2022 (6) TMI 1410 - AT - Income Tax

Tribunal cancels penalty for unsecured loans in income, stresses notice requirement.

Shri Chetan Gupta Versus DCIT, Central Circle-12, New Delhi.

The Tribunal annulled the penalty imposed under section 271(1)(c) for the addition of unsecured loans to total income during the financial year 2003-04. ... Penalty u/s 271(1)(c) - unsecured loans received during the F.Y. 2003-04 - HELD THAT:- As decided in Manjunatha Cotton and Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law. In Mr. Mohd. Farhan A. Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT] - Penalty-Concealment-Non-striking off of the irrelevant part while issuing notice u/s 271(1)(c) of the Income Tax Act, order is bad in law. Assessee must be informed of the ground of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. In the case of PCIT vs. Sahara India Life Insurance Co. Ltd.[2019 (8) TMI 409 - DELHI HIGH COURT]reiterated that notice under section 274 should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically. The aforesaid principle has been reiterated in the in the case of CIT vs. SSA'S Emerald Meadows [2016 (8) TMI 1145 - SC ORDER] Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, the penalty levied is hereby obliterated. Issues involved:1. Addition of unsecured loans to total income during F.Y. 2003-042. Penalty u/s 271(1)(c) for the above additionAnalysis:Issue 1: Addition of unsecured loans to total income during F.Y. 2003-04The present appeals were filed against the orders of the ld. CIT(A)-24, New Delhi, dated 22.12.2014. The Assessing Officer made an addition to the total income on account of unsecured loans received during the financial year 2003-04. The penalty under section 271(1)(c) was also levied by the AO. It was noted that penalty proceedings under section 271(1)(c) were initiated separately. The penalty order specifically mentioned that penalty proceedings were initiated for concealment and failure to furnish true particulars of income. The AO held the assessee in default for concealing income. The Tribunal considered several judgments, including those from the Karnataka High Court, Bombay High Court, and Delhi High Court, emphasizing the importance of the notice under section 274 specifying the grounds for penalty imposition. Following the principles laid down by the jurisdictional High Court, the Tribunal obliterated the penalty levied.Issue 2: Penalty u/s 271(1)(c) for the above additionThe Tribunal, guided by relevant judgments, emphasized the necessity for the notice under section 274 to clearly state the grounds for penalty imposition, whether for concealment of income or furnishing incorrect particulars. The Tribunal highlighted that sending a printed form with all grounds mentioned in section 271 would not fulfill the legal requirements. Citing cases from different High Courts, the Tribunal reiterated that the assessee must be informed of the grounds of penalty proceedings through a statutory notice to avoid vagueness. Ultimately, the Tribunal, following the order of the jurisdictional High Court, allowed the appeals of the assessee and annulled the penalty levied. The order was pronounced in the open court on 28/06/2022.