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TMI Blog2017 (2) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO which has served on assessee. On similar facts, as in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the practice of the department sending a printed form where all the grounds mentioned in 271 are mentioned would not satisfy the requirement of law when the consequence of assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 10% to 300% of tax liability. As the said provisions have to be held to be strictly construed, notice u/s. 274 should satisfy the grounds which he has to meet specifically. - Decided in favour of assessee - I.T.A. No. 594/HYD/2016 - - - Dated:- 30-12-2016 - Smt. P. Madhavi Devi, Judicial Member And Shri B. Ramakotaiah, Accountant Member For Assessee : Shri K.A. Sai Prasad, AR For Revenue : Smt. U. Minichandran, DR ORDER Per B. Ramakotaiah, A. M. This is an appeal by assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-1, Hyderabad dated 29-01-2016, confirming the penalty u/s. 271(1)(c) of the Income Tax Act [Act] of ₹ 2,44,000/-. 2. Briefly stated, in the course of assessment proceedings, Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charge raised by the Assessing Officer in the notice u/s. 274 r.w.s. 271(1)(c), the levy of penalty u/s. 271(1)(c) is not valid . It relied on the judgment of Hon'ble Karnataka High Court in the case of CIT Anr. Vs. Manjunatha Cotton Ginning Factory [359 ITR 565]. It was submitted that appeal by Revenue against the said judgment of Hon'ble Karnataka High Court was dismissed by the Hon'ble Supreme Court. 5. Coming to the merits, it was submitted that the amounts assessed in the hands of assessee are pertaining to the other two concerns and affidavits to that extent have been filed which have not been disproved. AO made the addition on the reason that the said amounts were not accounted for in their books of account. Once those amounts were accepted as belonging to them, it is not correct to levy penalty in the hands of assessee without proving that the money belongs to assessee. Just because assessee accepted the addition to settle the matters it is not enough to levy penalty u/s. 271(1)(c). 6. Ld. DR however, relied on the orders of the AO to substantiate that on the facts of the case, penalty is warranted. 7. We have considered the rival contentions. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings were initiated for concealment of penalty or for furnishing inaccurate particulars . The copy of the notice placed on record do indicate that it is a printed proforma, without striking-off the relevant columns and simply signed by the AO which has served on assessee. On similar facts, the Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory [359 ITR 565] (supra) has held that the practice of the department sending a printed form where all the grounds mentioned in 271 are mentioned would not satisfy the requirement of law when the consequence of assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 10% to 300% of tax liability. As the said provisions have to be held to be strictly construed, notice u/s. 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended, if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on assessee. 10. Similar issue has come up in the case of M/s. Nivee Property Developers Private Ltd., Vs. ACIT in ITA No. 951/Hyd/2016 (AY. 2005-06) dt. 11-11-2016. In that case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the Assessing Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. (p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Vs. Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565 (Kar.). I find that the notice issued u/s. 274 r. w. s. 271 of the Act, dated 17-11- 2011, clearly reveals that the AO while issuing the notice has not strike off inappropriate words and accordingly, the purpose of the notice issued for levy of penalty is lost. Accordingly, it is not clear what default is committed by the assessee i.e. whether it is initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income so that the penalty u/s. 271(1)( c) can be levied. I find that the Hon'ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) has held as under:- 58. It must be noticed that this finding recording concealment in the order to be passed by these authorities is only for the purpose of initiating. The said finding is not conclusive; it is in the nature of prima facie satisfaction, which authorizes them to initiate the penalty proceedings. Once a penalty proceedings is validly initiated, then under Section 274(1) an obligation is cast on the person initiating the proceedings to issue notice to the assessee. When such a notice is issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x, certainly, that is a fact which should weigh in the penalty proceedings after the assessee has paid tax with interest before imposing penalty. NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entical 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 determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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