2020 (9) TMI 862 - AT - Income Tax

Penalty U/s 271(1)(c) - Defective notice - non specification of charge - HELD THAT - From the notice u/s 274 dated 27.12.2011, neither the assessee nor anyone else could make out as to 'for what precise charge, the assessee was asked to show cause viz. whether the charge is for furnishing inaccurate particulars of income or concealment of particulars of such income. In notice, under the point which is intended towards proposed penalty u/s 271(1)(c), the word OR has been used between the charge of concealment of income and furnishing inaccurate particulars of income. These facts and circumstances make it abundantly clear that in the case of assessee, penalty notice is completely vague and ambiguous. AO simply issued a preprinted notice without striking off the unnecessary charge and not mentioning the precise charge. The above act of the AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind which resulted into issuing a completely vague jurisdictional notice u/s 274 and the jurisdictional notice being vague, the consequent levy of penalty is illegal and deserves to be deleted in full - Initiation of penalty proceeding is void ab initio - Decided in favour of assessee.

Summary

Issues:
Appeal against imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for A.Y. 2006-07 to 2008-09.

Analysis:
The appeals were filed by the assessee against the composite order of the ld. CIT(A)-4, Jaipur for the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961. The common issue in all three appeals was the imposition of penalties for concealment of income or furnishing inaccurate particulars of income. The hearing was conducted via video conference due to the Covid-19 pandemic situation.

The penalty proceedings were initiated by the Assessing Officer (AO) through a notice under section 274 read with section 271 of the Act dated 27.12.2011. The notice did not clearly specify whether the charge was for concealing income or furnishing inaccurate particulars of income, which is a statutory requirement for initiating penalty proceedings.

The law mandates that the penalty can only be imposed when the authority is satisfied that either of the two events of concealing income or furnishing inaccurate particulars of income exists, as evident from the jurisdictional notice issued under section 274 r.w.s 271 of the Act. In this case, the notice was vague and ambiguous, lacking clarity on the precise charge against the assessee.

The AO's failure to specify the charge in the notice and the use of the word "OR" between the two charges in the notice rendered the penalty proceedings void ab initio. The initiation of penalty proceedings without a clear and specific charge violates the principles of natural justice and deprives the assessee of a fair opportunity to explain their position.

The Tribunal referred to various judicial pronouncements and decisions to support its conclusion that the penalty imposed under section 271(1)(c) was not justified in this case. The Tribunal highlighted the importance of clarity in the penalty notice and the necessity for the AO to specify the charge of concealment or furnishing inaccurate particulars of income to ensure a fair process for the assessee.

Based on the above analysis and considering the precedents cited, the Tribunal directed the AO to delete the penalties imposed for the A.Y. 2006-07, 2007-08, and 2008-09. The appeals were allowed in favor of the assessee, emphasizing the significance of adherence to procedural requirements and principles of natural justice in penalty proceedings under the Income Tax Act, 1961.