2020 (5) TMI 306 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice - surrender of income was not made by assessee on his own volition but only after the same has been detected by the AO - HELD THAT - Inappropriate words in the penalty notice has not been struck off and the notice does not specify as to under which limb of the provisions, the penalty u/s 271(1)(c) has been initiated, therefore, we are of the considered opinion that the penalty levied u/s 271(1)(c) is not sustainable and has to be deleted. Although the Ld. DR submitted that mere non-striking off of the inappropriate words will not invalidate the penalty proceedings, however, the decision in the case of SSA S Emerald Meadows 2016 (8) TMI 1145 - SC ORDER where the SLP filed by the Revenue has been dismissed is directly on the issue contested herein by the Assessee. Further, when the notice is not mentioning the concealment or the furnishing of inaccurate particulars, the ratio laid down in case of M/s. Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT will be applicable in the present case. - Decided in favour of assessee.

Summary

Issues:
- Imposition of penalty under section 271(1)(c)
- Validity of penalty notice specifying charge for levy of penalty
- Concealment of income or furnishing of inaccurate particulars
- Applicability of case laws in penalty proceedings

Imposition of Penalty under Section 271(1)(c):
The appellant filed an appeal against the order passed by CIT(A)-34 for Assessment Year 2011-12, which imposed a penalty under section 271(1)(c) of the Income Tax Act. The Assessing Officer made additions to the appellant's income based on cash deposits in bank accounts and undisclosed bank interest. The penalty proceedings were initiated as the income was surrendered only after detection by the Assessing Officer. The penalty was levied at 100% of the tax sought to be evaded on the undisclosed income.

Validity of Penalty Notice Specifying Charge for Levy of Penalty:
The appellant argued that the show cause notice under section 271(1)(c) did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars. Citing case laws, the appellant contended that the notice was invalid as it did not clearly indicate the charge for which the penalty was being levied. The appellant relied on decisions by the Karnataka High Court and the Delhi High Court to support the argument that a penalty notice must specify the exact charge for the penalty to be valid.

Concealment of Income or Furnishing of Inaccurate Particulars:
During the appeal, it was highlighted that there was no concealment of income in the case, as the appellant had provided all details during the regular assessment proceedings. The penalty notice failed to specify under which provision of Section 271 the penalty was being imposed, leading to ambiguity. The tribunal referred to relevant court judgments to support the conclusion that a penalty notice lacking clarity on the charge for penalty renders the penalty unsustainable.

Applicability of Case Laws in Penalty Proceedings:
The tribunal considered the arguments presented by both parties and analyzed the case laws cited. It was emphasized that the penalty notice must unambiguously state the charge for the penalty to be valid. The tribunal found that the penalty notice in this case did not specify the charge clearly, following the precedents set by the Karnataka High Court and the Delhi High Court. Consequently, the tribunal set aside the penalty imposed by the CIT(A) and directed the Assessing Officer to cancel the penalty.

In conclusion, the tribunal allowed the appeal of the assessee, emphasizing the importance of a penalty notice specifying the charge for the penalty to ensure procedural fairness and legal validity. The judgment was delivered on May 8, 2020, by Ms. Suchitra Kamble, Judicial Member, and Shri B. R. R. Kumar, Accountant Member of the Appellate Tribunal ITAT Delhi.