2019 (3) TMI 640 - AT - Income Tax

Penalty u/s 271(l)(c) - non specification of charge - whether it is for concealment of income or for furnishing of inaccurate particulars of income? - HELD THAT - From a perusal of show cause notice, it is crystal clear that the charge for which penalty is proposed to be levied under section 271(1)(c) of the Act, whether for concealment of income, or for furnishing of inaccurate particulars of income, is not specific. The law mandates that the authority who is proposing to impose penalty shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence which he would like to take to support his case. This is even enshrined in the principles of natural justice and as has been upheld by Hon ble Apex Court and other High Courts. - Penalty deleted - decided in favour of assessee.

Summary

Issues:
Appeals against penalty under section 271(1)(c) of the Income Tax Act for Assessment Years 2007-08 to 2010-11.

Analysis:
The appeals were filed by the assessee challenging the imposition of penalty under section 271(1)(c) of the Income Tax Act, which was upheld by the CIT(A). The contention was that the show cause notice for the penalty was not specific regarding whether it was for concealment of income or furnishing of inaccurate particulars of income. The assessee argued that a vague notice renders any subsequent penalty invalid as per principles of natural justice. The case law cited supported the requirement of a specific notice under section 271(1)(c) to inform the assessee clearly about the charge. The tribunal agreed that the notice in question lacked specificity, leading to the penalty being considered void ab initio and illegal. Consequently, the penalty was directed to be deleted.

The tribunal emphasized the importance of a specific charge in the penalty notice to enable the assessee to prepare a defense adequately. Citing various legal precedents, it highlighted that penalty proceedings are separate from assessment proceedings and must adhere to the principles of natural justice. Failure to specify the grounds for penalty in the notice was deemed a violation of natural justice, rendering the penalty imposed invalid. The tribunal's decision to delete the penalty was based on the established legal position that a vague notice under section 271(1)(c) is illegal and lacks the necessary legal basis for penalty imposition.

Given the similarity of facts in other appeals, the tribunal allowed those appeals as well, with the same reasoning as in the main case. The final decision pronounced on 08/03/2019 was the allowance of all appeals, emphasizing the necessity of a specific charge in penalty notices under section 271(1)(c) to ensure compliance with legal principles and fair treatment of the assessee.