TMI Blog2019 (10) TMI 1169X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER N V VASUDEVAN, VICE PRESIDENT This is an appeal by the Assessee against the order dated 17.09.2018 of CIT(Appeals) relating to assessment year 2008-09. 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 (the Act). 2. The facts and circumstances under which penalty was imposed on the Assessee by the AO are that the Assessee is an individual. In the course of assessment proceedings for AY 2008-09, the AO noticed that the Assessee had a Bank Account with Karuru Vysya Bank and that had not been disclosed in the books of accounts maintained by the Assessee. There was one cash deposit of ₹ 1,000 in this Bank Account and about 121 deposits of money by cheques totalling in all to a sum of ₹ 17,48,674/-. The Assessee was asked to explain the transaction i.e., the source for the deposits in the various bank accounts. The Assessee s reply was that during the previous year he had income from trading in iron and steel under the name M/s. Lohit Wires ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the show-cause notice issued u/s.274 of the Act for the aforesaid AY 2008-09. The AO in the said show cause notice has not struck off the irrelevant portion as to whether the charge against the Assessee is concealing particulars of income or furnishing of inaccurate particulars of income . 7. The learned DR relied on the order of the CIT(A). The CIT(A) in rejecting the contention of the Assessee on the issue of invalidity of the order imposing penalty because of defective show cause notice u/s.274 of the Act had placed reliance on the decision of the ITAT Bangalore Bench in the case of Shri P.M. Abdulla Vs. ITO ITA No.1223 1224/Bang/2012 order dated 17.10.2016 taking a view that absence of specific mention in the show cause notice u/s.274 of the Act about the charge u/s.271(1)(c ) of the Act is not fatal to levy of penalty u/s.271(1)( c) of the Act. In coming to the aforesaid conclusion the Bench followed decision of Hon ble Karnataka High Court in the case of CIT Vs. Sri Durga Enterprises (2014) Taxmann.com 442 (Karnataka) . The CIT(A) also placed reliance on the decision of ITAT Hyderabad Bench in the case of Jyothirmoy Yamsani Vs. DCIT wherein the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiating penalty proceedings on one limb and find the Assessee guilty on another limb of Sec.271(1)(c) of the Act. 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 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 case of relying on deeming provision contained in Explanation-1 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciples 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 is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein 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 particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. 12. We have already observed that the show cause notice issued in the present case u/s 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 of 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
