TMI Blog2016 (2) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2005-06 are as under: 1. On the facts and in the circumstances of the case, the order of the Commissioner of Income-tax (Appeals) upholding the levy of penalty under section 271(l)(c) of the Act was opposed to law and to the principles of natural justice in that the submissions of the appellant had not been brought out and considered and accordingly the impugned order is liable to be set aside and the penalty levied u/ s.27l(1)(c) of the Act is liable to be cancelled. 2. On the facts the learned Commissioner (A) ought to have appreciated that the assessing authority having failed to comply with the provisions of Sec.271(1)(c) of the Act with regard to the initiation of penalty proceedings, the proceedings were vitiated and consequently the penalty order passed was invalid and accordingly liable to be cancelled. 3. The learned Commissioner (A) having failed to record the satisfaction as required under the provisions, the penalty proceedings were invalid and no penalty u/s.271(l)(c) of the Act was exigible and thus the impugned penalty is liable to be cancelled. 4. The learned Commissioner (A) ought to have appreciated that the explanation of the appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has submitted that the penalty levied u/s 271(1)(c) in all these assessment years would not survive because the show cause notice issued by the suffers from the defect on the account that the AO has not specifically pointed out whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income. Learned AR of the assessee has filed the respective copies of the show cause notice for all these four assessment years issued by the AO dated 28/12/2010 and submitted that the AO has not specified the grounds mentioned in sec. 271(1)(c) whether it is for concealment of income or furnishing inaccurate particulars of income. Therefore, the show cause notice issued u/s 274 is a defective notice and in view of the judgment of the Hon'ble jurisdictional High Court in case of Manjunatha Cotton Ginning Factory (359 ITR 565) the penalty levied u/s 271(1)(c) deserves to be deleted. Learned AR of the assessee has also relied upon the decision dated 3/7/2015 of the co-ordinate bench of this Tribunal in case of Shri H.Lakshminarayana vs. ITO in ITA No.992 to 996/Bang/2014 as well as in the case of M/s. Maganur Builders vs. ITO dated 11/6/2015 in I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the intent imposing of penalty on him as the sec.274 makes it clear that the assessee has a right to contest such proceeding 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. By observing the requirement of the conditions on which the AO proposed to impose the penalty be made known to the assessee, the Hon'ble High Court has held that in the absence of specifying that which condition is satisfied and the assessee is accused of the condition as mentioned in sec. 271, the assessee has not been given the proper opportunity to meet those grounds. The penalty is to be imposed only on the ground that he is called upon to answer. Thus, it is not open to the authority at the time of imposing the penalty to impose penalty on a ground other than what the assessee was called upon to meet. Thus, by analysing the requirement of the provision, the Hon'ble High Court has held that the standard proforma without striking out the relevant clauses in the show cause notice will lead to inference of nonapplication of mind. We note that the Tribunal in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 have not been struck off by the AO. 12. The ld. counsel for the assessee drew our attention to the decision of the Hon'ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), wherein the Hon'ble High Court has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed 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 imposing penalty have to be held as bad in law and liable to be quashed. 13. The ld. DR relied on the order of the CIT(Appeals) wherein the CIT(A) has expressed his opinion that the assessee was fully aware of the charge against him and he cannot take shelter on technical grounds. 14. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional 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 Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. 16. It is clear from the aforesaid decision 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. In our view, the aforesaid defect cannot be said to be curable u/s. 292BB of the Act, as the defect cannot be said to be a notice which is in substance and effect in conformity with or according to the intent and purpose of the Act. Following the decision of the Hon'ble Karnataka High Court, we hold that the orders imposing penalty in all the assessment years have to be held as invalid and consequently penalty imposed is cancelled. 7. Following the judgment of the Hon'ble High Court in case of Manjunatha Cotton Ginning Factory (supra) as well as the decision of the co-ordinate bench of this Tribunal in the case of H.Lakshminarayana (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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