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Mrs. Nanjaiah Nagamani Versus Asst. Commissioner of Income Tax,

2015 (5) TMI 893 - ITAT BANGALORE

Penalty under Section 271(1)(c) - validity of the notice issued under Section 274 rws 271 of the Act dt.20.10.2010 for initiating penalty proceedings under Section 271(1)(c) - Held that:- A perusal of the notice issued under Section 274 r.w.s. 271 of the Act dt.20.10.2010, reveals that the Assessing Officer has not deleted the inappropriate words and parts of the notice, whereby it is not clear as to the default committed by the assessee; i.e. whether it is the concealment of particulars of inco .....

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Dated:- 10-4-2015 - Shri Rajpal Yadav Shri Jason P. Boaz JJ. For the Appellant : Shri V. Srinivasan, CA For the Respondent : Dr. P.K. Srihari,Addl. CIT (D.R) ORDER Per Shri Jason P. Boaz : This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-III, Bangalore dt.26.6.2014 for Assessment Year 2008-09 confirming the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (herein after referred to as 'the Act') by the Assessing Offic .....

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loss of the assessee was determined at ₹ 8,20,127 in view of the following additions/disallowances made by the Assessing Officer :- i. Interest on housing loan, claimed as business expenditure : ₹ 8,26,701. ii. Accident fund collected from drivers, but not accounted in the assessee's profit and loss account : ₹ 36,800. 2.2 While passing the order of assessment for Assessment Year 2008-09, the Assessing Officer simultaneously initiated penalty proceedings under Section 271(1 .....

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accounted for by the assessee in her profit and loss account. 2.3 Aggrieved by the order dt.29.4.2011, wherein the Assessing Officer had levied penalty of ₹ 2,10,687 under Section 271(1)(c) of the Act for Assessment Year 2008-09, the assessee preferred an appeal before the CIT(A) - III, Bangalore. The learned CIT(A) vide the impugned order dt.26.4.2014 dismissed the assessee's appeal, thereby confirming the levy of penalty of ₹ 2,10,687 under Section 271(1)(c) of the Act for Ass .....

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the case. 2. The order levying penalty under Section 271(1)(c) of the Act, is bad in law in as much as, the ld. A.O. has neither reached any satisfaction nor has such satisfaction been recorded in the assessment order and consequently, the very initiation of proceedings under Section 271(1)(c) of the Act, is not in accordance with the requirements of section 271(1) of the Act and consequently, the order of penalty founded on the invalid initiation of penalty proceedings is liable to be cancelled .....

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being interest payment and ₹ 36,800 being amount collected from the drivers which was not accounted in the profit and loss account under the facts and in the circumstances of the appellant s case. 5. The authorities below failed to appreciate that the appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore, the penalty levied under Section 271(1)(c) of the Act requires to be cancelled. 6. Without prejudice to the ab .....

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us, are rendered infructuous and therefore no adjudication is called for thereon. 5.1 The Grounds raised at S.Nos.1 to 5 challenge the action of the authorities below in both levying and confirming the levy of penalty of ₹ 2,10,687 under Section 271(1)(c) of the Act for Assessment Year 2008-09 in the case on hand. At the outset, the learned Authorised Representative put forth submissions on behalf of the assessee in respect of Ground raised at S.No.3 (supra) wherein the assessee challenges .....

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in the said notice the Assessing Officer has not deleted the inappropriate words and parts of the notice. It is submitted that in view of this, it is not clear whether the default of the assessee is concealment of particulars of income or furnishing of inappropriate particulars of income. The learned Authorised Representative submits that in similar circumstances, the Hon'ble High Court of Karnataka in the case of Manjunath Cotton & Ginning Factory in ITA No.2564 of 2005 dt. 13.12.2012 .....

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w of the above judicial pronouncements which are on identical facts as in the case on hand, the penalty of ₹ 2,10,687 levied under Section 271(1)(c) of the Act for Assessment Year 2008-09 and duly confirmed by the authorities below ought to be cancelled. 5.2 The learned Departmental Representative supported the orders of the authorities below. 5.3.1 We have heard both parties and perused and carefully considered the material on record; including the judicial pronouncements relied on by the .....

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. whether it is the concealment of particulars of income or furnishing of inaccurate particulars of income that the penalty under Section 271(1)(c) of the Act is sought to be levied. We find that the Hon'ble High Court of Karnataka in its order in the case of M/s. Manjunatha Cotton & Ginning Factory in ITA No.2564 of 2005 dt.13.12.2012 has held that such a notice, as has also been issued in the case on hand, is invalid and the consequential penalty proceedings are also not valid. The rel .....

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ontains 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 mentioned in Section 271 should be made known about the grounds on which they .....

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tting 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 .....

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s 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 .....

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f 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 i .....

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