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TMI Blog2020 (2) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded proper satisfaction in the order of assessment for initiating penalty u/s. 271(1)(c) of the Act. In the decisions cited by the ld. counsel for the assessee on identical facts as in the case of assessee in the present appeals, CHANDRASEKARAN [ 2015 (4) TMI 679 - KARNATAKA HIGH COURT] took the view that there has been no recording of satisfaction for initiating penalty u/s. 271(1)(c) and on that ground the penalty imposed was cancelled. - Decided in favour of assessee - ITA No. 1866/B/2018, 1867/B/2018, 1868/B/2018, 959/B/2018, 2527/B/2018, ITA No. 966/B/2018, 1869/B/2018, 1870/B/2018 - - - Dated:- 12-2-2020 - Shri N.V. Vasudevan, Vice President And Shri A.K. Garodia, Accountant Member For the Appellant : Shri Tatakrishna, Advocate. For the Respondent : Shri Manjeeth Singh, Addl.CIT(DR)(ITAT), Bengaluru. ORDER PER BENCH ITA Nos.966, 1869 1870/Bang/2018 are appeals by the assessee against the orders dated 28.9.2017, 28.2.2018 28.02.2018 respectively of the CIT(Appeals), Mysuru relating to assessment years 2007-08, 2010-11 2011-12 whereby the CIT(Appeals) confirmed the order of AO imposing penalty u/s. 271(1)(c) of the Act. 2. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AYs 2007-08, 2010-11 2011-12. 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 . 5. The learned DR relied on the order of the CIT(A). He placed reliance on the decision of the Hon ble ITAT Bangalore Bench in the case of Shri P.M. Abdulla Vs. ITO ITA No.1223 1224/Bang/2012 order dated 17.10.2016 taking a view that absence of specific mention in the show cause notice u/s.274 of the Act about the charge u/s.271(1)(c ) of the Act is not fatal to levy of penalty u/s.271(1)( c) of the Act. In coming to the aforesaid conclusion the Bench followed decision of Hon ble Karnataka High Court in the case of CIT Vs. Sri Durga Enterprises (2014) Taxmann.com 442 (Karnataka). A Co-ordinate bench in the case of Shri A Nagaraju (ITA No.2196/Bang/2016 dated 6/4/2018) , has considered the decision cited by the learned DR in the case of P.M. Abdullah (supra) and has held that the same is contrary to the decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton Spinning Mills Ltd., (supra) and therefore cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. 8. The final conclusion of the Hon ble Court was as follows:- 63. In the light of what is stated above, what emerges is as under: a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for impos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sustained and the same is directed to be cancelled. ITA Nos. 959, 1867 1868/Bang/2018 9. These are appeals against the separate order of CIT(Appeals), Mysuru dated 28.9.2017 for AY 2009-10, dated 28.2.2018 for AY 2010-11 28.8.2018 for AY 2012-13, by the assessee, Shri K. Ramaswamy, father of Shri Ajith R. assessee in ITA Nos. 966, 1869 1870/B/2018. In these cases also, penalty u/s. 271(1)(c) of the Act was initiated and levied on the assessee for the reason that but for the survey, assessee would not have filed return of income. The CIT(Appeals) confirmed the order of AO. 10. In all these appeals, assessee has raised ground No.7, which reads as follows:- 7. As regards the Learned Assessing Officer having not recorded satisfaction before initiating penalty proceedings : 7.1. The Learned Assessing Officer is not justified in levying penalty without recording his satisfaction in the reassessment order before initiating penalty proceedings. 7.2. The Learned Assessing Officer has failed to appreciate that the provisions of Section 271(1B) do not apply for the reason that the re-assessment order does not contain any direction for initiation of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing the total income of such person as a result thereof shall for the purposes of clause (c) of this sub-section be deemed to represent the income in respect of which particulars have been concealed. Therefore, it is clear that aforesaid instances by itself do not constitute concealment. The Assessing Officers were just writing at the end of the assessment order that penalty proceedings are initiated or something to the effect. The Delhi High Court in the case of Ram Commercials has held that such a note alone in the assessment order does not satisfy the requirement of assuming jurisdiction in law in respect of the initiation of penalty proceedings. The satisfaction should be in the assessment order. The said view was also approved by the full Bench of the Delhi High Court in the case of CIT v. Rampur Engg. [2009] 309 ITR 143. The said view has been approved by the Apex Court in the case of Dilip N. Shroff v. Jt. CIT [2007] 291 ITR 519. That is the view the courts have consistently taken. After taking note of the judicial pronouncements in this regard, the Legislature thought it fit to insert Section 271(1)(B), which reads as under: 271(1)(B) Where any amount is added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Constitution if the same is not read in the manner it has read and in fact has read down the provisions to hold it Constitutional. Therefore according to Delhi High Court, in post amendment and pre amendment there is not much difference and the satisfaction is required to arrived in the course of assessment proceedings and should be discernable in the assessment order. Therefore, this provision makes it abundantly clear that satisfaction of the Assessing Officer before initiation of penalty proceedings is a must The satisfaction should be that he has concealed particulars of his income or furnished inaccurate particular of such income and even in the absence of those expressed words or findings recorded in the Assessment proceedings, if a direction as aforesaid is mentioned, it constitutes satisfaction of the Assessing Officer. DIRECTION 50. A reading of Section clearly indicates that the assessment order should contain a direction for initiation of penalty proceedings. The meaning of the word direction is of importance. Merely saying that penalty proceedings are being initiated will not satisfy the requirement. The direction to initiate proceedings should be clear and not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was requested to furnish factual and legal justification of the claim. In reply vide ltr. dt. 31-10-03, the procedure of valuation as per accounting standard No. 13 was explained, however in the last para it was stated that the company is of the view that under the provisions of the IT. Act, the said claim is not allowable. The company was again requested to intimate whether the claim is being withdrawn. Vide letter dt. 10-11-03, it is stated that the claim is being withdrawn. In view of this the claim of ₹ 4,40,00,000/- is not considered for computation and claim disallowed. Thereafter, in the end, it is stated as under: Penalty u/s 271(1)(c) initiated separately. 12. A reading of the aforesaid order makes it clear that Assessing Authority was not satisfied that there is any concealment of the intent. Further there is no direction for initiation of penalty proceedings could be gathered from the said order also. It is held in the aforesaid judgment that (a) phrases like penalty proceedings are being initiated separately (b) penalty proceedings under Section 271(1)(c) are initiated separated don not comply with the meaning of the word direction as contemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CIT(Appeals), Mysore relating to AY 2008-09. ITA 2527/B/2018 is an appeal against the order dated 13.7.2018 of the CIT(Appeals), Mysore, relating to AY 2011-12. These appeals are by the Assessee, Mr. K. Ramaswamy. In these appeals also, the facts are identical, the penalty proceedings u/s. 271(1)(c) were initiated for the reason that but for the survey, the assessee would not have filed return of income. The assessee has raised ground No.8 challenging the action of the AO in not specifying the specific charge against the assessee in the show cause notice issued u/s. 274 of the Act. Copy of the show cause notice for AY 2008-09 at page 157 of the PB and for the AY 2011-12 at page 128 of paper book. The same has been perused and it is found that the show cause notice does not specify the charge against the assessee as to whether it is for furnishing inaccurate particulars or concealing particulars of income. We are of the view that in light of the decision of the Hon ble High Court of Karnataka in the case of Manjunatha Cotton and ginning Mills Ltd. (supra) the imposition of penalty is liable to be cancelled on the ground that the show cause notice u/s.274 of the Act for impos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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