2018 (4) TMI 1525 - AT - Income Tax

Levying of penalty u/s. 271(1)(c) - defective notice - non specification of charge - Held that - We are of the view that 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, hence, we cancel the penalty in dispute. See CIT & Anr. Vs. M/s SSA s Emerald Meadows 2016 (8) TMI 1145 Supreme Court - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 without specifying the grounds of concealment of income or furnishing inaccurate particulars.

Analysis:
The appeal was against the Order of the Ld. Commissioner of Income Tax (Appeals) concerning the assessment year 2008-09. The Assessee raised 10 grounds related to the levy of penalty, focusing on the absence of specific charges for initiating the penalty under section 271(1)(c). The Assessee argued that the penalty was illegal and should be quashed. Both parties did not dispute the facts narrated by the revenue authorities. The Assessee's Counsel highlighted that the penalty notice did not specify the grounds for concealment of income or furnishing inaccurate particulars, relying on various legal decisions to support their argument.

Upon reviewing the penalty notice issued by the Assessing Officer, the ITAT found that the penalty was initiated for concealment of income or furnishing inaccurate particulars without specifying the relevant grounds. Citing legal precedents, including decisions by the Karnataka High Court and the Supreme Court, the ITAT concluded that the penalty notice was bad in law and not sustainable. The ITAT noted that the penalty notice should specify which limb of section 271(1)(c) the penalty proceedings were initiated under, either for concealment of income or furnishing inaccurate particulars. Therefore, the ITAT canceled the penalty in dispute, deciding in favor of the Assessee and against the Revenue.

In another related case, the ITAT observed a similar issue where the penalty notice did not clearly specify the grounds for initiating the penalty under section 271(1)(c). Despite the CIT(A) upholding the penalty based on the furnishing of inaccurate particulars of income, the ITAT found that the penalty was not sustainable in the eyes of the law. Relying on the same legal precedents, the ITAT deleted the penalty and decided the issue in favor of the Assessee, following the decisions of higher courts and respecting legal principles.

In both cases, the ITAT emphasized the importance of the penalty notice clearly specifying the grounds for initiating the penalty under section 271(1)(c) to ensure the proceedings are lawful and sustainable. By following established legal precedents and principles, the ITAT canceled the penalties and allowed the appeals of the Assessees, highlighting the significance of adherence to procedural requirements in penalty proceedings under the Income Tax Act, 1961.