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TMI Blog2018 (4) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 29.09.2015 for assessment year 2011-12. The Revenue has raised following ground:- (i) That, under the facts circumstances of the case and in view of the distinction of facts of the instant case (Discussed elaborately in respect to he statement of facts) that the of the case law relied upon in deciding the case in favour of the assessee, the Ld. CIT(A) erred in allowing relief to the assessee. (ii) That the appellant craves leave to add, alter or amend any ground or grounds of appeal before or at the time of hearing. Shri G.Hanshing, Ld. Departmental Representative appeared on behalf of Revenue and Shri A.K. Tibrewal, Ld. Authorized Representative appeared on behalf of assessee. 2. The issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the penalty levied by the AO under section 271(1)(c) of the Act. 3. The facts and circumstances under which penalty u/s 271(1)(c) of the Act was levied on the assessee by the Assessing Officer are that the assessee is a limited company and filed its return of income declaring taxable income u/s 139 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... word, satisfaction of AO must reflect from the order either with expressed words recorded by the AO himself or by his overt act and action. . The ITAT Mumbai Bench in the case of Trishul Enterprises Vs. DCIT (ITA No.384- 385/Mum/2014 for AYs 2006-007 2007-08) dated 10.02.2017 dismissed the contention of the assessee regarding failure of the AO to strike off the relevant part of the notice u/s. 274 for initiating proceedings u/s. 271(1)(c) of the Act. the ITAT relied upon the judgment of the Hon'ble Bombay High Court (Nagpur Bench) in the case of M/s Maharaj Garge Company vs. CIT in its judgment dated 22.08.2017 has also held that 15. The requirement of Section 274 of the Income Tax Act for granting reasonable opportunity of being heard in the matte cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged .. It further observed that 16. It is not in dispute that a reasonable opportunity of being heard in the matter as required by Section 274 of the said Act was given to the assessee before imposing the penalty by the I.T. Officer. Further, the ITAT M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2016 and the Hon ble Supreme Court by its order dated 05.08.2016 dismissed the SLP preferred by the department. The ld. Counsel also brought to our notice the decision of the Hon ble Bombay High Court in the case of CIT vs Shri Samson Perinchery in ITA No.1154 of 2014 dated 05.01.2017 wherein the Hon ble Bombay High Court following the decision of the Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra) came to the conclusion that imposition of penalty on defective show cause notice without specifying the charge against the assessee cannot be sustained. Our attention was also drawn to the decision of Co-ordinate Bench of this Tribunal in the case of Suvaprasanna Bhattacharya vs ACIT in ITA No.1303/Kol/2010 dated 06.11.2015 wherein identical proposition has been followed by the Tribunal. 6. We have already observed that the show cause notice issued in the present case u/s 274 of the Act does not specify the charge against the assessee as to whether it is for concealing particulars of income or furnishing inaccurate particulars of income. The show cause notice u/s 274 of the Act does not strike out the inappropriate words. In these circumsta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pay penalty. The practice of the Department sending a printed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 limb for which it is levied and the position being unc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped 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 ..... 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