2021 (4) TMI 256 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of clear charge - HELD THAT - It is an admitted fact that before levy of the penalty A.O. has issued show cause notice Dated 20.06.2014 in all the years in which A.O. has mentioned both the limbs of Section 271(1)(c) of the I.T. Act that assessee have concealed the particulars of your income or furnished inaccurate particulars of such income. Thus the A.O. has not mentioned as to for which limb of Section 271(1)(c) of the I.T. Act penalty shall have to be levied against the assessee. The Hon ble Karnataka High Court in the case of CIT vs. M/s. SSAs Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT confirmed the Order of the Tribunal by dismissing the Departmental Appeal in which the Tribunal has allowed the appeal filed by the assessee holding that notice issued by the A.O. under section 274 read with Section 271(1)(c) of the I.T. Act to be bad in Law and it did not specify under which limb of Section 271(1)(c) of the I.T. Act penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing inaccurate particulars of income. The Judgment of the Hon ble Karnataka High Court have been confirmed by the Hon ble Supreme Court 2016 (8) TMI 1145 - SC ORDER Also see M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. 2019 (8) TMI 409 - DELHI HIGH COURT - A.O. has issued invalid and defective notices under section 271(1)(c) of the I.T. Act read with Section 274 of the I.T. Act Dated 20.06.2014 before levy of the penalty. Therefore, entire penalty proceedings are vitiated and are liable to be quashed. - Decided in favour of assessee.

Summary

Issues: Challenge to penalty levied under section 271(1)(C) of the Income Tax Act due to defective notice.

Detailed Analysis:
1. The appeals by the Assessee were against different Orders of the Ld. CIT(A)-24, New Delhi, for the assessment years 2009-2010 to 2012-2013.
2. The Assessee filed an application in all years for admission of an additional ground of appeal challenging the penalty levied under section 271(1)(C) of the Act due to a defective notice issued by the Assessing Officer (A.O.).
3. The Assessee's Counsel submitted that the notice issued by the A.O. did not specify the appropriate clause under which the penalty was proposed, rendering it void.
4. The Assessee relied on the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT 229 ITR 383 (SC) to support the admission of the additional ground.
5. After considering both parties' arguments, the Tribunal admitted the additional ground as it was legal in nature and fundamental to the matter, challenging the penalty under section 271(1)(C) of the Income Tax Act.
6. The Assessee further argued that since the show cause notice mentioned both limbs of Section 271(1)(C) without specifying which limb the penalty was imposed under, the entire penalty proceedings were invalid and should be quashed.
7. The A.O. had issued show cause notices before levying the penalty, mentioning both limbs of Section 271(1)(C) without specifying which limb the penalty was based on, violating the provisions of Section 274 of the Income Tax Act.
8. Referring to relevant case laws, including the decision of the Hon'ble Delhi High Court, the Tribunal concluded that the A.O.'s notices were invalid and defective, leading to the vitiation of the entire penalty proceedings.
9. Consequently, the Tribunal set aside the Orders of the lower authorities and deleted the penalty proceedings under section 271(1)(C) for the relevant assessment years, allowing all the appeals of the Assessee.

This detailed analysis highlights the key arguments, legal references, and the Tribunal's decision regarding the challenge to the penalty levied under section 271(1)(C) of the Income Tax Act due to defective notices issued by the Assessing Officer.