2021 (9) TMI 1224 - AT - Income Tax

Penalty u/s 271(1) (C) - no specific charges as relates to concealment of income or furnishing of inaccurate particulars of income - whether the penalty is for concealment of income or furnishing of inaccurate particulars of income was not evident from the notice nor from the penalty order as well? - HELD THAT - In the instant case the 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 of the Hon ble Karnataka High Court in the case of SSA S Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT 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 by the Hon ble High Court 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. Thus, notice under Section 271(1)(c) r.w.s. 274 of the Act itself is bad in law. We, therefore, set-aside the order of the CIT(A) and direct the Assessing Officer to cancel the penalty so levied. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty imposed under section 271(1)(c) for assessment years 2010-11 and 2014-15.

Analysis:

Assessment Year 2010-11:
The appellant contested the penalty imposed under section 271(1)(c) for concealment of income without specific charges mentioned in the notice. The Assessing Officer added income based on Section 44AE provisions, despite the CIT(A) acknowledging the inapplicability of these provisions. The appellant did not appeal this addition to avoid litigation. The penalty order lacked specificity regarding the charge of concealment or furnishing inaccurate particulars. Citing legal precedents, the appellant argued that a penalty cannot be levied without a specific charge. The Tribunal agreed, citing the Supreme Court and High Court decisions, and quashed the penalty due to the invalid notice.

Assessment Year 2014-15:
The issues raised were similar to those in the 2010-11 assessment year. The appellant contested the penalty imposed under section 271(1)(c) without specific charges mentioned in the notice. The appellant disclosed all relevant facts, and the issue of disallowance under section 40(a)(ia) was debatable. The penalty order was challenged for lack of specificity in the charge. Following the precedent set in the 2010-11 assessment year, the Tribunal allowed the appeal and quashed the penalty.

In both cases, the Tribunal emphasized the importance of specific charges in penalty notices under section 271(1)(c) and the need to adhere to legal requirements. The judgments were based on the invalidity of the penalty notices due to the absence of specific charges, in line with established legal principles and court decisions.