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DCIT, C.C XXVIII, Kolkata Versus M/s. Pratap Properties Pvt. Ltd

2016 (3) TMI 641 - ITAT KOLKATA

Penalty u/s 271(1)(c ) - whether the assessee is entitled for immunity from levy of penalty on account of Explanation 5 to Section 271(1)(c ) of the Act in respect of income offered after the search but in the return filed u/s 153C of the Act - Held that:- The assessee has cumulatively satisfied all the conditions stipulated in Clause 2 of Explanation 5 to Section 271(1)( c) of the Act and hence entitled for immunity from levy of penalty for all the assessment years under appeal.

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limbs of section 271(1)(c ) of the Act , was recorded by the Learned AO and the same is not discernible either from the show cause notice or from the assessment order. - Decided in favour of assessee - ITA No. 1386/Kol/2010, ITA No. 1387/Kol/2010, ITA No. 1388/Kol/2010 - Dated:- 10-2-2016 - Sri Mahavir Singh and Sri M.Balaganesh For The Appellant : Shri Nongothung Jungio, JCIT, ld.Sr.DR For The Respondent : Shri A.K Tibrewal, FCA, ld.AR ORDER Shri Sri M.Balaganesh, AM: These appeals of the reve .....

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olved in all these appeals is that whether the assessee is entitled for immunity from levy of penalty on account of Explanation 5 to Section 271(1)(c ) of the Act in respect of income offered after the search but in the return filed u/s 153C of the Act. Since identical issue is involved in all the appeals, they are taken up together and disposed off by this common order for the sake of convenience. 3. The brief facts of this issue is that a search and seizure operation was conducted on 28.3.2007 .....

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the Act was issued to the assessee on 11.8.2008. In response to the said notice, the assessee filed return u/s 153C of the Act on 19.12.2008 for the Asst Years 2005-06 & 2006-07 and return u/s 139(1) of the Act on 19.12.2008 for the Asst Year 2007-08 declaring taxable income of ₹ 24,54,178/- ; ₹ 97,85,800/- and ₹ 50,50,982/- for the Asst Years 2005-06 ; 2006-07 & 2007-08 respectively. 3.1. In the course of search, inventory of various documents vide identification mark .....

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lopment Private Limited. The assessee also explained tht in the course of search, no money, bullion, jewellery or other valuable article or thing belonging to the assessee were found and seized. It was also argued that certain loose papers were found recording various notings which are neither authenticated nor signed by any person including the assessee. Shri Bimal Kumar Jhunjhunwala, key person in the group, furnished a statement u/s 132(4) of the Act on 23.4.2007 and disclosed a sum of ₹ .....

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income for Asst Year 2007-08 and paid taxes thereon. The Learned AO for the Asst Years 2005-06 , 2006-07 and 2007-08 levied penalty u/s 271(1)(c ) of the Act by stating that the assessee had not demonstrated the manner of deriving the undisclosed income and had made the disclosure u/s 132(4) of the Act followed by offering the same in the returns filed u/s 153C and 139(1) of the Act , as the case may be, only because of the search and not otherwise and in terms of Explanation 5 to section 271(1 .....

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t and accordingly brought the following sums to tax separately in the assessments completed u/s 153C of the Act and section 143(3) of the Act for the Asst Years 2005-06 and 2007-08 respectively :- Asst Year 2005-06 - towards undisclosed interest - ₹ 9,06,250/- Asst Year 2007-08 - towards undisclosed interest - ₹ 36,51,503/- 4. The Learned CITA appreciated the contentions of the assessee and the various case laws relied upon by the assessee deleted the penalty u/s 271(1)(c ) of the Ac .....

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r immunity of the penalty laid down in clause (2) of Explanation 5 of section 271 (1)( c) of the Act are fulfilled in this case ,whereas the assessee had failed to specify in the statement u/s. 132(4) of the Act the manner in which such income was derived. 2. That in the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in canceling the penalty of ₹ 12,29,6651 levied u/s 271 (1 )(c) of the Act, without appreciating that had there been no search the assessee would not .....

