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TMI Blog2019 (4) TMI 871X X X X Extracts X X X X X X X X Extracts X X X X ..... URT] referred to in the earlier part of this order, has to be accepted. We therefore hold that imposition of penalty in the present cases cannot be sustained and the same is directed to be cancelled. - ITA No.1277/Bang/2018, CO No.17/Bang/2019 - - - Dated:- 3-4-2019 - Shri N.V. Vasudevan, Vice President And Shri Jason P. Boaz, Accountant Member For the Assessee : Smt. Vani H., Advocate For the Revenue : Shri C.H. Sundar Rao, CIT(DR)(ITAT), Bengaluru. ORDER PER N V VASUDEVAN, VICE PRESIDENT The appeal is by the revenue against the order dated 14.02.2018 of CIT(Appeals), Belagavi, relating to assessment year 2010-11. The Assessee has filed C.O.No.17/Bang/2019 against the very same order of CIT(A). 2. In the appeal by the Revenue, the revenue has challenged the order of the CIT(A) whereby the CIT(A) cancelled the order of the AO imposing penalty on the Assessee u/s. 271(1)(c) of the Income Tax Act, 1961 (Act). In the Cross objection the Assessee has submitted that the penalty proceedings u/s.271(1)(c) of the Act has to be quashed on the ground that the show cause notice issued u/s.274 of the Act, before imposing penalty does not specify the exact cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal the learned counsel for the Assessee contended that the notice issued before imposing penalty was not in 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 (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, than th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso contrary to the decision of Hon ble Karnataka High Court which is the jurisdiction High Court as far as the Bangalore Benches of ITAT are concerned and is therefore not binding. 11. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould 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 interest that 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. 14. We have already observed that the show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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