2018 (4) TMI 241 - AT - Income Tax

Imposition of penalty imposed u/s 271(1)(c) - concealment of particulars of income or for furnishing of inaccurate particulars of income - non specification of charge - Held that - AO is required to specify which limb of Section 271 (1)(c) the penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. From the perusal of the notices, in the case of both the assessee, issued u/s 274 r.w.s. 271 of the Act, it is clear that the AO has not specified as to under which limb of the section the penalty was imposable. The notices, in fact, are in the standard pro forma wherein the irrelevant clauses have not been struck off. This indicates non application of mind on the part of the AO while issuing the penalty notices. The penalty proceedings initiated by the Assessing Officer are bad in law and deserve to be deleted. Accordingly, the impugned orders are set aside and the AO is directed to delete the penalty in both the cases. - Decided in favour of the assessee

Issues:
Challenge to imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for two assesses for the assessment year 2009-10 due to lack of specification of charge in the notices.

Analysis:

Issue 1: Lack of specification of charge in penalty notices
The appeals challenged the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for two assesses for the assessment year 2009-10. The issue revolved around the lack of specification of the charge on which the penalty was sought to be levied in the notices issued by the Assessing Officer. The appellants argued that the AO did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income, as required by the Act. They relied on the judgment of the Hon’ble High Court of Karnataka in the case of CIT vs. Manjunatha Cotton & Ginning Factory, which emphasized the necessity of explicitly stating the grounds for penalty under section 271(1)(c) in the notice. The appellants contended that since the AO did not specify the charge and left irrelevant portions in the notices, the penalty proceedings were not in compliance with the law.

Issue 2: Arguments of the Revenue
The Revenue argued that the penalty proceedings were validly initiated as per the notice issued under section 274 r.w.s. 271 of the Act. However, the contention of the appellants was that the failure to explicitly mention the grounds for penalty in the notices rendered them invalid.

Judgment and Analysis
The Tribunal analyzed the notices issued by the Assessing Officer and found that they did not specifically mention under which limb of Section 271(1)(c) the penalty proceedings had been initiated, i.e., for concealment of income or furnishing inaccurate particulars of income. Citing the judgment of the Hon’ble High Court of Karnataka, the Tribunal held that the notices should have explicitly stated the grounds for penalty as per the provisions of the Act. The Tribunal further referred to the judgment in the case of Commissioner of Income Tax vs. SSA’s Emerald Meadows, where it was emphasized that the assessing officer must specify the grounds for penalty under Section 271(1)(c). The Tribunal, in line with the legal precedents, concluded that the penalty notices were bad in law due to the lack of specification of the charge and ordered the deletion of penalties imposed on both assesses. The legal ground raised by the assesses was decided in their favor, and the appeals were allowed, setting aside the impugned orders and directing the AO to delete the penalties in both cases.

In conclusion, the Tribunal's decision highlighted the significance of explicitly specifying the grounds for penalty in the notices issued under section 271(1)(c) of the Income Tax Act, 1961. The judgment underscored that the failure to do so renders the penalty proceedings invalid, as observed in the legal precedents from the Hon’ble High Court of Karnataka.

← Previous Next →