TMI Blog2016 (5) TMI 757X X X X Extracts X X X X X X X X Extracts X X X X ..... running retail showrooms for watches, clocks and time pieces etc. The Assessee filed return of income for A.Y.2003-04 declaring the loss of ₹ 1,89,627/-. AO framed an order of assessment u/s 144 of the Act determining the total income of the assessee at ₹ 2,06,73,855/- by order dated 27.03.2006. This assessment was set aside by C.I.T. in exercising of powers u/s 263 of the Act. Subsequently order of assessment u/s 143(3) was framed by AO on 18.08.2008 and the total income was determined at Rs.,2,10,70,840/-. 4. On further appeal by the assessee CIT(A) vide his order dated 22.12.2009 gave relief to the assessee consequent to which addition of ₹ 12,77,461/- was alone sustained. The Assessee is in appeal against the aforesaid addition before CIT(A). However in the meanwhile, in respect of additions so sustained, AO initiated penalty proceedings u/s.271(1)(c) of the Act imposed penalty on the assessee u/s 271(1)(c) of the Act. 5. On appeal by the assessee CIT(A) confirmed the order of AO. Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal. 6. None appeared on behalf of the Revenue. We have heard the submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the earlier part of this order, nowhere spells out or indicates that the AO was of the view that the Assessee was guilty of either concealing particulars of income or furnishing inaccurate particulars of income. The offer to tax of income by the Assessee has just been accepted. It is no doubt true that it is not the requirement of the law that the satisfaction has to be recorded in a particular manner, especially after the introduction of the provisions of Sec.271(1B) of the Act with retrospective effect from 1.4.1989. Nevertheless, as laid down by the Hon ble Delhi High Court in the case of Ms.Madhushree Gupta (supra), the position of law both pre and post Sec.271(1B) of the Act is similar, inasmuch, the AO will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings. prima facie satisfaction of the AO that the case may deserve the imposition of penalty should be discernible from the order passed during the course of the proceedings. At the stage of initiation of penalty proceeding the order passed by the AO nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... context of the observations in the last portion of para-9 of the said judgment. Therefore even the Hon ble supreme court s decision suggests that the satisfaction need not be recorded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. If the AO accepts all the contentions of the Assessee and the offer of income that has not been declared in the return of income to tax without indicating either directly or indirectly that the Assessee has concealed particulars of income or furnished inaccurate particulars of income, it cannot be said that satisfaction for initiation of penalty proceedings is discernible from the order of assessment. If the Assessee in good faith offers income to tax voluntarily prior to any positive detection by the AO, such voluntary offer cannot be taken advantage of by the AO to initiate penalty proceedings against the Assesssee without specifying the reasons why penalty proceedings are initiated u/s.271(1) ( c) of the Act. In the present case, we have read the order of assessment as a whole and are satisfied that satisfaction for initiation of penalty proceedings is not discernible from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious 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. Otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxman 156, 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 mind. The final conclusion of the Hon ble Court was as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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(1)(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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