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TMI Blog2016 (10) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... , D.R. ORDER Shri K. Narasimha Chary, This is an appeal by assessee challenging the order dated 25.07.2013, in Appeal No.19/CC-XVII/CIT(A)-C-1/11-12, passed by the ld. Commissioner of Income Tax (Appeals)-9, Kolkata [hereinafter called as CIT(A) ]. 2. Brief facts of the case are that original assessment u/s.143(3) was completed by 18.12.2007, wherein an addition of ₹ 14,00,000/- was made by the Assessing Officer u/s.68 on account of unexplained cash credit, since the assessee failed to explain the source of share application money, which was confirmed in appeal before the ld. CIT(A), vide order dated 6.12.2010. On 23.11.2007, there was a search and seizure operations u/s.132 of the Act in the premises of the assessee company and assessment u/s.153A was done on 31.12.2009, wherein the addition of ₹ 14 lakhs was maintained, since even at that time the assessee failed to explain the source of its income. An appeal was preferred against this assessment but was withdrawn by the assessee. Since the assessee failed to explain the source of share application money, the AO concluded that assessee company has introduced bogus share application money into its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recorded in any particular manner or reduce such manner of arriving at satisfaction in writing. 6. The point that arises for our consideration is as to whether the penalty proceedings are sustainable on the face of defects on the notice issued u/s.271(1)(c) of the I.T. Act. 7. We have gone through the copy of notice u/s.274 r.w.s.271 of the Income Tax Act issued by the AO. It is a printed form with so many clauses. This notice does not specifically point out as to whether there is any concealment of particulars of income or furnishing any inaccurate particulars of such income but across the printed line, there is a big tick mark. 8. 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 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 bona fide, an order imposing penalty could ..... 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