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Income Tax Appellate Tribunal - Hyderabad

Nivee Property Developers Pvt.Ltd., ... vs Acit, Circle-16(1), Hyderabad, ... on 11 November, 2016

                                   ITA No 951 Nivee Property Developers P Ltd Hyderabad




            IN THE INCOME TAX APPELLATE TRIBUNAL
             Hyderabad ' A ' (SMC) Bench, Hyderabad

       Before Shri J. Sudhakar Reddy, Accountant Member

                      ITA No.951/Hyd/2016
                    (Assessment Year: 2005-06)

M/s. Nivee Property            Vs       Asstt. Commissioner of
Developers Private Ltd                  Income Tax, Circle 16(1)
Hyderabad                               Hyderabad
PAN: AABCN 5025 G

              For Assessee :            Shri P. Murali Mohan Rao
              For Revenue :             Shri A. Sitarama Rao, DR

          Date of Hearing:             11.11.2016
          Date of Pronouncement:       11.11.2016

                                     ORDER

This is assessee's appeal for the A.Y 2005-06 directed against the order of the CIT (A)-4 Hyderabad dated 19th April, 2012 wherein the penalty order passed u/s 271(1)(c) was confirmed by the learned CIT (A).

2. After hearing the rival contentions, we find that in the notice issued u/s 271(1)(c), the charge is not specified. In other words, the AO has not specifically stated whether the notice was issued for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton & Ginning Page 1 of 4 ITA No 951 Nivee Property Developers P Ltd Hyderabad Factory reported in (2013) 35 taxmann.com 250 (Kar.) at Para 63 held as under:

"63. In the light of what is stated above, what emerges is as under:

(a) Penalty under Section 271(l)(c) is a civil liability.

(b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities.

(c) Wilful concealment is not an essential ingredient for attracting civil liability.

(d) Existence of conditions stipulated in Section 271(l)(c) is a sine qua non for initiation of penalty proceedings under Section 271.

(e) The 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(l)(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 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.

ITA No 951 Nivee Property Developers P Ltd Hyderabad

(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 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(l)(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. (u) The findings recorded in the assessment proceedings insofar as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the 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".

Respectfully following the same, I quash the penalty levied u/s 271(1)(c) as bad in law.

3. In the result, assessee's appeal is allowed.

Order pronounced in the Open Court on 11th November, 2016.

Sd/-

(J. Sudhakar Reddy) Accountant Member Hyderabad, dated 11th November, 2016.

ITA No 951 Nivee Property Developers P Ltd Hyderabad Vinodan/sps Copy to:

1 P. Murali & Co. CAs, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad 500082 2 Asstt. Commissioner of Income Tax, Circle 16(1) Hyderabad 3 CIT (A)-4 Hyderabad 4 Pr. CIT - 4 Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order Page 4 of 4