TMI Blog2016 (10) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... s of manufacturing of machines. The assessee filed her return of income at Rs. NIL on 29-09-2008 Under scrutiny, notice U/sec 143(2) was issued. During such proceedings, the AO determined total income of the assessee at ₹ 23,34,605/- to that effect an assessment order dt: 27-12-2010 was passed u/sec 143(3) of the Act. During such proceedings the AO observed that the assessee claimed discount on sale of machine due to some defects, which was not allowed by him. Accordingly, the said amount was added as income of the assessee. According to him, the assessee could not file any evidence in respect of said claim. For which notice dt. 27-12-2010 u/s. 274 r.w.s 271(1)(c) of the Act issued for initiation of penalty proceedings. The Assessing officer has initiated the penalty proceedings u/s. 271(1) (c) for willful concealment and for furnishing inaccurate particulars of income and levied penalty of ₹ 7,84,087/- U/Sec 271(1)(c) of the Act by an order dt. 24-06- 2011. Against which the assessee preferred an appeal before the CIT(A). The CIT-A found that the assessee could not able to satisfy prima facie that her claim is bonafide. Accordingly, he confirmed the penalty imposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of the Tribunal in the case of Suvaprasanna Bhattacharya Vs. ACIT, Cir-55, Kolkata in ITA No. 1303/Kol/2010 dated 06-11-2015 which considered decision of the Hon ble Karnataka High Court supra and passed detailed order the said issue. On the contrary, the Ld. DR has relied on the orders of the lower authorities. 5. Heard the rival submissions and perused the material available on record. The question before us is as to whether the penalty order passed by the AO and confirmed by the ld.CIT(A) is falls for our consideration in pursuance of the law laid down by the Hon ble Karnataka High Court supra . The Hon ble Karnataka High Court in the case of CIT Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), has held that notice u/s. 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of income or for furnishing inaccurate particulars of income. Further as submitted by the Ld.AR the aforesaid decision will squarely applicable to the present case and all the orders imposing penalty have to be held as bad in law and liable to be quashed. 6. As rightly pointed out by the Ld.AR, the co-ordinate bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Otherwise, principles of natural justice is offended if the show caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cealment, 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 pro forma 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 follows:- 63. In the light of what is stated above, what em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee guilty of another limb is bad in law. t) The penalty procee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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