2019 (12) TMI 1544 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - Defective Notice u/s 274 - Non specification of charge - assessee has argued that the penalty notice nowhere speaks about specific limb to levy the penalty because the particular charge was not tick off in the notice - HELD THAT - Since the notice was nowhere tick off by the AO to specify the limb to levy the penalty, therefore, the penalty is not liable to be sustainable in the eyes of law, therefore, we set aside the finding of the CIT(A) on these issues and delete the penalty. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty notice under Section 271(1)(c) of the Income Tax Act, 1961.
2. Application of mind by the Assessing Officer (AO) in penalty proceedings.
3. Compliance with principles of natural justice in penalty proceedings.

Issue-wise Detailed Analysis:

1. Validity of Penalty Notice under Section 271(1)(c):

The primary issue in this case was whether the penalty notice issued under Section 271(1)(c) was valid. The assessee argued that the penalty notice did not specify the exact charge (either concealment of income or furnishing inaccurate particulars of income) because the AO did not tick off the relevant limb in the notice. The Tribunal noted that Section 271(1)(c) imposes penalties for two distinct offenses: concealing income and furnishing inaccurate particulars of income, each having different legal implications. The Tribunal cited the Supreme Court's decision in Dilip N. Shroff, which emphasized the necessity for the assessee to be clearly informed about the specific charge to prepare an adequate defense. The Tribunal also referenced the Bombay High Court's ruling in CIT-11 Vs. Samson Perinchery, which invalidated penalty notices that failed to specify the charge. Consequently, the Tribunal found the penalty notice in this case defective due to non-specification of the charge.

2. Application of Mind by the Assessing Officer:

The Tribunal examined whether the AO applied his mind while issuing the penalty notice. It was observed that the AO used a standard proforma without striking out the irrelevant clauses, indicating a lack of clarity on which charge was being pursued. The Tribunal highlighted that such non-application of mind by the AO was evident from the notice itself, which was issued in a routine manner without specifying the exact contravention. This was further supported by the Tribunal's reference to the Supreme Court's observations in Dilip N. Shroff that non-striking off irrelevant portions in the notice reflected non-application of mind by the AO.

3. Compliance with Principles of Natural Justice:

The Tribunal emphasized the importance of adhering to the principles of natural justice in quasi-criminal proceedings under Section 271(1)(c). It was noted that the AO's failure to specify the charge deprived the assessee of a fair opportunity to defend against the penalty. The Tribunal reiterated that the penalty proceedings must comply with natural justice principles, ensuring the assessee is fully aware of the charge to respond appropriately. The Tribunal found that the AO's actions, including issuing an incorrect notice and not specifying the charge, violated these principles. The Tribunal also referenced the Bombay High Court's decision in Smt. Kaushalya & Others, which quashed penalty proceedings due to non-application of mind and vagueness in the notice.

Conclusion:

Based on the above analysis, the Tribunal concluded that the penalty notice issued under Section 271(1)(c) was invalid due to the AO's failure to specify the charge, reflecting non-application of mind and violating principles of natural justice. Consequently, the Tribunal set aside the CIT(A)'s order confirming the penalty and deleted the penalty imposed on the assessee. The appeal filed by the assessee was allowed.