2017 (2) TMI 392 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of income or for furnishing in accurate particulars of income - Held that - In the penalty order it nowhere mentions that it is for concealment of income or for furnishing in accurate particulars of income. Penalty notice dated 25.3.2013 mentions both the alleged charges without clearly specifying as to whether it is for concealment or for inaccurate particulars. As in the next penalty notice dated 26.8.2013 is also on the similar lines as per notice dated 25.3.2013. Therefore, the notice for penalty was ambiguous and vague in as much as it is stated both concealment of particulars of income or furnishing of inaccurate particulars. No proper or reasonable opportunity was given by the AO to meet the charge. The charge itself was stated to be nebulously. The penalty notice contains both ingredients of penalty without satisfying the particular contravention for which the proceedings have been initiated. In such circumstances, the penalty as levied by the AO in terms of his order dated 30.9.2013 in ab initio invalid, illegal and must be quashed. - Decided in favour of assessee

Summary

Issues involved:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment or furnishing inaccurate particulars of income.

Analysis:
The appeal was against the penalty order imposed by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) for concealment or furnishing inaccurate particulars of income. The assessee filed a return of income for the assessment year 2009-10, showing long term capital gains on the sale of property and claiming deduction under section 54F of the Act. The AO initiated penalty proceedings under section 271(1)(c) for concealment/inaccurate particulars. The AO issued notices to the assessee on 25.3.2013 and 26.8.2013, alleging both charges without clear specification. The assessee contended that the penalty notice was vague and ambiguous, violating the principle of natural justice. The AO imposed a penalty of ?4,32,389 under section 271(1)(c) on 30.9.2013.

The assessee appealed, arguing that the penalty proceedings were flawed as the notice did not specify the exact charge, preventing a proper defense. The AO's penalty order lacked clarity on whether it was for concealment or furnishing inaccurate particulars. The Tribunal noted that the penalty notice contained both charges without specifying the contravention. Citing a decision by the Gujarat High Court, the Tribunal ruled that vague or ambiguous penalty notices render the penalty unsustainable. Therefore, the penalty imposed by the AO and upheld by the CIT(A) was deemed illegal and invalid. The Tribunal deleted the penalty, deciding in favor of the assessee based on the principle of natural justice and the Gujarat High Court's decision.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed under section 271(1)(c) due to the vague and ambiguous nature of the penalty notice, which did not specify the exact charge, violating the principle of natural justice and rendering the penalty unsustainable in the eyes of the law.