2019 (5) TMI 1121 - AT - Income Tax

Penalty u/s 271(1)(c) - penalty levied on the basis of vague and non specific show cause notice - defective notice - undisclosed interest income - HELD THAT - From perusal of the above show cause notices we find that the Ld.A.O has merely mentioned the section but the specific charge i.e. whether the penalty have been initiated for concealment of particulars of income or for furnishing inaccurate particulars of income has not been mentioned. Now whether such type of notice which does not speak about the specific charge leveled against the assessee is valid and tenable in the eyes of law needs to be examined. As decided in MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, 2013 (7) TMI 620 - KARNATAKA HIGH COURT taking up the penalty proceedings on one limb and finding the assesssee in another limb is bad in law . Though in the instant appeal the Ld. A.O has made proper satisfaction in the body of the assessment order but in the notice issued u/s 274 r.w.s. 271(1)(c) of the Act he failed to mention the limbs for which penalty proceedings have been initiated. It is the negligence of the Ld. A.O in not making proper specific charge in the notice u/s 274 about the addition for which penalty proceedings have been initiated. Ld. A.O should be clear as to whether the alleged addition goes under the limb of concealment of particulars of income or furnishing inaccurate particulars of income . Merely issuing notice in general proforma will negate the very purpose of natural justice as held by the Hon'ble Apex Court in the case of Dilip N Shraf 2007 (5) TMI 198 - SUPREME COURT that the quasicriminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice. - Decided in favour of assessee.

Summary

Issues Involved:
- Validity of penalty proceedings under Section 271(1)(c) of the Income Tax Act 1961 for Assessment Year 2009-10.
- Specific charge for levy of penalty - concealment of income or furnishing inaccurate particulars of income.
- Compliance with legal requirements in issuing show cause notice for penalty proceedings.

Analysis:

Issue 1: Validity of Penalty Proceedings
The appeal filed by the assessee challenges the legality of the penalty proceedings initiated under Section 271(1)(c) of the Act for the Assessment Year 2009-10. The case was selected for scrutiny, and the penalty of ?9,21,000 was imposed on the assessee for undisclosed interest income. The assessee contended that the penalty order was bad in law and without jurisdiction. The appeal was made to the Tribunal after partial relief was obtained from the CIT(A). The Tribunal examined the grounds raised by the assessee against the penalty levied and the arguments presented by both parties.

Issue 2: Specific Charge for Levy of Penalty
The primary legal issue raised by the assessee was that the Assessing Officer (A.O) failed to specify the charge for the levy of penalty, i.e., whether it was for concealing particulars of income or furnishing inaccurate particulars of income. The notice issued under Section 271(1)(c) did not mention the specific charge against the assessee. The Tribunal referred to previous judgments, including the case of Varad Mehta, where it was held that the notice must specify the grounds for penalty under Section 271(1)(c) to comply with the principles of natural justice. In the absence of a specific charge in the notice, the Tribunal concluded that the penalty proceedings were invalid and void ab initio. Consequently, the penalty of ?8,21,000 imposed for Assessment Year 2009-10 was directed to be deleted.

Issue 3: Compliance with Legal Requirements
The Tribunal emphasized the importance of the notice issued under Section 271(1)(c) specifying the grounds for penalty. Citing relevant case law, the Tribunal held that a notice lacking specific charges against the assessee would violate the principles of natural justice. The failure to mention the charge for which the penalty proceedings were initiated rendered the notice invalid and the subsequent penalty void. The Tribunal allowed the appeal of the assessee based on the invalidity of the notice and directed the deletion of the penalty imposed.

In conclusion, the Tribunal allowed the appeal of the assessee, holding that the notice issued for penalty proceedings lacked specificity regarding the charge for the levy of penalty, rendering the penalty proceedings invalid and the penalty imposed void ab initio.