2024 (8) TMI 1183 - AT - Income Tax

Tax Penalty Invalid Without Specific Charge: ITAT Dismisses Revenue's Appeal, Upholds Decision to Delete Penalty.

The ITAT Chennai upheld the CIT(A)'s decision to delete the penalty under section 271(1)(c) of the Income Tax Act due to the lack of a specific charge in ... Penalty u/s 271(1)(c) - specific charge framed while initiating penalty or not? - non striking of irrelevant portion - Whether assessee has concealed the particulars of income or furnishing inaccurate particulars of income? - CIT(A) deleted addition - HELD THAT:- As during survey certain sales were found not to be recorded in the books of accounts and hence, assessee admitted additional income and declared in the return of income filed in response to notice u/s. 148 of the Act. AO initiated penalty proceedings but while issuing notice u/s. 274 r.w.s. 271 AO has mentioned no specific charge in the notice whether the penalty is being levied for concealment of particulars income or for furnishing of inaccurate particulars of income. AO has not struck of the inapplicable words in the notice issued u/s. 274 r.w.s. 271. In these facts, admittedly the issue is covered by the decision of Babuji Jacob [2020 (12) TMI 574 - MADRAS HIGH COURT] wherein considering the decision cited in the case of Sundaram Finance Ltd. [2018 (5) TMI 259 - MADRAS HIGH COURT] decided the issue in favor of assessee. Hence, we confirm the order of CIT(A) deleting the penalty. The appeal of the Revenue is dismissed. Issues:Penalty under section 271(1)(c) of the Income Tax Act - Whether specific charge framed for concealment of income or furnishing inaccurate particulars of income.Analysis:The judgment pertains to an appeal by the Revenue against the deletion of a penalty levied under section 271(1)(c) of the Income Tax Act. The primary issue was whether the penalty was validly imposed without a specific charge being framed for either concealing income or furnishing inaccurate particulars. The assessee admitted additional income during a survey, leading to penalty proceedings initiated by the Assessing Officer (AO). However, the AO's notice did not specify the nature of the penalty charge, as required under section 274 r.w.s. 271 of the Act. The Commissioner of Income Tax (Appeal) directed the AO to delete the penalty, emphasizing the lack of a clear charge in the notice issued by the AO.The CIT(A) based the decision on the principles established in various judicial precedents. The CIT(A) highlighted that the AO's failure to specify whether the penalty was for concealment of income or furnishing inaccurate particulars rendered the penalty invalid. The CIT(A) referenced a decision by the ITAT Chennai and the Madras High Court, emphasizing the importance of a clear charge in the penalty notice. The CIT(A) also cited a decision by the Bombay High Court, further supporting the position that the penalty under section 271(1)(c) must be specific and well-founded.The ITAT Chennai upheld the CIT(A)'s decision, noting that the issue was covered by a judgment of the Madras High Court in a similar case. The ITAT Chennai affirmed that the penalty could not be sustained due to the lack of a specific charge in the penalty notice. By relying on the judicial discipline and precedents, the ITAT Chennai confirmed the deletion of the penalty levied by the AO. The ITAT Chennai dismissed the Revenue's appeal, thereby affirming the decision of the CIT(A) to delete the penalty under section 271(1)(c) for the relevant assessment years.In conclusion, the judgment underscores the significance of a clear and specific charge in penalty notices issued under section 271(1)(c) of the Income Tax Act. Failure to articulate the basis for the penalty, whether for concealment of income or furnishing inaccurate particulars, can render the penalty invalid. The decision reflects a consistent application of legal principles established by higher courts, ensuring fairness and compliance with procedural requirements in penalty proceedings.