2023 (6) TMI 271 - AT - Income Tax

Penalty u/s. 271(1)(c) - defective notice u/s 274 - scope of vagueness - HELD THAT - Vagueness regarding the charge for which penalty is to be levied continued to be there in the mind of Assessing Officer right through from recording of satisfaction to levy of penalty. In penal proceedings there is no scope of vagueness. The assessee against whom penalty proceedings are initiated has to be made aware in absolute terms the charges for which the penalty proceedings are initiated. The notice vide which charges for levy of penalty are communicated to the assessee should be unambiguous. As decided in the case of Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT has held that mere defect in the notice would vitiate penalty proceedings. In the instant case, vagueness of charge is not only confined to the notice, even in the order passed u/s. 271(1)(c) of the Act vagueness is reflected writ large. Thus, notice issued u/s. 274 r.w.s. 271(1)(c) of the Act is defective. Consequently, the subsequent proceedings arising therefrom are vitiated. Appeal of the assessee is allowed.

Summary

Issues:
The appeal challenges the order confirming penalty under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2015-16 based on the ambiguity in the notice and levy of penalty.

Ambiguity in Notice:
The appellant argued that the notice issued under section 271(1)(c) of the Act was defective as it did not specify the relevant clause and both limbs of the section were mentioned without striking off the irrelevant one. Citing the decision of the Bombay High Court in a similar case, the appellant contended that such defects render the notice invalid.

Defence by the Department:
The Departmental Representative contended that the penalty was justified as the assessee had wrongly claimed deduction under section 35D of the Act, leading to the levy of penalty under section 271(1)(c) by the Assessing Officer.

Analysis and Decision:
Upon examination of the orders and the assessment record, it was found that the Assessing Officer had issued a notice invoking both limbs of section 271(1)(c) without clarity. The subsequent penalty order also lacked specificity, starting with the charge of concealment but ultimately penalizing for furnishing inaccurate particulars. The Tribunal emphasized that in penalty proceedings, clarity and specificity are crucial, and any ambiguity in the notice or order can vitiate the entire proceedings. Relying on the Full Bench decision of the Bombay High Court, it was held that the defective notice and the subsequent proceedings were vitiated due to the ambiguity in the charges. Consequently, the impugned order confirming the penalty was set aside, and the appeal of the assessee was allowed.