Penalty Order Quashed: Lack of Specificity in Notice Invalidates Income Tax Penalty for Assessment Year 2010-11.

The appeal challenging the penalty order under section 271(1)(c) of the Income Tax Act, 1961, was allowed. The HC quashed the penalty order due to the lack of specificity in the penalty notice, as the Assessing Officer (AO) failed to clearly specify whether the penalty was for concealment of income or furnishing inaccurate particulars. The court cited a relevant decision indicating that failure to strike off irrelevant charges in the notice invalidates the penalty proceedings. As a result, the penalty imposed on the assessee for the assessment year 2010-11 was set aside.

---

---

Issues involved:
The appeal challenging the penalty order under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11.

Grounds raised by the assessee:
1. The CIT(A) erred in sustaining the penalty.
2. The AO did not specify the basis for the penalty in the show cause notice.
3. The penalty was levied for furnishing inaccurate particulars of income.
4. No penalty should be levied where addition is made on the basis of income estimation.
5. The AO did not strike off any of the twin charges in the notice.

Detailed Judgment:
The assessee, engaged in civil and interior work, filed its return of income declaring a total income. A survey revealed bogus purchases, leading to additions in the total income. Subsequently, a penalty was imposed under section 271(1)(c) of the Act. The CIT(A) upheld the penalty, prompting the appeal.

During the hearing, the AR argued that the penalty lacked specificity in the head under which it was levied. The AO had not clearly stated whether the penalty was for concealment of income or furnishing inaccurate particulars. The DR supported the lower authorities' decision.

Upon review, it was observed that the penalty notice did not specify the basis for the penalty. Citing a relevant court decision, it was held that failure to strike off irrelevant matters in the notice would invalidate the penalty proceedings. Consequently, the penalty order was quashed, and the appeal by the assessee was allowed.

In conclusion, the penalty order under section 271(1)(c) of the Act was set aside based on the lack of specificity in the penalty notice, as per the decision of the Jurisdictional High Court.

---