2017 (5) TMI 121 - AT - Income Tax

Penalty u/s 271(1)(c) - unaccounted receipts - assessee was receiving incomes outside the books of account - claim of assessee is that the notice does not specify the exact ground on which penalty is to be charged i.e. whether for concealment of income or for furnishing of inaccurate particulars of income - Held that - it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly - having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) of the Act dated 30/12/2010 without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable. At the time of initiation of penalty, the Assessing Officer was quite unsure as to which of the two sections namely, section 271(1)(c) of the Act or section 271AAA of the Act was he intending to proceed. Such an approach is also reflective of non application of mind by the Assessing Officer. Appeal allowed - decided in favor of appellant.

Summary

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

Analysis:
1. The appeal concerns the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act, sustained by the CIT(A), against the assessee for concealing income. The case involves a partnership firm engaged in construction. During a search, incriminating documents revealed unaccounted receipts from the sale of units in a building. The Assessing Officer added unaccounted cash receipts to the income, resulting in a penalty of ?69,93,271. The CIT(A) affirmed the penalty, leading to the current appeal.

2. The primary contention raised by the assessee challenges the validity of the penalty proceedings. The notice issued by the Assessing Officer did not specify the exact ground for penalty - concealment of income or furnishing inaccurate particulars. The assessee argued that the notice's standard proforma, without striking off irrelevant portions, rendered it invalid. Citing relevant case laws, the assessee contended that the notice's ambiguity violated procedural requirements.

3. The Departmental Representative defended the penalty, emphasizing that it was imposed for concealing income. They argued that the notice's failure to strike off an irrelevant limb did not invalidate the penalty. Distinguishing the case from precedent, they asserted that the penalty was appropriately imposed for concealment, not furnishing inaccurate particulars.

4. The Tribunal analyzed the preliminary plea regarding the validity of penalty proceedings. Referring to legal precedents, including the Supreme Court and High Court judgments, the Tribunal concluded that the notice's ambiguity indicated a lack of application of mind by the Assessing Officer. The failure to specify the charge against the assessee violated procedural norms, rendering the penalty unsustainable.

5. Additionally, the Tribunal highlighted another instance of non-application of mind by the Assessing Officer. Issuing notices under both section 271(1)(c) and section 271AAA of the Act, the Assessing Officer displayed uncertainty in choosing the applicable section. Given the inapplicability of section 271AAA to the assessment year, the Tribunal deemed the penalty proceedings erroneous. Following legal precedents, the Tribunal directed the deletion of the penalty imposed under section 271(1)(c) of the Act.

6. As the assessee succeeded on the preliminary ground, further arguments on the merits of the penalty were not addressed, deeming them academic. Consequently, the Tribunal allowed the appeal, setting aside the penalty imposed under section 271(1)(c) of the Act.

In conclusion, the Tribunal's detailed analysis focused on procedural irregularities in the penalty proceedings, emphasizing the necessity of clarity and application of mind by the Assessing Officer. The decision to delete the penalty underscored the importance of adherence to procedural requirements in tax assessments.