2022 (3) TMI 1211 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Defective notice u/s 274 - non specifying under which limb of Section 271(1)(c) penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income and finally imposed the penalty - HELD THAT - The penalty provisions of section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income - a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings - It is imperative for the AO to specify the relevant limb so as to make the Assessee aware as to what is the charge made against him so that he can respond accordingly. Having regard to the manner in which the Assessing Officer has issued the notice u/s 274 read with 271(1)(c) without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered a valid notice sufficient to impose penalty u/s 271(1)(c) and therefore we are of the considered view that under these circumstances, the penalty is not leviable as held by the various Court including Apex Court and hence, we have no hesitation to delete the penalty levied by the AO and affirmed by the ld. Commissioner. - Decided in favour of assessee.

Summary

Issues involved:
- Validity of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 based on a notice that did not specify the limb under which penalty proceedings were initiated.

Detailed Analysis:
The appeal was filed against the order affirming the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The Assessee argued that the notice issued did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, rendering it vague and the penalty not leviable. The Assessee cited judgments like CIT Vs. SSA's Emerald Meadows and Principal CIT Vs. Goa Coastal Resorts and Recreation to support this contention.

The Revenue, on the other hand, supported the orders passed by the authorities below, stating that there was no perversity, impropriety, or illegality in the order under challenge. The Assessee challenged the imposition of penalty primarily based on the notice itself, leading to a legal issue regarding the specificity required in initiating penalty proceedings under section 271(1)(c) of the Act.

The Tribunal referred to the judgment in the case of M/s. SSA's Emerald Meadows where the issue of specifying the limb under which penalty proceedings are initiated was discussed. The Tribunal allowed the Assessee's appeal, considering the notice issued by the Assessing Officer as bad in law for not specifying the relevant limb under section 271(1)(c) of the Act.

The legal position established by various judgments, including the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, emphasized the necessity of clarity in specifying the limb under which the penalty is levied. The Hon'ble High Court of Delhi in the case of M/s. Sahara India Life Insurance Company Ltd. echoed similar sentiments, highlighting the importance of specifying the limb under section 271(1)(c) to make the Assessee aware of the charges against them.

The Tribunal concluded that the penalty provisions of section 271(1)(c) are attracted when there is concealment of income or furnishing inaccurate particulars, each carrying different meanings. As the notice in this case did not specify the relevant limb, it was issued in a stereotyped manner without proper application of mind, rendering it invalid to impose the penalty. Consequently, the penalty was deemed not leviable, and the appeal filed by the Assessee was allowed, leading to the deletion of the penalty imposed by the Assessing Officer and affirmed by the Commissioner.