TMI Blog2016 (2) TMI 701X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT(A) whereby the CIT(A) has confirmed the order of AO imposing penalty u/s 271 (1)(c) of the Act. 3. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was imposed on the assessee by the AO are as follows :- The Assessee is an individual. He derives income from salary from Shyam Ferro Alloys Ltd, besides dividend income and interest income from PPF Account, income from other sources and capital gain on sale of shares. There was a search and seizure operation carried out by the revenue u/s 132(1) of the Act in Shyma Sel Power Ltd. Group on 26.03.2010. The Assessee was also subjected to a search as he was part of the said group. Consequent to the search, proceedings u/s 153A of the Act were initiated against the assessee. In respect of A.Y.2007-08 and 2008-09, the assessee filed return of income in response to notice u/s 153A of the Act declaring income of ₹ 6 crores for A.Y.2007-08 and a sum of ₹ 2,54,00,000/- for A.Y.2008- 09. The income offered in the returns filed in response to notice u/s 153A of the Act were brought to tax by the AO and the assessment for the aforesaid assessment years were completed accepting the undisclosed inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sustained. 7. None appeared on behalf of the Revenue. Shri.Vivek Verma, JCIT Sr. DR who was the DR present for A Bench cases expressed his inability to inform the Bench as to why no DR is present for arguing this appeal. We therefore proceed to decide the appeal after hearing the submissions of the learned AR. 8. We have considered the submissions of the learned AR. The argument of the learned counsel for the Assessee was that the show cause notice u/s.274 of the Act which is in a printed form and the AO has indicated in the said notice as to whether the penalty is sought to be levied on the assessee for furnishing inaccurate particulars of income or concealing particulars of such income by striking off the irrelevant portion of the printed show cause notice. On this aspect we find that in the show cause notice u/s.274 of the Act the AO has not struck out the irrelevant part. It is therefore not spelt out as to whether the penalty proceedings are sought to be levied for furnishing inaccurate particulars of income or concealing particulars of such income . 8.1. The Hon ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. 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 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 grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. 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 for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. 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 levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. (emphasis supplied) 8.3. 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 ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
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