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Kartik Mehra Versus D.C.I.T., Central Circle-XVIII, Kolkata

2016 (9) TMI 595 - ITAT KOLKATA

Penalty u/s.271(1)(c) - defective notice - Held 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. - As find from the show cause notice that the AO has not even indicated the section under which penalty is sought to be levied on the assessee. 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 .....

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d the order of the CIT(A) whereby the CIT(A) has confirmed the order 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 t .....

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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 the assessed income of ₹ 4,25,402/-. While completing the assessment, the AO initiated penalty proceedings u/s 271( 1)( c) of the Act for not disclosing the income of ₹ 4,00,000/- in the original return. During th .....

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ncorrect particulars of his income. Since, concealment involves penal action, it has to be proved as a conscious act. In other words, the mere fact that certain amounts claimed by the assessee have been disallowed and treated as income does not necessarily lead to the conclusion that the assessee is guilty of fraud or willful neglect. It was submitted by the assessee that the fact that the explanation to section 271(1)(c) requires the assessee to show that there was no fraud or willful negligenc .....

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the original return of income filed u/s 139. Therefore, he imposed the penalty of ₹ 92,001/-. 4. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. Hence this appeal by the Assessee before the Tribunal. 5. Before us a preliminary 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 271(1)(c) of the Act dated 31.12.2010 issued by the AO before imposing the penalty u/s 271(1)(c) of the Ac .....

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ght 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 la .....

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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 notice u/s.274 of the Act which is in a printed form does not strike out as to whether .....

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. 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 proceedi .....

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TION 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 of the authority which has passed the order. However, if the existence of the conditio .....

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ceedings 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 nature and he had to pay penalty from 100% to 300% of the tax liabi .....

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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 satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is .....

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n 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 pena .....

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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 inaccu .....

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. 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 nonapplication 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 element for imposing penalty for breach of civil obligations or liabilities. c) Willful conce .....

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tion 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 t .....

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earthing 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 imposing penalty could be passed. m) If the explanation offered, even though not subs .....

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n, 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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