2024 (1) TMI 1033 - AT - Income Tax

Penalty u/s 271(1)(c) - validity of notice u/s 274 as it not indicated as to under which limb of the said section the notice has been issued - HELD THAT - If we consider the penalty notice the same shows that without striking off as to which of the part the said notice, the assessee was called on to reply, the notice was issued. The notice does not make it clear if the assessee was called upon to explain for concealment of particulars of income or for furnishing inaccurate particulars of income. As there is substance in the contention of the ld. AR that in the absence of striking off specific limb in the notice, the notice was invalid and the consequential penalty order is not sustainable in law. Reliance in this regard can be placed on the judgement of Sahara India Life Insurance Company Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT Even otherwise, we have, vide our separate order 2024 (1) TMI 696 - ITAT DELHI already deleted the additions made by the ld. AO arising out of disallowance of depreciation and in regard to other issues of disallowance on deferred expenditure, the issue has been restored to the files of CIT(A). Therefore, on merits also the penalty is not sustainable. Assessee appeal allowed.

Summary

Issues involved:
The validity of penalty notice under section 271(1)(c)/274 of the Income Tax Act, 1961 and the sustainability of the penalty order based on inaccurate particulars of income.

Validity of Penalty Notice:
The appeal before the Appellate Tribunal concerned the validity of a penalty notice issued under section 271(1)(c)/274 of the Income Tax Act, 1961. The Assessee contended that the notice was invalid as it did not specify under which limb of the section it was issued. The Tribunal observed that the notice failed to indicate whether the assessee was called upon to explain for concealment of particulars of income or for furnishing inaccurate particulars of income. Citing the judgment of the Hon'ble Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Company Ltd., the Tribunal held that the notice was invalid due to the absence of a specific limb being struck off, rendering the consequential penalty order unsustainable in law.

Sustainability of Penalty Order:
The Tribunal further examined the sustainability of the penalty order based on inaccurate particulars of income. Upon reviewing the assessment order, it was noted that the Assessing Officer (AO) had primarily recorded satisfaction that the assessee had furnished inaccurate particulars of income, leading to the imposition of the penalty. However, the Tribunal, in a separate order dated 12.01.2024, had already deleted the additions made by the AO regarding the disallowance of depreciation. Additionally, for other issues of disallowance on deferred expenditure, the matter had been restored to the files of the Commissioner of Income Tax (Appeals). Consequently, the Tribunal found that on merits, the penalty was not sustainable. As a result, the grounds raised by the Assessee were allowed, and the appeal was allowed, setting aside the impugned penalty order.

This summary provides a detailed overview of the issues involved in the legal judgment, focusing on the validity of the penalty notice and the sustainability of the penalty order based on inaccurate particulars of income.