2016 (2) TMI 1130 - AT - Income Tax

Penalty u/s 271 - invalid notice - Held that - Notice issued to the assessee does not specify the default of the assessee. In our opinion, notice u/s.274 r.w.s.271 of the Act, issued for the impugned assessment year was invalid. Ex-consequenti the penalty order is set aside.

Summary

Issues Involved:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on a notice suffering from defects.

Detailed Analysis:

Issue 1: Validity of the notice initiating penalty proceedings
The assessee challenged the penalty levied under section 271(1)(c) of the Act, citing a defect in the notice issued for initiating the penalty proceedings. The notice did not specify whether there was concealment of income or furnishing of inaccurate particulars of income. The jurisdictional High Court emphasized the importance of the notice being clear on the grounds for penalty initiation. The Court held that the AO must specify the grounds for penalty initiation, whether concealment of income or furnishing inaccurate particulars, and failure to do so indicates non-application of mind. In this case, the notice did not specify the relevant portion for initiating penalty proceedings, rendering it invalid. The Tribunal followed the High Court's decision and held the notice invalid, setting aside the penalty order.

Conclusion:
The Tribunal allowed the appeal of the assessee, emphasizing the necessity for the AO to clearly specify the default of the assessee in the notice initiating penalty proceedings. The invalid notice led to the setting aside of the penalty order, highlighting the importance of procedural compliance in penalty imposition under the Income-tax Act, 1961.