2016 (6) TMI 1383 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus/non genuine agricultural income - HELD THAT - In absence of any specific charge the assessee does not get proper opportunity to defend its case and violate the principles of natural justice. The Hon ble Karnataka High Court in the case of CIT Vs M/s Manjunath Cotton Ginning Factory Ors. 2013 (7) TMI 620 - KARNATAKA HIGH COURT has held that sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically otherwise the principle of natural justice is offended on the basis of such proceedings no penalty could be imposed to the assessee. Ticking of the penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. Penalty imposed by the ld Assessing Officer confirmed by the ld CIT(A) is not justified. Accordingly we allow the assessee s appeal.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Imposition of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
3. Specificity of the charge in penalty proceedings.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 58 days. The delay was claimed to be due to the assessee's authorized representative (AR) assigning the task to another AR, who misplaced the file. The assessee argued that the delay was beyond their control and requested condonation. The Departmental Representative (DR) opposed the condonation. However, in the interest of natural justice, the delay was condoned.

2. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The assessee declared a total income of Rs. 95,880 and agricultural income of Rs. 35,98,640 in the return filed. The Assessing Officer (AO) added the agricultural income to the total income, treating it as unverified and initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income and concealment of income. The AO imposed a penalty of Rs. 11,87,476, which is 100% of the tax sought to be evaded on the concealed income. The CIT(A) confirmed the penalty, observing that the assessee failed to substantiate the agricultural income and that the documents provided were not verifiable. The CIT(A) also noted that the burden of proof was on the assessee to prove the genuineness of the agricultural income, which the assessee failed to discharge.

3. Specificity of the Charge in Penalty Proceedings:
The assessee contended that the penalty order was out of jurisdiction as there was no precise charge given in the assessment order or the penalty notice. The AO initiated penalty proceedings for furnishing inaccurate particulars of income but imposed the penalty for concealment of income. The assessee argued that this lack of specificity violated the principles of natural justice, as they could not adequately defend against an unspecified charge. The Tribunal referred to the decision of the Karnataka High Court in CIT vs. Manjunatha Cotton and Ginning Factory, which held that the penalty notice should clearly state whether the penalty is for concealment of income or for furnishing inaccurate particulars. The Tribunal also noted that the AO was not sure whether the penalty was for furnishing inaccurate particulars or for concealment of income, which was evident from the assessment order, penalty notice, and penalty order. The Tribunal concluded that the penalty proceedings were not justified due to the lack of a specific charge and allowed the appeal.

Conclusion:
The Tribunal allowed the appeal, condoning the delay and setting aside the penalty imposed under Section 271(1)(c) due to the lack of specificity in the charge, which violated the principles of natural justice. The order emphasized the necessity for clear and specific charges in penalty proceedings to ensure the assessee's right to a fair defense.