2021 (12) TMI 404 - AT - Income Tax

Penalty levied u/s. 271(1)(c) - validity of notice issued u/s 274 - mere failure to tick mark the applicable grounds - non-strike off of the irrelevant part in the notice issued u/s.271(1)(c) - Whether notice was issued stating that assessee has concealed particulars of income or furnished inaccurate particulars of such income? - HELD THAT - As in the case of Mr. Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT while dealing with the issue of non-strike off of the irrelevant part in the notice issued u/s.271(1)(c) of the Act, held that assessee must be informed of the grounds of the penalty proceedings only through statutory notice and an omnibus notice suffers from the vice of vagueness. Ratio of this full bench decision of the Hon'ble Bombay High Court (Goa) squarely applies to the facts of the assessee s case as the notices u/s. 274 r.w.s. 271(1)(c) of the Act were issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued On a perusal of the notices issued u/s. 274 r.w.s. 271(1)(c) of the Act, we observe that the Assessing Officer has not specified any limb for which the notices were issued i.e., either for concealment of particulars of income or for furnishing inaccurate particulars of such income. Assessing Officer did not strike off irrelevant limb in the notices specifying the charge for which notices were issued. It can be seen from the notices issued u/s. 271(1)(c) of the Act it appears that the charge was for both the limbs. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty order under section 271(1)(c) of the Income Tax Act.
2. Specificity required in penalty notice regarding the limb of section 271(1)(c) under which penalty is initiated.

Analysis:

Issue 1: Validity of Penalty Order
The appeals were filed by the assessee and the revenue against different orders of the Commissioner of Income Tax (Appeals) for the Assessment Years 2007-08 to 2011-12. The primary contention raised was that the penalty order was bad in law as the penalty proceedings were initiated and levied without specifying the exact limb of section 271(1)(c) of the Act. The Assessing Officer issued notices under section 274 r.w.s. 271(1)(c) without specifying whether the penalty was for concealing particulars of income or furnishing inaccurate particulars. The Hon'ble Tribunal observed that the charge was for both limbs, which was in violation of the requirement for specificity in penalty notices.

Issue 2: Specificity in Penalty Notice
The Hon'ble Tribunal referred to a decision by the Bombay High Court in a similar case and emphasized the importance of specifying the grounds of penalty proceedings through a statutory notice. The Tribunal cited a Full Bench decision of the Bombay High Court in another case, where it was held that an omnibus notice, not striking off irrelevant parts, leads to vagueness and is against the principles of natural justice. The Tribunal concluded that the penalty order passed by the Assessing Officer was bad in law due to the lack of specificity in the penalty notices. Consequently, the penalty orders for the Assessment Years 2007-08 to 2011-12 were quashed.

In conclusion, the Tribunal allowed the appeals of the assessee and dismissed the appeal of the revenue. The penalty order for the Assessment Year 2008-09 was quashed, rendering the revenue's appeal on the same issue infructuous. The Tribunal's decision was based on the principles of natural justice and the requirement for specificity in penalty notices under section 271(1)(c) of the Income Tax Act.