2021 (3) TMI 1381 - AT - Income Tax

Penalty u/s 271(1)(c) - allegation of defective notice u/s 274 and non specification of clear charge - non striking of inappropriate words - interest income received in respect of enhanced compensation - as per AO the assessee concealed the income - HELD THAT - First of all in the notice issued u/s 274 r.w.s 271(1)(c) there was no specific charges as relates to concealment of income or furnishing of inaccurate particulars of income. From the notice produced by the Ld. AR during the hearing it can be seen that the AO was not sure under which limb of provisions of Section 271 the assessee is liable for penalty. In the present case the enhanced compensation and interest received thereon was taken into account but the Assessing Officer observed that the interest received on compensation or interest received on enhanced compensation is taxable under the income from other sources and will not come under the purview of the exemption under Section 10(37) - AO initiated penalty under Section 271(1)(c) as relating to concealment of income due to the fact that the assessee had not filed the return of income and never declared the compensation and the interest received thereon. Merely not filing the return of income cannot amount to concealment of income. Therefore we are taking up the contention of the assessee that there is no particular limb mentioned in the notice issued under Section 271(1)(c) r.w.s. 274 - See M/S SSA S EMERALD MEADOWS 2016 (8) TMI 1145 - SC ORDER As inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions the penalty u/s 271(1)(c) has been initiated therefore we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Appeal of assessee allowed.

Summary

Issues:
- Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961 without specifying the particular limb of the provision.
- Lack of specific charges related to concealment of income or furnishing inaccurate particulars of income in the penalty notice.
- Dispute over whether the penalty order is bad in law due to the absence of mentioning the specific limb of Section 271(1)(c).
- Argument regarding the necessity of a specific charge for penalty under the quasi-judicial penalty provision.
- Interpretation of legal precedents related to the specification of the limb of Section 271(1)(c) in penalty notices.

Analysis:

The appeal involved a case where the assessee, an agriculturist, received enhanced compensation for the acquisition of agricultural land and interest thereon. The Assessing Officer imposed a penalty under Section 271(1)(c) of the Act, alleging concealment of income due to the non-disclosure of interest received. The primary contention raised was the absence of specific charges in the penalty notice related to concealment or inaccurate particulars of income. The appellant argued that without specifying the particular limb of Section 271(1)(c) in the notice, the penalty order was erroneous and against legal principles.

The appellant's representative highlighted that the penalty notice did not clearly mention the grounds for the penalty, leading to ambiguity regarding the nature of the alleged offense. Reference was made to legal judgments emphasizing the necessity of a specific charge for penalty under quasi-judicial provisions. The appellant relied on decisions by the Hon'ble Supreme Court and High Courts to support the argument that the absence of a specific limb in the notice rendered the penalty order unsustainable.

On the other hand, the Departmental Representative contended that the penalty order clearly indicated concealment of income as the basis for imposition. However, the appellant's argument centered on the importance of specifying the particular limb of Section 271(1)(c) in the notice to enable a proper defense. The Tribunal analyzed the legal precedents cited by both parties, particularly emphasizing the significance of specifying the limb of the penalty provision in the notice to ensure procedural fairness and compliance with legal requirements.

Ultimately, the Tribunal held that the penalty notice's failure to mention the specific limb of Section 271(1)(c) rendered the penalty order unsustainable. Citing relevant legal judgments, the Tribunal concluded that the absence of a clear charge in the notice violated procedural fairness and invalidated the penalty proceedings. Consequently, the Tribunal allowed the appeal, quashed the penalty imposed under Section 271(1)(c), and directed the Assessing Officer to cancel the penalty. The decision underscored the importance of clarity and specificity in penalty notices to uphold the principles of natural justice and procedural fairness in tax proceedings.