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TMI Blog2016 (8) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. 2. The brief facts of the case are that the assessee is an individual and dealing in the business of trading of cables. The assessee fi led his return of income declaring at ₹ 2,72,490/- on 31-10-2006. Under scrutiny, notices U/sec 143(2)/142(1) were issued. During such proceedings, the AO determined the total income of the assessee at ₹ 6,69,520/- to that effect an assessment order dt: 31-10-2008 was passed u/sec 143(3) of the Act. During such proceedings the AO observed that the assessee claimed towards commission payment of ₹ 8,23,730/- in respect of six persons. Before the AO the assessee filed details of commission agents with their names and address. But the assessee has failed to produce them before the AO for verification of the same. However, the AO after considering the submissions of the assessee disallowed the sum of ₹ 3,97,030/- and added the same by treating it as bogus commission expenses, thereby he initiated penalty proceedings by issuing notice dt. 31-10- 2008 u/s.274 r.w.s 271(1) ( c) of the Act and imposed penalty of ₹ 1,21,491/- by an order dated 29-06-2011. Against which the assessee preferred an appeal before the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 448(SC) and in the case of Dharmendra Textile Processors reported in (2008) 13 SCC 369(SC). 4. Heard the rival submissions and perused the material available on record. The question before us is as to whether the penalty order passed by the AO and confirmed by the ld.CIT(A) falls for our consideration in pursuance of the law laid down by the Hon ble Karnataka High Court supra . 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 income or for furnishing inaccurate particulars of income. Further submitted by the Ld.AR the aforesaid decision will squarely applicable to the present case and all the orders imposing penalty have to be held as bad in law and liable to be quashed. 5. As rightly pointed out by the Ld.AR, the Co-ordinate Bench of ITAT, Kolkata in the case of Suvaprasanna Bhattacharya supra by an order dated 06-11-2015 considered the Judgment of Hon ble Karnataka High Court supra the relevant portion of which reproduced hereunder: 8. The next argument tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accurate 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 reported 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 pro forma 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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