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TMI Blog2023 (1) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances of the case, the ld. CIT(A) has erred in law and facts of the case in cancelling the penalty of Rs. 2,33,74,126/- levied u/s 271(1)(c) of the Act without appreciating that the AO did not mention the specific charge, viz. "concealment of the particulars of income" or "furnishing of inaccurate particulars of such income" and did not strike out the inappropriate words though in assessment order dated 31.03.2016 the assessing officer had specified in very clear terms that the penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 is initiated for concealed particulars of income and had also clearly specified the particular condition for which penalty proceedings was initiated with the arrow symbol in the notice u/s 274 r/w section 271(1)(c) of the I.T. Act, 1961 dated 31.03.2016. 2. That the department craves leaves to add, modify or alter any of the ground(s) of appeal and/or adduce additional evidence at the time of hearing of the case." 2. The brief facts of the case are that the assessee filed its return of income on 30.09.2009 declaring total loss of Rs. 35,99,13,932/- and survey operation u/s 133A was conducted on 05.05.2014 in the case of Shri Adish Jain and its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolation of which limb and condition, that is, whether it was for "the concealment of particulars of income" or for "the furnishing of inaccurate particulars of income" that the penalty proceedings were being conducted and the appellant was being put to notice. The AO has not done this in the present case and for such failure, the entire penalty proceedings become void and penalty levied in this case, deserves to be deleted. During appeal the appellant has also produced a copy of the notice u/s 274 r/w section 271(1)(c), as issued by the AO. The fact that the AO had indeed failed to specify the particular limb under which the penalty was proposed to be imposed is not only apparent from the copy of the notice itself, but is also borne out by the discussion in this relation by the AO, in his penalty order. In the impugned penalty order, in paragraph 4.d,, the AO has admitted that he did not specify the particular limb in his notice u/s 274 r/w section 271(1)(c) of the Act. On the contrary, he has placed reliance upon the decision of the Hon ble Apex court in the case of K.P. Madhusudhanan Vs CIT [2001] 118 Taxman 324/251 ITR 99 to argue that there was no need to strike out the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such proceedings, no penalty could be imposed on the assessee." This decision has been relied upon by the Hon'ble Karnataka High Court in the case of SSA Emerald Meadows to take a similar view. The Hon'ble Supreme Court has dismissed the appeal of the department in the-case of Commissioner of Income Tax and others vs. SSA Emerald Meadows 2016,73 taxmann.com 248 SC by stating that no merits have being found in the Department's SLR against the order of the Hon'ble High Court of Karnataka. In fact this position of the mandatory need for speçifying the correct limb under which penalty u/s 271(1)(c) is proposed to be imposed has-been affirmed to be valid even in those cases where the assessee has not-challenged the order for assessment and has paid the corresponding taxes and interest. The Hon'ble Karnataka High Court, in the case of MANJUNATHA COTTON AND GINNING FACTORY, mentioned supra, has once again underlined this necessity by stating that merely because the assessee has not challenged the order for assessment and has paid the corresponding taxes and interest, it would not be sufficient reason either to initiate or impose penalty u/s 271(1)(c). On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ITAT order, Kolkata Bench in the case of Suresh Karmakar vs. DCIT. In an elaborately discussed decision by the Hon'ble Kolkata Tribunal, in the case of lTO, Ward -13(1), Kolkata, vs M/S. Ambey Retailers Pvt. Ltd., delivered on 5 September, 2018, the Hon'ble D-Bench of the Tribunal, in ITA No.2104/Kol/2017 for AY 2012-13, the Hon'ble Bench has discussed the entire gamut of citations relevant to the present question of law. They have not only discussed the various case laws that have supported the assessee, but have also discussed and distinguished the various citation cited by the appellant in that case. After this careful analysis the Hon'ble Tribunal has come to the following conclusion: "15. We have already observed that the show cause notice issued in the present case us 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars or income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in support of his argument. He has invited our attention to the relevant penalty notice to point out that the irrelevant portion viz. "furnished inaccurate particulars of income" or "concealed particulars of such income" was not strike out by the ld. AO. It is observed that the ld. co-ordinate bench of this Tribunal in the case of Suvaprasanna Bhattacharya -vs.- ACIT (in ITA No. 1303/KOL/2010) cited by the ld. Counsel for the assessee had an occasion to consider a similar issue in the identical fact situation and the order passed by the Assessing Officer imposing penalty under section 271(1)(c) was held to be invalid by the Tribunal relying on the decision of the Hon'ble Karnataka High Court in the case of CIT & Another -vs.- Manjunatha Cotton & Ginning Factory reported in 359 ITR 565 after discussing the proposition laid down therein in great detail in paragraph no. 8 to 8.2 of its order dated 06.11.2015, which read as under:- "8. The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for "furnishing inaccurate particulars of income" or "concealing particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, 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 dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... EERING 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 pro forma without striking of the relevant clauses will lead to an inference as to non-application of mind." 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) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. 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 Or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld 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 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 lev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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