TMI Blog2018 (4) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 respectively. The assessee has raised the common grounds in these appeals. The grounds raised for the assessment year 2009-10 are reproduced as under:- 1. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in rejecting the legal contention of the assessee that the initiation and imposing of penalty proceeding is wrong, bad in law, in-valid and void-ab-initio as the ld AO initiated/imposed the penalty u/s 271(1)(c) of Income Tax Act, 1961 without specifying the limb for reasons in the penalty notice to impose the penalty i.e.. Whether it is for concealment of particulars of income or for furnishing of inaccurate particulars of income. 2. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the penalty u/s 271(1)(c) of I.T. Act, 1961 on the additional income of ₹ 29,01,920/- declared by the assessee in his return of income filed u/s 153A of the Act. 3. The assessee prays for leave to add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. 2. Ground no. 1 is regarding the validity of initiation of proceedings u/s 271(1)(c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is bad in law and void-ab-intio. The ld. AR has referred to the show cause notice issued by the AO u/s 274 r.w.s. 271 and submitted that the Assessing Officer has not specified the ground for which the penalty was proposed to be levied. In support of his contention, he has relied upon the decision of Hon ble Karnataka High Court in case of CIT vs. Manjunatha Cotton and Ginning Factory 359 ITR 565 as well as decision of Hon ble Supreme Court in case of CIT vs. SSA s Emerald Meadows 242 taxman 150. The ld. AR has also relied upon the decision of Hon ble of jurisdictional High Court in case of Sheveta Construction Company Pvt. Ltd vs. ITO vide decision dated 06.12.2016 in DB ITA No. 534/2008. Hence, the ld. AR of the assessee has submitted that when the AO has not specified the charge in the show cause notice then the assessee was not given an opportunity to explain and reply to the charge of the Assessing Officer. 4. On the other hand, ld. DR has submitted that the penalty is levied in respect of the surrender income which is undisclosed income of the assessee, therefore, the question of explaining the charge does not arise when the assessee himself has surrendered the income whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation 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 stipulated in Section 271(l)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of T. Ashok Pai v. CIT [2007] 292 ITR 11/161 Taxman 340at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of CIT v. Manu Engg. [1980] 122 ITR 306 and the Delhi High Court in the case of CIT v. Virgo Marketing (P.) Ltd. [2008] 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. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty notice or initiate penalty proceedings even long before the assessment is completed. There is no statutory requirement that the penalty order should precede or be simultaneous with the assessment order. In point of fact, having regard to the mode of computation of penalty outlined in the statute, the actual penalty order cannot be passed until the assessment is finalised. CONCLUSION 63. In the light of what is stated above, what emerges is as under: ( a) Penalty under Section 271(l)(c) is a civil liability. ( b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. ( c) Wilful concealment is not an essential ingredient for attracting civil liability. ( d) Existence of conditions stipulated in Section 271(l)(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(l)(c), at least the facts set out in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of income ( q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. ( r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is 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 insofar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded. 6. Another decision of Supreme Court in case of Dilip N. Shroff Vs. Joint commissioner of Income Tax Anr. (2007) 291ITR 519 (SC) it has been held as under It is of come significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non-application of mind. It was also bound to comply with the principles of natural justice. The Income Tax Officer had merely held that the assessee is guilty of furnishing of inaccurate particulars and not of concealment of income; which finding was arrived at also by the Commissioner of Income Tax and the Income Tax Appellate Tribunal. In the facts and circumstances of the case, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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