2020 (12) TMI 216 - AT - Income Tax

Penalty u/s 271(1)(c) - defective Notice - Non specification of charge - HELD THAT - while issuing notice u/s. 274 r.w.s. 271(1)(c) of the Act the Assessing Officer has not made charge clear as to whether he proposed to levy penalty for either concealing particulars of income or furnishing inaccurate particulars of income. Therefore, in our view when there is no mention in the Assessment Order for which the penalty proceedings are initiated, penalty cannot be levied for both the charges i.e. for concealment of particulars and also for furnishing inaccurate particulars of income. See VENTURA TEXTILES LTD. 2020 (6) TMI 305 - BOMBAY HIGH COURT As AO failed to record any satisfaction in the Assessment Order by specifying the charge for which penalty was initiated and even in the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act failed to specify the charge for which the said notice was issued and since penalty was levied for both the limbs i.e. for concealment of particulars of income and also for furnishing inaccurate particulars of income, the levy of penalty is on account of non-application of mind and therefore the very initiation of proceedings are bad in law. - Decided in favour of assessee.

Issues Involved:
1. Validity of the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.
2. Specificity of the charge in the penalty notice and assessment order.
3. Application of mind by the Assessing Officer in initiating and levying the penalty.
4. Legal precedents and principles regarding penalty proceedings under Section 271(1)(c).

Detailed Analysis:

1. Validity of the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act:
The appeal was filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals) sustaining the penalty levied under Section 271(1)(c) of the Act. The primary contention was that the initiation of penalty proceedings was bad in law because the Assessing Officer did not specify the limb (either concealment of income or furnishing inaccurate particulars) for which the penalty was proposed to be levied.

2. Specificity of the charge in the penalty notice and assessment order:
The assessee's counsel argued that the notice issued under Section 274 read with Section 271(1)(c) did not clearly state whether the penalty was for concealment of income or for furnishing inaccurate particulars. The inappropriate limb in the notice was not struck off. Similarly, in the assessment order, the Assessing Officer merely stated "Issue penalty notice u/s. 271(1)(c) of the Act" without specifying the charge. In the penalty order, the penalty was levied for both furnishing inaccurate particulars of income and for concealment of income, which were not mentioned in the assessment order.

3. Application of mind by the Assessing Officer in initiating and levying the penalty:
The Tribunal observed that the Assessing Officer did not make any specific charge in the assessment order for initiating penalty proceedings. The penalty order levied penalty for both charges, which were not specified in the assessment order. This indicated a lack of proper satisfaction and application of mind by the Assessing Officer. The Tribunal noted that the initiation of penalty proceedings without specifying the charge and not striking off the irrelevant portion in the notice showed non-application of mind, making the penalty proceedings invalid.

4. Legal precedents and principles regarding penalty proceedings under Section 271(1)(c):
The Tribunal referred to several legal precedents to support its decision:
- CIT v. SSA’s Emerald Meadows [242 Taxman 180 (SC)]: It was held that the notice must specify the charge for penalty.
- CIT v. Samson Perinchery [392 ITR 4 (Bom.)]: The Bombay High Court held that the notice must indicate whether the penalty is for concealment of income or furnishing inaccurate particulars.
- Ventura Textiles Ltd., v. CIT [274 Taxman 144]: The Bombay High Court held that penalty cannot be imposed for one limb of Section 271(1)(c) when proceedings were initiated for another limb.
- Goa Coastal Resorts and Recreation Pvt. Ltd.: The absence of satisfaction by the Assessing Officer regarding concealment or furnishing inaccurate particulars was held to be a sine qua non for initiating penalty proceedings.
- New Era Sova Mine: The Tribunal observed that penalty notices must specify the charge, and failure to strike off the irrelevant portion indicated non-application of mind.

Conclusion:
The Tribunal concluded that the Assessing Officer's failure to specify the charge in the assessment order, the penalty notice, and the penalty order indicated non-application of mind, rendering the penalty proceedings invalid. The Tribunal directed the Assessing Officer to delete the penalty levied under Section 271(1)(c) of the Act. The other arguments raised by the assessee were not dealt with as they became academic.

Order:
The appeal of the assessee was allowed, and the penalty levied under Section 271(1)(c) was directed to be deleted. The order was pronounced on 17.11.2020.

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