Income Tax Appellate Tribunal (ITAT), Delhi bench comprising A.D. Jain, Vice President and Dr. B. R. R. Kumar, Accountant Member quashed the penalty imposed by AO for non-compliance of notice under Section 274 of Income Tax Act.
The assessee, Neelkanth Town Planners Pvt. Ltd. Preferred an appeal before the Tribunal against the order of Commissioner of Income Tax (CIT). The Assessing Officer (AO) made addition of Rs.1,40,00,000/- to the total income on account of accommodation entry and with regard to the addition, penalty u/s 271(1)(c) has been levied by the AO. The Assessing Officer issued the penalty notice stating that, “subsequently penalty notice u/s 271(1)(c) “and the assessee was asked to why penalty u/s 271(1)(c) should not be imposed upon for the concealment of the particulars of income or furnishing inaccurate particulars of income.” The Assessing Officer mentioned that “I am satisfied that the assessee company has concealed the particulars of its income for the Assessment Year 2005-06, therefore penalty provisions u/s 271(1)(c) of the of the Income Tax Act, 1961 are attracted.”
The Karnataka High Court in the much-celebrated case of CIT v. Manjunatha Cotton and Ginning Factory held that notice under section 274 should specifically state the grounds mentioned in section 271(1)(c) of the Act, i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy requirement of law. The Tribunal also relied on the judgment in PCIT v. Sahara India Life Insurance Co. Ltd wherein the Delhi High Court held that notice under section 274 should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically.
ITAT said” Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged ‘concealment of income’ OR ‘furnishing of inaccurate particulars of such income’ , the penalty levied is hereby obliterated”.
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