2024 (10) TMI 483 - AT - Income Tax

Penalty levied u/s 271(1)(c) - defective notice u/s 274 - non striking of the irrelevant limb - assessee argued that the ld. A.O. had issued notice u/s. 274 r.w.s. 271 without striking out the irrelevant limb as to whether the penalty was levied for concealment of particulars of income or for furnishing inaccurate particulars of income - HELD THAT - We are of the considered view that the assessee s case would be squarely covered by the full bench decision of the Hon'ble Jurisdictional High Court in Mohammed Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) where the non striking of the irrelevant limb would vitiate the penalty proceeding. Thus, we hold that the impugned notice issued by the ld. A.O. is null and void and, hence, direct the ld. A.O. to delete the impugned penalty. Decided in favour of assessee.

Summary

Issues:
Challenge to penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income and furnishing inaccurate particulars.

Detailed Analysis:

1. Grounds of Appeal: The assessee challenged the penalty levied by the Assessing Officer under section 271(1)(c) of Rs. 5,28,234, contending that the penalty was bad in law due to the dual basis of concealment of income and furnishing inaccurate particulars. The assessee argued that concealment and furnishing inaccurate particulars cannot coexist. Additionally, the assessee claimed that the jewellery found in a locker, considered unexplained, belonged to the daughter, thus no concealment or furnishing of inaccurate facts occurred. The penalty was challenged as being unjustified.

2. Facts and Assessment: The assessee filed the income tax return for the Assessment Year 2012-13, declaring a total income of Rs. 19,21,260. Following a search action in the Thakkar Group's case, the Assessing Officer conducted scrutiny, resulting in an assessment order declaring total income at Rs. 55,08,510 with additions for unexplained jewellery. The Assessing Officer initiated penalty proceedings under section 271(1)(c) and levied a penalty of Rs. 5,28,234 for furnishing inaccurate particulars and concealment of income.

3. Appellate Proceedings: The assessee appealed the penalty before the Commissioner of Income Tax (Appeals), who dismissed the appeal on the grounds of failure to substantiate the claim. Subsequently, the assessee appealed to the Appellate Tribunal challenging the Commissioner's order.

4. Arguments and Decision: The Authorized Representative for the assessee argued that the penalty notice did not specify whether it was for concealment or furnishing inaccurate particulars, citing a mandatory requirement to strike out the irrelevant limb. The Departmental Representative contended that the penalty was justified due to the unexplained jewellery. The Tribunal observed that the failure to strike out the irrelevant limb in the penalty notice vitiated the proceedings, following a Full Bench decision. Consequently, the Tribunal allowed the appeal, holding the penalty notice null and void, directing the Assessing Officer to delete the penalty.

5. Conclusion: The Tribunal allowed the appeal, emphasizing the mandatory requirement to specify the basis of penalty in the notice. The decision was based on the principle that failure to strike out the irrelevant limb in the penalty notice renders it null and void, leading to the deletion of the penalty. The Tribunal's decision was in line with the Full Bench decision of the Jurisdictional High Court, ensuring adherence to procedural requirements in penalty proceedings.