2019 (10) TMI 131 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice - HELD THAT - Notice issued u/s 274 r.w.s. 271(1)(c) of the Act dated 22.03.2016 is invalid, untenable and suffers from the infirmity of non application of mind by the Assessing Officer. We accordingly direct to delete the penalty of at ₹ 50,000/-, ₹ 2,10,000/- and,₹ 2,60,000/- for Assessment Years 2008-09, 2011-12 and 2013-14 respectively imposed u/s 271(1)(c) on this legal ground itself. We accordingly allow the additional ground raised by the assessee on the legality of the penalty proceedings initiated u/s 271(1)(c) of the Act. Since the issue of penalty u/s 271(1)(c) also has been dealt on the preliminary points other arguments of the assessee dealing with the merits of the levy of penalty are not been dealt with, as the same are rendered academic in nature and thus the appeal of the assessee for the Assessment Years 2008-09, 2011-12 2013-14 are partly allowed.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.
2. Reliance on seized document BS-16 not pertaining to the relevant assessment year.
3. Breach of natural justice by not providing the opportunity to explain the seized document.
4. Validity of the notice issued under Section 274 read with Section 271(1)(c) of the Act.
5. Specificity of the charge in the penalty notice.

Comprehensive, Issue-Wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:
The core issue revolves around the levy of penalties amounting to ?50,000/-, ?2,10,000/-, and ?2,60,000/- for the assessment years 2008-09, 2011-12, and 2013-14 respectively. The penalties were imposed for either "concealing particulars of income" or "furnishing inaccurate particulars of income." However, the Assessee contended that the Assessing Officer (A.O.) failed to specify the exact charge under Section 271(1)(c) in the penalty proceedings.

2. Reliance on Seized Document BS-16 Not Pertaining to the Relevant Assessment Year:
The Assessee argued that the Ld. Commissioner of Income Tax (Appeals) [CIT(A)] erred by relying heavily on the seized document BS-16, which did not pertain to the relevant assessment year. The A.O. did not consider BS-16 in the penalty order, yet the CIT(A) used it to confirm the penalty.

3. Breach of Natural Justice by Not Providing Opportunity to Explain the Seized Document:
The Assessee claimed a breach of natural justice, arguing that the CIT(A) did not provide an opportunity to explain the stand on the seized document BS-16, thus causing prejudice. This lack of opportunity to present an explanation was seen as a violation of the principles of natural justice.

4. Validity of the Notice Issued Under Section 274 Read with Section 271(1)(c) of the Act:
During the hearing, the Assessee raised an additional legal ground challenging the validity of the notice issued under Section 274 read with Section 271(1)(c) of the Act. The Assessee argued that the notice was illegal and bad in law as it did not specify whether the penalty was for "concealing particulars of income" or "furnishing inaccurate particulars of income." The Tribunal admitted this additional ground for adjudication, referencing the Supreme Court judgments in the cases of National Thermal Power Company Limited and Jute Corporation of India, which allow for the admission of legal grounds that do not require further investigation of facts.

5. Specificity of the Charge in the Penalty Notice:
The Tribunal examined the penalty notices issued on 30.10.2012 and found that the A.O. had not specified the exact charge for the penalty, merely mentioning the section without specifying whether it was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal referenced the jurisdictional High Court's decision in the case of PCIT Vs Kulwant Singh Bhatia and other judicial precedents, which held that such notices are invalid if they do not specify the charge. The Tribunal concluded that the notices suffered from non-application of mind and were thus invalid.

Conclusion:
The Tribunal allowed the Assessee's appeal on the legal ground, directing the deletion of penalties for the assessment years 2008-09, 2011-12, and 2013-14 due to the invalidity of the penalty notices. As the penalty was dealt with on this preliminary point, other arguments on the merits of the penalty were rendered academic and not addressed. The appeals for the respective assessment years were partly allowed. The order was pronounced in the open Court on 27.09.2019.

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