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Friday, 21 August 2015 11:46

Section 271(1)(c) - Penalty for concealment - Notice issued u/s 274 r.w.s. 271 is invalid and bad in law if does not specify whether penalty is initiated for concealment or furnishing inaccurate particulars - Bangalore Tribunal Featured

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Gist

When penalty notice u/s 274 r.w.s. 271 does not specify under which limb of the penalty u/s 271(1)(c) of the Act is to be levied; i.e. whether the penalty proceedings are being initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income, such initiation of penalty proceedings has been held to be illegal and notices issued under Section 274 rws 271 are bad in law and consequently the penalty orders passed in consequence of these defective, invalid notices also to be invalid and must be cancelled

Facts

1. Survey was conducted u/s 133A at assessee's premises and consequent to survey assessee declared his share of income from the joint venture

2. Assessee filed revised returns for three years in question

3. Proceedings u/s 147 was initiated to bring to tax the income from joint venture which escaped assessment

4. Assessment orders were passed adding income which escaped assessment

5. AO initiated penalty proceedings u/s 271(1)(c) and notices u/s 274 r.w.s. 271 issued

6. AO concluded that if there would have not been a survey u/s 133A the assessee would have not disclosed the income

7. The Assessing Officer accordingly held that the assessee had concealed particulars of his income and furnished inaccurate particulars of income and proceeded to levy penalty under Section 271(1)(c) of the Ac

8. CIT(A) dismissed the assessee's appeal to cancel the penalty

9. Assessee moved to the Tribunal who after hearing both parties removed the penalty in all the three assessment years

Adjudication

In the case on hand, we find from a careful perusal of the notices, issued under Section 274 rws 271 of the Act dt.29.12.2011 for Assessment Years 2007-08 and placed before the Bench in the course of hearing that the Assessing Officer has not specified under which limb of the penalty u/s.271(1)(c) of the Act is to be levied; i.e. whether the penalty proceedings are being initiated for concealment of particulars of income or for furnishing of inaccurate particulars of income. Such initiation of penalty proceedings has been held to be illegal by the Hon’ble High Court of Karnataka in the case of Manjunatha Cotton & Ginning Factory (supra). Following the aforesaid decision of the Hon'ble High Court of Karnataka in the case of Raveendhiraa L & Others (supra), we hold that the notices issued under Section 274 rws 271 of the Act dt.29.12.2011 for Assessment Years 2007-08 to 2009-10 are bad in law for the reasons mentioned in the aforesaid orders and consequently hold the penalty orders passed in consequence of these defective, invalid notices also to be inva id and cancel them.

Cases referred to

CIT V Manjunatha Cotton & Ginning Factory 359 ITR 56

CIT V Tolaram Hassomal 298 ITR 22

PVAL Kulandagan Chettiar 267 ITR 654

Additional Info

Read 23070 times Last modified on Saturday, 13 February 2016 16:14
Deepak Kumar

A Post Graduate and Chartered Accountant Deepak Sinha is a member of Taxpundit's core team. An analytical, result oriented professional with more than 10 years of combined experience in industry and consultancy.

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