2022 (1) TMI 80 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - whether the notice was issued for incorrect particulars of income or for both, the proceeding cannot be initiated? - HELD THAT - Notice imposing the penalty was vague, imprecise and incapable of clear understanding, therefore, the proceeding initiated on such notice is liable to be quashed. In view of the above, we are of the considered opinion that the penalty initiated against the assessee are also liable to be quashed. We may further mention that the assessee being loss making company, is not going to gain anything by wrongly declaring the loss on sale of asset as revenue loss instead of capital loss as in our view it is tax neutral. Therefore, no malafide intention to conceal the income or particulars of income can be attributed to the assessee. For the above said purpose, we may further relied upon the decision of the Hon'ble Supreme Court in the matter of Price Water Cooper Pvt. Ltd. 2012 (9) TMI 775 - SUPREME COURT for the said purposes. Respectfully following the decision of the Hon'ble Supreme Court and on merit also we are of the opinion that the penalty imposed on the assessee is also liable to be deleted. In the result, the penalty imposed against the assessee is deleted on account of vague and improper notice as well as on merit. - Decided in favour of assessee.

Summary

Issues involved:
1. Challenge to penalty under section 271(1)(c) by the assessee.
2. Admissibility of additional ground raised by the assessee regarding the show cause notice for penalty proceedings.
3. Interpretation of the notice issued for penalty and imposition of penalty for inaccurate particulars of income.
4. Assessment of the penalty imposition considering the nature of the company and intention behind the declaration of loss.

Analysis:

1. The appeal was filed by the assessee challenging the penalty imposed under section 271(1)(c). The Authorized Representative (AR) for the assessee raised an additional ground questioning the validity of the show cause notice for the penalty proceedings. The Departmental Representative (DR) had no objection to admitting the additional ground.

2. The Tribunal considered the additional ground raised by the assessee, which was of a legal nature and required no new documents. After hearing arguments from both sides, the Tribunal admitted the additional ground for adjudication.

3. The Tribunal examined the notice issued for the penalty and the imposition of penalty for inaccurate particulars of income. It was noted that the penalty was imposed for both concealing income and furnishing inaccurate particulars, while the notice only mentioned incorrect particulars of income. Citing legal precedent, the Tribunal held that the vague notice rendered the penalty proceedings unsustainable.

4. Considering the nature of the company as a loss-making entity and the lack of benefit from misrepresenting the loss on the sale of assets, the Tribunal concluded that no malicious intent to conceal income could be attributed to the assessee. Referring to relevant case law, the Tribunal decided to delete the penalty imposed on the assessee both due to the vague notice and on merit.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the penalty imposed against them based on the inadequacy of the notice and the lack of malicious intent in declaring the loss. The order was pronounced on a specific date.