2024 (6) TMI 883 - AT - Income Tax

Penalty under Section 271(1)(c) quashed due to defective notice under Section 274 lacking specification of concealment nature

ITAT Mumbai quashed penalty under Section 271(1)(c) due to defective notice under Section 274. The AO failed to specify the nature of concealment in the ... Penalty U/s 271(1)(c) - defective notice u/s 274 - non specification of clear charge - HELD THAT:- AO did not mention the nature of concealment in the notice issued u/s 274/271(1)(c). The counsel laid down that in the absence of such specific notice, the notice would be invalid. As held in various judicial pronouncements including the decision of SAS’s Emerald Meadows [2015 (11) TMI 1620 - KARNATAKA HIGH COURT] against which Special Leave Petition (SLP) filed by the department stood dismissed by Hon’ble Supreme Court [2016 (8) TMI 1145 - SC ORDER]. The notice u/s 274/271(1)(c) of the Act is not carrying the specific limb. Therefore, this is a case where both the parts of the offences i.e., concealment of income as well as furnishing of inaccurate particulars of income were involved. Finally, respectfully following the binding judicial precedents as cited aforesaid, we are of the considered opinion that the impugned penalty is not sustainable on legal grounds. The issue was agitated before the ld. CIT(A) but the issue is not adjudicated in appeal order. The ld. DR is unable to submit any contrary judgment before the bench. Hence, penalty U/s 271(1)(c) is quashed. We allow the appeal of the assessee. Issues Involved:1. Validity of the penalty notice under Section 271(1)(c) of the Income-tax Act, 1961.2. Allegation of concealment of income and furnishing inaccurate particulars of income.3. Enhancement of penalty rate from 100% to 200% without providing an opportunity of hearing.4. Deletion of penalty by the CIT(A) and its implications.Issue-wise Detailed Analysis:1. Validity of the Penalty Notice:The primary issue raised by the assessee was that the notice issued under Section 271(1)(c) did not specify the nature of the limb under which the assessee was covered, i.e., whether for concealment of particulars of income or for furnishing inaccurate particulars of income. The Tribunal noted that the notice was indeed defective as it did not specify the exact charge, making it vague. The Tribunal referred to the jurisdictional High Court's decision in 'Mohammed Farhan A. Shaikh vs. PCIT' which emphasized that an omnibus notice suffers from the vice of vagueness and must be specific to inform the assessee of the grounds of the penalty proceedings. Consequently, the Tribunal quashed the penalty proceedings on this ground.2. Allegation of Concealment of Income and Furnishing Inaccurate Particulars:The Revenue contended that the assessee society and its members did not offer income received during the year amounting to Rs. 8,10,08,200/- from the sale of TDR/FSI and other amounts received as lease rent and donation. The Tribunal, however, found that the penalty notice was defective, and thus the penalty proceedings could not be sustained. The Tribunal also noted that the issue of defective notice was already challenged before the CIT(A), who had admitted the additional ground of appeal regarding the penalty order being bad in law.3. Enhancement of Penalty Rate:The assessee argued that the CIT(A) erred in enhancing the penalty rate from 100% to 200% without providing an opportunity of hearing. The Tribunal did not delve into this issue in detail as the primary ground of the defective notice was sufficient to quash the penalty proceedings. However, it is implicit that the Tribunal found procedural lapses in the enhancement of the penalty rate.4. Deletion of Penalty by the CIT(A):The Revenue's appeal contended that the CIT(A) erred in deleting the penalty without considering the facts and legal provisions. The Tribunal, however, upheld the CIT(A)'s decision to delete the penalty, reinforcing that the penalty notice was defective and thus invalid. The Tribunal emphasized that the penalty proceedings must stand on their own and cannot derive strength from the assessment proceedings.Conclusion:The Tribunal allowed the appeal of the assessee and dismissed the appeal of the Revenue. The penalty imposed under Section 271(1)(c) was quashed on the grounds that the notice issued was defective and did not specify the exact charge, making it invalid. The Tribunal's decision was based on binding judicial precedents that require penalty notices to be specific and unambiguous. The judgment highlights the importance of procedural correctness in penalty proceedings under the Income-tax Act.