I am not sure why this is happening neither the hostnode or VM changed. All I did was reboot the hostnode and startup the Centos VM again, also note it happened with the original kernel on the VM and also the latest 6.9 kernel as of this writing as shown below.
Host Node: Centos 6.9
Same result in any kernel above
VM Node: Centos 6.6 originally (this is where the error started but chrooting and upgrading did not fix it).
Kernels: 2.6.32-504.el6.x86_64, 2.6.32-696.6.3.el6.x86_64
I have tried different kernels on the host node and in the VM it made no difference.
I restored the same VM image and so far it boots fine but I have not made any changes to see if it boots again. As mentioned even chrooting into the VM and upgrading the kernel and rebuilding initramfs has not fixed it.
Kernel panic - not syncing: Attempted to kill init!
Pid: 1, comm: init Not tained 2.32-696.6.3.el6.x86_64 #1