by the AO in the following manner:- "7. I have considered the above arguments of the assessee carefully. However, I do not find them acceptable. During the search, the assessee declared additional income of Rs. 90,03,946/- for the year under consideration. This additional income of Rs. 90,03,946/- was offered by, the assessee only on being confronted with incriminating material found during the search. The assessee had filed return of income u /s. 139(1)....
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....and paid the taxes is no enough ground for non levy of penalty. The Hon'ble Supreme Court in the case of MAK Data (P.) Ltd. v Commissioner of Income-tax - II [2013] 38 taxmanm.com 448 (SC) held eld that "the AO shall not be carried away by the plea of the assessee like "voluntary disclosure", "buy peace", "avoid litigation", "amicable settlement" etc to explain away its conduct. The question. is whether the assessee has offered any explanation for concealment of particulars of income or furnishing inaccurate particulars of income. Explanation to sec.271(11 raised a presumption of concealment when a difference is noticed by the AO, between reported and assessed income, the burden is then on the assessee to show otherwise, by cogent and reliable evidence. When the initial onus placed by the explanation has been discharged by him, the onus shifts on the revenue to show that the amount in question constituted the income and not otherwise". 6. Accordingly penalty was imposed for the various assessment years as follows:- AY Amount (Rs.) 2009-10 23,50,000 2010-11 27,00,000 2011-12 45,00,000 2012-13 90,95,000 2013-14 43,50,000 2014-15 50,00,....
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....ion to the rival submissions. The first aspect which we notice is that in the order of assessment for AY 2009-10 to 2014-15, the AO initiated penalty proceedings against the assessee for 'concealing particulars of income'. However, in the show cause notice issued u/s. 274 of the Act, the following words have been mentioned:- "have concealed furnished inaccurate particulars of such income" 12. In the order imposing penalty, the AO has imposed penalty on the assessee for 'concealing particulars of income'. The Hon'ble High Court of Karnataka in Manjunatha Cotton and Ginning Factory (supra) has laid down principles with regard to imposition of penalty u/s. 271(1)(c) of the Act. [The same will be applicable to imposition of penalty u/s. 271AAB of the Act]. The Hon'ble Karnataka High Court has held that notice u/s. 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 sending printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court....
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....d 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 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. ....
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....ility. 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(l)(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 ass....
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....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) 14. It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. The AO has not applied his mind to the specific charge against the Assessee. The mentioning of furnishing of inaccurate particulars of income in the show cause notice issued u/s.274 of the Act was fatal to the case. 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 Gi....