2016 (6) TMI 457 - AT - Income Tax

Penalty u/s. 271(1) (c) - income disclosed u/s. 132(4)and included in the return filed u/s. 153A - Held that - On perusal of the said show cause notice issued u/s. 274 r.ws. 271(1)( c) of the Act purportedly issued to show cause why the penalty shall not be imposed, We find that irrelevant portion of such notice was not struck out by the AO. Therefore, the said notice is not clear whether it was issued for furnishing of inaccurate particulars of income or concealment of particulars of such income. See Suvaprassanna Bhattacharya case 2015 (12) TMI 43 - ITAT KOLKATA - Decided in favour of assessee.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of penalty proceedings due to lack of specific charge in the notice issued under Section 274 r.w.s. 271.
3. Application of Explanation 5A to Section 271(1)(c) regarding concealment of income.

Issue-Wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The appeals pertain to the imposition of penalties for the assessment years 2005-06 and 2006-07. The assessee argued that the penalties imposed by the Assessing Officer (AO) under Section 271(1)(c) for concealment of income were erroneous and should be deleted. The AO had imposed penalties of ?3,55,422 and ?2,29,779 for the respective assessment years, citing that the assessee concealed particulars of income not disclosed in the original returns filed under Section 139(1). The assessee contended that the additional income disclosed in the returns filed under Section 153A was voluntary and should not attract penalties.

2. Validity of Penalty Proceedings Due to Lack of Specific Charge in the Notice Issued Under Section 274 r.w.s. 271:
A significant issue raised was the validity of the penalty proceedings due to the AO's failure to specify the exact charge—whether it was for concealment of income or furnishing inaccurate particulars of income—in the notice issued under Section 274 r.w.s. 271. The Tribunal referred to the judgment of the Hon'ble Karnataka High Court in the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory, 359 ITR 565 (Karn), which mandates that the notice should clearly state the grounds for penalty. The Tribunal found that the AO did not strike out the irrelevant portion in the printed notice, making it unclear whether the penalty was for concealment or inaccurate particulars. This defect rendered the penalty proceedings invalid.

3. Application of Explanation 5A to Section 271(1)(c) Regarding Concealment of Income:
The AO and the CIT(A) applied Explanation 5A to Section 271(1)(c), which deems the assessee to have concealed income if undisclosed income is found or declared after a search initiated on or after June 1, 2007, and not declared in the original return filed under Section 139(1). The CIT(A) upheld the penalties, stating that the assessee concealed particulars of income as the undisclosed income was found during the search and was not declared in the original returns. However, the Tribunal noted that the AO's notice was defective, and therefore, the penalties could not be sustained.

Conclusion:
The Tribunal concluded that the penalty notices issued by the AO were defective due to the failure to specify the exact charge, as required by law. Consequently, the penalties imposed under Section 271(1)(c) for both assessment years were canceled. The appeals of the assessee were allowed, and the penalties were deleted.

Final Order:
The appeals of the assessee for the assessment years 2005-06 and 2006-07 were allowed, and the penalties levied under Section 271(1)(c) were canceled.

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