2023 (6) TMI 1271 - AT - Income Tax

Tribunal invalidates penalty under Income Tax Act for defective notice

The Tribunal ruled in favor of the assessee in a case concerning the validity of a penalty imposed under section 271(1)(c) of the Income Tax Act. The ... Penalty u/s 271(1)(c) - Non specification of clear charge - HELD THAT:- There is no dispute with regard to the fact that the notice issued by the AO does not disclose the specific charge. As in the case of Pr.CIT vs M/s. Sahara India Life Insurance Company Ltd. [2019 (8) TMI 409 - DELHI HIGH COURT] has decided the issue in favour of the assessee. Thus facts are not under dispute regarding the notice being defective. Therefore, we, hereby delete the impugned penalty imposed u/s 271(1)(c) - Decided in favour of assessee. Issues Involved:The issues involved in this case include the validity of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, specifically related to the notice issued under section 274 r.w.s 271 and the charge of concealment of income or furnishing inaccurate particulars of income.Validity of Penalty Notice:The appeal was filed against the order of the Ld. CIT(A) confirming the penalty imposed under section 271(1)(c) for concealment of income and furnishing inaccurate particulars of income. The AO had issued notices under section 274 r.w.s. 271, but failed to specify the charge clearly, leading to ambiguity. The appellant argued that the penalty cannot be imposed due to the defective notice, citing various legal precedents. The Tribunal, in line with the decision of the Hon'ble Delhi High Court, ruled in favor of the assessee, holding that the notice was defective, and consequently deleted the penalty imposed under section 271(1)(c).Assessment and Penalty Imposition:The assessee's income tax return for the assessment year 2012-13 was re-opened for scrutiny under section 147/148 of the Income Tax Act, 1961, due to discrepancies in the declaration of income from capital gains. The Assessing Officer observed that the assessee had not fully disclosed the short term capital gain from the sale of penny scrips, leading to an addition to the assessed income. Subsequently, the AO initiated penalty proceedings under section 271(1)(c) separately, resulting in the imposition of a penalty. The Ld.CIT(A) dismissed the appeal, prompting the assessee to approach the Tribunal.Tribunal's Decision:The Tribunal heard arguments from both parties and reviewed the material on record. It was established that the notice issued by the AO did not specify the charge clearly, aligning with legal precedents that supported the assessee's position. Citing the judgment of the Hon'ble Delhi High Court, the Tribunal concluded that the defective notice rendered the penalty invalid under section 271(1)(c). Consequently, the Tribunal allowed the appeal of the assessee, thereby deleting the imposed penalty.Conclusion:In conclusion, the Tribunal's decision in this case revolved around the defective notice issued by the Assessing Officer under section 274 r.w.s. 271, which failed to specify the charge of concealment of income or furnishing inaccurate particulars of income clearly. The Tribunal, in line with legal precedents, ruled in favor of the assessee, deeming the penalty imposed under section 271(1)(c) invalid and subsequently deleting the same.