2024 (4) TMI 129 - AT - Income Tax

Penalty u/s. 271(1)(c) - validity of show cause notice issued - mentioning of both limbs in notice issued - as per AO assessee had deliberately furnished inaccurate particulars of income as well as concealed the particulars of income - HELD THAT - Though the A.O. in the penalty order passed u/s. 271(1)(c) had mentioned both the limbs by stating that the assessee had furnished inaccurate particulars of income as well as concealed the particulars of income , but the penalty notice issued u/s. 274 r.w.s. 271(1)(c) of the Act dated 24.09.2021 reveals that the assessee was called upon to explain why penalty u/s. 271(1)(c) of the Act may not be imposed upon him for having concealed the particulars of income . We are of the considered view that now when as per the settled position of law the two defaults, viz. concealment of income and furnishing of inaccurate particulars of income are separate and distinct defaults, and not overlapping, therefore, the AO had grossly erred, wherein he vide the SCN, had on one hand called upon the assessee to explain as to why penalty u/s 271(1)(c) may not be imposed on her foe having concealed the particulars of income , but thereafter had vide his penalty order u/s. 271(1)(c) visited the assessee for a penalty for both the defaults, viz. furnished inaccurate particulars of income as well as concealed the particulars of income . The aforesaid approach adopted by the A.O. cannot be merely dubbed as a technical default as the same had divested the assessee of her statutory right of a proper opportunity to be heard and defend her case. The assessee had been saddled with penalty u/s 271(1)(c) without validly putting her to notice about the default for which the same was sought to be imposed. A.O had failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the default for which she was being proceeded against, therefore, the penalty under Sec. 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of penalty proceedings initiated u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

Condonation of Delay:

The appeal involved a delay of 6 days. The assessee's Authorized Representative (AR) explained that the delay was due to the health issues of the assessee's son, who manages her business. The Departmental Representative did not object to the condonation. Considering the bona fide reasons, the Tribunal condoned the delay.

Validity of Penalty Proceedings:

The assessee, engaged in the business of petroleum products, had her income reassessed by the A.O. under Sec. 147 of the Act, leading to an addition of Rs. 6,48,359/- to her returned income. Subsequently, a penalty of Rs. 1,45,955/- was imposed u/s 271(1)(c) for "furnishing inaccurate particulars of income" and "concealing the particulars of income".

The Tribunal noted discrepancies in the penalty proceedings. The A.O. initially cited "furnishing inaccurate particulars of income" but later mentioned both "furnishing inaccurate particulars of income" and "concealing the particulars of income" in the penalty order. The Show Cause Notice (SCN) issued u/s 274 r.w.s. 271(1)(c) only mentioned "concealing the particulars of income". This inconsistency indicated non-application of mind by the A.O., violating the principles of natural justice.

The Tribunal referenced several judicial pronouncements, including the Supreme Court's decision in Dilip N. Shroff and the High Court of Bombay's rulings, emphasizing that penalty proceedings require clear and explicit charges. The failure to specify the exact charge in the SCN deprived the assessee of a fair opportunity to defend herself.

Consequently, the Tribunal held that the penalty order was invalid due to the A.O.'s failure to clearly specify the charge in the SCN and the subsequent vague penalty order. The penalty of Rs. 1,45,955/- imposed u/s 271(1)(c) was quashed. The Tribunal refrained from addressing other grounds of appeal related to the merits of the case.

Conclusion: The appeal was allowed, and the penalty imposed was quashed.