2022 (4) TMI 1311 - AT - Income Tax

Penalty u/s 271(1)(c) - penalty proceedings u/s 271(1)(c) was initiated on the basis of an order of assessment r.w.s. 147 of the Act, wherein the returned income has been accepted without any addition - HELD THAT - We are unable to persuade, as to how in the absence of any addition to the returned income, the conclusion of either concealment of income or furnishing of inaccurate particulars of such income could prudently be drawn. Since the return of income in response to notice u/s 148 was accepted indifferently, there remain no scope for alleging against the assessee, as both concealment of income or furnishing of inaccurate particulars of such fails, consequently the jurisdiction. Therefore, in view of the aforesaid discussion, the issue herein on both legal as well on merits stands concluded in favour of the assessee and nothing contrary has been shown to us in the present facts which would warrant our taking a view different from Hon'ble Karnataka High Court in the case of S Chandrashekar Vs ACIT 2017 (2) TMI 1127 - KARNATAKA HIGH COURT Since the provision of section 271(1)(c) is calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling or dilution therewith, as a result we are of the considered view that, having regard to the fact that in the instant case the SCN dt. 15/03/2014 issued u/s 274 r.w.s. 271(1)(c) of the Act without specifying any limb or charge vis- -vis absence of any default on account of acceptance of return indifferently, is invalid and untenable in the eyes of law, consequently the penalty imposed u/s 271(1)(c) of the Act is bad in law and hence same is quashed accordingly - Decided in favour of assessee.

Summary

Issues:
Penalty imposition for concealment of income under section 271(1)(c) of the Income-tax Act, 1961 without specifying the nature of the charge in the notice.

Analysis:
The judgment concerns an appeal by the assessee against the penalty imposed under section 271(1)(c) of the Income-tax Act for the assessment year 2010-11. The case involved the proprietor of a business engaged in cable network operations and other services. The penalty was initiated based on a survey and subsequent assessment under section 147 of the Act. The issue raised was the lack of specificity in the notice regarding the nature of the charge against the assessee, whether for concealment of income or furnishing inaccurate particulars.

The judgment highlighted the requirement for the assessing officer to clearly specify the charge in the notice under section 271(1)(c) as either concealment of income or furnishing inaccurate particulars. Failure to do so was considered a violation of natural justice as it hindered the assessee's ability to defend appropriately. The judgment cited relevant case laws emphasizing the distinction between the two charges and the necessity for clarity in the notice.

The court found that the notice issued lacked specificity, indicating a lack of application of mind by the assessing officer. The judgment referenced precedents where similar deficiencies in notices had been deemed invalid. The court emphasized the importance of complying with principles of natural justice in quasi-criminal proceedings under section 271(1)(c) and concluded that the proceedings in this case suffered from non-compliance.

Furthermore, the court examined the merits of the case and noted that since the returned income had been accepted without any additions, there was no basis for alleging concealment or furnishing inaccurate particulars. As a result, the court concluded in favor of the assessee on both legal and merit-based grounds, ultimately quashing the penalty imposed under section 271(1)(c) of the Act.

In conclusion, the court allowed the appeal of the assessee, emphasizing the mandatory nature of the penalty provision and the importance of adhering to procedural requirements, including specifying the nature of the charge in the notice. The judgment underscored the significance of upholding principles of natural justice in penalty proceedings to ensure a fair and transparent process.