2022 (7) TMI 1301 - AT - Income Tax

Penalty u/s 271(1)(c) - AO without recoding any satisfaction, initiated the penalty proceedings under section 271(1)(c) - HELD THAT - The penalty provisions of section 271(1)(c) 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) carry different meanings. Therefore, it is imperative for the AO 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 AO has issued the notice dated 28.03.2013 u/s 274 r.w.s. 271(1)(c) 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) and therefore we are of the penalty is not leviable we have no hesitation to delete the penalty levied by the AO and affirmed by the Ld. Commissioner - Assessee appeal allowed.

Summary

Issues:
1. Validity of penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for assessment year 2010-11.
2. Challenge to penalty order based on the validity of the notice issued under section 274 of the Act without specifying the particular limb of penalty.

Analysis:

Issue 1:
The appeal was filed against the penalty of Rs.36,72,755/- imposed under section 271(1)(c) of the Act for assessment year 2010-11. The Assessee declared its income at 'Nil' in the return of income, but the Assessing Officer computed the net book profit at Rs.2,16,10,800/- under Section 115JB of the Act. The penalty was imposed on the grounds of concealing income and furnishing inaccurate particulars of income. The Commissioner of Income-tax (Appeals) affirmed the penalty, leading to the appeal before the Appellate Tribunal.

Issue 2:
The Assessee challenged the penalty order primarily on the basis of the notice issued under section 274 of the Act, which did not specify the particular limb of penalty under section 271(1)(c). The Appellate Tribunal examined the legal issue related to the validity of the notice issued without specifying the penalty limb. The Tribunal referred to various judgments, including the decision of the Hon'ble Apex Court and High Courts, emphasizing the importance of specifying the relevant limb of penalty in the notice.

The Tribunal noted that the penalty provisions of section 271(1)(c) are attracted when the Assessee conceals income or furnishes inaccurate particulars. It highlighted that specifying the relevant limb in the notice is crucial for the Assessee to understand the charges and respond accordingly. The Tribunal cited judgments where notices without specifying penalty limbs were deemed invalid, leading to the cancellation of penalties.

In conclusion, the Tribunal found that the notice issued in this case lacked specificity regarding the penalty limb, indicating a lack of application of mind by the Assessing Officer. Therefore, the Tribunal held that the penalty was not leviable due to the defective notice, in line with precedents from various Courts, including the Apex Court. Consequently, the penalty imposed by the Assessing Officer and affirmed by the Commissioner was deleted, and the appeal filed by the Assessee was allowed.