2024 (5) TMI 1393 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of clear charge - whether the assessee has concealed its particulars of income or furnished inaccurate particulars of such income? - HELD THAT - AO has not struck off the inappropriate portion therein. The notice so issued does not mention the specific charge i.e. whether the assessee has concealed particulars of its income or furnished inaccurate particulars of such income. Hence the show cause notice issued u/s 274 read with Section 271(1)(c) of the Act dated 08.03.2016 becomes defective and bad in law therefore no penalty u/s 271(1)(c) can be levied in such case. The issue is squarely covered by the ratio of decision of M/s Sahara India Life Insurance Company Ltd.. 2019 (8) TMI 409 - DELHI HIGH COURT As Revenue could not bring any contrary material on record to demonstrate that the notice so issued contained specific charge grounds raised by the Revenue are rejected.

Summary

Issues Involved:
1. Deletion of penalty imposed u/s 271(1)(c) of the Income-tax Act, 1961.
2. Validity of penalty proceedings initiated by the AO u/s 271(1)(c) due to defective notice.
3. Imposition of penalty on additions based on estimates and mere disallowance of claims.

Summary:

Issue 1: Deletion of Penalty Imposed u/s 271(1)(c)
The Revenue appealed against the order of the CIT(A) which deleted the penalty of Rs. 2,57,51,235/- imposed by the AO u/s 271(1)(c) of the Income-tax Act, 1961. The CIT(A) held that the penalty proceedings were invalid as the show cause notice did not specify the specific charge of offence committed by the assessee.

Issue 2: Validity of Penalty Proceedings Due to Defective Notice
The learned CIT(DR) argued that the CIT(A) erred in deleting the penalty on technical grounds. However, the counsel for the assessee contended that the notice issued by the AO was defective as it did not mention whether the penalty was for concealment of income or furnishing inaccurate particulars. The Tribunal noted that the impugned notice dated 08.03.2020 did not specify the charge, making it defective and bad in law. This was supported by precedents from the Hon'ble Jurisdictional High Court of Delhi in the case of PCIT & others Vs. M/s Sahara India Life Insurance Company Ltd. (2019).

Issue 3: Imposition of Penalty on Additions Based on Estimates
The Tribunal observed that the penalty was levied on an estimated addition of Rs. 1,14,07,009/- due to the assessee's inability to produce books of accounts, which were with the Official Liquidator. The CIT(A) found that the addition was based on estimation and there was no material to prove that the assessee concealed income or furnished inaccurate particulars. The Tribunal upheld the CIT(A)'s view that penalty cannot be levied on estimated additions, citing various judicial pronouncements supporting this position.

Conclusion:
The Tribunal affirmed the order of the CIT(A) deleting the penalty levied by the AO u/s 271(1)(c) of the Act, as the notice was defective and the penalty was based on estimated additions. The appeal of the Revenue was dismissed.