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TMI Blog2018 (4) TMI 334X X X X Extracts X X X X X X X X Extracts X X X X ..... eleting the penalty levied by the Assessing Officer u/s 271(1)(c) of the Act. 3. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was levied on the assessee by the AO are that the assessee is private limited company and engaged in the whole sale business of Saree s and the premises of assessee was surveyed u/s 133A of the Act on 13.02.2013 wherein assessee admitted an additional income of ₹ 4.50 crores which was duly disclosed in the income tax return. In respect of the above income the AO initiated penalty proceedings u/s 271(1)(c) of the Act. Finally the AO imposed penalty u/s 271(1)(c) of the Act. On appeal the ld. CIT(A) deleted the penalty imposed by the AO. Being aggrieved by the order of ld. CIT(A) Revenue is in appeal before the Tribunal. 4. Ld. DR for the Revenue before us placed the reliance on several case laws as presented on the issue of whether tick mark not placed on the relevant space as provided in the Notice u/s. 274 of the Act , outlining the type of default, would constitute ground for rejection of satisfaction and levy of penalty u/s. 271(1)(c) of the Act. First, the judgment of Hon'ble jurisdictional High Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t contain the specific charge against the assessee namely as to whether the assessee was guilty of having concealed particulars of income or having furnished inaccurate particulars of income. A copy of the show cause notice u/s 274 of the Act is placed on the records and perusal of the same reveals that AO has not struck out the irrelevant portion in the show cause notice and therefore the show cause notice does not specify the charge against the assessee as to whether the charge is of concealment of particulars of income or furnishing of inaccurate particulars of income. 6.1 The ld. Counsel for the assessee drew our attention to the decision of the Hon ble Karnataka High Court in the case of CIT vs. SSA s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of ina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of income or concealing particulars of such income by striking off the irrelevant portion of the printed show cause notice. On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for furnishing inaccurate particulars of income or concealing particulars of such income . 9.1. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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(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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (emphasis supplied) 9.3. It is clear from the aforesaid 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. 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. 9.4. For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. In view of our above conclusions on the issue of defect in show cause notice u/s.274 of the Act, we are not dealing with the other arguments made on merits of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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