2020 (3) TMI 1404 - AT - Income Tax

Penalty u/s 271(1)(c) - Defective notice u/s 274 - non specification of charge - non specify under which limb of section 271(1)(c) the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars thereof - HELD THAT - AO to assume jurisdiction u/s 271(1)(c) proper notice is necessary and the defect in notice u/s 274 of the Act vitiates the assumption of jurisdiction by the learned Assessing Officer to levy any penalty. In this case facts stated clearly establish that the notice issued under section 274 read with 271 of the Act is defective and therefore we find it difficult to hold that the learned AO rightly assumed jurisdiction to pass the order levying the penalty. As a consequence of our findings above we direct the Assessing Officer to delete the penalty in question. - Decided in favour of assessee.

Summary

Issues:
1. Assessment of income and adjustments made by Assessing Officer.
2. Penalty imposed under section 271(1)(c) by Assessing Officer.
3. Appeal against penalty before Ld. CIT(A).
4. Arguments presented by parties before the Tribunal.
5. Legal precedents cited by both parties.
6. Analysis of legal precedents by the Tribunal.
7. Decision of the Tribunal on the penalty imposition.

The judgment involved a case where the assessee, a Chartered Accountant firm, filed a return of income for the assessment year 2007-08, showing profit and gains of business along with short term capital gains. The Assessing Officer made adjustments and additions to the income, leading to a total income determination. Subsequently, penalty proceedings were initiated under section 271(1)(c) based on certain additions made by the Assessing Officer. The Ld. CIT(A) partly allowed the appeal by reducing the penalty amount imposed. The assessee contended that no penalty was warranted as all relevant facts were disclosed in the income tax return and financial statements. The Tribunal analyzed the legal aspects of the case, focusing on the notice issued under section 274 read with section 271 of the Act, which did not specify the grounds for penalty imposition.

The Tribunal referred to legal precedents, including the decisions of the Hon'ble Karnataka High Court and Hon'ble Madras High Court. The Karnataka High Court emphasized that penalty proceedings should be initiated based on specific grounds, and the penalty imposed should align with the grounds on which the assessee was called upon to answer. The Madras High Court highlighted the importance of specifying the limb of section 271(1)(c) under which penalty proceedings are initiated. The Tribunal also mentioned a case where the Hon'ble Delhi High Court upheld the view that a defective notice under section 274 vitiates the assumption of jurisdiction by the Assessing Officer to levy any penalty.

Based on the analysis of legal precedents and the defective notice issued in the present case, the Tribunal concluded that the Assessing Officer did not have the jurisdiction to pass the penalty order. Therefore, the Tribunal directed the Assessing Officer to delete the penalty imposed on the assessee. Ultimately, the appeal of the assessee was allowed by the Tribunal.