2017 (2) TMI 1272 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - defective notice - Held that - In the present case we find that at the time of initiating penalty proceedings the Assessing Officer while recording satisfaction has observed that, the assessee has concealed the income and has also furnished inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. . While issuing notice the Assessing Officer has not struck off irrelevant part in the show cause notice issued u/s. 274. From the perusal of notice that the Assessing Officer is not clear as to under what charge penalty has to be levied u/s. 271(1)(c) of the Act. The notice is vague as it fails to clearly spell out the charge for levy of penalty. A further examination of the records show that the observations of the Assessing Officer are inconsistent while recording satisfaction and at the time of passing of the penalty order. The Assessing Officer has levied penalty for furnishing inaccurate particulars of income. The Assessing Officer is incoherent in reasoning for recording satisfaction and in passing the order levying penalty. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 for assessment year 2006-07 based on defective notice and inconsistency in charge for penalty.

Analysis:

Issue 1: Defective Notice
The appeal challenged the penalty imposed under section 271(1)(c) of the Act for assessment year 2006-07. The contention raised was regarding the defective notice issued by the Assessing Officer. The notice failed to clearly specify the charge for the levy of penalty, as relevant parts of the proforma notice were not struck off. The argument was supported by a reference to a case where it was held that a notice lacking specificity regarding the charge for penalty renders the penalty invalid.

Issue 2: Inconsistency in Charge for Penalty
The Assessing Officer initiated penalty proceedings for both concealment of income and furnishing inaccurate particulars of income. However, the notice issued did not unambiguously specify the charge for the penalty. The order levying penalty was based on furnishing inaccurate particulars of income, leading to inconsistency between the grounds for initiating penalty and the actual charge for penalty in the order. This inconsistency was deemed as a lack of coherence in reasoning by the Assessing Officer.

Judgment
The Tribunal found merit in the arguments presented by the assessee regarding the defective notice and inconsistency in the charge for penalty. Citing relevant legal precedents, the Tribunal emphasized the importance of unambiguously specifying the charge for penalty in the notice. As the notice in this case failed to do so, reflecting a lack of application of mind by the Assessing Officer, the Tribunal directed the cancellation of the penalty. Consequently, the impugned order confirming the penalty was set aside, and the appeal of the assessee was allowed.