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TMI Blog2014 (6) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... quently orders of assessment were passed u/s. 143(3) r.w.s. 153A of the Act for the A.Y. 2006-07 assessing the total income at Rs. 1,37,19,154 which was the income returned in the return of income filed u/s. 153A of the Act. It is worthwhile to note that in the return filed u/s. 139 of the Act, the income declared was only Rs. 32,30,690. The difference between the income assessed u/s. 153A of the Act and the income returned by the assessee u/s. 139 of the Act was offered to tax by the assessee consequent to the disclosure made at the time of search. In the order of assessment dated 30.12.2011 passed u/s. 153A r.w.s. 143(3) of the Act, the AO initiated penalty proceedings u/s. 271(1)(c) of the Act. 4. For the A.Y. 2008-09, the income returned u/s. 139 of the Act was a sum of Rs. 30,94,607 whereas the income returned in the proceedings u/s. 153A of the Act was a sum of Rs. 89,96,651. The difference between the amount returned u/s. 139 and the amount offered in the return filed u/s. 153A of the Act was consequent to the search u/s. 132 of the Act. In the order of assessment, the AO initiated penalty proceedings u/s. 271(1)(c)/271AAA of the Act. This order of assessment was also passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing contained in sub-section (1) shall apply if the assessee,- (i) in the course of the search, in a statement under subsection (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) pays the tax, together with interest, if any, in respect of the undisclosed income. (3) No penalty under the provisions of clause (c) of subsection (1) of section 271 shall be imposed upon the assessee in respect of the undisclosed income referred to in sub-section (1). (4) The provisions of sections 274 and 275 shall, so far as may be, apply in relation to the penalty referred to in this section. Explanation.-For the purposes of this section,- (a) "undisclosed income" means- (i) any income of the specified previous year represented, either wholl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 565 (Karn), wherein the Hon'ble High Court 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. 13. The ld. DR relied on the order of the CIT(Appeals) wherein the CIT(A) has expressed his opinion that the assessee was fully aware of the charge against him and he cannot take shelter on technical grounds. 14. We have heard the rival submissions. 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) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order of penalty must be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 resulted in payment of such tax or such tax liability came to be admitted and if not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid 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. The show cause notice is also bad for the reason that in the A.Ys. 2008-09 and 2009-10 the show cause notice refers to imposition of penalty u/s. 271AAA, whereas the order imposing penalty has been passed u/s. 271(1)(c) of the Act. In our view, the aforesaid defect cannot be said to be curable u/.s 292BB of the Act, as the defect cannot be said to be a notice which is in substance and effect in conformity with or according to the intent and purpose of the Act. 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.
17. Since the appeals have been decided, the stay petitions filed by the assessee have become infructuous and are dismissed as infructuous.
18. In the result, the appeals are allowed, while the stay petitions are dismissed as infructuous.
Pronounced in the open court on this 5th day of June, 2014. X X X X Extracts X X X X X X X X Extracts X X X X
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