2022 (11) TMI 20 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - HELD THAT - Respectfully following the judgment of the Hon ble Delhi High Court in the case of Sahara India Life Insurance Co. Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT we hold that the notice issued by the Assessing Authority did not specify under which limb of section 271(1)(c) of the Act the notice has been issued hence it is bad in law. Therefore the penalty levied by the AO and sustained by the learned CIT(Appeals) on the basis of invalid notice deserves to be deleted. Accordingly the AO is herby directed to delete the penalty. Grounds raised by the assessee are allowed.

Summary

Issues:
1. Validity of penalty order passed by the Assessing Officer.
2. Compliance with legal requirements in penalty proceedings.
3. Consideration of merits of the case in penalty imposition.

Issue 1: Validity of penalty order:
The appeal was against the order of the Commissioner of Income-tax upholding the penalty order passed by the Assessing Officer for the assessment year 2009-10. The penalty imposed under section 271(1)(c) of the Income Tax Act was challenged by the assessee. The Assessing Officer had failed to specify the charge under which the penalty was proposed to be levied, rendering the penalty notice invalid. The Hon'ble Delhi High Court's judgment in a similar case highlighted the necessity of specifying the charge under which the penalty proceedings were initiated.

Issue 2: Compliance with legal requirements:
The counsel for the assessee argued that the penalty notices issued by the Assessing Authority were contrary to legal precedents, including a judgment by the Hon'ble Delhi High Court and the Supreme Court. The Tribunal had previously deleted penalties in line with the Delhi High Court's judgment. The Assessing Authority's failure to specify the charge under section 271(1)(c) in the penalty notice was a crucial legal flaw, leading to the penalty being deemed invalid.

Issue 3: Consideration of merits in penalty imposition:
The Tribunal, after considering the submissions and legal precedents, held that the penalty notice's lack of specification regarding the charge under section 271(1)(c) rendered it invalid. Citing the Delhi High Court's judgment, the Tribunal directed the Assessing Officer to delete the penalty imposed on the assessee. The appeal was allowed in favor of the assessee based on the legal requirement for specifying the charge under which the penalty is imposed.

In conclusion, the Tribunal's decision emphasized the significance of complying with legal requirements in penalty proceedings, specifically the necessity of specifying the charge under which the penalty is imposed. The judgment highlighted the invalidity of penalty notices that fail to specify the relevant charge, leading to the deletion of the penalty in this case.