2019 (3) TMI 599 - AT - Income Tax

Penalty under Income Tax Act overturned due to improper notice lacking specific charges.

Ms. Neha Sharma Versus I.T.O., Ward 2 (3). Jaipur.

The Tribunal found the penalty imposed under Section 271(1)(c) of the Income Tax Act unsustainable due to the improper and invalid notice that failed to ... Penalty u/s 271(1)(c) - non specification of charge - non specifying in which limb of Section 271(1)(c) the penalty proceedings has been initiated as to whether it was for concealment of income or for furnishing inaccurate particulars of income - defective notice - assessee in return filed u/s 153A declared capital gain on the basis of consideration received as specified in registered sale deed - HELD THAT:- the notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, should specify under which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271 (1) (c) of the Act. There can be no doubt that penalty u/s. 271(1)(c) is levied for concealing particulars of income or for furnishing inaccurate particulars of such Income, which are the two limbs of this provision. The intent and purpose of this notice is to inform the assessee as to the specific charge for which he has been show caused so that he could furnish his reply without any confusion and to the point. In the present case, neither the assessee nor anyone else could make out as to whether the notice u/s. 274 r.w.S. 271 of the Act was issued for concealing the particulars of income or for furnishing inaccurate particulars of such income disabling it to meet with the case of the Assessing Officer. There are a catena of judgments highlighting the necessity for identifying the charge for which the assessee is being visited and in all those decisions, Hon'ble Courts have repeatedly held that where the jurisdictional notice is vague, similar to the one in the present case, the consequent levy cannot be sustained. As decided in SHEVETA CONSTRUCTION CO. PVT. LTD., THROUGH ITS MANAGING DIRECTOR DINESH KR. CHOUDHARY VERSUS ITO, WARD 3 (4) , JAIPUR [2016 (12) TMI 1603 - RAJASTHAN HIGH COURT] A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order. - decided in favour of assessee. Issues Involved:1. Improper and invalid notice issued under Section 271(1)(c) of the Income Tax Act, 1961.2. Absence of specific charge in the penalty notice.3. Estimation of higher capital gains without concrete evidence.4. Application of judicial precedents regarding penalty imposition.Issue-wise Detailed Analysis:1. Improper and Invalid Notice Issued Under Section 271(1)(c):The primary grievance of the assessee was the imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961, without specifying whether it was for concealment of income or for furnishing inaccurate particulars of income. The assessee argued that the notice issued under Section 271(1)(c) was improper and invalid as it did not clearly state the specific charge. The Tribunal noted that the assessment order and the penalty notice did not provide a clear satisfaction regarding the specific limb under which the penalty was initiated. The Tribunal emphasized that determination of the specific limb is sine qua non for the imposition of penalty under Section 271(1)(c).2. Absence of Specific Charge in the Penalty Notice:The Tribunal observed that the notice under Section 274 read with Section 271 of the Act was vague, as it mentioned both limbs—concealment of income and furnishing inaccurate particulars of income—without striking off the irrelevant portion. The Tribunal relied on several judicial precedents, including the Hon'ble Karnataka High Court's decision in CIT Vs. SSA’s Emerald Meadows and Manjunatha Cotton & Ginning Factory, which held that the penalty notice must specify the exact charge. The Tribunal concluded that the absence of a specific charge rendered the penalty notice invalid.3. Estimation of Higher Capital Gains Without Concrete Evidence:On merits, the assessee contended that the higher capital gains were determined by the Assessing Officer based on an estimate without any concrete evidence. The assessee argued that no material or evidence was found during the search that could establish that the assessee received any amount as on-money over and above the consideration specified in the registered sale deed. The Tribunal noted that the Assessing Officer had estimated the sale value of the plot(s) of land sold by the assessee based on the statement recorded from the assessee’s grandfather and a seized paper. The Tribunal found that the higher capital gains were determined only by estimation, which could not justify the imposition of penalty.4. Application of Judicial Precedents Regarding Penalty Imposition:The Tribunal extensively referred to various judicial precedents to support its decision. It cited the Hon'ble Karnataka High Court's decision in Manjunatha Cotton & Ginning Factory, which emphasized that the notice under Section 274 should specifically state the grounds for penalty—whether for concealment of income or furnishing inaccurate particulars of income. The Tribunal also referred to the Hon'ble Supreme Court's dismissal of the SLP against the Karnataka High Court's decision, thereby approving the findings. Additionally, the Tribunal relied on decisions from other High Courts, including the Hon'ble Bombay High Court in CIT v. Shri Samson Perinchery and the Hon'ble Rajasthan High Court in Shevata Construction Co. Pvt. Ltd., which upheld the necessity of specifying the exact charge in the penalty notice.Conclusion:The Tribunal concluded that the penalty imposed under Section 271(1)(c) was not sustainable in law due to the improper and invalid notice that failed to specify the exact charge. The Tribunal directed the Assessing Officer to delete the penalty imposed on the assessee. The appeal of the assessee was allowed, and the order was pronounced in the open court on 08th March 2019.