2019 (7) TMI 17 - AT - Income Tax

Penalty u/s 271(1)(c) - non disclosure of income as sum as received from General Electoral Trust - Defective notice - HELD THAT - Assessee is a Member of Legislative Assembly. In order to contest the elections she received ₹ 2,00,000/- from General Electoral Trust, Mumbai which was used by her in incurring expenses towards the elections but she did not include the same in her income under a belief that the said amount is not taxable since it was already been spent during the election process. However during the course of assessment proceedings initiated by issuance of notice u/s 148 of the Act and the assessee agreed to include the said amount as income. We find that both the charges i.e. concealment of particulars of income as well as furnishing incorrect particulars of income are mentioned. A.O has failed to level specific charge against the assessee as to whether she has concealed particulars of income or furnished inaccurate particulars of income. In case of such failure the impugned notice issued u/s 274 r.w.s. u/s 271(1)(c) of the Act suffers from a technical defect and as held in the case of PCIT Vs Kulwant Singh Bhatia 2018 (5) TMI 960 - MADHYA PRADESH HIGH COURT such proceedings initiated by issuance of defective notice u/s 274 r.w.s. 271(1)(c) are liable to be quashed. - Decided in favour of assessee.

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Income Tax Act for concealment of income.

Analysis:
The appeal was filed by the assessee against the order of the Ld. Commissioner of Income Tax(Appeals) pertaining to the Assessment Year 2009-10, challenging the penalty imposed under section 271(1)(c) of the Income Tax Act. The assessee, an individual deriving income from salary and house property, had declared an income of ?2,83,000 in the return filed. The case was reopened by the Income Tax Officer for income received from electoral fund, which was not initially assessed. The assessee, believing the amount received from General Electoral Trust was not taxable as it was spent on elections, agreed to include it as income during the assessment. The penalty of ?50,000 was imposed under section 271(1)(c) for concealment of income. The assessee contended that the notice suffered from a technical error as specific charges were not leveled against her.

The counsel for the assessee argued that the amount received was genuinely believed to be exempt from tax and had already been spent, leaving nothing with the assessee. It was further contended that the notice issued under section 271(1)(c) along with section 148 lacked specific charges against the assessee. On the contrary, the Departmental Representative supported the lower authorities' orders.

The Tribunal examined the issue and found that the notice failed to specify whether the assessee had concealed particulars of income or furnished inaccurate particulars of income, leading to a technical defect. Citing a precedent, the Tribunal held that proceedings initiated with a defective notice are liable to be quashed. Consequently, the Tribunal allowed the legal issue raised by the assessee and deleted the penalty of ?50,000 imposed under section 271(1)(c) of the Act. Since the penalty was quashed on legal grounds, further adjudication on the merits of the issue became unnecessary and academic.

In conclusion, the Tribunal allowed the appeal of the assessee, pronouncing the order in open court on 27.06.2019.