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2017 (11) TMI 1620 - AT - Income TaxPenalty under section 271(1)(c) - invalid notice - no recording of satisfaction by AO - Held that - Assessing Officer has not recorded any satisfaction regarding the exact nature of offence committed by the assessee for initiating proceedings for imposition of penalty under section 271(1)(c) of the Act. Therefore, the basic conditions of the said penalty provision has not been complied with. Thus we are of the considered opinion that the impugned penalty order passed in case of the assessee is invalid due to lack of recording of satisfaction by the Assessing Officer with regard to the nature of offence committed by the assessee. Hence, we have no hesitation in deleting the penalty imposed. - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. 2. Recording of satisfaction by the Assessing Officer. 3. Specificity in the notice issued under section 274 r/w section 271(1)(c). Detailed Analysis: 1. Validity of Penalty Proceedings under Section 271(1)(c): The primary issue in this case was the imposition of a penalty of ` 45 lakh under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2000-01. The penalty was imposed on the grounds of concealment of particulars of income and furnishing of inaccurate particulars of income. The assessee challenged the penalty, arguing that the Assessing Officer did not record a clear satisfaction regarding the specific default committed by the assessee, which is a mandatory requirement under the statute. 2. Recording of Satisfaction by the Assessing Officer: The Tribunal noted that the Assessing Officer, in the assessment order, did not record any satisfaction in absolute terms regarding whether the assessee had concealed particulars of income or furnished inaccurate particulars of income. The assessment order merely stated, "Penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 are initiated," which was deemed insufficient. The Tribunal referred to the Karnataka High Court's decision in CIT v/s Manjunatha Cotton and Ginning Factory, which emphasized that the direction to initiate penalty proceedings should be clear and unambiguous. The Tribunal concluded that the Assessing Officer's failure to record a clear satisfaction rendered the penalty proceedings invalid. 3. Specificity in the Notice Issued under Section 274 r/w Section 271(1)(c): The Tribunal also examined the notice issued under section 274 r/w section 271(1)(c) of the Act. It was observed that the notice, being in a standard printed format, did not specify the exact charge against the assessee, i.e., whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal cited the Supreme Court's decision in Dilip N. Shroff v/s JCIT, which held that the notice should delete inappropriate words or paragraphs to indicate the specific charge. The Tribunal found that the notice's vagueness and ambiguity deprived the assessee of a fair opportunity to defend itself, violating the principles of natural justice. Conclusion: The Tribunal concluded that the penalty order passed against the assessee was invalid due to the lack of clear satisfaction recorded by the Assessing Officer and the ambiguous notice issued under section 274 r/w section 271(1)(c). Consequently, the Tribunal deleted the penalty imposed on the assessee. Separate Judgments: There were no separate judgments delivered by the judges in this case. Order: The assessee's appeal was allowed, and the penalty imposed was deleted. The order was pronounced in the open Court on 10.11.2017.
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