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2018 (2) TMI 1512 - AT - Income TaxPenalty u/s 271(1)(c) - exemption u/s 54F as claimed in the return of income - defective notice - non-striking off of the irrelevant clause - Held that - The notice talks about both the charges and it doesn t convey to the assessee as to which charge he has to respond. The notice thus demonstrate non-application of mind on the part of the AO. Further, we refer to the assessment order where, after discussing the issue relating to computation of capital gains, the AO held that by showing less capital gains, the assessee has furnished inaccurate particulars of income and penalty proceedings are being initiated separately and thereafter, towards the end of the assessment order, the AO states that penalty proceedings u/s 271(1)(c) read with section 274 have been initiated separately for concealment of income/furnishing of inaccurate particulars of income. AO himself is unsure about the charge against the assessee during the course of assessment proceedings. Considering the observations of the AO in the assessment order alongside his action of non-striking off the irrelevant clause in the penalty notice shows that the charge being made against the assessee qua 271(1)(c) is not firm, shows non-application of mind on the part of the AO, and the vagueness and ambiguity in the notice has thus prejudiced the right of reasonable opportunity to the assessee in as much as the assessee is not made aware as to which of the two charges, he has to submit his defence. Where the factum of non-striking off of the irrelevant clause in the notice has been held as reflective of non-application of mind by the AO and in light of facts and circumstances of the present case and the above discussions, the penalty imposed under section 271(1)(c) is liable to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Legality of the order passed under Section 271(1)(c). 2. Confirmation of penalty levy by the Commissioner of Income Tax (Appeals) under Section 271(1)(c) of the IT Act, 1961. Detailed Analysis: 1. Legality of the Order Passed Under Section 271(1)(c): The assessee contended that the penalty proceedings initiated under Section 271(1)(c) were illegal and bad in law. The penalty notice issued did not specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." This ambiguity was argued to violate principles of natural justice as the assessee was not made aware of the specific charge to respond to. The Tribunal referred to the Supreme Court's decision in CIT Vs. SSA’s Emerald Meadows, which held that a penalty notice must clearly state the grounds under Section 271(1)(c). The Tribunal concluded that the penalty notice in this case demonstrated non-application of mind by the Assessing Officer (AO) and was thus prejudicial to the assessee's right to a fair hearing. 2. Confirmation of Penalty Levy by the Commissioner of Income Tax (Appeals): The AO had imposed a penalty on the grounds that the assessee had furnished inaccurate particulars of income by showing lesser capital gains. The assessee initially declared long-term capital gains (LTCG) of ?3,85,600 but revised it to ?68,91,723 during assessment proceedings. The AO observed discrepancies in the cost of acquisition and the exemption claimed under Section 54F. The CIT(A) confirmed the penalty, stating that the revised computation was not voluntary and was filed only after the AO's detection. The CIT(A) relied on various judicial precedents, including the Supreme Court's decision in Mak Data (P) Ltd. vs. CIT, to support the imposition of penalty. The assessee argued that the differences in the LTCG arose due to a bona fide belief and estimation errors, not due to any intentional concealment or furnishing of inaccurate particulars. The Tribunal noted that the AO did not provide a clear finding of inaccurate particulars in the assessment order. The Tribunal emphasized that merely making an incorrect claim does not amount to furnishing inaccurate particulars, as held in CIT Vs. Reliance Petroproducts Pvt. Ltd. Conclusion: The Tribunal found that the penalty notice lacked specificity, reflecting non-application of mind by the AO. This procedural lapse was deemed sufficient to invalidate the penalty proceedings. Consequently, the Tribunal allowed the appeal filed by the assessee and deleted the penalty under Section 271(1)(c). Order Pronounced: The appeal filed by the assessee was allowed, and the order was pronounced in the open court on 21/12/2017.
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