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TMI Blog2019 (7) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of revenue because in the absence of clear charge of AO in the penalty notice issued by him u/s. 274 r.w.s. 271 of IT Act, this default of revenue regarding violation of principle of natural justice continues because in such a situation, the assessee does not know at that stage regarding the ground which he has to meet specifically. - decided against revenue. - ITA No. 3324/Bang/2018, ITA No. 3325/Bang/2018, C.O. No. 04/Bang/2019 (in ITA No. 3324/Bang/2018), C.O. No. 05/Bang/2019 (in ITA No. 3325/Bang/2018) - - - Dated:- 28-6-2019 - Shri Arun Kumar Garodia, Accountant Member And Shri Pavan Kumar Gadale, Judicial Member For the Assessee : Dr. C.P. Ramaswami, Advocate For the Revenue : Shri R.N. Siddappaji, Addl. CIT (DR) ORDER PER BENCH: Both these appeals are filed by the revenue and both the C.Os. are filed by the respective assessees for Assessment Year 2008-09 in the proceedings u/s. 271(1)(c) of IT Act. The assessee involved are two different assessees. But the issue in dispute and the orders of CIT(A) are almost identical and these were heard together and are be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that in the present case, the assessee had filed inaccurate particulars in respect of cost of improvement and had concealed the particulars in respect of sale consideration and thus the penalty was leviable for filing of inaccurate particulars of income as well as for concealment of particulars of income. 4. The CIT(A) erred in not considering the fact that the Assessing Officer has mentioned in his penalty order that, the penalty was levied for concealment of particulars and furnishing of inaccurate particulars of income for the relevant assessment year and nowhere the word 'or' was used by him. 5. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 6. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above. 4. The ld. DR of revenue supported the penalty orders. He also submitted that ld. CIT(A) has followed the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o LLP, it was held by Hon ble High Court that this error would not invalidate re-assessment proceedings as same was not a jurisdictional error but an irregularity and procedural / technical lapse which could be cured u/s. 292B of IT Act. It is submitted that in the present case also, even if there is some mistake in the notice issued by the AO u/s. 274, it should be held that this is a procedural / technical lapse which could be cured u/s. 292B of IT Act and hence, the penalty is justified. He also placed reliance on the judgment of Hon ble Kerala High Court rendered in the case of Parisons Roller Flour Mills (P) Ltd. Vs. CIT as reported in (2019) 176 DTR 377 (Kerala). 5. As against this, the ld. AR of assessee supported the order of CIT(A). He placed reliance on the same judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra). He also submitted that in para 7.4 of his order, the ld. CIT(A) has also followed another judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. SSA S Emerald Meadows as reported in [2016] 73 taxmann.com 241 (Karnataka) and he pointed out that in this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e particulars of your income or furnished inaccurate particulars of such income. The notice is scanned and pasted below: 7.2 In the case of Manjunath Cotton (Supra), on identical facts, the jurisdictional High Court decided as follows: 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 Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty 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 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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the penalty notice under Section 274 r.w.s. 271(1)(c) is bad in law and invalid despite the amendment of Section 271(1B) with retrospective effect and by virtue of the amendment, the assessing officer has initiated the penalty by properly recording the satisfaction for the same? (3) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deciding the appeals against the Revenue on the basis of notice issued under Section 274 without taking into consideration the assessment order when the assessing officer has specified that the assessee has concealed particulars of income? 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short the Act ) to be bad in law as it did not specify which limb of Section 271( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) Ever 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) 1(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 automati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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. 8. We are not required to consider the other contingencies for examination of legality and validity of the penalty under Section 271(1)(c) of the Act, but clauses (p), (q) (r) of the above referred observations are required to be considered. 9. As per the above referred decision of this Court, the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether the assessee is guilty of concealment of income or furnishing of inaccurate particulars of income. In para no. 61 of the judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra) which is reproduced by CIT(A) in para 7.2 of his order as reproduced above, it is noted by Hon'ble Karnataka High Court that the AO while issuing notice has to come to the conclusion that whether it is a case of concealment of income or it is a case of furnishing of inaccurate particulars of income. In fact, in para no. 63 of this judgment of Hon'ble Karnataka High Court rendered in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (supra), it is noted by Hon'ble Karnataka High Court that the assessee should note the grounds which he has to meet specifically because otherwise, principle of natural justice is affected, and therefore, on the basis of such proceedings, no penalty should be imposed on the assessee. In view of this specific finding of Hon'ble Karnataka High Court in this case, merely this fact that in the penalty order, the AO has stated that assessee is guilty of both defaults will not improve th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpose 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 1B 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 satisfaction, then the penalty proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Madras High Court in the same case as reported in 403 ITR 407. Para nos. 16 and 17 of this judgment of Hon ble Madras High Court rendered in the case of Sundaram Finance Ltd. Vs. CIT (supra) are relevant and hence, we reproduce these paras from this judgment. 16. We have perused the notices and we find that the relevant columns have been marked, more particularly, when the case against the assessee is that they have concealed particulars of income and furnished inaccurate particulars of income. Therefore, the contention raised by the assessee is liable to be rejected on facts. That apart, this issue can never be a question of law in the assessee s case, as it is purely a question of fact. Apart from that, the assessee had at no earlier point of time raised the plea that on account of a defect in the notice, they were put to prejudice. All violations will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that they have been put to prejudice and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter. This was never the plea of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The next judgment cited by ld. DR of revenue is the judgment of Hon ble Apex Court rendered in the case of Sky Light Hospitality LLP Vs. ACIT (supra). In this case, the issue involved was regarding defects in the notice of reassessment issued by the AO u/s. 147 and 148 of IT Act. The notice in that case was issued in the name of erstwhile company despite company ceasing to exist as it had been converted into LLP and under those facts, it was held that section 292B of IT Act is applicable and hence, the defect in the notice can be cured because only wrong name was given in the notice. It was held that it was merely a clerical error which could be corrected u/s. 292B of IT Act. In the present case, the issue involved is regarding defect in penalty notice and that too not regarding defect in the name but regarding the defect in the allegation and hence, in our considered opinion, this judgment is also not applicable in the present case. 12. The next judgment cited by ld. DR of revenue is the judgment of Hon ble Kerala High Court rendered in the case of Parisons Roller Flour Mills (P) Ltd. Vs. CIT (supra). Four question of law were raised in that cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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