2022 (6) TMI 222 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice u/s 274 - main grievance of the assessee that the notice initiated by the Ld. AO was not determined the allegation of the assessee whether it is concealed income or furnished inaccurate particular of income - HELD THAT - This particular notice it is a self defective and the Ld. AO did not mention the nature of concealment in the notice issued u/s. 274/271(1)(c). The counsel laid down that in the absence of such specific notice, the notice would be invalid as held in various judicial pronouncements including the decision of Hon'ble Karnataka High Court in CIT V/s. SAS's Emerald Meadows 2015 (11) TMI 1620 - KARNATAKA HIGH COURT against which Special Leave Petition (SLP) filed by the department stood dismissed by Hon'ble Supreme Court which is reported 2016 (8) TMI 1145 - SC ORDER . The notice u/s. 274/271(1)(c) of the Act is not carrying the specific limb. Therefore, this is a case where both the parts of the offences i.e., concealment of income as well as furnishing of inaccurate particulars of income were involved. Appeal of assessee allowed.

Issues:
Assessment under section 271(1)(c) of the Income Tax Act - Validity of penalty imposed - Nature of concealment or inaccurate particulars of income not specified in the notice - Applicability of judicial precedents - Deletion of penalty.

Analysis:
The appeal was filed against the order of the Ld. Commissioner of Income Tax (Appeal)-1, Ludhiana, regarding assessment under section 271(1)(c) for A.Y. 2014-15. The Ld. AO initiated penalty based on 100% of the evaded tax amounting to Rs. 3,38,520. The Ld. CIT(A) upheld the penalty, leading to the appeal. The main contention was the lack of determination in the notice whether the alleged offense was concealment of income or furnishing inaccurate particulars of income. The notice issued by the Ld. AO did not specify the nature of the offense, rendering it defective. The appellant argued that without a specific notice, the penalty could not be sustained, citing judicial precedents like CIT v. SAS's Emerald Meadows and the decision of the Jaipur Tribunal in Grass Field Farms and Resorts P. Ltd. The Tribunal concurred, stating that both aspects of the offense were involved, and the penalty was not sustainable on legal grounds. Consequently, the penalty was deleted, and the appeal of the assessee was allowed.

The Ld. DR vehemently argued in favor of upholding the penalty, relying on the assessment order which concluded "inaccurate particulars of income." However, the Tribunal found the notice to be self-defective as it did not mention the nature of concealment. Referring to legal precedents, including the decision of the Hon'ble Karnataka High Court and the Jaipur Tribunal, the Tribunal held that without a specific notice detailing the offense, the penalty could not be upheld. The Tribunal emphasized the importance of a clear notice specifying whether it was a case of concealment of income or furnishing inaccurate particulars of income. By following binding judicial precedents, the Tribunal concluded that the penalty was not sustainable on legal grounds and proceeded to delete it, thereby allowing the appeal of the assessee.

The Tribunal's decision was based on the principle that a notice under section 271(1)(c) must clearly indicate whether the offense pertains to concealment of income or furnishing inaccurate particulars of income. In this case, the notice issued by the Ld. AO lacked such specificity, making it invalid. The Tribunal highlighted the necessity of a precise notice to enable the assessee to respond adequately to the allegations. By referencing relevant judicial pronouncements and precedents, the Tribunal established that without a proper notice outlining the offense, the penalty could not be sustained. Consequently, the Tribunal ruled in favor of the assessee, emphasizing the importance of legal compliance and due process in penalty proceedings under the Income Tax Act.

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