2019 (1) TMI 87 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessment competed U/s 143(3) r.w.s 153A - addition of interest income as difference between the interest income reflected in Form 26AS and what has been declared by the assessee in his return of income - defective notice - nonstriking off of the irrelevant clause in the notice - Held that - in the absence of any specific charge against the assessee in the penalty notice, consequent penalty imposed by the AO is illegal and bad in law. See COMMISSIONER OF INCOME TAX & ANR. VERSUS M/S SSA S EMERALD MEADOWS 2016 (8) TMI 1145 - SUPREME COURT . In the facts of the present case, undisputedly, the notice issued under section 274 read with section 271(1)(c) doesn t specify the exact charge against the assessee as to whether it relates to concealing the particulars of income or furnishing inaccurate particulars of income. Respectfully following the decisions referred supra, the factum of nonstriking off of the irrelevant clause in the notice issued under section 274 read with section 271(1)(c) is hereby held as reflective of non-application of mind by the AO, the penalty imposed U/s 271(1)(c) is deleted. - decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) for concealment of income/furnishing inaccurate particulars of income.

Analysis:
The appeal was filed by the assessee against the order of ld. CIT(A), Jaipur challenging the confirmation of the penalty amounting to ?2,04,970/- under section 271(1)(c) for the Assessment Year 2011-12. The AO initiated penalty proceedings based on the difference between interest income reflected in Form 26AS and the income declared by the assessee. The penalty was confirmed by the ld. CIT(A) and the assessee appealed to the ITAT.

During the hearing, the assessee argued that the penalty notice did not specify the exact charge against the assessee, mentioning both concealing income and furnishing inaccurate particulars. Citing legal precedents, the assessee contended that the notice's ambiguity prejudiced the right of a reasonable opportunity for defense. The Coordinate Bench of the Tribunal in a similar case highlighted the importance of specifying the charge clearly in the penalty notice for the assessee to respond effectively.

Referring to the decision of the Hon'ble Supreme Court in Dilip N Shroff, it was emphasized that the imposition of penalty should be based on a specific charge, and the failure to do so indicates non-application of mind by the AO. The Karnataka High Court's ruling in Manjunatha Cotton and Ginning Factory was also cited to support the argument that vague penalty notices are invalid. The ITAT, following the legal authorities and the facts of the case, concluded that the penalty imposed under section 271(1)(c) should be deleted due to the non-specific charge in the notice.

The ITAT held that since the penalty notice did not specify the charge clearly, reflecting a lack of application of mind by the AO, the penalty under section 271(1)(c) was deleted. Other contentions raised by the assessee on the merits of the case were not examined as the penalty itself was found to be invalid. Consequently, the appeal filed by the assessee was allowed, and the penalty was set aside.

In conclusion, the ITAT's decision focused on the necessity of a clear and specific charge in penalty notices to ensure the assessee's right to a reasonable opportunity to defend against the allegations of concealing income or furnishing inaccurate particulars.