Income Tax Penalty Notice does not specify under which limb of section 271(1)(c) the Penalty proceedings had been initiated: ITAT quashes Proceedings [Read Order]

The Income Tax Appellate Tribunal (ITAT), Raipur bench consisting of Ravish Sood, Judicial Member, and Rathod Kamlesh Jayantbhai, Accountant Member quashed the proceedings on the ground that Income Tax Penalty Notice does not specify under which limb of section 271(1)(c) the penalty proceedings had been initiated.

The assessee, Deepak Kumar Patel, has filed the return of income declaring a total income of Rs. 12,85,579/. The assessee is doing business with MFG of HDP Pipes & Assembly of Sprinkler System. The scrutiny assessment completed u/s. 143(3) determining a total income of Rs. 67,14,940/-. During the course of assessment proceedings that the assessee had incurred job work expenses at Rs. 36,95,000/-. Job work expenses were claimed to have been paid to three persons. As per details submitted by the assessee, the address of the job work contractor is either the same or close to that of the assessee. The job work payment was made at Rs. 10,45,000/-, 10,45,000/- & 16,00,000/- to the contractors who have offered a meagre profit i.e. below the taxability limit. On-field inquiry it was noticed that no such job work is undertaken at the factory premises of the assessee or at the factory addresses of the parties to whom payments were made under this head. Summons u/s. 131 was issued to each recipient. Thus, the persons had no proof of actually doing any work in the nature of job work. Hence the job work expenses to profit s Job Work Expenses of Rs. 36,95,000/- was disallowed and added to the total income of the assessee and penalty proceedings u/s. 271(1)(C) was initiated for furnishing inaccurate particulars of income. Aggrieved by the order the assessee approached the ITAT. 

The Tribunal relied on the judgment in Dilip N. Shroff v JCIT and held that the AO, while issuing a Notice for initiating a penalty proceeding U/s 271(1)(c) of the Act should apply his mind and make it clear as to whether he had proceeded on the basis that the taxpayer had concealed his income or he had furnished inaccurate particulars of income. That since the Assessing Officer has not specifically mentioned under which limb of Section 271(1)(c) of the Act the Notice for initiating Penalty proceedings has been issued, the said Notice and entire Penalty proceedings are not valid.

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