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TMI Blog2016 (2) TMI 934X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing of sponge iron and trading in liquor. Pursuant to the search, an order of assessment u/s 153A r.w.s. 143(3) of the Act was passed on 31.12.2009. In the said order AO made an addition of Rs. 4,30,00,000/-. The addition was made on the basis of the seized documents marked as TPS-9 at pages 3,4,15 and 16 found in the course of search. The documents seized evidenced the assessee having received a sum of Rs. 4,20,97,077/.- from Sree Metalik Ltd. It was stated that the said sum was received for supply of materials to the party and was not recorded in the regular books of account of the assessee. The assessee offered to tax income of Rs. 4,30,00,000/- on the basis of the seized documents. The said sum was declared in the return of income filed in response to the notice u/s 153A of the Act. The same was brought to tax by the AO. The disclosure in the return of income was made pursuant to disclosure made in the statement u/s 132(4) of the Act. In the order of assessment AO has not recorded any other fact except the seizure of documents in the course of search based on which disclosure of Rs. 4.3 crores was made by the assessee. There is no other adverse observation in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome" or "concealed particulars of income" by striking out the irrelevant portion of printed show cause notice, than the imposition of penalty on the basis of such invalid show cause notice cannot be sustained. 6. None appeared on behalf of the Revenue. We proceeded to decide the appeal after hearing the submissions of the learned AR. 7. We have considered the submissions of the learned AR. The argument of the learned counsel for the Assessee was that the show cause notice u/s.274 of the Act which is in a printed form and the AO has indicated in the said notice as to whether the penalty is sought to be levied on the assessee for "furnishing inaccurate particulars of income" or "concealing particulars of such income" by striking off the irrelevant portion of the printed show cause notice. 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 particulars of such income". 7.1. The Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rious 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 particulars 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 satisfaction 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 sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for furnishing inaccurate particulars of income. The standard proforma 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 element 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 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 assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings." (emphasis supplied) 7.3. It is clear from the aforesaid decision that on the facts of the present case 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. Following the decision of the Hon'ble Kar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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