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TMI Blog2015 (9) TMI 547X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 (Act) on the assessee. 3. The facts and circumstances under which penalty u/s. 271(1)(c) of the Act was imposed by the AO on the assessee are as follows. The assessee is an individual. He is in the business of manufacturing of office stationery products. There was a Survey conducted u/s.133A of the Act in the business premises of the Assessee on 25.1.2008. In the course of survey certain bank accounts in the name of the Assessee were found. The transaction entries in this bank accounts were not recorded in the books of accounts maintained by the Assessee for AY 2004-05 to 2007-08. The Assessee explained that the bank accounts evidence unaccounted sales. The Assessee claimed that only the gross profit on these unacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), wherein the Hon'ble High Court 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 particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High court has further laid down that certain printed form where all the grounds given in section 271 are given would not satisfy the requirement of law. The Court has also held that initiating penalty proceedings on one limb and find the assessee guilty in another limb is bad in law. It was submitted that in the present case, the aforesaid decision will squarely apply and all the orders imposing penalty have to be held as ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions or liabilities. c) Willful concealment is not an essential ingredient for attracting civil liability. d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority. f) Even if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & (B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision. g) Even if these conditions do not exist in the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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