Penalty u/s 271(1)(c) upheld despite notice without specifying applicable charge

Penalty u/s 271(1)(c) upheld despite notice without striking off the not applicable charge as in penalty order AO specified the applicable limb

ABACUS Case Law Citation
ABCAUS 3359 (2020) (08) ITAT

Important case law relied upon by the parties:
Shweta Construction Company Pvt. Ltd. vs. ITO,
B. D. Mundra & Sons, Kota vs. DCIT
Sundram Finance Limited
SSA’s Emerald Meadow

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).

The case of the assessee was that in the show cause notice u/s 274 of the Act, the Assessing Officer (AO) had asked the assessee to show cause as to why penalty should not be  levied u/s 271(1)(c)  of  the  Act  for  concealment  of particulars  of  income  or furnishing inaccurate particulars of income. In other words, the AO had not struck off / specified the appropriate limb of the charge.

It was submitted that during the penalty proceedings, the assessee had raised the contention before the Assessing Officer stating that no specific charge for levy of penalty had been specified in the show cause notice. However, the Assessing Officer ignored the submission and levied the penalty on charge of concealment of particulars of income.

It was submitted that before the CIT(A). the assessee had relied upon the decision of the jurisdictional High Court laying down the proposition that where the AO failed to specify the charge while initiating the penalty proceedings, the proceedings are vitiated. However, CIT(A) relied on the Hon’ble Supreme Court decision wherein the Special Leave Petition against the Hon’ble Madras High Court decision had been dismissed by the Hon’ble Supreme Court by a non speaking order.

It was submitted that in the present case, both in the assessment order as well as the penalty show cause notice, the penalty had been initiated for concealment of particulars of income or furnishing inaccurate particulars of income. However, the penalty was levied by the AO for concealing particulars of income.

Therefore, it was contended that due to variation in the charge levied in the show cause viz a viz the penalty order, the penalty was not sustainable in view of the decision of the Hon’ble Apex Court in the case of SSA’s Emerald Meadows. It was submitted that similar view had been taken by the Co-ordinate Benches.

The Revenue contended that the assessee was well aware of the reasons for initiation of penalty proceedings and replied accordingly during the penalty proceedings. Therefore, even assuming there was a defect in the penalty notice, it did not result in denial of natural justice to the assessee.

The Revenue placed reliance on another decision of the Hon’ble Supreme Court. It was further submitted that the provision of section 5A to section 271(1)(c) were squarely applicable in the instant case.

Penalty u/s 271(1)(c) upheld despite notice without specifying applicable charge

The Tribunal noted that though the Assessing officer had initiated the penalty proceedings on both the limbs/charges, while levying the penalty, the AO had levied the penalty on a specific and clear-cut charge for concealing the particulars of income.

Therefore, the Tribunal opined that it was not a case where the penalty had been initiated for a particular charge and thereafter, penalty had been finally levied on a different charge.  The assessee was made aware of both the charges at the time of initiation of penalty proceedings and while finally levying the penalty, the AO has given a specific finding that it is a case of concealment of particulars of income.

Further the Tribunal stated that even where it was held that the charge was uncertain at the initiation stage, the same had been made definite while passing the penalty order, therefore, it was not a case of lack of opportunity to the  assessee as well as  lack of application of mind on the part of the Assessing officer.  It was not a case of the assessee that the charge of concealment of particulars of income was not attracted in the  facts of the case.

The Tribunal distinguished the decisions relied upon by the assessee and confirmed the penalty imposed.

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