2018 (4) TMI 39 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - non specified in the notice whether the penalty is going to be levied for concealment of income or furnishing inaccurate particulars - Held that - As the notice issued by the Assessing Officer u/s. 274 r.w.s. 271(1)(c) of the Act is on account of non-application of mind and therefore on this account itself the penalty imposed u/s.271(1)(c) is liable to be deleted. Thus, we direct the Assessing Officer to delete the penalty levied u/s.271(1)(c). See Orbit Enterprises v. Income Tax Officer 2017 (11) TMI 172 - ITAT MUMBAI . - Decided in favour of assessee

Issues Involved:
1. Validity of the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.
2. Specificity of the charge in the notice issued under Section 274 read with Section 271 of the Act.
3. Application of the principles of natural justice.

Issue-wise Detailed Analysis:

1. Validity of the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue in this appeal was whether the initiation of penalty proceedings under Section 271(1)(c) was valid. The assessee argued that the initiation was bad in law due to the lack of a specific charge in the notice issued under Section 274 read with Section 271. The Tribunal noted that the Assessing Officer (AO) did not strike off the irrelevant charge in the notice, thus failing to specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income." The penalty order also contained contradictory statements regarding the charge. This ambiguity rendered the initiation of penalty proceedings invalid.

2. Specificity of the charge in the notice issued under Section 274 read with Section 271 of the Act:
The Tribunal emphasized the importance of specifying the exact charge in the notice. It referenced the Coordinate Bench's decision in Meherjee Cassinath Holdings v. ACIT and the Hon'ble Supreme Court's judgment in Dilip N. Shroff, which highlighted that the phrases "concealment of the particulars of income" and "furnishing inaccurate particulars of income" have different connotations. The failure to strike off the irrelevant charge in the notice demonstrated non-application of mind by the AO and violated the principles of natural justice, as the assessee was not made aware of the specific charge to defend against.

3. Application of the principles of natural justice:
The Tribunal observed that the non-striking off of the irrelevant clause in the notice indicated that the AO was unsure of the charge against the assessee, which led to a violation of the principles of natural justice. The Tribunal cited the Hon'ble Supreme Court's decision in Dilip N. Shroff, which stated that quasi-criminal proceedings under Section 271(1)(c) must comply with the principles of natural justice. The Tribunal also referenced the Hon'ble Bombay High Court's decision in the case of Shri Samson Perinchery, which approved the Tribunal's decision that the levy of penalty in such circumstances was bad.

Conclusion:
The Tribunal concluded that the notice issued by the AO under Section 274 read with Section 271(1)(c) was untenable due to non-application of mind and failure to specify the exact charge. Consequently, the penalty imposed under Section 271(1)(c) was deleted. The Tribunal did not address the other arguments raised by the assessee, as the penalty was deleted on the preliminary point itself.

Order:
The appeal filed by the assessee was allowed, and the penalty levied under Section 271(1)(c) was directed to be deleted. The order was pronounced in the open court on March 5, 2018.

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