2021 (12) TMI 982 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - whether the penalty is on account of furnishing of inaccurate particulars of income or for concealment of income? - HELD THAT - Assessment order dated 24/12/2011 clearly shows that the AO recorded satisfaction that the assessee was guilty of concealment of income/filing inaccurate particulars of income and therefore proceedings under section 271(1)(c) of the Act were to be initiated separately. A copy of notice dated 23/12/2011 is produced before us and it shows that the penalty was proposed for the assessee having concealed the particulars of income or furnishing inaccurate particulars of such income. Neither the assessment order, nor the notice issued under section 271(1)(c) read with section 274 of the Act specify the ground on which the penalty was proposed. It simply states that either for concealment of income or for furnishing of inaccurate particulars, such proceedings are initiated. It is therefore, clear that neither the assessment order nor the notice issued under section 274 of the Act give any reasonable grounds for the assessee to defend themselves. Hon ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT and SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER wherein it was held that the notice issued by the learned Assessing Officer would be bad in law if it did not specify which limb of section 271(1)( c ) of the Act the penalty proceedings had been initiated under i.e., whether for concealment of particulars of income or for furnishing of inaccurate particulars thereof. - Decided in favour of assessee.

Issues:
1. Jurisdiction of Assessing Officer to levy penalty under section 271(1)(c) of the Income Tax Act.
2. Defect in the notice issued under section 274 of the Act.
3. Principles of natural justice in penalty proceedings.

Issue 1: Jurisdiction of Assessing Officer to levy penalty under section 271(1)(c) of the Income Tax Act:
The judgment revolves around the appeal filed by the assessee against the penalty order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act for the assessment year 2009-10. The Assessing Officer had initiated penalty proceedings against the assessee for concealment of income/furnishing inaccurate particulars of income. The main contention raised by the assessee was that the penalty order was in violation of the principles of natural justice as the notice did not specify the grounds for which the penalty was levied. The Tribunal examined the assessment order and the notice issued under section 271(1)(c) and concluded that they did not specify the grounds on which the penalty was proposed. This lack of specificity deprived the assessee of the opportunity to defend themselves adequately.

Issue 2: Defect in the notice issued under section 274 of the Act:
The Tribunal referred to various legal precedents, including the decisions of the Hon'ble Karnataka High Court and the Hon'ble Delhi High Court, to emphasize the importance of a proper notice specifying the grounds for initiating penalty proceedings under section 271(1)(c) of the Act. The Tribunal highlighted that the notice issued in this case did not specify whether the penalty was being imposed for concealment of income or furnishing inaccurate particulars of income. This defect in the notice was deemed crucial as it affected the jurisdiction of the Assessing Officer to levy any penalty. The Tribunal held that the defective notice rendered the assumption of jurisdiction by the Assessing Officer to levy the penalty invalid.

Issue 3: Principles of natural justice in penalty proceedings:
The Tribunal delved into the principles of natural justice concerning penalty proceedings. It noted that the penalty proceedings should be initiated based on specific grounds, and the assessee should be informed of these grounds to defend themselves effectively. The Tribunal cited legal judgments that emphasized the need for clarity in the notice issued under section 271(1)(c) to ensure that the assessee has a fair opportunity to respond. The Tribunal ultimately ruled in favor of the assessee, directing the Assessing Officer to delete the penalty in question due to the defective notice issued under section 274 of the Act. The decision highlighted the significance of adherence to procedural requirements and principles of natural justice in penalty proceedings under the Income Tax Act.

In conclusion, the judgment by the Appellate Tribunal ITAT DELHI underscores the importance of providing a clear and specific notice to the assessee when initiating penalty proceedings under section 271(1)(c) of the Income Tax Act. The lack of specificity in the notice was deemed a violation of natural justice principles and resulted in the Tribunal directing the deletion of the penalty imposed on the assessee. The case serves as a reminder of the procedural requirements and the need for transparency in penalty proceedings to ensure a fair and just outcome.

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