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2024 (10) TMI 1581 - HC - Income TaxPenalty u/s 271 (1) (c) - defective notice u/s 274 - Tribunal has on facts found that the notice which was served upon the Assessee for seeking his explanation was not clear and unambiguous and Assessing Authority concerned had not recorded its satisfaction with regard to one of the two limbs or on both the limbs indicated in clause (c) of sub-section 1 of Section 271 - HELD THAT - Assessing Authority was itself not clear, whether it was a case of concealment of particulars of income by the Assessee or his failure to furnish correct particulars of such income - Assessee too was deprived of a clear opportunity to give the explanation in view of the confusion created by the Assessing Authority itself. It is in these circumstances, the Tribunal, after relying upon the several precedents, came to the correct conclusion that it was a case where the Assessee had not given the proper opportunity to offer his explanation and, therefore, the impugned order of imposition of penalty was vitiated being in violation of the principles of natural justice. Tribunal also found fault with the requisite satisfaction which the Assessing Authority was required to arrive at before initiating the penalty proceedings. Be that as it may, the order impugned before us does not suffer from any illegality and, therefore, there is no case made out for interference with the judgment of the Tribunal - Decided against revenue.
Issues:
Appeal against order under Section 260-A of the Income Tax Act, 1961 for assessment year 2011-12. Determination of whether penalty proceedings under Section 271(1)(c) can be vitiated if satisfaction is derived by the Assessing Authority. Clarity in notice served to the Assessee for explanation on concealment or furnishing incorrect particulars of income. Compliance with principles of natural justice in penalty proceedings. Analysis: The appeal was filed against an order under Section 260-A of the Income Tax Act, 1961 for the assessment year 2011-12. The main issue revolved around whether the penalty proceedings under Section 271(1)(c) could be vitiated if the satisfaction was derived by the Assessing Authority. The Court identified the key question of law as determining whether the proceedings for imposition of penalty could be vitiated if satisfaction was derived by the relevant authority during the course of any proceedings under the Income Tax Act. The Court highlighted the necessity for the authority to be satisfied that the person had concealed income or furnished incorrect particulars before initiating penalty proceedings. The Court observed that the Tribunal found the notice served to the Assessee for seeking explanation was not clear and unambiguous. The Assessing Authority had not clearly recorded its satisfaction regarding the concealment of income or furnishing incorrect particulars. The notice issued was composite, creating confusion for the Assessee to provide a proper explanation. The Tribunal concluded that the Assessee was not given a fair opportunity to offer an explanation, leading to a violation of natural justice principles. The Tribunal also noted deficiencies in the required satisfaction by the Assessing Authority before initiating penalty proceedings. Ultimately, the Court agreed with the Tribunal's decision that the imposition of penalty was vitiated due to procedural irregularities. However, the Court pointed out that the Tribunal did not grant liberty to the Income Tax Authorities to issue a fresh notice in compliance with the law. Despite finding no illegality in the impugned order, the Court dismissed the appeal, stating it lacked merit. The Court left open the option for the appellants to proceed against the respondent in accordance with the law if necessary.
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