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2016 (11) TMI 1030 - ITAT KOLKATA

2016 (11) TMI 1030 - ITAT KOLKATA - TMI - Penalty u/s. 271(1)(c) - AO failed to cut the irrelevant portion of the printed Show cause notice - assessee contended that, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income - Held that:- In the present case the AO failed to strike out the irrelevant portion in the said show cause notice, respectfully following the order above, we cancel the penalty levied u .....

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the assessee by way of additional ground for both the assessment years 2006-07 & 2007-08 are allowed, in view of the same the other grounds raised requires no adjudication, therefore, all are dismissed. - I.T.A Nos. 736 & 737/Kol/2013 - Dated:- 27-5-2016 - Shri P.M. Jagtap , Accountant Member And Shri S. S Viswanethra Ravi, Judicial Member For the Appellant/assessee : Shri Amit Kumar, ACA, ld.AR For the Respondent/assessee: Shri Kalyan, ld.DR ORDER Shri S. S. Viswanethra Ravi, JM These appeals o .....

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nalty amounting to ₹ 23,56,670/- u/s. 271(1) ( c) of the Income Tax Act, 1961 @ 100% of the tax alleged to be sought to be evaded on the amount of additional income voluntarily disclosed by the assessee u/s. 132(4) and included in the return filed u/s. 153A of the Act. The penalty so levied is unjustified and need to be deleted. 3. Subsequently, the assessee has raised following additional ground of appeal for both the assessment years under consideration:- 1) That the Ld. AO erred in not .....

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ng the material available on record, we admit the additional ground as raised by the assessee since the issue involved therein is a legal issue and all the facts necessary for adjudication thereof are already on record. 4. Brief facts of the case are that a search and seizure operation was conducted u/s. 132 of the Act in the Aroma Group of cases on 27-02-2009. The assessee filed his return of income on 12-11-2010 declaring total income of ₹ 72,34,300/- in response to notice dated 02-09-20 .....

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fter considering the various submissions/papers of the assessee assessed the total income of the assessee at ₹ 72,34,300/- by stating as under:- During the course of .search .and seizure operations conducted at the residential premises of the assessee, cash amounting to ₹ 1,08,34,500/- was found. The amount of cash found has been owned up by the assessee and the same has been considered as application of funds out of his income disclosed u/s 132(4). During the course of search and se .....

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weight 1859.040 gm and valued by the departmental valuer at ₹ 21,58,1571- was made. Out of the total jewellery found, jewellery of net weight 331.50 (being item nos. BKT/05 and BKT/07) valued at ₹ 5,10,8701-has been owned up by the assessee and the same has been considered as application of funds out of his income disclosed u/s 132(4). The remaining jewellery items of net weight of gold 3367.70 gm and diamond of 27.10 carat have been found to form part of the jewellery disclosed by .....

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rticles of gross weight 30.00 kg and valued at ₹ 6,90,000/- were owned up by the assessee and the same have been considered as application of funds out of his income disclosed u/s 132(4). The remaining silver utensils and articles weighing 16.381 kg have been found to form part of the silver utensils and articles disclosed by various members of the assessee's family as per their Wealth Tax returns. During the course of search and seizure operations conducted at the residential premises .....

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s application of funds out of his income disclosed u/s 132(4) for the AY 2006-07. In the disclosure petition filed u/s 132(4), the assessee had disclosed an amount of ₹ 15,00,00,000/- as his undisclosed income. 5. Thereafter, the AO issued notice u/s. 274 r.w.s 271 of the Act dated 30- 12-2010 to the assessee to show cause why penalty be imposed for both the assessment years under consideration. In response to such notice, the assessee submitted as under:- 5. The disclosure of income was m .....

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hat As such the income disclosed suo moto by the assessee in the return filed cant be treated as concealed income. 6. The assessee has cited explanation 5A to section 271(1)9 c) and tried to explain that the amount of ₹ 70,00,000/-, which is undisclosed income for the assessment year 2006-07 has been covered in the disclosure petition filed by Sri Vaibhav Tulsyan along with the source from which such undisclosed income was earned. It was also stated that the entire tax along with interest .....

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only to cover up and take care of the omissions and mistakes in the seized documents. The CIT(A) confirmed the impugned penalty by observing as under:- In the instant case search u/s. 132 was conducted on 27.02.2009 i.e after 01.06.2007. The appellant had admitted additional undisclosed income for the A.yrs 2006-07 and 2007-08 to cover up and take care of the omissions/mistakes in the seized documents. That means the additional undisclosed income was admitted based on seized documents and previo .....

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.Y 2006-07 and ₹ 25,13,837/- for A.Y 2007-08 in these cases is confirmed. 8. Aggrieved, the assessee is in appeal before us by raising the additional ground of appeal as above. 9. During the course of hearing before us the Ld. Counsel for the assessee submitted and prayed to decide the preliminary issue being additional ground as raised by the assessee before us. The ld. Counsel also submitted that the AO has not recorded any satisfaction as to whether the assessee has concealed his income .....

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in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), wherein it has been held that the notice issued 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. He also relied on the order of the Tribunal in the case of Suvaprasanna Bhattacharya Vs. ACIT, Cir- 55, Kolkata dated 06-11-2015. On the contrary, the ld. DR has relie .....

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the Hon ble Karnataka High Court supra. That on perusal of the said show cause notice dated 30-12-2010 issued u/s. 274 r.ws. 271(1)( c) of the Act purportedly issued to show cause why the penalty shall not be imposed, We find that irrelevant portion of such notice was not struck out by the AO. Therefore, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income. We find that the assessee as relied on the ord .....

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culars of such income . 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 spell out as to whether the penalty proceedings are sought to be levied for furnishing inaccurate particulars of income or concealing particulars of such income . 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 .....

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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. 5.1 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 .....

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xplanation-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 stipul .....

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tisfy 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 .....

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nd the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those 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 proce .....

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ts 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 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). C .....

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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 case for furnishing inaccurate particulars of income. The standard pro forma without striking o .....

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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 conc .....

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f 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 .....

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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 .....

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nalty 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 inc .....

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