2024 (5) TMI 781 - HC - Income Tax

Penalty proceedings u/s 271(1) (c) - ITAT remanded mater to the AO to re-examine the question of Section 271(1)(c) - HELD THAT - What appears to have weighed upon the ITAT was a failure on the part of the appellant to indicate in the original notice the particular limb of Section 271(1)(c) which was sought to be invoked. We note that the imperatives of such a procedure being adhered to and being ex facie evident from a reading of the show cause notice itself was one which was emphasised by this Court in Blackroak Securities Pvt. Ltd. 2023 (12) TMI 714 - DELHI HIGH COURT as held AO is required to apply his mind to the material and indicate clearly to the assessee what is being put against him. In other words which limb of Section 271(1)(c) of the Act is attracted in the given facts and circumstances of the case. It is our view that this clarity would be necessary as the pecuniary burden that the assessee may be mulct with could vary depending on the infraction committed by him. Thus in the given case where concealment has taken place a heavier burden may be imposed as compared to the situation where the assessee furnishes inaccurate particulars. We may also make it clear that there may be circumstances where both limbs are attracted. If that is the situation the notice should allude to this aspect. No justification to entertain the instant appeal.

Summary

Issues involved:
The appeal against the order of the Income Tax Appellate Tribunal remanding the matter to re-examine Section 271(1)(c) of the Income Tax Act, 1961.

Details of the Judgment:
1. The appeal was filed against the ITAT order remanding the matter to the Assessing Officer to re-examine Section 271(1)(c) of the Income Tax Act, 1961.
2. The ITAT emphasized the importance of clearly indicating the specific limb of Section 271(1)(c) being invoked in the notice to the appellant, as per previous court judgments.
3. The Tribunal's decision was supported by various court judgments, including those in the cases of Minu Bakshi, Unitech Reliable Projects Pvt. Ltd., Gopal Kumar Goyal, Ansal Properties and Infrastructure, Bhudeva Estate Pvt. Ltd., Jamnalal Bajaj Foundation, and others.
4. The Tribunal's decision was in line with the rationale that the AO must specify the limb of Section 271(1)(c) being triggered in penalty proceedings, as highlighted in the Unitech Reliable Projects Pvt. Ltd. case.
5. The imposition of a penalty requires clarity on the part of the AO to indicate the specific limb of Section 271(1)(c) being invoked, as the consequences and burden on the assessee may vary depending on the nature of the infraction.
6. The Court found no justification to entertain the appeal, which consequently failed and was dismissed.

This judgment underscores the importance of clearly specifying the limb of Section 271(1)(c) being invoked in penalty proceedings to ensure fairness and transparency in the assessment of penalties under the Income Tax Act, 1961.