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2019 (4) TMI 775 - AT - Income TaxPenalty u/s 271(1)(c) - defective notice - inappropriate words are not deleted - non specifying whether the assessee has concealed particulars of income or assessee has furnished inaccurate particulars of income so as to provide adequate opportunity to the assessee to explain the show cause notice - HELD THAT - The penalty provisions of section 27l(1)(c) are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore it was imperative for the Assessing Officer to strike- off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT observed that the levy of penalty has to be clear as to the limb under which it is being levied. Also see DILIP N. SHROFF VERSUS JOINT COMMISSIONER OF INCOME-TAX AND ANOTHER 2007 (5) TMI 198 - SUPREME COURT - Decided in favour of assessee.
Issues:
1. Confirmation of penalty under section 271(1)(c) of the Act by the CIT(A). Detailed Analysis: The appeal filed by the assessee was against the order of the Ld. CIT(Appeals)-III, Gurgaon confirming the penalty of ?67,025/- imposed by the Assessing Officer under section 271(1)(c) of the Act. The primary issue revolved around whether the penalty was justified in the case where the returned income of the assessee was significantly lower than the income assessed by the AO due to capital gains on the sale of property. The assessee contended that the penalty notice issued by the Assessing Officer did not explicitly specify whether it was for concealment of income or furnishing inaccurate particulars of income. Citing a Supreme Court case, the assessee argued that such ambiguity in the notice rendered the penalty order liable for cancellation. The Departmental Representative, on the other hand, relied on various legal precedents to support the justification of penalty proceedings in cases where the claim made in the return of income was found to be bogus. Upon reviewing the submissions and lower authorities' orders, the Tribunal found that the penalty was levied by the Assessing Officer without specifying the nature of the default - concealment or furnishing inaccurate particulars. The Tribunal referred to a judgment by the Hon'ble Apex Court in a similar case where the penalty notice was deemed invalid due to lack of specificity. The Tribunal concluded that the notice issued in the present case was not valid, as it did not provide the assessee with a clear opportunity to respond to the allegations. The penalty provisions under section 271(1)(c) of the Act require a clear indication of whether the assessee concealed income or furnished inaccurate particulars. The Tribunal emphasized the importance of specifying the relevant limb of the section in the penalty notice to enable the assessee to respond appropriately. Citing legal precedents, including a Karnataka High Court case, the Tribunal highlighted that a standard proforma notice without striking off irrelevant clauses indicated a lack of application of mind by the Assessing Officer. In line with the legal principles established in previous judgments, the Tribunal canceled the penalty imposed by the Assessing Officer, amounting to ?67,025/-, as the penalty proceedings were deemed to lack proper application of mind. The decision was based on the necessity for clarity in penalty notices under section 271(1)(c) and ensuring that the assessee is adequately informed of the charges against them. In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the penalty order and emphasizing the importance of clear and specific penalty notices under the relevant provisions of the Act.
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