2025 (10) TMI 1377 - AT - Income Tax

Notice specificity for section 271(1)(c): ambiguity between concealment and inaccurate particulars vitiates penalty; penalty quashed.

A penalty under section 271(1)(c) cannot stand where the initiating notice under section 274 fails to specify which limb-concealment of particulars of ... Penalty u/s 271(1)(c) - non specification of clear charge - Ambiguity in show-cause notice - whether the penalty has been levied for concealment of income or furnishing inaccurate particulars of income. HELD THAT: - The Tribunal found that the penalty notice did not strike out either of the twin limbs under section 271(1)(c) and thus remained ambiguous. Applying the principle articulated in PCIT v. Smt. Baisetty Revathi [2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] the Tribunal held that when penalty proceedings are penal in nature the specific ground for levy must be unequivocally stated so the assessee has a proper opportunity to defend. The ambiguity in the notice deprived the assessee of a clear charge and vitiated the penalty proceedings; accordingly the penalty could not be sustained. [Paras 8, 9] Final Conclusion: The Tribunal quashed the penalty levied under section 271(1)(c) for AY 2010-11 because the show-cause notice was ambiguous as it did not specify whether the charge was concealment of income or furnishing inaccurate particulars, and allowed the appeal. Issues: Whether the penalty levied under section 271(1)(c) of the Income-tax Act, 1961 can be sustained where the notice under section 274 read with section 271(1)(c) did not specify which limb-concealment of particulars of income or furnishing inaccurate particulars of income-was being invoked.Analysis: Section 271(1)(c) imposes penalty for concealment of particulars of income or furnishing inaccurate particulars of income; section 274 prescribes issuance of notice initiating penalty proceedings. The notice must specify the particular ground relied upon so that the assessee has a clear and unambiguous charge and fair opportunity to defend. The notice in the present case did not strike out either of the twin charges and thereby remained ambiguous as to whether concealment or furnishing inaccurate particulars was the basis for penalty. Reliance was placed on the jurisdictional High Court decision in PCIT vs. Smt. Baisetty Revathi which held that ambiguity in a show-cause notice under section 271(1)(c) vitiates the penalty proceedings because the penal charge must be unequivocal and specific. Applying that principle to the facts where the AO did not specify the particular limb, the penalty proceedings lack the required clarity and procedural fairness.Conclusion: The penalty order under section 271(1)(c) of the Income-tax Act, 1961 is quashed. The appeal is allowed in favour of the assessee.