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2019 (3) TMI 1199

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..... ision Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX -VS- MANJUNATHA COTTON AND GINNING FACTORY (2013 (7) TMI 620 - KARNATAKA HIGH COURT) and M/S SSA’S EMERALD MEADOWS [2015 (11) TMI 1620 - KARNATAKA HIGH COURT]- Decided in favour of assessee. - ITA No.2193/Bang/2018 - - - Dated:- 22-3-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P Boaz, Accountant Member For the Assessee : Shri. Rajeev C. Nulvi, CA For the Revenue : Dr. P. V. Pradeep Kumar, Addl. CIT ORDER PER SHRI JASON P BOAZ, A.M. : This appeal by the assessee is directed against the ex-parte order of CIT(A)-2, Bangalore, dated 28.05.2018, upholding the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 .....

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..... 2. On the facts and circumstances of the case and under the provisions of law, the Assessing Officer erred in levying the penalty u/s 271(1)(c) without serving a valid notice u/s 271 r.w.s 274 of the Income Tax Act, 1961. 3. On the facts and circumstances of the case and under the provisions of law, the Assessing Officer erred in levying the penalty u/s 271(1)(c) as there was no concealment of income or providing of inaccurate particulars by the appellant eventhough the appellant has offered the said income for taxation during the course of assessment only to buy the peace, but in fact, the said income was not taxable under the provision of law. 4. For these and other reasons which may be adduced at the time of hearing, the ap .....

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..... of inaccurate particulars of income; is invalid and consequential penalty proceedings / orders are also not valid; the learned AR placed reliance on the decision of the Hon ble Karnataka High Court in the case of M/s. Manjunatha Cotton Ginning Factory in 359 ITR 565 (Kar). It was prayed that in the light of the above judicial pronouncements of the Hon ble Karnataka High Court (supra), the orders levying penalty u/s 271(1)(c) of the Act for Assessment Year 2009-10 in the case on hand is liable to be quashed / cancelled. 4.2 Per contra, the learned DR for Revenue placed reliance on the orders of the AO as being in order. 4.3.1 We have heard and carefully considered the rival contentions and submissions on record and the decision of th .....

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..... tioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a rase of relying on deeming provision contained in Explanation-I 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 oil as the Section 274 makes it clear that assessee has a ri .....

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..... 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 initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice an .....

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..... n 156, has held that penalty has to be clear as to the limb for which it is levied and the action 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 nonapplication of mind. 4.3.3 The aforesaid view taken by the Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (Supra) was followed by the Hon'ble Karnataka High Court in the case of SSAS Emerald Meadows in ITA No.380 of 2015 dated 23/11/2015; wherein the Ho .....

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