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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI PRAMOD KUMAR & SMT. P. MADHAVI DEVI
Per Smt. P.MADHAVI DEVI, JM:
This appeal by the assessee is against the order of the CIT(A), Hubli, dated 06/01/2010 for the assessment year 1999- 2000. The assessee is aggrieved by the confirmation of penalty levied by the Assessing Officer (AO) u/s 271(1)(c) of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. The assessee has raised as many as six grounds of appeal but the main grievance is that the penalty order is bad in M/s.Maganur Builders. Page 2 of 5 law as the notice u/s 274 r.w.s. 271 does not specify the exact reason for initiation of penalty proceedings u/s 271(1)(c) of the Act.
At the time of hearing, learned counsel for the assessee has filed before us a copy of the notice u/s 274 read with sec.271 of the Act to demonstrate that the AO did not strike off the irrelevant portion of the said notice. He further submitted that this issue is covered in favour of the assessee by the decision of the jurisdictional High Court in the case of M/s.Manjunatha Cotton and Ginning Factory in of 2005 dated 13-12-2012 and that this Tribunal has been following the said decision in various cases to which one of us, i.e. the JM is a signatory.
The learned Departmental Representative, on the other hand, supported the orders of the authorities below.
Having regard to the rival contentions and the material on record, we find that the issue of validity of the notice wherein the AO has not struck off the irrelevant portion of the notice u/s 274 because of which the reason for levy of penalty is not evident, is covered by the judgment of the jurisdictional High Court in the case of M/s.Manjunatha Cotton and Ginning Factory (cited supra). The relevant portion of the judgment is reproduced hereunder for ready reference:
‘59. As the provision stands, the penalty proceedings can be initiated on various grounds set M/s.Maganur Builders. Page 3 of 5 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 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 form 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 of such proceedings, no penalty could be imposed on the assessee.
Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the 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 M/s.Maganur Builders. Page 4 of 5 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 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.
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 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’.
M/s.Maganur Builders. Page 5 of 5 Since the facts and circumstances in the case before us are similar, respectfully following the jurisdictional High Court in the above case (cited supra), we delete the penalty levied by the AO u/s 271(1)(c) of the Act.
In the result, the assessee’s appeal is allowed.