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2018 (7) TMI 1164 - AT - Income TaxPenalty u/s 271(1)(c) - whether the notice issued by the Assessing Officer dated 26/12/2011 is valid or not? - non striking irrelevant portion of notice - Held that - The assessing officer did not strike off the irrelevant column in the notice and made known the assessee whether the penalty was initiated for the concealment of income or for furnishing the inaccurate particulars. In the assessment order also the AO simply recorded that the penalty proceedings u/s 271(1)(c) are initiated separately. Neither in the assessment order nor in the penalty notice the assessing officer has put the assessee on notice for which offence the penalty u/s 271 was initiated. See CIT Vs. SSA s Emerald Meadows 2016 (8) TMI 1145 - SUPREME COURT - Decided in favour of assessee.
Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Specificity of the charge in the penalty notice. 3. Difference between concealment of income and furnishing inaccurate particulars of income. Detailed Analysis: 1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961: The primary issue revolves around the imposition of a penalty under Section 271(1)(c) of the Income Tax Act, 1961, for the assessment years 2006-07 and 2007-08. The assessee filed the original return of income declaring ?3,66,88,330/-, which was later revised to ?3,78,16,430/- and finally to ?3,79,58,650/- following a search and seizure operation. The AO found that the assessee had paid cash in the form of commission amounting to ?11,92,220/- to purchasers, which was not initially disclosed. The AO initiated penalty proceedings for this non-disclosure, resulting in a penalty of ?4,01,300/- being levied for the concealment of income. 2. Specificity of the Charge in the Penalty Notice: A critical point in the judgment is the specificity of the charge in the penalty notice. The AO initiated the penalty proceedings for furnishing inaccurate particulars of income but levied the penalty for concealment of income. The notice issued under Section 274 of the Act did not specify the exact charge, stating ambiguously that the assessee "have concealed the particulars of your income or furnished inaccurate particulars of such income." This lack of specificity was a significant point of contention. 3. Difference Between Concealment of Income and Furnishing Inaccurate Particulars of Income: The judgment emphasizes the distinction between "concealment of income" and "furnishing inaccurate particulars of income." The Tribunal noted that these two charges carry different connotations and that the AO must be clear about which specific charge is being levied. The Tribunal referred to several precedents, including the Hon'ble Bombay High Court's decision in CIT-II Vs Sh. Samson Perinchery, which underscored that the initiation of penalty proceedings must be specific and cannot be ambiguous. Tribunal's Findings: The Tribunal found that the AO initiated the penalty proceedings on the basis of one limb (furnishing inaccurate particulars of income) but levied the penalty on another limb (concealment of income). This discrepancy, along with the non-specific notice under Section 274, led to the conclusion that the penalty proceedings were not valid. The Tribunal cited the Hon'ble Bombay High Court's decision in CIT-II Vs Sh. Samson Perinchery and the Hon'ble Karnataka High Court's decision in CIT Vs Manjunatha Cotton & Ginning Factory, which held that the penalty proceedings must be clear and specific about the charge. The Tribunal also referenced the ITAT Delhi Bench's decision in Sanraj Engineering Pvt. Ltd. Vs ITO, which supported the need for clarity in the charge specified in the penalty notice. Conclusion: The Tribunal concluded that the penalty levied by the AO and sustained by the CIT(A) under Section 271(1)(c) of the Act was not valid due to the lack of specificity in the charge and the discrepancy between the initiation and imposition of the penalty. Consequently, the penalty was deleted for both assessment years 2006-07 and 2007-08. The appeals of the assessee were allowed, and the penalty proceedings were quashed.
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