2023 (8) TMI 675 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - notice was issued for both the limbs without strike off irrelevant limb and specifying the charge for which the notice was issued - HELD THAT - The notice issued by the AO was bad in law if it did not specify under which limb of section 271(1)(c) of the Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income. Ratio of the full bench decision of MR. MOHD. FARHAN A. SHAIKH 2021 (3) TMI 608 - BOMBAY HIGH COURT squarely applies to the facts of the assessee's case as the notice u/s. 274 r.w.s. 271(1)(c) of the Act was issued without striking off the irrelevant portion of the limb and failed to intimate the assessee the relevant limb and charge for which the notices were issued. Thus, respectfully following the said decision I hold that the penalty order passed u/s. 271(1)(c) of the Act by the Assessing Officer is bad in law and accordingly the penalty order passed u/s. 271(1)(c) of the Act for Assessment Year 2008-09 is quashed.

Summary

Issues:
The appeal against the order of the Commissioner of Income Tax (Appeals) for assessment year 2008-09.

Grounds of Appeal:
The assessee challenged the penalty imposed under section 271(1)(c) of the Income Tax Act amounting to Rs. 15,31,470. The main contentions were that the penalty proceedings were initiated without specifying the exact limb of Section 271(1)(c) and that the notice issued was vague and mechanical, leading to a lack of clarity on the charge for which the penalty was imposed. The assessee argued that there was no concealment or furnishing of inaccurate particulars of income, and that the penalty was unjustified.

Judgment Details:
The counsel for the assessee contended that the penalty order was bad in law as the notice issued did not specify the limb for which the penalty was imposed, citing relevant case laws. On the other hand, the Department argued that the penalty was levied for furnishing incorrect particulars of income. Upon review, it was observed that the notice issued by the Assessing Officer did not specify the charge for which the penalty was imposed, violating the principles of natural justice. The judgment referred to a similar case before the Bombay High Court, which emphasized the importance of informing the assessee of the grounds of penalty proceedings through a specific notice.

Legal Precedents:
The judgment cited the decision of the Hon'ble Bombay High Court (Full Bench at Goa) in a similar case, highlighting the necessity for a precise notice specifying the grounds for penalty proceedings. It also referenced the judgment in PCIT Vs. Sahara India Life Insurance Co. Ltd., where the jurisdictional High Court upheld that a penalty notice must clearly indicate the limb of Section 271(1)(c) under which the penalty proceedings were initiated.

Conclusion:
Based on the legal principles and precedents, the Tribunal held that the penalty order passed by the Assessing Officer was bad in law due to the lack of specificity in the notice issued under Section 271(1)(c). Consequently, the penalty imposed on the assessee was quashed for Assessment Year 2008-09. As a result, the appeal of the assessee was allowed, and the other grounds raised were not addressed as the penalty order was deemed invalid.

Separate Judgment:
The judgment was pronounced by Shri Challa Nagendra Prasad, Judicial Member, on 11/08/2023.