Income Tax Appellate Tribunal

Artmica Laminates P. Ltd, Delhi vs. ITO, New Delhi

MANU/ID/1356/2022

23.08.2022

Direct Taxation

Where there is failure on the part of the AO to specify the limb of Section 271(1)(c) of IT Act under which the penalty is imposed, penalty order cannot be sustained

Present appeal has been preferred by the Assessee against the order of First Appellate Authority arising out of an appeal before it against the penalty order passed under Section 271(1)(c) of the Income Tax Act, 1961 by the learned Assessing Officer (AO).

The basic argument of the Assessee was that the penalty proceeding notice issued under Section 274 read with section 271 of the IT Act is defective as same does not disclose as to if the penalty has been levied for concealment of the income or for furnishing inaccurate particulars of income.

There is no dispute to the fact that, the notice under Section 274 read with section 271 of the Act did not categorically specify if the penalty proceeding under Section 271(1)(c) have been initiated on finding of concealment of particulars of income or furnishing inaccurate particulars of such income. It can be further appreciated that, in the assessment order, the Learned AO had though observed that there is concealment of income and accordingly Assessee company is liable for penalty proceeding under Section 271(1)(c) of the Act. However, when the notice was issued, there was no specific indication of the limb of the default.

The Notice issued and the penalty order makes it ambiguous as to under which limb, the penalty order has been passed. Thus, in view of settled proposition of law recognized in Pr. CIT Vs. Sahara Life Insurance Company Ltd. that where there is failure on the part of the AO to indicate and specify under which limb of Section 271(1)(c) of IT Act, penalty proceedings has been initiated, the penalty order cannot be sustained. The impugned penalty order is set aside. Appeal allowed.

Tags : Penalty Imposition Legality

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