TMI Blog2017 (2) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... olkata 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 revenue are against the reduction of penalty amount from 300% to 100% against the order of ld CITA. The appeals of the assessee are against the confirmation of levy of penalty @ 100% by the ld CITA. Since issues are identical we have taken up all the appeals together for hearing and dispose of the same by this consolidated order. 2. The only issue to be decided in all these appeals is as to whether the penalty u/s 271(1)(c) of the Act could be levied in respect of income offered after the search 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have come forward with the disclosure of undisclosed income and hence penalty is leviable thereon. The ld AO levied penalty as under for various assessment years :- Asst Year Amount of Penalty Remarks 2004-05 32,139 300% 2005-06 21,91,752 300% 2006-07 17,67,795 300% 2007-08 22,43,964 300% The ld CITA on first appeal upheld the 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 income or furnished inaccurate partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has considered the effect of Sec. 271(1B) of the Act, in the light 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 of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings; (iii) prima facie satisfaction of the AO that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. Obviously, the AO would arrive at a decision, i.e., a final conclusion only after hearing the assessee; (iv) at the stage of initiation of penalty proceeding the order passed by the AO need not reflect satisfaction vis-a-vis each and every item of addition or disallowance if overall sense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present 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. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of 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 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 order imposing penalty could be passed. m) If the explanation offered, ev ..... 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