2019 (8) TMI 563 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice - HELD THAT - A.O. in the assessment order has mentioned at the time of initiation of penalty proceedings that penalty proceedings under section 271(1)(c) of the I.T. Act have been initiated for furnishing inaccurate particulars of income. However on the same day of passing of the assessment order on 23.03.2001 the A.O. issued show cause notice before levy of the penalty in which A.O. has mentioned that assessee has concealed the particulars of income or furnished inaccurate particulars of such income as per the notice reproduced above. After passing of the Judgment by the Hon ble jurisdictional High Court restoring the addition A.O. further issued notice Dated 02.05.2011 in which A.O. did not mention any such fact in the notice which is reproduced above. Thus A.O. has not clarified in the notice as to for which limb of Section 271(1)(c) of the I.T. Act penalty proceedings have been initiated against the assessee whether for concealment of the particulars of income or furnishing inaccurate particulars of such income. See Jagdamba Prasad Gupta Delhi vs. ACIT Circle 35(1) New Delhi 2019 (1) TMI 1200 - ITAT DELHI and M/S SSA S EMERALD MEADOWS 2016 (8) TMI 1145 - SC ORDER - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the I.T. Act, 1961 for A.Y. 1994-1995.

Analysis:
The appeal was filed against the Order of the Ld. CIT(A) challenging the penalty under section 271(1)(c) of the I.T. Act. The A.O. made additions on account of unexplained gifts and premium paid for gifts, initiating penalty proceedings. The A.O. issued a notice mentioning concealment of income or furnishing inaccurate particulars. The Revenue filed an appeal which was allowed by the High Court, leading to a fresh notice for penalty. The Assessee contended that the A.O. did not specify the limb of Section 271(1)(c) under which penalty proceedings were initiated. The Assessee relied on a previous ITAT order and argued that the penalty was not leviable. The Revenue argued that the Assessee was aware of receiving bogus gifts, justifying the penalty. The Tribunal noted discrepancies in the A.O.'s notices and referenced a similar case where the notice was deemed void, leading to the cancellation of penalty proceedings.

The Tribunal observed that the A.O. failed to clarify the specific limb of Section 271(1)(c) under which the penalty was initiated. Citing a previous ITAT order and a High Court judgment, the Tribunal held that the notice issued by the A.O. without specifying the limb of penalty proceedings rendered the penalty illegal. The Tribunal set aside the orders of the lower authorities and canceled the penalty, following the consistent view taken in previous judgments. The Tribunal's decision was based on the principle that a notice lacking specificity regarding the penalty's basis makes the penalty proceedings void and illegal.

Thus, the Tribunal allowed the Assessee's appeal, canceling the penalty imposed under section 271(1)(c) of the I.T. Act for the relevant assessment year. The Tribunal's decision was in line with previous judgments and legal principles regarding the initiation of penalty proceedings under the Income Tax Act.