TMI Blog2019 (8) TMI 1122X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income or furnishing inaccurate particulars of income . The show cause notice under section 271(1)(c) does not strike out the inappropriate words .Imposition of penalty cannot be sustained. - Decided in favour of assessee. - ITA No.3187/Bang/2018 - - - Dated:- 21-8-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P. Boaz, Accountant Member For the Assessee : Shri. Sumeet Khurana, CA For the Revenue : Shri. Vikas Suryavamshi, Addl. CIT ORDER PER JASON P. BOAZ, A.M. This appeal by the assessee is directed against the order dated 20.09.2018 of CIT(A) - 7, Bangalore, relating to Assessment Year 2009-10 whereby the CIT(A) confirmed the order of the Assessing Officer (AO) dated 30.10.2013 imposing penalty on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (in short the Act ). 2. Briefly stated, the facts relevant for disposal of this appeal are as under:- 2.1 The assessee company, engaged in business of manufacture and sale, including exports of Solar Cells, Photovoltaic Modules and Systems, filed its ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposits with capital work in progress. . 7. That the learned CIT(A) erred in facts and law in confirming the action of the learned AO in levying penalty in respect of transfer pricing adjustments. 8. That the learned CIT(A) erred in facts and law by challenging the aggregation of the engineering division transactions with other transactions and holding that such transactions are not at arm's length. 4. Ground Nos.1 and 3 : In support of these 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); and since the notice issued under section 271(1)(c) of the Act dated 09.04.2013 for initiating proceedings for imposing penalty was not in accordance with law, on this ground alone, the order imposing penalty should be quashed. In this regard, the learned Counsel for the assessee also drew our attention to the show cause notice issued under section 271(1)(c) of the Act for initiating penalty proceedings dated 09.04.2013 (placed at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... totally different context of defect in notice issued under section148 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 present case. The same reasoning would apply to the decision of the ITAT Bangalore in the case of Jayson Infrastructure India Ltd. (supra). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear 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(1)(c) do not exist 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout any ambiguity. o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal. if the appellate authority records satisfaction, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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