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TMI Blog2019 (3) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... ojects, Kalburgi Homes, Arvind Kalburgi Enterprises and Bhavani Enterprises (hereinafter referred to as Kalburgi group of cases). In the search of Kalburgi group of cases, certain incriminating documents relating to the Assessee was found. Based on the same, proceedings u/s.153C of the Act were initiated against the Assessee. The Assessee had not disclosed income arising from the sale of the said plots in the return of income filed for AYs 2011-12 and 2012-13. The seized documents showed that the Assessee earned income from sale of plots. In the return of income filed for AYs 2011-12 to 2014-15, in response to notice u/s.153C of the Act, income from sale of plots was disclosed for the aforesaid AYs. The income so disclosed were brought to tax in the order of assessment passed u/s.153C of the Act for the aforesaid AYs. 3. The AO initiated penalty proceedings in the order of assessment for all the AYs in respect of the income disclosed in the return of income u/s.153C of the Act in respect of sale of plots. The AO imposed penalty on the Assessee holding that but for the search and seizure operation the Assessee would not have declared the income in question in the returns of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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 (Kar.) wherein it was held that if the show cause notice u/s.274 of the Act does not specify as to the exact charge viz., whether the charge is that the Assessee has "furnished inaccurate particulars of income" or "concealed particulars of income" by striking out the irrelevant portion of printed show cause notice, then the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. 8. We have also perused the show-cause notice issued u/s. 274 of the Act for all the aforesaid AYs 2011-12 to 2014-15. The AO in the said show cause notice has not struck off the irrelevant portion as to whether the charge against the Assessee is "concealing particulars of income" or "furnishing of inaccurate particulars of income". 9. The learned DR relied on the order of the CIT(A). He placed reliance on the decision of the Hon'ble Supreme Court in the case of Prasanna Dugar Vs. CIT 373 ITR 681(SC) wherein the Supreme Court dismissed Special Leave Petition against order of Hon'ble Calcutta High Court which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. 10. The AO has to satisfy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing......." 11. The decision is not a case on the show cause notice u/s.274 of the Act being defective. The decision is in the context of, whether satisfaction regarding concealment of income has to be expressed stated in an order of assessment or can be implied. Therefore, this decision is not of any relevance to the plea of the Assessee on validity of show cause notice u/s.274 of the Act. 12. The learned DR relied on the decision of Hon'ble Karnataka High Court in the case of B. Damodar Varman Baliga Jewellers Vs. JCIT 353 ITR 206 (Karn.) wherein the question was with regard to recording of satisfaction in the order of assessment and are not relevant to the issue of validity of show cause notice u/s.274 of the Act. 13. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting penalty proceedings on one limb and find the Assessee guilty on another limb of Sec.271(1)(c) of the Act. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act:- "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities 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 satisf ..... 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