Penalty under section 271(1)(c) quashed due to defective notice under section 274 failing to specify grounds

ITAT Delhi quashed penalty levied under section 271(1)(c) due to defective notice under section 274. The AO failed to specify whether penalty proceedings were initiated for concealment of income particulars or furnishing inaccurate particulars. Following Bombay HC precedent in Mohd. Farhan A. Shaikh, the tribunal held that notices must clearly indicate the specific limb under section 271(1)(c) and strike off irrelevant portions. The penalty order was declared bad in law and quashed in favor of the assessee.

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Issues Involved:
1. Validity of the penalty order due to non-specification of the exact charge u/s 271(1)(c) of the Act.
2. Legal precedents regarding the requirement to specify the exact charge in penalty notices.

Summary:

Issue 1: Validity of the penalty order due to non-specification of the exact charge u/s 271(1)(c) of the Act.

The assessee challenged the penalty order on the grounds that the penalty proceedings were initiated and levied without specifying the exact charge under section 271(1)(c) of the Act. The AO did not clarify whether the penalty was for "concealment of particulars of income" or "furnishing of inaccurate particulars of income". The Tribunal observed that the penalty notice issued u/s 274 r.w.s. 271(1)(c) was mechanical and vague, failing to specify the exact limb of the charge.

Issue 2: Legal precedents regarding the requirement to specify the exact charge in penalty notices.

The Tribunal referenced several legal precedents to support its decision. The Hon'ble Bombay High Court in Mr. Mohd. Farhan A. Shaikh vs. ACIT [434 ITR 1] held that an omnibus notice suffers from vagueness and does not meet the statutory requirement. The Hon'ble Delhi High Court in PCIT Vs. Sahara India Life Insurance Co. Ltd. [432 ITR 84] and PCIT Vs. Gopal Kumar Goyal [153 taxmann.com 534] upheld that a penalty notice must specify the exact charge under section 271(1)(c) to be valid.

In conclusion, the Tribunal held that the penalty order passed u/s 271(1)(c) was bad in law due to the failure to specify the relevant limb of the charge in the notice. Consequently, the penalty order for AY 2014-15 was quashed, and the appeal of the assessee was allowed.

Order pronounced in the open court on 09.04.2024.

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