2020 (5) TMI 298 - AT - Income Tax

Penalty u/s 271(1)(C) - Non specification of charge - whether the penalty is going to be levied for concealing particulars of income or furnishing of inaccurate particular of income? - HELD THAT - Notice issued by the Assessing Officer u/s 274 r.w.s 271(1)(c) of the Act 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.See M/S SSA'S EMERALD MEADOWS 2016 (8) TMI 1145 - SC ORDER - Decided in favour of the assessee.

Summary

Issues:
Challenge to correctness of penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2014-15.

Analysis:

Issue 1: Correctness of the penalty order
The assessee challenged the penalty of ?7,99,90,570/- imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The primary grievance was regarding the clarity in the notice issued under this section. The penalty was based on an addition of ?23.53 crores made during the assessment under section 143(3) of the Act, invoking section 56(2)((vii)(b) of the Act. The contention was that the notice did not specify whether the penalty was for concealing income or furnishing inaccurate particulars of income. The assessee argued that the notice lacked clarity, citing a decision of the Hon'ble High Court of Delhi. The Revenue, however, argued that the penalty was justified as the Assessing Officer had made his intention clear in the assessment order itself.

Issue 2: Clarity in the notice
The notice issued under section 274 r.w.s 271(1)(c) of the Act was found to be ambiguous as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars of income. The Assessing Officer's conclusion in the penalty order was based on both aspects, leading to confusion. The lack of clarity in the notice was a crucial point of contention, with the assessee arguing that the penalty proceedings should specify the exact grounds for penalty imposition. The tribunal emphasized the importance of clearly indicating the basis for initiating penalty proceedings, as demonstrated by judicial precedents.

Issue 3: Judicial precedents and legal principles
The tribunal referred to various judicial decisions to support its findings. It cited a case where the High Court held that penalty proceedings must specify the grounds under which they are initiated. The tribunal also mentioned a Supreme Court decision where it was ruled that a notice failing to specify the grounds for penalty under section 271(1)(c) would be considered bad in law. These legal precedents highlighted the significance of clarity in penalty notices and the need for adherence to procedural requirements.

Conclusion:
After careful consideration of the arguments and legal precedents, the tribunal set aside the penalty imposed on the assessee. Citing the lack of clarity in the notice and the importance of specifying the grounds for penalty imposition, the tribunal directed the Assessing Officer to delete the penalty amount of ?7,99,90,570/-. The appeal of the assessee was allowed, emphasizing the necessity of clarity and adherence to procedural requirements in penalty proceedings.