2020 (7) TMI 13 - AT - Income Tax

Penalty u/s 271(1)(c) - allegation of defective notice - charge is not specific for which penalty is levied - HELD THAT - From a perusal of this notice, it is crystal clear that the charge is not specific for which penalty is levied under section 271(1)(c) of the Act, whether for concealment of income or for furnishing of inaccurate particulars of income. The notice has specified both charges, i.e., concealment of income and furnishing of inaccurate particulars of income and has not specified the charge for which action has been taken against assessee. The non specific nature of the notice indicates non application of mind by Assessing Officer. It is a settled position of law that if notice under section 274 read with 271(1)(c) is not specific about the charge or limb under which penalty is being levied under section 271(1)(c) of the Act, then any penalty levied on the basis of such notice is bad in law and liable to be deleted. Law mandates that the authority, who is proposing to impose penalty, shall be certain as to what basis penalty is being levied and notice must reflect that specific reason so that assessee, to whom such notice is given, can well prepare himself regarding defence, which he likes 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. Thus notice under section 274 read with 271(1)(c) of the Act, which has not specified the charge and limb under which penalty should be levied, it is void ab initio. Decided in favour of assessee. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Summary

Issues Involved:
1. Imposition of penalty under section 271(1)(c) of the Income Tax Act.
2. Specificity of the charge in the penalty notice under section 274 read with 271(1)(c).
3. Compliance with principles of natural justice.
4. Validity of penalty proceedings based on non-specific notices.
5. Pronouncement of orders beyond the 90-day period due to extraordinary circumstances.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:
The appeal was filed by the assessee against the imposition of penalty under section 271(1)(c) of the Income Tax Act, which was confirmed by the learned CIT(A). The primary grievance was that the penalty notice did not specify whether the penalty was for "concealment of income" or "furnishing of inaccurate particulars of income."

2. Specificity of the Charge in the Penalty Notice under Section 274 read with 271(1)(c):
The assessee's representative argued that the show cause notice was not specific about the charge, which is a settled position of law. The notice mentioned both "concealment of income" and "furnishing of inaccurate particulars of income" without specifying the exact charge, indicating non-application of mind by the Assessing Officer. This non-specific nature of the notice was deemed a significant procedural lapse.

3. Compliance with Principles of Natural Justice:
The Tribunal emphasized that the authority proposing to impose a penalty must be certain about the basis for the penalty, and the notice must reflect that specific reason. This requirement is rooted in the principles of natural justice, ensuring that the assessee can adequately prepare their defense. The Tribunal cited several cases to support this principle, including:
- CIT vs. SSA’s Emerald Meadows: The Supreme Court upheld that a non-specific notice under section 274 read with 271(1)(c) is bad in law.
- CIT and Another vs. Manjunath Cotton & Ginning Factory: The Karnataka High Court held that a notice must specifically state the grounds for penalty, failing which it offends the principles of natural justice.
- Meherjee Cassinath Holdings Pvt. Ltd vs. ACIT: The ITAT Mumbai emphasized that penalty proceedings are quasi-criminal and must comply with natural justice principles.
- Chandra Prakash Bubna vs. ITO: The ITAT Kolkata held that penalties imposed without specifying the charge are liable to be deleted.

4. Validity of Penalty Proceedings Based on Non-Specific Notices:
The Tribunal concluded that the notice under section 274 read with 271(1)(c) was void ab initio due to its non-specific nature. Consequently, any penalty imposed based on such a notice is illegal and must be deleted. The Tribunal directed the deletion of the penalty imposed on the assessee.

5. Pronouncement of Orders Beyond the 90-Day Period Due to Extraordinary Circumstances:
The order was pronounced after a period of 90 days from the conclusion of the hearing due to the COVID-19 lockdown. The Tribunal relied on the decision in the case of JSW Ltd, which allowed for the extension of the pronouncement period due to extraordinary circumstances. The Tribunal noted that the lockdown period should be excluded when computing the 90-day period for pronouncement of orders, as per the guidelines issued by the Supreme Court and High Courts during the pandemic.

Conclusion:
The appeal of the assessee was allowed, and the penalty imposed was directed to be deleted. The order was pronounced beyond the 90-day period due to the exceptional circumstances of the COVID-19 lockdown, following the judicial precedent set by the JSW Ltd case.