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2016 (11) TMI 533 - ITAT BANGALORE

2016 (11) TMI 533 - ITAT BANGALORE - TMI - Penalty u/s. 271(1)(c) - defective notice - Held that:- We find that 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, following the aforesaid judgment of Hon'ble jurisdictional High Court, we are of the considered view that on account of defective notice issued for initiation of penalty proceedings, the pe .....

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ER Per Sunil Kumar Yadav, Judicial Member This is an appeal filed by the assessee against the order of CIT(Appeals) inter alia on the following grounds:- 1. The order of the Commissioner of Income Tax (Appeals) is opposed to law and facts of the case. 2. Neither in respect of the sum of ₹ 8,47,981/- being the addition in respect of creditors and ₹ 3,88,925/- being the sustained addition in respect of alleged inflation of wages, the provision of section 271 (1 )(C) are not attracted. .....

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of that sub-section would be operative and on that basis, no penalty is leviable. 5. The alternative requirement required under law as enunciated by their lordships of Karnataka High Court in the said decision of satisfaction as regards concealment/filing of inaccurate particulars in the body of the order is conspicuously absent. Therefore, the absence of a direction is fatal to the impugned order of penalty. 6. It should have been appreciated that the mere repetition in the body of the order of .....

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nt craves for leave to add, to delete from or amend the ground of appeal. 2. During the course of hearing, the ld. counsel for the assessee has challenged the validity of these proceedings on the ground that in the show cause notice for levying the penalty u/s. 271(1)(c), the AO has not specified as to on what ground the AO intends to levy penalty, whether it is on account of concealment of income or furnishing of inaccurate particulars. To explain these facts, he filed a copy of notice u/s. 274 .....

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4 r.w.s. 271(1)(c) of the Act, we find that notice was issued on a printed proforma in which the AO did not identify, whether the assessee has concealed 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 furnishing of inaccurate particulars of income. This aspect has been examined by the Hon'ble jurisdictional High Cou .....

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rounds 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 proceedings can be initiated on various grounds set out therein. If the order passed by the authority categorically records .....

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eedings 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 the case of the Department and show that the conditions stipulated in section 271(1)(c) do not exist as such he is not liab .....

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pecifically. 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 both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the pen .....

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pecifically 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 than what the assessee was called upon to meet. Otherwise, though the initiation of penalty proceedings may be valid and leg .....

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e 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 is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing .....

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orted 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 the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The stand .....

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& 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. Krishnappa v. ITO (supra) are extracted hereunder:- 4.4.3 In the ca .....

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