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Facts
The assessee's income tax return was processed under Section 153A, revealing a discrepancy in land purchase value found during a search. The AO levied a penalty under Section 271(1)(c) for furnishing inaccurate particulars of income, which was upheld by the Ld. CIT(A).
Held
The Tribunal ruled that the penalty notice issued under Section 274 read with Section 271 was vague as it did not specify the exact limb of the charge (concealment or inaccurate particulars). Citing judicial precedents from High Courts and the Apex Court, the Tribunal held that such a vague notice renders the penalty invalid.
Key Issues
The key issue is the validity of a penalty levied under Section 271(1)(c) when the penalty notice issued under Section 274 is vague regarding the specific charge.
Sections Cited
153A, 271, 271(1)(c), 274, 22(1), 22(2), 34, 139(1), 139(2), 148, 22(4), 23(2), 142(1), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
Asst.Year 2006-2007 Sri.V.V.Mohammed The Income Tax Officer Kalanthan Veettil, Chettamkunnu Ward - 2 v. Thalassery Kannur. Kannur – 670 101. PAN : AECPM7765A. (Appellant) (Respondent) Appellant by : Sri.Sureshkumar C, CA Respondent by :Smt.Leena Lal, Sr.AR Date of Pronouncement : 04.04.2025 Date of Hearing : 27.02.2025. O R D E R
Per Prakash Chand Yadav, JM :
The present appeal of the assessee is arising from the order of the NFAC / learned Commissioner of Income-tax (Appeals) dated 16.09.2024and relates to the assessment year 2006-2007, having DIN & Order No.ITBA/NFAC/S/250/2024- 25/1068713147(1).
Brief facts of the case as coming out from the orders of authorities below are that the assessee is an individual deriving income from proprietary concern under the name and style of V.V.Enterprises. The assessee has filed its return of income on 24th October, 2009 in response to notice u/s.153A of the Act declaring total income of Rs. 96,000. During the course of assessment proceedings, the Assessing Officer . Sri.V.V.Mohammed. observed that the assessee has purchased some land at Mahe for establishing a petrol pump. The AO observed that in search premises of the assessee a document was found which shows that the land value was Rs.5,96,00,000. Thereafter the AO quantifying the share of the assessee amounting to Rs.1,49,00,000 framed the assessment. The AO simultaneously initiated penalty for concealment of income. Thereafter on 30th March, 2012, the AO levied the penalty u/s.271(1)(c) of the Act on the ground that the assessee has furnished inaccurate particulars of his income.
Aggrieved with the order of the AO levying the penalty u/s.271(1)(c) of the Act, the assessee preferred an appeal before the ld.CIT(A) and contended that the penalty initiated by the AO in response to the notice u/s.274 of the Act, in which notice the correct limb has not been specified, is not tenable. The ld.CIT(A), however, relied upon the order of the Hon’ble Andhra Pradesh High Court in the case of Srinivasa Pitty & Sons, dismissed the appeal of the assessee.
Now the assessee has come up in appeal before us. The learned Counsel for the assessee drawn our attention to the paper book page 12 and contended that the proceedings initiated are void abinitio inasmuch as the AO failed to specify the correct limb.
The learned Departmental Representative relied upon the orders of authorities below.
NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME TAX ACT 1961. PAN: AECPM7765A Office of the Income Tax Officer, Dy.Commissioner of Incometax. Central Circle-2, Calicut. Dated: 30-12-2009 To SHRI.V.V.MOHAMMED, VANNATHAM VEETTIL, VEE VEES, CHETTAM KUNNU, THALASSERRY.. Where as in the course of proceedings before me for the assessment year 2006-07 it appears to me that you:- have without reasonable cause failed to furnish me return of income which you were required to furnish by a notice given under section 22(1)/22(2)/34 of the Indian Income Tax Act, 1922 or which you were required to furnish under section 139(1) or by a notice given under section 139(2)/148 of the Income tax Act 1961, No......dated have without reasonable cause failed to furnish it within the time allowed and the manner required by the said section 139(1) or by such notice. *have without reasonable cause failed to comply with a notice under section 22(4)/23(2) of the Indian Income Tax Act, 1922 or under section 142(1)/143(2) of the Income Tax Act, 1961 No dated *have concealed the particulars of your income or Furnished inaccurate particulars of such income. You are hereby requested to appear before me on 29/01/2010 at 3.30PM and show cause why an order imposing a penalty on you should not be made under section 271 of the Income tax Act 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative, you may show cause in writing on or before the said date which will be considered before any such order is made under section 271(1)(C).
Perusal of the above notice would show that the AO has failed to specify the correct limb for initiating the levy of penalty u/s.271(1)(c) of the Act. We observe that there are number of judgments on this issue and the basic judgment is that of the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory Mills 359 ITR 565 (Kar.). This decision of the Hon’ble Karnataka High Court has been followed by the Karnataka High Court in the case of SSAs Emerald Meadows reported in (2015) 94 CCH 334. Against this order in the case of SS, the SLP filed by the Revenue has already been dismissed by the Hon’ble Apex Court in the case of CIT v. SSAs Emerald Meadows reported in 73 taxmann.com 248. We further observe that recently the three judges Bench of Hon’ble Bombay High Court in the case of Mhd. Farah in Tax Appeal No.51/2012 vide order dated 11th March, 2021 has also held that notice initiating penalty should not be vague, it must specify the correct limb under which the penalty is levied and if the notice is vague then the penalty initiated u/s.271(1)(c) of the Act is not tenable.
. Sri.V.V.Mohammed. 8. We further observe in this case that the AO at the time of framing the assessment has alleged that the penalty is initiated for concealment of income, however, at the time of levying of the penalty the AO held that the assessee is guilty of furnishing inaccurate particulars of income. Therefore, in view of the above facts and law and the judicial pronouncements of various High Courts and Apex Court, the penalty is not leviable.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on this 04th day of April, 2025.