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TMI Blog2019 (3) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be sustained. - Decided in favour of assessee. - ITA No.104/Bang/2017 - - - Dated:- 27-2-2019 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Shri Ashok A Kulkarni, Advocate For the Respondent : Shri R.N. Siddappaji, Addl.CIT(DR)(ITAT), Bengaluru. ORDER PER N.V. VASUDEVAN, VICE PRESIDENT This is an appeal by the Assessee against the order dated 29.09.2016 of CIT(Appeals), Hubli relating to assessment year 2012-13. In this appeal the Assessee has challenged the order of the CIT(A) whereby the CIT(A) confirmed the order of the AO imposing penalty on the Assessee u/s.271(1)(c) of the Income Tax Act, 1961 (Act). 2. The facts and circumstances under which penalty was imposed on the Assessee by the AO are that the Assessee sold property and derived long term capital gain (LTCG) on sale of the property. He did not declare LTCG in the return of income filed. Subsequently, the fact that the Assessee sold property and did not declare LTCG on sale of property came to light only, consequent to a Survey action u/s.133A of the Act. The Assessee agreed to the addition of LTCG . In respect of the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxmann.com 442 (Karnataka) . A Co-ordinate bench, in the case of Shri A Nagarju (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 followed. The decision rendered in the case of Sri Durga Enterprises (supra) was in a totally different context of defect in notice issued u/s.148 of the Act wherein the assessment year was not mentioned and period within which the return was to be filed was not mentioned. The defect was held to be curable u/s.292B of the Act. The same reasoning cannot be applied in the context of show cause notice u/s.274 of the Act. Similarly, the decision of Hon ble Supreme Court in the case of Skylight Hospitality LLP Vs. ACIT (2018) 92 taxmann.com 93(SC) was rendered in the context of Sec.148 of the Act wherein the name of the erstwhile company which got converted into an LLP was mentioned. The defect was held to be curable and falling within the mischief of Sec.292B of the Act. This decision rendered in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vague. On the basis of such proceedings, no penalty could be imposed on the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile 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) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 71 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 imposition of penalty though emanate from proceedings of assessment, it is ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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