Your penalty notice keeps both limbs and strikes off neither. Does that make it bad?
Yes. Concealment and inaccurate particulars are different charges. A printed form that retains every ground shows non-application of mind, denies you the chance to answer the actual charge, and makes the proceedings bad in law.
Decided by the High Court (High Court of Karnataka at Bangalore — N. Kumar J and Aravind Kumar J) on 2012-12-13, reported as [2013] 35 taxmann.com 250 (Kar) / [2013] 218 Taxman 423 (Kar) / [2013] 359 ITR 565 (Kar) / [2013] 263 CTR 153 (Kar); ITA No. 2564/2005 c/w ITA Nos. 2565/2005, 5020/2009, 5022/2009, 5023/2009, 5025/2010 and 5026/2010. It bears on section 271(1)(c), section 274 of the Income Tax Act 1961, in Penalty matters.
This is the parent authority behind SSA's Emerald Meadows, and the single most useful page to hold in a penalty file. The defect is visible on the face of the notice, before any argument about whether the addition was right.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A batch of seven appeals by the Revenue, raising different facets of s.271(1)(c), for assessment years 2000-01, 2003-04 and 2004-05. Two appeals concerned a ginning firm which, after a survey, filed revised returns offering amounts shown as creditor balances; two concerned iron-ore firms where the Assessing Officer added undisclosed stock under s.69 and the first appellate authority deleted that addition but sustained an addition on the different ground of under-valuation of closing stock; two concerned a granite and ceramic-tile importer where the addition rested on customs valuation. In each the Tribunal had cancelled the penalty. The defective printed s.274 notice arose in the appeal of the mining firm in IT Appeal No. 5020 of 2009, where the Tribunal found the standard proforma had been issued without striking off the inapplicable words.
All seven appeals of the Revenue were dismissed and every substantial question of law was answered in favour of the assessee. On the s.274 notice, the Court held that the notice must specifically state which limb of s.271(1)(c) is invoked; a printed form retaining all the grounds in s.271 does not satisfy the requirement of law, offends natural justice, and no penalty can be imposed on such proceedings. Penalty proceedings begun on one limb cannot end in a finding of guilt on the other. The Court also held that penalty is not automatic on an admitted or agreed addition, and that where the appellate authority sustains an addition on a ground the Assessing Officer never found, it is the appellate authority - not the Assessing Officer - that must initiate the penalty proceedings.
The Court read s.271(1)(c) as creating two distinct defaults: an item not shown at all falls in the limb of concealment, and an item shown in the return but shown wrongly falls in the limb of furnishing inaccurate particulars (para 35). Because the two are distinct, the assessee must be told which he has to answer; the Court held that the departmental practice of issuing a printed form retaining every ground in s.271 does not satisfy the requirement of law where the consequence is a penalty of 100 to 300 per cent of the tax, and that a vague show-cause notice offends natural justice (para 59). Proceedings initiated on one limb cannot end in a finding of guilt on the other, and penalty must be imposed only on the ground the assessee was called upon to meet (para 60). A standard proforma issued without striking off the irrelevant clauses shows non-application of mind (para 61). Separately, the Court held that penalty is not automatic: acceptance of an assessment and payment of tax and interest is not by itself enough to initiate or impose penalty unless concealment is discernible from the order, and a bona fide explanation, though not substantiated, defeats penalty (paras 58 and 63). The presumption in Explanation 1 is rebuttable (para 58). Where the first appellate authority sustains an addition on a ground the Assessing Officer never recorded, the subject matter of the penalty is the appellate order, and it is the appellate authority which must initiate penalty proceedings (paras 54-55 and 67).
The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind.
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Handle my notice → Ask a CA on WhatsAppYes. Concealment and inaccurate particulars are different charges. A printed form that retains every ground shows non-application of mind, denies you the chance to answer the actual charge, and makes the proceedings bad in law. This was decided by the High Court (High Court of Karnataka at Bangalore — N. Kumar J and Aravind Kumar J) and bears on section 271(1)(c), section 274 of the Income Tax Act 1961. It is reported as [2013] 35 taxmann.com 250 (Kar) / [2013] 218 Taxman 423 (Kar) / [2013] 359 ITR 565 (Kar) / [2013] 263 CTR 153 (Kar); ITA No. 2564/2005 c/w ITA Nos. 2565/2005, 5020/2009, 5022/2009, 5023/2009, 5025/2010 and 5026/2010. This is the parent authority behind SSA's Emerald Meadows, and the single most useful page to hold in a penalty file. The defect is visible on the face of the notice, before any argument about whether the addition was right. If it applies to you, the first step is this: Pull out the s.274 notice and look at whether either limb was struck off.
A batch of seven appeals by the Revenue, raising different facets of s.271(1)(c), for assessment years 2000-01, 2003-04 and 2004-05. Two appeals concerned a ginning firm which, after a survey, filed revised returns offering amounts shown as creditor balances; two concerned iron-ore firms where the Assessing Officer added undisclosed stock under s.69 and the first appellate authority deleted that addition but sustained an addition on the different ground of under-valuation of closing stock; two concerned a granite and ceramic-tile importer where the addition rested on customs valuation. In each the Tribunal had cancelled the penalty. The defective printed s.274 notice arose in the appeal of the mining firm in IT Appeal No. 5020 of 2009, where the Tribunal found the standard proforma had been issued without striking off the inapplicable words. The matter was decided on 2012-12-13 by the High Court (High Court of Karnataka at Bangalore — N. Kumar J and Aravind Kumar J). On those facts the High Court held as follows. All seven appeals of the Revenue were dismissed and every substantial question of law was answered in favour of the assessee. On the s.274 notice, the Court held that the notice must specifically state which limb of s.271(1)(c) is invoked; a printed form retaining all the grounds in s.271 does not satisfy the requirement of law, offends natural justice, and no penalty can be imposed on such proceedings. Penalty proceedings begun on one limb cannot end in a finding of guilt on the other. The Court also held that penalty is not automatic on an admitted or agreed addition, and that where the appellate authority sustains an addition on a ground the Assessing Officer never found, it is the appellate authority - not the Assessing Officer - that must initiate the penalty proceedings.
