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2017 (2) TMI 1091 - AT - Income TaxPenalty u/s. 271(1)(c) - disallowance of expenditure - Held that:- The levy of penalty on the mere disallowance of expenditure cannot be sustained. AO has not made out a case of concealment or furnishing of inaccurate particulars in the order. Just because assessee has not produced the books of account and expenditure claim is unverifiable, it cannot be stated that assessee has concealed particulars of income or furnished inaccurate particulars. As seen from the order, AO has not disallowed any specific expenditure, but made a roundsum disallowance of ₹ 10 Lakhs. He did not even bother to name the nature of expenditure disallowed. In these circumstances, the mere disallowance of expenditure does not attract levy of penalty. Assessee claimed before the AO that the notice does not specify the nature of offence calling for penalty. Assessee has raised an additional ground contesting that the notice issued does not specify whether the proceedings were initiated for ‘concealment of penalty’ or ‘for furnishing inaccurate particulars’. The copy of the notice placed on record do indicate that it is a printed proforma, without striking-off the relevant columns and simply signed by the AO which was served on assessee. On similar facts, the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the practice of the department sending a printed form where all the grounds mentioned in 271 are mentioned would not satisfy the requirement of law when the consequence of assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 10% to 300% of tax liability. As the said provisions have to be held to be strictly construed, notice u/s. 274 should satisfy the grounds which he has to meet specifically. Otherwise, the principles of natural justice are offended, if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on assessee. - Decided in favour of assessee
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