2018 (3) TMI 1460 - AT - Income Tax

Penalty u/s 271(1)(c) - non specification of charge - Held that - AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. I am of the view that notice issued by the AO u/s. 271(1)(c) read with Section 274 of the Act is bad in law as it 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. Therefore, the penalty in dispute is not sustainable in the eyes of law, hence, cancel the penalty in dispute. See CIT & Anr. Vs. M/s SSA s Emerald Meadows 2015 (11) TMI 1620 Karnataka High Court - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the penalty order under Section 271(1)(c) of the Income Tax Act.
2. Specificity of the notice issued under Section 274 read with Section 271(1)(c) regarding the nature of the penalty (concealment of income or furnishing of inaccurate particulars).

Issue-Wise Detailed Analysis:

1. Validity of the Penalty Order under Section 271(1)(c):
The appellant contested the penalty order passed under Section 271(1)(c) of the Income Tax Act, arguing that it was invalid and bad in law. The primary contention was that the notice issued under Section 274 read with Section 271(1)(c) did not specify whether the penalty proceedings were initiated for "furnishing of inaccurate particulars of income" or "concealment of income." The appellant's counsel cited multiple judicial precedents to support the argument that such ambiguity renders the penalty order unsustainable.

2. Specificity of the Notice Issued under Section 274 Read with Section 271(1)(c):
The Tribunal examined the notice dated 23.12.2011 issued by the Assessing Officer (AO) and observed that it merely ticked options for "concealment of income" or "furnishing inaccurate particulars of income" without specifying the exact charge. This lack of specificity was deemed contrary to the provisions of law. The Tribunal referred to several judicial decisions, including:

- *CIT & Anr. Vs. M/s SSA’s Emerald Meadows* (Karnataka High Court and Supreme Court) which held that a notice under Section 274 read with Section 271(1)(c) must clearly specify the limb under which penalty proceedings are initiated.
- *Ashok Kumar Chordia vs. DCIT* (ITAT, Delhi) where the Tribunal found that the AO's non-specific notice and subsequent penalty order were contrary to law.
- *Rajender Jain vs. ACIT* (ITAT, Delhi) which reiterated that a penalty notice must clearly indicate whether the charge is for "concealment of income" or "furnishing inaccurate particulars."

The Tribunal concluded that the penalty in dispute was not sustainable in the eyes of the law due to the non-specific nature of the notice. Consequently, the penalty was canceled, and the appeal was allowed in favor of the assessee.

Conclusion:
The Tribunal allowed the appeal, canceling the penalty imposed under Section 271(1)(c) of the Income Tax Act. The decision was based on the principle that a penalty notice must clearly specify the charge, whether it is for "concealment of income" or "furnishing inaccurate particulars of income." The Tribunal's decision was supported by multiple judicial precedents emphasizing the necessity of specificity in penalty notices.