2022 (3) TMI 1340 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - 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. It is also a well-accepted proposition that the aforesaid two limbs of section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer 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 notice dated 29.12.2016 under section 274 r.w.s. 271(1)(c) of the Act 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 cannot be considered a valid notice sufficient to impose penalty u/s 271(1)(c) of the Act 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 - Appeal of assessee allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act based on a vague notice lacking specification of penalty limb.

Analysis:
The Assessee appealed against the penalty order imposed under section 271(1)(c) of the Income Tax Act, challenging the validity of the notice issued by the Assessing Officer. The Assessee contended that the notice dated 29.12.2016 was vague as it did not specify the limb of the penalty, making it not leviable. The Assessee relied on judgments such as CIT Vs. SSA's Emerald Meadows and Principal CIT Vs. Goa Coastal Resorts and Recreation to support their argument. The Revenue, represented by the Ld. DR, supported the orders of the authorities below, arguing that the penalty was rightfully imposed. The Tribunal decided to address the legal issue of the notice's validity rather than delving into the case's merits.

The Tribunal referred to the judgment of the Hon'ble Apex Court in the case of M/s. SSA's Emerald Meadows, where the issue of specifying the penalty limb in the notice was crucial. The Tribunal highlighted that the notice must clearly indicate whether the penalty is for concealing particulars of income or furnishing inaccurate particulars of income. The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory emphasized the importance of clarity in specifying the penalty limb to avoid non-application of mind by the Assessing Officer. Similarly, the Hon'ble High Court of Delhi in the case of M/s. Sahara India Life Insurance Company Ltd. reiterated the necessity of specifying the penalty limb in the notice under section 271(1)(c) of the Act.

The penalty provisions under section 271(1)(c) of the Act apply when there is concealment of income or furnishing inaccurate particulars of income, with distinct meanings for each limb. It is crucial for the Assessing Officer to specify the relevant limb in the notice to inform the Assessee properly. In this case, the Tribunal found that the notice issued by the Assessing Officer lacked specification of the penalty limb, indicating a stereotyped issuance without proper application of mind, rendering it invalid. Consequently, the Tribunal concluded that the penalty was not leviable under these circumstances, aligning with decisions from various Courts, including the Apex Court. As a result, the Tribunal allowed the appeal filed by the Assessee, setting aside the penalty imposed by the Assessing Officer and affirmed by the Ld. Commissioner.

In conclusion, the Tribunal's decision emphasized the importance of clarity in specifying the penalty limb in the notice under section 271(1)(c) of the Income Tax Act to ensure a valid imposition of penalties for concealing or furnishing inaccurate particulars of income. The judgment highlighted the legal precedent set by various Courts, including the Apex Court, regarding the necessity of a clear and specific notice to levy penalties effectively.