TaxTMI 
TaxTMI 
2019 (9) TMI 663
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....the absence of recording proper satisfaction is contrary to law and void ab-initio. 4. The ld. CIT(A) has erred on facts and in law in holding that the ITO is not required to record any satisfaction which is discernible. 5. The ld. CIT(A) has erred on facts and in law in holding that proper opportunity was granted by AO as is clear from the penalty order. 6. The Id. CIT(A) has erred on facts and in law in stating that the assessee had deliberately claimed excess bad debts and furnished inaccurate particulars and as such holding that penalty is exigible on the facts and circumstances of the case." 2. Briefly stated the facts necessary for adjudication of the issue at hand are : On the basis of assessment order framed under section 143 (3) of the Income-tax Act, 1961 (for short 'the Act') at an income of Rs. 20,17,610/- by way of making disallowance of Rs. 19,70,000/- on account of claiming excessive bad debts written off, the penalty proceedings were initiated under section 271(1)(c) of the Act. Declining the contentions raised by the assessee, Assessing Officer (AO) levied the penalty to the tune of Rs. 7,36,512/- @ 100% of the tax sought to be evaded. 3. Assessee carried t....
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.... To M/s Vashulinga Finance P. Ltd. 1004, Chiranjiv Tower, 43, Nehru Place, New Delhi Whereas in the course of proceedings before me for the assessment year 2011-12 it appears to me that you:- * Have without reasonable cause failed to comply with a notice under section 142(1)/143(2) of the Income Tax Act, 1961 dated......... * Have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1, 2,3,4 and 5. You are hereby requested to appear before me at 11.30 AM/PM on 9.4.2014 and show cause why an order imposing a penalty on you should not be made under section 271 of the Income Tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representatives you may show cause in writing on or before the said date which will be considers before any such order is made under section 271. Sd/- Assessing Officer, Income-tax Officer, Ward 17 (2), New Delhi." 9. Bare perusal of the notice issued u/s 274 read with section 271(1)(c) of the Act, extracted above, in order to initiate the penalty proceedings against the assessee goes to prove that the AO himself was....
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....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 the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some 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(1)(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....
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....t striking of the relevant clauses will lead to an inference as to non-application of mind. " 11. Hon'ble Apex Court in case of CIT vs. SSA's Emerala Meadows - (2016) 73 taxmann.com 248 (SC) while dismissing the SLP filed by the Revenue quashing the penalty by the Tribunal as well as Hon'ble High Court on ground of unspecified notice has held as under:- "Section 274, read with section 271(1)(c), of the Income-tax Act, 1961 - Penalty - Procedure for imposition of (Conditions precedent) - Assessment year 2009-10 - Tribunal, relying on decision of Division Bench of Karnataka High Court rendered in case of CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 1TR 565/218 Taxman 423/35 taxmann.com 250, allowed appeal of assessee holding that notice issued by Assessing Officer under section 274 read with section 271 (1 )(c) was bad in law, as it did not specify under which limb of section 271 (1 )(c) penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income - High Court held that matter was covered by aforesaid decision of Division Bench and, therefore, there was no substantial question of law arisi....