INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Defective show cause notice under section 274 - Non-specification of charge -

A search and seizure action under section 132 in case of an entity and its associates was initiated. The case of assessee was also covered under section 132. Consequent to the search action, a notice under section 153A was issued to assessee. In response, the assessee filed his return of income. Thereafter, the case was taken up for scrutiny and assessment was framed under section 153A read with section 144. Aggrieved, the assessee carried the matter before CIT(A), who granted partial relief to the assessee. Thereafter, on additions made by the AO and upheld by the CIT(A), the AO levied penalty under section 271(1)(c). On appeal, such penalty was confirmed by the CIT(A). Held: On perusal of assessment order, it was found that in the assessment order, no specific finding had been recorded by AO as to whether it was a case of concealment of income or a case of furnishing of inaccurate particulars of income. Further in notice issued under section 274 read with section 271, the inapplicable portion or limb of section 271(1)(c) had not been struck off. Various High Courts held that the AO must indicate in the notice for which of the two limbs, he proposes to impose the penalty and for this the notice has to be appropriately marked. If in a printed format of the notice, the inapplicable portion is not struck off thus not indicating for which limb the penalty is proposed to be imposed, it would lead to an inference as to non application of mind, thus vitiating imposition of penalty. Thus, the penalty under section 271(1)(c) would not be leviable when notice issued by AO did not specify as to whether the proceedings were initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income. Hence, the penalty levied under section 271(1)(c) was accordingly, deleted.

Relied:Pr. CIT & Ors. v. Sahara India Life Insurance Company Ltd. (2021) 432 ITR 84 (Del-HC) : 2019 TaxPub(DT) 6933 (Del-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11, 2011-12 & 2012-13

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