The Court read s.271(1)(c) as creating two distinct defaults: an item not shown at all falls in the limb of concealment, and an item shown in the return but shown wrongly falls in the limb of furnishing inaccurate particulars (para 35). Because the two are distinct, the assessee must be told which he has to answer; the Court held that the departmental practice of issuing a printed form retaining every ground in s.271 does not satisfy the requirement of law where the consequence is a penalty of 100 to 300 per cent of the tax, and that a vague show-cause notice offends natural justice (para 59). Proceedings initiated on one limb cannot end in a finding of guilt on the other, and penalty must be imposed only on the ground the assessee was called upon to meet (para 60). A standard proforma issued without striking off the irrelevant clauses shows non-application of mind (para 61). Separately, the Court held that penalty is not automatic: acceptance of an assessment and payment of tax and interest is not by itself enough to initiate or impose penalty unless concealment is discernible from the order, and a bona fide explanation, though not substantiated, defeats penalty (paras 58 and 63). The presumption in Explanation 1 is rebuttable (para 58). Where the first appellate authority sustains an addition on a ground the Assessing Officer never recorded, the subject matter of the penalty is the appellate order, and it is the appellate authority which must initiate penalty proceedings (paras 54-55 and 67). In the words reproduced by the source cited on this page: "The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind."
It was decided by the High Court on 2012-12-13 and is reported as [2013] 35 taxmann.com 250 (Kar) / [2013] 218 Taxman 423 (Kar) / [2013] 359 ITR 565 (Kar) / [2013] 263 CTR 153 (Kar); ITA No. 2564/2005 c/w ITA Nos. 2565/2005, 5020/2009, 5022/2009, 5023/2009, 5025/2010 and 5026/2010. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 271(1)(c), section 274, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. All seven appeals of the Revenue were dismissed and every substantial question of law was answered in favour of the assessee. On the s.274 notice, the Court held that the notice must specifically state which limb of s.271(1)(c) is invoked; a printed form retaining all the grounds in s.271 does not satisfy the requirement of law, offends natural justice, and no penalty can be imposed on such proceedings. Penalty proceedings begun on one limb cannot end in a finding of guilt on the other. The Court also held that penalty is not automatic on an admitted or agreed addition, and that where the appellate authority sustains an addition on a ground the Assessing Officer never found, it is the appellate authority - not the Assessing Officer - that must initiate the penalty proceedings. It arises in Penalty matters, on section 271(1)(c), section 274 of the Income Tax Act 1961, and was decided by High Court of Karnataka at Bangalore — N. Kumar J and Aravind Kumar J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Compare the limb in the notice with the limb in the penalty order — a shift between them is itself a ground. Take the point in the reply to the penalty notice, not only in appeal, so the record shows you asked what the charge was.
Still good law. Still applied, but now expressly under Supreme Court scrutiny. On 31 July 2026 the Supreme Court dismissed the Revenue's SLP in PCIT v Mahesh G. Garodia (SLP(C) Diary No. 31777 of 2026), upholding deletion of penalty where the pre-printed s.274 notice did not strike off the irrelevant limb. But on 7 November 2025 the Court admitted PCIT v Ennoble Constructions (SLP(C) Diary No. 20179 of 2024, listed 16 February 2026) precisely to examine whether a notice not specifying the limb is valid, expressly noting Manjunatha Cotton and CIT v SSA's Emerald Meadows; I found no reported outcome of that hearing. Note also that s.271(1)(c) is inoperative for AY 2017-18 onwards, having been replaced by s.270A/270AA. That finding was checked against a published source, which is linked on this page, on 2026-08-25. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment is dated 13 December 2012 and reported in the 2013 volumes; that is a reporting lag, not a discrepancy. The Revenue's appeals were all dismissed - IT Appeal Nos. 2564 and 2565 of 2005, 5020, 5022 and 5023 of 2009 and 5025 and 5026 of 2010 - so the outcome was uniform across the batch. Note that the defective-notice ground decided the appeal in IT Appeal No. 5020 of 2009; the other appeals turned on the absence of concealment on agreed additions and on which authority could initiate the penalty. Section 271(1)(c) is inoperative from AY 2017-18, having been replaced by ss.270A and 270AA. Check whether your High Court follows this line; there is contrary reasoning elsewhere. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
All seven appeals of the Revenue were dismissed and every substantial question of law was answered in favour of the assessee. On the s.274 notice, the Court held that the notice must specifically state which limb of s.271(1)(c) is invoked; a printed form retaining all the grounds in s.271 does not satisfy the requirement of law, offends natural justice, and no penalty can be imposed on such proceedings. Penalty proceedings begun on one limb cannot end in a finding of guilt on the other. The Court also held that penalty is not automatic on an admitted or agreed addition, and that where the appellate authority sustains an addition on a ground the Assessing Officer never found, it is the appellate authority - not the Assessing Officer - that must initiate the penalty proceedings.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Valuables were found at my premises and I say they are not mine. Who has to prove ownership?
Is penalty under s.271(1)(c) criminal, quasi-criminal or civil?
The officer disallowed your claim. Does a disallowance automatically bring penalty with it?
The penalty notice does not say whether I concealed income or filed inaccurate particulars. Does that matter?