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d by the Learned AO of section 153A assessee as to certain seized documents belonging to the assessee herein, before handing over the said documents to the Learned AO of section 153C (assessee herein) assessee. The Learned AR also tried to argue that the said issue eventhough not raised in original assessment proceedings , the assessee is not debarred from raising the same in the penalty proceedings as both the proceedings and distinct, separate and independent. He argued that this aspect goes i .....

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ue. We are not in agreement with the argument advanced by the Learned AR that the jurisdiction issue could be raised by him in Petition under Rule 27 of ITAT Rules without preferring cross appeal or cross objections. The provisions of Rule 27 of ITAT Rules is reproduced herein below for the sake of convenience :- The respondent though he may not have appealed, may support the order appealed against on any of the grounds decided against him. We find that the assessee had not questioned the validi .....

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e reading. First is the condition precedent for invoking this Rule and the second is scope of interference. In so far as the first element is concerned, we find that this Rule has been enshrined with a view to dispense justice to an assessee who is otherwise enttield to assail the correctness of the impugned order by filing appeal or cross objection, whether or not actually filed. This is borne out from the expression though he may not have appealed used in the context of an assessee. This amply .....

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e Rule, which provides that the respondent may support the order appealed against on any of the grounds decided against him . Crux of the matter is that the order appealed against can be challenged by the assessee only qua the aspects of the issue decided against him in deciding such overall issue against the assessee, which has been assailed in the appeal. It means that there is an inherent limitation on the power of the assessee in not challenging the order appealed against under Rule 27 de ho .....

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e the petition filed by the assessee for the three asst years in terms of Rule 27 of the ITAT Rules is dismissed as unadmitted. 6. Apropos the grounds raised by the revenue, the Learned DR argued that but for the search, the assessee would not have come forward to disclose these undisclosed incomes and hence assessee has concealed the particulars of income and argued that penalty is leviable in terms of Explanation 5 to Section 271(1)(c ) of the Act. He argued that the assessee had not demonstra .....

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further argued that, even assuming without conceding, immunity is available for the assessee in terms of Clause 2 of Explanation 5 to Section 271(1)(c ) of the Act, it is available only for the year of search and for the previous year for which the due date of filing the return had not expired and hence the immunity, in any case, is not available for the earlier years other than these two years. In other words, the immunity cannot be made available to the assessee for the Asst Years 2005-06 and .....

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gs that commenced on 28.3.2007 vide Reply to Question No. 10, 14 , 16 & 19. The Learned AR further argued that the manner od deriving the undisclosed income need not be demonstrated by the assessee. He argued further that the moment disclosure u/s 132(4) is made and taxes together with interest are paid by the assessee, substantive compliance has been made by the assessee and accordingly entitled for immunity. 7.1. He further argued that the immunity provided in clause 2 of Explanation 5 to .....

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he income u/s 132(4) followed by filing of return u/s 153C of the Act and no interest expenditure was claimed by the assessee as stated by the Learned AO. 7.3. He argued that no satisfaction as to concealment of income or furnishing of inaccurate particulars of income is not discernible either in the the show cause notice for initiating penalty proceedings u/s 274 read with section 271(1)(c ) of the Act or from the assessment order. In response to this, the Learned DR relied on the provisions of .....

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t reiterated herein for the sake of brevity. We find that no addition has been made in the assessment by the Learned AO in the search assessments completed for Asst Years 2005-06 , 2006-07 and 2007-08. Even the undisclosed interest income though added separately by the Learned AO in the assessment orders for the Asst Years 2005-06 and 2007-08, we find that the same has been duly considered already by the assessee in its computation of income and hence the same cannot be construed as an addition .....

