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TMI Blog2019 (4) TMI 1660X X X X Extracts X X X X X X X X Extracts X X X X ..... paid amounting to Rs. 7 crore. 2. The brief facts qua the issue of levy of penalty in the quantum proceedings is that, the Assessing Officer has made disallowance of 'technical advisory services' for sum of Rs. 13,57,45,000/-; and disallowance of excise duty of Rs. 70 lac. In so far as disallowance of technical advisory fees is concerned, the Assessing Officer noted that assessee had paid sum of Rs. 13,57,45,000/- as a technical advisory fees to M/s. 'Shervani Industrial Syndicate', whereas no such fee was paid in the last year. In response to the show cause notice, the assessee submitted that the same was paid on account of providing technical support to the assessee company in the field of battery manufacturing and such payment was made in terms of agreement entered by the assessee with the said company. The assessee company had acquired a zinc battery manufacturing facility at Mysore in the previous years and M/s. Shervani Industrial Syndicate Ltd. was in the field of manufacture of batteries and had valuable experience in this field. It was for this reason the said company was hired to provide technical specialized advisory services on a continuous basis to produce the product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en levied on the quantum of disallowance upheld by the first appellate authority and before passing of the Tribunal order. Thus, the Assessing Officer had levied a penalty on entire disallowances made for Rs. 5,65,00,000/-. Ld. CIT(A) has confirmed the penalty on amount of addition sustained by the Tribunal for Rs. 7 crore and on account of disallowance u/s.43B of Rs. 70 lacs. 6. Before us, learned counsel for the assessee, Mr. Pradeep Dinodiya, raising a legal issue submitted that, here in this case, in the show cause notice issued u/s.274 r.w.s. 271 dated 29.03.2004, which has been sent in a printed standard format, Assessing Officer has not specified exact nature of default for the purposes of initiation and levy of penalty under Section 271(1)(c). In support, he has filed the copy of notices before us. He further submitted that in another show-cause notice dated 08.02.2012, once again notice of the Assessing Officer did not specify the exact default, as to whether it is for the concealment of income or for furnishing of inaccurate particulars of income. There was no clear charge of penalty in the notice. Thus, Assessing Officer himself was not sure of the exact default committ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b he is proposing to levy the penalty. The Section 271(1)(c) stipulates two limbs of charges in which penalty can be levied, one, where any person has concealed the particulars of his income; or second, he has furnished inaccurate particulars of such income. 9. The Hon'ble Karnataka High Court in the case of CIT vs. Manjunatha Cotton and Ginning Factory (supra) has held that a person who is accused of conditions mentioned in Section 271 should be made known about the grounds on which the Department is imposing penalty, as Section 274 makes it clear that the assessee has right to contest such proceedings and should have full opportunity to meet the case of the Department and show that conditions stipulates in Section 271(1)(c) did not exist and is not liable to pay the penalty. Their Lordships have further held that the practice of the Department sending a printed form where all the grounds mentioned in Section 271 would not satisfy the requirement of the law when the consequences of the assessee not rebutting the initial presumption is serious in nature and had to pay penalty from 100% to 300% of the tax liability. Therefore, the said provision has to be strictly construed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically 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 assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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