TMI Blog2016 (9) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... idual having and deriving his income from profession, deed preparation and other sources etc... The assessee filed his return of income on 11-07-2005 declaring total income of ₹ 1,47,500/-. Under scrutiny, notices U/sec 143(2) and 142(1) were issued. During such proceedings, the AO found that the assessee made investments in mutual funds to a tune of ₹ 13,78,075/- which the assessee did not disclose to that extent and filed revised statement and an assessment order dt:19-12-07 was passed u/sec 143(3) adding such amount to the total income of the assessee.. The Assessing officer has initiated the penalty proceedings u/s. 271(1) (c) for not disclosing the income of the assessee. Aggrieved, the assessee preferred an appeal before the ld.CIT(A). Before the ld. CIT(A) the contention of the assessee was that he was not aware of accounting procedure. But, on being asked by the AO in the scrutiny proceedings, the assessee disclosed and offered the said amount for taxation. The ld. CIT(A) confirmed the order of the Assessing Officer in imposing penalty u/s. 271(1)( c) of the Act. Aggrieved, the assessee is in appeal before us. 4. During the course of arguments the ld. AR for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty 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. 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 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 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate 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 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 order imposi ..... 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