2020 (6) TMI 398 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice - HELD THAT - Assessment order did not record any satisfaction as to for which limb of Section 271 (1)(c) of the I.T. Act the penalty proceedings have been initiated. The A.O. merely mentioned at the bottom of the assessment order after computing the income that penalty proceedings under section 271(1)(c) of the I.T. Act have been initiated separately. Thus there is a violation of the Law in the matter. We, therefore, do not find any justification to levy the penalty under section 271(1)(c) of the I.T. Act against the assessee. In view of the above discussion, we set aside the Orders of the authorities below and cancel the penalty. Appeal of the Assessee is allowed accordingly.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the I.T. Act, 1961 without specifying the grounds for penalty initiation.

Analysis:
The appeal was against the Order of the Ld. CIT(A)-20, New Delhi, challenging the penalty under section 271(1)(c) of the I.T. Act, 1961 for the A.Y. 1996-1997. The assessment was completed with an addition of &8377; 35,50,000/- from loans taken from relatives and friends. The A.O. initiated penalty proceedings separately without specifying the grounds in the assessment order. The Ld. CIT(A) upheld the penalty, leading to the appeal.

The Assessee contended that the A.O. did not record any satisfaction under section 271(1)(c) in the assessment order for initiating the penalty proceedings. The notice issued did not specify whether the penalty was for furnishing inaccurate particulars of income or concealment of particulars of income. Citing relevant case laws, the Assessee argued that the penalty cannot be levied without clear grounds for initiation.

The Tribunal noted that the show cause notice issued by the A.O. did not specify the grounds for initiating the penalty under section 271(1)(c) of the I.T. Act. It was held that the notice was bad in law as it did not clarify whether the penalty was for concealment of income particulars or furnishing inaccurate particulars. Referring to precedents, the Tribunal concluded that the penalty proceedings were vitiated due to lack of specificity in the notice and absence of recorded satisfaction in the assessment order. Therefore, the penalty was deemed not leviable, and the Orders of the authorities below were set aside, canceling the penalty.

In light of the above discussion, the Tribunal allowed the appeal of the Assessee, emphasizing the importance of clearly specifying the grounds for initiating penalty proceedings under section 271(1)(c) of the I.T. Act. The judgment highlighted the necessity for proper documentation and adherence to legal requirements in penalty imposition cases to ensure fairness and compliance with the law.