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are extracted herein below for the sake of convenience:- Q.No.10. Kindly go through the bunch of loose sheets marked HRV-1 and explain the contents therein ? Ans. This bunch contains written pages from 1 to 48 . Of these the following are explained below - Page 1 - …… Pages 2 -8 - ………. Pages 9 to 10 - ……….. Pages 11 to 48 relate to M/s Pratap Properties Ltd (PPL). This is company which has investment in various properties in Kolkata and How .....

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t he cash flow statement of M/s PPL as on 17.3.2007. The details of various unaccounted expenses. The last mentioned head of expenses amounting to ₹ 22.345 lakhs is not accounted for. The quantum of unaccounted expenses under the heads needs to be determined. Pages 75 to 87 contained the details of cash received and payment made by the group during the financial year 06-07. The exact quantum of unaccounted transaction as per these pages needs to be determined. Q. No. 16. Please go through .....

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PPL. Pages 19 to 22 - …… Pages 23 to 27 - ……… Pages 28 to 32 - ……. Page 33 - ….. Page 34 - ….. Pages 35 to 37 - …….. Pages 39 to 46 ……. Q. No. 19. Please go through the bunch of loose sheets marked HRV -10 and explain? Ans. This bound pages 1 to 53 relates to accounted and unaccounted transaction of M/s PPL. We find that the assessee had demonstrated the manner of deriving the undisclosed income vis- a- v .....

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Hon ble Gujarat High Court in the case of CIT vs Mahendra C Shah reported in (2008) 299 ITR 305 (Guj) , it was held that at page 315 :- In so far as the alleged failure on the part of the assessee to specify in the statement under section 132(4) of the Act regarding the manner in which such income has been derived, suffice it state that when the statement is being recorded by the authorized officer it is incumbent upon the authorized officer to explain the provisions of Explanation 5 in its enti .....

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he Allahabad High Court in the case of CIT Radha Kishan Goel (2005) 248 ITR 454. Secondly, considering the social environment it is not possible to expect from an assessee, whether literate or illiterate, to be specific and to the point regarding the conditions stipulated by exception No.2 while making statement under section 132(4) of the Act. The view taken by the Tribunal as well as the Allahabad High Court to the effect that even if the statement does not specify the maner in which the incom .....

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penalty as provided under Explanation 5 to section 271(1)(c ) of the Act. In the absence of any infirmity in the order of the Tribunal on this count the question referred is answered in the affirmative, i.e in favour of the assessee and against the Revenue. 8.1. The next aspect is with regard to the fact as to whether penalty could be levied when there was no additions made in the search assessments by the Learned AO. We find that the Learned AO did not independently work out the quantum of undi .....

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enalty - For Concealment of income - Assessment Year 2004-05 - Whether for purpose of imposition of penalty under section 271(1)(c ) resulting as a result of search assessments made under section 153A, original return of income filed under section 139 cannot be considered - Held, Yes - Whether concealment of income has to be seen with reference to additional income brought to tax over and above income returned by assessee in response to notice issued under section 153A and, therefore, once retur .....

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invoking Explanation 5 in assessment year 2004-05 in respect of cash found in previous year relevant to assessment year 2007-08 , merely on presumption that assessee might have been in possession of cash throughout period covered by search assessments - Held, yes [ in favour of assessee] 8.1.1. We find that this decision of Delhi Tribunal has been followed by this Tribunal in the case of DCWT vs Vivek Kr. Kathotia in WTA Nos. 02 to 08 / Kol / 2013 dated 15.5.2015, wherein it was held that :- Th .....

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of the case once the returned wealth is accepted by the AO u/s 153A of the Act then there cannot be a case of concealment of income or furnishing inaccurate particulars of income. In the circumstances and facts of the case the decision in the case of Prem Arora vs DCIT (24 taxmann.com 260) (Delhi Tribunal) is squarely applicable in the present case, since in the present case the assessee has disclosed gold and diamond in the statement recorded u/s 132(4) of the Act during the search operation it .....

