2019 (7) TMI 1319 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT - Having regard to the manner in which the Assessing Officer has issued notice under section 274 r.w.s. 271(l)(c) for assessment year 2011-12 without mentioning that whether the assessee had concealed the particulars of his income or furnished inaccurate particulars of income, it is of the considered view that when the assessee has not been specifically made aware of the charges leveled against him as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty u/s 271(1)(c) of the Act is not sustainable.The proceedings show a non-application of mind by the Assessing Officer and is, thus, unsustainable. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Act by the Commissioner of Income Tax(Appeals).
2. Allegation of concealing income or furnishing inaccurate particulars of income by the assessee.
3. Validity of the notice issued by the Assessing Officer under section 271(1)(c) of the Act.
4. Legal interpretation of the provisions contained in section 271(1)(c) of the Act.

Analysis:
1. The appeal was filed against the order confirming a penalty of ?3,92,709 under section 271(1)(c) of the Act for the assessment year 2011-12. The Assessing Officer determined the total income at ?37,28,572, with relief allowed in quantum proceedings. The penalty was imposed based on cash deposits by the assessee, leading to the primary question of whether there was concealment or furnishing of inaccurate particulars of income during assessment proceedings.

2. The assessee contended that the penalty notice issued under section 271(1)(c) was invalid as it did not specify whether the assessee concealed income or furnished inaccurate particulars. The Tribunal observed that the notice did not clearly indicate the basis for the penalty, as required by legal standards. The High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory highlighted the necessity for clarity in the levy of penalties under section 271(1)(c).

3. The Tribunal emphasized that the Assessing Officer's notice must specify whether the penalty is for concealment of income or furnishing inaccurate particulars. Failure to do so indicates a lack of application of mind, as per legal precedents. The Tribunal cited the Supreme Court's rulings in Dilip N. Shroff vs. JCIT and CIT vs. SSA's Emarld Meadows to support the requirement for clarity in penalty notices under section 271(1)(c).

4. Ultimately, the Tribunal held that the penalty imposed on the assessee was not sustainable due to the non-application of mind by the Assessing Officer in issuing the notice under section 274 r.w.s. 271(1)(c) of the Act. The Tribunal concluded that the penalty proceedings lacked specificity regarding the charges against the assessee, rendering the penalty unsustainable. Consequently, the penalty of ?3,92,709 imposed under section 271(1)(c) of the Act was deleted, and the appeal filed by the assessee was allowed.