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Facts
The Revenue appealed against the CIT(A)'s order deleting a penalty of Rs. 7,01,86,346/- imposed by the AO. The penalty was levied for allegedly furnishing inaccurate particulars of income by claiming capital expenditure (acquisition of business) as revenue expenditure.
Held
The Tribunal upheld the CIT(A)'s decision, ruling that the penalty notice issued under Section 274 read with Section 271 was invalid. This was because the notice failed to specifically indicate whether the penalty was proposed for "concealment of income" or "furnishing inaccurate particulars," which is a mandatory requirement as per several High Court judgments.
Key Issues
Whether a penalty notice under Section 274 read with Section 271(1)(c) is valid if it does not specify the exact grounds (concealment of income or furnishing inaccurate particulars) for which the penalty is sought to be imposed.
Sections Cited
271(1)(c), 274
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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI
Before: Dr. B. R. R. Kumar, Sh. Sudhir Kumar
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the Revenue against the order of ld. CIT(A)-42, New Delhi dated 01.11.2017.
Following grounds have been raised by the Revenue: “1. Whether on the facts and circumstances of the case, Ld. CIT(A) has erred in deleting the penalty imposed by the AO for Rs. 7,01,86,346/- and held that the appellant's explanations in the matter is bonafide and acceptable.
2. Whether on facts and circumstances of the case, Ld. CIT(A) erred in holding that the assessee did not file inaccurate particulars of income though it claimed expenditure incurred towards acquisition of collection and analytics Business from another company namely Genpact India as revenue expenditure; which was actually capital expenditure.
3. Whether on facts and circumstances of the case, the Ld. CIT(A) has erred in giving benefit of doubt to the assessee that expenditure on acquisition of business of another
Genpact Services LLC company could be classified as revenue expenditure though the conduct the assessee shows that it was well aware of true nature of the expenditure.” 3. In the entire grounds taken up by the Revenue, there was no mention of “Section 271(1)(c)” of the Income Tax Act, 1961. 4. At the outset, the ld. AR brought to our attention, the notice issued u/s 274 r.w.s. 271 of the Income Tax Act, 1961 dated 01.05.2014. The same is reproduced as under:
Genpact Services LLC 5. From the perusal of the notice, we find that the ADIT omitted to delete in appropriate words and paragraphs and failed to specifically state, the limb on which the penalty was proposed.
On this issue, we are guided by the following judgments:
1) Karnataka High Court: CIT vs. Manjunatha Cotton and Ginning Factory: 359 ITR 565 held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) of the Act, i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law. 2) Bombay High Court: Mr. Mohd. Farhan A. Shaikh Vs ACIT Section 271(1)(c): Penalty-Concealment-Non-striking off of the irrelevant part while issuing notice u/s 271(1)(c) of the Income Tax Act, order is bad in law. Assessee must be informed of the ground of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness. 3) The Hon’ble jurisdictional Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. in of 2019, reiterated that notice under section 274 should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically.
Genpact Services LLC 4) The aforesaid principle has been reiterated in the in the case of CIT vs. SSA'S Emerald Meadows: 73 taxmann.com 241 (Kar) [Revenue’s SLP dismissed in 242 Taxman 180]
Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged ‘concealment of income’ OR ‘furnishing of inaccurate particulars of such income’, the penalty levied is hereby obliterated.
In the result, the appeal of the Revenue is dismissed. Order Pronounced in the Open Court on 06/06/2024.