2019 (7) TMI 1028 - AT - Income Tax

Penalty Cancelled due to Defective Notice: Precision in Penalty Proceedings

Income Tax Officer Ward-1 Srikakulam Versus M/s Sai Gold Palace

The Tribunal upheld the CIT(A)'s decision to cancel a penalty of &8377; 42,53,875/- under section 271(1)(c) of the Income Tax Act. The penalty was ... Penalty levied u/s 271(1)(c) - non striking irrelevant column in notice - difference between the remuneration claimed by the partners and the remuneration allowed as per the Act - HELD THAT:- There is no dispute that the AO had issued the notice seeking explanation of the assessee without referring to the specific charge of concealment of income or furnishing of inaccurate particulars. As per the notice the AO sought explanation for concealment of income or furnishing of inaccurate particulars which leads to ambiguity and confusion to the assessee as well as the AO. On identical facts, this Tribunal in KONCHADA SREERAM VERSUS INCOME TAX OFFICER, WARD-1 (1) , VISAKHAPATNAM [2017 (11) TMI 1164 - ITAT VISAKHAPATNAM] held that the notice issued u/s 271(1)(c) without striking irrelevant column renders the notice invalid. Since the Ld.CIT(A) has followed the decision of SMT. BAISETTY REVATHI [2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] and the order of this Tribunal in KONCHADA SREERAM, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. - Appeal of the revenue is dismissed. Issues:Penalty u/s 271(1)(c) - Ambiguity in notice issued by AO - Concealment of income or furnishing inaccurate particulars.Analysis:The appeal before the Appellate Tribunal ITAT VISAKHAPATNAM pertained to the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The assessee had declared a total income of &8377; 1,13,03,068/-, but during assessment, an excess stock of gold jewellery amounting to &8377; 1,37,66,588/- was found and admitted as additional income for the A.Y 2014-15. Additionally, a discrepancy in partner remuneration led to an addition of &8377; 24,81,568/-. The Assessing Officer initiated a penalty of &8377; 42,53,875/- under section 271(1)(c) of the Act, which was later cancelled by the CIT(A) due to a defective notice leading to ambiguity. The notice did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, as required by law. The CIT(A) relied on judicial precedents and held that the notice was invalid due to the ambiguity, following the decisions of the jurisdictional High Court and the Tribunal in similar cases.The Tribunal upheld the CIT(A)'s decision, emphasizing that the notice issued by the AO lacked clarity by not specifying the exact charge of concealment of income or furnishing inaccurate particulars. The Tribunal noted that such ambiguity in the notice causes confusion for both the assessee and the AO. Citing previous decisions, the Tribunal reiterated that a notice under section 271(1)(c) must unambiguously state the charge to provide the assessee with a fair opportunity to present a defense. As the notice in this case was found to be invalid due to the non-striking of an irrelevant column, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order based on the principles established by the jurisdictional High Court and previous Tribunal decisions.In conclusion, the Tribunal's decision highlighted the importance of clarity in penalty notices under section 271(1)(c) of the Income Tax Act, emphasizing that such notices must unambiguously specify whether the charge pertains to concealment of income or furnishing inaccurate particulars. The judgment underscored the necessity for precision in such notices to ensure fairness and clarity in penalty proceedings, ultimately leading to the dismissal of the revenue's appeal in this case.