2024 (11) TMI 1021 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice u/s 274 - no specific limb of the penalty indicated - HELD THAT - We find considerable cogency in the contention of the Ld. AR that notice dated 24.11.2016 u/s 274 r.w.s. 271 (1)(c) of the Act was issued to the Assessee wherein, no specific limb of the penalty indicated i.e., whether it is for concealment of particulars of income or for furnishing of inaccurate particulars of income, which is not sustainable in the eyes of law and illegal, as per the settled law. Assessee appeal allowed.

Summary

Issues:
1. Validity of penalty order under section 271(1)(c) of the Income Tax Act.
2. Jurisdiction of the Assessing Officer in initiating penalty proceedings.
3. Confirmation of penalty by the Ld. CIT(A) under section 271(1)(c).

Analysis:

Issue 1: Validity of penalty order under section 271(1)(c) of the Income Tax Act
The appellant challenged the penalty order under section 271(1)(c) on the grounds that the notice issued by the Assessing Officer did not specify whether it was for concealment of particulars of income or for furnishing inaccurate particulars of income. The appellant argued that such a notice is illegal and without jurisdiction. The appellant cited various case laws where similar issues were decided in favor of the assessee. The Tribunal found merit in the appellant's contention, citing previous decisions where penalties were quashed due to defective notices. The Tribunal held that the penalty order and the confirmation by the CIT(A) were erroneous due to the defective notice, and accordingly, the penalty was quashed.

Issue 2: Jurisdiction of the Assessing Officer in initiating penalty proceedings
The appellant contended that the Assessing Officer wrongly assumed jurisdiction under section 147/143(3) for the penalty proceedings, as the same addition had already been made in the hands of another assessee. The Tribunal agreed with the appellant's argument, stating that the penalty proceedings were void ab initio due to the same addition being made in the hands of another assessee. The CIT(A) was criticized for not adjudicating on this issue and ignoring the submissions of the assessee.

Issue 3: Confirmation of penalty by the Ld. CIT(A) under section 271(1)(c)
The Ld. CIT(A) confirmed the penalty of Rs. 13,60,455 under section 271(1)(c). However, the Tribunal found that the penalty was not sustainable due to the defective notice issued by the Assessing Officer. Citing various legal precedents, the Tribunal held that the penalty was to be deleted as the notice did not specify the charge for which the penalty was initiated. The Tribunal set aside the orders of the authorities below and deleted the penalty in dispute.

In conclusion, the Tribunal allowed the appeal filed by the assessee, quashed the penalty, and set aside the orders of the authorities below. The penalty was deleted due to the defective notice issued by the Assessing Officer, rendering the penalty unsustainable.