TMI Blog2019 (9) TMI 373X X X X Extracts X X X X X X X X Extracts X X X X ..... 201/Bang/2019 - - - Dated:- 4-9-2019 - Shri N. V. Vasudevan, Vice President And Shri Jason P. Boaz, Accountant Member For the Assessee : Shri. Siddesh Gaddi, CA For the Revenue : Shri. Vikas Suryavamshi, Addl. CIT(DR)(ITAT), Bengaluru ORDER PER JASON P. BOAZ, A.M. This appeal by the assessee is directed against the order dated 22.02.2019 of CIT(A) - 11, Bangalore, relating to Assessment Year 2012-13 whereby the CIT(A) confirmed the order of the Assessing Officer (AO) dated 31.08.2015 imposing penalty of ₹ 14,04,106/- 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 manufacturing of stationery products, filed its return for Assessment Year 2012-13 on 29.09.2012 declaring income of ₹ 74,843/-, and subsequently filed a revised return declaring Nil income. A survey under section 133A of the Act was conducted at the assessee s business premises on 20.03.2014. The case wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout appreciating that penalty cannot be levied on additions made on protective basis in the assessment proceedings; 7. Without prejudice to the above, the Learned CIT(A) and the AO have erred in concluding that the Appellant has furnished inaccurate particulars of income; 8. The Learned CIT(A) has erred not following binding precedence of judicial bodies which are covered in favour of the Appellant on the impugned issue; 9. The Learned CIT(A) has erred in failing to appreciate that there was no conscious act of furnishing inaccurate particular or concealment of income on the part of the Appellant. 4. Ground Nos.4 and 5 : 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 274 r.w.s. 271 of the Act for imposing penalty under section 271(1)(c) of the Act was not in accordance with law, on this ground alone, the order imposing penalty should be qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of CIT Vs. Sri Durga Enterprises (2014) Taxmann.com 442 (Karnataka). A Co-ordinate bench in the case of Shri A Nagarju (ITA No.2196/Bang/2016 dated 6/4/2018), has considered the decision cited by the learned DR in the case of P.M.Abdullah (supra) and has held that the same is contrary to the decision of Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory Ltd., (supra) and therefore cannot be followed. The decision rendered in the case of Sri Durga Enterprises (supra) was in a 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich 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(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 sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings 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 Ashok Pai reported in 292 ITR 11 at 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide. an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee. but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice issued in the case on hand under section 274 r.w.s 271 of the Act for levy of penalty under section 271(1)(c) of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income . The said show cause notice does not strike out the inappropriate words. In these circumstances, we are of the view that imposition of penalty cannot be sustained. The plea of the ld. Counsel for the assessee which is based on the decisions referred to in the earlier part of this order has to be accepted. We therefore hold that imposition of penalty in the present case cannot be sustained and the same are directed to be cancelled. 12. In view of our above orders cancelling the penalty imposed under section 271(1)(c) of the Act for Assessment Year 2012-13, the Stay Petition in SP No.201/Bang/2019 for Assessment Year 2012-13 is rendered infructuous and is accordingly dismissed. 13. In the result, the assessee s appeal for Assessment Year 2012-13 is allowed and the assessee s Stay Petition is dismissed. Pronounced in the open court on 4th September, 2019. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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