2019 (12) TMI 447 - AT - Income Tax

Penalty u/s 271(1)(c) - whether the penalty proceedings was initiated for furnishing of inaccurate particulars of income or concealment of income ? - Defective notice - HELD THAT - Bare perusal of the notices issued u/s 274 read with section 271(1)(c) of the Act, extracted above, in order to initiate the penalty proceedings against the assessee go to prove that the AO himself was not aware / sure as to whether he is issuing notice to initiate the penalty proceedings either for concealment of particulars of income or furnishing of inaccurate particulars of such income by the assessee rather issued vague and ambiguous notice by incorporating both the limbs of section 271(1)(c). When the charge is to be framed against any person so as to move the penal provisions against him/her, he/she is required to be specifically made aware of the charges to be leveled against him/her. Following the decisions rendered in the cases of CIT vs. Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT , CIT vs. SSA s Emerala Meadows 2016 (8) TMI 1145 - SC ORDER and Pr. CIT vs. Sahara India Life Insurance Company Ltd 2019 (8) TMI 409 - DELHI HIGH COURT we are of the considered view that when the notices issued by the AO are bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty order under Section 271(1)(c) of the Income Tax Act.
2. Adequate opportunity of being heard provided to the appellant.
3. Appropriateness of penalty amounts imposed for the assessment years 2008-09, 2009-10, and 2010-11.

Issue-wise Detailed Analysis:

1. Validity of Penalty Order under Section 271(1)(c):
The primary issue was whether the penalty order under Section 271(1)(c) was valid, given that the notice issued under Section 274 read with Section 271(1)(c) did not specify whether the penalty proceedings were initiated for "concealment of particulars of income" or "furnishing inaccurate particulars of income." The Tribunal noted that the Assessing Officer (AO) issued vague and ambiguous notices by incorporating both limbs of Section 271(1)(c). The Tribunal referred to the judgments of the Hon'ble Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory and CIT vs. SSA’s Emerala Meadows, which held that such unspecified notices are invalid. The Hon'ble Delhi High Court in Pr. CIT vs. Sahara India Life Insurance Company Ltd. also supported this view. Consequently, the Tribunal concluded that the penalty proceedings initiated under Section 271(1)(c) were not sustainable and the penalty orders were quashed.

2. Adequate Opportunity of Being Heard:
The appellant contended that the CIT(A) erred by passing the appellate order without affording an adequate opportunity of being heard. However, the Tribunal's decision primarily focused on the invalidity of the penalty notices. Given that the penalty orders were quashed due to the invalid notices, this issue became secondary and was not elaborately discussed in the judgment.

3. Appropriateness of Penalty Amounts:
The Tribunal reviewed the penalties imposed by the AO for the assessment years 2008-09, 2009-10, and 2010-11, which were ?5,62,988/-, ?83,246/-, and ?18,972/- respectively. The penalties were levied at 100% of the tax sought to be evaded. However, since the Tribunal found the penalty notices to be invalid, it did not delve into the appropriateness of the penalty amounts. Instead, it focused on the procedural flaw in the penalty initiation process, leading to the deletion of the penalties.

Conclusion:
The Tribunal quashed the penalty orders under Section 271(1)(c) for the assessment years 2008-09, 2009-10, and 2010-11 due to the invalid notices issued by the AO, which did not specify whether the penalty was for "concealment of particulars of income" or "furnishing inaccurate particulars of income." This decision was consistent with the precedents set by the Hon'ble Karnataka High Court and the Hon'ble Delhi High Court. Consequently, all the appeals filed by the assessee were allowed, and the penalties were deleted.