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2018 (7) TMI 60 - AT - Income TaxPenalty proceedings u/s 271(1)(c) - Invalid notice - non striking off inapplicable portion in the notice - Held that - We are of the considered view that the AO has initiated penalty u/s 271(1)(c) by issuing show cause notice u/s 274 without striking off inapplicable portion in the notice. Therefore, it is a clear case of non application of mind by the AO as to whether penalty has been initiated for furnishing of inaccurate particulars of income or concealment of particulars of income. Even in the penalty order, the AO has levied penalty under Explanation 1 to section 271(1)(c) which is applicable for deemed concealment of particulars of income. AO was not clear while initiating penalty u/s 271(1)(c) and hence, the whole penalty proceedings is vitiated and consequently, penalty levied by the AO u/s 271(1)(c) cannot survive. - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty proceedings initiated under section 271(1)(c) of the Income Tax Act. 2. Whether the penalty was correctly levied for furnishing inaccurate particulars of income. Issue-wise Detailed Analysis: 1. Validity of Penalty Proceedings: The assessee argued that the penalty proceedings initiated by the Assessing Officer (AO) were invalid due to the issuance of a vague notice under section 274 read with section 271(1)(c). The notice did not specify whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." This lack of specificity was deemed a non-application of mind by the AO, which vitiates the penalty proceedings. The assessee cited numerous judicial precedents, including the Supreme Court's decision in CIT vs SSA’s Emerald Meadows and the Karnataka High Court's decision in CIT vs Manjunatha Cotton & Ginning Factory, which held that such vague notices render penalty proceedings void ab initio. The Tribunal agreed with the assessee, noting that the AO had issued a printed form of notice without striking off the irrelevant portions, thus failing to specify the exact charge. This was a clear case of non-application of mind, making the penalty proceedings invalid. The Tribunal also referenced its own decision in M/s Tata Communications Transformations Services Ltd vs DCIT, which had similarly quashed penalty proceedings due to vague notices. 2. Correctness of Penalty for Furnishing Inaccurate Particulars: The AO had levied a penalty of ?79,05,625 under section 271(1)(c) for furnishing inaccurate particulars of income, specifically regarding the excessive claim of loss on account of provision for doubtful debts and loss on sale of fixed assets. The AO relied on judicial precedents, including the Delhi High Court's decision in Zoom Communications India Ltd, to conclude that the assessee had deliberately filed inaccurate particulars of income. The assessee contended that the excessive claims were part of the regular return and were withdrawn in a revised statement before the completion of the assessment. Therefore, these could not be considered as furnishing inaccurate particulars. The CIT(A) upheld the AO's decision, stating that the excess claim of loss was discovered during the assessment proceedings and not voluntarily by the assessee, indicating an attempt to evade taxes. However, the Tribunal found that the AO's failure to specify the exact charge in the penalty notice and order rendered the penalty proceedings invalid. Consequently, the penalty levied under section 271(1)(c) could not survive. Conclusion: The Tribunal quashed the penalty proceedings and directed the AO to delete the penalty of ?79,05,625 levied under section 271(1)(c) of the Income Tax Act. The appeal filed by the assessee was allowed in full. Order Pronounced: The order was pronounced in the open court on 29th June 2018.
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