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the said undisclosed income in the returns filed in response to notice under section 153C of the Act and assessments completed accordingly. We hold that the expression to be furnished in Clause 2 of Explanation 5 to Section 271(1)(c ) of the Act has to be understood as required to be furnished which in turn has to be understood as a return required to be furnished in response to notice u/s 153A of the Act. In this regard, we place reliance on the decision of the Jurisdictional Calcutta High Cou .....

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ed to immunity from penalty on account of Explanation 5 to section 271(1)(c ) when the assessee s case does not come under the purview of the exceptions provided therein. Held that : Clause (a) of Explanation 5 to section 271(1)(c ) contemplates income for any previous year for which returns has been furnished but the income since disclosed had not been shown. It is axiomatic that if such income had been disclosed in the returns filed under section 139, the question of undisclosed income would n .....

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t of his income which has not been dislosed so far in his returns of income already filed. The difficulty arises by the use of the expression to be furnished before the expiry of time specified in sub-section (1) of section 139 . A confusion is likely to arise as to whether the departure has been sought to be made by the legislature only for those cases where the statement as regards undisclosed income was made pertaining to a previous year for which time to file return under section 139 had not .....

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High Court in the case of CIT vs S.D.Chandru reported in (2004) 266 ITR 175 (Mad)wherein a Division Bench opined that The additional words which refer to the time specified in section 139(1) are only a reiteration of the legal requirement regarding the time within which returns should normally be filed. In that view of the matter, the question proposed by Revenue is answered in the affirmative and in favour of the assessee. The appeal is thus disposed of. 8.1.3. We would like to place reliance o .....

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iously offered to tax is not a concealment on the part of the respondent / assessee ? (b) WHETHER on the facts and in the circumstances of the case the Income Tax Appellate Tribunal erred in law in upholding the order of Commissioner of Income Tax (Appeal) holding the Assessing Officer was not justified in levying penalty under section 271(1)(c ) of the Income Tax Act, 1961 for the Assessment Years 2003-04 to 2005-06 ? Since both the questions are covered by the judgements passed by this Court i .....

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eon is as below:- Whether on the facts and in the circumstances of the case the learned Tribunal has committed error in applying the provisions of the Explanation 5 of Section 271(1)(c ) of the Income Tax Act, 1961 and thereby committed error in law in modifying the order of penalty of ₹ 4,17,926/- in relation to the Assessment Years 2003-04 and 2005-06 Since we find that the issue stands covered by the judgements delivered in ITA 39 of 2010 (Commissioner of Income Tax , Central -I, Kolkat .....

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red thereon is as below:- Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in restoring the penalty imposed under section 271(1)(c ) of the Act holding that benefit under Explanation 5 to Section 271(1)( c) of the Act would be available only for period where due date for filing the return under section 139(1) of the Act had not expired ? 13. Considering the facts and circumstances of the case and also considering the decisions relied upon by .....

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iled under section 139 of the Act, as the Assessing Officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under section 271(1)(c ) of the I.T.Act and the penalty is to be levied on the income assessed over and above the income returned under section 153A, if any. 14. Further, in the present case, it appears from the record that the assesses had satisfied all the conditions which are required for claiming immunity from payment of p .....

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ntly, the order of the CIT(A) is restored. The question of law involved in this appeals is answered in favour of the assesee and against the revenue. D. Rajasthan High Court in the case of CIT vs Kanhaialal reported in (2008) 299 ITR 19 (Raj) , it was held that :- Where the Assessing Officer had found the income to relate to different assessment years, in different volumes, as contra distinguished to the one submitted by the assessee, and had accordingly made the assessments, which assessments h .....

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aid. F. Rajasthan High Court in the case of ACIT vs Gebilal Kanhaialal reported in (2004) 270 ITR 523 (Raj) , it was held that:- Penalty u/s 271(1)(c ) was not leviable by operation of Explanation 5 in a case where a statement u/s 132(4) was filed in course of a search and seizure and thereafter the assessee has disclosed a particular concealed income and surrendered it for tax and tax had been together with interest. 8.2. The next aspect is as to whether the immunity provided in clause 2 of Exp .....

