2018 (6) TMI 1749 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - HELD THAT - In the present case, the AO has not made it clear in the notice issued by him u/s. 274 r.w.s. 271 of IT Act that whether the assessee is guilty of concealment of income or of furnishing inaccurate particulars of income, the Tribunal order cited by ld. AR of assessee rendered in the case of CIT Vs. Manjunatha Cotton and Ginning factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT is squarely applicable and respectfully following it we hold that in the present case also, the penalty order passed by AO is invalid and as a consequence, the penalty imposed by AO stands deleted. Appeal filed by the assessee is allowed.

Summary

Issues:
1. Appeal against order of ld. CIT(A) for Assessment Year 2010-11.
2. Validity of penalty order u/s 271[1][c] of the Act.
3. Whether penalty proceedings were initiated for furnishing inaccurate particulars of income or concealment of income.

Issue 1: Appeal against order of ld. CIT(A) for Assessment Year 2010-11

The appeal was filed by the assessee against the order of ld. CIT(A) for Assessment Year 2010-11. The grounds raised by the assessee challenged the orders of the authorities below, claiming they were against the law, equity, and weight of evidence. The appellant further contended that the penalty order passed u/s 271[1][c] of the Act was bad in law as it lacked clarity on whether the penalty proceedings were initiated for inaccurate particulars of income or concealment of income. The appellant sought the cancellation of the penalty order, arguing that there was no concealment or furnishing of inaccurate particulars of income.

Issue 2: Validity of penalty order u/s 271[1][c] of the Act

The main contention revolved around the validity of the penalty order passed by the Assessing Officer (AO) u/s 271[1][c] of the Act. The appellant argued that the notice issued by the AO did not specify whether the assessee was guilty of concealment of income or furnishing inaccurate particulars of income. The appellant relied on a Tribunal order and a judgment of the Hon'ble Karnataka High Court in a similar case where the penalty was deleted due to the lack of clarity in the notice. The Tribunal, following the precedent, held that in the present case as well, the penalty order passed by the AO was invalid. Consequently, the penalty imposed by the AO was deleted, and the appeal filed by the assessee was allowed.

Issue 3: Whether penalty proceedings were initiated for furnishing inaccurate particulars of income or concealment of income

The crux of the issue was the ambiguity in the notice issued by the AO regarding the grounds for initiating the penalty proceedings. The appellant argued that without a clear indication in the notice, it was unjust to levy a penalty u/s 271[1][c] of the Act. The Tribunal agreed with the appellant's contention, citing previous judgments, and held that in the absence of a clear mention in the notice, the penalty order was invalid. The Tribunal's decision to delete the penalty was based on the principle that penalty proceedings must be initiated with clarity on whether it pertains to concealment of income or furnishing inaccurate particulars of income.

In conclusion, the Appellate Tribunal ITAT BANGALORE allowed the appeal filed by the assessee against the order of ld. CIT(A) for Assessment Year 2010-11. The Tribunal held that the penalty order passed by the AO u/s 271[1][c] of the Act was invalid due to the lack of clarity in the notice regarding the grounds for penalty proceedings. The decision was based on established legal principles and previous judgments, emphasizing the importance of clear communication in initiating penalty proceedings.