2014 (11) TMI 1225

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.... Commissioner of Income-Tax and another vs. Manjunatha Cotton and Ginning Factory and others reported in [2013] 359 ITR 565 (Karn) has contended that, the notice issued for levying penalty is improper and is not in accordance with law and therefore, the entire proceedings based on notice is liable to be set aside. He further submits that, in Para No. 5.1, the Tribunal has made an observation with regard to the show-cause notice as under: "It is true that the show-cause notice does not contain the specific allegation i.e. whether it is in respect of concealment of income or furnishing of inaccurate particulars of income. The notice is to be read along with the assessment order during the course of which proceedings has been initiate....

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....ice 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 the assessee has a right to contest such proceedings and should have full opportunity to....

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....on 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 the 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 the principles of natural justice and cannot be sustained. Thus once the proceedings....