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TMI Blog2020 (2) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... leave to add any more grounds of appeal before or at the time of hearing." 2. Briefly stated the facts of the case are that a survey u/s. 133A of the Income Tax Act,1961, was conducted in the business premises of the assessee at Gadag and Koppal on 19.02.*2013. During the course of survey it was found that the assessee along with his wife was constructing a new lodge building which was almost on completion stage. On the basis of books found and impounded it was found that the actual investment made in the construction of lodge building was worked out at Rs. 2,41,20,000. On the other hand the explained sources of investment in Lodge building was to the tune of Rs. 1,49,81,000. Thus there was unexplained investment in construction of lodge building to the tune of Rs. 74,86,000. The assessee along with her spouse Sri.Kasim Ali Sayed declared the excess investment in construction of lodge building as under:- Sl. No. Name A.Y.2012-13 (Rs.) A.Y.2013-14 (Rs.) Total (Rs.) 1. Sri.Kasim Ali Sayed 31,95,627 5,47,373 37,43,000 2. Smt.Simran Sayed 31,95,627 5,47,373 37,43,000 2.1 Further, during the course of survey proceedings, the assessee has also offered additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clear that the assessee has not offered his additional income in his original return of income, neither he has availed the chance to make it revise u/s 139(4) of the I.T.Act. The A.O., thus noted that it is therefore clear that the intention of the assessee is to avoid the taxes on additional income detected during the survey. The additional income so taxed is just because of survey operation and not in any way by voluntary declaration / offer of such income and it is clear that the assessee has concealed the particulars of income and has filed inaccurate particulars of income while filing. Accordingly, the A.O. concluded that the assessee has concealed the particulars of income, liable for penalty and thus he levied penalty of Rs. 16,01,000 u/s 271(1)(c) of the Act. In first appeal, the CIT(A) confirmed the penalty order passed by the Assessing Officer. Against this, the assessee is in appeal before the Tribunal. 3. Before me, the learned AR argued that the A.O. has not strike down the irrelevant portion of notice issued u/s 274 of the I.T.Act and accordingly, it is not clear whether the Assessing Officer has levied penalty for concealment of income or furnishing of inaccura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such return of income, assessment, notice, summons or other proceedings is in substance and effect in conformity with or according to the intent and purpose of this Act." The Hon'ble jurisdictional High Court had neither considered nor brought to the notice of the Hon'ble High Court, provisions of section 292B of the Act. Even assuming that there is a defect in the show cause notice issued, as canvassed by the learned counsel for assessee that will vitiate the entire penalty proceedings, the judgment was rendered by the Hon'ble High Court In the case of Manjunatha Cotton & Ginnning Factory (supra) without considering the provisions of section 292E Subsequently, the Hon'ble jurisdictional High Court in the case of CIT vs. Sri Durga Enterprise (2014) 44 taxmann.com 442 (Kar) while dealing with the validity of notice u/s 148 r.w.s 292B held that where assessee has taken the notice u/s 148 as valid and responded to it in letter and spirit and participated in the proceedings and in light of the provisions of section 292B, notice issued u/s 148 was held to be valid. The relevant paragraph of judgment is extracted below: "9) In the present case, as observed earlier, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of law in favour of the Revenue and against the assessee. In view of the peculiar facts and circumstances of the case, there shall be no order as to costs." Thus, having regard to the ratio laid down by the Hon'ble jurisdictional High Court in the subsequent decision in the case of Sri Durga Enterprise (supra), we hold that show cause notice Issued u/s 274 r.w.s. 271(1)(c) cannot be held to be invalid. 10. Now, adverting to the merits of the case for levy of penalty, the only explanation offered by the assessee in support of the outstanding balance shown in the books of account is that outstanding balances have subsequently been paid but the assessee neither submitted payment details nor rebutted the information obtained by the AO under the provisions of section 133(6) of the Act from the sundry creditors who had flatly denied having any transactions with the assessee. This remains uncontroverted and in our considered opinion, it amounts to concealment of income and the AO was right in levying penalty u/s 271(1)(c) of the Act." 4.1 The learned DR also relied on the order of the ITAT Bangalore Bench in the case of M/s.Jaysons Infrastructure India P. Ltd. v. ITO (ITA No.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiating the penalty proceedings against the assessee. Moreover, if the Assessee is of the view that there is some ambiguity, the said ambiguity can be sorted out by participating in the penalty proceedings and taking objection to the fact before AO. The assessee has not taken any objection before the AO in the penalty proceedings and for the first time, the said objection has been taken before CIT(A). In our view, the purpose of issuing the notice is to inform the assessee about the charges under which the assessee is liable for imposition of penalty. Once the charges are clearly known to the assessee which are duly mentioned in the assessment order as well as in the notice, there is no error in the notice issued by the AO for imposition of penalty. In view thereof also, we do not find any merit in the appeal. As a result, penalty proceedings are confirmed." 5. We have heard the rival submissions and perused the material on record. The only dispute in this appeal is that the notice issued u/s 274, the Assessing Officer has not struck down the irrelevant portion in the said notice and hence it was not clear whether the Assessing Officer has levied penalty for concealment of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome 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 lead to an inference as to non-application of mind." 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 from proceedings of assessment, it is independent and separate aspect of the proceedings. The findings recorded in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts advanced by the learned AR before us. The contention of the Ld. DR is that the assessee has participated in the penalty proceedings and hence the error, if any that has occurred would be cured in view of the provisions of sec. 292B/292BB of the Act. Opposing the said contention, reliance was placed on the decision rendered by the Bangalore Bench of the Tribunal in the case of Shri K. Prakash Shetty vs. ACIT (ITA Nos. 265 to 267/Bang/2014 dt. 05/06/2014) wherein it was held that the provisions of sec.292BB would not come to the rescue of the revenue, when the notice was not in substance and effect in conformity with or according to the intent and purpose of the Act. In our view, the notice issued by the Assessing Officer was not in substance, and effect in conformity with or according to the intent and purpose of the Act, since the Assessing Officer did not specify the charge for which penalty proceedings were initiated and further there was non-application of mind on the part of the Assessing Officer. 5.4 For the reasons given above, we hold that levy of penalty in the present case cannot be sustained. We therefore cancel the orders imposing penalty on the Assessee and allow t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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