2022 (2) TMI 1144 - AT - Income Tax

Penalty u/s 271(1)( c) - Addition of bogus purchases - Argument of defective notice - non specification of charge or striking of irrelevant portions in notice - difference taken by the assessee was not tenable and the assessee was guilty of furnishing inaccurate particulars - HELD THAT - Legality or otherwise of assumption of jurisdiction by the learned Assessing Officer under a notice issued under section 271(1)( c ) of the Act without striking off of the relevant limb under which the penalty is proposed is no longer res integra, and the Hon ble jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance company limited case 2019 (8) TMI 409 - DELHI HIGH COURT AND MANJUNATHA COTTON AND GINNING FACTORY 2013 (7) TMI 620 - KARNATAKA HIGH COURT The notice issued by the learned Assessing Officer would be bad in law if it did not specify which limb of section 271(1)( c ) of the Act the penalty proceedings had been initiated under i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars thereof. 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 passed the order levying the penalty. - Decided in favour of assessee.

Summary

Issues:
- Penalty under section 271(1)(c) of the Income Tax Act, 1961 based on vague notice
- Legality of assumption of jurisdiction by the Assessing Officer for penalty imposition

Analysis:
1. The case involved an appeal against the penalty confirmation by the Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The penalty of ?1,72,400/- was imposed by the Assessing Officer due to certain additions made during the assessment, including on account of bogus purchases.

2. The Assessing Officer issued a notice to the assessee under section 271(1)(c) of the Act, alleging furnishing of inaccurate particulars of income. The assessee challenged the notice's validity, claiming it was vague and did not specify the grounds for penalty imposition. The Commissioner upheld the penalty, citing the notice's sufficiency based on a Bombay High Court decision.

3. The assessee contended that the penalty was unjust as the Assessing Officer did not have valid jurisdiction due to the defective notice. The Karnataka High Court's ruling in CIT vs. Manjunatha Cotton & Ginning Factory was cited, emphasizing that penalty proceedings must be based on the specific grounds mentioned in the notice.

4. The Delhi High Court's decision in PCIT vs. Sahara India Life Insurance supported the requirement for a clear notice specifying the grounds for penalty imposition. The Tribunal upheld this view, leading to the appeal's success, as the defective notice invalidated the Assessing Officer's assumption of jurisdiction.

5. The Tribunal directed the Assessing Officer to delete the penalty, emphasizing the necessity of a proper notice for jurisdiction under section 271(1)(c). The appeal was allowed, overturning the penalty imposition based on the defective notice issued by the Assessing Officer.

This judgment highlights the importance of a clear and specific notice under section 271(1)(c) for the valid assumption of jurisdiction by the Assessing Officer to impose penalties, as established by relevant legal precedents.