2021 (8) TMI 807 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - HELD THAT - A bare perusal of the aforementioned notice shows that the Assessing Officer himself was not aware/certain as to whether he is issuing notice to initiate penalty proceedings either for concealment of income or for furnishing inaccurate particulars of income. In our considered opinion the extracted notice is vague and ambiguous as the charge framed by the Assessing Officer is not clear and it is not possible for the person to explain the charge whether it is for concealment of particulars of income or for filing inaccurate particulars of income. Following the decisions rendered in the cases of CIT vs. Manjunatha Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT CIT vs. SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER and Pr. CIT Vs Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT we are of the considered view that when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the penalty proceedings initiated u/s 271(1)(c) are not sustainable. We are of the considered view that when the very initiation of the penalty by way of issuance of vague and ambiguous notice u/s 271(1)(c) read with section 274 of the Act without specifically charging the assessee if he has concealed the particulars of income or has furnished inaccurate particulars of such income subsequent penalty proceedings are not sustainable hence penalty levied by the AO and confirmed by the Id. CIT (A) is not sustainable and as such the appeal filed by the assessee is allowed.

Summary

Issues:
Challenge to penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2008-09 based on vague notice lacking clarity on the charge.

Analysis:
The appeal was against the Commissioner of Income Tax [Appeals]'s order confirming a penalty under section 271(1)(c) of the Income Tax Act, 1961. The counsel for the assessee highlighted that the notice issued lacked clarity on whether the penalty was for furnishing inaccurate particulars of income or for concealment of income. The notice was deemed vague and ambiguous as it did not specify the charge clearly, making it difficult for the assessee to respond effectively. The Tribunal observed that the Assessing Officer's notice did not clearly indicate whether the penalty was for concealment of income or for providing inaccurate particulars of income, rendering it invalid.

The Tribunal referenced a Supreme Court case where penalties were quashed due to an unspecified notice, emphasizing the importance of clarity in penalty notices under section 271(1)(c). Additionally, the Tribunal cited a Delhi High Court case that reiterated the necessity of specifying the grounds for penalty imposition in the notice. Relying on these precedents, the Tribunal concluded that the penalty proceedings initiated based on a vague and ambiguous notice were not sustainable.

Based on the legal principles established in previous cases, the Tribunal held that the penalty imposed by the Assessing Officer and upheld by the Commissioner of Income Tax [Appeals] was not valid due to the defective notice lacking specificity. Consequently, the Tribunal allowed the assessee's appeal and directed the Assessing Officer to delete the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was made in line with the precedents discussed, emphasizing the necessity of clear and specific notices in penalty proceedings.

In conclusion, the Tribunal found in favor of the assessee, highlighting the importance of clear and unambiguous notices in penalty proceedings under section 271(1)(c) of the Income Tax Act. The decision to quash the penalty was based on legal precedents emphasizing the need for specificity in charging documents to ensure fairness and transparency in penalty imposition.