2017 (5) TMI 1306 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition u/s 68 - defective notice - Held that - The notice issued u/s. 274 r.w.s 271(1)(c) of the Act was illegal and bad in law as it had not specified the charges on which the penalty was levied i.e. for concealment of particulars of income or furnishing inaccurate particulars of income, therefore, we allow the appeal of the assessee. - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty under section 271(1)(c) for concealment of income.
- Validity of the notice u/s. 274 r.w.s. 271(1)(c) of the Act.

Analysis:
1. Imposition of Penalty:
The appeal was filed against the order of the Commissioner of Income Tax(Appeals) confirming a penalty under section 271(1)(c) of ?10,110 for the Assessment Year 2011-12. The assessee failed to offer a satisfactory explanation for cash deposits in bank accounts, resulting in the addition of ?94,000 as unexplained cash credit to the total income under section 68 of the IT Act, 1961. The penalty was imposed by the Assessing Officer for concealment of income, which was upheld by the CIT(A). However, during the appellate proceedings, the assessee argued that the penalty notice did not specify whether it was issued for concealing the particulars of income or furnishing inaccurate particulars of income.

2. Validity of Notice:
The notice issued under section 274 r.w.s. 271(1)(c) of the Act was challenged by the assessee on the grounds of ambiguity and lack of specificity. The appellate tribunal observed that the notice did not clearly specify the charges for which the penalty was levied, i.e., concealing particulars of income or furnishing inaccurate particulars of income. Citing legal precedents, including judgments from the Karnataka High Court and the Co-ordinate Bench of the Tribunal, it was concluded that such vague notices impair the assessee's right to a reasonable opportunity to defend the case. Therefore, the tribunal deemed the notice illegal and bad in law, leading to the allowance of the assessee's appeal against the penalty.

In conclusion, the appellate tribunal allowed the appeal of the assessee, quashing the penalty proceedings based on the invalid notice that failed to specify the charges for which the penalty was imposed. The judgment highlighted the importance of clear and specific penalty notices to ensure the assessee's right to a fair opportunity to defend their case.