2020 (3) TMI 280 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - whether it is for concealment of income or for furnishing of inaccurate particulars of income - HELD THAT - The law mandates that the authority, who is proposing to impose penalty, shall be certain as to the basis on which the penalty is being levied and the notice must reflect that specific reason, so that the assessee, to whom such notice is given, can prepare himself regarding the defence, which he would like to take to support his case. This is even enshrined in the principles of natural justice and as has been upheld by Hon'ble Apex Court and other High Courts. We hold that the show cause notice, which has not specified the charge and limb under which the penalty is proposed to be levied, is void ab initio and the consequent penalty imposed on the basis of such notice is, therefore, illegal and bad in law and liable to be deleted. - Decided in favour of assessee

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act without specific charge mentioned in the notice.

Analysis:
The appeal was against the penalty imposed under section 271(1)(c) of the Income Tax Act, which the CIT(A) upheld. The appellant argued that the notice for penalty lacked specificity regarding the charge, whether for concealment of income or furnishing inaccurate particulars. The appellant contended that such a notice is legally insufficient and any penalty based on it should be canceled. The respondent, however, claimed that the notice, despite any defect, did not prejudice the appellant, citing a judgment from the Madras High Court. The appellant highlighted that the specific charge was not delineated even in the assessment order, further supporting their argument.

The Tribunal emphasized the importance of a specific charge in penalty notices, in line with principles of natural justice. Citing precedents, including the Madras High Court and Karnataka High Court judgments, it was reiterated that a notice must clearly state the grounds for penalty under section 271(1)(c) of the Act. Failure to do so violates natural justice principles and renders any penalty imposed invalid. The Tribunal noted that penalty proceedings are distinct from assessment proceedings and must adhere to the principles of natural justice. The Tribunal concluded that the lack of specificity in the penalty notice rendered the subsequent penalty illegal and ordered its deletion.

The Tribunal's decision was based on the legal requirement for a penalty notice to specify the charge under which the penalty is imposed. By emphasizing the need for clarity in such notices to ensure the rights of the assessee are protected, the Tribunal held that the penalty imposed without a specific charge was invalid. Citing relevant case laws and legal principles, the Tribunal highlighted that the absence of a clear charge in the notice violated natural justice and warranted the deletion of the penalty. The judgment underscored the significance of procedural fairness and legal compliance in penalty proceedings under the Income Tax Act.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee by deleting the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was grounded in the legal requirement for a specific charge in penalty notices to uphold principles of natural justice and procedural fairness. The Tribunal's detailed analysis, referencing relevant case laws and legal principles, underscored the importance of clarity and specificity in penalty proceedings to protect the rights of the assessee and ensure legal compliance.