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2019 (10) TMI 441 - AT - Income TaxPenalty u/s 271(1)(c) or sec.271AAB - HELD THAT - It is not clear as to whether the penalty proceedings were initiated for concealment of income or for furnishing of inaccurate particulars of income or for having undisclosed income within the meaning of sec.271AAB of the Act. In the instant case, the AO is asking the assessee to furnish explanations on concealment of income and furnishing of inaccurate particulars of income . The AO has mentioned section 271AAB in the last sentence of notice, but the charge specified is not undisclosed income relevant to sec.271AAB of the Act. The decision rendered by Hon'ble Delhi High Court in the case of Smt. Ritu Singhal 2018 (3) TMI 593 - DELHI HIGH COURT is on different issue and in any case, it is related to the penalty levied u/s 271AAA of the Act. We are of the view that the penalty notice issued u/s 271AAB of the Act to the assessee for AY 2013-14 and 2014-15 cannot be sustained and accordingly the penalty orders passed for the above said years are liable to be quashed. We order accordingly.
Issues Involved:
1. Penalty levied under Section 271(1)(c) for AY 2008-09 to 2012-13. 2. Penalty levied under Section 271AAB for AY 2013-14 and 2014-15. Detailed Analysis: 1. Penalty under Section 271(1)(c) for AY 2008-09 to 2012-13: Facts and Contentions: The assessee, a partner in a firm, was subjected to search and seizure operations, revealing undisclosed income from money lending and unreported bank accounts. The AO initiated penalty proceedings under Section 271(1)(c) for concealing particulars of income and furnishing inaccurate particulars of income. The assessee contended that the AO was unclear about the specific charge, rendering the penalty order invalid. CIT(A)’s Decision: The CIT(A) upheld the penalty, stating that the notice was not vague even though it used "and" instead of "or" between the charges of concealment and furnishing inaccurate particulars. Tribunal’s Analysis: The Tribunal emphasized that the AO must be clear about the charge under which penalty proceedings are initiated. Citing the Supreme Court's decision in T. Ashok Pai vs. CIT and the Karnataka High Court's ruling in Manjunatha Cotton and Ginning Factory, the Tribunal noted that both charges convey different meanings and the AO’s lack of clarity indicated non-application of mind. The Tribunal referenced multiple case laws, including CIT vs. Manjunatha Cotton and Ginning Factory and Smt. Jayalakshmi vs. ITO, supporting the view that penalty proceedings must specify the exact charge. Conclusion: The Tribunal set aside the orders passed by CIT(A) for AY 2008-09 to 2012-13, directing the AO to delete the penalty levied under Section 271(1)(c) due to the lack of clarity in the penalty notice. 2. Penalty under Section 271AAB for AY 2013-14 and 2014-15: Facts and Contentions: For AY 2013-14 and 2014-15, the AO initiated penalty proceedings under Section 271AAB for undisclosed income but issued notices mentioning penalties under Section 271(1)(c). The assessee argued that the AO was unclear whether the penalty was for concealment of income or for having undisclosed income, as required under Section 271AAB. CIT(A)’s Decision: The CIT(A) confirmed the penalty, referencing a Kolkata Tribunal decision. However, the assessee pointed out inconsistencies in the CIT(A)’s order and the AO’s notices. Tribunal’s Analysis: The Tribunal noted that the AO’s notices were ambiguous, mixing charges under Section 271(1)(c) and Section 271AAB, which have different implications. Citing the Chennai Tribunal’s decision in R. Elangovan and the Karnataka High Court’s ruling in Manjunatha Cotton and Ginning Factory, the Tribunal held that the AO’s lack of clarity violated the principles of natural justice. The Tribunal also referenced the Allahabad High Court’s decision in Pr. CIT vs. Shri Sandeep Chandak, noting differences in facts. Conclusion: The Tribunal quashed the penalty orders for AY 2013-14 and 2014-15, ruling that the penalty notices were invalid due to the AO’s failure to specify the correct charge under Section 271AAB. Final Judgment: All the appeals filed by the assessee were allowed, with the Tribunal quashing the penalty orders for both sets of assessment years due to procedural lapses and lack of clarity in the penalty notices.
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