Penalty under section 271(1)(c)–Leviability–Inconsistency in recording of satisfaction and levy of penalty

Penalty under section 271(1)(c)--Leviability--Inconsistency in recording of satisfaction and levy of penalty

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section 271(1)(c)

Ashok Sahakari Sakhar Karkhana Ltd. v. Asstt. CIT

During the course of scrutiny assessment proceedings, AO made additions/disallowances on eight counts. However, the penalty had been levied in respect of the addition. on account of excess expenditure debited to the profit and loss account. While recording satisfaction for the levy of penalty, the AO held that penalty proceedings under section 271(1)(c) were initiated for concealment of income and filing of inaccurate particulars of income. Thereafter, notice under section 274 read with section 271(1)(c) was issued, wherein it was mentioned that the assessee had concealed particulars of income or furnished inaccurate particulars of income. The irrelevant limb or the charge had not been deleted by the AO while issuing notice.

Held:

The reasons for initiating penalty proceedings and the notice for levy of penalty showed vagueness and ambiguity in the mind of the AO with respect to charge for the levy of penalty. AO was not consistent in specifying the limb under which penalty was to be levied. While recording satisfaction the AO had used the conjunction “and” to mention both the limbs for initiating penalty proceedings, i.e., concealment of income or furnishing inaccurate particulars of income, whereas in the notice issued under section 274 the AO had used conjunction “or”. There was ambiguity in recording of satisfaction and notice issued for the levy of penalty under section 274 read with section 271(1)(c). Since the charge for levy of penalty was not explicitly clear from the notice. The penalty was bad in law and hence, the penalty proceedings were liable to be set aside

section 271(1)(c)


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