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TMI Blog2016 (7) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... m Ahmed, Accountant Member:- Both appeal by the Revenue are directed against the common orders of Commissioner of Income Tax (Appeals) Central-I, Kolkata dated 05.03.2013. Assessments were framed by DCIT, Central Circle-VII Kolkata u/s 153C/143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his orders dated 24.12.2010 for assessment years 2006-07 and 2007-08 respectively. Penalty levied by Assessing Officer u/s 271(1)(c)/274 of the Act vide his orders dated 27.12.2011 respectively. 2. Except figure the issues are same in both the appeals therefore we are taking the facts of the case for AY 2006-07 as a lead case for the sake of convenience, we pass a consolidated order for both the appeals. Grounds raised by Revenue per its appeal are reproduced below:- "1. The CIT(A), Central-I, Kolkata has erred in deleting the penalty u/s. 271(1)(c) imposed upon the assessee to the tune of ₹ 36,86,345/- by the AO. 2. On the facts and circumstances of the case and also in law, the CIT(A) has erred in deleting the penalty on the presumption that Explanation 5A to Sec. 271(1)(c) does not apply to assessment completed u/s. 153C of the IT Act. 3. On the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Kamal Gandhi. Accordingly, AO issued summon u/s 131 of the Act to assessee, on confrontation, he accepted that the payment was made for the investment in the land through various companies as detailed under:- Sl No Name of company Paid to FY Amount (Rs) Remark(s) 1 Mayur Sales Pvt. Ltd. Gayatri Mondal (1) 2005-06 100,800/- Gayatri Mondal (2) 2005-06 100,800/- Hari Das Mondal 2005-06 4,763,950/- Narayan Das Mondal 2005-06 536,350/- Registration charges 2005-06 585,845/- Arun Kr. Bhoumik 2006-07 20,240/- Arun Kr. Bhoumik 2007-08 (20,240/-) Cancelled Arun Kr. Bhoumik 2007-08 21,580/- Navketan Enterprises 2008-09 399,700/- Cash final settlement 2008-09 100,000/- 2 Abha Vyapaar Pvt. Ltd Gayatri Mondal 2006-07 437,500/- Arun K. Bhoumik 2007-08 38,420/- 4 Bhavsagar Sales Pvt. Ltd Hari Das Mondal 2006-07 180,600/- 5 Jagran Marketing Pvt. Ltd. Hari Das Mondal 2006-07 525.000/- Arun Kr. Bhoumik 2007-08 38,775.00 6 Progressive Vyappar Pvt. Ltd. Hari Das Mondal 2006-07 437,500/- Arun Kr Bhoumik 2007-08 36,540/- 7 Sansakar Goods Pvt Ltd Hari Das Mondal 2006-07 525,000/- Arun Kr Bhoumik 2007-08 38,775/- 8 Cash 14,374 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or after 1st day of June, 2007". From the plain reading of the provision of Section, it is clear that Explanation 5A to Sec. 271(1)(c) is applied to assessee where the search was conducted. In the instant case, search was not conducted upon the assessee, therefore the provision of Explanation 5A to Sec. 271(1)(c) is not applicable to the assessee. Accordingly, L'd CIT(A) deleted the penalty levied by AO by observing as under:- i) The provision of Sec. 153A, 153B and 153C if read jointly then it shows that these provisions are complete course for such assessment where such penalty initiated after 31.03.2003. However, these provisions of the Act demand to exclude the normal assessment procedure as covered u/s 139/147/148, 149/151/153 of the Act. In this circumstances, L'd CIT(A) opined that there is no need to make reference to the provision as specified for filing return of income u/s. 139 of the Act for the purpose of imposition of penalty u/s 271(1)(c) of the Act. ii) The income offered in response to the notice issued u/s 153C of the Act was accepted by the Assessing Officer without making any addition. Therefore, there was no concealment of income as per the provisions of Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the papers belonging to M/s Mayur Sales Pvt. Ltd. and Kamal Gandhi. We accordingly find that, as such there was no role of the Searched Party. Accordingly, AO issued notice to assessee who voluntarily admitted the undisclosed income and revised income tax return and paid tax thereon by filing revised return which was accepted by the AO. The AO also initiated the penalty proceedings which was subsequently deleted by Ld CIT(A) in appellate stage on the ground that there was no mismatch in the income of assessee which declared by assessee u/s. 153C of the Act and the assessee was not search party u/s 132 of the Act. Therefore, undisclosed income is out of the purview of the provisions specified under Explanation 5A to Sec. 271(1)(c) of the Act. Now the question, before us arise so as to whether the undisclosed income declared by assessee in pursuance to notice u/s. 153C of the Act is subject to penalty under Explanation 5A to Sec. 271(1)(c) of the Act in the aforesaid facts and circumstances. From the submission of assessee, we agree that name of assessee was nowhere recorded in the seized documents but assessee himself voluntarily came forward and offered the undisclosed income u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee offered its undisclosed income only after initiation of search u/s 132 of the Act on M/s SALTEE Group and after issuing the notice u/s 153C of the Act. So in our view, it is not the case that assessee has voluntarily offered the undisclosed income to tax. Therefore the reasons given by the ld. CIT(A) with regard to the deletion of party are not tenable. However, we find that notice issued u/s. 274 of the Act is silent about the charge under which penalty proceedings has been initiated whether it was initiated for concealment of income or for furnishing inaccurate particulars of income. On this basis, Hon'ble Karnataka High Court in the case of CIT & Anr. Vs. Manjunatha Cotton and Giniing Factory has laid down the following principles to be followed in the matter of imposing penalty u/s. 271(1)(c) of the Act. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn) (supra), 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 furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow 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, it should be imposed only on the grounds on which he is called upon to answer. It is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 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 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 Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings 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) 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 in the case of Manjunatha Cotton and Ginning Factory (supra) we hold that the orders imposing penalty in the assessment year under consideration has to be held as invalid and consequently penalty imposed is cancelled. 7.3 For the reasons given above, we hold that levy of penalty in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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