2020 (9) TMI 767 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - non specification of charge - HELD THAT - Since appropriate limb has not been specified in the subject notice and therefore, the principles of natural justice could be said to be have been violated. More or less, similar proposition has been laid in other binding judicial precedents as tabulated by us. Failure to frame specific charge against the assessee during penalty proceedings would be fatal to penalty proceedings itself and the same could not be sustained in the eyes of law. The revenue is unable to demonstrate that specific charge was ever framed and confronted to the assessee during penalty proceedings. Therefore, respectfully following the binding judicial precedents favoring the assessee, on the issue, we find substantial force in legal grounds raised by Ld. AR, in this regard. Provisions of Explanation-5A to Section 271(1)(c), as invoked by learned first appellate authority for the first time, which were never invoked by Ld. AO and which was never confronted to the assessee during penalty proceedings, could also not be sustained. Moreover, the condition of framing of specific charge, in any case, was required to be fulfilled before invoking Explanation 5A against the assessee - we hold that impugned penalty was unsustainable in the eyes of law and therefore, we direct for deletion of the same. -Decided in favour of assessee. Penalty proceedings u/s 271AAA - notice u/s 274 read with Section 271AAA was issued to the assessee without specifying the exact charge - HELD THAT - It is quite evident that beside failure to frame specific charges against the assessee, the penalty was initiated u/s 271AAA in the quantum assessment order whereas the same has finally been levied u/s 271AAB which would show non- application of mind on the part of Ld. AO to factual matrix of the case. It is noted that the penal provisions of Sections 271AAA were not, at all, applicable to the facts of the case since the search was conducted on the assessee after 01/07/2012. Therefore, from any angle, the penalty would not be sustainable in the eyes of law. - Decided in favour of assessee.

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) for Assessment Years 2007-08 to 2012-13 and 2014-15.
2. Admission of additional grounds of appeal.
3. Validity of penalty proceedings due to non-specific charges.
4. Use of incriminating statements and lack of cross-examination opportunity.
5. Applicability of Explanation 5A to Section 271(1)(c).
6. Specificity of charges in penalty notices.
7. Levy of penalty under Section 271AAB for AY 2014-15.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The appeals pertain to the confirmation of penalties for AYs 2007-08 to 2012-13 and 2014-15. The penalties stem from common facts, leading to a consolidated hearing and disposal for convenience. The penalties were confirmed by the first appellate authority, and the assessee contested these confirmations.

2. Admission of Additional Grounds of Appeal:
The assessee filed an additional ground of appeal, arguing that the penalty order was void ab initio due to non-specification of the limb under which the penalty was initiated. The Tribunal admitted this additional ground, considering it a legal ground that did not require new facts.

3. Validity of Penalty Proceedings Due to Non-Specific Charges:
The Tribunal found that the penalty proceedings were initiated on both limbs—concealment of income and furnishing inaccurate particulars of income—without specifying the exact charge. This non-specificity was evident in the penalty notice and order, leading to a conclusion of non-application of mind by the AO. The Tribunal cited several judicial precedents, including the Hon’ble Bombay High Court in CIT v. Samson Perinchery, confirming that non-specific charges in penalty notices vitiate the proceedings.

4. Use of Incriminating Statements and Lack of Cross-Examination Opportunity:
The Tribunal noted that the revenue relied on incriminating statements from third parties, which were not corroborated by any material evidence and were not confronted to the assessee. This lack of opportunity for cross-examination violated principles of natural justice, making the penalty unsustainable.

5. Applicability of Explanation 5A to Section 271(1)(c):
The first appellate authority invoked Explanation 5A for the first time during appellate proceedings. The Tribunal held that this invocation was unsustainable as it was not confronted to the assessee during penalty proceedings. Moreover, the condition of framing a specific charge was required before invoking Explanation 5A.

6. Specificity of Charges in Penalty Notices:
The Tribunal emphasized that penalty notices must specifically state the ground—either concealment of income or furnishing inaccurate particulars—for which the penalty is initiated. The use of a standard printed form without specifying the exact charge violates principles of natural justice, rendering the penalty proceedings void.

7. Levy of Penalty under Section 271AAB for AY 2014-15:
For AY 2014-15, the penalty was initiated under Section 271AAA but levied under Section 271AAB. The Tribunal found this switch indicative of non-application of mind. Additionally, Section 271AAA was not applicable as the search was conducted after 01/07/2012. Consequently, the penalty was deleted.

Conclusion:
The Tribunal allowed all the appeals, directing the deletion of penalties for AYs 2007-08 to 2012-13 and 2014-15. The penalties were found unsustainable due to non-specific charges, lack of corroborative evidence, and procedural lapses in penalty initiation and levy. The order was pronounced in the open court on 18th September 2020.

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