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2015 (9) TMI 1011 - AT - Income TaxLevy of penalty u/s. 271(1)(c) - additional income admitted during search and returned u/s. 153A proceedings - Held that - Furnishing of inaccurate particulars of income and concealing of income are two different expressions having different connotations. For initiating penalty proceedings, the Assessing Officer has to be very specific for the reasons of levying penalty, Whether it is for furnishing of inaccurate particulars of income or concealing of income or for both. In the present case, a perusal of notice issued u/s. 271(1)(c) r.w.s. 274 shows that the Assessing Officer has not specified the reasons for levying of penalty i.e. whether it is for furnishing of inaccurate particulars or concealment of income or both. A perusal of notices show that they are stereo type notices, with blank spaces. Specific reasons for levy of penalty u/s. 271(1)(c), whether it is for concealment of particulars or for furnishing inaccurate particulars or for both, have not been specified. The assessee in his written submission has pointed out that if the irrelevant columns of the printed form of notice u/s. 274 have not been stuck off by the Assessing Officer, the notice for levy of penalty u/s. 271(1)(c) shall be deemed to be invalid. The Hon ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT ) has held that where it is not clear from the notice u/s. 274 the reasons for levying of penalty the notice itself is bad in law and the penalty order passed on the basis of such notice is not sustainable - Decided in favour of assessee.
Issues Involved:
1. Validity of penalty levied under section 271(1)(c) of the Income Tax Act. 2. Specificity and clarity of the show cause notice issued under section 274 read with section 271(1)(c). 3. Compliance with principles of natural justice in penalty proceedings. Issue-wise Detailed Analysis: 1. Validity of Penalty Levied under Section 271(1)(c): The assessee appealed against the penalty orders for the assessment years 2007-08 and 2008-09, which were confirmed by the Commissioner of Income Tax (Appeals)-I, Nashik. The penalty was levied for concealment of income under section 271(1)(c) of the Income Tax Act. The assessee argued that the penalty was unjustified as the additional income was declared in response to a notice issued under section 153A following a search action under section 132. 2. Specificity and Clarity of the Show Cause Notice Issued under Section 274 Read with Section 271(1)(c): The assessee contended that the show cause notice issued under section 274 did not specify whether the penalty proceedings were for "concealing particulars of income" or "furnishing inaccurate particulars of income." The notices were found to be stereo type with blank spaces and did not clearly state the grounds for penalty. This lack of specificity was argued to be a violation of the principles laid down in the case of CIT Vs. Manjunatha Cotton & Ginning Factory, where it was held that the notice must clearly state the grounds for penalty to allow the assessee to prepare an adequate defense. 3. Compliance with Principles of Natural Justice in Penalty Proceedings: The Tribunal observed that the penalty orders were inconsistent. In the penalty order, the Assessing Officer initially mentioned that the penalty was for concealing income but later stated that it was for both furnishing inaccurate particulars and concealing income. This ambiguity and lack of clarity in the penalty order were found to be against the principles of natural justice. The Karnataka High Court in Manjunatha Cotton & Ginning Factory held that penalty proceedings must be clear and specific about the grounds for penalty, and any vague or unclear notice would be invalid. Conclusion: The Tribunal concluded that the penalty notices issued under section 271(1)(c) read with section 274 were invalid due to their lack of specificity and clarity. Consequently, the subsequent penalty proceedings were vitiated. The appeals filed by the assessee for both assessment years were allowed, and the penalty orders were set aside. Order: The appeals of the assessee were allowed, and the impugned penalty orders were set aside. The decision was pronounced on August 31, 2015.
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