2022 (4) TMI 33 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice u/s 274 - non specification of clear charge - addition of unexplained cash deposits in the bank account - - HELD THAT - Notice u/s. 274 r.w.s. 271(1)(c) of the Act is to be issued to the assessee. The aforesaid notice should specifically indicate on which ground penalty is sought to be imposed, whether for concealment of income or for furnishing inaccurate particulars of income. In the present case, the perusal of assessment order passed by the AO reveals that in the Assessment Order, no specific finding has been recorded by the AO as to whether it is a case of concealment of income or a case of furnishing of inaccurate particulars of income. In the notice dated 26.12.2016, issued under Section 274 read with Section 271 of the Act, the copy of which is placed at page 2 of the paper book, the inapplicable portion or limb of Section 271(1)(c) of the Act has not been struck off. It is a settled law that the two limbs i.e. concealment of particulars of income and furnishing of inaccurate particulars of income carry different connotations. Various High Courts have held that Assessing Officer must indicate in the notice for which of the two limbs he proposes to impose the penalty and for this the notice has to be appropriately marked. If in a printed format of the notice the inapplicable portion is not struck off thus not indicating for which limb the penalty is proposed to be imposed, it would lead to an inference as to non application of mind, thus vitiating imposition of penalty. As relying on M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. 2019 (8) TMI 409 - DELHI HIGH COURT penalty u/s 271(1)(c) was not leviable when the notice issued by AO did not specify as to whether the proceedings were initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income. - Decided in favour of assessee.

Summary

Issues:
- Appeal against order of Commissioner of Income-Tax(Appeals)
- Levy of penalty under Section 271(1)(c) of the Income-Tax Act
- Whether penalty was justified

Analysis:

Issue 1: Appeal against order of Commissioner of Income-Tax(Appeals)
The appeal was filed by the Assessee against the order of the Commissioner of Income-Tax(Appeals) dated 30.07.2018 in appeal No.10070/17-18. The Assessee, an individual, had filed the return of income for assessment year 2014-15, declaring total income of ?1,99,940. The case was selected for scrutiny, and an assessment was framed under Section 143(3) of the Income-Tax Act, 1961, resulting in a total income of ?22,19,940, with an addition of ?20,20,000 on account of unexplained cash deposits. Subsequently, a penalty under Section 271(1)(c) of the Act amounting to ?5,10,861 was levied by the Assessing Officer.

Issue 2: Levy of penalty under Section 271(1)(c) of the Income-Tax Act
The key issue revolved around the levy of penalty under Section 271(1)(c) of the Income-Tax Act. The Assessee raised multiple grounds challenging the penalty order, primarily focusing on the lack of clear satisfaction recorded by the Assessing Officer regarding whether it was a case of concealment of income or furnishing inaccurate particulars of income. The Assessee argued that the penalty order did not specify the grounds for penalty imposition, leading to ambiguity and non-compliance with legal requirements.

Issue 3: Whether penalty was justified
During the proceedings, the Authorized Representative highlighted the absence of a specific finding in the assessment order regarding concealment or furnishing inaccurate particulars of income. The notice issued under Section 274 read with Section 271(1)(c) of the Act also failed to indicate the specific ground for imposing the penalty. Citing relevant legal precedents, including the decision of the Hon'ble Delhi High Court in a similar case, it was argued that the penalty was not justified due to procedural irregularities and lack of clarity in the penalty imposition process.

Judgment:
After considering the arguments and legal provisions, the Tribunal held that the Assessing Officer had not justified the levy of penalty under Section 271(1)(c) of the Act. Citing the decision of the Hon'ble Delhi High Court in a comparable case, the Tribunal concluded that the penalty imposition was flawed due to the failure to specify the grounds for penalty initiation. As a result, the Tribunal set aside the penalty levied by the Assessing Officer, thereby allowing the Assessee's appeal against the penalty order.

This comprehensive analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's decision based on legal principles and precedents.