2022 (1) TMI 1159 - AT - Income Tax

Penalty Notice Invalidated for Non-Specification

The Tribunal found the penalty notice issued under Section 274 read with Section 271(1)(c) to be invalid due to non-specification of the charge, leading ... Levy penalty u/s 271(1)(C) - defective notice u/s 274 - assessee has argued that the penalty notice nowhere speaks about specific limb to levy the penalty because the particular charge was not tick off in the notice, therefore, in the said circumstances, the penalty is not liable to be sustainable in the eyes of law - HELD THAT:- It is not in dispute that the penalty u/s 271(c) of the Act is leviable on account of the concealment of particular of income and on account of furnishing the inaccurate particulars of income. Both have different connotations. In this regard, the Hon’ble Supreme Court has appreciated the distinction between both the limb in the case Dilip N. Shroff [2007 (5) TMI 198 - SUPREME COURT] - As per the record, the assessment order speaks about levying the penalty on account of taken the action in view of provisions u/s 274 r.w.s. 271 (1)(c) of the Act but the notice nowhere specify any limb to levy the penalty. The notice is not justifiable in view of the law settled by the Bombay High Court in the case of CIT-11 Vs. Samson Perinchery.[2017 (1) TMI 1292 - BOMBAY HIGH COURT] Notice issued by the Assessing Officer u/s 274 r.w.s. 271(1)(c) of the Act is untenable as it suffers from the vice of non-application of mind - Decided in favour of assessee. Issues Involved:1. Confirmation of penalty levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961.2. Validity of the penalty notice issued under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961.Issue-Wise Detailed Analysis:1. Confirmation of Penalty Levied by the AO under Section 271(1)(c):The assessee filed an appeal against the order confirming the penalty levied by the AO. The AO had determined the total income to be Rs. 46,67,940 against the returned income of Rs. 39,81,041 for the Assessment Year (A.Y.) 2007-08. The AO noticed a cash balance of Rs. 6,70,891 in the assessee's proprietary concern and, upon failure to provide documentary evidence, added this amount under Section 68 of the Act. Consequently, a penalty of Rs. 2,36,464 was levied under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars of income. The CIT(A) confirmed this penalty, leading to the present appeal.2. Validity of the Penalty Notice Issued under Section 274 read with Section 271(1)(c):The core issue raised by the assessee was the validity of the penalty notice, which did not specify the exact charge—whether it was for concealment of particulars of income or for furnishing inaccurate particulars. The assessee argued that the notice was defective as it did not strike off the irrelevant limb, thus failing to inform the assessee of the specific charge. This argument was supported by various judicial precedents, including the Supreme Court's decision in Dilip N. Shroff v. CIT and the Bombay High Court's decision in CIT v. Samson Perinchery.The Tribunal examined the notice and found that it did not specify the limb under which the penalty was initiated. The Tribunal noted that both concealment of income and furnishing inaccurate particulars have different connotations and that the assessee must be made aware of the specific charge to defend accordingly. The Tribunal referred to the Supreme Court's observation that non-striking off irrelevant clauses in the notice reflects non-application of mind by the AO, rendering the notice invalid.The Tribunal also considered the argument that the AO's assessment order indicated a specific charge. However, it was held that the notice itself must clearly convey the charge, and failure to do so violates principles of natural justice. The Tribunal cited the Bombay High Court's decision in Samson Perinchery and the ITAT's decision in Meherjee Cassinath Holdings P. Ltd. v. ACIT, which emphasized the necessity of specifying the charge in the penalty notice.Conclusion:The Tribunal concluded that the penalty notice issued under Section 274 read with Section 271(1)(c) was invalid due to non-application of mind and failure to specify the charge. Consequently, the penalty levied was deleted. The appeal filed by the assessee was allowed, and the order confirming the penalty was set aside.Order:The appeal filed by the assessee is hereby allowed. The penalty imposed under Section 271(1)(c) of the Act is deleted.Order pronounced in the open court on 28/01/2022.