2019 (7) TMI 172 - AT - Income Tax

Penalty order u/s 271(1)(c) - non striking off either of two charges i.e concealment of particulars of income or furnishing of inaccurate particulars of income and thereby rendering the penalty proceeding bad in law - HELD THAT - The penalty is not liable to be sustainable on account of defective notice. Since, the assessee has succeeded on the basis of legal issue, therefore, we are not inclined to decide the matter of controversy on merits being academic in nature. In view of the said circumstances, we are of the view that the finding of the CIT(A) is wrong against law and facts and is not liable to be sustainable in the eyes of law, therefore, we set aside the finding of the CIT(A) on this issue and delete the penalty. - Decided in favour of assessee.

Issues Involved:
1. Legality of penalty levied under section 271(1)(c) of the Income Tax Act.
2. Validity of the penalty order due to alleged non-specific notice under section 274 read with section 271.
3. Confirmation of penalty by the Commissioner of Income-Tax (Appeals) [CIT(A)].

Detailed Analysis:

1. Legality of Penalty Levied under Section 271(1)(c):
The core issue revolves around the penalty of ?5,56,685 levied under section 271(1)(c) of the Income Tax Act, 1961, for the Assessment Year (A.Y) 2011-12. The assessee argued that the penalty was unjustified as there was no concealment of income or furnishing of inaccurate particulars. The penalty was initiated due to a discrepancy involving a cash deposit of ?65,22,970 in ICICI Bank, BKC branch, which was not disclosed by the assessee. This amount was added to the income of the assessee, leading to the penalty proceedings.

2. Validity of the Penalty Order Due to Alleged Non-Specific Notice:
The assessee contended that the penalty notice issued under section 274 read with section 271 was defective as it did not specify the particular charge—whether it was for concealment of income or for furnishing inaccurate particulars of income. This ambiguity in the notice was argued to render the penalty proceedings invalid. The Tribunal referred to several precedents, including the case of CIT-11 Vs. Samson Perinchery and Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, which emphasized that the notice must clearly specify the charge to allow the assessee to prepare an adequate defense. The Tribunal highlighted that the Supreme Court, in the case of Dilip N. Shroff, recognized the distinct connotations of 'concealment of income' and 'furnishing inaccurate particulars of income,' necessitating clear communication of the specific charge in the penalty notice.

3. Confirmation of Penalty by the CIT(A):
The CIT(A) had confirmed the penalty levied by the Assessing Officer (AO). However, the Tribunal found that the notice issued to the assessee did not strike off the irrelevant charge, reflecting non-application of mind by the AO. The Tribunal noted that the assessment order mentioned both charges, but the notice failed to specify which charge was being pursued. This defect was deemed sufficient to invalidate the penalty proceedings.

Conclusion:
The Tribunal concluded that the penalty was not sustainable due to the defective notice, which failed to specify the exact charge under section 271(1)(c). Consequently, the Tribunal set aside the CIT(A)'s order and deleted the penalty. The appeal filed by the assessee was allowed on these grounds, without delving into the merits of the case, as the legal issue regarding the defective notice was sufficient to decide the matter.

Order Pronouncement:
The order was pronounced in the open court on June 26, 2019, allowing the appeal filed by the assessee and deleting the penalty levied under section 271(1)(c).

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