Penalty under Section 271(1)(c) set aside due to defective show cause notice covering unmentioned grounds

The ITAT Raipur held that a penalty u/s 271(1)(c) was invalid due to defective show cause notice. The AO issued a notice specifically for "concealment of income" but subsequently imposed penalty for both "concealment" and "furnishing inaccurate particulars" - two distinct defaults under the provision. The tribunal ruled this violated the assessee's statutory right to proper notice and opportunity to defend, as the penalty order covered grounds not mentioned in the original notice. The penalty was set aside in favor of the assessee.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of penalty proceedings initiated u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

Condonation of Delay:

The appeal involved a delay of 6 days. The assessee's Authorized Representative (AR) explained that the delay was due to the health issues of the assessee's son, who manages her business. The Departmental Representative did not object to the condonation. Considering the bona fide reasons, the Tribunal condoned the delay.

Validity of Penalty Proceedings:

The assessee, engaged in the business of petroleum products, had her income reassessed by the A.O. under Sec. 147 of the Act, leading to an addition of Rs. 6,48,359/- to her returned income. Subsequently, a penalty of Rs. 1,45,955/- was imposed u/s 271(1)(c) for "furnishing inaccurate particulars of income" and "concealing the particulars of income".

The Tribunal noted discrepancies in the penalty proceedings. The A.O. initially cited "furnishing inaccurate particulars of income" but later mentioned both "furnishing inaccurate particulars of income" and "concealing the particulars of income" in the penalty order. The Show Cause Notice (SCN) issued u/s 274 r.w.s. 271(1)(c) only mentioned "concealing the particulars of income". This inconsistency indicated non-application of mind by the A.O., violating the principles of natural justice.

The Tribunal referenced several judicial pronouncements, including the Supreme Court's decision in Dilip N. Shroff and the High Court of Bombay's rulings, emphasizing that penalty proceedings require clear and explicit charges. The failure to specify the exact charge in the SCN deprived the assessee of a fair opportunity to defend herself.

Consequently, the Tribunal held that the penalty order was invalid due to the A.O.'s failure to clearly specify the charge in the SCN and the subsequent vague penalty order. The penalty of Rs. 1,45,955/- imposed u/s 271(1)(c) was quashed. The Tribunal refrained from addressing other grounds of appeal related to the merits of the case.

Conclusion: The appeal was allowed, and the penalty imposed was quashed.

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