2020 (4) TMI 366 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of charge - defective notice - HELD THAT - As per notice issued by the AO under section 274 r.w.s. 271 allegation of the AO is vague because the AO is saying that the assessee has concealed the particular of his income or furnished inadequate particulars of such income and this is not clearly alleged as to whether the assessee has concealed the income or furnished inadequate particulars of income. AO has not specifically stated as to whether the assessee is guilty of concealment of income or furnishing of inadequate particulars of income and therefore, this Tribunal order renders no help to the Revenue in the present case because of difference in facts. Hence, we respectfully follow the judgment of Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and hold that the penalty imposed by the AO under section 271 (1) (c) of the IT Act, 1961 is not sustainable and we delete the same. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the assessee challenging the penalty of ?8,32,767 imposed by the Assessing Officer (AO) under section 271(1)(c) for Assessment Year 2014-15. The key contention of the assessee was that the notice issued by the AO was vague and did not clearly allege whether the assessee had concealed income or furnished inadequate particulars. The assessee relied on a judgment of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory, emphasizing the importance of clear allegations in penalty proceedings.

During the hearing, the Departmental Representative (DR) supported the order of the learned CIT(A) and cited a Tribunal order in a different case where the AO had specifically ticked the column relevant to concealment of income. However, the Tribunal noted that in the present case, the AO had not clearly stated the grounds for penalty under section 271(1)(c), distinguishing it from the case cited by the DR. The Tribunal emphasized the significance of clear allegations in penalty proceedings to ensure the principles of natural justice are upheld.

The Tribunal referred to the conclusions of the Hon’ble Karnataka High Court, highlighting that the notice under section 274 should specify whether the penalty is for concealment of income or furnishing of inadequate particulars. It was further emphasized that the assessee must be aware of the grounds to be met specifically, failing which the penalty imposition would violate natural justice. Based on these principles, the Tribunal held that the penalty imposed by the AO was not sustainable due to the lack of clear allegations and deleted the penalty amount.

In conclusion, the Tribunal allowed the assessee’s appeal, following the judgment of the Hon’ble Karnataka High Court and emphasizing the importance of specific grounds for penalty imposition in accordance with the provisions of the Income Tax Act, 1961. The decision underscored the necessity of clear allegations to uphold the principles of natural justice in penalty proceedings.