2019 (4) TMI 771 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - non specification of exact charge viz., whether the charge is that the Assessee has furnished inaccurate particulars of income or concealed particulars of income by striking out the irrelevant portion of printed show cause notice - HELD THAT - Bare perusal of the notice issued u/s 27I(1)(c) apparently goes to prove that the Assessing Officer initiated the penalty proceedings by issuing the notice u/s 274/271(1)(c) without specifying whether the assessee has concealed particulars of income or assessee has furnished inaccurate particulars of income , so as to provide adequate opportunity to the assessee to explain the show cause notice. Rather notice in this case has been issued in a stereotyped manner without applying any mind which is bad in law, hence is not a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act. The penalty provisions of section 27l(1)(c) are attracted where the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) carry different meanings. Therefore, it was imperative for the Assessing Officer to strike-off the irrelevant limb so as to make the assessee aware as to what is the charge made against him so that he can respond accordingly. The Hon ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (2013 (7) TMI 620 - KARNATAKA HIGH COURT) observed that the levy of penalty has to be clear as to the limb under which it is being levied. - Decided in favour of assessee.

Summary

Issues Involved:
Levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for furnishing inaccurate particulars of income.

Detailed Analysis:

Issue 1: Levy of Penalty u/s 271(1)(c)
The appeal filed by the Assessee was against the order of CIT(Appeals) confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 amounting to &8377; 35,400. The AO disallowed a loss on the sale of a car in the assessment for the relevant year. The penalty was imposed based on a notice issued by the AO under section 274 read with section 271 of the Act, alleging that the Assessee had furnished inaccurate particulars of income. The Assessee argued that the notice did not specify the exact charge, citing a decision by the Hon'ble Karnataka High Court and Kolkata ITAT. The Departmental Representative did not counter this argument.

Issue 2: Validity of Penalty Notice
The Tribunal found that the notice issued by the Assessing Officer did not specify whether the Assessee had concealed particulars of income or furnished inaccurate particulars thereof, as required by law. Referring to a judgment by the Hon'ble Apex Court and the decision in another case, the Tribunal held that the notice was bad in law for not clearly indicating the charge under section 271(1)(c) of the Act. The Tribunal dismissed the appeal of the Revenue, relying on previous decisions.

Issue 3: Application of Legal Precedents
The Tribunal emphasized the importance of clearly specifying the charge of concealment or furnishing inaccurate particulars in penalty notices under section 271(1)(c) of the Act. Citing judgments by the Hon'ble Karnataka High Court and the Hon'ble Supreme Court, the Tribunal concluded that the penalty proceedings lacked proper application of mind by the Assessing Officer due to the generic nature of the notice issued. The Tribunal followed the decision of the Hon'ble Karnataka High Court and canceled the penalty levied on the Assessee.

In conclusion, the Tribunal allowed the appeal of the Assessee, canceling the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The judgment highlighted the necessity of clearly specifying the charge in penalty notices to ensure fairness and proper application of the law.