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TMI Blog2021 (1) TMI 836X X X X Extracts X X X X X X X X Extracts X X X X ..... filing the C.O. It has been explained by the assessee in the application for condonation of delay supported by Affidavit that the earlier Chartered Accountant did not advise the assessee to file a C.O. and that the Counsel to whom the case was entrusted later advised the assessee to file C.O. 5. We have considered the reasons given for the condoning the delay in filing C.O. In terms of Rule 27 of the ITAT Rules, 1963, an assessee is entitled to support the order appealed against on any ground desired against him. One of the grounds which is sought to be urged by the assessee in the C.O. is that the show cause notice issued under section 274 of the Income Tax Act, 1961 (hereinafter called 'the Act'), before imposing penalty under section 271(1)(c) does not spell out the exact charge against the assessee i.e., whether the assessee is guilty in furnishing inaccurate particulars of income or concealing particulars of income. This ground was not specifically urged by the assessee before the CIT(A) but is sought to be urged as an additional ground in the C.O. filed before the Tribunal. This ground of objection being a legal ground can be raised by the assessee before the Tribunal for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income within 30 days from the date of service of notice, by the ACIT, Central Circle-2(1), Bangalore. 7. In response to the notice u/s.153A of the Act, the assessee filed a letter dated 18.4.2010 stating that the return of income already filed by him on 2.4.2009 declaring income of Rs. 1,64,27,758/- for Assessment Year 2005-06 and Rs. 4,68,76,382/- for Assessment Year 2006-07 and Rs. 4,69,13,969/- for Assessment Year 2007-08 should be taken as a return filed in response to the notice under section 153A of the Act. It is not in dispute that the income so declared by the assessee was accepted by the AO and assessment was completed for the aforesaid Assessment Year under section 153A of the Act. It is in respect to the income declared in the return filed in response to notice under section 153A of the Act. The AO imposed penalty under section 271(1)(c) of the Act holding that the assessee was guilty of furnishing inaccurate particulars of income. 8. On appeal by the assessee, the CIT(A) cancelled the order of the AO imposing penalty for the following reasons: "8. It is noticed that in the all the years under consideration, returned income has been accepted and no addition wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee drew our attention to the decision of Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton and Ginning Factory (2013) 218 Taxmann 423 (Kar) wherein it was held that if the show cause notice under section 274 of the Act does not specifically mentioned as to the exact charge viz., whether the charge is for furnishing of inaccurate particulars of income or concealing of particulars of income by striking out the irrelevant portion of printed show cause notice, then the imposing of penalty on the basis of such invalid show cause notice cannot be sustained. The learned DR while relying on the order of the AO pointed out that the defect pointed out in the show cause notice under section 274 of the Act is not fatal to imposing of penalty. 12. We have considered the rival submission. 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 ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua 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 initiati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities. c) Willful concealment is 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) Even 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) & (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 automatic. j) Imposition of penalty even if the tax liability is admitted is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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." (emphasis supplied) 14. It is clear from the aforesaid decision that on the facts of the present case that the show cause notice 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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