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Shri H. Lakshminarayana Versus The Income Tax Officer, Ward 2 (3) , Bangalore

Penalty u/s. 271(1)(c) - interest so earned by the assessee had not been offered to tax by the assessee in the returns of income filed for A.Ys. 2004-05 to 2008-09. Similarly, the assessee also did not declare interest received on SB account for A.Ys. 2004-05 to 2008-09 - Held that:- The show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. In our view, the aforesaid defect cannot be said to be curable u/s. 292BB of .....

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. - ITA Nos. 992 to 996/Bang/2014 - Dated:- 3-7-2015 - Shri N.V. Vasudevan and Shri Jason P. Boaz , JJ. For the Petitioner : Mrs. Sheetal Borkar, Advocate For the Respondent : Shri P. Dhivahar, Jt. CIT(DR) ORDER Per Bench ITA Nos.992 to 996/Bang/14 are appeals against the common order dated 16.04.2014 of CIT(Appeals)-I, Bangalore relating to assessment years 2004-05 to 2008-09. 2. In all these appeals, the assessee has challenged the order of the CIT(Appeals) confirming the orders of the Assessi .....

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ncome filed by the assessee. The deposits had been made in the previous year relevant to A.Y. 2004-05. This deposit earned interest income in A.Y. 2004-05 and the subsequent A.Ys. 2005-06 to 2008-09. The interest so earned by the assessee had not been offered to tax by the assessee in the returns of income filed for A.Ys. 2004-05 to 2008-09. Similarly, the assessee also did not declare interest received on SB account for A.Ys. 2004-05 to 2008-09. 5. The assessee filed revised returns of income o .....

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02/07/10 02/07/10 02/07/10 02/07/10 02/07/10 Additional income declared (in Rs.) 13,66,704 3,25,392 15,42,099 4,15,766 5,62,361 Date of Asst. Order 21/07/10 21/07/10 21/07/10 21/07/10 21/07/10 Total 18,06,180 7,24,350 19,17,950 9,90,890 14,17,770 6. In respect of the additions made in the assessment proceedings for all the aforesaid assessment years, the AO imposed penalty u/s. 271(1)(c) of the Act on the assessee, which was confirmed by the CIT(Appeals). Aggrieved by the orders of the CIT(Appe .....

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the notice under section 274 read with section 271(1)(c) of the Act in a mechanical manner, the penalty order passed under section 271(1)(c) of the Act is not sustainable in the eye of law. 2. The Appellant begs to submit that the decision of the jurisdictional High Court in the case of CIT vs. Manjunatha Cotton & Ginning Factory (2013) 359 ITR 565 (Karn) is squarely applicable and therefore the impugned order of the authorities below is required to be set aside. 8. The additional ground bei .....

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ons, we have heard the parties at length. A copy of the show cause notice issued u/s. 274 of the Act for the Assessment years involved in these appeals, is placed at pages 1 to 5 of the assessee s paperbook, the same is given as Annexures-I to V to this order. 11. The ld. counsel for the assessee submitted before us that the show cause notice issued u/s. 274 of the Act does not specify as to whether penalty proceeding is being initiated for concealing particulars of income or furnishing inaccura .....

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r concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposi .....

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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 .....

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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 .....

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ing 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 drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existen .....

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thority, 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 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 gro .....

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edings 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 furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page .....

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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. 15. 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 f .....

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ned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said .....

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ble 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 .....

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gs, 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 .....

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