2017 (11) TMI 1048 - AT - Income Tax

Levy of penalty under section 271(1)(c) - non application of mind by AO - Held that - It is apparent from the documents on record that there is inconsistency with respect to charge for levy of penalty at all the three stages i.e.,(i) recording of satisfaction ;(ii) issuance of notice ; and(iii) levy of penalty. There is ambiguity in recording of satisfaction and notice issued for the levy of penalty under section 274 read with section 271(1)(c) of the Act. Since the charge for levy of penalty is not explicitly clear from the notice, the same is held to be bad in law and hence, the penalty proceedings are liable to be set aside on this ground alone. Since the additional ground raised by the assessee has been allowed, the grounds raised by the assessee challenging the levy of penalty on the merits have become academic and thus, are not dealt with. Levy of penalty by the Assessing Officer in a mechanical manner without proper application of mind is fatal. Ambiguity in the notice issued under section 274 read with section 271(1)(c) would itself vitiate the entire penalty proceedings. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income and filing inaccurate particulars of income.

Detailed Analysis:
1. The appellant challenged the levy of penalty under section 271(1)(c) for the assessment year 1998-99. The Tribunal had previously remitted the matter back to the Assessing Officer for fresh adjudication. The appellant contested the validity of the notice issued under section 274 read with section 271(1)(c) due to vagueness and ambiguity.

2. The appellant argued that the Assessing Officer was unclear in specifying the charge for the penalty, leading to inconsistencies in the satisfaction recorded, notice issued, and penalty levied. The appellant cited relevant case laws to support the contention that the penalty proceedings should be specific and consistent in mentioning the grounds for penalty.

3. The Department representative defended the penalty, stating that the Assessing Officer invoked both limbs of section 271(1)(c) due to intentional inaccurate particulars of income. However, the Tribunal noted the lack of coherence in the Assessing Officer's approach regarding the charge for penalty.

4. The Tribunal observed that the Assessing Officer's inconsistency in specifying the grounds for penalty violated the principles of natural justice. Citing legal precedents, the Tribunal emphasized that penalty proceedings must be based on specific grounds, and any ambiguity in the notice would invalidate the penalty proceedings.

5. Ultimately, the Tribunal allowed the appeal, holding that the ambiguity in the notice and inconsistency in specifying the charge for the penalty rendered the penalty proceedings invalid. The Tribunal emphasized that mechanical levy of penalty without proper application of mind and ambiguity in the notice would vitiate the penalty proceedings.

6. The Tribunal's decision highlighted the importance of clarity and specificity in penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961. The judgment underscored the need for consistency in recording satisfaction, issuing notices, and levying penalties to ensure procedural fairness and adherence to legal principles.