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2016 (9) TMI 595

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..... of the Assessing Officer (AO), imposing penalty on the Assessee u/s.271(1)( c) of the Income Tax Act, 1961 (Act). 3. The facts of the case are that the search operation u/s 132 of the Act was conducted in Kaushalya Group of cases on 26.03.2009 at various business premises and the residential premises of the directors and associates. During the course of search incriminating documents were found and seized relating to various assessees of the group which revealed the fact that they had earned the undisclosed income in different assessment years. The group made total disclosure of ₹ 6 crore in the hands of various assessees of the group. In the case of instant assessee i.e. Shri Kartik Mehra disclosure of additional income of ₹ 7,96,291/- was made for A.Y. 2004-05 to A.Y. 2007-08. For the year under consideration the assessee made disclosure of ₹ 4,00,000/-. The assessee filed his return of income for the year declaring total income of RSA,25,402/- which includes the additional income of ₹ 4,00,000/-. The original return of income was Wed on 06.12.2004 wherein the aforesaid . additional income was not declared. The assessment was by the on 31.12.2010 at .....

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..... ticulars of income. The ld. Counsel placed reliance on the decision of ITAT, Kolkata Bench in the case of Suvaprasanna Bhattacharya vs ACIT vide ITA No.1303/Kol/2010 order dated 06.11.2015 wherein this Tribunal took the view that in the absence of proper indication in the show cause 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 CIT(A). 6. We have considered the rival submissions. In ground no.1 the assessee has submitted that the order of the CIT(A) was bad in law. This ground , in our opinion, is sufficient to raise the plea that the show cause notice u/s 274 of the Act being defective and the consequent imposing of penalty is not legal. So far as the merits of the submissions made by the ld. Counsel for the assessee is concerned we find from the show cause notice that the AO has not even indicated the section under whic .....

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..... 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 of 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 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 presumption is serious in nat .....

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..... , when passed, was not sustainable . 61. The Assessing Officer is empowered under the Act 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 reported 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 invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the c .....

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..... ssessee fails to prove that the explanation offered is not bona fide, an order 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 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 not satisfy requirement of law. r) The assessee should know the grounds which he has to m .....

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