Loading judgment…
Facts
The assessee, Paras Equipments & Engineering Pvt. Ltd., appealed against a CIT(A) order which upheld penalty proceedings initiated by the Assessing Officer under section 271(1)(c) of the Income Tax Act. The penalty was for alleged concealment or furnishing inaccurate particulars of income, contested by the assessee who cited clerical errors and prior surrender of expenses.
Held
The Tribunal held that the penalty levied under section 271(1)(c) was invalid and obliterated. This was because the notice issued by the Assessing Officer under section 274 failed to specifically state whether the penalty was for concealment of income or furnishing inaccurate particulars, a requirement supported by various High Court judgments.
Key Issues
Whether the penalty under Section 271(1)(c) is valid if the notice under Section 274 does not specify the exact ground for penalty (concealment or inaccurate particulars).
Sections Cited
271, 271(1)(c), 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Kul BharatDr. B. R. R. Kumar
ORDER Per Dr. B. R. R. Kumar, Accountant Member:
This appeal has been filed by the assessee against the order of ld. CIT(A)-36, New Delhi dated 12.01.2017.
Following grounds have been raised by the assessee:
“1. The order of the Assessing Officer is erroneous on the facts and in the law on the facts and in circumstances of the case he ought to have accepted the returned income. 2. The order passed by the Ld. CIT is not according to law and facts of the circumstances. That due to certain unavoidable circumstances the Assessee Company was not in a position to produce the evidence in support of ground of Appeal filed.
3. That the Ld. A.O. has erred in initiating penalty proceeding U/s 27(1)(c) of the Income Tax Act being contrary to the facts and law.
Paras Equipments & Engineering Pvt. Ltd.
4. That the Ld. A.A is not justified in disallowing PF, TDS payable and other expenses on the facts and circumstances of the case.
5. The Depreciation was wrongly claimed due to some clerical mistake by the Assessee accountant at the time of filing the return by him, which has been properly explained at the time of, surrendered the expenses.
6. The Assessee has surrendered all the required expenses and filed a revise computation of Income before the issues were flagged by the Assessing Officer. So it clearly shows that the Assessee has not concealed any facts.
The learned assessing officer is not justified in not allowing any other opportunity to the appellant to produce necessary evidence.”
We have gone through the notice u/s 274 r.w.s. 271 of the Income Tax Act, 1961 issued by the Assessing Officer on 12.02.2015. We find that the Assessing Officer has issued the penalty order stating that, “have concealed the particulars of your income or _______ or furnished inaccurate particulars of such income.”
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 Paras Equipments & Engineering Pvt. Ltd. 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. 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 Assessing Officer 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 assessee is allowed. Order Pronounced in the Open Court on 28/02/2024.