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TMI Blog2016 (5) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 271(1)(c) of the Act was imposed on the assessee by AO are as follows :- The Assessee is an HUF. The Assessee carries on the business of infrastructure developments and trading. There was a search and seizure operation carried out u/s.132 of the Income Tax Act, 1961 (Act) on 18.3.2008 by the Income Tax department. In the course of said search & seizure proceedings Mr.Manoj Kumar Jain, Karta of the assessee made a disclosure of Rs. 8.75 crores u/s 132(4) of the I.Tax Act. The assessee filed a letter dt.19.02.09 claiming that some of the assets and documents found and seized in the course of search & seizure operation at the various premises of the group, belonged to it. In the said letter, Mr. Manoj Kumar Jain, Karta of the assessee also stated that the disclosure of income made u/s 132(4) of the I.Tax Act on 19.03.08 by him of Rs. 8.75 crores was on behalf of the assessee. The break-up of the said additional income which has been offered to tax subsequently in the return filed after search & seizure proceedings were as under :- Asst.Year Amount 2002-03 21,00,000/- 2003-04 10,50,000/- 2004-05 21,00,000/- 2005-06 24,50,000/- 2006-07 5,00,000/- 2007-08 3,93,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submitted that the following statements would show that the income disclosed for A.Y.2002-03 to 2007-08 has not been utilised for any investments based on the seized documents or assets found except Rs. 8,50,000/- in the A.Y. 2004-05 and Rs. 51,61,439/- in the A.Y. 2007-08. The detailed workings are as under :- BREAK-UP OF THE INCOME DISCLOSED YEAR WISE AND CUMULATIVE INCOME: Asst.Year Addl.Voluntary Disclosure of Income Cumulative of the Voluntary Addl.Income 2002-03 21,00,000/- 21,00,000/- 2003-04 10,50,000/- 31,50,000/- 2004-05 21,00,000/- 52,50,000/- 2005-06 24,50,000/- 77,00,000/- 2006-07 5,00,000/- 82,00,000/- 2007-08 3,93,00,000/- 4,75,00,000/- 2008-09 4,51,50,000/- 9,26,50,000/- STATEMENT OF CASH IN HAND AVAILABLE AFTER CONSIDERAING THE ADDITONAL INCOME DISCLOSED STATEMENT OF UTILISATION OF ADDITONAL INCOME DISCLOSED BASED ON THE SEIZED DOCUMENTS : Asst.Year Cumulative Additional Income Cash in Hand (Cumulative) Additional income utilised on the basis of seized documents 2002-03 21,00,000/- 21,00,000/- ---- 2003-04 31,50,000/- 31,50,000/- NIL 2004-05 52,50,000/- 44,00,000/- 8,50,000/- 2005-06 77,00,000/- 94,75,280/- - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO issued show cause notice u/s 274 of the Act for imposing penalty u/s 271(1)(c) of the Act on the Assessee and imposed penalty on the Assessee. According to the AO but for the search and seizure operations and discovery of material in such search, the Assessee would not have offered income to tax in the course of search proceedings and in the return of income filed after the search in the proceedings u/s.153A of the Act. The AO imposed penalty equal to 300% of the tax sought to be evaded. In the show cause notice u/s 274 of the Act issued prior to the passing of the order u/s 271(1)(c) of the Act imposing penalty, the AO has not specified as to whether the charge against the Assessee is for furnishing inaccurate particulars of income or for concealing particulars of income. 10. Before CIT(A) the assessee submitted that the assessee offered explanation in the course of assessment proceedings while offering additional income to tax and such offering was accepted by the AO without any modification and without any finding whatsoever against the bona fide of the workings submitted for the additional disclosure. The assessee also relied on certain judicial pronouncements in support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of assessment. It was also submitted that in the show cause notice issued u/s 274 of the Act, the AO has not struck off the irrelevant portion. In other words it was submitted that the show cause notice u/s 274 of the Act is not clear as to whether penalty is being imposed for concealing particulars of income or for furnishing inaccurate particulars of income. In this regard our attention was drawn to the decision of ITAT Kolkata Bench in the case of Satyananda Achariya Biswas vs DCIT in ITA No.05/Kol/2010 for A.Y.2003-04 dated 02.12.2015 wherein it was held that such defect in the show cause notice u/s.274 of the Act renders the order imposing penalty illegal. The learned DR relied on the order of the AO. 16. We have carefully considered the rival submissions. As far as the appeals filed by the assessee are concerned we find that the facts of the assessee's case are identical to the decision in the case of Satyananda Achariya Biswas vs DCIT rendered by ITAT Kolkata Bench (supra). In the present case as well as in the case of Satyananda Achariya Biswas (supra), the AO in the order of assessment accepted the offer of additional income to tax as declared in the return of income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther 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 in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer 8 deeds duly signed, have been impounded in the course of survey proceedings under Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not proper in the present case and on that ground the imposition of penalty u/s.271(1)( c) of the Act is unsustainable. 9. The next argument that the show cause notice u/s.274 of the Act which is in a printed form does not strike out as to whether the penalty is sought to be levied on the for "furnishing inaccurate particulars of income" or "concealing particulars of such income". 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". 9.1. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. 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 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 9.3. 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 grounds on which the penalty is sought to be imposed. 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. 9.4. For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the Assessee and allow the appeal by the Assessee. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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