2019 (9) TMI 189 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - Defective notice - HELD THAT - In this case the A.O. issued show cause notice for levy of penalty u/s 271(1)(c) which is bad in law as it did not specify in which limb of Section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing inaccurate particulars of income. The entire penalty proceedings are therefore vitiated and no penalty is leviable. On this score itself similar view is taken by Hon ble Karnataka High Court in the case of CIT vs. M/s. SSAs Emerald Meadows 2016 (8) TMI 1145 - SC ORDER . Also see M/S. SAHARA INDIA LIFE INSURANCE COMPANY LTD. 2019 (8) TMI 409 - DELHI HIGH COURT - Decided in favour of assessee.

Issues: Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 due to ambiguity in show cause notices regarding the nature of the penalty.

Analysis:
1. Issue of Ambiguity in Show Cause Notices:
The appeals were filed challenging the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The Counsel for the Assessee argued that the show cause notices issued by the Assessing Officer (AO) before the penalty was imposed did not clearly specify whether the penalty was initiated for concealing particulars of income or for furnishing inaccurate particulars of income. This ambiguity was highlighted by referring to the wording of the notices issued to different Assessees. The Counsel argued that this ambiguity rendered the penalty proceedings illegal and should be quashed, citing a judgment of the Hon'ble Delhi High Court in a similar case.

2. Legal Precedents and Arguments:
The Counsel for the Assessee presented the case of another judgment by the Hon'ble Delhi High Court in the matter of Pr. CIT vs. M/s. Sahara India Life Insurance Company Ltd., emphasizing the importance of specifying the exact nature of the penalty being imposed under section 271(1)(c) of the Act. The Counsel contended that the penalty should not be levied if the show cause notice does not clearly indicate whether it pertains to concealment of income particulars or furnishing inaccurate income particulars. This argument was supported by referencing decisions of the Karnataka High Court and the Supreme Court, which emphasized the necessity of clarity in the initiation of penalty proceedings.

3. Decision and Rationale:
After considering the arguments presented, the Judicial Member of the Appellate Tribunal agreed with the Assessee's contention. It was held that the show cause notices issued by the AO were deficient as they did not specify the exact limb of section 271(1)(c) under which the penalty proceedings were initiated. Citing the precedent set by the Karnataka High Court and the recent judgment of the Hon'ble Delhi High Court, the Tribunal concluded that the penalty proceedings were vitiated due to this lack of clarity. Consequently, the Tribunal set aside the Orders of the lower authorities and canceled the penalty, aligning with the decision in the aforementioned case of Pr. CIT vs. M/s. Sahara India Life Insurance Company Ltd.

4. Final Outcome:
In conclusion, the appeals of the Assessees were allowed, and the penalty under section 271(1)(c) of the Income Tax Act, 1961 was canceled due to the inadequacy in specifying the nature of the penalty in the show cause notices. The Tribunal's decision was based on legal precedents emphasizing the importance of clarity in initiating penalty proceedings under the relevant section of the Act.

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