2022 (9) TMI 356 - AT - Income Tax

Penalty u/s 271(1)(c) r.w.s. 274 - allegation of defective notice u/s 274 and non specification of clear charge - whether AO has failed to specify the appropriate limb of charges by striking off the inappropriate limb, either in the assessment order while initiating penalty u/s 271(1)(c)? - HELD THAT - A perusal of the order of CIT(A) shows that it reproduced / scanned the notice issued by the Ld. AO for the purpose of proceedings u/s 271(1)(c) of the Act and the same shows that it is on a Performa where certain columns have been even left blank. Section 271(1)(c) of the Act talks of penalty proceedings in cases where assessing officer is satisfied that any person has concealed the particulars of his income or furnish inaccurate particulars of such income. The section talks of only two nature of default ; First where assessee has concealed the particulars of his income and second where the assessee has furnished inaccurate particulars of such income. DR trying to defend the act of Ld. AO in carving out the third nature of default being a composite default of nature, concealment of income and for furnishing of inaccurate particulars. If the intention of Ld. AO was of finding the assessee guilty of concealment of income and also for furnishing of inaccurate particulars then that would be a case of proceedings for two different defaults but for which a common charge of the nature framed and conveyed to the assessee by the impugned notice is not sustainable. See M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. 2019 (8) TMI 409 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961.
2. Whether the penalty was rightly imposed for concealment of income and furnishing inaccurate particulars.
3. Interpretation of Section 271(1)(c) regarding the nature of defaults.
4. Compliance with the notice requirements for penalty proceedings.

Analysis:

Issue 1: Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961
The Revenue filed an appeal against the order passed by the Commissioner of Income Tax (Appeals) regarding the penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2008-09. The penalty was initiated due to a search conducted at the company's office premises, resulting in additions made by the Assessing Officer. The Commissioner of Income Tax (Appeals) had deleted the penalty based on procedural grounds, leading to the Revenue's appeal.

Issue 2: Whether the penalty was rightly imposed for concealment of income and furnishing inaccurate particulars
The Revenue contended that the penalty was imposed correctly as the Assessing Officer found the assessee guilty of both concealing income and furnishing inaccurate particulars. However, the Commissioner of Income Tax (Appeals) deleted the penalty citing procedural lapses, including the failure to specify the appropriate limb of charges in the penalty notice. The Revenue argued that the penalty was imposed in accordance with the law, while the assessee relied on precedents supporting the deletion of the penalty.

Issue 3: Interpretation of Section 271(1)(c) regarding the nature of defaults
The Tribunal analyzed Section 271(1)(c) of the Income Tax Act, which addresses penalties for concealing income or furnishing inaccurate particulars. The Assessing Officer's attempt to combine both defaults into a single charge was deemed unsustainable. The Tribunal emphasized the need for clarity in specifying the nature of defaults when initiating penalty proceedings, as highlighted in relevant judicial precedents, including the judgment of the Jurisdictional High Court.

Issue 4: Compliance with the notice requirements for penalty proceedings
The Tribunal referred to judgments emphasizing the necessity of the Assessing Officer specifying the exact provisions under which the penalty is being issued. Failure to clearly state the grounds for penalty proceedings was considered a procedural flaw, leading to the cancellation of the penalty. The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) based on the legal requirements for issuing penalty notices under Section 271(1)(c) of the Act.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty by the Commissioner of Income Tax (Appeals) due to procedural irregularities in the penalty notice and the necessity of specifying the nature of defaults under Section 271(1)(c) of the Income Tax Act.