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TMI Blog2016 (10) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... s maintained, since even at that time the assessee failed to explain the source of its income. An appeal was preferred against this assessment but was withdrawn by the assessee. Since the assessee failed to explain the source of share application money, the AO concluded that assessee company has introduced bogus share application money into its books of accounts, thereby furnished inaccurate particulars of income and concealed the income as such initiated proceedings u/s.271(1)(c) of the Act, which concluded in imposition of penalty of Rs. 10 lakhs. 3. Challenging the same, the assessee carried the matter in appeal and the ld. CIT(A) confirming the propriety of imposition of penalty, but reduced the same from Rs. 10 lakhs to Rs. 5,12,295/- being the penalty at 100%. Aggrieved by the said impugned order, the assessee is before us in this appeal on the following grounds :- "1) That the Ld.CIT(A)-C-I, Kolkata, erred in confirming penalty amounting to Rs. 5,12,295/- @ 100% of the amount of tax without considering the fact that no addition was made in the proceedings under sec. 153A of the Income Tax Act, 1961. The addition was made in the original assessment made under sec. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NOTICE UNDER SECTION 274 59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. 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 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is concealment of income or furnishing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have escaped from tax net and as opined by the assessing officer in the assessment order. l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bona fide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bona fide and 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 ..... 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