Income Tax Penalty not leviable in the Absence of Specific Charge against Assessee: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai bench comprising Shri Mahavir Singh, Vice President and  Shri Manoj Kumar Aggarwal, AM has held that the income tax penalty levied under section 271(1)(c) of the Income Tax Act, 1961 is invalid in the absence of specific charges against the assessee.

The Tribunal was considering a bunch of appeals against the order of the Assessing Officer on 21.09.2020 confirming penalty under section 271(1)(c) of the Act as levied vide separate orders.the assessee made large cash deposits in his bank account and attributed the same to the fact that cash was received out of auctions aswell as from private parties against equivalent amount of cheque. However, in the absence of any satisfactory explanation / evidences forthcoming from the assessee, the same has been added u/s 68 in the hands of the assessee. Accordingly, penalty was also imposed on the assessee.

The assessee contended that no specific charge was made against the assessee which would vitiate the penalty proceedings as per settled legal position and the levy of penalty was automatic.

Ruling in favour of the assessee, the Tribunal held that “Upon perusal of notice issued u/s 274 r.w.s. 271(1)(c) as extracted above, we find that though the applicable clause has been ticked by Ld. AO, however, the applicable limb i.e., whether the penalty was being initiated for furnishing of inaccurate particulars of income or forconcealment of income has not been specified. Even in the body of penalty order, penalty has mechanically been levied without framing specific charge against the assessee. As per settled legal position, the failure to frame specific charge against the assessee would vitiate the penalty proceedings and the penalty would be bad in law. The two limbs of Sec.271(1)(c) are concealment of income and furnishing of inaccurate particulars of income which carry different connotation / meaning. Nonframing of specific charge against the assessee would vitiate the penalty proceedings since the penalty could be levied only for a specific charge.”

To Read the full text of the Order CLICK HERE

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