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n the question raised before their Lordships and decision rendered thereon is as below:- (a) Whether on the facts and in the circumstances of the case the Learned Tribunal was justified in law in cancelling the order of penalties for ₹ 3,99,476/- , ₹ 5,24,169/-, ₹ 5,96,020/-, ₹ 4,86,030/- and ₹ 25,12,525/- for the assessment years 2002-03 , 2003-04, 2004-05, 2005-06 and 2006-07 respectively on the ground that the Explanation 5 to section 271(1)( c) protects the asse .....

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expired and returns filed prior to the date of search and for the assessment years 2006-07 also the return was not filed on the due date. We have heard Mr.Sinha extensively and gone through the impugned judgement and order of the Learned Tribunal. The Learned Tribunal has recorded the fact that the record does not show that the Assessing Officer had detected the additional income in the assessment proceedings. It further recorded upon perusal of the records that small variation in income was due .....

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f Prem Chand Garg has been challenged or not. Moreover, the learned Tribunal has also relied on a large number of decisions of the various court on the same point. Hence when the point is covered, we do not find any merit in this appeal for admission. Accordingly, the same is dismissed. 8.3. The next aspect to be considered is as to whether proper satisfaction was recorded by the Learned AO either in the show cause notice for initiating penalty proceedings or in the assessment order. We hold tha .....

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se of CIT , Panchkula vs Jai Laxmi Rice Mills Ambala City reported in (2015) 64 taxmann.com 75 (SC) vide order dated 20.11.2015, wherein it was held that :- 5. As pointed out above, in so far as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under section 271E of the act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under section 271(1)(c ) of the Act. Thus, in so far as penalty under section 271E is c .....

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565 (Kar) and which considered the applicability of newly inserted provision of section 271(1B) of the Act with retrospective effect from 1.4.1989 and the decision of the Hon ble Delhi High Court in the case of Ms. Madhushree Gupta vs Union of India reported in 317 IR 107 (Del). In this judgement, the relevant operative portions are reproduced herein below:- 6. We shall now deal with the question whether proper satisfaction was arrived at by the AO for initiating penalty proceedings u/s.271(1)(c .....

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see has just been accepted. It is no doubt true that it is not the requirement of the law that the satisfaction has to be recorded in a particular manner, especially after the introduction of the provisions of Sec.271(1B) of the Act with retrospective effect from 1.4.1989. Nevertheless, as laid down by the Hon ble Delhi High Court in the case of Ms.Madhushree Gupta (supra), the position of law both pre and post Sec.271(1B) of the Act is similar, inasmuch, the AO will have to arrive at a prima fa .....

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f addition or disallowance, if overall sense gathered from the order is that a further prognosis is called for. The decision of the Hon ble Supreme Court in the case of MAK Data (P) Ltd. (supra) has to be understood in the context of the facts of the said case. The relevant portion of the judgment in the aforesaid case, reads thus: 9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO .....

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n 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true inc .....

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fy whether the penalty proceedings be initiated or not during the course of the assessment proceedings and the AO is not required to record his satisfaction in a particular manner or reduce it into writing……. 7. The Revenue places reliance only on the sentence appearing in para-10 of the judgment without reading it in the context of the observations in the last portion of para-9 of the said judgment. Therefore even the Hon ble supreme court s decision suggests that the satisfaction .....

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eedings is discernible from the order of assessment. If the assessee in good faith offers income to tax voluntarily prior to any positive detection by the AO, such voluntary offer cannot be taken advantage of by the AO to initiate penalty proceedings against the assessee without specifying the reasons why penalty proceedings are initiated u/s.271(1)(c) of the Act. In the present case, we have read the order of assessment as a whole and are satisfied that satisfaction for initiation of penalty pr .....

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lty u/s.271(1)(c) of the Act. 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 .....

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hese 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 .....

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om 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 bona fide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and all facts relating to the same and material to the computation of his total income have been disclose .....

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ecifically 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. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking .....

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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) 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 defect .....

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