2024 (6) TMI 884 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of clear charge - HELD THAT - The issue is squarely covered by the judgement of Hon ble Jurisdictional High Court in the case of Mohammed Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) primary burden lies on the Revenue. In the assessment proceedings, it forms an opinion, prima facie or otherwise, to launch penalty proceedings against the assessee. But that translates into action only through the statutory notice under section 271(1)(c), read with section 274 of IT Act. True, the assessment proceedings form the basis for the penalty proceedings, but they are not composite proceedings to draw strength from each other. Nor can each cure the other's defect. A penalty proceeding is a corollary; nevertheless, it must stand on its own. These proceedings culminate under a different statutory scheme that remains distinct from the assessment proceedings. Therefore, the assessee must be informed of the grounds of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. The notice u/s 274/271(1)(c) of the Act is not carrying the specific limb. Therefore, this is a case where both the parts of the offences i.e., concealment of income as well as furnishing of inaccurate particulars of income were involved. We are of the considered opinion that the impugned penalty is not sustainable on legal grounds. The ld. DR is unable to submit any contrary judgment before the bench. Hence, penalty U/s 271(1)(c) is quashed. The appeal of the assessee is succeeded.

Summary

Issues involved:
The judgment involves issues related to the validity of penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961 based on the notice issued by the Assessing Officer (AO) and the nature of the charges against the assessee.

Issue 1 - Defective Notice for Penalty Proceedings:
The Assessee challenged the validity of the notice u/s 274 r.w.s. 271(1)(c) issued by the AO, arguing that it did not specify the reasons for initiating the penalty proceedings. The Appellate Tribunal considered legal precedents, including the judgment in Mohammed Farhan A. Shaikh Vs. PCIT, and held that a defective notice can vitiate penalty proceedings. The Tribunal found that the notice lacked specificity regarding the nature of concealment of income or furnishing inaccurate particulars, rendering it invalid. Consequently, the penalty of Rs. 59,08,492/- imposed by the AO was quashed, as it was not sustainable on legal grounds.

Issue 2 - Nature of Charges and Penalty Imposition:
The Assessee contended that the penalty was imposed on an assumption basis, which should not attract penalty u/s 271(1)(c). The Tribunal noted that the AO failed to mention the nature of concealment in the notice, leading to ambiguity regarding the charges. Citing legal precedents, including the decision of the Hon'ble Karnataka High Court in CIT V/s SAS's Emerald Meadows, the Tribunal emphasized the need for specific notice under section 271(1)(c) to inform the assessee of the grounds for penalty proceedings. As the notice in this case did not specify the nature of the charges, the Tribunal concluded that the penalty was not sustainable. Consequently, the penalty amount of Rs. 59,08,492/- was quashed, and the appeal of the assessee was upheld.