TaxTMI 
TaxTMI 
2023 (7) TMI 118
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....ent, the AO found that the assessee had not accounted commission received from ICICI Bank amounting to Rs. 30,21,251 which was recorded in the tax credit statement Form 26AS. Accordingly the same was brought to tax. 4. The AO initiated penalty proceedings u/s. 271(1)(c) of the Income-tax Act, 1961 [the Act] and notice u/s. 274 r.w.s. 271 of the Act was issued to the assessee on 24.12.2010 and duly served on the assessee. In his reply dated 4.1.2011, the assessee stated that the said amount was received as commission during the year, however, it was omitted to be included in the total income which was noticed during the assessment stage and offered it for assessment. As the penalty proceedings were getting time barred the AO issued another letter on 3.6.2011 and in reply, the assessee offered explanation reiterating the submissions filed on 4.1.2011. The AO did not accept with the explanation of the assessee on the ground that the amount of Rs. 30,21,251 was quite huge and assessee was availing qualified personnel to maintain his accounts. Therefore, the AO levied a penalty of Rs. 9,29,923. 5. Before the CIT(A), the assessee specifically contended a legal ground that the show ....
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....on 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 Manjunatha Cotton & Ginning Factory (supra) wherein it was held that if the show cause notice u/s. 274 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, than the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. 8. The learned DR relied on the order of the CIT(A). 9. We heard the rival submissions and perused the material on record. On perusal of the show-cause notice issued u/s. 274 r.w.s 271 of the Act it is noticed that the AO in the said show cause notice has not struck off the irrelevant portion as to whether the charge against the Assessee is "concealing particulars of income or furnishing of inaccurate particulars of income". The Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) has held that notice u/s. 274 of ....
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....eet specifically. Otherwise, principles 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, i....
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....e Hon'ble Court was 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(l)(c) is a sine qua non for the Assessment Officer to initiate....
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.... s) Taking 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 present case that the show cause notice u/s. 274 r.w.s 271 of the Act 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's Emer....