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2018 (5) TMI 423 - AT - Income TaxPenalty u/s 271(1)(c) - non specification of charge - Held that - We are of the view that the AO has initiated the penalty for concealment of particulars of income or furnishing of inaccurate particulars, which is contrary to the provisions of law. We are 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 - See CIT & Anr. Vs. M/s SSA s Emerald Meadows 2016 (8) TMI 1145 Supreme Court - Decided in favour of assessee.
Issues Involved:
1. Legality of the penalty imposed under section 271(1)(c) of the Income Tax Act. 2. Validity of the notice issued under section 271(1)(c) read with section 274 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Legality of the penalty imposed under section 271(1)(c) of the Income Tax Act: The core issue raised by the Assessee was the legality of the penalty imposed under section 271(1)(c) amounting to ?1,22,00,000/-. The Assessee argued that the penalty was imposed without any specific charge, making the notice and the order illegal, bad in law, and without jurisdiction. The Assessee cited various judgments, including the Hon'ble Supreme Court's decision in NTPC vs. CIT and M/s Jute Corporation of India Ltd. vs. CIT, to support the argument that the penalty notice should specify the exact charge—whether it was for concealment of income or furnishing inaccurate particulars of income. The Tribunal reviewed the records and found that the additional ground raised by the Assessee was legal in nature and did not require fresh facts to be investigated. It was admitted in the interest of justice, following the precedent set by the Hon'ble Supreme Court in NTPC Limited. 2. Validity of the notice issued under section 271(1)(c) read with section 274 of the Income Tax Act: The Assessee's counsel argued that the notice dated 23.03.2006 issued by the Assessing Officer (AO) was in a standard format and did not specify the exact charge—whether it was for concealment of particulars of income or furnishing inaccurate particulars of income. This lack of specificity was argued to be contrary to the provisions of law, rendering the penalty notice bad in law. The Tribunal examined the notice and found that it indeed failed to specify which limb of section 271(1)(c) the penalty proceedings were initiated under. This ambiguity made the notice and the subsequent penalty order unsustainable in the eyes of the law. The Tribunal's view was supported by several judicial precedents, including: - The Karnataka High Court's decision in CIT & Ors. vs. M/s Manjunatha Cotton and Ginning Factory, which held that a notice under section 274 read with section 271(1)(c) must specify the exact charge. - The Apex Court's decision in CIT & Anr. vs. M/s SSA’s Emerald Meadows, which confirmed that a notice failing to specify whether the penalty was for concealment of income or furnishing inaccurate particulars was bad in law. The Tribunal also referenced several ITAT decisions, such as ABR Auto Pvt. Ltd. vs. ACIT and Ashok Kumar Chordia vs. DCIT, which supported the Assessee's position. Conclusion: The Tribunal concluded that the penalty notice issued by the AO was legally unsustainable as it did not specify the exact charge under section 271(1)(c). Consequently, the penalty imposed was cancelled. The Tribunal allowed the appeal filed by the Assessee and did not adjudicate the other grounds as they became academic after the cancellation of the penalty. Order: The appeal filed by the Assessee was allowed, and the penalty in dispute was cancelled. The order was pronounced in the Open Court on 26/04/2018.
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