2023 (7) TMI 173 - AT - Income Tax

Penalty proceeding u/s 271(1)(c) - mandation to mention charge of concealment of particulars or furnishing of inaccurate particulars - HELD THAT - While passing assessment-order the AO has simply mentioned that penalty proceeding u/s 271(1)(c) is being initiated separately but nowhere mentioned any charge of concealment of particulars or furnishing of inaccurate particulars. Then came the next stage of issuing show-cause notice in terms of section 274. On perusal of the show-cause notice, we nowhere find that the AO has specified the kind of default committed by assessee, whether it is concealment of income or furnishing of inaccurate particulars. Therefore, in absence of any charge against assessee, the decision in Kulwant Singh Bhatia 2017 (8) TMI 1375 - ITAT INDORE holds good. We are of the considered view that the penalty proceeding conducted in present case are not sustainable. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961.
2. Whether the assessee's actions constituted concealment of income or furnishing of inaccurate particulars.

Summary:

Issue 1: Validity of Penalty Proceedings under Section 271(1)(c)
The assessee contested the penalty order on the grounds that the Assessing Officer (AO) did not specify the charge of default, whether it was for "concealment of income" or "furnishing of inaccurate particulars," in either the assessment order or the show-cause notice. The assessee relied on the decision of the Hon'ble Jurisdictional High Court in Pr. CIT-I vs. Kulwant Singh Bhatia, which held that a show-cause notice under Section 274 must specify the exact charge against the assessee to satisfy the principle of 'audi alteram partem' (no one should be condemned unheard). The Tribunal agreed with the assessee, noting that the AO's failure to specify the charge rendered the penalty proceedings unsustainable. Consequently, the penalty order was set aside.

Issue 2: Concealment of Income or Furnishing of Inaccurate Particulars
Although the Tribunal set aside the penalty order based on procedural grounds, it also considered the merits of the case. The assessee argued that the omission to consider brought forward losses while claiming deductions under Section 80-IC was a bona fide and inadvertent mistake. The assessee had voluntarily filed a revised return and paid additional tax before the AO issued the first query letter under Section 142(1), indicating no intention to conceal income or furnish inaccurate particulars. The Revenue, however, contended that the assessee's actions were not voluntary as they occurred after the issuance of the scrutiny notice under Section 143(2). Despite these arguments, the Tribunal did not adjudicate on the merits, as the penalty order was already set aside on procedural grounds.

Conclusion:
The appeal was allowed, and the penalty order was set aside due to the AO's failure to specify the charge in the penalty proceedings, making the proceedings non-maintainable. Other arguments on the merits were rendered infructuous and left open without adjudication.