2018 (4) TMI 1208 - AT - Income Tax

Penalty u/s 271(1)(C) - non specification of charge - Held that - Omission by the AO to explicitly specify in the penalty notice as to whether penalty proceedings are being initiated for furnishing of inaccurate particulars or for concealment of income makes the penalty order liable for cancellation. CIT vs. SSA s. Emarld Meadows 2016 (8) TMI 1145 - SUPREME COURT followed - In the present case having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(1)(c) without striking off the irrelevant words, the penalty proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable.- Decided in favour of assessee

Summary

Issues Involved:
Levy of penalty u/s.271(1)(c) of the Act for assessment year 2009-2010.

Analysis:

1. Issue of Penalty Notice Clarity:
The appeal centered on the clarity of the penalty notice issued by the Assessing Officer under section 271(1)(c) of the Act. The appellant argued that the notice did not explicitly specify whether the penalty proceedings were for concealing income or furnishing inaccurate particulars. Citing a Supreme Court case, the appellant contended that such ambiguity rendered the penalty order liable for cancellation. The Departmental Representative did not counter this argument. The Tribunal noted that the penalty amount was levied without dispute by the Assessing Officer.

2. Legal Precedents and Interpretation:
The Tribunal referred to a Supreme Court judgment and a High Court decision that emphasized the importance of clearly specifying the grounds for penalty under section 271(1)(c) of the Act. The court rulings highlighted that the two limbs of the provision, i.e., concealing income and furnishing inaccurate particulars, carry distinct meanings. It was observed that the Assessing Officer must indicate the specific limb to inform the assessee properly. Failure to do so, as in this case, indicated a lack of application of mind and rendered the penalty unsustainable.

3. Application of Legal Precedents:
Drawing parallels with a similar case before the Supreme Court, the Tribunal concluded that the Assessing Officer's failure to specify the grounds for penalty in the notice mirrored the circumstances in the referenced case. Consequently, following the Supreme Court's decision, the Tribunal canceled the penalty imposed by the Assessing Officer. The judgment highlighted the necessity of a clear and specific penalty notice to ensure fairness and compliance with legal provisions.

4. Final Decision:
In light of the legal principles established by the Supreme Court and High Court decisions, the Tribunal allowed the appeal filed by the assessee. The penalty order of ?2,58,767 was canceled, emphasizing the importance of a well-defined penalty notice to uphold procedural fairness and legal validity.

5. Conclusion:
The Tribunal's decision underscored the significance of clarity and specificity in penalty notices under section 271(1)(c) of the Act. The judgment reaffirmed the legal requirement for Assessing Officers to unambiguously state the grounds for penalty, either for concealing income or furnishing inaccurate particulars, to ensure transparency and enable the assessee to respond adequately. The cancellation of the penalty in this case exemplified the adherence to established legal precedents and principles governing penalty proceedings.