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2018 (8) TMI 673

capital gain into capital gain and business income and thereafter recomputed the capital gain on the basis of the cost of acquisition adopted by the AO. The AO has also disallowed the claim of deduction U/s 80C of the Act of ₹ 16,000/- for want of required evidences. - Held that:- It is pertinent to note that in the show cause notice, the Assessing Officer has mentioned the charge as the assessee furnished inaccurate particulars of income or concealed the particulars of income whereas in the order passed U/s 271(1)(c), the Assessing Officer has stated that the assessee has furnished inaccurate particulars of income and concealed his income, therefore, the charge in the show cause notice is not certain whereas the levy of penalty in the impugned order is for both the limbs which is inconsistent with the charge as mentioned in the show cause notice. The findings of the Assessing Officer in the order passed U/s 271(1)(c) holding the assessee guilty of charge of furnishing inaccurate particulars of income and concealment of income is also contrary to the facts of the case. - This action of the Assessing Officer bifurcating is based on the premises that the development wo .....

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Further the Assessing Officer has also recomputed the cost of acquisition and adopted the fair market value of the land in question as on 01/4/1981 at ₹ 3196/- and after indexation cost of acquisition was determined by the Assessing Officer at ₹ 25,089/- as against the cost of acquisition computed by the assessee as on 01/4/1981 at ₹ 98,125/-. Thus, the Assessing Officer has made the addition by bifurcating the capital gain into capital gain and business income and thereafter recomputed the capital gain on the basis of the cost of acquisition adopted by the Assessing Officer. The Assessing Officer has also disallowed the claim of deduction U/s 80C of the Act of ₹ 16,000/- for want of required evidences. The Assessing Officer initiated the proceedings for levy of penalty U/s 271(1)(c) of the Act in respect of additions made in the assessment order and further by issuing show cause notice dated 23/3/2015. The Assessing Officer finally levied the penalty of ₹ 99,750/- being 100% of the tax sought to the evaded. 3. The assessee challenged the action of the Assessing Officer before the ld. CIT(A) but could not succeed. 4. Ground No. 1 of the appeal is regar .....

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me were sold, therefore, the Assessing Officer in the assessment proceedings bifurcated the gain arising from the sale of the plots into two parts as per provisions of Section 45 of the Act and assessed the capital gain on the date of conversion of the asset into stock in trade and then profit arising thereafter was assessed as business income. Therefore, it is clear case of furnishing inaccurate particulars of income by the assessee attracting the penal provision U/s 271(1)(c) of the Act. He has relied upon the orders of the authorities below. 6. We have heard the rival submissions as well as the relevant material available on the record. The assessee has raised the legal ground of validity of initiation of proceedings and consequential order passed by the Assessing Officer U/s 271(1)(c) of the Act. We note that in the assessment order, the Assessing Officer, though, recorded its satisfaction for initiating the penalty proceedings, however, except the term this issue is fit for initiating the penalty proceedings , the Assessing Officer has not mentioned whether it is a case of concealment of particulars of income or furnishing inaccurate particulars of income. Similarly, in the no .....

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is 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 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 340 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different conn .....

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is some record somewhere, even apart from the assessment order itself, that the Assessing Officer has recorded his satisfaction that the assessee is guilty of concealment or other default for which penalty action is called for. Indeed, in certain cases, it is possible for the Assessing Officer to issue a penalty 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 .....

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274 of the Act should specifically state the grounds mentioned in Section 271(l)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars 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 l .....

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o invalid. Hence, in view of the fact that the Assessing Officer has not specified the limb and charge for initiation of penalty proceedings in the show cause notice then the impugned order passed by the Assessing Officer is not sustainable and liable to be quashed. 6.1 It is pertinent to note that in the show cause notice, the Assessing Officer has mentioned the charge as the assessee furnished inaccurate particulars of income or concealed the particulars of income whereas in the order passed U/s 271(1)(c), the Assessing Officer has stated that the assessee has furnished inaccurate particulars of income and concealed his income, therefore, the charge in the show cause notice is not certain whereas the levy of penalty in the impugned order is for both the limbs which is inconsistent with the charge as mentioned in the show cause notice. The findings of the Assessing Officer in the order passed U/s 271(1)(c) holding the assessee guilty of charge of furnishing inaccurate particulars of income and concealment of income is also contrary to the facts of the case. The penalty in this case was levied against the addition made on account of bifurcation of capital gain into two parts one as .....

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business activity when the land in question was otherwise accepted by the Assessing Officer up till this year as capital asset. Further the assessee was holding this land as a successor and the cost of acquisition was determined by estimation of fair market value as on 01/4/1981, therefore, the addition made by the Assessing Officer on both the counts would not amount to concealment of income or furnishing of inaccurate particulars of income. Even otherwise it is a bonafide claim of assessee to offer the entire gain as long term capital gain arising from sale of the land in question which is the only transaction of sale and no transaction of purchase. So far as the penalty levied on account of addition made by the Assessing Officer in respect of sale of land in question, the same is otherwise not sustainable on the merits of the case. 7.1 As regards the penalty levied for disallowance of claim U/s 80C of the Act of ₹ 16,000/-, the Assessing Officer has disallowed the same for want of production of evidence. Though, it was not a case of the Assessing Officer that the assessee has made bogus claim but during the assessment proceedings, the assessee being the agriculturists cou .....

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