2019 (12) TMI 401 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - non-striking off the irrelevant limb - HELD THAT - It cannot be said that the penalty was levied for furnishing inaccurate particulars of income and concealment of income. When the penalty is levied for one of the offence, it is incumbent upon the Assessing Officer to struck down the irrelevant portion of the notice issued u/s 274 of the Act. We have gone through the contents of the notice issued u/s. 274 of the Act. As held in the case of CIT Anr. vs. M/s. SSA s Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT that the notice issued by the Assessing Officer u/s. 274 r.w.s 271(1)(c) is to be bad in law as it did not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. This view was confirmed by the Supreme Court in the same case, i.e., CIT Anr. vs. M/s. SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER We are inclined to hold that the penalty proceedings initiated by the AO is void ab initio and allow the appeal of the assessee.

Issues Involved:

1. Validity of the notice issued under section 274 read with section 271(1)(c) of the Income Tax Act.
2. Delay in filing the appeal by the Revenue.
3. Grounds for levying penalty under section 271(1)(c) by the Assessing Officer.

Detailed Analysis:

1. Validity of the notice issued under section 274 read with section 271(1)(c) of the Income Tax Act:

The primary issue in this case revolves around whether the notice issued under section 274 read with section 271(1)(c) is valid. The CIT(A) concluded that the notice was invalid because it did not specify the limb under which the penalty proceedings were initiated, i.e., whether for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal referred to the decision in the case of Babu Mathew vs. ACIT, where it was held that a notice under section 274 must specifically state the grounds for penalty. The Karnataka High Court in CIT & Anr. v. Manjunatha Cotton and Ginning Factory also supported this view, stating that a generic notice without specifying the grounds is insufficient and violates principles of natural justice. The Tribunal found that the Assessing Officer did not strike out the irrelevant portion in the notice, making it defective and invalid.

2. Delay in filing the appeal by the Revenue:

There was a delay of 232 days in filing the appeal before the Tribunal. The Revenue filed a condonation petition explaining that the delay was due to administrative reasons, specifically a mix-up in the delivery of documents. The Tribunal accepted the explanation, found sufficient cause for the delay, and condoned it, allowing the appeal to be heard on merits.

3. Grounds for levying penalty under section 271(1)(c) by the Assessing Officer:

The Assessing Officer levied a penalty under section 271(1)(c) for both "furnishing inaccurate particulars of income" and "concealing its true and correct taxable income." However, the Tribunal noted inconsistencies in the penalty order. The Assessing Officer mentioned different grounds for penalty in various parts of the order, indicating a lack of clarity and non-application of mind. The Tribunal emphasized that when levying a penalty, the specific charge must be clear and unambiguous. The Karnataka High Court's decision in CIT & Anr. vs. M/s. SSA’s Emerald Meadows held that a notice must specify whether the penalty is for concealment or furnishing inaccurate particulars. The Supreme Court confirmed this view. The Tribunal concluded that the penalty proceedings were void ab initio due to the defective notice and lack of clarity in the grounds for penalty.

Conclusion:

The Tribunal upheld the CIT(A)'s decision that the notice issued under section 274 read with section 271(1)(c) was invalid due to the failure to specify the exact charge. Consequently, the penalty order was also deemed invalid. The Tribunal dismissed the Revenue's appeal, confirming that the penalty proceedings were void ab initio.

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