2023 (5) TMI 1057 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - defective notice u/s 274 - HELD THAT - Since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged concealment of income OR furnishing of inaccurate particulars of such income , the penalty levied is hereby obliterated. Also quantum addition stands deleted. And hence, the penalty proceedings do not survive - Appeal of assessee allowed.

Summary

Issues involved: Appeal against CIT(A) order, levy of penalty u/s 271(1)(c), validity of penalty notice, concealment of income, specific default for penalty notice, confirmation of addition by CIT(A), pending appeal to ITAT.

Issue 1: Appeal against CIT(A) order
The present appeals were filed by the assessee against the order of ld. CIT(A), Dehradun dated 28.08.2019. Since the issues in both appeals were similar, they were heard together and adjudicated by a common order.

Issue 2: Levy of penalty u/s 271(1)(c)
The grounds raised by the assessee in ITA No. 178/DDN/2019 included contentions regarding the incorrect and unjustified levy of penalty u/s 271(1)(c) by the CIT(A). The assessee argued against the penalty on various grounds, such as the penalty notice being bad in law for not specifying the specific default, and the penalty being upheld without proving either the concealment of income or filing inaccurate particulars of income.

Issue 3: Validity of penalty notice
The assessee challenged the validity of the penalty notice, contending that inappropriate words regarding concealment of income or filing inaccurate particulars of income had not been struck off. The assessee also argued that the penalty notice itself was illegal, invalid, and bad in law.

Issue 4: Concealment of income
The Tribunal noted that the quantum addition had been deleted, rendering the penalty proceedings unnecessary. Citing relevant judgments, including the Karnataka High Court's decision in CIT vs. Manjunatha Cotton and Ginning Factory, it was emphasized that the notice under section 274 should specifically state the grounds for penalty under section 271(1)(c) of the Act, whether for concealment of income or furnishing incorrect particulars of income.

Issue 5: Confirmation of addition by CIT(A)
The Tribunal observed that the cases of the assessee were covered by judicial precedents emphasizing the importance of specifying the grounds for penalty in the notice under section 274. The Bombay High Court's decision in Mr. Mohd. Farhan A. Shaikh Vs ACIT highlighted that an omnibus notice suffers from vagueness and must inform the assessee of the specific grounds for penalty.

Issue 6: Pending appeal to ITAT
The Tribunal, in line with the principles reiterated by various High Courts, held that since the AO had not specified whether the penalty was proposed for concealment of income or furnishing inaccurate particulars, the penalty levied was obliterated. Consequently, both appeals of the assessee were allowed.

*Order Pronounced in the Open Court on 23/05/2023.*