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TMI Blog2015 (12) TMI 1617X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO imposing 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 an individual. There was a search and seizure operation u/s.132(1) of the Act, conducted in the case of Khaitan Group of cases. The Assessee was also searched u/s.132(1) of the Act. The search in question took place on 17.10.2008. In the course of search several incriminating documents, jewellery, cash etc., were found. The Assessee in his statement recorded u/s.132(4) of the Act made a disclosure of undisclosed income for the AYs 2004-05 to 2009-10 of a sum of ₹ 1,50,00,000. By a letter dated 16.12.2008 the Assessee explained and gave a break of the disclosure of income of ₹ 1.50 Crores. 3.1. A notice dated 12.8.2009 u/s.153A of the Act was issued to the Assessee for AYs 2004-05 to 2008-09. Proceedings were initiated by the AO by issue of notice u/s.153A 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 3.3. A show cause notice u/s.274 of the Act was issued to the Assessee for the AYs 2004-05 to 2008-09. 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 2004-05 to 2008-09. 4. On appeal by the Assessee, the CIT(A) confirmed the order of the AO imposing penalty by holding that Explanation 5A to Sec.271(1)( c) of the Act was applicable to the case and therefore penalty was to be imposed on the Assessee and therefore notwithstanding the fact that the income ultimately brought to tax in the assessment framed u/s.153C of the Act was declared in the return of income filed by the Assessee, penalty was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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. 7. The learned DR relied on the order of the CIT(A). 8. We have considered the rival submissions. The argument of the learned counsel for the Assessee was that the show cause notice u/s.274 of the Act which is in a printed form and the AO has indicated in the said notice as to whether the penalty is sought to be levied on the assessee for furnishing inaccurate particulars of income or concealing particulars of such income by striking off the irrelevant portion of the printed show cause notice. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted 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 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 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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