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2015 (11) TMI 1281 - ITAT BANGALORE

2015 (11) TMI 1281 - ITAT BANGALORE - TMI - Penalty u/s. 271(1)(c) - defective notice - Held that:- on the facts of the present case 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. Following the decision of the Hon’ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we hold that the orders imposing penalty in all the asse .....

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ar 2008-09. 2. In this appeal, the assessee has challenged the order of the CIT(Appeals) confirming the order of the Assessing Officer imposing penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (Act) on the assessee. 3. The facts and circumstances under which penalty u/s. 271(1)(c) of the Act was imposed by the AO on the assessee are as follows. The assessee is an individual. He is in the business of purchase and sale of Masala Products, Onion and Potato on wholesale as well as retail basis. Th .....

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Bank Ltd., on loan borrowed for repairing residential house which was a different property. Since the requirement for deduction of interest paid on borrowing against income from house property u/s.24(b) of the Act was that the borrowed funds ought to have been used for acquiring or constructing the property in respect of which income from house property was declared, the deduction was disallowed by the AO. The AO however allowed deduction of ₹ 30,000/- out of the interest paid under the 1 .....

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imposed penalty u/s. 271(1)(c) of the Act on the assessee was confirmed by the CIT(Appeals). Aggrieved by the orders of the CIT(Appeals), the assessee has preferred appeals before the Tribunal. 6. We have heard the submissions of the ld. counsel for the assessee and the ld. DR. Several technical objections with regard to validity of the order passed u/s. 271(1)(c) of the Act were raised by the assessee. In an additional ground filed before the Tribunal, which was filed alongwith the Memorandum .....

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ground because it was not specifically raised before the CIT(A). The said ground being a legal ground the Assessee is entitled to raise the same and hence, the additional ground is considered for adjudication. 7. 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 inaccurate particulars of income or for any other reason as .....

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d for 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 im .....

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f 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 ha .....

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4 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 natur .....

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shing 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 exist .....

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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 g .....

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ceedings 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 pag .....

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ng 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. 10. 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 .....

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oned 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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ible 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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ngs, 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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