TMI Blog2020 (10) TMI 840X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice cannot be accepted because the non-mentioning of the charge against the assessee in the show cause notice cannot be considered as a mistake, omission or defect, which is in substance and effect in conformity with or according to the intent and purpose of this Act. We therefore hold that the CIT(Appeals) was not right in rejecting the plea of assessee in this regard. We are, therefore, of the view that the penalty imposed in all these assessment years are liable to be cancelled. - Decided in favour of assessee. - ITA Nos. 1590 to 1596/Bang/2019 - - - Dated:- 19-10-2020 - Shri N.V. Vasudevan, Vice President And Shri A K Garodia, Accountant Member For the Appellant : Shri C. Ramesh, CA For the Respondent : Shri Manjeet Singh, Addl.CIT(DR)(ITAT), Bengaluru ORDER PER N.V. VASUDEVAN, VICE PRESIDENT All these appeals are directed against the order of CIT(Appeals)-11, Bengaluru, dated 29.04.2019, common order for the AYs 2009-10 to 2014-15 and a separate order dated 29.4.2019 for AY 2015-16 challenging the imposition of penalty u/s. 271(1)(c) and 271AAB of the Income-tax Act, 1961 [the Act] respectively. 2. The facts and circumstances under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69 of the IT Act,1961 and be taxed accordingly. Ans I accept that I had generated cash outside the books of account. However, I request you to grant me two days time to go through the records and come before you to quantify the total amount of disclosure after taking the benefit of telescoping. 4.1 During the course of post search proceedings in his letter to the DDIT (Inv.) Unit-II, Bangalore, the assessee reconciled the entries admitted to undisclosed income as under: AY Amount (Rs) 2009-10 71,64,563 2010-11 90,03,946 2011-12 1,47,15,551 2012-13 2,99,26,028 2013-14 1,45,87,132 2014-15 1 ,52,73,873 Upto 18-12-2014 74,80,090 Total 9,81,51,183 4.2 The assessee has offered the undisclosed income of Rs, 90,03,946/- to tax in the return of income filed by him in response to notice u/s. 153C. 3. In the orders of assessment for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or concealment of income. The additional income offered in the return of income filed in response to notice u/s. 153C is undeniably the assessee's undisclosed income which came to light only on account of search proceedings. The High Court of Rajasthan in the case of Grass Field Farms Resorts (P.) Ltd. vs Deputy Commissioner of Income-tax [2017] 79 taxmann.com 426 (Rajasthan) upheld the levy of penalty in a case where it was only when faced with statements as also unrecorded/recorded documents found at business premises of assessee during survey, that the assessee came forward with a surrender and even in penalty proceedings-it did not establish its bona fides. 8. Explanation 5A to section 271(1) which is applicable in the assessee's case raises a presumption of concealment as regards the undisclosed income admitted during the search. As per the provisions of Explanation 5A, when the assessee is found to be the owner of money, bullion, jewellery, valuable article or thing and the assessee claims that such assets have been acquired by him by utilising his undeclared income; then notwithstanding the fact that the assessee declares such income in any return of income file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Aggrieved by the aforesaid orders of AO imposing penalty, the assessee preferred appeals before the CIT(Appeals). Before the CIT(A), the assessee apart from reiterating the submissions that were made before the AO, also made a prayer that the show cause notice issued u/s. 274 of the Act before imposing penalty does not set out the specific charge against assessee and in the light of the decision of the Hon ble High Court of Karnataka in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn) , penalties cannot be imposed because the specific charge against the assessee has not been spelt out in the show cause notice. The CIT(Appeals) dealt with this argument in the following manner:- 12. In this context, it may be noted that the Provisions of section 292B provides for curing of defects, if any, in a notice issued. Further the appellant has not demonstrated with any cogent material, admissible as evidence, to prove his submissions. Therefore additional ground challenging the legality of notice validity of initiation of penalty proceedings are found to be untenable. Hence the same are dismissed. 8. The CIT(Appeals) found no fault w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting penalty proceedings cannot be on one limb and finding the Assessee guilty cannot be on the basis of another limb of Sec.271(1)(c) of the Act. The Hon ble High Court has laid down the following principles to be followed in the matter of imposing penalty u/s.271(1)(c) of the Act:- NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts and materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cify the charge against the assessee as to whether it is for concealment of particulars of income or furnishing of inaccurate particulars of income. The ld. Counsel further brought to our notice that as against the decision of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP in CC No.11485 of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. 15. We have already observed that the show cause notice issued in the present case u/s 274 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 show cause notice u/s 274 of the Act 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 cases cannot be sustained and the same is directed to be cancelled. The above discussion will equally apply to imposition of pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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