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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 ..... 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 Rs. 7 Crores. By a letter dated 20.6.2008 the Assessee explained and gave a break of the disclosure of income of Rs. 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 declaring income as was declared in the statement u/s.132(4) of the Act ( an additional sum of Rs. 31,724 was offered over and above Rs. 7 crores after again verifying the documents seized) and the same was accepted by the AO and assessment completed u/s.153C of the Act. The details in this regard can be summarised in the form of the following two charts: Sl. No. Financial Year Asst. Year Amount (Rs.) 1. 2002-03 2003-04 3,00,000/- 2. 2003-04 2004-05 5,00,000/- 3. 2004-05 2005-06 2,80,000/- 4. 2005-06 2006-07 37,81,033/- 5. 2006-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne, 2007, the assessee is found to be the owner of- (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), 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 certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposing penalty have to be held as bad in law and liable to be quashed. 7.2. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 explana ..... 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