2018 (2) TMI 740 - AT - Income Tax

Penalty u/s. 271 - defective notice - Held that - AO has initiated the penalty for concealing the particulars of income or furnishing inaccurate particulars of income as well as in the penalty order dated 29.6.2016 he held that the assessee had without reasonable cause concealed the particulars of his income, and / or furnished inaccurate particulars of income assessed. Therefore, in view of above, the penalty in dispute is not sustainable in the eyes of law and needs to be deleted. See CIT & Anr. Vs. M/s SSA s Emerald Meadows 2015 (11) TMI 1620 Karnataka High Court wherein held that the notice issued by the Assessing Officer under section 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. - Decided in favour of assessee

Summary

Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Ambiguity and vagueness of the penalty notice issued by the Assessing Officer (AO).

Issue-wise Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The appeal by the Assessee is against the order of the Commissioner of Income Tax (Appeals)-34, New Delhi, which pertains to the assessment year 2008-09. The primary contention is that the penalty under Section 271(1)(c) was wrongly levied by the Income Tax Officer (ITO) and upheld by the CIT(A). The Assessee argued that the penalty proceedings were initiated for both "furnishing of inaccurate particulars of income" and "concealment of income," without specifying the exact charge.

2. Ambiguity and Vagueness of the Penalty Notice:
The Assessee's counsel pointed out that the notice issued by the AO dated 30.11.2010 was ambiguous and vague. It mentioned both "furnishing of inaccurate particulars of income" and "concealment of income" without specifying under which limb the penalty proceedings were initiated. This ambiguity made the notice contrary to the provisions of law. The Assessee relied on several judicial precedents to support this contention, including decisions from the ITAT, Karnataka High Court, and the Supreme Court.

Judgment Analysis:

Upon hearing both parties and reviewing the records, the Tribunal noted that the notice dated 30.11.2010 did not specify whether the penalty was for "concealment of particulars of income" or "furnishing of inaccurate particulars." This lack of specificity rendered the notice bad in law. The Tribunal referenced several key judgments to support this view:

- CIT & Anr. Vs. M/s SSA’s Emerald Meadows (Karnataka High Court and Supreme Court):
The Karnataka High Court and the Supreme Court held that a notice under Section 274 read with Section 271(1)(c) must specify the exact charge against the Assessee. Failure to do so makes the notice invalid.

- ITAT, ‘A’ Bench, New Delhi in Ashok Kumar Chordia vs. DCIT:
The Tribunal observed that the AO's notice and penalty order were contradictory and did not clearly state whether the penalty was for concealment or for furnishing inaccurate particulars. This ambiguity invalidated the penalty.

- ITAT, ‘D’ Bench, New Delhi in Rajender Jain vs. ACIT:
Similar to the present case, the Tribunal found that the AO's notice was ambiguous, mentioning both concealment and furnishing inaccurate particulars. The penalty was deemed unsustainable as the AO did not record a clear finding.

Conclusion:
The Tribunal concluded that the penalty in dispute was not sustainable in law due to the ambiguity in the notice issued by the AO. The notice failed to specify the exact charge under Section 271(1)(c), making it contrary to the provisions of law. Consequently, the Tribunal allowed the Assessee's appeal and canceled the penalty.

Order:
The appeal filed by the Assessee is allowed, and the penalty in dispute is canceled. The decision was pronounced in the Open Court on 07/02/2018.