The assessee filed its return of income for the AY 2014-15. The assessee had issued equity shares at premium. The assessing officer made addition to the total income of the assessee on the ground that the aggregate consideration for shares exceeded the fair market value. A notice under section 274 read with section 271(1)(c) was issued to the assessee on ground that assessee had ‘furnished inaccurate particulars of income.’, whereas the assessment order mentioned that the penalty should be imposed as it had ‘concealed particulars of its income’.

Upon appeal to the High Court, it was held that the assessment order passed, and the penalty levied was on the ground that assessee has ‘concealed particulars of its income’ whereas the ground on which the notice under section 274 was issued on account of ‘have furnished inaccurate particulars of income’, without striking off the former ground in the notice. For initiation of penalty proceeding under section 271(1)(c) the satisfaction recorded should be on an existing ground on which the notice is issued. In this case the satisfaction recorded in the assessment order is regarding concealment of income, thereby the penalty order was not sustainable in law.(AY. 2014-15)