Penalty Overturned: Tribunal Sets Aside Penalty Due to Lack of Specificity in Notice u/s 271(1)(c.

The Tribunal allowed the assessee's appeal, setting aside the penalty under section 271(1)(c) due to the penalty notice's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The lack of specificity in the notice rendered the penalty unsustainable, aligning with precedents requiring clear grounds for penalties.

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Issues:
Penalty under section 271(1)(c) for various additions.

Analysis:
The appeal was filed against the order of the ld. CIT(A)-LTU, New Delhi. The grounds raised by the assessee included challenges to the penalty levied under section 271(1)(c) for different additions. The penalty was imposed for disallowance on account of non-compete fee, expenditure for increased authorized capital, and incorrect deduction claimed under section 80HHC for interest earned.

The Ld. AR argued that the notice issued for the penalty was invalid as it did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars of income, as required by section 271(1)(c). It was emphasized that the assessing officer must be satisfied prima facie that the assessee has either concealed income or furnished inaccurate particulars before issuing a valid penalty notice under section 274.

On the other hand, the Ld. DR contended that the assessee was aware of the reasons for the penalty and had responded to the show cause notice. However, upon review, it was found that the penalty notice did not clearly specify the grounds for the penalty as required by law.

Citing precedents, it was highlighted that the notice under section 274 should expressly state whether the penalty is for concealment of income or furnishing incorrect particulars. The failure to specify the precise charge in the penalty notice was deemed fatal to the imposition of the penalty. The Tribunal, in line with the decisions of the High Courts, concluded that since the notice did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, the penalty imposed was unsustainable.

Therefore, the appeal of the assessee was allowed, and the penalty levied under section 271(1)(c) was set aside due to the lack of specificity in the penalty notice.

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