TMI Blog2015 (9) TMI 1011X X X X Extracts X X X X X X X X Extracts X X X X ..... m of notice u/s. 274 have not been stuck off by the Assessing Officer, the notice for levy of penalty u/s. 271(1)(c) shall be deemed to be invalid. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable - Decided in favour of assessee. - ITA Nos. 688 & 689/PN/2014 - - - Dated:- 31-8-2015 - SHRI R.K. PANDA AND SHRI VIKAS AWASTHY, JJ. For The Assessee Written Submission For The Revenue Shri Hitendra Ninave ORDER PER VIKAS AWASTHY, JM These two appeals have been filed by the assessee against the orders of Commissioner of Income Tax (Appeals)-I, Nashik passed u/s. 271(1)(c), confirming the levy of penalty for the assessment years 2007-08 and 2008-09. Both the impugned orders are dated 07-02-2014. Since, the facts in both the appeals are similar, the appeals are taken up together for adjudication. 2. The brief facts of the case are The assessee is an individual. A search u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o above, 2) In the show cause notice u/s 274 r.w.s. 271(l)(c) of the Act dated 29.12.11, no specific charge was framed against the appellant, i.e. 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 inaccurate particulars of income or for any other reason as irrelevant columns of the printed form of notice u/s. 274 have not been struck off by the AO. Therefore, penalty levied u/s 271(l)(c), in pursuance of invalid notice, may please be deleted. Our view stands fortified by decision of Hon'ble Karnataka High Court in CIT V. Manjunatha Cotton Ginning Factory [2013] 359 ITR 565 (followed in K.P. Shetty vs. ACIT, ITA No. 265/Bang./2014): HELD: Notice u/s 274 r.w.s. 271(l)(c) should specifically state grounds mentioned in section 271(l)(c) i.e. whether it is for concealment of income or for furnishing of inaccurate particulars of income. The practice of the Department sending a printed form 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory [2013] 359 ITR 565 (Kar.) HELD Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. 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. ... 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. Similar views: - In the case of CIT vs. Jyoti Ltd. [2013] 34 taxmann.com 65, the assessing officer in his penalty order noted as under:- In view of the above facts, it is clear that the assessee concealed income/furnished inaccurate particulars of income. I, therefore, consider it a fit case for levy of penalty under Section 271(l)(c) The Hon'ble Gujrat High Court in the above case held that, where the Assessing Officer in order of penalty did not come to a clear finding regarding the penalty being im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed inaccurate particulars of income in his original return. It is only on account of search action that the assessee had disclosed the additional income. There were huge discrepancy in the books of account and the cash balances. The Commissioner of Income Tax (Appeals) has rightly invoked the provisions of Explanation 5A to section 271(1)(c). The ld. DR prayed for dismissing the appeals of the assessee and upholding the impugned orders. 5. We have heard the submissions made by the ld. DR and have thoroughly perused the written submission along with paper book filed by the assessee. A search and seizure action u/s. 132 of the Act was conducted on 21-05-2009 in the case of Lodha Group. Pursuant to notice issued u/s. 153A, the assessee filed his return of income for the impugned assessment years. In the return of income for the impugned assessment years, the assessee declared additional income admitted during the course of search. The assessment was completed u/s. 153A r.w.s. 143(3) by accepting the income returned by the assessee. Thus, no further addition was made during the course of assessment proceedings. Penalty u/s. 271(1)(c) was initiated against the assessee on the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a perusal of notice issued u/s. 271(1)(c) r.w.s. 274 shows that the Assessing Officer has not specified the reasons for levying of penalty i.e. whether it is for furnishing of inaccurate particulars or concealment of income or both. Further, a bare perusal of the order levying penalty would show that the Assessing Officer is not clear whether the penalty is levied for concealment of income or furnishing of inaccurate particulars of income or both. 8. The Hon'ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton Ginning Factory (supra) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable. The relevant extract of the order of Hon'ble High Court reads as under: 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
