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The Commissioner Of Income-Tax, Davangere Versus M/s. Maganur Builders

2016 (8) TMI 961 - KARNATAKA HIGH COURT

Penalty levied under section 271(1)(c) - defective notice - Held that:- 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 [2013 (7) TMI 620 - KARNATAKA HIGH COURT ] wherein held that the Assessing Officer proposes to invoke the first limb b .....

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lants-Revenue have preferred the present appeal by raising the following substantial question of law: Whether under the facts and in the circumstances of the case, the Tribunal was right in law in canceling the penalty levied under section 271(1)(c) overlooking the provisions of the Act and even when all the ingredients are satisfied for levy of penalty under section 271(1)(c) of the I.T.Act in the case of assessee? 2. We have heard Mr. E.I. Sanmathi, learned Counsel appearing for the appellants .....

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come Tax Appellate Tribunal in its reasons at para-3 has observed thus: 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 relevant portion of the judgm .....

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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 Section 274 makes it clear that .....

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enalty 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 or furnishing inaccurate part .....

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entioned 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 to the authority at the time .....

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alty 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 penalty proceedings once he is sa .....

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