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2016 (2) TMI 934 - ITAT KOLKATA

2016 (2) TMI 934 - ITAT KOLKATA - TMI - Penalty u/s 271 (1)(c) - non recording of satisfaction in the order of assessment - 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 - Decided in favour of assessee - ITA No.997/Kol/2011, ITA No.1188/Kol/2011 - Dated:- 3-2-2016 - Hon ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM] For the Assessee Shri A.K.Tulsiyan, FCA ORDER Per Shri N.V.Vasudevan, .....

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the authorities are silent as to whether any order u/s 143(3) of the Act or any intimation u/s 143(1) of the Act was issued on the return of income filed by the assessee. A Search and seizure operation was carried out u/s 132 of the Act on 23.11.2007 in the case of the assessee. The assessee is engaged in mining of iron ore, manufacturing 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 o .....

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,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 ₹ 4.3 crores was made by the assessee. There .....

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itled to immunity provided under Explanation 5A to section 271(1) (c) of the Act. The stand of the assesee was that the disclosure made in the return of income filed u/s 153A of the Act was true and full and disclosure made in good faith and in pursuance of disclosure made u/s 132(4) of the Act. The contention of the assessee did not favour either to the AO or CIT(A). Penalty was accordingly imposed on the assessee for the aforesaid assessment years u/s 271(1)(c) of the Act. 4. Aggrieved by the .....

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he order of assessment is not in accordance with law. 5.1. The learned counsel for the Assessee drew our attention to the show cause notice issued u/s.274 of the Act before imposing penalty and submitted that the said notice does not specify as to whether the Assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income . He pointed out that the printed show cause notice does not strike out the irrelevant portion viz., furnished inaccur .....

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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 .....

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ulars of such income . 7.1. 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 .....

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o 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 274, they could conveniently refer to the said order which contains the satisfact .....

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lty 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 pre .....

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rticulars 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 o .....

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swer. 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 .....

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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 r .....

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to 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 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 ele .....

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ce 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 .....

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alty, 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 bonafide, an or .....

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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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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 proceed .....

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