2025 (2) TMI 88 - AT - Income Tax

Penalty u/s 271(1)(c) - defective notice issued u/s 274 - non specification of clear charge - as argued no specific charge has been brought in the impugned penalty order by AO against the Appellant for initiation and subsequent levy of penalty - HELD THAT - As in notice it shows that as for the purpose of section 271(1)(c) it is not specifically mentioned as to under which limb of the default for which penalty is leviable the assessee was called on to reply and face penalty proceedings. In this context the law is now quite settled that the penalty proceedings should be based on a notice wherein it should be specifically mentioned as to penalty proceedings in regard to concealment of income or for furnishing inaccurate particulars of income. We find that even there is no striking of the irrelevant part while issuing notice u/s 274 of the Act. Thus the penalty notices are not sustainable under law. See MANJUNATHA COTTON AND GINNING FACTORY 2013 (7) TMI 620 - KARNATAKA HIGH COURT MR. MOHD. FARHAN 2021 (3) TMI 608 - BOMBAY HIGH COURT (LB) and M/S. SAHARA INDIA LIFE INSURANCE COMPANY LTD. 2019 (8) TMI 409 - DELHI HIGH COURT - Appeal of the assessee is allowed.

Summary

The Appellate Tribunal ITAT Delhi, comprising Accountant Member Shri Shamim Yahya and Judicial Member Shri Anubhav Sharma, addressed an appeal by the Assessee against the Commissioner of Income-tax (Appeals)-XXV, New Delhi's order dated 16.12.2019. The appeal arose from an order dated 23.03.2017 under section 271(1)(c) of the Income Tax Act, 1961, by the ITO, Ward 24(1), New Delhi.The primary contention was ground No.4, where the Assessee argued that the CIT(A) erred in upholding the penalty under section 271(1)(c) without a specific charge in the penalty order. The Assessee's representative argued that the notice issued under section 274 was legally insufficient, as it failed to specify whether the penalty was for "concealment of income" or "furnishing inaccurate particulars of income," as required by settled law.The Tribunal noted that the penalty notice did not specify the default limb, rendering it unsustainable. Reliance was placed on precedents including CIT vs. Manjunatha Cotton and Ginning Factory, Mr. Mohd. Farhan A. Shaikh vs. ACIT, and PCIT vs. Sahara India Life Insurance Co. Ltd., which emphasize the necessity of specificity in penalty notices.Consequently, the Tribunal sustained ground No.4, quashed the penalty proceedings, and allowed the Assessee's appeal. The order was pronounced in open court on 31.01.2025.