The Delhi High Court has quashed the penalty under Section 271(1)(c) of the Income Tax Act, 1961 citing absence of specific charge in notice.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that where the charges are either of concealment of particulars of income or furnishing of inaccurate particulars thereof, revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both.
Table of Contents – Absence Of Specific Charge
Background
The common issue sought to be urged by the department in all these appeals is whether the ITAT was justified in deleting the penalty under Section 271(1) (c) of the Income Tax Act, 1961 by ignoring the fact that the Assessee had claimed inaccurate expenses imposed by the Assessing Officer on the Assessing Company for the reason that in the notice under Section 274 read with Section 271(1) (c), the AO has not marked the specified limb for which the penalty notice is issued, although, penalty was also imposed for furnishing inaccurate income as per the penalty order by the AO.
Arguments
The department contended that the ITAT has misdirected itself by taking a hyper technical view that there is no specific charge in the notice for which penalty has been imposed. The purport and import of the notice issued under Section 274 read with Section 271 of the Income Tax Act is clearly discernible from the assessment order and the AO recorded the necessary satisfaction to initiate penalty proceedings.
The department submitted that there is an overlap between the two phrases namely “concealment of particulars of his income” and “furnished inaccurate particulars of such income” and therefore effectively there is no prejudice to the assessee in terms of them not being put to notice.
Section 271(1)(c) of Income Tax Act
Section 271(1)(c)/(d) relates to the concealment of particular income or furnishing of inaccurate particulars 100 percent of tax sought to be evaded. 300 percent of tax sought to be evaded, income, or Failure to maintain information documents etc.
Court’s Findings
The court noted that ordinarily the two phrases i.e. “conceal” and “furnishing of inaccurate particulars” are separate and distinct. Concealment of income and furnishing of inaccurate particulars of income in Section 271(1) (c) of the Income Tax Act carry different meanings and connotation.
The court stated that on principle where the penalty proceedings are said to be initiated by the Revenue under Section 271(1) (c) of the Act, the specific ground which forms the foundation thereof needs to be spelt out in clear terms. Otherwise, the assessee would not have proper opportunity to put forth his defence.
The court held that The proceedings for initiating the penalty are penal in nature, which may result in imposition of penalty ranging from 100 to 300% of the taxability and therefore the charge must be unequivocal and unambiguous. Where the charges are either of concealment of particulars of income or furnishing of inaccurate particulars thereof, revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both.
Conclusion
The court while dismissing the department’s appeal held that the ITAT rightly held that the levy of penalty under Section 271(1)(c) of the Income Tax Act in the case of the assessee was not valid.
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Case Details
Case Title: PCIT Versus M/S Gragerious Projects Pvt. Ltd.
Case No.: ITA 90/2020
Date: 22 November 2024
Counsel For Appellant: Zoheb Hossain
Counsel For Respondent: Ajay Vohra
