2024 (10) TMI 742 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice u/s 274 - allegation of non specification of clear charge - AO reached at the conclusion that the assessee has furnished inaccurate particulars of income in order to decrease its tax liability - HELD THAT -We note that assessee has duly raised issue against the assumption of jurisdiction for the levy of section 271(1)(c) that in the penalty notice, relevant limb was not specified whether the penalty proceedings were initiated for concealment of income or furnishing of inaccurate particulars of income. When the same was not so specified in the penalty notice it has been held in the case laws cited before us that mention of the same in the assessment order or penalty order cannot cure fatal short-coming. When the charge has not been specified in the notice, it is an omnibus notice. In such circumstances, Hon ble jurisdictional High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. 2019 (8) TMI 409 - DELHI HIGH COURT has held that the penalty order passed is liable to be quashed on account of this defect which is fatal. Full Bench of Hon ble Bombay High Court in the case of Mr. Mohd. Farhan A. Shaikh 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) has held that no specification of charge in the penalty notice leads to same becoming void and penalty on that count is to be deleted. Thus on the undisputed proposition that relevant limb of the penalty notice was not specified as to whether penalty was for concealment or furnishing of inaccurate particulars of income, we direct that the penalty in this case is liable to be deleted. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee.

Summary

Issues:
1. Validity of penalty proceedings initiated under section 271(1)(c) of the Income-tax Act.
2. Specificity requirement in the notice issued under section 274 of the Act for penalty proceedings.

Analysis:
The judgment pertains to an appeal filed by the assessee against the penalty proceedings initiated by the Assessing Officer under section 271(1)(c) of the Income-tax Act. The Assessing Officer had levied a penalty of Rs. 55,95,68,564/- @ 100% for furnishing inaccurate particulars of income to decrease tax liability. The assessee contended that the notice issued under section 274 read with section 271(1)(c) was defective as it did not specify the relevant limb for initiating the penalty proceedings.

The assessee raised a legal ground challenging the initiation of penalty proceedings, citing the case of NTPC Ltd. vs. CIT. The Tribunal admitted this ground as it was deemed to be crucial to the case based on legal precedents. The counsel for the assessee argued that the notice issued was defective as it did not specify the charge, relying on judgments such as Mr. Mohd. Farhan A. Shaikh vs. ACIT and PCIT vs. Sahara India Life Insurance Co. Ltd. The Revenue objected to these submissions, supporting the orders of the authorities below.

Upon considering the submissions and reviewing the material on record, the Tribunal noted that the Assessing Officer had indeed failed to specify the relevant limb for initiating the penalty proceedings in the notice issued under section 274 of the Act. Citing legal precedents, including the case of PCIT vs. Sahara India Life Insurance Co. Ltd. and Mr. Mohd. Farhan A. Shaikh vs. ACIT, the Tribunal held that the penalty order was liable to be quashed due to this fatal defect. The Tribunal directed the deletion of the penalty, setting aside the orders of the authorities below and deciding the issue in favor of the assessee.

As the penalty was quashed on the jurisdictional issue of specificity in the notice, the Tribunal did not adjudicate on the merits of the penalty levied, deeming it academic in nature. Consequently, the appeal filed by the assessee was allowed, and the penalty was deleted. The judgment was pronounced on August 9, 2024.