Income Tax Appellate Tribunal

Suyash Holding And Estate Developers Pvt Ltd. Vs. Income-Tax Officer

MANU/IU/1042/2023

23.11.2023

Direct Taxation

Levy of penalty has to be clear as to the limb under which it is being levied

The Assessee has challenged the penalty order on various grounds. In the instant case, the AO initiated penalty under Section 271(1)(c) of the Income Tax Act, 1961 (IT Act) for furnishing inaccurate particulars of Income leading to concealment of income and thereafter issued the notice under Section 274 read with 271(1)(c) of the Act without specifying any particular limb of the penalty and finally imposed the penalty for furnishing inaccurate particulars of income. The Assessee challenged the Imposition of penalty mainly on the basis of notice itself.

The Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory, observed that, the levy of penalty has to be clear as to the limb under which it is being levied. As per Hon'ble High Court, where the Assessing Officer proposed to invoke first limb being concealment, then the notice has to be appropriately marked. High Court also held that, the standard proforma of notice under Section 274 of the Act without striking off 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.

The penalty provisions of Section 271(1)(c) of the Act are attracted, where the Assessee has concealed the particulars of income or furnished inaccurate particulars of such income. It is also a well-accepted proposition that the aforesaid two limbs of Section 271(1)(c) of the Act carry different meanings. Therefore, it is imperative for the Assessing Officer to specify the relevant limb, so as to make the Assessee aware “as to what is the charge made against him” so that he can respond accordingly.

In view of fact that, Assessing Officer has issued the notice under Section 274 read with Section 271(1)(c) of the Act without specifying the limb under which the penalty proceedings have been initiated and proceeded with, apparently goes to prove that notice in this case has been issued in a stereotyped manner, hence can not be considered a valid notice. Therefore, the penalty is not leviable, hence, present Tribunal have no hesitation to delete the penalty levied by the AO and affirmed by the Learned Commissioner. Appeals allowed.

Tags : Penalty Levy Legality

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