Law:

Section:

Section 271(1)(c), read with section 274, of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessment year 1963-64 - Whether penalty proceedings can be initiated on basis of satisfaction recorded by ITO or AAC and prima satisfaction must be that person concerned has concealed particulars of his income or furnished inaccurate particulars of his income - Held, yes - Whether order imposing penalty can only be passed after assessee has been given a reasonable opportunity of being heard and as a part of such reasonable opportunity assessee must be told as to what particulars of satisfaction ITO or AAC arrived at - Held, yes - Penalty proceedings were initiated against assessee on basis of addition made on account of sales outside books - AAC held there was no sales outside books but there was under-valuation of closing stock - However, IAC thereafter imposed penalty on assessee on ground that assessee had furnished inaccurate particulars in its return of income - Whether penalty levied by IAC being based on a different footing altogether, it could not be said that assessee had been given a reasonable opportunity of being heard before order imposing penalty was passed - Held, yes - Whether, therefore, penalty order passed by IAC was without jurisdiction - Held, yes FACTS In the assessment order, addition of Rs. 58,000 was made on account of sales outside books and notice under section 274 for penalty for concealment was issued. On appeal, the AAC held that there was no sale outside books but there was under valuation of stock and made an addition of Rs. 34,000. The Tribunal upheld findings of the AAC but reduced addition. While so after the AAC's order, penalty was imposed by the IAC under section 271(1)(c) on ground that there was a concealment of income by under-valuation of stock and he came to the conclusion that the assessee deliberately concealed this fact from the ITO and as such deliberately furnished inaccurate particulars in its return of income. On appeal, before the Tribunal, the assessee contended that under section 271(1)(c) a penalty for concealment of income could be imposed by the IAC only if the ITO in the course of any…

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