2018 (4) TMI 1264 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Non specification of charge - defective notice - Held that - When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting an or between the two. We, therefore, respectfully following the order of the Hon ble Andhra Pradesh High Court in the case of Principal CIT-1, Vishakapatnam vs. Smt. Baisetty Revathi (2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT), hold that initiation of proceedings under section 271(1)(c) of the Act is not valid and accordingly quash the penalty. - Decided in favour of assessee.

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Justification of penalty imposition by the Assessing Officer.
3. Adequacy of opportunity provided to the appellant during the penalty proceedings.
4. Clarity in the notice issued for penalty under section 271(1)(c) of the Act.

Analysis:

Issue 1: Confirmation of Penalty under Section 271(1)(c)
The appellant contested the penalty imposed under section 271(1)(c) by the Assessing Officer, claiming that there was no concealment or furnishing of inaccurate particulars of income. The appellant argued that the penalty was unjustified as the income from other sources and rental income, which were inadvertently left out of the return, were voluntarily disclosed and taxes were paid prior to detection by the department. However, the ld. CIT(A) upheld the penalty, leading to the appeal before the ITAT Lucknow.

Issue 2: Justification of Penalty Imposition
The appellant, an employee of Essar Ports Ltd., filed the return showing total income, which was later scrutinized by the Assessing Officer resulting in additions under different heads. The penalty proceedings under section 271(1)(c) were initiated by the Assessing Officer, who imposed a penalty of ?2.50 lakhs. The appellant argued that the additions were unintentional due to a lack of awareness of tax provisions and promptly rectified the errors by revising the return and paying the due taxes with interest. Despite the appellant's submissions, the ld. CIT(A) confirmed the penalty, leading to the appeal.

Issue 3: Adequacy of Opportunity Provided
The appellant raised concerns regarding the adequacy of the opportunity provided during the penalty proceedings, alleging that the ld. CIT(A) did not afford the appellant firm a proper or sufficient opportunity to present its case or comply with the reasons relied upon in passing the order. The appellant contended that the order was passed without adequate opportunity and requested for it to be quashed. This issue highlighted the importance of procedural fairness in tax penalty cases.

Issue 4: Clarity in the Notice for Penalty
During the appeal before the ITAT Lucknow, the appellant challenged the clarity of the notice issued under section 274 read with 271(1)(c) of the Act. The appellant argued that the notice did not specify whether the penalty was proposed for concealment or furnishing inaccurate particulars of income, leading to ambiguity. Citing judicial precedents, the appellant contended that the notice was unclear about the grounds for penalty imposition, which should have been explicitly stated. The ITAT Lucknow, following previous decisions, emphasized the necessity of clarity in penalty notices to ensure proper defense by the assessee.

In conclusion, the ITAT Lucknow allowed the appeal, setting aside the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, based on the lack of specificity in the notice issued for penalty and the absence of a clear distinction between concealment and furnishing inaccurate particulars of income. The judgment underscored the importance of procedural clarity and adherence to legal requirements in penalty proceedings to safeguard the rights of the assessee.

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