TMI Blog2017 (8) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... ton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) observed that the condition precedent for levying the penalty is the satisfaction of the authority that there is a concealment of the particulars of the income or inaccurate particulars are furnished to avoid payment of tax. Where the assessee offers an explanation and substantiate the explanation, the question of imposing penalty would not arise. Even in cases where he fails to substantiate the explanation but if he proves that the explanation offered is a bonafide one and all the facts relating to the same and material to the computation of his total income has been disclosed by him, then, in law, a discretion is vested with the authority not to impose penalty. If the assessee offers explanation but fails to substantiate the same, but if he proves that explanation offered is bonafide but is not Sufficient to substantiate the explanation and discloses all material for the computation of his total income, the question of imposing penalty would not arise. Issue of improper show cause notice - Held that:- Notice issued by Assessing Officer u/s 274 read with section 271(1)(c) was bad in law, as it did not specify under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/-. 3. Thereafter, the AO initiated penalty proceedings u/s 271(1)(c) and issued a notice u/s 274 r.w.s. 271 dated 31/03/2015 on the ground that the assessee had declared additional income as a result of survey operations carried out in the case of M/s Nikhil Refineries Pvt. Ltd. and further observed that the assessee did not file his return of income within the due date as specified in section 139(1) of the Act. However, the original return of income for the AY under consideration was filed on 06/02/2013 for the first time, subsequent to the survey. 3.1 In response to the said notice, the assessee submitted that the additional income of ₹ 1.40 crores is that which was agreed to be offered during the course of survey proceedings in the case of M/s Nikhil Refineries Pvt. Ltd. and that he had paid the taxes due thereon on such agreed disclosure. He further stated that he had neither concealed the particulars nor had furnished inaccurate particulars of his income. He stated that the additional was offered during survey proceedings to buy peace with the department. 3.2 After considering the submissions of the assessee as well as referring to the provisions of 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concealment of particulars of income or a case of furnishing inaccurate particulars of such income. 6.1 Ground Nos. 5 to 12 are argumentative in nature, hence, need no adjudication. 7. Ld. AR of the assessee submitted that the CIT(A) failed to appreciate that the additional income agreed to be offered in the hands of the company was on account of the difficulty faced by the company to get confirmations from investors who had applied for the shares of the company due to non-cooperation by such investors. He submitted that no concealment of income was ever detected by the department in the case of assessee and the income returned by the assessee included the additional income agreed to be offered in the course of survey in the case of the company to buy peace with the department. Ld. AR submitted that the CIT(A) failed to appreciate that the AO has levied penalty on misunderstanding of the law and the order of the AO disclosed that the AO is not clear whether it is a case of concealment of particulars or a case of furnishing inaccurate particulars of income. He relied on the following cases: 1. CIT Vs. M/s Manjunatha Cotton and Ginning Factory, [2013] 359 ITR 565 (KAR) 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Manjunatha Cotton Ginning Factory (supra), the Hon ble Karnataka High Court has observed that the condition precedent for levying the penalty is the satisfaction of the authority that there is a concealment of the particulars of the income or inaccurate particulars are furnished to avoid payment of tax. Once the authority comes to such conclusion, the law mandates that before imposing penalty, the assessee must be heard. The assessee is given the opportunity to offer his explanation. Once such an opportunity is given and the assessee fails to offer the explanation or offers explanation which is found to be false, then the penalty will follow as prescribed under sub-clause (iii) of clause (c) of sub-section (1) of section 271. Where the assessee offers an explanation and substantiate the explanation, the question of imposing penalty would not arise. Even in cases where he fails to substantiate the explanation but if he proves that the explanation offered is a bona fide one and all the facts relating to the same and material to the computation of his total income has been disclosed by him, then, in law, a discretion is vested with the authority not to impose penalty. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. 10. As regards the issue of improper show cause notice, we find that the AO did not specify to mention whether the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. The issue is squarely covered by the decision of the Hon ble Supreme Court in the case of CIT Vs. SSA s Emerald Meadows, [2016] 73 Taxmann.com 248 (SC) wherein the Apex Court upheld the decision of the Hon ble High Court, in which, the Hon ble High Court confirmed the order of the Tribunal and dismissed the appeal of the revenue, who came in appeal against the order of the Tribunal. The Tribunal relying on a decision of Karnataka High Court in case of CIT Vs. Manjunatha Cotton Ginning Factory, [2013] 359 ITR 565/210 allowed the appeal of the assessee holding that notice issued by Assessing Officer u/s 274 read with section 271(1)(c) was bad in law, as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated, i.e. whether for concealment of particulars of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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