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2021 (4) TMI 458 - AT - Income TaxPenalty u/s 271(1)(c) - validity of notice issued - defective notice - AO completed the assessment under section 143(3) - addition treating unsecured loan as bogus and ingenuine - HELD THAT - A perusal of the assessment order shows that penalty has been initiated in general terms and the assessment order is not clear as to under which limb of the penalty i.e. for concealment of income or for furnishing inaccurate particulars of income has been mentioned. Similarly, in the case of penalty order, where it is mentioned that assessee has concealed its income to the tune of ₹ 2,47,06,820/- willingly and knowingly by furnishing inaccurate particulars of income. We, therefore, find merit in the arguments of the learned counsel for the assessee that in order to initiate penalty proceedings, the Assessing Officer has to specify in the show-cause notice u/s 271(1(c) r.w.s 274 of the Act, if the assessee has concealed the particulars of income or has furnished inaccurate particulars of income which is in instant case, the Assessing Officer has failed to do. See M/S SSA'S EMERALD MEADOWS 2016 (8) TMI 1145 - SC ORDER As relying on M/S MANJUNATHA COTTON AND GINNING FACTORY OTHS., M/S. V.S. LAD SONS, 2013 (7) TMI 620 - KARNATAKA HIGH COURT when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the penalty notice has been issued, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. - Decided in favour of assessee.
Issues Involved:
1. Legality and validity of the notice issued under section 271(1)(c) read with section 274 of the Income Tax Act, 1961. 2. Specificity of the charge against the assessee in the penalty proceedings. 3. Justification of the penalty imposed under section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income. Detailed Analysis: 1. Legality and Validity of the Notice Issued Under Section 271(1)(c) Read with Section 274: The assessee challenged the penalty order on the grounds that the notice issued under section 271(1)(c) read with section 274 was illegal, bad in law, and vague. The notice did not specify whether the penalty was for concealment of income or for furnishing inaccurate particulars of income. The Tribunal found merit in this argument, noting that the notice merely put a tick mark against "have concealed the particulars of income or furnished inaccurate particulars of such income in terms of Explanation 1, 2, 3, 4, and 5," without specifying the exact charge. This ambiguity rendered the notice invalid, as established by precedents such as CIT vs SSA's Emerald Meadows and CIT vs Manjunatha Cotton & Ginning Factory. 2. Specificity of the Charge Against the Assessee: The Tribunal noted that the assessment order and the penalty order were not clear on the specific limb under which the penalty was being levied. The assessment order mentioned a general satisfaction for initiating penalty proceedings but did not specify whether it was for concealment of income or for furnishing inaccurate particulars. The penalty order stated that the assessee had concealed its income by furnishing inaccurate particulars, but this lacked clarity and specificity. The Tribunal cited various judicial decisions, including the Delhi High Court's ruling in Pr. CIT vs Sahara India Life Insurance Company, which held that a penalty notice must clearly specify the charge to be valid. 3. Justification of the Penalty Imposed Under Section 271(1)(c): The Tribunal examined whether the penalty imposed under section 271(1)(c) was justified. The assessee argued that the addition of ?2,47,06,820/- as unsecured loans treated as bogus was highly debatable and contentious, and thus did not attract penalty provisions. The Tribunal found that the Assessing Officer had not conducted any enquiry to verify the evidence furnished by the assessee and had relied on findings from the previous assessment year. This indicated a lack of due diligence and enquiry on the part of the Assessing Officer, making the penalty untenable. Moreover, the Tribunal observed that the assessee had furnished all required evidence during the assessment proceedings, and there was no indication that the particulars were inaccurate or unsubstantiated. Conclusion: The Tribunal concluded that the penalty proceedings were initiated without proper application of mind and without specifying the exact charge against the assessee. This rendered the penalty notice invalid and the subsequent penalty order unjustified. The Tribunal set aside the order of the CIT(A) and directed the Assessing Officer to delete the penalty of ?74,12,046/-. Order: The appeal filed by the assessee was allowed, and the penalty levied by the Assessing Officer was directed to be deleted. The order was pronounced in the open court on 09.04.2021.
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