2020 (1) TMI 608 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice - HELD THAT - Notice issued by the AO u/s 274 read with Section 271(1)(c) to be bad in law as it did not specify which limb of Section 271(l)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. 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. As per Hon ble High Court where the Assessing Officer proposed to invoke first limb being concealment then the notice has to be appropriately marked. The Hon ble High Court held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clauses would lead to an inference of non-application of mind by the Assessing Officer. Hon ble Supreme Court in the case of Dilip N. Shroff vs. JCIT 2007 (5) TMI 198 - SUPREME COURT has also noticed that where the AO issues notice u/s 274 of the Act in the standard proforma and the inappropriate words are not deleted the same would postulate that the Assessing Officer was not sure as to whether he was to proceed on the basis that the assessee had concealed the particulars of his income or furnished inaccurate particulars of income. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act for assessment years 2011-2012 to 2015-2016.

Analysis:
1. The appeals filed by the assessee were consolidated due to identical issues across assessment years. The grounds for appeal included challenges to the penalty imposed by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] under section 271(1)(c) of the Income Tax Act for alleged concealment and inaccurate particulars of income.

2. The case involved a doctor who initially declared income but faced a search and seizure action leading to revised income declarations. The AO initiated penalties for each assessment year, which were upheld by the CIT(A) despite the assessee's appeals.

3. The main contention of the assessee was that the penalty notices did not specify whether they were for concealment of income or furnishing inaccurate particulars, citing legal precedents. The Department argued that the undeclared income justified the penalties.

4. The Tribunal analyzed the legal requirements for penalty notices, emphasizing the need for clarity on the specific grounds for penalty imposition. Citing relevant case laws, including the decision of the Karnataka High Court in Manjunatha Cotton & Ginning Factory, the Tribunal found the penalty notices in this case lacking specificity and therefore invalid.

5. Referring to the Supreme Court's decision in M/s. SSA's Emerald Meadows, the Tribunal concluded that the penalty proceedings lacked proper application of mind by the AO, rendering them unsustainable. The Tribunal set aside all penalty orders for the assessment years in question, following the legal principles established in the cited cases.

6. Ultimately, the Tribunal allowed all the assessee's appeals, canceling the penalties imposed by the AO for the assessment years 2011-2012 to 2015-2016. The decision was based on the legal requirement of clear and specific penalty notices as established by relevant case laws.

This detailed analysis of the judgment highlights the legal issues, arguments presented, and the Tribunal's decision based on legal principles and precedents cited during the proceedings.