2024 (2) TMI 153 - AT - Income Tax

Penalty levied u/s 271(1)(c) - defective notice - non specification of clear charge - non-strike off of the irrelevant part in the notice - whether the penalty proceedings are initiated on account of concealment of income or on account of furnishing inaccurate particulars of income? - HELD THAT - On perusal of the notice issued u/s 274 read with section 271(1)(c) of the Act it is noticed that the AO did not strike off the irrelevant limb in the notice. AO did not specify the limb for which the notice u/s 271(1)(c) was issued i.e. either for concealment of income or for furnishing inaccurate particulars of income. The notice was issued mechanically stating that the assessee had concealed particulars of income or furnished inaccurate particulars of income. As could be seen from the above in the case of Mr. Mohd. Farhan A. Shaikh . 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s 271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Thus notice issued by the Assessing Officer was bad in law if it did not specify under which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Decided in favour of assessee.

Issues involved:
The judgment deals with the issue of penalty levied under section 271(1)(c) of the Act for the assessment years 2011-12 & 2015-16. The primary issue raised was the lack of specification by the Assessing Officer regarding the limb under which the penalty proceedings were initiated, whether for concealment of income or furnishing inaccurate particulars of income.

Summary of Judgment:

For the assessment years 2011-12 & 2015-16:
The assessee challenged the validity of the penalty order on the grounds that the Assessing Officer did not specify the limb under which the penalty proceedings were initiated. The notice issued did not strike off the irrelevant limb, failing to specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The Hon'ble Bombay High Court held that a defect in the notice, such as not striking off the irrelevant matter, vitiates the penalty proceedings. The Court emphasized that the assessee must be informed of the grounds of the penalty proceedings through a statutory notice to avoid vagueness.

The Hon'ble Bombay High Court (Full Bench at Goa) decision in Mr. Mohd. Farhan A. Shaikh v. ACIT highlighted the importance of specifying the grounds of penalty proceedings in the notice issued under section 271(1)(c) of the Act. The Court emphasized that an omnibus notice lacking specificity is detrimental and violates the principles of natural justice. The judgment underscored that the penalty proceedings must stand on their own and not rely on the assessment proceedings to rectify defects.

The Hon'ble jurisdictional High Court upheld the Tribunal's decision that a notice failing to specify the limb under section 271(1)(c) of the Act for initiating penalty proceedings renders the notice bad in law. The Court reiterated the necessity of clearly informing the assessee of the grounds for penalty, whether for concealment of income or furnishing inaccurate particulars.

In conclusion, the penalty order passed by the Assessing Officer under section 271(1)(c) of the Act for the assessment year 2011-12 was quashed due to the failure to specify the relevant limb in the notice. The judgment emphasized the importance of clarity and specificity in penalty proceedings, ensuring adherence to statutory requirements and principles of natural justice. The appeals of the assessee for both assessment years were allowed based on the legal grounds discussed.

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