2022 (4) TMI 286 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - Non striking of irrelevant portion of notice - HELD THAT - On perusal of the notices for the year under consideration we find that relevant limb of either concealment of income or furnishing inaccurate particular of income has not been striken out in the notices issued for penalties by the Assessing Officer. - Decided in favour of assessee.

Issues Involved:
1. Deletion of penalty levied by the AO under Section 271(1)(c) of the Income Tax Act, 1961 for A.Y. 2012-13 and A.Y. 2013-14.
2. Validity of penalty notice issued under Section 274 read with Section 271(1)(c) due to non-specification of the charge.

Detailed Analysis:

Issue 1: Deletion of Penalty Levied by AO under Section 271(1)(c)
The revenue appealed against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)] who had deleted the penalties levied by the Assessing Officer (AO) for A.Y. 2012-13 and A.Y. 2013-14. The AO had imposed penalties based on the finding that the assessee had misclassified income as reimbursement of expenses instead of fee for technical services (FTS). The CIT(A) cancelled the penalties by relying on his own findings for A.Y. 2011-12, where it was held that there was no furnishing of inaccurate particulars of income.

Issue 2: Validity of Penalty Notice Issued Under Section 274 Read with Section 271(1)(c)
The assessee raised a cross-objection arguing that the penalty notices issued by the AO were invalid as they did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. This argument was based on the precedent set in A.Y. 2011-12, where the Tribunal had quashed the penalty on similar grounds.

Condonation of Delay in Filing Cross Objections:
The assessee filed cross-objections with a delay of 523 days. The Tribunal condoned the delay, considering the period covered by the Supreme Court's order in M.A. No 665/2021, which extended the limitation period due to the COVID-19 pandemic. The effective delay was thus reduced to 32 days. The Tribunal found that the delay was due to a bona fide belief and not due to any malicious intent, and therefore, condoned the delay.

Tribunal's Findings:
1. Non-Specification of Charge in Penalty Notices: The Tribunal found that the AO had not struck out the irrelevant limb (either concealment of income or furnishing inaccurate particulars) in the penalty notices for both A.Y. 2012-13 and A.Y. 2013-14. This non-specification rendered the penalty notices invalid.

2. Precedent from A.Y. 2011-12: The Tribunal referred to its decision in A.Y. 2011-12, where it had quashed the penalty on similar grounds. The Tribunal noted that the penalty provisions under Section 271(1)(c) require clear specification of the charge against the assessee, and failure to do so indicates non-application of mind by the AO.

3. Legal Principles Applied: The Tribunal cited various judgments, including those from the Supreme Court and High Courts, emphasizing that penalty proceedings must be clear and specific. The Karnataka High Court's decision in CIT vs. Manjunatha Cotton Ginning Factory and the Supreme Court's dismissal of the revenue's appeal in CIT vs. SSA’s Emerald Meadows were particularly noted.

Conclusion:
The Tribunal quashed the penalties levied by the AO for both A.Y. 2012-13 and A.Y. 2013-14, allowing the assessee's cross-objections. Consequently, the revenue's appeals were dismissed as infructuous. The Tribunal's decision was pronounced in the open court on 31.03.2022.

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