2018 (8) TMI 2125 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice u/s 274 - non specification of clear charge - assessees are employees of SAIL Bhilai Steel Plant and derive income from salary as claimed the perquisites received from the employer as exempt - AO reopened all these cases by issue of notice u/s 148 and respective employees offered the entire income and paid the taxes thereon and repaid refunds issued earlier on the basis of the original returns of income - HELD THAT - A perusal of the notice issued u/s 274 r.w.s. 271 in each case shows that the inappropriate words in the said notice has not been struck off i.e. the notice does not specify under which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of income or for furnishing of inaccurate particulars of income. Since in the instant case AO has not struck off the inappropriate words in the notices issued u/s 274 r.w.s. 271 therefore the notice does not specify under which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of income or for furnishing of inaccurate particulars of income. Therefore the penalty proceedings become bad in law. Decided in favour of assessee.

Summary

Issues:
Levy of penalty u/s 271(1)(c) of the I.T. Act, 1961 based on non-specification of the nature of default in the notice issued by the Assessing Officer.

Analysis:
The appeals before the Appellate Tribunal ITAT Raipur involved the levy of penalties under section 271(1)(c) of the Income Tax Act, 1961. The issue at hand was whether the penalty imposed by the Assessing Officer, confirmed by the ld. CIT(A), was justified. The assessees, who were employees of SAIL, Bhilai Steel Plant, had claimed exemptions on perquisites received from their employer in their income tax returns. Subsequently, the Assessing Officer initiated penalty proceedings under section 271(1)(c) after reopening the cases of the assessees. The penalty was imposed for allegedly concealing income and furnishing inaccurate particulars of income. The ld. CIT(A) upheld the penalties imposed by the Assessing Officer.

The crux of the matter revolved around the notices issued by the Assessing Officer under section 274 read with section 271(1)(c) of the Act. The counsel for the assessees contended that the show cause notices did not define the nature of the default, i.e., whether the penalty was levied for concealment of income or for furnishing inaccurate particulars of income. Citing a decision of the Hon'ble Karnataka High Court, the counsel argued that such notices were bad in law if they did not specify the grounds for initiating penalty proceedings. The counsel further pointed out that various Tribunal Benches had canceled penalties in similar cases where inappropriate words were not struck off from the notices issued under section 274 read with section 271.

In its analysis, the Appellate Tribunal noted that the inappropriate words specifying the nature of default were not struck off from the notices issued by the Assessing Officer. Referring to the decision of the Hon'ble Karnataka High Court and the subsequent dismissal of the Revenue's Special Leave Petition (SLP) by the Supreme Court, the Tribunal held that the penalty proceedings were flawed due to the lack of specificity in the notices. Consequently, the Tribunal set aside the orders of the ld. CIT(A) and directed the Assessing Officer to cancel the penalties imposed on the assessees. The appeals filed by the assessees were allowed, and all penalties were revoked.

In conclusion, the Appellate Tribunal ITAT Raipur ruled in favor of the assessees, emphasizing the importance of clearly specifying the grounds for initiating penalty proceedings in the notices issued by the Assessing Officer. The judgment highlighted the legal requirement for precision in such notices to ensure the validity of penalty imposition under section 271(1)(c) of the Income Tax Act, 1961.