TMI Blog2020 (11) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant : Shri Padamchand Khincha, CA. For the Respondent : Shri R.K. Mishra, CIT(DR)(ITAT), Bengaluru ORDER PER N.V. VASUDEVAN, VICE PRESIDENT This is an appeal by the Assesee against the order dated 11.12.2019 of the CIT(Appeals), Bengaluru-10, Bengaluru relating to assessment year 2006-07. 2. In this appeal the Assessee has challenged the order of the CIT(A) confirming the order of the AO imposing penalty on the Assessee u/s. 271(1)(c) of the Income Tax Act, 1961 (the Act). 3. The facts and circumstances under which penalty was imposed on the Assessee by the AO are that the assessee which is a company engaged in manufacture of Multi-Utility Vehicle, filed return of income for AY 2006-07 on 22.11.2006 declaring NIL income. The case was taken up for scrutiny and reference was made to the Transfer Pricing Officer (TPO) as per the provision of section 92CA of the Act. Assessment u/s 143(3) was completed on 18.10.2010 on a total income of ₹ 307,83,31,369. The total income included ₹ 240,11,91.692 being transfer pricing adjustment on account of determination of arm's length price (ALP) of international transactions with the AE of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income . The AO has placed a tick mark in the printed form of notice which has both the charges i.e., have concealed the particulars of your income or furnished in accurate particulars of such income . The CIT(A) has construed the placing of tick mark in the beginning of the letters have concealed as akin to initiation of penalty proceedings on the ground of concealing particulars of income. This approach of the CIT(A) is contrary to the decision of the Hon ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory (supra). The Hon ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the Assessee guilty on another limb of Sec.271(1)(c) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. i) The imposition of penalty is not automatic. j) Imposition of penalty even if the tax liability is admitted is not automatic. k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings. (emphasis supplied) 7. It is clear from the aforesaid decision that on the facts of the present case that the show cause notice u/s. 274 of the Act is defective as it does not spell out the grounds on which the penalty is sought to be imposed. The Hon ble Karnataka High Court in the case of CIT vs. SSA s Emerald Meadows in ITA No.380 of 2015 dated 23.11.2015 wherein the Hon ble Karnataka High Court following its own decision in the case of CIT vs Manjunatha Cotton and Ginning factory (2013) 359 ITR 565 took a view that imposing of penalty u/s 271(1)(c) of the Act is bad in law and invalid for the reason that the show cause notice u/s 274 of the Act does not specify 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 ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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