2022 (6) TMI 266 - AT - Income Tax

Penalty under Section 271(1)(c) - Defective notice u/s 274 - non-filing of return of income - HELD THAT - It is pertinent to note that the entire basis of imposing penalty was concealment of income on the part of the assessee as to non-filing of return of income by the assessee. But from the perusal of the records we can see that the assessee has filed return of income which was very much submitted before the AO as well as before the CIT(A) and quoted in the written submissions in both the orders - AO as well as the CIT(A) has not at all verified this fact and simplicitor imposed penalty on concealment of income under Section 271(1)(c) of the Act without giving any opportunity to the assessee at the appellate stage i.e. before the CIT(A). Further, it is noticed that in the notice issued under Section 271(1)(c) read with Section 274 of the Act the specific limb was also not mentioned in the notice. Therefore, the decision in the case of CIT vs. SSA s Emerald Meadows 2016 (8) TMI 1145 - SC ORDER and CIT vs. Manjunatha Cotton Ginning 2013 (7) TMI 620 - KARNATAKA HIGH COURT as well as decision of the Hon ble Delhi High Court in the case PCIT vs. Sahara India Life Insurance Co. Limited 2019 (8) TMI 409 - DELHI HIGH COURT are applicable in the present case. It has been held in these decisions that notice issued by the Assessing should specify which limb of Section 271(1)(c) of the Act penalty proceedings has been initiated. Therefore, the appeal of the assessee allowed.

Summary

Issues:
- Appeal against penalty levied under section 271(1)(c) of the Income Tax Act.
- Failure to specify the charge regarding concealing particulars of income or filing inaccurate particulars of income in the penalty notice.

Analysis:

Issue 1: Appeal against penalty under section 271(1)(c) of the Income Tax Act

The judgment involves four appeals pertaining to two different assessees, all filed against orders passed by the CIT(A)-9, Ahmedabad for the Assessment Years 2011-12 & 2012-13. The appeals were heard together due to a common issue, and the orders were disposed of by way of a consolidated order. The primary issue in these appeals was the confirmation of penalties levied under section 271(1)(c) of the Act. The penalty proceedings were initiated after the assessment was reopened under section 147 of the Income Tax Act, 1961. The Assessing Officer determined the total income and made various additions, leading to the initiation of penalty proceedings. The appellants challenged the penalty orders before the CIT(A), who dismissed the appeals. During the hearing, an adjournment application was filed by the assessee's representative, which was rejected, and the case proceeded based on written submissions.

Issue 2: Failure to specify the charge in the penalty notice

The key contention in the appeals was the failure to specify the nature of default committed by the assessee in the penalty notice, whether it was concealment of income or furnishing inaccurate particulars of income. The assessee argued that the notice issued under section 271(1)(c) did not mention the specific charge, and the Assessing Officer wrongly stated that the return of income was not filed. The Tribunal observed that the penalty was imposed on the grounds of concealment of income due to non-filing of the return, despite the fact that the return was filed and submitted before the authorities. The Tribunal highlighted that the penalty was imposed without verifying the facts and without giving the assessee an opportunity to present their case. Citing relevant legal precedents, including decisions of the Supreme Court and High Courts, the Tribunal emphasized the necessity for the penalty notice to specify the limb of section 271(1)(c) under which the penalty proceedings were initiated.

In conclusion, the Tribunal allowed the appeals of the assessee, including ITA No.1448/Ahd/2019, as the penalty was imposed without proper verification and without specifying the charge in the penalty notice. The judgment emphasized the importance of providing the assessee with a fair opportunity to respond to the allegations and the need for clarity in penalty notices under section 271(1)(c) of the Income Tax Act.