2023 (3) TMI 779 - AT - Income Tax

Penalty u/s 271(1)(c) read with section 274 - defective notice - non specification of clear charge - whether it was issued to explain the charge of concealment of particulars of income or for furnishing inaccurate particulars of income? - HELD THAT:- In the instant case, AO in the assessment order initiated the penalty under section 271(1)(c) of the Act for ‘concealing the particulars of income and furnishing inaccurate particulars of Income and thereafter issued the notices referred above u/s 274 read with 271(1)(c) of the Act without specifying any particular limb of the penalty and finally imposed the penalty for concealment of income only, on account of unsecured loan.

The Hon'ble Apex Court in case of M/s. SSA's Emerald Meadows [2016 (8) TMI 1145 - SC ORDER] dismissed the Special Leave Petition filed by the Revenue against the judgment rendered by Hon'ble High Court of Karnataka whereby identical issue was decided in favour of the Assessee.

In the case of Manjunatha Cotton & Ginning Factory [2013 (7) TMI 620 - KARNATAKA HIGH COURT] observed where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. The Hon'ble High Court also held that the standard proforma of notice under section 274 of the Act without striking of the irrelevant clause would lead to an inference of non-application of mind by the Assessing Officer and levy of penalty would suffers from non-application of mind

Thus in the present case AO has issued the notice referred to above under section 274 r.w.s. 271(1)(c) of the Act without specifying the limb under which the penalty proceeding has been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner without applying mind which is bad in law, hence can not be considered valid notice sufficient to impose penalty u/s 271(1)(c) - Decided in favour of assessee.