2026 (1) TMI 920 - AT - Income Tax

Levy of penalty under section 271(1)(c) invalid where penalty notice fails to specify concealment or inaccurate particulars, leading to deletion

Penalty under section 271(1)(c) was held invalid where the penalty notice failed to specify whether proceedings were based on concealment of income or ... Levy of penalty u/s 271(1)(c) - mandation of specification of clear charge - defective notice - Non striking off irrelevant matter - as argued no limb of either concealment of income or furnishing inaccurate particulars of income, have been specified in the penalty notice - HELD THAT:- From the notice itself, one cannot see that Assessing Officer has issued notice for concealment of particulars of income as well as inaccurate particulars of income, whereas the penalty proceedings initially on account of concealment of income. Hence, penalty levied by the Assessing Officer is bad-in-law as relying on GOA COASTAL RESORTS AND RECREATION PVT. LTD. [2020 (1) TMI 93 - BOMBAY HIGH COURT] Also in the case of Mohd. Farhan A Shaikh [2021 (3) TMI 608 - BOMBAY HIGH COURT (LB)] wherein the penalty u/s 271(1)(c) was deleted on account of defective penalty notice u/s 271(1)(c) of the Act. Satisfaction for imposing penalty on one or other, or both grounds mentioned in section 271(1)(c), a mere defect in notice not striking off irrelevant matter would vitiate penalty proceedings. Appeal of the assessee is allowed. Issues: Whether the penalty of Rs. 6,21,198/- under section 271(1)(c) of the Income-tax Act, 1961 can be sustained where the penalty notice did not clearly identify whether it was issued for concealment of particulars of income or for furnishing inaccurate particulars, and whether the defective notice vitiates the penalty proceedings.Analysis: The notice initiating penalty proceedings used the printed form without striking off the limb(s) not applicable, and the record does not contain a clear, specific satisfaction identifying concealment or inaccurate particulars as the basis for penalty. Judicial authorities hold that initiation of penalty under section 271(1)(c) requires a clear recorded satisfaction specifying the ground(s) relied upon, and a notice that fails to indicate the applicable limb(s) is defective. Where such defect exists, penalty proceedings are vitiated even if other substantive contentions (such as bona fide claims, computational errors, or AMT issues) are raised, because the statutory precondition for levy of penalty is absent.Conclusion: Penalty under section 271(1)(c) of the Income-tax Act, 1961 deleted on the ground that the penalty notice was defective for not specifying the applicable limb(s) of section 271(1)(c).