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2016 (9) TMI 796 - ITAT BANGALORE

2016 (9) TMI 796 - ITAT BANGALORE - TMI - Penalty u/s. 271(1)(c) - Held that:- Notices were issued on a printed proforma in which the AO did not identify, whether the assessee has concealed particulars of income or furnished inaccurate particulars of such income. - As undisputedly the AO has not identified in the notices as to whether the penalty proceedings are initiated for concealment of income or furnishing of inaccurate particulars of such income. Therefore we are of the considered view .....

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pellants : Shri Mayank Jain, Advocate For The Respondent : Dr.Sibichen K. Mathew, CIT-III(DR) ORDER Per Sunil Kumar Yadav, Judicial Member These appeals are preferred by the assessees against the separate orders dated 24.09.2013 of the CIT(Appeals)-VI, Bangalore for the A.Y. 2006-07 confirming the penalty levied u/s. 271(1)(c) of the Income-tax Act, 1961 [ the Act ]. 2. During the course of hearing of the appeals, the ld. counsel for the assessee has raised an additional ground challenging the v .....

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en the satisfaction recorded by Learned AO does not indicate whether it is a case of concealment of income or furnishing of inaccurate particulars of income. It is prayed that this Hon ble ITAT may pleased to cancel the penalty levied u/s. 271(1)(c) in the interests of equity and justice. 3. Since the additional ground raised by the assessee goes to the root of the case, we admit the same and prefer to adjudicate it at the threshold, before going into the merits of the penalty levied u/s. 271(1) .....

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n in the notice as to whether it is for concealment of income or furnishing of inaccurate particulars of such income. Sending printed form where all the grounds in section 271(1)(c) are specified would not satisfy the requirements of law. Therefore, in the light of these facts, initiation of penalty proceedings is not in accordance with law and deserves to be annulled. In support of his contention, the ld. counsel for the assessee placed reliance upon the judgments of the Hon'ble jurisdictio .....

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ch to fatal the validity of penalty proceedings. 6. Having carefully examined the notices issues u/s. 274 r.w.s. 271(1)(c) of the Act, we find that notices were issued on a printed proforma in which the AO did not identify, whether the assessee has concealed particulars of income or furnished inaccurate particulars of such income. Now the question arises whether, it is necessary to identify in the notice itself that the proceedings u/s. 271(1)(c) are initiated either for concealment of income or .....

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t is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. Before laying down the parameters, Their Lordships have analysed the provisions of section 274 for sending notices and for initiating proceedings u/s. 271(1)(c). The relevant observations of Their Lordships are extracted hereunder for reference:- 59. As the provision stands, the penalty pro .....

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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 section 274 makes it clear that the assessee has a right to contest such proceedings and should have full opportunity to meet th .....

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ve to be held to be strictly construed, notice issued under section 274 should satisfy the grounds which he has to meet specifically. Otherwise, the 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 particulars of income. No doubt, the facts of some cases may attract bot .....

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iation 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 of imposing penalty to impose penalty on the grounds other tha .....

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lid. 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 satisfied in the course of any proceedings that there i .....

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rate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering Works reported in [1980] 122 ITR 306 (Guj) and the Delhi High Court in the case of CIT v. Virgo Marketing P. Ltd. reported in [2008] 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 .....

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nd in the case of M/s. SLN Traders (in ITA No.1045/Bang/2015 & CO NO.210/Bang/2015 dated 30.6.2016) has also taken a view that where the Assessing Officer has not specified under which limb, penalty u/s. 271(1)(c) of the Act is to be levied, i.e., whether penalty proceedings are being initiated for concealment of income or furnishing of inaccurate particulars of income; such initiation of penalty proceedings has to be held to be illegal. The relevant observations of the Tribunal in E. Krishn .....

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