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2022 (3) TMI 78 - AT - Income TaxPenalty imposed u/s 271(1)(c) - Disallowance on account of travel expenses - Defective notice u/s 274 - arguments of non striking of irrelevant potion in notice - as submitted that AO has not stated as to whether on the addition of disallowance of travel expenses on which the penalty has been levied was a case of furnishing of inaccurate particulars of income or was a case of concealment of income - HELD THAT:- The first step is to record satisfaction and come to a finding while completing the assessment as to whether the assessee has concealed its income or furnished inaccurate particulars of income. AO thereafter has to levy penalty u/s 271(1)(c) of the Act for non-satisfaction of either of the limbs which gets attracted. Thereafter, notice u/s 274 r.w.s 271(1)(c) of the Act is to be issued to the assessee. The aforesaid notice should specifically indicate on what ground penalty is sought to be imposed, whether for concealment of income or for furnishing of inaccurate particulars of income. In the present case, the perusal of assessment order passed by the AO reveals that in the assessment order, no specific finding has been recorded by the AO as to whether it is a case of concealment of income or a case of furnishing of inaccurate particulars of income. Further in the notice dated 26.12.2008 issued u/s 274 r.w.s 271 of the Act, the inapplicable portion or limb of section 271(1)(c) of the Act has not been struck off. It is a settled law that the two limbs i.e. “concealment of particulars of income” and “furnishing of inaccurate particulars of income” carry different connotations. Various High Courts have held that AO must indicate in the notice for which of the two limbs he proposes to impose the penalty and for this the notice has to be appropriately marked. If in a printed format of the notice the inapplicable portion is not struck off thus not indicating for which limb the penalty is proposed to be imposed, it would lead to an inference as to non application of mind, thus vitiating imposition of penalty. Penalty u/s 271(1)(c) was not leviable when the notice issued by AO did not specify as to whether the proceedings were initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income - See M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. [2019 (8) TMI 409 - DELHI HIGH COURT] - Decided in favour of assessee.
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