TMI Blog2019 (8) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... (11) TMI 1620 - KARNATAKA HIGH COURT] - Decided in favour of assessee. - ITA No.16/Bang/2019 - - - Dated:- 2-8-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P. Boaz, Accountant Member For the Assessee : Shri. C. V. Ravishankar, Advocate For the Revenue : Shri. Vikas Suryavamshi, Addl. CIT ORDER PER JASON P. BOAZ, A.M. This is an appeal by the assessee directed against the order dated 25.10.2018 of CIT(A), Hubli, relating to Assessment Year 2008-09 whereby the CIT(A) confirmed the order of the Assessing Officer (AO) dated 26.03.2018 imposing penalty of ₹ 4,79,920/- on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ) for concealment of particulars of its income. 2. Briefly stated, the facts relevant for disposal of this appeal are as under:- 2.1 The assessee firm was engaged in business as retail traders in food articles, essence and colouring items, etc. No return of income was filed for Assessment Year 2008-09 within the specified date i.e., 30.09.2008. Notice under section 142(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion; the additional grounds are to be admitted for consideration and adjudication. In coming to this finding, we drew support, inter alia, from the decision of the Hon ble Apex Court in the case of NTPC Ltd., Vs. CIT in (229 ITR 383) (SC). 4. Additional Grounds of Appeal 4.1 In support of these additional grounds (supra) raised before the Tribunal, the learned Counsel for the assessee contended that the CIT(A) failed to follow the binding decision of Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory 359 ITR 565 (Kar). It was submitted that since the notice issued under section 274 r.w.s 271(1)(c) of the Act dated 26.11.2010 for initiating proceedings for imposing penalty under section 271(1)(c) of the Act was not in accordance with law, based on these additional grounds, the order imposing penalty should be quashed. The learned Counsel for the assessee also drew out attention to the show cause notice issued under section 271(1)(c) of the Act for initiating penalty proceedings dated 26.11.2010 and submitted that the said notice does not specify as to whether the assessee is guilty of having furnished inaccurate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act wherein the AY was not mentioned and period within which the return was to be filed was not mentioned. The defect was held to be curable under section 292B of the Act. The same reasoning cannot be applied in the context of show cause notice under section 271(1)(c) of the Act. Similarly the decision of Hon'ble Supreme Court in the case of Skylight Hospitality LLP Vs. ACIT (2018) 92 taxmann.com 93(SC) was rendered in the context of Section148 of the Act wherein the name of the erstwhile company which got converted into an LLP was mentioned. The defect was held to be curable and falling within the mischief of Section292B of the Act. This decision, rendered in the context of Section 148 of the Act, in our view is not relevant in the case on hand. 7. The learned DR relied on the decision of Mumbai ITAT in the case of Earthmoving Equipment Service Corporation Vs. DCIT 22(2), Mumbai, (2017) 84 taxmann.com 51. In this case the ITAT Mumbai did not follow the decision rendered in the case of Manjunatha Cotton Ginning Factory (supra) for the reason that penalty in that case was deleted for so many reasons and not solely on the basis of defect in show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly 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 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of VIRGO MARKETING reported in 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. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind.' 9. 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 disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(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 in so far as concealment of income and furnishi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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