In a recent case, the Jammu and Kashmir and Ladakh High Court has made it clear that notice to an assessee proposing imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 must specify reason for penalty imposition. It was held that it has to be mentioned whether the assessee is accused of ‘concealing’ his income or furnishing ‘incorrect’ income particulars.
In the case at hand, the notice issued to the respondent-assessee , J & K Power Development Corporation Limited was a composite notice intimating that he was liable to be proceeded for imposition of penalty for having concealed the particulars of his income/ for having furnished incorrect particulars for such income.
On assesse’s appeal, the Income Tax Appellate Tribunal held that it was a case where the Assessee was not given proper opportunity to offer his explanation and principles of natural justice were violated, thus vitiating the penalty order.
Get a Copy of EPF & ESI Act Unveiled – Landmark Supreme Court Decisions – click here to know more, Click here
A division bench of Justices Sanjeev Kumar and Rajesh Sekhri held that such a notice cannot be a “composite” one. The notice has to specify one of the two grounds to enable the assessee to file a proper explanation.
The High Court viewed that the Concerned Assessing Authority had not recorded its satisfaction with regard to one of the two limbs or on both the limbs indicated in clause (c) of sub-section 1 of Section 271. The Assessing Authority was itself not clear, whether it was a case of concealment of particulars of income by the Assessee or his failure to furnish correct particulars of such income. The Assessee too was deprived of a clear opportunity to give the explanation in view of the confusion created by the Assessing Authority itself.
Section 271(1)(c) stipulates that penalty proceedings can be initiated provided the Assessing Officer is satisfied that any person has concealed the particulars of the income or furnished the incorrect particulars of such income.
Get a Copy of EPF & ESI Act Unveiled – Landmark Supreme Court Decisions – click here to know more, Click here
While the court dismissed the revenue’s appeal against ITAT order, given liberty to proceed against the respondent afresh, as per law. Advocate Umar Rashid Wani appeared for the Revenue and Rashid Malik with Advocate Mohd Younis Hafiz appeared for Respondent.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
