2019 (7) TMI 1682 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - addition made during the course of assessment, which were confirmed by the appellate authority - non specification of charge - assessment was framed u/s 153A r.w.s. 143(3) of the Act wherein addition was made on account of undisclosed income as well as low household withdrawals - HELD THAT - It is only when the authority invested with the requisite power is satisfied that either of the two events existed in a particular case that proceedings u/s. 271(1)(c) are initiated. This pre-requisite should invariably be evident from the notice issued u/s. 274 r.w.s. 271 which is the jurisdictional notice, for visiting an assessee with the penal provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out asto whether the notice u/s. 274 r.w.s. 271 (1)(c) of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. There are a catena of judgments highlighting the necessity for identifying the charge for which the assessee is being visited and in all those decisions, Hon'ble Courts have repeatedly held that where the jurisdictional notice is vague, similar to the one in the present case, the consequent levy cannot be sustained. No merit for the penalty so imposed, accordingly, AO is directed to delete the penalty so imposed u/s. 271(1)(c) of Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.
2. Specificity of the show-cause notice issued under Section 274 read with Section 271(1)(c) of the Act.
3. Burden of proof in penalty proceedings.
4. Distinction between assessment proceedings and penalty proceedings.

Detailed Analysis:

1. Validity of Penalty Proceedings Under Section 271(1)(c):
The core issue in these appeals was the imposition of penalties under Section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2005-06 to 2009-10. The penalties were levied based on additions made during assessments, which were confirmed by appellate authorities. The assessee contended that the penalty proceedings were invalid due to the vagueness of the show-cause notice issued under Section 274 read with Section 271(1)(c). The Tribunal examined whether the penalty was imposed for "concealment of particulars of income" or "furnishing inaccurate particulars of income," as the notice did not specify this clearly.

2. Specificity of the Show-Cause Notice:
The Tribunal emphasized that the show-cause notice must clearly specify the charge against the assessee—whether it is for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The notice issued in this case was deemed vague as it did not strike out the irrelevant portion, thus failing to inform the assessee of the exact charge. This lack of specificity was found to violate principles of natural justice, as the assessee was not given a fair opportunity to respond to the precise charge.

3. Burden of Proof in Penalty Proceedings:
The Tribunal reiterated that penalty proceedings are quasi-criminal in nature and distinct from assessment proceedings. The burden of proof lies on the department to establish that the assessee had concealed income or furnished inaccurate particulars. The findings in assessment proceedings cannot be automatically adopted in penalty proceedings; the Assessing Officer (AO) must bring positive material to show intentional concealment. In this case, the AO failed to provide independent evidence to support the imposition of penalties, merely relying on findings from the assessment orders.

4. Distinction Between Assessment and Penalty Proceedings:
The Tribunal highlighted the fundamental difference between assessment and penalty proceedings. In assessment proceedings, income may be assessed even if the evidence is not conclusive. However, for imposing a penalty, the AO must conclusively prove the earning of undisclosed income. The Tribunal noted that the AO did not conduct independent inquiries or evaluate evidence afresh in penalty proceedings, which is necessary to establish intentional concealment beyond any doubt.

Conclusion:
The Tribunal found that the penalty orders were unsustainable due to the vagueness of the show-cause notices and the failure of the AO to conclusively prove intentional concealment. The penalties imposed under Section 271(1)(c) were directed to be deleted for all the assessment years under consideration. The appeals of the assessee were allowed, and the Tribunal emphasized the importance of clear and specific charges in penalty notices to uphold the principles of natural justice.