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TMI Blog2019 (3) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... o a Survey action u/s.133A of the Act. The Assessee agreed to the addition of LTCG . In respect of the addition made as aforesaid, the AO initiated penalty proceedings u/s.271(1)(c) of the Act and imposed penalty on the Assessee which was confirmed by the CIT(Appeals). Hence, appeal by the Assessee before the Tribunal. 3. Before the Tribunal, the learned counsel for the Assessee contended that the notice issued before imposing penalty was not accordance with law and on this ground the order imposing penalty should be quashed. The learned counsel for the Assessee also drew our attention to the show cause notice issued u/s.274 of the Act before imposing penalty and submitted that the said notice does not specify as to whether the Assessee is guilty of having "furnished inaccurate particulars of income" or of having "concealed particulars of such income". He pointed out that the show cause notice does not strike out the irrelevant portion viz., "furnished inaccurate particulars of income" or "concealed particulars of such income". He drew our attention to a decision of the Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013) 218 Taxman 423 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e curable and falling within the mischief of Sec.292B of the Act. This decision rendered in the context of Sec.148 of the Act, in our view, is not relevant in the present case. The same reasoning would apply to the decision of the ITAT Bangalore in the case of Jayson Infrastructure India Ltd. (supra). 6. The learned DR relied on the decision of Mumbai ITAT in the case of Earthmoving Equipment Service Corporation Vs. DCIT 22(2), Mumbai, (2017) 84 taxmann.com 51. In this case, the ITAT Mumbai did not follow the decision rendered in the case of Manjunatha Cotton & Ginning Factory (supra) for the reason that penalty in that case was deleted for so many reasons and not solely on the basis of defect in show cause notice u/s.274 of the Act. This decision is also contrary to the decision of Hon'ble Karnataka High Court, which is the jurisdictional High Court, as far as the Bangalore Benches of ITAT are concerned and is therefore not binding. 7. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping 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, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der 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(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 Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings 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." (emphasis supplied) 9. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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