TMI Blog2016 (5) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 16.6.2011 of CIT(A)-Central-I, Kolkata relating to A.Y.2002-03 to 2007-08. In these appeals, the assessee has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty @ 100% of the tax sought to be evaded u/s 271(1)(c) of the Act. ITA No.1183 to 1187/Kol/2011 are appeals by the Revenue against the very same orders of CIT(A) for AY 2002-03 to 2005-06 2007- 08. In these appeals the revenue has challenged the order of the CIT(A) whereby the CIT(A) reduced the quantum of penalty imposed by the AO from 300% of the tax sought to be evaded to 100% of the tax sought to be evaded. 2. The facts and circumstances under which penalty u/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 ₹ 8.75 crores u/s 132(4) of the I.Tax Act. The assessee filed a letter dt.19.02.09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84,630/- 24,50,000/- NIL 25,34,630/- 2006-07 95,220/- 5,00,000/- NIL 5,95,220/- 2007-08 1,04,940/- 3,93,00,000/- NIL 3,94,04,940/- 2008-09 4,00,00,000/- N.A. 51,50,000/- 4,51,50,000/- 4. Additional incomes disclosed for the Asst.Year 2002-03 to 2006-07 are not based on any seized documents or assets found in the course of search seizure operation. The income disclosed was purely voluntary to co-operate with the department and to buy peace. In the Asst. Year 2007-08 only income of ₹ 40 lacs is on the basis of peak balance of loan as per seized documents and balance income disclosed of ₹ 3,53,00,000/- is voluntary income disclosed and not based on any seized material or asset found. The A.O. has also not found/referred any seized document or asset to corroborate with the said income. 5. It was the plea of the Assessee that as per the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---- 2006-07 82,00,000/- 2,23,45,095/- NIL 2007-08 4,75,00,000/- 4,23,38,561/- 51,61,439/- 6. It was also the plea of the Assessee that on analysis of the income disclosed for the above years and cash balance lying unused at the end of the relevant financial year, it was only in the assessment year 2004-05 and 07-08 additional income has been utilised to the extent of ₹ 8,50,000/- and ₹ 51,61,439/- respectively for the investments based on the seized documents which is worked out by reducing the cash in hand available from the cumulative income of that year. Therefore, according to the Assessee, the income offered by the assessee is purely voluntary. 7. It was also the plea of the Assessee that in the course of said search seizure operation following cash, jewellery and other assets were found and partly seized. The same are related to Financial Year 2007-08 relevant to Asst.Year 2008-09 as under : Sl.No. Address Items Found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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 of its claim that he was entitled to immunity from imposition of penalty. 11. CIT(A) was of the view that the assessee had not furnished any bona fide explanation in the penalty proceedings to explain the reasons as to why he had not admitted the entire incomes in each of the returns filed u/s 139(1) of the Act for the relevant AYs. In question. He also held that under Explanation 5A to Sec. 271(1)(c) of the Act, that penalty is automatic in respect of income declared in a return of income filed pursuant to a search on or after 1.6.2007. The CIT(A) however held that imposition of penalty at 300% of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 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 filed u/s.153A of the Act and there is no specific comments on the conduct of the Assessee. So also the show cause notice u/s.274 of the Act did not contain specific charge as to whether the Assessee was guilty of furnishing inaccurate particulars of income or concealing particulars of income. The ruling in the case of Satyananda Achariya Biswas (supra) would therefore apply to the present appeals by the Assessee as well. The following were the observations of the Tribunal in the case of Satyananda Achariya Biswas (supra) on the effect of not recording satisfaction regarding concealment in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght 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 law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposing penalty have to be held as bad in law and liable to be quashed. 9.2. The Hon ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory (supra) has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act. NOTICE UNDER SECTION 274 59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee was called upon to meet. Otherwise 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 determined with reference to the infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 our above conclusions on the issue of not recording of proper satisfaction and the defect in show cause notice u/s.274 of the Act, we are not dealing with the other arguments made on merits of the order imposing penalty on the Assesssee. 17. Since the facts are identical to the facts of the aforesaid case, respectfully following the decision of the Tribunal we hold that penalty levied u/s 271(1)(c) of the Act is liable to be cancelled on the ground that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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