TaxTMI 
TaxTMI 
2020 (12) TMI 599
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....under section 271(1)(c) of the Act are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee had introduced share capital of Rs. 6,00,000/- and since the assessee could not explain the source of share capital, the Assessing officer made the addition u/s.68 of the Act. Therefore, the AO initiated penalty proceedings u/s.271(1)(c) by issuing notice u/s.274 on 21.3.2013 on the ground of concealment of particulars of income and furnishing inaccurate particulars of income. During the penalty proceedings, the assessee did not appear and offer any explanation. Therefore, the AO levied penalty of Rs. 5,00,000/-. 4. Before the ld CIT(A), the assessee submitted that the notice issued for levy of penalty d....
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....nalty order passed under Section 271(1)(c) of the Act in pursuance to the said notice is bad in law. He referred to the decision of Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory reported in 359 ITR 565, which decision has been upheld by the Hon'ble Apex Court in case of CIT Vs. SSA's Emerald Meadows (2016) 73 Taxman.com 248 (SC). He also submitted that mere disallowance of claim cannot lead to levy of penalty. Therefore, it was his contention that the penalty order deserves to be quashed. 6. Replying to above, ld Sr DR supported the penalty order as well as first appellate order. He submitted that as regards the notice which does not indicate whether the assessee has concealed particulars of his ....
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....arnataka High Court in the case of Manjunath Cotton & Ginning Factory (supra) and also the decision of Hon'ble Supreme Court in the case of SSA's Emerald Meadows (supra), the penalty imposed is not exigible. However, the contention of ld D.R. is that Hon'ble Madras High Court in the case of Sundaram Finance Ltd (supra) the decision in the Manjunath Cotton & Ginning Factory (supra) and also SSA's Emerald (supra) has been considered and on the same facts, the penalty-imposed u/s.271(1)(c) is leviable. 8. In this fact situation we shall refer to the decisions relied upon by the Ld. AR. 9. In the case of Manjunatha Cotton & Ginning Factory(supra), the Hon'ble Karnataka High Court has held as follows :- "60. Clause (c) deals with two specific....
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....s 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." 10. In SSA's Emerald Meadows, (2016) 73 Taxman.com 241(Kar), the Hon'ble Karnataka High Court Considered the question of law as to,- "Whether, omission if assessing officer to explicitly mention that penalty proceedings are being initiated for furnishi....
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....d." 13. Ld D.R. relied on the decision of Hon'ble Madras High Court in the case of Sundaram Finance Ltd (supra), wherein, the issue regarding defect in the penalty notice was not raised by the assessee before the AO, or ld CIT(A) or before the Tribunal and this question was raised at the time of hearing before the Hon'ble Madras High Court after 10 years when the appeals are listed for final hearing and, therefore, in these facts, Hon'ble High Court held that even assuming that there was defect in the notice, it had caused no prejudice to the assessee and the assessee clearly understood what was the purport and import of notice issued under section 274 r.w.s 271 of the Act. 14. Before us, the assessee seeks to contend that the notice issu....