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2016 (3) TMI 112 - ITAT BANGALORE

2016 (3) TMI 112 - ITAT BANGALORE - TMI - Penalty under Section 271(1)(c) - Concealment of income - Held that:- Show cause notice issued by the Assessing Officer for levy of penalty under Section 274 r.w.s. 271 is defective as the Assessing Officer has not specified the grounds on which the penalty sought to be levied. See CIT Vs. Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT ] - Decided in favour of assessee - I.T. A. No. 668/Bang/2015 - Dated:- 10-2-2016 - Shri V .....

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following grounds : 1. The orders of the authorities below in so far as levying penalty under Section 271(1)(c) of the Act against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. 2. The learned CIT (Appeals) is not justified in upholding the penalty under Section 271(1)(c) of the Act in respect of the following disallowances/additions : a) Difference in the opening stock : ₹ 2,67,186. b) Difference in the opening balance of .....

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appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs. 3. The assessee has also additional grounds which are as under : 1. The order levying penalty under Section 271(1)(c) of the Act, is bad in law in as much as, the learned Assessing Officer has neither reached any satisfaction nor has such satisfaction been recorded in th .....

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ated for furnishing of inaccurate particulars of income or concealment of income under the facts and in the circumstances of the appellant s case. 3. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered. 4. The brief facts leading to the levy of penalty are that the assessee is an individual and engaged in the business of purchase and sale of food-grains at APMC, Hubli. The assessee .....

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ounting to ₹ 2,67,186. When the assessee was asked to explain the discrepancy and the differences of the closing balance as on the last date of earlier year and opening balance of this year, the assessee offered the said difference amount of ₹ 2,67,186 to tax. Similarly, the Assessing Officer has noted that the assessee has shown the opening balance in the capital account. Similarly on examination of the capital account of the assessee, the Assessing Officer found that the assessee h .....

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ction 271(1)(c) of the Act and levied the penalty of ₹ 1,72,383 being 100% of tax sought to be evaded on the concealed income of ₹ 5,63,344 which comprising the difference in the closing and opening balance of stock as well as difference in the capital account. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and submitted that when the Assessing Officer has made the addition on account of difference in opening stock as well as the opening balance .....

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, if any, it relates to the Assessment Year 2003-04 and not for the Assessment Year under consideration and therefore the Assessing Officer should have considered the above additions for the Assessment Year 2003-04. Accordingly, the assessee pleaded that the penalty is not justified on the addition which was accepted by the assessee though the same pertains to the earlier assessment year. The CIT (Appeals) did not accept the contention of the assessee and upheld the levy of penalty under Section .....

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has further submitted that since the assessee accepted the mistake and offered the amount for tax would not ipso facto lead to the conclusion that the assessee has furnished inaccurate particulars or concealed the particulars of income when the actual mistake pertains to the earlier assessment year. Apart from the above arguments the learned Authorised Representative of the assessee has also raised an additional ground regarding the validity of notice issued under Section 274 r.w.s. 271 and thus .....

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ourt in case of CIT Vs. Manjunatha Cotton & Ginning Factory 359 ITR 365, the notice issued under Section 274 is invalid and consequently the penalty levied under Section 271(1)(c) is not sustainable. In support of his contention, he has relied upon the decision of co-ordinate bench of this Tribunal dt.1.10.2015 in case of Sri Raghunath H Baddi Vs. ITO in ITA No.669/Bang/2015 and submitted that on an identical facts the Tribunal while following the jurisdictional High Court in the case of Man .....

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assessment proceedings, therefore this issue cannot be raised at this stage when the assessee has not raised in the assessment proceedings. Further it is a case of enhancement of opening stock of this year and therefore the mistake which is accepted by the assessee during the assessment proceedings cannot be now shifted to the earlier assessment year when there was no such issue arises either for the Assessing Officer for this year or in the earlier assessment year. Therefore in the absence of .....

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the case of the assessee falls under both the defaults committed by the assessee. He has relied upon the orders of the authorities below. 7. We have heard the rival submissions as well as the relevant material on record. First we take up the legal and technical objections raised by the assessee in the additional grounds regarding the validity of notice issued under Section 274 of the Act. We find that this plea is purely legal in nature and does not require any investigation of facts. Therefore .....

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issued 274 r.w.s. 271(1)(c) of the Act we find that the Assessing Officer did not specify the default on the part of assessee for concealment of particulars of income or furnishing of inaccurate particulars of such income. The Assessing Officer has even not deleted the irrelevant part of these defaults and left the ambiguity about either of the defaults in the show cause notice without specifying the initiation of penalty proceedings for which of the defaults committed by the assessee. An ident .....

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itiated 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 has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of re .....

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rtment 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 nature 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, .....

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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 .....

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ise 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 determi .....

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culars 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 page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat H .....

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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 for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability .....

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ch 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 o .....

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ent 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 be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts .....

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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 law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended .....

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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. 11. It is clear from the aforesaid decision that on the facts o .....

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