2021 (10) TMI 665 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice u/s 274 - allegation of non specification of clear charge - Whether reasons for imposition of penalty i.e it was on account of concealment of income and was not on account of inaccurate particulars of income? - HELD THAT - As in the reply to penalty notice , the assessee has mentioned that the Assessing Officer has initiated the penalty on the concealment of the amount and not for filling of inaccurate particulars of income, further the assessee sought time as the matter was pending before CIT(A) . Admittedly, in the present case, the income was not disclosed by the assessee in the return of income filed by the assessee, however, the income was brought to tax only after the search was conducted by the revenue authorities in the premises of the assessee and thereafter the assessee has surrendered the amount as mentioned in the assessment order and also in the penalty order, by declaring the amount in the return filled consequent upon the receipt of notice under section 153A. In our considered opinion, the disclosure of amount in the return of income filed consequent to receipt of the notice under section 153A, was not voluntary, rather assessee was forced to surrender, on account of the search carried out by the Department. In our view the penalty was rightly imposed by the assessing officer after being satisfying that the assessee was habitual defaulter and despite survey/search the assessee had not declared the income and had only declared income after the receipt of the notice. Whether the penalty can be deleted on the basis of non-specific notice? - It is pertinent to note here that in this case the assessee was having the clarity as to what charge were levelled in the notice i.e. concealment of income only and, therefore, the assessee had not asked the Assessing Officer to specifically mention on what basis he sought to impose the penalty. On the other hand, the assessee in the reply reproduced hereinabove, in the penalty proceedings, had mentioned that no penalty can be levied on account of concealment of income (refer para 3.3 supra). Since there was no ambiguity in the mind of the assessee on what basis the penalty sought to be imposed and after considering the reason for imposing the penalty the assessee has specifically mentioned in the reply as reproduced herein above in paragraph 3.3. Therefore, the question of deleting/scoring one of the clause is immaterial being innocuous in nature. Hon ble Constitutional Bench in the case of Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT had laid down the guidelines for quashing the penalty proceedings initiated on account of non-specific notice or non-scoring of, non-applicable reason for penalty. It is pertinent to mention here that the Constitution Bench has not discussed the facts of each cases much less cases identical to the case before us whether in such cases the penalty is required to be deleted or not. Thus we delete the penalty levied by the Assessing Officer in all the appeals filed by the revenue. Accordingly, the appeals filed by the revenue are dismissed and the cross objections filed by the assessee are allowed.

Issues Involved:
1. Deletion of penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act for furnishing inaccurate particulars of income.
2. Consideration of relevant judicial precedents by the CIT(A).
3. Validity of the penalty notice issued under Section 274 read with Section 271 of the Income Tax Act.
4. Whether the penalty was rightly imposed by the Assessing Officer despite the non-specific notice.

Detailed Analysis:

1. Deletion of Penalty Imposed by the Assessing Officer:
The primary issue revolves around the deletion of the penalty imposed by the Assessing Officer under Section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) had deleted the penalty, which was challenged by the Revenue. The Revenue contended that the penalty was rightly imposed as the income was offered only after the search conducted by the department, indicating concealment of income.

2. Consideration of Relevant Judicial Precedents by the CIT(A):
The Revenue argued that the CIT(A) erred in not considering the decisions of the ITAT, Bengaluru Bench in the case of M/s Jaysons Infrastructure India Pvt. Ltd., and the ITAT, Mumbai Bench in the case of Shri Mahesh M. Gandhi. These decisions emphasized that once the reason for levying penalty is mentioned in the assessment order, the notice's wording does not prejudice the assessee. The CIT(A) relied on the decision of the Karnataka High Court in Manjunatha Cotton and Ginning Factory, which the Revenue argued was not applicable to the present case.

3. Validity of the Penalty Notice Issued Under Section 274 Read with Section 271:
The assessee's defense was based on the argument that the penalty notice was non-specific and did not mention the exact charge against the assessee. The AR of the assessee relied on the jurisdictional High Court decision in Md. Farhan A. Shaikh Vs. DCIT, which held that an ambiguous notice vitiates the penalty proceedings. The Revenue countered that the assessee was aware of the charges and had participated in the penalty proceedings, thus no prejudice was caused.

4. Whether the Penalty was Rightly Imposed Despite the Non-Specific Notice:
The tribunal considered whether the penalty could be deleted based on the non-specific notice. It was noted that the assessee was aware of the charges as indicated in the reply to the penalty notice. The tribunal referred to the statutory provisions under Section 274, which mandate giving the assessee a reasonable opportunity of being heard before imposing a penalty. The tribunal observed that the assessee had disclosed the income only after the search, indicating that the disclosure was not voluntary. The tribunal relied on judicial precedents, including the Supreme Court's decision in Mak Data (P) Ltd. Vs. CIT, which held that voluntary disclosure does not absolve the assessee from penalty.

Conclusion:
The tribunal concluded that the penalty was rightly imposed by the Assessing Officer as the disclosure of income was not voluntary but forced due to the search proceedings. The tribunal set aside the CIT(A)'s order and upheld the penalty imposed by the Assessing Officer. The appeals filed by the Revenue were dismissed, and the cross objections filed by the assessee were allowed, following the jurisdictional High Court's binding decision in Md. Farhan A. Shaikh Vs. DCIT.

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