2021 (9) TMI 397 - AT - Income Tax

Penalty u/s 271(1)(c) - Notice u/s 274 - non specification of charge - whether the levy of penalty on account of wrong striking out of the inapplicable limb of section 271(1)(c) of the Act from the notice issued u/s. 274 is detrimental to the imposition of the penalty? - HELD THAT - Where the charge is not properly set out in the notice u/s. 274, viz., both the limbs stand therein without striking off of the inapplicable limb, the penalty order gets vitiated. Turning to the facts of the extant case, we find from the notices u/s.274 of the Act that the AO did not strike out the irrelevant limb and further committed the same mistake in the penalty order as well. Respectfully following the case of MR. MOHD. FARHAN A. SHAIKH VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 BELGAUM., THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, BELGAUM. 2021 (3) TMI 608 - BOMBAY HIGH COURT we overturn the impugned order on this legal issue and direct to delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposition u/s. 271(1)(c) of the Income-tax Act, 1961 for the assessment year 2004-05.

Detailed Analysis:

ITA No. 474/PUN/2017:
The primary issue in this appeal is the confirmation of penalty without specific charges of concealment or furnishing inaccurate particulars of income. The Tribunal analyzed the penalty imposition in relation to various additions and disallowances made by the Assessing Officer. It was found that the penalty was imposed for items falling under the category of furnishing inaccurate particulars of income. The Tribunal noted that the notice u/s. 274 contained both limbs without striking out the irrelevant limb. Citing relevant legal precedents, including judgments by the Bombay High Court and the Supreme Court, the Tribunal held that the penalty order was vitiated due to the defect in the notice. Consequently, the penalty was deleted based on the legal position established by the courts.

ITA No. 2000/PUN/2017:
This appeal was against an order passed by the CIT(A) following a rectification order u/s. 154 of the Act. However, since the penalty in the related appeal (ITA No. 474/PUN/2017) was deleted by the Tribunal, rendering the present appeal infructuous, the Tribunal dismissed this appeal as well.

In conclusion, the Tribunal allowed the appeal in ITA No. 474/PUN/2017 by overturning the penalty imposition due to the defect in the notice u/s. 274. The Tribunal also dismissed the appeal in ITA No. 2000/PUN/2017 as it became irrelevant after the decision in the first appeal. The judgment emphasizes the importance of properly setting out charges in penalty notices to avoid vitiating the penalty order, as established by relevant legal precedents.