2023 (7) TMI 854 - AT - Income Tax

Penalty u/s 271(1)(c) - concealment of income while passing the assessment order - defective notice u/s 274 - non specification of clear charge - HELD THAT - In CIT and Another vs. Manjunath Cotton Ginning Factory 2013 (7) TMI 620 - KARNATAKA HIGH COURT held notice u/s 274 read with section 271(1)(c) of the Act should specifically state the grounds mentioned in section 271(1)(c) of the Act, i.e., whether it is for concealment of income or for furnishing of inaccurate particulars of income. Sending printed form, where all the grounds mentioned would not satisfy the requirement of law. The assessee should know the grounds which he has to meet Otherwise, the principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. Penalty proceedings are distinct from assessment proceedings, though it emanates from the assessment proceedings; still it is separate and independent proceedings all together. When the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the penalty notice has been issued, the penalty proceedings initiated u/s 271(1)(c) are not sustainable. Decided in favour of assessee.

Summary

Issues involved:
The appeal against the penalty levied by the Assessing officer under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income.

Summary:

Assessment Proceedings:
The assessment was completed based on the assessee's request to be assessed at NIL income instead of the declared loss, to avoid litigation and harassment. The Assessing Officer (AO) initiated penalty proceedings for concealment of income under section 271(1)(c) separately.

Grounds of Appeal:
The appellant raised multiple grounds challenging the penalty order, including issues with the notice ambiguity, lack of specific allegations, violation of natural justice, and incorrect application of law by the Commissioner of Income Tax (Appeals) (CIT(A)).

Arguments:
The appellant argued that the penalty proceedings were flawed as the AO failed to make any findings on concealment of income during assessment and the notices issued were ambiguous. The CIT(A) failed to consider relevant legal precedents cited by the appellant.

Judgment:
The Tribunal found that the AO accepted the assessee's plea to be assessed at NIL income without any evidence of concealment. The notices issued lacked specificity regarding the alleged offense. Citing legal precedents, the Tribunal held that penalty proceedings must specify the grounds under section 271(1)(c) to be valid. The appeal was allowed, and the impugned orders were set aside.

Conclusion:
The Tribunal concluded that the penalty proceedings were unsustainable due to the vague notices and lack of specific allegations, following established legal principles. The appeal was allowed, and the penalty order was set aside.

This summary provides a detailed overview of the legal judgment, highlighting the key issues, arguments, and the ultimate decision of the Tribunal.