2017 (8) TMI 172 - AT - Income Tax

Penalty under section 271(1)(c) - legality of notice under section 274 - Held that - At the time of issuing notice under section 274 of the Act the learned Assessing Officer initiated the proceedings without being certain as to whether it is for furnishing of inaccurate particulars of income or concealment of particulars of income ; whereas commonly for all the four years, in the assessment order under section 153C read with section 153A(1)(b) read with section 144 of the Act, penalty was initiated for furnishing inaccurate particulars of income ; whereas in the penalty order, it was alleged that the assessee has concealed its particulars of income. Thus all the four years from the assessment years 2001-02 to 2004-05, show-cause notice issued under section 274 read with section 271 of the Act is defective as it does not speak about the grounds on which the penalty has been imposed. We, therefore, hold that the orders imposing penalty in all the four assessment years are invalid - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the notice issued under section 274 read with section 271 of the Income-tax Act, 1961.
2. Imposition of penalty under section 271(1)(c) of the Income-tax Act, 1961 for the assessment years 2001-02 to 2004-05.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued under Section 274 read with Section 271 of the Income-tax Act, 1961:

The assessee challenged the legality of the notices issued under section 274 read with section 271 of the Act. The argument was that the Assessing Officer (AO) had not specified whether the penalty was for "concealing the particulars of income" or "furnishing inaccurate particulars of income." The Tribunal referred to several judgments, including the Supreme Court judgment in CIT v. SSA's Emerald Meadows and the Karnataka High Court judgment in CIT v. Manjunatha Cotton and Ginning Factory, which established that the AO must clearly state the grounds for imposing the penalty. The Tribunal found that the AO had merely ticked options in the notice, indicating a lack of clarity and application of mind. The Tribunal held that the penalty notices were defective and thus invalid.

2. Imposition of Penalty under Section 271(1)(c) of the Income-tax Act, 1961 for the Assessment Years 2001-02 to 2004-05:

The Tribunal examined the imposition of penalties for the assessment years 2001-02 to 2004-05. The penalties were imposed for additions confirmed under section 68 of the Act. The Tribunal noted that the AO had initiated penalty proceedings for "furnishing inaccurate particulars of income" but later imposed penalties for "concealment of income." This inconsistency was found to be similar to the issues discussed in the judgments cited. The Tribunal concluded that the AO had not clearly specified the grounds for the penalty, making the penalty orders invalid. Consequently, the penalties imposed were canceled.

Conclusion:

The Tribunal allowed the legal ground raised by the assessee, declaring the penalty notices defective and invalid. The penalties imposed for the assessment years 2001-02 to 2004-05 were canceled. The grounds of appeal on the merits were dismissed as infructuous since the penalties were already deleted. The order was pronounced on March 30, 2017, at Ahmedabad.