2020 (7) TMI 127 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - defective notice - Disallowance on account of interest - AO has to prove that there was concealment of particulars of income or that the assessee has furnished inaccurate particulars of such income - HELD THAT - A bare perusal of the notices issued to the assessee u/s 274 read with section 271(1)(c) of the Act goes to prove that assessee has not been called upon to explain if it has concealed the particulars of income or furnished inaccurate particulars of such income. As relying on Manjunatha Cotton 2013 (7) TMI 620 - KARNATAKA HIGH COURT we are of the considered view that when the assessee has not been specifically made aware of the charges leveled against it as to whether there is a concealment of income or furnishing of inaccurate particulars of income on his part, the penalty u/s 271(1)(c) of the Act is not sustainable. - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2000-01.
- Validity of notice issued for penalty proceedings.
- Challenge against the penalty imposed on interest disallowance.

Analysis:
1. Imposition of Penalty: The appeal was against the penalty of ?18,79,644 imposed under section 271(1)(c) of the Income Tax Act, 1961. The appellant contested the penalty on various grounds, including the lack of a specific show cause notice and absence of satisfaction recorded in the assessment order. The appellant argued that incorrect claims do not necessarily amount to furnishing inaccurate particulars. The Tribunal noted that penalty cannot be imposed solely based on confirmed additions to income and that the Assessing Officer must prove concealment or furnishing of inaccurate particulars of income.

2. Validity of Notice: The appellant challenged the validity of the notice issued for penalty proceedings, arguing that it was vague and did not specify whether the assessee had concealed income or furnished inaccurate particulars. Citing judicial precedents, the appellant contended that such a defect in the notice renders the penalty unsustainable. The Tribunal referred to the Karnataka High Court's ruling emphasizing the importance of clear grounds in the notice under section 271(1)(c) and held that the absence of specific charges against the assessee makes the penalty unsustainable.

3. Challenge Against Penalty: The penalty was imposed on interest disallowance, which was upheld by the CIT(A). The appellant contended that the penalty was illegal and invalid, emphasizing that the penalty order was vague and inconclusive. The Senior DR argued for the penalty, citing the upheld quantum addition. The Tribunal, after considering the arguments, relied on legal principles and precedents to conclude that the penalty was not sustainable due to the lack of specific charges in the notice and directed the Assessing Officer to delete the penalty.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed under section 271(1)(c) for the Assessment Year 2000-01. The decision was based on the fundamental requirement of clear charges in the notice for penalty proceedings, as highlighted by judicial precedents, and the necessity for the Assessing Officer to establish concealment or furnishing of inaccurate particulars of income before imposing a penalty.