2016 (9) TMI 1066 - AT - Income Tax

Initiation of penalty proceedings u/s. 271(1)(c) - Held that - We find that in the notice issued under section 274 r.w. sec. 271 of the Act, the AO has not specifically mentioned as to whether the penalty proceedings are initiated on account of concealment of particulars of income or furnishing of inaccurate particulars of such income.See CIT & Anr. V. Manjunatha Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT In the instant case, undisputedly the AO has not specifically stated the ground for which the penalty proceedings are initiated. We are of the view that the penalty proceedings are not properly initiated, therefore, deserves to be quashed. We accordingly set aside the penalty order and delete the penalty on account of wrong initiation of the penalty proceedings. - Decided in favour of assessee.

Summary

Issues:
Appeal against deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on validity of initiation of penalty proceedings.

Analysis:
The appeal was filed by the revenue challenging the deletion of penalty under section 271(1)(c) of the Income-tax Act, 1961 by the CIT(Appeals). The Respondent-assessee raised a preliminary objection regarding the validity of the initiation of penalty proceedings, citing the decision of the Hon'ble High Court of Karnataka in a specific case. The objection was centered around the lack of specific grounds mentioned in the notice issued under section 274 r.w. sec. 271 of the Act, regarding whether the penalty proceedings were initiated for concealment of income or furnishing inaccurate particulars of income.

Upon examination, it was found that the AO had not explicitly stated the grounds for initiating the penalty proceedings in the notice. Referring to the judgment of the Hon'ble jurisdictional High Court, it was highlighted that the notice should specifically mention whether the penalty is for concealment of income or for furnishing incorrect particulars of income. The Tribunal emphasized that sending a printed form with all the grounds listed would not meet the legal requirements.

Consequently, the Tribunal held that since the penalty proceedings were not properly initiated as per the legal parameters set by the High Court, the penalty order was set aside and the penalty was deleted due to the incorrect initiation of proceedings. As a result of quashing the penalty proceedings, the Tribunal found no need to address the revenue's appeal on its merits, leading to the dismissal of the revenue's appeal and the allowance of the Cross Objection filed by the assessee.

In conclusion, the Tribunal's decision was based on the lack of specific grounds mentioned in the notice for initiating penalty proceedings, aligning with the legal principles established by the Hon'ble jurisdictional High Court. The judgment emphasized the importance of complying with the legal requirements for initiating penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961 to ensure the validity and legality of such actions.