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2015 (8) TMI 919 - ITAT BANGALORE

2015 (8) TMI 919 - ITAT BANGALORE - TMI - Penalty under section 271[1][c] - Held that:- The order of penalty is bad in law for the reason that the Notice for initiation of penalty as to whether it is concealment of income or furnishing of inaccurate particulars of income is not discernable from the notice issued and consequently the order of penalty passed under section 271[1][c] of the Act on an invalid notice does not have any legs to stand and the penalty levied under section 271[1][c] of the .....

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e additional grounds in this regard are not required to be set aside to the file of the learned CIT (Appeals) as requested by the learned Departmental Representative. The fact that it is clear that the impugned notices under Section 274 rws 271 of the Act dt.29.12.2011 do not have the appropriate portions marked to specify as to whether the penalty is proposed to be levied for concealment of income or for furnishing of inaccurate particulars of income; which fact has not been disputed by Revenue .....

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Section 274 rws 271 of the Act dt.29.12.2011 as raised in additional Grounds raised in the other grounds become academice. - Decided in favour of assessee. - I. T. A. Nos.313 to 315/Bang/2014 - Dated:- 14-8-2015 - SHRI GEORGE GEORGE K, AND SHRI JASON P. BOAZ, JJ. For The Appellant : Shri Narendra Sharma, Advocate. For The Respondent : Dr.P.K. Srihari, Addl. CIT (D. R.) ORDER Per Bench : These appeals by the assessee are directed against the orders of the Commissioner of Income Tax (Appeals)-III .....

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ayout at Vidyaranyapura, Bangalore and sold the sites jointly. A survey under Section 133A of the Income Tax Act, 1961 (in short the Act ) was conducted at the assessee s premises on 11.11.2009. 2.2 Consequent to the survey under Section 133A of the Act, the assessee declared his share of income from the joint venture at Singapore Layout . For Assessment Year 2007-08, the assessee filed a revised return of income on 8.1.2010 declaring income of ₹ 84,73,277 wherein the assessee s profit fro .....

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008-09 to bring to tax income of the assessee, earned from Singapore Layout venture, that had escaped assessment. Consequently, notices under Section 148 of the Act dt.16.4.2010 were issued to the assessee for Assessment Years 2007-08 and 2008-09 and in response thereto, the assessee vide letter dt.6.5.2010 stated that the returns filed on 8.1.2010 for Assessment Year 2007-08 and on 7.1.2010 for Assessment Year 2008-09 be treated as filed in response to the notices issued under Section 148 of th .....

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00 143(3) rws 147 29.12.2011 2009-10 27,45,905 28,95,900 143(3) 29.12.2011 2.3 Consequent to the passing of orders of assessment for Assessment Years 2007-08 to 2009-10 dt.29.11.2011, the Assessing Officer took up penalty proceedings under Section 271(1)(c) of the Act for these three assessment years which were initiated by issue of separate notices under Section 274 rws 271 of the Act dt.29.12.2011 along with the orders of assessment for the aforesaid three assessment years. The Assessing Offic .....

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₹ 27,28,035 for Assessment Year 2008-09 and ₹ 9,.10,671 for Assessment Year 2009-10 @ 100% of the tax sought to be evaded vide orders dt.30.3.2012. 2.4 On appeal by the assessee, the learned CIT (Appeals) - III, Bangalore vide separate orders dt.6.11.2013 dismissed the assessee s appeals and confirmed the levy of penalty under Section 271(1)(c) of the Act for all the three assessment years 2007-08 to 2009-10. 3.1 Aggrieved by the orders of the CIT (Appeals) - III, Bangalore dt.6.11.2 .....

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. 2. The penalty proceedings are bad in law and not sustainable in law under the facts and circumstances of the case. 3. The appellant denies itself liable to be levied a penalty of ₹ 28,12,034 under the facts and circumstances of the case. 4. The learned CIT (Appeals) failed to appreciate that no penalty can be levied under the facts and circumstances of the case in as much as - (i) No addition has been made to the income returned, pursuant to the survey operations and the case is squarel .....

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rned Authorised Representative filed the following identical additional grounds of appeal for all the three for Assessment Years 2007-08 to 2009-10 along with a prayer for admission of the same :- 1. The order confirming the penalty passed by the learned Commissioner of Income Tax (Appeals) - III Bangalore, under section 271[1][c] of the Act, is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant s case. 2. The Appellant denies himself lia .....

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he facts and circumstances of the case. 4. The Commissioner of Income Tax (Appeals) was not justified in confirming the penalty as the levy of penalty under section 271[1][c] of the Act is not automatic and the learned CIT (A) ought to have deleted the penalty under the facts and circumstances of the case. 5. The order of penalty is bad in law for the reason that the Notice for initiation of penalty as to whether it is concealment of income or furnishing of inaccurate particulars of income is no .....

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e notice issued is ambiguous on the charge and hence bad in law. 7. The learned CIT (A) failed to appreciate that the penalty proceedings are independent with that of the assessment proceedings and ought to have considered the submissions made by the appellant as regard to the merits of the matter under the facts and circumstances of the case. 8. The learned CIT (A) failed to appreciate that the appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant .....

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. 11. The appellant craves leave to add, alter, modify, delete or substitute any or all of the grounds at the time of hearing the appeal. 12. In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed and appropriate relief may be granted in the interest of justice and equity. 4.1.1 The additional grounds raised by the assessee, more specifically at S.Nos.3 and 5 thereof; is a preliminary issue challen .....

