TaxTMI 
TaxTMI 
2021 (12) TMI 761
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.... Since the additional ground raised is a pure question of law and goes to the root of jurisdiction, we admit the additional ground raised by the assessee in view of the judgment of the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC). 4. Brief facts of the case are as follows: The assessee is a partnership concern, carrying on the business of property development. For the assessment year 2004-2005, return of income was filed on 31.10.2004 declaring total income of Rs. 33,412. Subsequently, search was conducted u/s 132 of the I.T.Act in the case of M/s.Davanam Jewellery Private Limited, wherein certain details relating to investment made by the assessee in purchase of erstwhile Minerva Mills was found. Consequent to the search, notice u/s 148 of the I.T.Act was issued to the assessee on 23.03.2011. In response to the notice issued u/s 148 of the I.T.Act, return of income was filed declaring total income of Rs. 70,26,410, which included Rs. 33,412 shown in the original return. The assessment u/s 147 r.w.s. 143(3) of the I.T.Act was completed on 27.12.2011 assessing the total income of Rs. 1,05,26,412. 5. Thereafter notice u/s 274 of ....
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....the paper book filed by the assessee), it is clear that the same is defective as it does not spell out the ground on which the penalty is sought to be imposed, whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income . It can be seen from the copy of the notice proposing penalty u/s 271(1)(c) of the Act, the irrelevant portion has not been strike off. The Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory (supra) has laid down the following principles 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 ....
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....enalty 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 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....
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....ner. 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 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....