2022 (4) TMI 178 - AT - Income Tax

Penalty u/s 271(1)(c) - Non specification of clear charge - defective notice u/s 274 - HELD THAT - Hon'ble Karnataka High Court in the case of S Chandrashekar Vs ACIT , 2017 (2) TMI 1127 - KARNATAKA HIGH COURT wherein a notice u/s 274 r.w.s. 271(1)(c) of the Act was issued in printed form without specifying the grounds of initiation of penalty proceedings, was held to be invalid and untenable in law. In omnibus, as noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff 2007 (5) TMI 198 - SUPREME COURT the quasi-criminal proceedings u/s 271(1)(c) of the Act ought to comply with the principles of natural justice, and in the present case, considering the observations of the Assessing Officer in the assessment order alongside his action of issuing the notice without any limb or charge being made against the assessee qua section 271(1)(c) of the Act establishes uniform stance and therefore the proceedings suffered from non- compliance with principles of audi alteram partem . Therefore, in view of the aforesaid discussion, the issue herein stands concluded in favour of the assessee and nothing contrary has been shown to us in the present facts which would warrant our taking a view different from Hon'ble Karnataka High Court in the case of S Chandrashekar Vs ACIT 2017 (2) TMI 1127 - KARNATAKA HIGH COURT Since the provision of section 271(1)(c) is calamitous, albeit commercial, consequences, the provision is mandatory and brooks no trifling or dilution therewith, as a result we are of the considered view that, having regard to the fact that in the instant case the SCN dt 14/01/2015 issued u/s 274 r.w.s. 271(1)(c) of the Act without specifying any limb or charge, is invalid and untenable in the eyes of law, consequently the penalty imposed u/s 271(1)(c) of the Act is bad in law and hence quashed accordingly. - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for AY 2010-11.

Detailed Analysis:

Issue 1: Delay in filing the appeal
The appeal was delayed by five days due to a shortfall in payment of appeal fees. The appellant explained the delay, and the tribunal, considering relevant legal precedents, condoned the delay.

Issue 2: Imposition of Penalty
The appellant, an individual and proprietor, filed the return of income for AY 2010-11, which was selected for scrutiny. The Assessing Officer (AO) made an addition under section 69C for unaccounted purchases, leading to penalty proceedings under section 271(1)(c). The AO imposed a penalty of ?40,239, which was confirmed by the Commissioner of Income Tax-Appeals (CIT(A)).

Issue 3: Legal Grounds Challenged
The appellant challenged the penalty imposition on grounds of non-application of mind by the AO. The appellant argued that the penalty initiation and imposition lacked proper reasoning and factual basis, while the CIT(A) upheld the penalty.

Issue 4: Compliance with Section 271(1)(c)
The tribunal analyzed the provisions of section 271(1)(c) and emphasized the distinction between concealment of income and furnishing inaccurate particulars. It highlighted the necessity for the AO to specify the charge against the assessee in the penalty notice to ensure natural justice.

Issue 5: Notice for Penalty Proceedings
The tribunal scrutinized the notice issued by the AO for penalty proceedings and found it lacking in specifying the grounds for penalty under section 271(1)(c). Citing legal precedents, the tribunal concluded that the notice's deficiency indicated a lack of application of mind by the AO.

Issue 6: Compliance with Principles of Natural Justice
The tribunal emphasized that penalty proceedings under section 271(1)(c) must adhere to the principles of natural justice. It noted that the AO's failure to specify the charge in the notice violated the principles of "audi alteram partem" and rendered the penalty proceedings invalid.

Conclusion:
Considering the legal precedents and the lack of specific charge in the penalty notice, the tribunal ruled in favor of the appellant. It held that the penalty imposed under section 271(1)(c) was invalid and quashed it accordingly. The appeal of the assessee was allowed based on the observations made.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments and legal principles considered by the tribunal in reaching its decision.