TMI Blog2014 (6) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant by : Shri H. Naginchand Khincha, C.A. Respondent by : Shri Farahat Hussain Qureshi, CIT-II(DR) ORDER Per Bench ITA Nos.265 to 267/Bang/14 are appeals against the common order dated 20.06.2012 of CIT(Appeals)-VI, Bangalore relating to assessment years 2006-07, 2008-09 2009-10. 2. In all these appeals, the assessee has challenged the order of the CIT(Appeals) confirming the orders of the Assessing Officer imposing penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (Act) on the assessee. 3. The facts and circumstances under which penalty u/s. 271(1)(c) of the Act was imposed by the AO on the assessee are as follows. The assessee is an individual. A search and seizure operation u/s. 132 of the Act was carried out on 20.11.2009 in the case of the assessee, who belongs to M/s. Gold Finch Hotels Group. Subsequently orders of assessment were passed u/s. 143(3) r.w.s. 153A of the Act for the A.Y. 2006-07 assessing the total income at ₹ 1,37,19,154 which was the income returned in the return of income filed u/s. 153A of the Act. It is worthwhile to note that in the return filed u/s. 139 of the Act, the income declared was only ₹ 32,30,690. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed u/s. 271(1)(c) of the Act. 8. On the above objections, we have heard the parties at length. A copy of the show cause notice issued u/s. 274 of the Act for the A.Y. 2006- 07, 2008-09 2009-10 is placed at pages 11, 12 13 of the assessee s paperbook, the same is given as Annexures-I, II III to this order. 9. It is worthwhile mentioning that all the penalty orders for the three assessment years have been passed by the AO u/s. 271(1)(c) of the Act. Perusal of the show cause notice u/s. 274 for the A.Y. 2008-09 and 2009- 10 shows that the show cause notice is one purported to have been issued u/s. 271AAA of the Act. The provisions of section 271AAA read as follows:- Penalty where search has been initiated. 271AAA. (1) The Assessing Officer may, notwithstanding anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of June, 2007 but before the 1st day of July, 2012, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him, a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year. (2) Nothing con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclose in the show cause notice as to whether penalty is being levied u/s.271AAA of the Act or u/s.271(1)( c) of the Act. 11. The ld. counsel for the assessee submitted before us that the show cause notice issued u/s. 274 of the Act does not specify as to whether penalty proceeding is being initiated for concealing particulars of income or furnishing inaccurate particulars of income or for any other reason as irrelevant columns of the printed form of notice u/s. 274 have not been struck off by the AO. It was further pointed out that for the A.Ys. 2008-09 and 2009-10, penalty proceedings in the show cause notice is claimed to have been initiated u/s. 271AAA of the Act, whereas the penalty has been imposed u/s. 271(1)(c) of the Act. 12. The ld. counsel for the assessee drew our attention to the decision of the Hon ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), wherein the Hon ble High Court 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 said g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to nonapplication of mind. 15. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offended. On the basis 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. 16. 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. The show cause notice is also bad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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