2019 (6) TMI 791 - AT - Income Tax

Penalty u/s 271(1)(c) - Income voluntarily offered by the appellant before commencement of assessment proceedings - non specification of charge - 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 relying on SHRI VARAD MEHTA VERSUS DCIT 1 (1) , BHOPAL 2018 (12) TMI 1091 - ITAT INDORE the alleged notice issued u/s 271(1)(c) of the Act dated 31.12.2013 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. Since we have held the notice u/s 274 of the Act as invalid, the subsequent proceeding u/s 271(1)(c) of the Act is thus held void ab initio. Quantum of penalty levied on the assessee - case selected for scrutiny through CASS - HELD THAT - The time limit for furnishing the return of income as per Section 139(5) of the Act for the Assessment Year 2011-12 was one year from the end of the assessment year or the date of completion of the assessment, whichever occurs earlier. So as on 31.3.2013 one year from the end of Assessment Year 2011-12 did not expired and assessment u/s 143(3) of the Act was still in the process of completion. Therefore the assessee was legally entitled to file the revised return of income. The assessment proceedings u/s 143(3) were completed on 31.12.2013 and the Ld. A.O has duly considered the revised return. In these given facts and circumstances of the case holding the assessee liable for paying penalty u/s 271(1)(c) on the income duly disclosed in the revised return of income before the completion of the assessment proceedings, is not justified and the same deserves to be deleted. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961.
2. Quantum of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of Penalty Proceedings under Section 271(1)(c):

The primary contention raised by the assessee was that the Assessing Officer (AO) did not specify the charge for which the penalty proceedings were initiated, i.e., whether it was for "concealing particulars of income" or "furnishing inaccurate particulars of income." The assessee relied on the judgment of the Hon'ble Jurisdictional High Court in the case of PCIT Vs Kulwant Singh Bhatia ITA No.9 of 2018 dated 9.5.2018, which mandates that the specific charge must be mentioned in the notice issued under Section 274 read with Section 271(1)(c).

Upon examination, the Tribunal found that the notice issued by the AO was indeed vague and did not specify the exact charge. The Tribunal referred to a similar case, Varad Mehta ITA No.693/Ind/16 dated 06.12.2018, where it was held that such notices are invalid and untenable as they fail to meet the requirements of natural justice. The Tribunal also cited the jurisdictional High Court's decision in Kulwant Singh Bhatia, which emphasized that a notice must clearly state whether the penalty is for "concealment of income" or "furnishing inaccurate particulars."

The Tribunal concluded that the notice issued to the assessee was invalid due to the lack of specificity regarding the charge. Consequently, the penalty proceedings initiated under Section 271(1)(c) were deemed void ab initio.

2. Quantum of Penalty Levied under Section 271(1)(c):

Even though the penalty proceedings were quashed on legal grounds, the Tribunal addressed the issue of the quantum of penalty for academic purposes. The assessee had filed a revised return on 30.03.2013, disclosing Long Term Capital Gain (LTCG) of ?8,07,996/-, before the completion of the assessment proceedings. The Tribunal noted that the revised return was filed within the permissible time limit under Section 139(5) of the Income Tax Act, which allows for a revised return to be filed within one year from the end of the assessment year or before the completion of the assessment, whichever is earlier.

The Tribunal found that the AO had duly considered the revised return in the assessment order. Therefore, penalizing the assessee for an income disclosed in a legally permissible revised return before the completion of the assessment was unjustified. The Tribunal held that the penalty levied under Section 271(1)(c) on the disclosed income in the revised return should be deleted.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, quashing the penalty proceedings initiated under Section 271(1)(c) due to the invalidity of the notice issued under Section 274. Additionally, the Tribunal found that the penalty on the income disclosed in the revised return was unjustified and directed its deletion. The order was pronounced in the open Court on 14.06.2019.