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2021 (11) TMI 631 - AT - Income TaxPenalty u/s 271(1)(c) - Mandation of specification of charge - HELD THAT - Merely because the claim preferred by the assessee was not acceptable to the learned Assessing Officer, the assessee cannot be visited with the proceedings under section 271(1)(c) of the Act, unless and until the twin requirements under section 271(1)(c) of the Act are satisfied. We therefore, while accepting the plea of the assessee hold that the penalty cannot be sustained. We accordingly direct the assessing officer to delete the same. Non specification of charge - Neither in the assessment order nor the notice issued under section 274 of the Act, there is any reference to either the concealment of income or the furnishing of inaccurate particulars thereof. See MANJUNATHA COTTON AND GINNING FACTORY, MANJUNATH GINNING AND PRESSING, VEERABHADRAPPA SANGAPPA AND CO., V.S. LAD AND SONS, G.M. EXPORT 2013 (7) TMI 620 - KARNATAKA HIGH COURT It is clear that for the AO to assume jurisdiction u/s 271(1)(c), proper notice is necessary and the defect in notice u/s 274 of the Act vitiates the assumption of jurisdiction by the learned Assessing Officer to levy any penalty. In this case, facts stated supra, clearly establish that the notice issued under section 274 read with 271 of the Act is defective and, therefore, we find it difficult to hold that the learned AO rightly assumed jurisdiction to pass the order levying the penalty. Viewing from any angle, we do not find any justification to sustain the penalty, and as a consequence thereof, we direct the learned Assessing Officer to delete the penalty in question. - Decided in favour of assessee.
Issues Involved:
1. Concealment of income or furnishing inaccurate particulars of income under Section 271(1)(c) of the Income Tax Act. 2. Specificity of charges in the penalty notice under Section 274 of the Income Tax Act. Detailed Analysis: Concealment of Income or Furnishing Inaccurate Particulars: The assessee, a company, filed its return of income for the assessment year 2003-04 declaring a loss of ?3,69,13,760/-. The assessment was completed at a loss of ?1,84,91,661/- after making certain additions. The matter was remanded back to the Assessing Officer (AO) by the ITAT, who then passed a revised assessment order computing a total loss of ?3,69,78,322/- with additions on account of financial expenses and excise duty. The AO also initiated penalty proceedings under Section 271(1)(c) and levied a penalty of ?67,93,848/-. The assessee argued that there was neither concealment of income nor furnishing of inaccurate particulars, but rather a difference of opinion, and hence, the penalty under Section 271(1)(c) was not applicable. The assessee cited decisions from higher courts to support this contention, including CIT vs. Manjunatha Cotton and Ginning Factory and CIT v. SSA’s Emerald Meadows. The Tribunal noted that the assessee had produced its books of accounts during the assessment proceedings, which were examined by the AO. The disallowance of expenses was based on the AO's view that the liabilities were contingent due to the pendency of the case with the Board for Industrial and Financial Reconstruction (BIFR). The Tribunal emphasized that the assessee did not conceal any facts and that the AO's disallowance was based on the verification of the books of accounts. The Tribunal referred to the decision in CIT vs. DCM Limited, which held that making a claim during assessment does not attract penalty unless there is factual concealment or inaccurate particulars provided. Similarly, in CIT vs. Reliance Petroproducts Pvt. Ltd., it was held that merely because a claim was not accepted by the Revenue, it does not attract penalty under Section 271(1)(c). The Tribunal concluded that the penalty under Section 271(1)(c) could only be imposed when there is concealment of income or furnishing of inaccurate particulars. Since the assessee made a proper disclosure and the disallowance was a matter of interpretation, the penalty was not justified. Specificity of Charges in Penalty Notice: The Tribunal also examined the specificity of the charges in the penalty notice issued under Section 274. It was observed that neither the assessment order nor the notice specified whether the penalty was for concealment of income or for furnishing inaccurate particulars. The Tribunal referred to the decision in CIT vs. Manjunatha Cotton & Ginning Factory, which held that the penalty proceedings must specify the grounds for the penalty to give the assessee an opportunity to respond. The Tribunal further cited Commissioner of Income Tax v. SSA’s Emerald Meadows, where it was held that a notice under Section 274 is bad in law if it does not specify the limb of Section 271(1)(c) under which the penalty proceedings are initiated. The Supreme Court dismissed the Revenue's appeal against this judgment, reinforcing the requirement for specificity in the penalty notice. The Tribunal also referred to the Delhi High Court's decision in PCIT vs. Sahara India Life Insurance Company Limited, which upheld the view that a defective notice under Section 274 vitiates the jurisdiction of the AO to levy penalty. Based on these precedents, the Tribunal concluded that the defective notice in the present case invalidated the AO's jurisdiction to levy the penalty. Consequently, the Tribunal directed the AO to delete the penalty. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the penalty under Section 271(1)(c) was not sustainable due to the lack of concealment or furnishing inaccurate particulars and the defective penalty notice under Section 274. The AO was directed to delete the penalty. The order was pronounced in the open court on November 3, 2021.
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