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2017 (2) TMI 514 - ITAT KOLKATA

2017 (2) TMI 514 - ITAT KOLKATA - TMI - Penalty u/s. 271(1)(c) - income offered after the search but in the return filed u/s 153A - Defective notice - Held that:- We find from the perusal of the show cause notice issued u/s 274 read with section 271(1)(c) of the Act, the ld AO had merely made a tick mark without mentioning the specific charge of offence and without strucking off the relevant portion in the show cause notice as to whether the assessee had concealed his income or furnished inaccur .....

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ee and revenue are arising out of separate orders of CIT(A), Central-I, Kolkata vide Appeal Nos. 95 to 98/CC-XI/CIT(A),C-1/10-11 dated 27.09.2011. Assessments were framed by DCIT, Central Circle-XI, Kolkata u/s. 153A/143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AYs 2004-05 to 2007-08 vide his order dated 31.12.2009. Penalty u/s. 271(1)(c) of the Act was imposed by DCIT, Central Circle-XI, Kolkata vide his order dated 21.06.2010 and 22.06.2010. The appeals of the r .....

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but in the return filed u/s 153A of the Act. 3. The brief facts of this issue is that a search and seizure operation was conducted on 24.1.2008 u/s 132 of the Act at the residence of the assessee at 3rd floor, New India Assurance Co Ltd Building, G.S.Road, Guwahati on 24.1.2008 besides conducting search in various factory and residential premises of the group. Besides a search and seizure operation was conducted at Locker No. 26 of HDFC Bank, Bhangagarh, Guwahati and some jewelleries were found. .....

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and based on the information gathered from inspection of the seized records, the actual extent of undisclosed income could be ascertained by the assessee. But in the meanwhile, the assessee had to file the returns in response to notice u/s 153A of the Act at a lesser figure. After inspection of the seized records and on ascertaining the actual extent of undisclosed income, the assessee offered additional income during the course of section 153A proceedings and revised the computation of income. .....

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th the assessment proceedings by making proper disclosure of undisclosed income and paying taxes due thereon with interest and search assessments were completed accepting such undisclosed income declared by the assessee and proper clarifications were given for each and every seized documents. Accordingly it was pleaded that there was no conscious or deliberate concealment of income or furnishing of inaccurate particulars of income on the part of the assessee warranting any levy of penalty. But t .....

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e levy of penalty but reduced the same to 100% of tax sought to be evaded. Aggrieved, both the assessee as well as the revenue are in appeals before us. 4. The ld AR placed on record the copy of the show cause notice issued u/s 274 rws 271(1)(c ) of the Act for all the asst years under appeal by pointing out that the ld AO had merely made a tick mark on the said notice without mentioning the specific charge of offence committed by the assessee i.e. whether he had concealed the particulars of inc .....

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in CC No. 11485/2016 dated 5.8.2016. He argued that this appeal to Hon ble Apex Court had emanated against the order passed by the Hon ble Karnataka High Court which placed reliance on its earlier decision in the case of CIT vs Manjunatha Cotton and Ginning Factory reported in (2013) 359 ITR 565 (Kar). He argued that hence the ratio laid down by the Hon ble Karnataka High Court in 359 ITR 565 (supra) had been approved and upheld by the Hon ble Supreme Court in the case referred supra. The ld AR .....

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cord. We find from the perusal of the show cause notice issued u/s 274 read with section 271(1)(c) of the Act, the ld AO had merely made a tick mark without mentioning the specific charge of offence and without strucking off the relevant portion in the show cause notice as to whether the assessee had concealed his income or furnished inaccurate particulars of income. Reliance was placed on the decision of the Hon ble Karnataka High Court in the case of CIT vs Manjunatha Cotton and Ginning Factor .....

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t of the decision of the Hon ble Delhi High Court in the case of Ms.Madhushree Gupta Vs. Union of India 317 ITR 107(Del) and held that the penalty in such cases pursuant to defective show cause notice is not leviable, wherein it was held :- In the result, conclusions are as follows : (i) sec. 271(1B) is not violative of Art. 14 of the Constitution; (ii) the position of law both pre and post amendment is similar, inasmuch, the AO will have to arrive at a prima facie satisfaction during the course .....

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der passed by the AO need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense gathered from the order is that a further prognosis is called for; (v) however, this would not debar an assessee from furnishing evidence to rebut the prima facie satisfaction of the AO; since penalty proceeding are not a continuation of assessment proceedings; (vi) due compliance would be required to be made in respect of the provisions of ss. 274 and 275; (vii) the proc .....

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vide order dated 26.8.2016 supra had held as under :- 5.5. We have also perused the show-cause notice issued u/s.274 of the Act for all the aforesaid AYs 2003-04 to 2007-08. The AO in the said show cause notice has not struck off the irrelevant portion as to whether the charge against the Assessee is concealing particulars of income or furnishing of inaccurate particulars of income . In this regard, this tribunal in the case of Shri Satyananda Achariya Biswas Vs. DCIT ITA No.5/Kol/2010 order dat .....

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ct 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 . 9.1. 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 .....

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e to be held as bad in law and liable to be quashed. 9.2. 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. If the order passed by the Authority categorically records a finding regarding the exi .....

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f 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 stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The prac .....

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stice 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. .....

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pportunity 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 proceedings may be valid and legal, the final order imposing penalty would offend principles .....

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r 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). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessin .....

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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 proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. The final .....

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71. 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 ass .....

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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 to be admitted and if not it would have escaped from tax net and as opined by the assessi .....

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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. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in .....

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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 i .....

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