2019 (10) TMI 604 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - non specification of charge - HELD THAT - The contents of the notice issued before levy of the penalty which clearly show that A.O. has not mentioned as to for which limb of Section 271(1)(c) penalty proceedings have been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The ITAT, Delhi C-Bench in the case of Shri Gulshan Kumar Jhurani, New Delhi vs., ACIT, Circle-37(1), New Delhi 2019 (10) TMI 453 - ITAT DELHI considering the Judgment of Pr. CIT vs., M/s. Sahara India Life Insurance Company Ltd., 2019 (8) TMI 409 - DELHI HIGH COURT and M/s. SSA Emerald Meadows reported 2016 (8) TMI 1145 - SC ORDER set aside the Orders of the authorities below in same circumstances and cancelled the penalty. - Decided in favour of assessee.

Summary

Issues:
1. Proper specification of penalty under section 271(1)(c) of the Income Tax Act.
2. Legal validity of show cause notices issued by the Assessing Officer.
3. Applicability of judicial precedents on penalty proceedings.

Issue 1: Proper specification of penalty under section 271(1)(c) of the Income Tax Act:
The appeal raised concerns regarding the levy of penalty under section 271(1)(c) of the Income Tax Act without proper specification by the Assessing Officer. The Assessee contended that the show cause notices did not clearly indicate the specific limb of Section 271(1)(c) under which the penalty proceedings were initiated, i.e., whether for concealment of income particulars or furnishing inaccurate income particulars. This lack of clarity was argued to render the penalty liable for cancellation. The Assessee relied on previous decisions by the ITAT, Delhi C-Bench, and cited cases such as Shri Gulshan Kumar Jhurani and Hemla Embroidery Mills Private Ltd., where penalties were canceled due to similar issues.

Issue 2: Legal validity of show cause notices issued by the Assessing Officer:
The Assessing Officer issued show cause notices for the levy of penalties without specifying the exact limb of Section 271(1)(c) under which the penalty proceedings were initiated. The Assessee argued that this lack of specificity in the notices rendered them invalid in law. The ITAT, Delhi C-Bench, in the case of Shri Gulshan Kumar Jhurani and Hemla Embroidery Mills Private Ltd., set aside penalties in similar circumstances, emphasizing the importance of clear specification in such notices. The Assessee's contention was supported by the judgment of the Hon'ble Delhi High Court in the case of Pr. CIT vs. M/s. Sahara India Life Insurance Company Ltd., which highlighted the necessity of specifying the exact limb of Section 271(1)(c) in penalty notices.

Issue 3: Applicability of judicial precedents on penalty proceedings:
The ITAT, Delhi C-Bench relied on judicial precedents to support the cancellation of penalties due to inadequate specification in show cause notices. The judgments of the Hon'ble Delhi High Court and the Hon'ble Supreme Court were cited to emphasize the legal requirement for clear indication under which limb of Section 271(1)(c) the penalty proceedings were initiated. The decisions in the cases of Shri Gulshan Kumar Jhurani and Hemla Embroidery Mills Private Ltd. were considered in line with the legal principles established by higher courts, leading to the cancellation of penalties in the present case.

This detailed analysis of the judgment highlights the issues of proper specification of penalties, the legal validity of show cause notices, and the reliance on judicial precedents in determining the cancellation of penalties under section 271(1)(c) of the Income Tax Act. The Assessee's arguments, supported by relevant case laws and legal principles, led to the cancellation of penalties by the ITAT, Delhi C-Bench, emphasizing the significance of clear and specific communication in penalty proceedings.