2018 (7) TMI 123 - AT - Income Tax

Penalty u/s 271(1)(c) - invalid notice - non mentioning of reasons for imposing penalty - Held that - A perusal of the notice issued u/s 274 read with section 271(1)(c) as appearing on page 6 of the paper book shows that notice has been issued in mechanical manner by merely filling up the format of the notice and it is not clear as to whether the penalty is proposed to be imposed for concealment or for furnishing inaccurate particulars as the relevant portions in the notice have been crossed out. The assessment order dated 30.12.2010 passed u/s 143(3) / 153A of the Act mentions initiation of penalty proceedings u/s 271(l)(c) of the Act for concealment of income and furnishing of inaccurate particulars. The penalty order dated 20.03.2014 passed u/s 271(l)(c) of the Act mentions that the assessee is liable to be penalized u/s 271(1)(c) of the Act but does not specify whether the penalty is being imposed for concealment or for furnishing inaccurate particulars. Concealment and furnishing inaccurate particulars are different. The AO, while issuing notice, has to come to the conclusion as to whether it is a case of concealment of income or whether it is a case of furnishing of inaccurate particulars. Levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Mere filling up of the standard proforma without striking of the relevant clauses will lead to inference as to non application of mind. - Decided in favour of assessee

Summary

Issues:
Imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2004-05 due to alleged concealment of income or furnishing inaccurate particulars of income.

Analysis:

1. Background and Facts:
The appellant, engaged in the business of manufacturing Pan Masala and Gutka, faced a search and seizure operation under section 132 of the Income Tax Act. Despite no incriminating material being found, an addition of ?7,39,037 was made to the income based on an earlier Excise Duty evasion case. The penalty of ?2,65,132 under section 271(1)(c) was imposed, leading to the appeal.

2. Contentions of the Assessee:
The appellant argued that the penalty notice did not specify whether it was for concealing income or furnishing inaccurate particulars. They contended that the charge was not specific, citing judicial precedents to support their claim that a penalty cannot be imposed without a clear charge.

3. Revenue's Argument:
The Revenue defended the penalty imposition, highlighting suppressed sales found by the Custom and Central Excise Department and the settlement of Excise Duty demand by the Settlement Commission. They argued that the penalty was justified despite the lack of specificity in the notice.

4. Judgment and Analysis:
The Tribunal observed discrepancies in the penalty notice and order, noting the absence of clarity on whether the penalty was for concealment or inaccurate particulars. Referring to legal precedents, the Tribunal emphasized the importance of specifying the grounds for penalty imposition. Citing the decision of the Hon'ble Karnataka High Court, the Tribunal held that the penalty was improperly imposed due to the lack of specificity in the notice. The appeal was allowed based on this procedural flaw, without delving into the merits of the penalty itself.

5. Conclusion:
The Tribunal allowed the appeal, emphasizing the necessity of a clear and specific charge in penalty notices to ensure procedural fairness. The judgment highlighted the significance of adhering to legal requirements in penalty proceedings, ultimately leading to the setting aside of the penalty imposed under section 271(1)(c) for the assessment year 2004-05.