2017 (9) TMI 1518 - AT - Income Tax

Penalty u/s 271(1)(c) - eligibility of notice - addition on inflated purchases and bogus sundry creditors - non-striking of the irrelevant column renders the notice issued u/s 271 - Held that - n the assessment order, the assessing officer recorded that the penalty proceedings u/s 271(1)(c) of the Act are initiated separately. It was not mentioned whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars. In the notice issued u/s 274 r.w.s. 271 of the Act, the A.O. has not striked off the irrelevant column and made known the assessee for which reason the penalty was initiated and for which limb of the notice explanation required to be submitted. The coordinate bench in the case of Smt. Makina Annapurna Vs. ITO Ward -5(2), Visakhapatnam in ITA Nos.604 & 605/Vizag/2014 dated 2.2.2017 on identical facts held that non-striking of the irrelevant column renders the notice issued u/s 271 of the Act invalid. In the instant case, the A.O. has issued the notice without striking off the irrelevant column and in the assessment order, the A.O. did not mention for which offence the penalty was initiated. Appeal filed by the assessee is allowed.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2009-10.

Analysis:
The appeal was filed against the penalty imposed by the Assessing Officer (A.O.) on additions made in the assessment order for the assessment year 2009-10. The grounds raised by the appellant included contentions that the penalty was unjustified as there was no concealment or furnishing of inaccurate particulars of income. The appeal primarily focused on the penalty of ?29,50,000 levied under section 271(1)(c) of the Income Tax Act, 1961.

The appellant argued that the penalty notice was defective as the A.O. failed to specify whether the penalty proceedings were initiated for concealment of income or for furnishing inaccurate particulars of income. The appellant contended that it was mandatory for the A.O. to clearly indicate the nature of the offense for which the explanation was required. The appellant asserted that since the relevant column was not struck in the notice issued under section 274 read with section 271 of the Act, the notice was legally flawed, and thus, the consequent penalty should be canceled.

On the other hand, the Departmental Representative (D.R.) supported the orders of the Commissioner of Income Tax (Appeals) and argued that the A.O. had issued the notice for both inaccurate particulars and concealment of income, making the notice valid. The D.R. contended that the penalty imposed by the A.O. should be upheld.

After considering the arguments from both sides and examining the records, the Tribunal noted that the A.O. had failed to specify in the notice whether the penalty proceedings were for concealment of income or furnishing inaccurate particulars. Citing a precedent where a similar issue was addressed, the Tribunal held that the failure to strike off the irrelevant column in the notice rendered it invalid. The Tribunal concluded that since the A.O. did not mention the offense for which the penalty was initiated, the notice was defective. Consequently, the penalty imposed by the A.O. was deemed invalid and was canceled. The appeal filed by the assessee was allowed, and the decision was pronounced in open court on August 18, 2017.