TMI Blog2016 (4) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... th Cotton & Ginning Factory & Ors [2013 (7) TMI 620 - KARNATAKA HIGH COURT] - Decided in favour of assessee - ITA No. 773/JP/2013 - - - Dated:- 18-3-2016 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM For The Assessee : Shri P.C. Parwal (CA) For The Revenue : Mrs. Neena Jeph (JCIT) ORDER PER T.R. MEENA, A.M. This is an appeal filed by the assessee against the order dated 16/09/2013 of the learned CIT(A), Central, Jaipur for A.Y. 2005-06. The effective grounds of appeal are as under:- 1. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the levy of penalty u/s 271(1)(c) even when no such proceedings were initiated for the year under consideration while recording the satisfaction for initiation of penalty in the body of assessment order. 1.1. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the levy of penalty even when notice issued u/s 271(1)(c) does not state whether the charge against the assessee is for concealment of income or for furnishing inaccurate particulars of income and the penalty order also does not specify as to on what offence penalty is levied i.e. f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /275 is issued separately for concealment/furnishing of inaccurate particulars of income This quantum addition was challenged by the assessee before the appellate authority but the quantum addition has been confirmed by the Hon ble ITAT, which has been accepted by the assessee. The ld Assessing Officer in notice U/s 274 read with Section 271-272 of the Act, gave notice dated 30/10/2009 as under:- U/s 271(1)(c):- Concealed particulars of income or furnished inaccurate particulars of income . 2.1 Before imposing penalty, the ld Assessing Officer gave reasonable opportunity of being heard on 30/10/2009. Again opportunity was allowed vide show cause noticed dated 09/2/2012. The assessee replied vide letter dated 09/3/2012. Brief facts of the case has been reproduced by the Assessing Officer on page 1,2,3,4,5 of the penalty order. The ld Assessing Officer after considering the penalty order held as under:- (a) The surrender of income of ₹ 5 Crores in the statement u/s 132(4) of the IT Act, 1961 dated 22/06/2007 was made for the assessment year 2006-07 to 2008-09. (b) The surrender of income was towards income earned from unaccounted business of trading in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han High Court in case of CIT vs. Kanhaiyalal 299 ITR 19 and Madras High Court in case of CIT vs. S.D.V. Chandru 266 ITR 175. These judgments relates to offer of income in the statement u/s 132(4) of the IT Act, 1961 and immunity available under explanation 5 to section 271(1)(c) of the IT Act, 1961. The ratio of these judgments is not applicable to the case of the assessee as the assessee has offered no income for the assessment year 2005-06 and repeated original income of ₹ 1,56,290/- in the return of income filed in compliance to notice u/s 153A of the IT Act, 1961. (h) The assessee has further relied on following judgments- Hindustan Steel Ltd. 83 ITR 26 Dharmendra Textile Processors 306 ITR 277 (SC) Dilip N Shroff Vs CIT 291 ITR 519 (SC) Ashok Grih Udyog Kendra P. Ltd. Vs. ACIT 313 ITR 200 (AT)(Luck) CIT V/s Mehta Engineers Ltd. (2008) 300 ITR 308 (P H) Section - 271 (1)(c) CIT Vs. Ajaib Singh Co. (2001) 253 ITR 630 (Puj. Har.) The ratio of above judgments is not applicable to the case of the assessee. The case of Hindustan Steel Ltd. 83 ITR 26 and Dharmendra Textile Processors 306 ITR 277 (SC) has been over ruled by the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, impose a penalty of? 14,25,187/- u/s 271(1)(c) of the IT Act, 1961. The working of the amount of penalty has been made as under- 1. Tax on total assessed income including concealed income ₹ 1455716/- 2. Tax on income excluding concealed income(156290+30,143 =1,86,433) ₹ 30529/- 3. Tax sought to be evaded (1-2) ₹ 1425187/- 4. 100% of Tax sought to be evaded ₹ 1425187/- 5. 300% of Tax sought to be evaded ₹ 4275561/- 6. Penalty imposed equivalent to 100% of Tax sought to be evaded ₹ 1425187/- Issue necessary forms. This order has been passed after prior approval of the Jt. Commissioner of income-Tax, Central Range, Jaipur received vide her office letter No. Joint CIT(C)/ Penalty/JPR/2011-12/2380 dated 15.03.2012. The ld Assessing Officer imposed minimum penalty at ₹ 14,25,187/- U/s 271(1)(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of search, he shall, for the purposes of imposition of a penalty under clause (a) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. iii) This Explanation is a non-obstante clause and it is a deeming provision for purpose of imposition of penalty once the specific conditions are fulfilled. The facts of the case of the appellant are examined with reference to the conditions laid down as per Explanantion-5A of sec. 271 (l)(c) as follows: a) The search was carried out from 21 to 25th June, 2007 i.e after 1.6.2007 since when the deeming provisions of Explanation-5A to sec. 271(1 )(c) came into operation. b) The return of income for A.Y. 2005-06 u/s 139(1) was filed 8.9.2005 declaring income of ₹ 1,56,290/- in which the undisclosed investment in debtors was not shown. In fact the undisclosed income was not even declared in the return filed in response to notice u/s 153 A. c) Documentary evidence was gathered during the course of search which proved that the appellant was indulging in business outside his regular books of accounts income from which was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 271(1)(c) r.w.s 274/275 is issued separately for concealment/ furnishing of inaccurate particulars of income. Therefore, it cannot be said