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TMI Blog2023 (1) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified in the notice u/s 274 r.w.s. 271(1)(c) as the inapplicable limb of charge was not struck off by the whereas the fact is that the penalty u/s 271(1)(c) was initiated in the original assessment order for furnishing inaccurate particulars of income on some issues and also for concealment of income on some other issues. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) was justified in deleting the penalty u/s 271(1)(c) on the ground that the inapplicable limb of charge for the penalty was not struck off by the A.O. in the notice u/s 274 r.w.s. 271(1)(c), whereas the fact is that no limb of charge i.e. neither furnishing inaccurate particulars of income nor concealment of income, was inapplicable as per the satisfaction recorded by the A.O. under section 271(1B) in the assessment order, which was duly served on the assessee making it aware of the charges of penalty. 3. Whether on the facts and in the circumstances of the case and in law, the Ld CIT (A) was justified in deleting the penalty u/s 271(1)(c) on the ground that the charge was not specified in the notice u/s 274 r.w.s. 271(1)(c), whereas the fact is that the only charge of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after, notice dated 16.01.2021 was issued to the Assessee under Section 274 read with Section 271(1)(c) of the Act (hereinafter referred to as the "Second Penalty Notice"). In response thereto, the Assessee filed submission vide letter dated 15.02.2021. However, the same did not find favour with the Assessing Officer who passed order dated 31.03.2022 levying penalty of INR 2,85,23,354/- under Section 271(1)(c) of the Act. 6. Being aggrieved, the Assessee preferred appeal before CIT (A) and contended that the penalty order, dated 31.03.2022, was bad in law since the Assessing Officer had failed to specify in the notice issued under Section 274 of the Act proposing to levy penalty under Section 271(1)(c) of the Act as to whether in the case of the Assessee there was concealment of particulars of income, or furnishing of inaccurate particulars of income. The CIT (A) accepted the aforesaid contention of the Assessee and deleted the penalty vide order, dated 27.07.2022, by relying upon the Full Bench judgment of the Hon'ble Bombay High Court in the case of Mohd. Farhan A Shaikh Vs. DCIT, Central Circle-1, Belgaum : 434 ITR 1 (Bombay) holding as under: "9.14. Turning to the facts of e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts mentioned in the penalty order and is untenable. The requirement to issue show-cause notices under Section 274 of the Act is only a procedural requirement before levying penalty. There is no time limit prescribed for issue of notice under Section 274 of the Act. She further submitted that in the present case the Penalty Order has been passed in accordance with the procedural requirements. In the case of Mohd. Farhan A Shaikh (434 ITR 1), the Hon'ble Bombay High Court has held that an assessee must be informed of the grounds of initiating penalty proceedings only through statutory notice. As apparent from the facts stated above, the Assessee was clearly informed of the grounds of initiating penalty proceedings through the statutory notice, dated 16.01.2021, issued under Section 274 of the Act. There is no vagueness and thereby, no infirmity in the Second Penalty Notice. There was sufficient compliance time (of more than 16 months) given by the Assessing Officer to the Assessee before finally levying the penalty under Section 271(1)(c) of the Act vide Penalty Order, dated 31.03.2022. In view of the above, she contended that the Penalty Order, dated 31.03.2022, passed by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being "have concealed the particulars of income". Whereas it was contended by the Ld. Departmental Representative that penalty was levied after issuing the Second Penalty Notice whereby the charge against the Assessee (i.e. furnishing inaccurate particulars of income) was made known to the Assessee and therefore, the Second Penalty Notice meets the test laid down by the Full Bench of the Hon'ble Bombay High Court in the aforesaid judgment. 11. We note that in the case of Manjunatha Cotton & Ginning Factory (supra) the Hon'ble Karnataka High Court has made following observations regarding issuance of notice under Section 274 of the Act: "Notice under section 274 59. As the provision stands, the penalty proceedings can be initiated on various grounds 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 the 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 the 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 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. xx xx 62. xx xx CONCLUSION 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. xx xx (p) Notice under section 274 of the Act s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of income, whereas in respect of two additions/disallowances penalty proceedings were initiated for concealment of income. In our view, the CIT (A) has failed to consider the aforesaid facts while concluding that the Assessing Officer erred in not striking off one of the two limbs of penalty in the First Penalty Notice. Further, the penalty proceedings initiated under Section 271(1)(c) of the Act were kept in abeyance till the disposal of the quantum appeal by the CIT(A). After disposal of the quantum appeal by the CIT (A) vide order, dated 11.10.2018, Second Penalty Notice was issued by the Assessing Officer. However, the CIT (A) has also failed to consider the Second Penalty Notice while deleting the penalty. The relevant extract of the Second Penalty Notice read as under: "Sir/Madam, Whereas in the course of proceedings before me for the Assessment Year 2010-11, it appears to me that you have furnished inaccurate particulars of income. xx xx xx xx Additional Remarks: In connection with the same, it is to inform you that penalty proceeding U/s 271(1)c) of the LT Act, 1961 was initiated in your case for the A.Y. 2010-11, while completing the assessment u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 274 of the Act is the statutory requirement before passing the penalty order. 16. By issuance of Second Penalty Notice the aforesaid requirement contained in Section 274 of the Act stood fulfilled. It is not the case of the Assessee that requisite satisfaction for initiation of penalty proceedings was not recorded in the Assessment Order. Further, the Assessee was also granted sufficient time to meet the case of the Revenue for levy of penalty in relation to the disallowance of deduction under Section 10B of the Act during the penalty proceedings. The Penalty Order also meets the test laid down by the Hon'ble Karnataka High Court since the case before us is not one in which penalty proceedings were taken up on one limb of Section 271(1)(c) of the Act and the assessee was found guilty under another limb of the said section. A perusal of paragraph 5.7 of the Assessment Order shows that in respect of disallowance of deduction under Section 10B of the Act, the Assessing Officer had initiated penalty proceedings for furnishing inaccurate particulars of income. In the Penalty Order, penalty has been levied for furnishing inaccurate particulars of income. Thus, penalty under S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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