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TMI Blog2016 (2) TMI 1000X X X X Extracts X X X X X X X X Extracts X X X X ..... n we do not find any infirmity in the arguments advanced by the learned AR before us. Thus we hold that levy of penalty in the present case cannot be sustained. - Decided in favour of assessee. - ITA Nos.616 to 618/Kol/2013 - - - Dated:- 3-2-2016 - Shri N.V. Vasudevan, JM And Shri M. Balaganesh, AM. For the Appellant : Ms. Varsha Jalan, Advocate For the Respondent : Shri Kalyan Nath, JCIT, Sr. DR ORDER Per Shri N.V. Vasudevan, JM These are appeals by the assessee against three orders of dated 17.01.2013 of CIT(A)-Central-II, Kolkata relating to A.Y.2007-08, 2008-09 2009-2010. 2. In all these appeals the assessee has challenged the order of CIT(A) whereby CIT(A) confirmed the order of AO on imposing penalty u/s 271(1)(c) of the Act. 3. The facts and circumstances under which the penalty was imposed by the AO are as follows :- The Assessee is an individual. There was a search and seizure operation conducted by the Revenue u/s 132(1) of the Income Tax Act, 1961 (Act) in the case of Patwari group of cases on 30.03.2010. The assessee being part of the group was also subjected to search. In response to the notice u/s 153A of the Act the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore 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 Factory (supra) has laid down the following principles to be followed in the matter of imposing penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessment or reassessment cannot be declared as invalid in the penalty proceedings. (emphasis supplied) 8.4. 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. 8.5. We may also add that the provision of section 292B of the Act cannot cure the basic defect in assumption of jurisdiction and only cure the mistake, defect or omission in return of income, assessment, notice or the proceeding is in substance and effect in conformity with or according to intent and purpose of the Act. As we have already seen that the Hon ble Karnataka High Court in the decision referred to earlier view the show cause notice and the reasons mentioned in the show cause notice are part of the process of the natural justice and the defect in such notice cannot be overlooked. In view of the aforesaid decision we do not find ..... X X X X Extracts X X X X X X X X Extracts X X X X
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