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penalty proceedings for Assessment Years 2007-08 to 2009-10. It was brought to our notice that in the show cause notices issued to the assessee under Section 274 rws 271 of the Act, the Assessing Officer has not spelt out as to whether the assessee has concealed the particulars of his income or furnished inaccurate particulars of his income. The learned Authorised Representative drew the attention of the Bench to the said notices and to the fact that the Assessing Officer has placed a tick mark .....

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income or of having furnished inaccurate particulars of income. 4.1.2 The learned Authorised Representative further submitted that it is not discernable from the assessment orders that satisfaction has been arrived at by the Assessing Officer for initiation of penalty proceedings. It was further submitted that the returns of income filed by the assessee disclosing the income earned from sale of sites at Singapore Layout has been accepted without making further additions/disallowances to the busi .....

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ditional grounds before the Tribunal for the first time and not before the authorities below, the said additional grounds be remanded to the file of the learned CIT (Appeals) for consideration. In support of this contention, the learned Departmental Representative placed reliance on the decision of the Hon ble Madhya Pradesh High Court in the case of CIT V Tolaram Hassomal reported in 298 ITR 22. 4.3 In his rejoinder, the learned Authorised Representative for the assessee submitted that the addi .....

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oceedings concluded on an illegal notice is void-ab-initio and would have no legs to stand on. In respect of the submissions of the learned Departmental Representative for the additional grounds to be set aside for consideration by the learned CIT (Appeals), the learned Authorised Representative vehemently opposed the same. It was contended that the issue regarding the validity of the defective notices issued under Section 274 rws 271 of the Act is a jurisdictional matter, which is not a curable .....

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e assessee challenging the validity of the impugned penalty order levying penalty u/s.271(1)(c) of the Act for the Assessment Years 2007-08 to 2009-10 on the basis of defective notices issued by the Assessing Officer under Section 274 rws 271 of the Act dt.29.12.2011 for initiating penalty proceedings u/s.271(1)(c) of the Act. On a careful appreciation thereof, we find that these grounds are pure question of law and do not involve investigation of any facts otherwise than those on the records of .....

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tentions that the penalty levied u/s.271(1)(c) of the Act in the case on hand for Assessment Years 2007-08 to 2009-10 are to be cancelled as they are invalid, being based on initiation of the penalty proceedings by issue of defective notices under Section 274 rws 271 of the Act dt.29.12.2011, the learned Authorised Representative for the assessee has relied upon the decision of the Hon ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory (supra) and of the co-ordina .....

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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, .....

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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 requireme .....

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0. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing 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 eith .....

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ed, 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 and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed .....

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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 fu .....

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r 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. 09. 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 u .....

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isional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned 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 O .....

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ficient 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 .....

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ing 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 .....

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s. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as concealment of income and furnishing of incorrect particulars would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is .....

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penalty proceedings are being initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income. Such initiation of penalty proceedings has been held to be illegal by the Hon ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory (supra). Following the aforesaid decision of the Hon ble High Court of Karnataka in the case of Raveendhiraa L & Others (supra), we hold that the notices issued under Section 274 rws 271 of the Act .....

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regard to the validity of the defective notices issued by the Assessing Officer under Section 274 rws 271 of the Act for Assessment Years 2007-08 to 2009-10 in the case on hand is a jurisdictional matter, a pure question of law in respect of a defect in the notice that is not curable in nature. In this view of the matter, we are of the opinion that the additional grounds in this regard are not required to be set aside to the file of the learned CIT (Appeals) as requested by the learned Departmen .....

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or us to set aside the additional ground to the file of the learned CIT (Appeals) for consideration. 4.5.2 As regards the decision cited by the learned Departmental Representative CIT V Tolaram Hassomal (298 ITR 22) (MP), the co-ordinate bench of this Tribunal in the case of Smt. K. R. Prabhavati in M.P. No.5/Bang/2014 (in ITA No.234/Bang/2011) had occasion to examine the said decision. The co-ordinate bench in its order dt.10.4.2015 observed that it is not the decision of the jurisdictional Hig .....

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z. Hon ble High Court of Karnataka in the case of Sankeshwar Printers Pvt. Ltd. (supra) and is also contrary to the decision of the law laid down by the Hon ble Supreme Court in the case of NTPC Ltd. (supra)……… 4.5.3 In fact, the Hon ble Madhya Pradesh High Court itself has not followed the decision of Tolaram Hassomal (supra) in its subsequent decisions. The Hon ble Madhya Pradesh High Court has analysed the powers of the Tribunals on admissibility of additional grounds in .....

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ssing Officer or the learned CIT (Appeals) but was raised for the first time before the Tribunal. The said order has been affirmed by the Hon ble Apex Court in 168 Taxmann 107. 4.5.4 The Indore Bench of the Tribunal in the case of Basantilal Jain in IT(SS)A No.64/Ind/2007 has examined both the aforesaid decisions of the Hon ble Madhya Pradesh High Court and at para 4 of its order held that :- 4….………Hon ble High Court of Madhya Pradesh in 11 the case of Either Motors r .....

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eld that additional ground requiring no appreciation of facts, Tribunal should have permitted the assessee to raise the question. It was observed that eventual destination of every litigation is justice and as such technicality should not be 12 permitted to prevail as a speed breaker in the case of dispension of justice. Similar view has been taken by the Hon ble High Court of Madhya Pradesh in the case of Bhopal Sugar Mills Limited; 233 ITR 429 wherein it was held that there is no prohibition o .....

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