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2016 (5) TMI 977 - ITAT KOLKATA

2016 (5) TMI 977 - ITAT KOLKATA - TMI - Penalty u/s 271(1)(c) - defective notice - Held that:- In the order of the assessment the AO has not initiated penalty proceedings u/s 271(1)(c ) of the Act. As rightly pointed out by the ld. Counsel for the assessee even in the assessment proceedings the AO has not made any reference to the provision of section 271(1)(c) of the Act in the show cause notice issued before making the impugned additions in respect of which penalty was imposed. The AO has mere .....

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gs while concluding the assessment. In the absence of initiation of penalty proceedings in the order of assessment the proceedings u/s 271(1)(c) of the Act have to be held illegal and invalid and are liable to be quashed.

Also in the show cause notice issued before imposing penalty u/s 271(1)(c) of the Act, the AO has not struck off the irrelevant portions namely whether the penalty is sought to be levied for furnishing inaccurate particulars of income or for concealing particulars of .....

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sessee against the order dated 12.08.2013 of CIT(A) Siliguri, relating to AY 2009-10. 2. In this appeal the assessee has challenged the order of CIT(A) whereby the CIT(A) confirmed the order of AO imposing penalty on the assessee us/ 271(1)(c) of the Act. 3. The facts and circumstances under which penalty was imposed on the assessee by the AO are as follows : The Assessee is an individual. The assessee is engaged in the business of exporting and trading in rice, wheat, coal and pulses etc. In th .....

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. On verification by the AO Shri Sajjan Kumar Maskara had shown purchases from the assessee of only ₹ 34,23,711/- and ₹ 26,70,045/- as per bill No.15/08-09 and 14/08-09 respectively. He had also shown that he had paid ₹ 60,73,711/- to the assessee and further debited on account of defective quality of soya of ₹ 20,045/-. There was thus a difference of ₹ 22,86,631/- between the figure of sales shown by the assessee and that shown by Sajjan Kumar Maskara. The assessee .....

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er the AO was also of the view that the gross profit from unsuppressed sales had to be made for the following reasons :- As per ledger of the assessee a sales of ₹ 37,87,080/-to Sri Sajjan Kumar Maskara was shown but information received from Sajjan kumar Maskara revealed that the assessee had actually made total sales of ₹ 60,73,711./- Thus, Rs, 23,06,676/- has been suppressed on account of sales. The assesse vide this office letter NO: DCIT/Cir- 1/Slg/2011-12/571. Dated: 22.12.2011 .....

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proceedings u/s 271(1)(c) of the Act. Nevertheless the AO proceeded to issue show cause notice to the assessee for imposing penalty u/s 271(1) (c) of the Act. The AO ultimately held that the assessee has deliberately and wilfully furnished inaccurate particulars in the return of income in respect of the additions referred to earlier and imposed penalty of ₹ 13,44,986/- which was 125% of the tax sought to be evaded. 7. On appeal by the assessee the CIT(A) confirmed the order of the AO. Aggr .....

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essee was guilty of concealing or furnishing inaccurate particulars of income and has also not thereafter initiated penalty proceedings u/s 271(1)(c) of the Act. Besides the above, the ld. Counsel for the assessee also pointed out that in the show-cause notice issued before levying penalty the AO has not struck off the irrelevant portions namely whether the assessee is guilty of having concealed particulars of income or of having furnished inaccurate particulars of income . The ld. Counsel for t .....

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order imposing penalty on the assessee is liable to be quashed. The ld. DR placed reliance on the orders of the revenue authorities. 9. We have given a very careful consideration to the rival submissions. As rightly contended by the ld. Counsel for the assessee, in the order of the assessment the AO has not initiated penalty proceedings u/s 271(1)(c ) of the Act. As rightly pointed out by the ld. Counsel for the assessee even in the assessment proceedings the AO has not made any reference to the .....

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rson has concealed particulars of his income or furnished inaccurate particulars of such income. Such satisfaction can emanate only from initiation of penalty proceedings while concluding the assessment. In the absence of initiation of penalty proceedings in the order of assessment the proceedings u/s 271(1)(c) of the Act have to be held illegal and invalid and are liable to be quashed. 10. Apart from the above, we also find that in the show cause notice issued before imposing penalty u/s 271(1) .....

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tice 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 particula .....

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isfy 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. 8.2 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 .....

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f 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 relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty o .....

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ion 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, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particu .....

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tisfaction 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. .....

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ot 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 information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act .....

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ed in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, has 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, when the Assessing Officer proposes to in .....

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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 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 o .....

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tion 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 .....

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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 disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to i .....

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