2021 (6) TMI 98 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice - As argued notice issued does not specify the limb of Section 271(1)(c) for which the penalty has been levied - HELD THAT - Hon ble Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT has also deleted the penalty levied u/s 271(1)(c) when the notice did not mention whether the proceedings were initiated for concealment of particulars or for furnishing of inaccurate particulars of income. We for the reasons stated by the Co-ordinate Bench of Tribunal while deciding the issue for earlier years and for similar reasons and relying in the case of Sahara India Life Insurance 2019 (8) TMI 409 - DELHI HIGH COURT are of the view that AO was not justified in levying the penalty u/s 271(1)(c) of the Act. We accordingly set aside the levy of penalty levied by the AO and thus the ground of the assessee is allowed.

Summary

Issues Involved:
1. Legality of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the notice issued under Section 274 read with Section 271.
3. Additional grounds raised by the assessee during appellate proceedings.

Detailed Analysis:

1. Legality of Penalty Levied under Section 271(1)(c):

The assessee challenged the penalty of ?33,372/- imposed by the AO under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was upheld by the CIT(A). The assessee argued that the penalty was imposed without specifying the exact charge, i.e., whether it was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal noted that the notice issued by the AO did not specify the limb under which the penalty was levied, thus making the penalty order unsustainable and bad in law. The Tribunal relied on precedents, including the decisions in CIT vs. SSA’s Emerald Meadows and CIT vs. Manjunatha Cotton and Ginning Factory, which held that such ambiguity in the notice invalidates the penalty proceedings.

2. Validity of the Notice Issued under Section 274 Read with Section 271:

The Tribunal examined the notice issued under Section 274 read with Section 271 and found that it did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. This lack of specificity rendered the notice defective and invalid. The Tribunal emphasized that the AO must clearly indicate the specific charge for which the penalty is being levied. The Tribunal cited the Delhi High Court's decision in PCIT vs. Sahara India Life Insurance Co. Ltd., which supported the view that a notice lacking such specificity is bad in law.

3. Additional Grounds Raised by the Assessee:

The assessee raised additional grounds during the appellate proceedings, arguing that the penalty notice was void as it was defective. The Tribunal allowed the additional grounds, noting that legal grounds can be raised at any stage of the proceedings. The Tribunal admitted the additional grounds, considering that they went to the root of the matter. The Tribunal referred to the Supreme Court's decisions in CIT Vs Varas International and NATIONAL THERMAL POWER CO. LTD vs. CIT, which support the admissibility of additional legal grounds.

Conclusion:

The Tribunal concluded that the penalty levied under Section 271(1)(c) was not justified due to the defective notice issued by the AO. The Tribunal directed the deletion of the penalty, emphasizing that the notice must specify the exact charge for which the penalty is being levied. The Tribunal's decision was consistent with its earlier rulings in the assessee's own case for previous assessment years and supported by higher judicial precedents. Consequently, the appeal of the assessee was allowed, and the penalty was set aside.