TMI Blog2019 (3) TMI 328X X X X Extracts X X X X X X X X Extracts X X X X ..... ONER OF INCOME TAX, BANGALORE AND THE INCOME TAX OFFICER, WARD-6 (3) , BANGALORE VERSUS M/S SSA’S EMERALD MEADOWS [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] as relying on M/S MANJUNATHA COTTON AND GINNING FACTORY & OTHS., M/S. V.S. LAD & SONS, [2013 (7) TMI 620 - KARNATAKA HIGH COURT]imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. - ITA Nos. 2047 to 2050/Bang/2017 - - - Dated:- 27-2-2019 - Shri N.V. Vasudevan, Vice President And Shri B.R. Baskaran, Accountant Member For the Appellant : Smt. Suman Lunkar, CA For the Respondent : Shri R.N. Siddappaji, Addl.CIT(DR)(ITAT), Bengaluru. ORDER PER BENCH These are appeals by the Assessee against four orders, all dated 14.08.2017 of CIT(Appeals)-2, Panaji, Goa, relating to assessment years 2011-12 to 2014-15. In all these appeals, the Assessee has challenged the order of the CIT(Appeals) whereby the CIT(A) confirmed the order of the AO imposing penalty on the Assessee u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any immunity. 4. On appeal by the Assessee, the CIT(A) held that, but for the search, the Assessee would not have declared income in the return filed u/s.153C of the Act. The CIT(A) therefore confirmed the orders of the AO imposing penalty on the Assessee. 5. Aggrieved by the orders of the CIT(A), which are identical in all the aforesaid AYs, the Assessee is in appeal before the Tribunal. 6. The learned counsel for the Assessee filed an application for admission of additional grounds in each of the appeals, in which the Assessee has contended that the notice issued before imposing penalty was not accordance with law and on this ground the order imposing penalty should be quashed. Since this ground is a legal ground and can be decided on the basis of facts already available on record, we deem it proper and fit to admit the additional ground, keeping in mind the ratio of the Hon ble Supreme Court in the case of NTPC 229 ITR 383(SC) laying down the proposition that question of law which can be decided on facts available on record should be permitted to be raised before the Tribunal. 7. The learned counsel for the Assessee also drew our attention to the show cause notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Hon ble Supreme Court in the case of MAK Data (P) Ltd. (supra) has to be understood in the context of the facts of the said case. The relevant portion of the judgment in the aforesaid case, reads thus:- 9. We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer 8 deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spinning Mills Ltd., (supra) and therefore cannot be followed. The same reasoning would apply to the decision of the ITAT Bangalore in the case of Jayson Infrastructure India Ltd. (supra) . 15. The learned DR relied on the decision of Mumbai ITAT in the case of Mahesh M. Gandhi Vs. ACIT Vs. ACIT ITA No.2976/Mum/2016 dated 27.2.2017 . In the case of Mahesh M. Gandhi (supra) the Mumbai ITAT held that the decision of the Hon ble Karnataka High Court in the case Manjunatha Cotton Ginning (supra) will not be applicable to the facts of that case, because the AO in the assessment order while initiating penalty proceedings has held that the Assessee had concealed particulars of income and merely because in the show cause notice u/s.274 of the Act, there is no mention whether the proceedings are for furnishing inaccurate particulars or concealing particulars of income, that will not vitiate the penalty proceedings. This decision is contrary to the decision of Hon ble Karnataka High Court which is the jurisdictional High Court, as far as the Bangalore Benches of ITAT are concerned and is therefore not binding. 16. The Hon ble Karnataka High Court in the case of CIT Anr. v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice 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. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clauses will lead to an inference as to non-application of mind. 17. The final conclusion of the Hon ble Court was as follows:- 63. In the light of what is stated above, what emerges is as under:- a) Penalty under Section 271(1)(c) is a civil liability. b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(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(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 assessment order passed, at least, a direction to initiate proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in so far 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 penalty proceedings. (emphasis supplied) 18. It is clear from the aforesaid decision that on the facts of the present case the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. The Hon ble Karnataka High Court in the case of CIT vs. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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