2018 (3) TMI 666 - AT - Income Tax

Penalty u/s 271(1)(c) - no specific allegation as to the concealment of particulars of income or furnishing of inaccurate particulars - defective notice - Held that - AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. Notice issued by the AO u/s. 271(1)(C) read with Section 274 of the Act is bad in law as it does 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. Therefore, the penalty in dispute is not sustainable in the eyes of law. Thus penalty cancelled - Decided in favour of assessee

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act.
2. Alleged concealment of income and furnishing of inaccurate particulars.
3. Validity of the notice issued under section 271(1)(c) read with Section 274.
4. Denial of deduction under section 80 HHD of the Act.
5. Violation of principles of natural justice.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:
The primary contention was the imposition of a penalty amounting to ?10,41,586/- under section 271(1)(c) of the Income Tax Act. The assessee argued that there was neither furnishing of inaccurate particulars of income nor concealment of income. The penalty imposed was deemed unsustainable in law as there was no clear satisfaction by the assessing officer regarding these allegations.

2. Alleged Concealment of Income and Furnishing of Inaccurate Particulars:
The assessee contended that the penalty proceedings were initiated without any specific allegation of concealment or furnishing inaccurate particulars. The notice issued by the AO on 28.2.2006 was a standard format where the AO merely ticked the option of concealment of income or furnishing inaccurate particulars. This lack of specificity was argued to be contrary to the provisions of law.

3. Validity of the Notice Issued under Section 271(1)(c) Read with Section 274:
The tribunal observed that the notice issued by the AO did not specify which limb of section 271(1)(c) the penalty proceedings were initiated under, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars. This ambiguity rendered the notice bad in law. The tribunal supported this view by citing several decisions, including:
- CIT & Anr. Vs. M/s SSA’s Emerald Meadows (Karnataka High Court and Supreme Court)
- ITAT, ‘A’ Bench, New Delhi decision in Ashok Kumar Chordia vs. DCIT
- ITAT, ‘D’ Bench, New Delhi decision in Rajender Jain vs. ACIT

4. Denial of Deduction under Section 80 HHD of the Act:
The assessee argued that the denial of deduction on account of pocket expenses amounting to ?26,71,040/- was a bona fide claim. The tribunal noted that the additions on which the penalty was levied had already been deleted by the Hon'ble Tribunal, further supporting the assessee's position that the penalty was unsustainable.

5. Violation of Principles of Natural Justice:
The assessee claimed that the penalty order was sustained without proper opportunity to present its case, violating the principles of natural justice. The tribunal acknowledged this concern, emphasizing the necessity of a fair hearing.

Conclusion:
The tribunal concluded that the penalty imposed was not sustainable in law due to the ambiguous notice issued by the AO and the lack of clear findings regarding the concealment of income or furnishing of inaccurate particulars. The penalty was canceled, and the appeal filed by the assessee was allowed. The tribunal's decision was pronounced on 12/03/2018.

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