that he has not recorded his satisfaction for initiating penalty u/s 271 (1 )(c) for A.Y. 2005-06. In fact in the case of CIT vs. M/s Manjunatha Cotton Jinning Factory Ors. relied on by the AR of the appellant the Hon. Karnataka High Court has made the following observations regarding recording of satisfaction: Though it is usual for the AO to record in the assessment order that penalty proceedings are being initiated, this is more a matter of convenience than of legal requirement. All that the law required, so far as the penalty proceedings are concerned, is that they should be imitated in the course of the proceedings for assessment. It is sufficient, if there is some record somewhere, even apart from the assessment order itself, that the AO has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. The fact that the AO has noted his satisfaction for initiating proceedings u/s 271 (1 )(c) at the end of the assessment order rather than i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich 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. Thus it is seen that the Hon. Karnataka High Court itself has accepted that there may be cases where there may be overlapping of the two offences and in such cases the initiation of penalty proceedings must be for both the offences. Thus in the case of the appellant the AO while initiating penalty proceedings u/s 271(1)(c) was satisfied that penalty was merited for both the offences namely concealment and filing of inaccurate particulars of income. However, it is now an established principle that the penalty proceedings are separate proceedings from the assessment proceedings. During the course of penalty proceedings the assessee was given full opportunity to explain his case. While passing the penalty order u/s 271(1)(c) the AO after considering all the submissions of the appellant came to the conclusion that penalty should be imposed u/s 271(1 )(c) for only concealment of his income. Thus the principle of natural justice was not offended given the facts of the case of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation-5A to sec. 271(1)(c) is confirmed. 4. Now the assessee is in appeal before us. The ld AR of the assessee has reiterated the arguments made before the ld CIT(A) and submitted that the condition precedent for initiation of penalty proceeding is that the AO is satisfied that assessee has either concealed the income or furnished inaccurate particulars of income. In the present case, AO in the assessment order has specifically recorded his satisfaction for the assessment years for which he intended to initiate the penalty proceedings. This satisfaction he has recorded for AY 2002-03, 03-04, 04- 05, 07-08 08-09 only. For AY 2005-06 2006-07, no satisfaction is recorded for initiation of penalty proceedings. Therefore only because at the end of the assessment order, the AO has stated to have issued penalty notice u/s 271(1)(c) of the Act, the same cannot be taken as the satisfaction of the AO of having initiated the penalty proceedings. It may be noted that for AY 2006-07, neither any penalty proceedings were initiated nor any penalty was imposed on the assessee. He further argued that on Section 271 (IB) which provides that where an assessment order contains a directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Taxman 156 have held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, in issuing the notice U/s 274, the Assessing Officer should be specific either on concealment of particulars of income or furnishing inaccurate particulars of income. The ld Assessing Officer in the present case has not initiated penalty proceedings by issuing notice specifically for concealment of particulars of income or furnishing inaccurate particulars of income. He further relied on the following case laws:- (i) CIT Vs Manu Engineering Works 122 ITR 306 (Guj) (HC). (ii) New Sorathia Engineering Co. Vs CIT 282 ITR 642 (Guj.)(HC) (iii) CIT Vs Jyoti Ltd. 216 Taxman 64 (Guj) (HC) (Magz). (iv) CIT Vs Virgo Marketing Pvt. Ltd. 171 Taxman 156 (Del.)(HC). Alternatively, it is also submitted by the ld AR that the approval memo on the basis of which addition is made represents the outstanding debtors as on the date of search. The assessee in his statement u/s 132(4) has categorically stated that in his trade the goods are generally purchased and sold in cash but where the payment is not received in cash, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me/furnishing of inaccurate particulars of income. In last para of the assessment order, the satisfaction of the Assessing Officer has been as under:- Penalty notice u/s 271(1)(c) r.w.s. 274/275 is issued separately for concealment/furnishing of inaccurate particulars of income In notice U/s 274 read with Section 271-272 of the Act dated 30/10/2009 issued as under:- U/s 271(1)(c):- Concealed particulars of income or furnished inaccurate particulars of income . It is apparent from the initiation as well as issue of notice that Assessing Officer has not specifically specified that penalty proceedings either issued for concealed particulars of income or furnished inaccurate particulars of income. The amended provisions of Section (1B) was challenged before the Hon'ble Delhi High Court in the case of Madhu Shree Gupta vs. UOl (supra) wherein the Hon'ble High Court has held that at the stage of initiation of penalty proceedings, the order passed by the Assessing Officer need not reflect satisfaction vis a vis each and every item of addition or disallowance if the overall sense gathered from the order is that a further prognosis is called for. It would be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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