TaxTMI 
TaxTMI 
2016 (3) TMI 112
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....ns : a) Difference in the opening stock : Rs. 2,67,186. b) Difference in the opening balance of capital account : Rs. 2,96,158. 3. The authorities below failed to appreciate that the appellant has neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty and therefore, the penalty levied under Section 271(1)(c) of the Act requires to be cancelled. 4. Without prejudice to the above, the penalty levied is highly excessive and liable to be reduced substantially. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs." 3. The assessee has also additional grounds which are as under : "1. The order levying penalty under Section 271(1)(c) of the Act, is bad in law in as much as, the learned Assessing Officer has neither reached any satisfaction nor has such satisfaction been recorded in the assessment order and consequently, the very ini....
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....ssee. Subsequently, the Assessing Officer initiated the penalty under Section 271(1)(c) of the Act and levied the penalty of Rs. 1,72,383 being 100% of tax sought to be evaded on the concealed income of Rs. 5,63,344 which comprising the difference in the closing and opening balance of stock as well as difference in the capital account. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) and submitted that when the Assessing Officer has made the addition on account of difference in opening stock as well as the opening balance of the capital account, then it should have been telescoping effect and despite the assessee admitted the said amount to tax, the penalty cannot be levied on such addition. It was further submitted that the mistakes were not intentional and there was no intention to furnish inaccurate particulars of income. The difference was on account of difference of opinion between the Accountant and previous tax practitioner and the assessee has been made to suffer. It was further contended that the mistake, if any, it relates to the Assessment Year 2003-04 and not for the Assessment Year under consideration and therefore the Assessing Offi....
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....ra) has decided the issue in favour of the assessee holding that show cause notice under Section 274 of the Act is defective and therefore the consequential order under Section 271(1)(c) of the Act is not sustainable. 6. On the other hand, the learned Departmental Representative has submitted that as far as the merits of the case are concerned, the assessee has accepted the difference amount being the income of the assessee which was offered to tax in the assessment proceedings, therefore this issue cannot be raised at this stage when the assessee has not raised in the assessment proceedings. Further it is a case of enhancement of opening stock of this year and therefore the mistake which is accepted by the assessee during the assessment proceedings cannot be now shifted to the earlier assessment year when there was no such issue arises either for the Assessing Officer for this year or in the earlier assessment year. Therefore in the absence of any record to establish that the mistake actually occurred in the earlier assessment year, the contention of the assessee is without any substance. As regards the objection of the assessee on the validity of the notice issued under Sectio....
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....arding 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 farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not ....
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....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 unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the noti....
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....ly 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 bonafide, an order imposing penalty could be passed. m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide 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) Sending printed form where all the ground mentioned in Section 271 are men....