The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) has held that the defect in the notice issued by the income tax department would nullify the entire penalty proceedings against the assessee.
A survey under Section 133A of the Income Tax Act was conducted at the business premises of the assessee on 18/03/2008. During the course of survey operation, short stock of Rs. 7,77,010/- was detected on physical verification and after addition on account of perceived sale of short stock, a total addition of Rs. 2,61,930/- was made in the assessment.
The CIT(A) and thereafter the ITAT, Jaipur Bench in its order dated 08/02/2017 have confirmed the addition of Rs. 2,61,930/-. The A.O has levied penalty u/s 271(1)(c) of the Act on this amount.
The assessee contended that the penalty proceedings in the case of the assessee were specifically initiated for furnishing inaccurate particulars of income. However, while imposing the penalty, the AO has recorded the conclusion that assessee has concealed the income in addition to the furnishing of inaccurate particulars of income.
The Tribunal observed that “The sum and substance of above decision is that the nature of specification of charge by the A.O. at the stage of initiation of penalty proceedings at the time of issue of notice U/s 274 read with Section 271(1)(c) of the Act and at the time of passing the penalty order U/s 271(1)(c) should not be at variance. If there is any variance between the charge levied at the time of initiation of penalty proceedings and the charge levied at the time of imposition of penalty, the penalty order will be vitiated and the penalty cannot be sustained. However, if the charge is same then no fault can be found with regard to defect in the notice so as to hold that the penalty is not leviable.”
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