2024 (4) TMI 424 - AT - Income Tax

Penalty under Section 271(1)(c) quashed due to defective notice under Section 274 failing to specify exact default

ITAT Raipur quashed penalty under Section 271(1)(c) due to defective notice under Section 274. The AO failed to strike off irrelevant defaults and did not ... Penalty u/s 271(1)(c) - defective notice u/s 274 - as argued AO had failed to strike-off the irrelevant default while calling upon the assessee to explain as to why he may not be subjected to penalty u/s 271(1)(c) - HELD THAT:- Failure on the part of the A.O to clearly put the assessee to notice as regards the default for which penalty u/s 271(1)(c) was sought to be imposed on him by clearly and explicitly pointing out the specific default in the SCN(s) for which he was called upon to explain that as to why penalty u/s. 271(1)(c) of the Act may not be imposed upon him had left the assessee guessing of the default for which he was being proceeded against, and further divested him of an opportunity to put forth an explanation before the A.O that no such penalty was called for in his case. We, thus, are of a strong conviction that as the A.O had clearly failed to discharge his statutory obligation of fairly putting the assessee to notice as regards the defaults for which he was being proceeded against, therefore, the penalty u/s 271(1)(c) imposed by him being in clear violation of the mandate of Sec. 274(1) of the Act cannot be sustained. Thus we are not being able to persuade ourselves to subscribe to the imposition of penalty by the A.O, therefore, set-aside the order of the CIT(A) who had upheld the same. The penalty imposed by the A.O under Sec.271(1)(c) is quashed in terms of our aforesaid observations. Assessee appeal allowed. Issues Involved:1. Validity of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income and concealment of income.2. Validity of the show cause notices issued u/s 274 r.w.s 271(1)(c).Summary:Issue 1: Validity of Penalty u/s 271(1)(c)The assessee was penalized under Sec. 271(1)(c) for furnishing inaccurate particulars of income and concealment of income for the assessment years 2009-10 and 2014-15. The penalty was confirmed by the CIT(A). The Tribunal noted that the penalty proceedings were initiated following a search and seizure action u/s 132 and subsequent assessment u/ss 153A/143(3). The penalty was imposed due to the alleged furnishing of inaccurate particulars and concealment of income.Issue 2: Validity of Show Cause NoticesThe Tribunal found that the Assessing Officer (A.O) issued two show cause notices (SCNs) dated 16.12.2016 and 18.05.2017, which failed to specify the exact default for which the penalty was being imposed. The SCNs did not clearly indicate whether the penalty was for 'concealment of particulars of income' or 'furnishing of inaccurate particulars of income,' thus violating the statutory obligation of the A.O to inform the assessee of the specific charge. This failure was seen as a lack of application of mind and deprived the assessee of a fair opportunity to defend himself.Judicial Precedents:The Tribunal referred to several judicial pronouncements, including:- Prashant Manohar Bhagwat Vs. ITO (2023) 68 CCH 674 (Raipur)- CIT Vs. SSA Emerald Meadows (2015) 94 CCH 334 (Kar.)- PCIT Vs. Modi Rubber Ltd. (2024) 296 Taxman 381 (Delhi)These cases emphasized the necessity for the A.O to clearly specify the charge in the SCN to ensure the assessee is aware of the exact default and can prepare a defense accordingly.Conclusion:The Tribunal concluded that the penalty imposed u/s 271(1)(c) could not be sustained due to the failure of the A.O to specify the exact default in the SCNs. The penalty orders were quashed, and the appeals of the assessee for both assessment years were allowed.Result:- ITA No.93/RPR/2024 (A.Y. 2009-10): The penalty of Rs. 1,04,530/- was quashed.- ITA No.94/RPR/2024 (A.Y. 2014-15): The penalty of Rs. 72,600/- was quashed.Order Pronounced:The order was pronounced in open court on 08th April 2024.