TMI Blog2023 (7) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Karnataka High Court the revenue preferred an appeal in SLP [ 2016 (8) TMI 1145 - SC ORDER] preferred by the department. Appeal by the assessee is allowed. - ITA No. 04/Coch/2021 - - - Dated:- 8-12-2022 - Shri N. V. Vasudevan, Vice President And Ms. Padmavathy S, Accountant Member For the Assessee : Shri R. Sreenivasan, CA For the Revenue : Smt. J M Jamuna Devi, Sr. AR ORDER PER PADMAVATHY S, ACCOUNTANT MEMBER: This is an appeal by the assessee directed against the order dated 21.12.2020 of the CIT(Appeals), Kochi, in relation to Assessment Year 2008-09. 2. The only issue contended through various grounds raised by the assessee is with regard to the levy of penalty u/s. 271(1)(c) by the AO. The assessee contended that the notice issued before imposing penalty was not accordance with law and on this ground the order imposing penalty should be quashed. 3. Brief facts of the case are that the assessee is a partner in all the firms and director in all the companies in Muthoot Pappachen Group . He filed return of income on 30.3.2009 at Rs. 18,37,000. During the course of assessment, the AO found that the assessee had not accounted co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al. 7. The learned Counsel for the assessee addressed arguments on the legal ground stating that the show cause notice issued under section 274 of the Act before imposing penalty was defective in as much as the AO has not mentioned in the said show cause notice as to whether the penalty is proposed to be imposed on the ground that the assessee concealed particulars of income or furnished inaccurate particulars of income. It has been contended that the irrelevant portion in the show cause notice has not been struck off. The learned counsel for the Assessee contended that the notice issued before imposing penalty was not accordance with law and on this ground the order imposing penalty should be quashed. The learned counsel for the Assessee also drew our attention to the show cause notice issued u/s. 274 of the Act (pg.3 of PB) before imposing penalty and submitted that the said notice does not specify as to whether the Assessee is guilty of having furnished inaccurate particulars of income or of having concealed particulars of such income . He pointed out that the show cause notice does not strike out the irrelevant portion viz., furnished inaccurate particulars of income or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (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 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 proforma without striking of the relevant clauses will lead to an inference as to nonapplication of mind. 7. The final conclusion of the Hon ble Court was as follows:- 63. In the light of what is stated above, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 proceedings are distinct from the assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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