2018 (8) TMI 839 - AT - Income Tax

Levy of penalty - unintentional mistake in computation of income - assessee has explained that the error was not intentional and was prevented by circumstances beyond his control - defective notice - Held that - Following the decision in the case of Sachin Arora vs. ITO 2018 (3) TMI 1026 - ITAT AGRA , levy of penalty deleted - Decided in favor of assessee.

Summary

Issues Involved:
1. Validity of penalty imposed under Section 271(1)(c) of the Income Tax Act.
2. Whether the mistake in computation of income was unintentional.
3. Whether the penalty notice was in conformity with the law.
4. Application of judicial precedents to the case.

Detailed Analysis:

1. Validity of Penalty Imposed under Section 271(1)(c):
The appellant contested the penalty of ?12,50,000/- for AY 2012-13 and ?1,60,00,000/- for AY 2013-14, arguing that the CIT(A) wrongly confirmed the penalties imposed by the DCIT. The Tribunal referred to the Division Bench decision in 'Sachin Arora vs. ITO' for AY 2008-09, which dealt with similar facts and circumstances. The Tribunal observed that the penalty imposed under Section 271(1)(c) was not valid as the notice issued was not specific about the charge against the assessee, thus rendering it void ab initio.

2. Mistake in Computation of Income:
The appellant argued that the mistake in computation of income was unintentional and all particulars of income and expenditures were disclosed in the books of accounts. The Tribunal noted that the appellant's explanation was consistent with the facts of the case and supported by judicial precedents, indicating that the error was not intentional and was beyond the appellant's control.

3. Conformity of Penalty Notice with the Law:
The Tribunal emphasized the importance of a clear and specific penalty notice. The notice issued under Section 274 read with Section 271(1)(c) mentioned both charges—concealment of income and furnishing inaccurate particulars—without specifying the exact charge. This lack of specificity violated the principles of natural justice and rendered the notice void. The Tribunal cited several judicial precedents, including 'CIT vs. Manjunath Cotton and Ginning Factory', which held that a penalty notice must clearly state whether it is for concealment of income or furnishing inaccurate particulars.

4. Application of Judicial Precedents:
The Tribunal referred to multiple judicial decisions to support its conclusion. Key cases included:
- 'CIT vs. Manjunath Cotton and Ginning Factory' (359 ITR 565), which emphasized the need for specificity in penalty notices.
- 'Dilip N. Shroff vs. JCIT' (291 ITR 519) and 'Ashok Pai vs. CIT' (292 ITR 11), which distinguished between concealment of income and furnishing inaccurate particulars.
- 'CIT vs. Reliance Petroproducts (P) Ltd.' (322 ITR 158), which discussed the strict liability under Section 271(1)(c) without the necessity of mens rea.

The Tribunal concluded that the penalty notices in both cases were not in conformity with the law, and the penalties imposed were therefore invalid. Consequently, the penalties for both assessment years were cancelled.

Conclusion:
In both appeals, the Tribunal held that the penalty notices were void due to lack of specificity and non-compliance with legal requirements. The mistakes in income computation were deemed unintentional, and the penalties imposed under Section 271(1)(c) were cancelled. The appeals filed by the assessee were allowed.