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TMI Blog2017 (11) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, the Assessing Officer while examining assessee's claim under section 11 of the Act found that the assessee was granted registration under section 12A of the Act from 1st April 2000. Hence, the said registration granted to the assessee is not applicable for assessment year 2000-01. Therefore, the assessee cannot claim exemption under section 11 of the Act. Further, he also found that the registration granted to the assessee under section 12A of the Act was subsequently cancelled under section 12AA(3) vide order dated 28th September 2007. On the basis of material found during the search as well as information gathered in post search proceedings, the Assessing Officer recommended for special audit under section 142(2A) of the Act. On the basis of special audit report, the Assessing Officer proceeded to compute the income of the assessee by making various additions / disallowances which resulted in determination of total income at ` 2,49,15,795 and the tax liability including interest of ` 1,73,70,454. Against the aforesaid assessment order the assessee went in appeal before the first appellate authority. 3. The learned Commissioner (Appeals) after considering the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, ITA no.2158/Mum./ 2016 dated 24th February 2017; and vi) Subha Prasanna Bhattacharya v/s ACIT, ITA no.1303/Kol./ 2010; 6. Learned Departmental Representative strongly supporting the order of the learned Commissioner (Appeals) submitted that in the course of search and seizure operation various incriminating material was found and on that basis as well as on the basis of the report of the special audit additions were made by the Assessing Officer, part of which was sustained by the learned Commissioner (Appeals). Therefore, he submitted, there was prima-facie evidence before the Assessing Officer that the assessee has concealed particulars of income or has furnished inaccurate particulars of income. He submitted, the Assessing Officer in the assessment order has directed initiation of proceedings under section 271(1)(c) of the Act. He submitted, in case of Smt. Kaushalya Devi, Hon'ble Jurisdictional High Court has held that non-mentioning of nature of offence by the Assessing Officer in the show cause notice would not invalidate the penalty order. 7. We have heard rival contentions and perused the material available on record in the light of the decisions relied upon. A p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ‟ has been interpreted by the decision of the Apex Court in the case of RAJENDRANATH reported in 120 ITR pg.14, where it has been held that in any event whatever else it may amount to, on its very terms the observation that the ITO is free to take action, to assess the excess in the hand of the coowners cannot be described as a direction. A direction by a statutory authority is in the nature of an order requiring positive compliance. When it is left to the option and discretion of the ITO whether or not take action, it cannot be described as a direction. 51. Therefore, it is settled law that in the absence of the existence of these conditions in the assessment order penalty proceedings could not be proceeded with. The proceedings which are initiated contrary to the said legal position are liable to be set aside." 9. As could be seen from the aforesaid observations of the Hon'ble Court, use of phrase like "penalty proceedings under section 271(1)(c) are initiated" cannot be construed as a direction for initiation of penalty proceedings. As far as the contention of the Learned Departmental Representative that in terms of sub-section (1B) of section 271(1)(c), the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Hon'ble Court after dealing with all the aspects ultimately concluded as under:- "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 order of the Appellate Authority or Revisional Authority. f) Even if there is no specific 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(1)(c) is a sine qua non for the Assessment Officer to initiate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilty 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 be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. 11. In case of Dilip N. Shroff v/s JCIT, [2007] 291 ITR 519 (SC), the Hon'ble Supreme Court observed, while issuing the notice under section 274 r/w section 271 of the Act in standard format, the Assessing Officer should delete the inappropriate words or paragraphs, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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