2018 (3) TMI 1207 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - validity of notice - Held that - Notice does not specify which limb of Section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. Further the penalty order reads that the penalty was levied for furnishing of inaccurate particulars of income which amounts to concealment thereof thereby making an omnibus allegation. In view of the submission on behalf of the assessee that the notice which confers jurisdiction on the revenue to levy penalty under section 271(1)(c) of the Act and the settled preparation of law on this aspect we re of the considered opinion that the penalty cannot be sustained. We accordingly crash the penalty proceedings and direct the Ld. AO to delete the penalty. - Decided in favour of assessee.

Summary

Issues:
Levying and sustaining penalty for furnishing inaccurate particulars of income in the return.

Analysis:
The appellant, a company dealing in petroleum and chemical products, filed a return of income for AY 2009-10, declaring a total income of ?54,621, including dividend income from mutual funds. After a notice under section 143(2) of the Income-tax Act, the appellant submitted a revised computation showing additional income. The Assessing Officer (AO) held the revised computation as invalid, imposed a penalty of ?1,31,900 under section 271(1)(c) for furnishing inaccurate particulars of income, which was confirmed by the Commissioner of Income Tax (Appeals). The appellant contended that the error was accidental, not intentional, and the notice did not specify the grounds for penalty under section 271(1)(c).

The appellant argued that the notice lacked clarity on whether the penalty was for concealment or furnishing inaccurate particulars of income. Citing legal precedents, the appellant emphasized the importance of specifying the grounds for penalty initiation. Conversely, the Revenue contended that there was no ambiguity as the penalty was proposed and imposed for furnishing inaccurate particulars of income. The Tribunal analyzed the notice and penalty order, noting that the penalty was levied for furnishing inaccurate particulars, which amounted to concealment.

Referring to legal judgments, the Tribunal highlighted the necessity of aligning the grounds for penalty initiation and imposition. The Karnataka High Court's decision emphasized that penalty proceedings must be based on the same grounds as the initiation, ensuring natural justice. Another case underscored the importance of explicitly mentioning the grounds for penalty initiation in the notice. The Tribunal, considering the settled law and the lack of specificity in the notice, concluded that the penalty could not be sustained. Consequently, the penalty proceedings were quashed, directing the AO to delete the penalty.

In conclusion, the Tribunal allowed the appeal, emphasizing the significance of specifying the grounds for penalty initiation in the notice under section 271(1)(c) to ensure procedural fairness and adherence to legal principles. The judgment highlighted the need for alignment between the grounds for initiating penalty proceedings and those for imposing penalties, as established in legal precedents, ultimately leading to the dismissal of the penalty in this case.