Appeal succeeds as tribunal finds ambiguity in penalty notice under Income Tax Act 1961

The appeal challenged the penalty confirmation under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2015-16 due to ambiguity in the notice and penalty imposition. The Tribunal found that the notice and penalty order lacked specificity and clarity, invoking both limbs of the section without distinction. Relying on precedent, the Tribunal held that such ambiguity vitiates the proceedings. Consequently, the penalty confirmation was set aside, and the appeal was allowed in favor of the assessee.

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Issues:
The appeal challenges the order confirming penalty under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2015-16 based on the ambiguity in the notice and levy of penalty.

Ambiguity in Notice:
The appellant argued that the notice issued under section 271(1)(c) of the Act was defective as it did not specify the relevant clause and both limbs of the section were mentioned without striking off the irrelevant one. Citing the decision of the Bombay High Court in a similar case, the appellant contended that such defects render the notice invalid.

Defence by the Department:
The Departmental Representative contended that the penalty was justified as the assessee had wrongly claimed deduction under section 35D of the Act, leading to the levy of penalty under section 271(1)(c) by the Assessing Officer.

Analysis and Decision:
Upon examination of the orders and the assessment record, it was found that the Assessing Officer had issued a notice invoking both limbs of section 271(1)(c) without clarity. The subsequent penalty order also lacked specificity, starting with the charge of concealment but ultimately penalizing for furnishing inaccurate particulars. The Tribunal emphasized that in penalty proceedings, clarity and specificity are crucial, and any ambiguity in the notice or order can vitiate the entire proceedings. Relying on the Full Bench decision of the Bombay High Court, it was held that the defective notice and the subsequent proceedings were vitiated due to the ambiguity in the charges. Consequently, the impugned order confirming the penalty was set aside, and the appeal of the assessee was allowed.

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