Penalty notice u/s 271(1)(c) without specifying specific charge quashed. The decisions relied by Revenue rejected by the Tribunal
ABCAUS Case Law Citation:
ABCAUS 3117 (2019) (08) ITAT
Important case law relied upon by the parties:
Jagdamba Prasad Gupta, Delhi vs. ACIT
Sundaram Finance Ltd., vs. CIT  403 ITR 407 (Mad.)
The instant appeal was filed by the Assessee against the Order of the CIT(A)in sustaining the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 (the Act).
The Assessing Officer (AO) had passed the assessment order under section 143(3) of the Act and made an addition on account of unexplained gifts and amount paid as premium to procure gift.
The AO in the assessment order initiated the penalty proceedings under section 271(1)(c) of the Act.
However, on appeal by the assessee, the CIT(A) deleted the said addition and Tribunal also dismissed the departmental appeal. Subsequently Revenue filed appeal before Hon’ble High Court which allowed the appeal of the Revenue.
Therefore, a fresh notice u/s 274 of the Act was issued for levy of the said penalty and finally the AO levied the penalty on account of unexplained gifts.
The CIT(A) dismissed the appeal of assessee.
Before the Tribunal, the assessee contended that the AO in the assessment order had mentioned at the time of initiation of penalty proceedings that penalty proceedings under section 271(1)(c) of the Act Act had been initiated for furnishing inaccurate particulars of income. However, on the same day of passing of the assessment order, the AO issued show cause notice before levy of the penalty in which he had mentioned that assessee has concealed the particulars of income or furnished inaccurate particulars of income.
It was submitted that A.O. had not pointed-out as to under which limb of section 271(1)(c) of the Act, penalty proceedings had been initiated, whether for concealment of particulars of income or furnishing inaccurate particulars of income. Therefore, penalty was not leviable in the matter.
On the contrary, the Department submitted that assessee had not raised this issue before the authorities below and that assessee was aware of the fact that he has received bogus gift, therefore, assessee was aware of the fact that assessee had furnished inaccurate particulars of income and as such liable for penalty.
It was contended that, merely because such facts were not mentioned in the show cause notice before levy of the penalty would not be fatal to the case of Revenue. The Department relied upon Judgment of the Hon’ble High Court in which it was held that the assessee had understood the purport and import of notice, and hence, no prejudice was caused to the assessee.
The Revenue further submitted that the judgment of High Court relied upon by them was confirmed by the Hon’ble Supreme Court.
The Tribunal noted that the AO in both the notices issued (before and after the judgment of the High Court confirming the addition) did not mention / clarified in the notice as to for which limb of Section 271(1)(c) of the Act, penalty proceedings had been initiated against the assessee, whether for concealment of the particulars of income or furnishing inaccurate particulars of such income.
Penalty notice u/s 271(1)(c) without specifying specific charge invalid
The Tribunal further observed that the issue was covered by the decision of the Coordinate Bench where too AO had not specified in the notice as to under which limb of section 271(1)(c) of the Act the show cause notice had been issued against the assessee for levy of the penalty.
The Coordinate Bench had noted the judgment of the Hon’ble Karnataka High Court in the case of CIT vs. M/s SSA’s Emerald Meadows confirmed the order of the Tribunal by dismissing the Departmental appeal in which the Tribunal had allowed the appeal filed by the assessee holding the notice issued by AO u/s 274 read with section 271(1)(c) of the Act to be bad in law as it did not specify which limb of section 271(1)(c) of the Act. The SLP of the Department had also been dismissed by the Supreme Court.
The Coordinate Bench had held that since the notice was void, bad in law and illegal, therefore, entire penalty proceedings were vitiated. It was also held that the decision of High Court/Supreme Court as relied upon by the Department would not support the case of Revenue.
In view of the above, the Tribunal, taking a consistent view in the matter, opined that penalty was not leviable and set aside the Orders of the authorities below and cancelled the penalty.
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