2022 (7) TMI 163 - AT - Income Tax

Penalty u/s. 271(1)(c) - allegation of defective notice issued u/s 274 - non specification of clear charge - assessee challenged that AO initiated penalty under section 271(1)(c) for concealing/ furnishing of particulars of Income' and thereafter issued the notice u/s 274 read with 271(1)(c) without specifying the limb of the penalty and finally imposed the penalty for concealment by filling of inaccurate particulars of income - HELD THAT - The Hon'ble Karnataka High Court in the case of Manjunatha Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT observed that the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind. Also see M/S. SAHARA INDIA LIFE INSURANCE COMPANY, LTD. 2019 (8) TMI 409 - DELHI HIGH COURT 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 the notice 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 can not 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 - Decided in favour of assessee.

Summary

Issues:
Assessment of long-term capital gains, Disallowance of exemption u/s 54F, Penalty proceedings u/s 271(1)(c), Validity of penalty notice

Assessment of long-term capital gains:
The Assessee declared total income and claimed exemption u/s 54F for constructing residential accommodation after selling a land property. The Assessing Officer disallowed the exemption, considering bills and vouchers as bogus, and computed long-term capital gains at Rs. 80,45,860. The Commissioner dismissed the Assessee's appeal, leading to penalty proceedings.

Disallowance of exemption u/s 54F:
The Assessee challenged the penalty imposed by the Assessing Officer under section 271(1)(c) for furnishing inaccurate particulars of income. The Assessee contended that the penalty notice was vague and did not specify the limb of the penalty, citing various judgments to support the argument.

Penalty proceedings u/s 271(1)(c):
The penalty notice issued by the Assessing Officer did not specify the limb under which the penalty proceedings were initiated, leading to a legal challenge by the Assessee. The Tribunal referred to judgments highlighting the importance of clarity in penalty notices and the need for specifying the relevant limb for the Assessee to respond adequately.

Validity of penalty notice:
The Tribunal emphasized the necessity of clearly specifying the limb of penalty under section 271(1)(c) in the notice issued by the Assessing Officer. Citing legal precedents, including decisions by the Hon'ble Apex Court and various High Courts, the Tribunal concluded that the vague notice lacking specificity was issued without due application of mind, rendering the penalty not leviable. Consequently, the penalty imposed by the Assessing Officer and affirmed by the Commissioner was deleted, and the appeal by the Assessee was allowed.