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TMI Blog2016 (1) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty on the Assessee u/s.271(1)( c) of the Income Tax Act, 1961 (Act). 3. The facts and circumstances under which penalty u/s.271(1) (c) of the Act was imposed on the Assessee by the AO are as follows: The Assessee is a HUF. There was a search and seizure operation u/s.132(1) of the Act, conducted in the case of Shri.Sajjan Kumar Bansal, the karta of the Assessee HUF on 30.4.2008. In the course of search several incriminating documents, jewellery, cash etc., were found. The Assessee HUF carries on business in manufacture of steel, tubes etc. The Karta of the HUF Shri.Sajjan Kumar Bansal, in his statement recorded u/s.132(4) of the Act made a disclosure of undisclosed income for the AYs 2002-03 to 2008-09 of a sum of ₹ 7 Crores. By a letter dated 20.6.2008 the Assessee explained and gave a break of the disclosure of income of ₹ 7 Crores. A notice dated 12.8.2009 u/s.153C of the Act was issued to the Assessee for AYs 2002-03 to 2008-09. Since the Assessee i.e., the HUF was not searched the proceedings were initiated by the AO by issue of notice u/s.153C of the Act for each of aforesaid AYs. In response to the said notices, the Assessee filed return of income dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.1. In the orders of Assessment passed for the various AYs, the AO has accepted the income returned by the Assessee. The AO has elaborated on the disclosure letter dated 12.8.2009 and the verification of the books of accounts. There is no comments by the AO in the order of assessment about the Assessee's act of any concealment of income. The AO also initiated penalty proceedings against the Assessee u/s.271(1)( c) of the Act by observing as follows: Penalty proceedings u/s.271(1)( c) has been separately initiated 3.2. A show cause notice u/s.274 of the Act was issued to the Assessee for the AYs 2003-04 to 2007-08. The Assessee submitted reply to the show cause notice pointing out that the disclosure made by the Assessee was voluntary prior to any detection by the revenue and that there was no attempt to conceal particulars of income. The AO however held that but for the search and seizure operation the income declared by the Assessee would not have been declared. Accordingly, the AO imposed penalty u/s.271(1)( c) of the Act on the Assessee for AY 2003-04 to 2007-08. On appeal by the Assessee, the CIT(A) confirmed the order of the AO imposing penalty by holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drew our attention to the show cause notice issued u/s.274 of the Act before imposing penalty and submitted that the said notice does not specify as to whether the Assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income . He pointed out that the printed show cause notice does not strike out the irrelevant portion 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 CIT Vs. Manjunatha Cotton Ginning Factory (2013) 218 Taxman 423 (Kar.) 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. 6. The learned DR relied on the order of the CIT(A). 7. We have considered the rival submissions. The argument that the show cause notice u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. The final conclusion of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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