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2016 (6) TMI 360 - ITAT KOLKATA

2016 (6) TMI 360 - ITAT KOLKATA - TMI - Penalty on the assessee u/s 18(1)(c) of the Wealth Tax Act - Held that:- The show cause notice u/s. 18(2) 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 in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, [2013 (7) TMI 620 - KARNATAKA HIGH COURT] we hold that the order imposing penalty has to be held as invalid and conseque .....

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rder of AO imposing penalty on the assessee u/s 18(1)(c) of the Wealth Tax Act, 1957 (Act). 3. The facts and circumstances under which the penalty was imposed on the assesee are as follows :- The Assessee is an individual. The assessee owned a property namely 36 & 98, Gorakshabasu road, Dum Dum, Kolkata. It was a bustee which was in adverse possession of anti-social elements. There was no income for several years in the past from this property. In A.Y.2007-08, in the assessment completed und .....

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assessee received a sum of ₹ 83,16,000/-. Since the property was sold during the previous year 2008-09 for a sum of ₹ 1,30,47,125/- the AO was of the view that there was taxable wealth for A.Y.2007-08 under the Act. Therefore proceedings u/s 17 of the Act were initiated against the assessee. 4. In response to the notice u/s 17 of the Act the assessee filed return of wealth on 31.01.2011 disclosing net wealth of ₹ 1,30,47,125/-. The same was accepted by the AO and the assessmen .....

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(1) of the Act. The order imposing penalty is silent on this aspect. The AO ultimately vide order dated 10.05.2012 imposing penalty on the assessee u/s 18(1)(c) of the Act. Order of the AO was confirmed by CWT(A) and gave rise to the present appeal by the assessee be3fore the Tribunal. 5. Before us the primary objection was raised by the ld. Counsel for the assessee. The ld. Counsel for the assessee brought to our notice the show cause notice u/s 18(2) of the Act dated 16.11.2011 issued by the A .....

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ause notice as to the ground on which penalty is sought to be imposed the order imposing penalty is liable to be held as bad in law and liable to be cancelled. The ld. DR on the other hand submitted that the assessee had not raised this ground before the first appellate authority or WTO and the assessee has also not raised a specific ground of appeal in this regard before the Tribunal. He relied on the order of CWT(A). 6. We have considered the rival submissions. In ground no.1 the assessee has .....

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e. The show cause notice also does not indicate as to whether penalty was sought to be levied on the assessee for concealing or furnishing inaccurate particulars of net wealth. The show cause notice is given as an annexure to this order. This Tribunal in the case of Suvaprasanna Bhattacharya vs ACIT (supra) took the following view on valid point of penalty when the show cause notice contains similar defect. The following were the relevant observations :- 8. The next argument that the show cause .....

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lars of such income . 8.1 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 s .....

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e followed in the matter of imposing penalty u/s.271(1)(c) of the Act. NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction .....

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on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presum .....

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culars 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 .....

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r. 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 .....

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t to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai repo .....

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invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard pro forma without striking of the relevant clauses will lead to an inference as to non-application of mind. 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 eleme .....

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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 S .....

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ty, 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 admitted and if not it would have escaped from 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 ord .....

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initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically 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 n .....

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