2018 (4) TMI 179 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - addition on account of surrender of professional receipts - Held that - Language used in the end of the assessment order and even while levying the penalty, the A.O. mentioned the same facts. Same facts are mentioned in the show cause notice. The show cause notice issued by A.O. under section 274 r.w.s. 271(1)(c) of the I.T. Act, is bad in law as it did not specify which limb of Section 271(1)(c) of the I.T. Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or for furnishing inaccurate particulars of income. Therefore, penalty is liable to be cancelled because the notice itself is vitiated. The issue is covered in favour of the assessee by the order in the case of Sunstar Exposition Pvt. Ltd., New Delhi (2017 (8) TMI 75 - ITAT DELHI). - Decided in favour of assessee.

Summary

Issues:
Challenge against levy of penalty under section 271(1)(c) of the I.T. Act, 1961 for A.Y. 2011-2012.

Analysis:
The appeal was filed against the order of the Ld. CIT(A)-20, New Delhi, challenging the penalty under section 271(1)(c) of the I.T. Act, 1961. The A.O. had initiated penalty proceedings for concealing income and furnishing inaccurate particulars. The penalty was levied for non-disclosure of provisional receipts in the return of income. The Assessee argued that the show cause notice was vague as it did not specify the exact reason for initiating penalty proceedings. The Assessee relied on a previous ITAT Delhi Bench case where it was held that penalty proceedings are void if the notice does not specify the exact reason for penalty. The Assessee's counsel contended that the penalty should be cancelled due to the defective notice.

The Departmental Representative (D.R.) argued that the Assessee had surrendered an amount on account of professional receipts not shown in the original return of income. However, the Assessee's mere surrender was deemed insufficient. The A.O. had initiated penalty proceedings for concealing income and furnishing inaccurate particulars. The language used in the assessment order, penalty order, and show cause notice was consistent. The Assessee contended that the show cause notice did not specify the exact limb of Section 271(1)(c) under which penalty proceedings were initiated, rendering the notice defective. The ITAT Delhi Bench's previous decision was cited in favor of the Assessee, emphasizing that a vague notice vitiates penalty proceedings. Consequently, the penalty was cancelled due to the defective notice.

In conclusion, the penalty levied under section 271(1)(c) of the I.T. Act was cancelled as the show cause notice was found to be defective for not specifying the exact reason for initiating penalty proceedings. The Assessee's appeal was allowed, setting aside the orders of the authorities below.