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TMI Blog2016 (10) TMI 415X X X X Extracts X X X X X X X X Extracts X X X X ..... Bros, Maa Kamakhya Tyres and M/s. Radha Rani Market, besides above, the assessee has also involved in supply business. The assessee filed his return of income by declaring his income at ₹ 1,87,850/- on 25-02-2003. The AO determined the total income of assessee at ₹ 4,87,850/- by an order u/s. 143(3) on 30- 03-2005. During such proceedings, the AO found that the assessee has received ₹ 3 lakhs from 3 persons towards gift. Before the AO the assessee could not produce the said three persons to prove the same. Accordingly, the AO held that the claim of gift is bogus and for non furnishing of proper explanation, the AO initiated penalty proceedings and imposed a penalty of ₹ 91,800/- u/s. 271(1) ( c) of the Act. Against which the assessee preferred an appeal before the CIT(A). The CIT-A relying on various case laws and considering the submission of the assessee confirmed the imposed penalty. Aggrieved, the assessee is in appeal before us by raising the fol lowing additional grounds:- 1. That the order dt. 31.03.2012 passed u/s. 271(1) ( c) of the Income Tax Act, 1961 is barred by l imitation as per Sec. 275(1) (c) of the Act. Hence, the penalty order is bad i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for furnishing inaccurate particulars of income or concealing particulars of such income . 8.1 The Hon 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. 8.2 The Hon ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Facto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment 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) It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. Following the decision of the Hon ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. 6. In the present case, the notice dt. 30-3-2005 issued to Assessee by the AO U/Sec 274 r/w 271 of the Act does not show on which ground the penalty is sought to be imposed, therefore the law laid down by the Hon ble High Court supra and followed by Suvaprasanna Bhattacharya Vs. ACIT of Coordinate Bench supra and in view of the same, we hold that the order dt: 30-3-2012 levying penalty is not valid. Respectfully following the order above, we cancel the penalty of ₹ 91,800/- levied u/s. 271(1) ( c) by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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