Penalty Proceedings for Concealment of Income not sustainable when Notice issued by AO is Vague and Ambiguous: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty proceedings for concealment of income are not sustainable when the notice issued by the Assessing Officer is vague and ambiguous.

The assessment was completed under Section 143(3) of the Income Tax Act based upon the request of the assessee. Notice was issued to the assessee initiating penalty proceedings under Section 271(1)(c) of the Income Tax Act for concealment of income.

The counsel of the appellant submitted that the whole penalty proceedings are vitiated as at one end Assessing Officer failed to give any findings with regard to any concealment of income while passing the assessment order and at the same time, the notices issued were ambiguous with regard to the limb under which they were issued under Section 271(1)(c) of the Income Tax Act.

It was further submitted that Commissioner of Income Tax (Appeal) [CIT(A)] had failed to appreciate the law which was cited in the case of CIT & Anr. Vs. M/s SSA’s Emerald Meadows in CC dated 05.8.2016 [2016]73 and preferred to rely on the judgment of Madras High Court in the case of Sundaram Finlease Ltd. vs. ACIT 403 ITR 407.

The Departmental Representative, however, defended the orders of Tax Authorities below.

In the case of CIT and Another vs. Manjunath Cotton & Ginning Factory’ [2013] 359 ITR 565 (Karn.), allowed the appeal of the assessee, holding that notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act was bad in law, as it did not specify under which limb of Section 271(1)(c) of the Income Tax Act, penalty proceedings has been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income.

The Two-bench members comprising of N.K. Billaiya (Accountant member) and Anubhav Sharma (Judicial member) held that the notice issued by the Assessing Officer is bad in law being vague and ambiguous having not specified under which limb of Section 271(1)(c) of the Income Tax Act the penalty notice has been issued, the penalty proceedings initiated under Section 271(1)(c) of the Income Tax Act are not sustainable.

Thus, the appeal was allowed and the impugned orders were set aside.

To Read the full text of the Order CLICK HERE

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