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2024 (11) TMI 1108 - HC - Income TaxPenalty u/s 271(1) (c) - defective notice u/s 274 - non specification of clear charge - Assessee had claimed inaccurate expenses - ITAT deleted penalty as notice u/s 274 r.w.s. 271(1)(c), AO has not marked the specified limb for which the penalty notice is issued - HELD THAT - Two phrases i.e. conceal and furnishing of inaccurate particulars are separate and distinct. Concealment of income and furnishing of inaccurate particulars of income in Section 271(1) (c) of the Act carry different meanings and connotation. On principle where the penalty proceedings are said to be initiated by the Revenue under Section 271(1) (c) of the Act, the specific ground which forms the foundation thereof needs to be spelt out in clear terms. Otherwise, the assessee would not have proper opportunity to put forth his defence. The proceedings for initiating the penalty are penal in nature, which may result in imposition of penalty ranging from 100 to 300% of the taxability and therefore the charge must be unequivocal and unambiguous. Where the charges are either of concealment of particulars of income or furnishing of inaccurate particulars thereof, revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both. Following the decision of Manjunath Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and the other decisions of different High Courts, the ITAT rightly held that the levy of penalty u/s 271(1)(c) of the Act in the case of the assessee was not valid. Decided in favour of assessee.
Issues Involved:
1. Whether the Income Tax Appellate Tribunal (ITAT) was justified in deleting the penalty under Section 271(1)(c) of the Income Tax Act, 1961, due to the alleged vagueness of the penalty notice. 2. Whether the absence of a specific charge in the penalty notice, regarding either "concealment of particulars of income" or "furnishing inaccurate particulars of income," invalidates the penalty proceedings. 3. Whether the findings in the assessment proceedings are conclusive for the imposition of penalty under Section 271(1)(c). Issue-wise Detailed Analysis: 1. Justification of ITAT's Deletion of Penalty: The core issue in the appeals was whether ITAT was justified in deleting the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961. The ITAT held that the penalty notice was vague as it did not specify the exact charge against the assessee, thereby violating the principles of natural justice. The ITAT observed that the notice failed to clearly indicate whether the penalty was for "concealment of particulars of income" or for "furnishing inaccurate particulars of income." This lack of clarity was deemed sufficient to invalidate the penalty, as it deprived the assessee of a fair opportunity to defend themselves. The ITAT's decision was supported by precedents, including the Karnataka High Court's judgment in the case of Manjunatha Cotton and Ginning Factory, which emphasized the necessity of specifying the charge in penalty notices. 2. Absence of Specific Charge in Penalty Notice: The Tribunal's decision was further reinforced by the legal principle that penalty proceedings, being penal in nature, require a clear and unequivocal charge. The High Court noted that the Revenue must specify whether the penalty is for "concealment" or "furnishing inaccurate particulars," as these carry different legal connotations. The judgment cited several precedents, including the Supreme Court's decision in CIT v. Reliance Petroproducts Pvt. Ltd., which held that merely making an unsustainable claim does not amount to furnishing inaccurate particulars. The High Court concurred with ITAT, emphasizing that an omnibus notice lacking specificity is insufficient for imposing penalties under Section 271(1)(c). 3. Findings in Assessment Proceedings: The High Court clarified that findings in assessment proceedings are not conclusive for penalty imposition. While such findings may serve as evidence, they do not mandate penalty imposition under Section 271(1)(c). The judgment highlighted that penalty proceedings focus on the conduct of the assessee, not merely on the addition or disallowance made during assessment. The Court reiterated that penalty is imposed for concealment or furnishing inaccurate particulars, not simply because an addition is made. The High Court cited the case of New Holland Tractors (India) Private Limited to illustrate the distinction between assessment and penalty proceedings, underscoring the need for a specific charge in penalty notices. In conclusion, the High Court upheld ITAT's decision to delete the penalty, affirming that the lack of a specific charge in the penalty notice rendered the proceedings invalid. The appeals were dismissed, with the Court finding no substantial question of law warranting interference with ITAT's judgment.
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