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M/s. Maganur Builders Versus Income-tax Officer, Ward-2,

Penalty u/s 271(1)(c) - whether 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)? - Held that:- 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 O .....

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(1) TMI 885 - DELHI HIGH COURT] 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 mi .....

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ved 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 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. 2. At the time of hearing, learned counsel for the assessee has filed before .....

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earned Departmental Representative, on the other hand, supported the orders of the authorities below. 3. 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 .....

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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 Se .....

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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. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income .....

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he 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 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 .....

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th 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. 61. The Assessing Officer is empowered under the Act to initiate pen .....

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