2018 (7) TMI 2298 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - voluntary disclosures of unexplained income - during the course of assessment proceedings - assessee in her return of income has not disclosed the correct receipts since there was difference in Form 26AS and income declared - as per revenue voluntary disclosure does not release the assessee from the mischief of penal proceedings - HELD THAT - A perusal of the notice issued for levied of penalty shows that the inappropriate words in the said notice have not been struck off and the notice does not specify as to whether penalty is being levied for concealing the particulars of income or for furnishing inaccurate particulars of such income. As in the case of CIT vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT held that where the inappropriate words in the notice issued for levy of penalty are not struck off and the notice does not specify as to whether the assessee has concealed its particulars of income or furnished inaccurate particulars of income penalty u/s 271(1)(c) is liable to be deleted. Since in the instance case also AO has not struck off the inappropriate words and the notice does not specify as to whether the penalty is levied for furnishing inaccurate particulars of income or for concealing particulars of income therefore penalty levied by the AO and sustained by the ld. CIT(A) is liable to be deleted - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed against the order of the CIT(A) upholding the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10. The Assessing Officer reopened the assessment due to discrepancies between receipts as per Form No.26AS and the income tax return. The assessee voluntarily disclosed additional income during the assessment proceedings. The penalty was imposed as 100% of the tax sought to be evaded. The CIT(A) upheld the penalty, stating that voluntary disclosure does not absolve the assessee from penal provisions, especially in cases involving suspicious transactions. The assessee challenged this decision before the Tribunal.

During the appeal, the assessee argued that the penalty notice did not specify whether it was for concealing particulars or furnishing inaccurate particulars of income. The assessee contended that in such cases, where inappropriate words in the notice are not deleted and the nature of the penalty is not specified, penalty under section 271(1)(c) cannot be levied. The Department, however, supported the CIT(A)'s decision, asserting that the assessee had concealed particulars by not declaring correct short term capital gains.

After considering both sides' arguments, the Tribunal found merit in the assessee's contention regarding the penalty notice. Citing a decision of the Hon'ble Karnataka High Court, the Tribunal held that if the penalty notice does not specify whether the assessee concealed particulars or furnished inaccurate particulars of income, the penalty under section 271(1)(c) should be deleted. The Tribunal referred to a Supreme Court order dismissing the Revenue's Special Leave Petition in a similar case. Consequently, the Tribunal set aside the CIT(A)'s order and allowed the assessee's appeal.

In conclusion, the Tribunal ruled in favor of the assessee, directing the deletion of the penalty imposed under section 271(1)(c) due to the inadequacy of the penalty notice in specifying the nature of the offense. The appeal was allowed, and the decision was pronounced in open court on July 26, 2018.