2018 (4) TMI 245 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - whether for concealment of particulars of income or for furnishing of inaccurate particulars of income? - Held that - Assessing Officer is required to 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 for furnishing of inaccurate particulars of income. From the perusal of the notice u/s.274 r.w.s. 271 in the present appeal, it is very much obvious that the AO has not specified the same. The notice in fact is in standard pro forma without the irrelevant clauses therein being struck off. This indicates non application of mind on the part of the AO while issuing the penalty notice. Penalty proceedings initiated by the Assessing Officer are bad in law and accordingly the penalty so initiated is directed to be deleted and the order of the learned CIT (A) is set aside. - Decided in favour of assessee.

Summary

Issues:
Challenge to imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 due to lack of specification in the notice.

Analysis:
The appeal challenges the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961. The appellant argued that the Assessing Officer failed to specify the charge on which the penalty was imposed in the notice, as required by law. The appellant contended that the notice mentioned both limbs under which the penalty could be imposed without specifying the relevant charge, rendering the notice defective. The appellant relied on judicial decisions, including the Hon'ble High Court of Karnataka's ruling in CIT vs. Manjunatha Cotton & Ginning Factory, emphasizing the necessity of specifying the grounds for penalty under section 271(1)(c) in the notice.

The Revenue, represented by the DR, asserted that the penalty proceedings were validly initiated as per the notice issued under section 274 r.w.s. 271 of the Act. However, upon examination of the material on record, it was evident that the Assessing Officer did not specify under which limb of Section 271(1)(c) the penalty proceedings were initiated, i.e., for concealment of income or furnishing inaccurate particulars of income. Citing the judgment of the Hon'ble High Court of Karnataka in the case of CIT vs. Manjunatha Cotton & Ginning Factory, it was noted that a notice under section 274 should explicitly state the grounds mentioned in Section 271(1)(c) to satisfy legal requirements.

The Tribunal, after considering the arguments and legal precedents, held that the notice issued by the Assessing Officer was deficient as it did not specify the limb of Section 271(1)(c) under which the penalty proceedings were initiated. Relying on the decision in CIT vs. Manjunatha Cotton & Ginning Factory, the Tribunal found the penalty notice to be legally flawed. Consequently, the Tribunal allowed the appeal of the assessee, directing the deletion of the penalty initiated by the Assessing Officer. The judgment emphasized the necessity for the Assessing Officer to specify the relevant limb of Section 271(1)(c) in the penalty notice, failing which the penalty proceedings could be deemed invalid. The appeal of the assessee was allowed based on these grounds, and the penalty was set aside.