2019 (2) TMI 902 - AT - Income Tax

Penalty levied u/s 271(1)(c) - non specification of charge - Held that - AO issued notice dated 29/12/2009 which is also mentioned in the penalty order, in which he has not specified the limb for which penalty was initiated. Even in the assessment order, the AO did not mention as to under which limb of section 271(1)(c) the penalty had been initiated against the assessee. Therefore the show cause notice for levy of the penalty itself is invalid and bad in law and as such, the resultant proceedings get vitiated. Since the notice issued for initiating the penalty proceeding itself is not in accordance with law, therefore no penalty could be levied against assessee. We accordingly set aside the order of the authorities below and cancel the penalty. - Decided in favour of assessee.

Summary

Issues Involved:
Appeals against penalty under section 271(1)(c) of the Income-tax Act, 1961 for assessment years 2005-06 and 2006-07 due to lack of specificity in the penalty notice regarding the nature of default.

Analysis:

Issue 1: Penalty Imposition
The appeals were against the penalty levied by the Assessing Officer under section 271(1)(c) of the Income-tax Act, 1961. The penalty was imposed due to discrepancies found during search proceedings, where cash sales exceeding a certain amount were made to various parties, including the appellant. The Assessing Officer also made trading additions based on unrecorded purchases. The CIT(A) confirmed the penalty, stating that the addition was not made on an estimated basis.

Issue 2: Lack of Specificity in Penalty Notice
The appellant argued that the penalty notice did not specify whether the penalty was imposed for concealment of income particulars or furnishing inaccurate income particulars. Citing a decision by the Hon'ble Karnataka High Court in a similar case, the appellant contended that without specifying the charges, the penalty could not be imposed. The High Court's ruling emphasized the necessity of detailing the nature of the default in the penalty notice.

Judgment and Rationale
The Tribunal agreed with the appellant, highlighting the importance of a clear and specific penalty notice. Referring to previous judgments, including the case of CIT vs. SSA Emerald Meadows, the Tribunal noted that the penalty notice must specify the limb of section 271(1)(c) under which the penalty is initiated. Since the penalty notice in this case did not adhere to these requirements, the Tribunal deemed the penalty proceedings invalid and canceled the penalty imposed on the appellant for both assessment years.

Conclusion
Ultimately, the Tribunal allowed both appeals of the assessee, emphasizing the significance of a properly detailed penalty notice to ensure the validity of penalty proceedings. The lack of specificity in the penalty notice led to the cancellation of the penalties imposed under section 271(1)(c) for the respective assessment years.